THE LIBRARY
OF
THE UNIVERSITY
OF CALIFORNIA
LOS ANGELES
SCHOOL OF LAW
A TREATISE
ON THE
LAW OF INSURANCE
OF EVERY KIND
By
JOSEPH A. JOYCE
Of the New York, California, and Connecticut Bars
Second Edition
In Five Volumes
Vol. I
THE LAWYERS CO-OPERATIVE PUBLISHING CO.
ROCHESTER, N. Y.
1917
T
Copyright 1897
by
Joseph A. Joyce.
Copyrisht 1917
by
Joseph A. Joych.
\
i
To My Wife
M. E. J.
THIS TREATISE WAS DEDICATED
IN THE
FIRST EDITION
"AS A TRIBUTE TO HER CONSTANT ENCOURAGEMENT"
AND
THIS SECOND EDITION
IS
REDEDICATED
TO HER
AS A PERPETUAL TRIBUTE
PREFACE TO SECOND EDITION.
In the following volnmes tlie author has adhered to the plan
adopted in the first edition as stated in the preface thereto, which
also appears herein, although it may be restated here that the
writer has not treated the several kinds of insurance separately,
but, on the contrary, he has grouped decisions together with refer-
ence to the grounds on which the authorities have been based;
where this has not been possible owing to some technical doctrine
peculiar to a particular kind of insurance, as in case of abandon-
ment and constructive total loss in marine insurance and some
other instances, the subject has been treated separately under its
proper heading.
In other w^ords, the author has endeavored to make clear the unity
of insurance law, which unity cannot be ignored in any authori-
tative treatise on insurance for its recognition is necessary to any
thorough understanding of this great subject or of any kind or
form of true insurance. That this is realized by the courts is evi-
denced b}' numerous learned and exhaustive opinions wherein the
discussion is not limited to that of the particular kind of' insurance
involved, but recourse is had to authorities covering other kinds of
insurance in w^hich the same or like principles have controlled. And
the writer has believed and still believes that it were futile to
attempt to solve a question of insurance law without recourse to
principles, and necessarily a recourse to principles means a recog-
nition of the unity of insurance law. Therefore it has been the
intention in this edition, as in the first, to bring out as clearly as
possible and apply the underlying principles running through and
governing this entire subject, to present whatever distinctions exist
between the various kinds or forms of insurance, to follow up to a
logical conclusion, to show generally and particularly this applica-
tion of principles and these distinctions, to harmonize conflicting
decisions as far as possible, and to formulate rules whenever it
can be done.
iii
iv PREFACE
The author has given the last five years and more of ardvious
exdusive application to the writing of this second edition, exam-
ining personally the adjudications since the publication of the
first edition, and has added over one thousand new sections and
also new material to nearly all the old sections, and he believes
no point of value has been overlooked.
Various new forms or kinds of insurance concerning which there
were few if any decisions when the first edition was issued have
been fully treated so far as there have been authorities covering the
same.
It has also been the writer's purpose to present as exhaustively
as the decisions or rulings of courts and other authorities permit,
all insurance questions involving war risks, including arrests, re-
straints, capture, seizure, contraband of war, etc., prize law in so
far as it has bearing upon questions involved, a consideration of
the British Proclamations or Orders in Council, etc., etc.
An appendix has been added containing certain matters which
have been deemed of special importance to the profession in con-
nection with the subjects of war risks in insurance; average; and
marine insurance.
In this, as in the former edition, every effort has been made to
bring this treatise up to that standard which the profession requires
'and which is necessitated by the technical character of the subject,
and it is sincerely hoped that the profession will find that it meets
its approval and use, and that the work will accomplish something
towards bringing about some degree of certainty or uniformity in
the law in many instances where it is now wanting.
It is believed that in this edition, as in the first, full credit has
been given to all works and authorities consulted. The author also
acknowledges with great pleasure the many courtesies extended to
him in '"The Law Library in Brooklyn," County Court House,
Brooklyn, ]^ew York, by the librarian, Mr. Otto Wetzel; the
assistant librarians, Mr. William Burt Cooke, Jr., and Mr. Daniel
Cubberly, and the clerk, Mr. William Rosmarin,
JOSEPH A. JOYCE.
New York City, K Y., 1917.
PREFACE TO FIRST EDITION.
In the following volumes the writer has endeavored to give the
profession not only a treatise, but a working book, which will meet
the needs, lessen the labors, and save the time of all lawyers inter-
ested in questions relating to insurance, and to make it alike valuable
to the practitioner who has access to large libraries and to the one
who has not. The writer's experience in practice, coupled with
what he has learned from judges and other members of the profes-
sion, convinced him that a work covering the whole law of insur-
ances and its practice before the courts would be favorably received.
He has, therefore, attempted to prepare a work presenting, in a
carefully and systematically arranged form, the principles under-
lying adjudged cases, the facts to which such principles have been
applied, and the opinions of courts and text-writers upon conilicting
questions of law. Having this purpose in view, the writer in 1S80
commenced collecting the necessary material, since which time no
labor has been spared in critically examining the authorities, syste-
matically arranging them with reference to their underlying prin-
ciples, and in noting as briefly and concisely as has been deemed
advisable the facts of such important cases as will show the applica-
tion of the governing principle therein, and the grounds of the
decisions. If for other reasons than a conflict of authority it has
been impossible to formulate any certain rule, the substance of the
decision or decisions in point has been given. Where decisions
have conflicted, the writer has endeavored to reconcile them and
to state the weight of authority, and has called to his aid in numer-
ous instances the opinions of other text-writers and of courts. It
has not been the writer's plan to treat of the several kinds of insur-
ances separately, but, on the contrary, to group decisions together
with reference to the grounds on which the rulings have been based ;
where this has not been possible, owing to some technical doctrine
peculiar to a particular kind of insurance, as in case of abandon-
vi PREFACE
raeut and constructive total loss in marine assurance, the subject
has been treated separately under that heading to which it belongs.
This arrangement has made it possible to cover all kinds of insur-
ances, including mutual benefit insurance. Much time and labor
has been expended in arranging alphabetically the sections of some
chapters, but in no instance has this been done where it has not
seemed more systematic, in view of the subject matter of such
chapters, and better calculated to aid the practitioner by facilitating
speedy reference. It is believed that no errors exist as to the
authorities relied on, for they have not only been carefully selected
and fully and conscientiously examined before and during compila-
tion, but the citations made have also been verified from the com-
pleted manuscript. Every effort has been made to bring this work
up to that standard which the technical character of the subject
and the wants of the profession necessitate, and to make it one of
value alike in the court room and the office. It is trusted that such
effort has not been unsuccessful.
A succinct account of the origin and sources of insurances has
been incorporated in the form of a "Preliminary Chapter.'' The
adjudications have been brought down to the time of going to press,
and cover not onlv those in this countrv, but also numerous Enoiish
and Canadian cases. The w^riter has freely consulted the works
of Emerigon, Marshall, Arnould, Duer, and others, and has care-
fully endeavored to give full credit to all from whom any informa-
tion has been obtained. The writer also acknowledges his indebt-
edness to his brother, Mr. Howard C. Joyce, for assistance rendered
during a part of the time. Credit is also due Mr. Howard K.
James for aid in helping verify some of the citations; and the
unfailing courtesy of Mr. James H. Deering and Mr. Lloyd Conk-
ling of the San Francisco Law Library extended to the writer is
acknowledged by him with great pleasure.
If the purpose of this treatise and the choice of the plan have
been fortunate and the work is otherwise meritorious, the writer
is content to leave it in the hands of the profession.
JOSEPH A. JOYCE.
San Francisco, Cal., August, 1897.
CONTENTS.
TITLE I.
PRELIMINARY CHAPTER.
THE SOURCES AND ORIGIN OF INSURANCES.
I. Sources of insurance.
II. Origin of insurance generally.
III. Origin of marine insurance.
IV. Adoption of marine insurance in modern times.
I\'a. Marine insurance continued : origin of Lloyds.
IVb. Marine insurance: summary.
IVc. Lloyds associations in United States: American Lloyds.
IVd. Inter-insurance: reciprocal insurance: inter-indemnity contracts.
Origin of mutual insurance system.
Origin of cattle insurance societies.
Origin of fire insurance.
Boards of fire or marine underwriters.
Origin of life insurance.
§ Vila. History of industrial insurance.
§ Vllb. History of workmen's industrial insurance: state insurance:
compulsory insurance: workmen's compensation.
§ VIIc. Savings bank insurance and annuity law of Massachusetts.
§ VIII. Origin of accident insurance.
§ Villa. History of casualty insurance.
§ Vlllb. History of employers' liability insurance.
§ IX. Origin of guaranty, fidelity guaranty, etc., insurances.
§ IXa. History of title guaranty insurance.
§ IXb. History of credit guaranty insurance.
§
V.
§
Va,
§
VI.
§
Via
§
VIL
X. Origin of other insurances.
vu
viii CONTENTS
TITLE IL
GENERAL TERMS AND DEFINITIONS.
CHAPTER I.
TERMS AND DEFINITIONS.
§ 1. "Insured'' and "assured" synonymous.
§ 2. Definition of insurance.
§§ 3, 4. (Transferred to §§ 338d, 339c herein.)
§ 5. Definition of marine insurance.
§ 6. Definition of fire insurance.
§ 7. Definition of life insurance.
§ 7a. Definition of assessment insurance.
§ 7b. Definition of industrial insurance.
§ 7c. Definition of burial insurance.
§ 7d. Definition of workmen's industrial insurance: state insurance : com-
pulsory insurance: workmen's compensation.
§ 8. Definition of accident insurance.
§ 9. Definition of casualty insurance.
§ 9a. Definition of employers' liability or indemnity insurance.
§ 10. Definition of endowment insurance.
§ 11. Definition of tontine insurance.
§ 12. Definition of guaranty insurance.
§ 13. Definition of real estate and title insurance.
§ 13a. Definition of rent insurance: rent guaranty insurance.
§ 13b. Definition of strike insurance.
CONTENTS ix
TITLE III.
CONTRACT AND POLICY.
CHAPTER II.
NATURE OF THE CONTRACT.
§ 16, Risk is an essential element.
§ 17. Division and distribution of loss are essential.
§ 18. Insurance is an aleatory contract.
§ 19. Insurance is a voluntary contract.
§ 19a. Standard fire, policy a voluntary contract.
§ 20. Insurance is an executory contract.
§ 21. The contract is synallag-matic.
§ 22. Insurance is a conditional contract.
§ 23. Insurance is a personal contract. »
§ 24. Insurance other than that of life and accident is a contract of in-
demnity.
§ 24a. Standard fire policy is contract of indemnity: collateral contracts:
mortgages.
§ 25. Indemnity : stipulation as to value in policy.
§ 26. Life insurance not a contract of indemnity.
§ 27. Accident insurance is not a contract of indemnity in all cases.
§ 27a. That employers' liability insurance is contract of indemnity.
§ 27b. Same subject : whether contract one of indemnity or liability or both.
§ 27c. Injury to property or to employees and others : to what extent con-
tract one of indemnity.
§ 27d. English workmen's compensation act grants complete indemnity.
§ 27e. Insurance of carriers against losses from injuries to passengers is
contract of indemnity.
§ 27f. Insurance against burglary and loss or damage to property are con-
tracts of indemnity.
§ 27g. Insurance against accidents, death, and theft of animals is contract
of indemnity.
§ 27h. Fidelity guaranty insurance is contract of indemnity.
§ 27i. Title guaranty insurance is contract of indemnity.
§ 27 j. Rent or rent guaranty insurance is contract of indemnity.
§ 27k. Insurance on ''use and occupancy" of an elevator: when not a con-
tract of indemnity.
X CONTENTS
^ 271. Credit guaranty insurance is contract of indemnity.
§ 27m. Whether contract to defend physician against suits for malprac-
tice is one of insurance and indemnity.
§ 27n. Employees' benefit and relief association: contract not one of in-
demnity.
§ 28. Reinsurance is a contract of indemnity.
^ 29. Other incidents of the doctrine of indemnit3%
CHAPTER III.
PAROL CONTRACTS.
§ 31. Contract need not be in writing: parol contract and rule in England.
§ 31a. Parol contracts: life insurance — industrial life insurance.
§ 31b. Parol contracts: accident insurance.
§ 31c. Parol contracts: "workman's collective policy:" custom.
§ 31d. Parol contract: where policy partly w-ritten at time of loss: contract
binding.
§ 32. Parol contracts: the common-law rule.
§ 33. Parol contracts: statutory regulations: English stamp acts.
§ 33a. Parol contracts: standard policy.
§ 33b. Statutory regulations: contract partly in writing and partly by
parol.
§ 34. Parol contracts: mutual benefit societies.
§ 35. Parol contracts: corporations: statutory or charter provisions.
§ 36. Parol contracts: corporations: statutory or charter provisions, con-
tinued.
§ 37. Parol contract for insurance subject to usual provisions of policy.
§ 38. Parol agreement for insurance may be specifically enforced, or court
may award damages.
§ 38a. Same subject: standard policy: rule in New York.
§ 38b. Same subject: life insurance: industrial life insurance.
§ 38c. Evidence: oral contract must be clearly established.
§ 39. Parol contracts: statute of frauds.
§ 40. How far parol contract merged in written agreement.
§ 41. Parol contract : renewal.
§ 41a. Same subject: standard policy: agent's authority.
§ 41b. Parol contract: renewal: contract must be complete: recovery: evi-
dence to establish.
§ 41c. Parol contract: renewal: standard policy: equitable estoppel.
§ 41d. Parol contract: reinsurance: validity.
§ 41e. Parol agreement for reinsurance may be specifically enforced.
CONTENTS xi
CHAPTER IV.
REQUISITES OF VALID CONTRACT— COMPLETION OP
CONTRACT.
SuBDiv. I. Requisites of Valid Contract.
11. Completion of Contract — Proposal and Acceptance.
III. Completion of Contract — Prepayment of Premium.
IV. Completion of Contract— Delivery of Policy — Knowl
EDGE OF Loss.
SuBDiv. I. Requisites of Valid Contract.
§ 43. Requisites of a valid contract of insurance.
§ 44. Requisites of a valid parol contract of insurance.
§ 44a. Same subject : identity of parties : designation of insurer.
§ 44b. Same subject : designation of insured.
§ 44c. Oral contract for reinsurance or for renewal must be complete.
§ 45. Minds of the parties must meet on all essentials of contract.
§ 45a. Same subject : where impossible to obtain definite particulars or im-
portant facts.
§ 46. Essentials need not be expressly agreed upon : prior course of deal-
ing, custom, etc.
§ 47. The usual rate of premium will be presumed to have been intended.
§ 48. Both the rate of premium and the duration of the risk may be under-
stood.
§ 49. The rate of premium and amount may be understood.
§ 50. Whether contract exists may be governed by custom or usage of the
parties or of the insurance business at a place.
SuBDiv. II. Completion op Contract — Proposal and Acceptance.
§ 53. Completion of contract : mutual benefit societies or associations.
§ 53a. Same subject : acceptance : approval.
§ 53b. Same subject: signing.
§ 53c. Same subject r initiation : medical examination : signing.
§ 54. Completion of contract: prdposal or application.
§ 54a. Effect of absence of signed proposal : insurer may be estopped to set
up want of proposal.
§ 54b. When contract of fidelity insurance Complete, and not a mere pro-
posal.
§ 55. Completion of contract : acceptance generally.
§ 55a. Mere intention to accept, insufficient.
xii CONTENTS
§ 55b. To what extent acceptance must accord with terms of application.
§ 55c. Proposal and acceptance: counter propositions.
§ 55d. Whether acceptance of offer should be communicated to proposer.
§ 55e. Protection by insurer pending approval : date when policy in force.
§ 56. Qualified acceptance: conditions precedent.
§ 57. Acceptance: delay in acting on application.
§ 58. (Transferred to §§ G6b-66j herein.)
§ 59. Agent's agi-eement: liability not to attach till approval.
§ 59a. Usage or custom that agents can bind insurer until notice of refusal.
§ 60. Approval may be implied from the circumstances.
§ 61. Oral agreement of agent may be controlled by application.
§ 61a. Agent's statement that application accepted: when insurer estopped.
§ 61b. Agent's statement that certificate or application binding: mutual
benefit insurance.
§ 62. Completion of contract: negotiations through mail.
§ 62a. Employers' liability insurance: when contract incomplete: negotia-
tions with insurance agent through mail.
§ 62b. Contracts of insurance: telegraphic agency.
§ 63. No contract where acceptance mailed differs in terms from proposal.
§ 64. Agents receipt pending approval or issuance of policy: "binding
slip :" "binding receipt."
§ 65. Same subject: effect of memorandum: binding slip, indorsement,
etc.
§ 6G. Completion of contract, marine and fire: binding slip.
§ 66a. Binding slips, etc., continued: new terms: rate of premium: parol
evidence.
§ 66b. Delivery to and acceptance by applicant: generally.
§ 66c. Right of applicant to reject policy: generally.
§ 66d. Stipulation or agreement for return of policy by applicant : option
to accept or reject.
§ 66e. Where applicant receives policy for examination: acceptance.
§ 66f. Applicant not bound to accept policy when it does not conform to
proposal or agreement.
§ 66g. Where policy does not conform to proposal : neglect of applicant or
assured to read policy: duty to notify company or rescind.
§ 66h. When applicant may reject policy not conforming to agent's repre-
sentations.
§ 66i. Effect of retention of policy by applicant: unreasonable delay.
§ 66 j. Acceptance by insured father for infant beneficiaries.
SUBDIV. III. COMPLKTIOK OF CONTRACT — PREPAYMENT OF PREMIUM.
§ 70. Prepayment of premium condition precedent.
§ 71. Actual prepayment of premium not in all cases essential to validity
of contract.
CONTENTS xiii
§ 72. Prepayment of premium: oral agi'eement.
§ 73. Prepayment of premium to agent or broker.
§ 74. Effect of part payment.
§ 74a. Same subject : rebate : agent's commission released or property taken
on credit therefor.
§ 74b. Part payment: good health.
§ 75. Payment by third person.
§ 76. Prepayment of premium may be waived.
§ 77. Waiver of prepayment by agent.
§ 78. Renewal: waiver of prepayment of premium.
§ 79. Prepayment of premium: effect of delivery of policy.
§ 80. Prepayment: credit may be given.
§ 80a. Same subject: promissory notes, checks, and drafts.
§ 81. Prepayment: mutual credits: application on agent's debt.
§ 82. Where there are mutual credits.
§ 83. Crediting premium on agent's indebtedness to applicant.
§ 84. Prepayment: course of dealings: allowing credit.
§ 85. Prepayment of premium: evidence of waiver.
§ 86. Effect of receipt in policy for premium.
SuBDiv. IV. Completion op Contract — Delivery of Policy — Knowledge
OF Loss.
§ 90. Delivery of policy not necessary to complete contract.
§ 90a. Same subject: date.
§ 91. Actual or manual delivery of policy not necessary to complete
contract.
§ 92. Agreement to deliver policy: demand is unnecessary.
§ 93. There may be a constructive delivery.
§ 94. Delivery: possession of policy by assured.
§ 95. Neglect of assurer to deliver policy.
§ 96. Conditional delivery.
§ 97. Parol evidence admissible to show conditional delivery.
§ 97a. Condition precedent: delivery or prepayment of premium during
lifetime or good health, etc., of assured.
§ 97b. Same subject.
§ 97c. Change in health of assured: date of contract.
§ 98. Wlien actual delivery of the policy necessary.
§ 99. Delivery: misrepresentation or fraud.
§ 100. Delivery: notice to assured of execution of policy.
§ 101. Delivery to agent of insured or to third person.
§ 102. Delivery by and to agent: policy held by agent.
§103. Delivery: agreement completed before loss, mortal illness or
accident.
xiv CONTENTS
§ 104. Delivery: agreement iucomplete at time of loss, mortal illness, or
accident.
§ 104a. Same subject.
§ 105. Loss before date of contract : policy retroactive.
§ lOG. AVhere both parties know of loss when contract is made or exe-
cuted.
§ 107. Knowledge of loss by assured before and after risk attaches.
§ 108. Assured not obligated to notify company of loss before de-
livery of policy when risk has attached.
§ 108a. Mutual benotit societies or associations: issuance of certificate.
§ 108b. Mutual benefit societies or associations: actual delivery of cer-
tificate unnecessary, unless.
§ 108c. Mutual benefit societies or associations: initiation as prerequisite
to delivery.
§ 108d. Delivery of certificate to subordinate lodge, local camp, etc.
§ 108e. Mutual benefit societies or associations: delay in executing and
delivering certificates : retention of certificate.
§ 108f. Where officer of society acts as custodian of certificate.
§ 108g. Mutual benefit societies or associations: delivery of certificate or
prepayment of dues during life or good health.
CHAPTER V.
REINSURANCE.
§ 112. Reinsurance defined.
§ 112a. Evidence admissible to show "reinsurance" has technical mean-
ing of agency reinsurance.
§ 112b. When transfer is not reinsurance, but an illegal transaction :
assets a trust fund: deposit with state.
§ 113. Reinsurance: nature of contract.
§ 114. Reinsurance : validity of contract.
§ 115. Reinsurance: validity of company's acts: its powers.
§ 115a. Same subject.
§ 115b. Same subject: mutual benefit societies, associations, and co-oper-
ative companies : Lloyds.
§ 116. Reinsurance not within statute of frauds.
§ 117. Relations between parties and between insured and reinsurer.
§ 117a. Same subject : Lloyds.
§ 118. Insurable interest of reinsurer.
§ 118a. Same subject : wagering contract.
§ 118b. Same subject : Lloyds.
CONTENTS XV
§ 119. Reinsurance: the risk.
§ 119a. Same subject.
§ 119b. Same subject : mutual, etc., companies.
§ 120. Duration : term of risk may be controlled by ori^nal insurance.
§ 121. Custom of underwriters may affect risk.
§ 122. Limitation of risk of specified date: change of risk.
§ 122a. Reinsurance not retroactive: property destroyed when contract
made.
§ 123. Limitation of risk to particular locality.
§ 121. Condition as to assignment.
§ 123. Condition as to other insurance.
§ 126. Conditions : time limit for suing : award.
§ 127. Amount of reinsurance.
§ 127a. Same subject: sej^arate risks: notice.
§ 128. Representations and warranties in reinsurance: concealment.
§ 129. Abandonment unnecessarj^ in reinsurance.
§ 130. Proofs of loss in reinsurance.
§ 131. Extent of reinsurer's liability.
§ 131a. Same subject.
§ 131b. Same subject: mutual benefit societies, etc.
§ 131c. Same subject : reinsurer not liable where risk materially altered.
§ 132. Agreements affecting reinsurer's liability.
§ 133. Reinsurer's liability: pi-o rata clause.
§ 133a. Same subject.
§ 134. Reinsurer's liability : compromise : insolvency of insurer.
§ 134a. Same subject : mutual benefit societies, etc. : trust fund.
§ 135. When suit may be brought against reinsurer: rights of original
insured.
§ 135a. Same subject.
§ 135b. Same subject : mutual benefit societies, etc.
§ 135c. Same subject : Lloyds.
§ 136. Reinsurance: recovery: evidence.
§ 136a. Same subject: mutual benefit societies, etc.: fraud of directors.
§ 136b. Same subject : recovery of statutory deposits.
§ 136c. Reinsurance: recovery induced by fraud: subrogation: deduction
of expenses of recovery.
§ 137. Reinsurer bound by judgment: notice to defend.
§ 138. Defenses available to reinsurer.
CHAPTER VI.
THE POLICY— ITS FORM AND REQUISITES— SUBSTANCE
GENERALLY.
§ 145. Policy defined.
§
146.
§
147.
§
148.
§
149.
§
150.
§
151.
§
152.
§
153.
§
154.
§
155.
§
156.
xvi CONTENTS
Certificates in mutual benefit societies or associations.
Division and kinds of policies.
Wager policies.
Wager policies, valid at common law, now void.
Wager policy : conflict of laws.
Valued policy may be sbown to be a wager.
Policy valid at inception cannot become wager.
Wager policies : loss should be total.
Wager policies: what are and are not. (Transferred to §§ 894a,
954a herein.)
Interest policy defined.
Open or unvalued policy defined.
§ 156a. Named policy defined.
§ 157. Kunning policies : blanket policies : floating policies.
§ 157a. Blanket or compound policies: floating policies: distinguished
from specific policies.
§ 157b. "Drummer floater" policy defined: when risk suspended.
§ 158. Open or unvalued policies : what are : whether policy open or
valued.
§ 158a. Same subject : standard policy.
§ 159. Valued policy defined.
§ 160. Valued policy: what the valuation includes.
§ 161. Valued policy: how far valuation conclusive.
§ 162. Valued policy: effect of overvaluation: fraudulent valuation.
§ 163. Valued policies: statutory regulations.
§ 163a. Same subject : conflicting clauses.
§ 163b. Valued policy laws : three-fourths value.
§ 163c. Valued policy laws: overvaluation: fraudulent valuation.
§ 163d. Valued policy law : property destroyed by more than one fire.
§ 163e. Valued policy law : real and personal property.
§ 163f . Valued policy law : improvements upon real property : loss of
rents not covered.
§ 163g. Valued policy laws : mutual companies : mutual benefit societies.
§ 164. Valued policies : partial loss.
§ 165. Valued policy; pro rata recovery.
§ 166. Valued policies : "valued at" not conclusive.
§ 167. Valued policies; prior insurance.
§ 168. Valued policies: what are.
§ 168a. Rent insurance policy analogous to valued policy.
§ 169. Mixed policy defined.
§ 170. Time policy defined.
§ 171. Time policy: computation of time.
§ 172. Time policy: trading voyage: nature of contract.
§ 173. Time policy: continuance after expiration of time.
§ 174. Voyage policy defined.
CONTENTS svii
§ 175. Voyage policy : voyage must conform to course fixed by usage.
§ 176. The form of the policy : statutory provisions : standard policy.
§ ITGa. Standard policy: constitutional law: power of legislature and
of commission: review by court: injunction.
§ 176b. Standard policy: stipulations contra, additions, changes, etc.
§ 176c. Standard policy : waiver.
§ 17Gd. Standard policy law: effect as to valued policy law.
§ 176e. Statutory requirements as to size of type, written conditions, etc.
§ 176f. Standard policy: mutual companies or associations: "special reg-
ulations" as part of policy.
§ 177. The policy: what it usually contains: policy to contain entire
contract : statutes.
§ 178. Execution of the policy.
§ 178a. Fidelity bond: necessity of signing by employee: agency: waiver.
§ 179. Execution of policy : afifixing date.
§ 180. Execution of policy : affixing seal.
§ 180a. Life annuity: insurance contract: non-necessity of seal.
§ 180b. Printed signature is sutficient to satisfy the statute of frauds.
§ 181. Requisites of a valid policy.
CHAPTER VII.
CONSTRUCTION— WHAT IS PART OF THE POLICY.
§ 185. What is part of the policy: general rule: parol evidence.
§ 185a. Same subject.
§ 186. W^hen application is part of the policy.
§ 186a. Same subject.
§ 187. When application is not part of policy.
§ 187a. Same subject : subsequent application.
§ 188. When charter and by-laws are and are not part of contract.
§ 188a. Same subject.
§ 189. Effect of subsequent amendment of by-laws or enactment of new
by-laws.
§ 189a. Same subject.
§ 190. Application and by-laws: when part of contract: statutory pro-
visions.
§ 190a. Standard policy: what is part of contract: application, by-laws,
etc., special provisions.
§ 190b, What is pa«rt of contract: contract to be plainly expressed in pol-
icy: policy to contain entire contract: statutes.
§ 190c. State has power to enact : such statutes constitutional.
§ 190d. Purpose or intent of such statutes.
xviii CONTENTS
§ 190e. Construction of such statutes, the policy and application or con-
tract.
§ 190f. Such statutes govern only relative rights of parties.
§ 190g. Retroactive effect of such statutory requirements.
§ 190h. Necessity of true, correct, or entire copy of application.
§ 190i. Such statutes do not apply to oral contracts.
§ 190 j. Copy of application for renewal or reinstatement to be annexed,
etc.
§ 190k. Mere reference to application insufficient under such statutes.
§ 1901. Right of insurer to provide forms of application under such stat-
utes.
§ 190m. What is and is not part of contract: statutes.
§ 190n. Same subject : medical examination.
§ 190o. Foreign contracts: effect of statutes.
§ 190p. What companies or associations are within such .statutes.
§ 190q. Failure to comply with such statutes does not preclude defenses
based upon policy alone.
§ 190r, Application as part of contract: statutes: fraud as defense: mis-
rejaresentations.
§ 190s. Conspiracy a defense though application not attacked.
§ loot. Waiver of statutory rights by insurer or insured.
§ 190u. When question whether copy of application annexed to or in-
dorsed on policy is for jury.
§ 191. When other papers are and are not part of policy.
§ 191a. Receipt books, manuals, and schedules as part of contract.
§ 191b. Riders or slips as part of contract: standard policy.
§ 192. Whether prospectus or pamphlet part of policy.
§ 193. Same subject : the cases.
§ 194. Whether common or statutory law part of contract: city ordi-
nances or local laws.
(a) City ordinances or local laws.
(b) Statutes relating to foreign insurance companies.
(e) As to prospective or retroactive statutes, or in case of re-
peal or amendment,
(d) As to mutual companies, benefit societies and the like,
(o) Total loss: valued policy statutes.
(f) As to representations and warranties.
(g) As to stipulations in tlie policy contrary to statutory re-
quirements,
(h) Express statutory provisions making void policy stipula-
tions contra.
(i ) As to waiver.
§ 191a. Same subject: what statutes are and are not part of contract:
miscellaneous cases.
§ 195. Indorsements: marginal references: when part of policy: when
not.
CONTENTS xix
§ 105a. Same subject.
§ 196. Indorsements continued: conditions annexed to policy, etc.: when
and when not part of same,
(a) Conditions and stipulations when indorsed upon the back
of a policy.
§ 197. Whether premium note part of policy.
§ 197a. Same subject : statutory provisions : standard policy.
§ 198. Usage: how far a part of policy.
CHAPTER VIII.
CONSTRUCTION OF POLICY.
§ 205. Construction generally.
§ 205a, Recitals: when not conclusive.
§ 20G. Whether same rules govern marine, fire, and life policies.
§ 20Ga. Rule as to standard policy.
§ 20Gb. Where standard policy statute declares policy binding though
not in form prescribed.
§ 20Cc. Rule as to guaranty or tidelity, contract, credit guaranty, title,
and employers' liability insurance.
§ 207. Construction: mutual companies: benefit societies,
§ 208. Policies construed like other written contracts.
§ 209. Construction : intention of parties governs.
§ 209a. Same subject : cases generally,
§ 209b. Same subject: construction of warranties.
§ 209c. Same subject: application, proposal, policy, etc.
§ 209d, Contemporaneous agreements.
§ 210. Construction: reference must be had to nature of risk and sub-
ject-matter.
§ 211. Construction must be reasonable.
§ 212. Contract should be given effect if possible.
§ 213. Construction : rejection of words and clauses,
§ 214. General and special clauses.
§ 214a. General provisions not rcfen-ed to in separate, independent para-
graph nor limited by prior clause : accident policy.
§ 215. Construction will be given to uphold the law.
§ 216. Words are to be construed in ordinary and popular sense,
§ 217. Construction : technical, etc., words.
§ 218. Addition of words by construction.
§ 219. Courts cannot extend or enlarge by construction.
§ 220. Forfeitures and exceptions not favored by construction.
§ 220a. Same subject: benefit certificates.
XX CONTENTS
§ 220b. Same subject: guaranty or fidelity insurance: employers' liability
policy.
§ 221. Construction should be liberal in favor of assured and for benefit
of trade.
§ 221a. Same subject.
§ 221b. Same subject : kinds of insurance to which rule applicable.
§ 222. Same subject: the rule contra proferentem.
§ 222a. Same subject.
§ 222b. Same subject: employers' liability policy.
§ 222e. Same subject : accident policy under workmen's compensation act.
§ 222d. Same subject : reinsurance.
§ 222e. Rule as to standard policy.
§ 223. The written controls the printed part of policy.
§ 224
§ 225
§ 226
§ 227
§ 228
§ 229
§ 230
§ 231
Same subject : cases.
Construction: lex loci contractus.
Same subject : cases.
Same subject : exceptions to the rule.
Same subject: mutual benefit, etc., societies.
When place where policy is countersigned is place of contract.
"When pla^'e of delivery is place of contract.
When place of acceptance and mailing is place of contract.
§ 231a. Lex loci: situation of insured property.
§ 231b. Lex loci : fidelity or guaranty insurance.
§ 231c. Lex loci : contracts by unauthorized companies or agents.
§ 231d. Lex loci : contract stipulations.
§ 231e. Lex loci: statutory provisions.
§ 231f . Lex loci : public policy : comity.
§ 231g. Lex loci: rights of beneficiaries or claimants.
§ 231h. Lex loci : adjustment of claim on forfeited policy.
§ 231i. Lex loci : reinstatement, extension or revival of policy.
§ 231j. Lex loci: policy pledged for loan: collateral note: capital-stock
note.
§ 232. Lex loci : assignment.
§ 232a. Lex loci: substituted policy.
CHAPTER IX.
CONSTRUCTION— USAGE.
§ 237. LTsage generally.
§ 238. L'sage part of the common law.
§ 239. Presumption as to knowledge of usage..
§ 240. Usage must be general.
CONTENTS XXI
§ 241. Usage must be well established and notorious.
§ 242. Usage may be of recent origin.
§ 243. Usage must be reasonable.
§ 244. Usage must be uniform.
§ 245. Parties may by express contract include or waive usage.
§ 246. Usage admissible where contract ambiguous or obscure.
§ 247. Usage inadmissible to contradict or substantially vary the plain
terms of policy.
§ 248. Same subject: cases and authorities.
§ 249. Whether usage controls the plain and legal import of words of
the policy.
§ 250. Same subject: opinions and cases.
§ 251. Same subject: conclusion.
§ 252. Usage cannot legalize an illegal act.
§ 253. General usage may be controlled by evidence of a different usage.
§ 254. Usage controls implied limitations.
§ 255. Usage of another similar trade or place or of another company.
§ 256. Evidence of usage: liberal construction.
§ 257. What is sufficient evidence of usage.
§ 258. Evidence of usage, when admissible: cases. \
§ 259. Evidence of usage, when inadmissible: cases.
CHAPTER X.
THE POLICY— ALTERATION AND MODIFICATION.
§ 265. Material alteration without consent avoids contract.
§ 266. Immaterial alteration does not avoid contract.
§ 267. Alteration when contract is inchoate.
§ 268. Alteration by a third party.
§ 269. Alteration by the insurer.
§ 269a. Substitution of corrected policy by insurer.
§ 270. Material alteration of policy may be made by consent.
§ 271. Same subject: decisions.
§ 271a. Alteration of certificate of membership: consent.
§ 272. Alteration of contract by parol.
§ 273. Same subject: decisions.
§ 274. Alteration with intent to obtain insurer's consent.
§ 275. Same subject: decisions.
§ 276. Alteration: substitution of parties.
§ 276a. Alteration or modification of standard policy.
xxii CONTENTS
CHAPTER XI.
WAR— ALIEN ENEMIES.
§ 281. Effect of war generally.
§ 282. Insurances on enemies' property formerly upheld.
§ 283. Insurances on enemies' property now illegal.
§ 284. Same subject : early decisions.
§ 285. Trading with enemy : mistake or ignorance no excuse.
§ 286. Defense of alien enemy.
§ 287. Binding force here of laws of belligerent nations.
§ 288. Alien enemies: life insurance.
^ 289. Effect of war on pre-existing valid contract.
§ 290. Same subject : loss before war.
§ 291. Same subject : that war merely suspends the contract.
§ 292. Right of citizen to bring property from enemy's country.
§ 29;i. War : license to trade,
j:; 294. Wlijo are alien enemies: domicil.
§ 295. Alien enemy: what constitutes domicil.
§ 296. Residence with intent to return.
§ 297. Change of domicil.
§ 298. Alien enemy : what is enemy's country.
§ 299. Alien enemy : commencement and cessation of hostilities.
§ 299a. Alien enemy: intention to subsequently wage war.
§ 299b. Alien enemies: status of: power of government over: acts of
Congress: effect of war declaration.
TITLE IV.
PARTIES— AGENTS— BENEFICIARIES.
CHAPTER XII.
PARTIES TO THE CONTRACT— THE INSURED.
§ 305. Who may be parties to the contract.
§ 300. Who are not parties.
CONTENTS xxiii
§ 306a. Parties: husband or wife.
§ 307. Parties: infants.
§ 307a. Same subject: statutes.
§ 307b. When infant bound.
§ 307c. Corporation or partnership as party insured.
§ 307d. Municipal corporation as party insured.
§ 307e. Parties: employees under employers' liability and fidelity or guar-
anty insurance.
§ 308. When aliens may be insured,
§ 300. Relations of insurer and insured.
§ 309a. Same subject: title guaranty.
§ 309b. Relation of insured to each other.
§ 310. Name of assured need not be set out in policy.
§ 311. Names: evidence admissible to show actual party in interest.
CHAPTER XIII.
PARTIES— MEMBERS OF MUTUAL INSURANCE COMPANIES,
MUTUAL BENEFIT, ETC., SOCIETIES.
§ 316. Parties: members of mutual insurance companies and mutual
benefit societies.
§ 317. Membership exists when contract is completed.
§ 318. Obligations and rights of members generally.
§ 318a. Same subject: title to company's property.
§ 318b. Property rights of company and members: constitutional law.
§ 319. Relations of members of mutual companies: partnership.
CHAPTER XIV.
PARTIES— THE INSURER.
§ 325. Insurer defined.
§ 326. Stock insurance companies defined.
§ 327. Legislation concerning insurance companies.
§ 328. Same subject: foreign companies.
§ 328a. State regulation : insurance business as franchise.
§ 328b. State regulation : quasi public character of insurance business.
xxiv CONTENTS
§ 329. Foreign company: retaliatory and anti-compact laws: combina-
tions to control rates.
§ 329a. Anti-compact laws: combinations to control rates continued: con-
spiracy.
§ 330. Foreign companies: what constitutes "doing business," etc.
§ 330a. Same subject.
§ 331. Foreign company estopped to avoid contract by setting up non-
compliance with statutes.
§ 332. Wlien contracts valid although company has not complied with
statutes.
§ 332a. Same subject.
§ 332b. Same subject: insurance in foreign state of property in another
state.
§ 333. When contracts not valid where company has not complied with
statutes.
§ 333a. Same subject.
§ 333b. Same subject.
§ 334. Charter: corporate powers: ultra vires.
§ 334a. Same subject: power of corporation to insure life of its president.
§ 335. Forfeiture of charter.
CHAPTER XV.
INDIVIDUALS, UNINCORPORATED ASSOCIATIONS, LLOYDS,
PARTNERSHIPS.
§ 335a. English and American Lloyds systems compared.
§ 335b. Individuals, unincorporated associations) Lloyds: Alabama.
§ 335c. Same subject : Florida.
§ 335d. Same subject: Georgia.
§ 335e. Same subject: Illinois.
§ 335f . Same subject : Kentucky.
§ 335g. Same subject: Massachusetts.
§ 335h. Same subject : Minnesota.
§ 335i. Same subject : Mississippi.
§ 335j. Same, subject : Missouri.
§ 335k. Same subject : New Jersey.
§ 3351. Same subject : New York.
§ 335m. Same subject : Ohio.
§ 335n. Same subject : Pennsylvania.
§ 335o. Same subject : decisions inf erentially bearing thereon.
§ 335p. Partnerships as insurers.
CONTENTS XXV
CHAPTER XVI.
DIFFERENT FORMS OF INSURANCE CLASSIFIED.
§ 33G. Policy against railroad .liability for fires is fire, not guaranty, in-
surance.
§ 336a. Whether inter-insurance or inter-indemnity plans are insurance
contracts.
§ 336b. Same subject: agreement between printing companies.
§ 336c. When copartnership agreement is life insurance.
§ 336d. Burial or funeral benefit insurance is life insurance.
§ 336e. Whether annuities are life insurance.
§ 336f. Endowment: pure endowment and annuity contracts.
§ 336g. To what extent tontine insurance is life insurance.
§ 337. Whether contract one of loan or of life insurance.
§ 337a. Other instances of what is and is not life insurance.
§ 337b. Whether policy, life or accident : generally.
§ 337c. Industrial insurance with provisions as to accidental death is not
accident insurance.
§ 337d. Newspaper contract may constitute an accident policy: ultra vires.
§ 337e. Employers' liability or indemnity insurance.
§ 338. Insurance of and by carriers: agreement of, to procure insurance.
§ 338a. Burglary insurance.
§ 338b. What is not insurance on automobiles.
§ 338c. When bicycle association not insurance company.
§ 338d. Sanitary inspection of buildings, etc., is not insurance.
§ 338e. Contracts to compensate unemployed employees.
§ 339. When guarantee or surety company contracts constitute insurance.
§ 339a. Fidelity guaranty bonds or contracts constitute insurance.
§ 339b. Same subject.
§ 339c, Contract to indemnify "assured" for bank's default is contract of
insurance: bond to secure deposits.
§ 339d. WHien contract guaranty, bond, mortgage, and securities guaranty,
do and do not constitute insurance.
§ 339e. Guarantee to repay loan is contract of insurance.
§ 339f. When building contractors' bonds are insurance contracts.
§ 339g. Title guaranty contract constitutes insurance.
§ 339h. Credit guaranty contracts constitute insurance.
§ 339i. Loss of crops: guarantee of realty revenue constitutes insurance.
xxvi CONTEXTS
CHArXER XVII.
PARTIES— MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES.
§ 340. Mutual insurance benefit, etc. companies or associations defined.
§ 341. Mutual and benefit, etc. companies or associations: capital stock:
funds for payment of losses: guaranty or reserve funds.
§ 341a. Same subject.
§ 342. Kinds of mutual insurance companies or associations.
§ 343. Plans of mutual insurance.
§ 344. When mutual, etc. societies or associations are and are not insurance
companies.
§ 344a. Same subject : pecuniary profit as a factor.
§ 344b. Same subject : pecuniary profit as a factor : lodge systems.
§ 344c. Same subject: lodge system continued.
§ 344d. Same subject : pecuniary profit as a factor : masonic benevolent or
relief associations.
§ 344e. Same subject : rules of construction as a factor.
S 344f . Same subject : attachment of copy of application or by-laws.
>5 344g. Same subject: other insurance as a factor.
§ 344h. Same subject : liabilitj^ as a factor.
§ 344i. Same subject: applicability of insurance laws: statutory exemp-
tions.
§ 344j. Applicability of insurance laws continued : right to do business as a
factor.
§ 344k. Applicability of insurance laws: live stock association.
CHAPTER XVIII.
PARTIES— MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES,
CONTINUED.
§ 345. What societies or associations are not insurance companies: cases.
§ 34G. What societies or associations are insurance companies : cases.
§ 346a. Same subject.
§ 346b. Whether co-operative or assessment plan or old line company:
distinctions.
§ 346e. Whether comiiany fraternal beneficial association or mutual assess-
ment company: distinctions.
§ 346d. Whether sick benefit, burial, and beneficial association an insur-
ance company.
CONTENTS .xxyii
§ 346e. Whether railroad relief associations are insiiranee companies. ..
§ 346f. Stock associations with beneficiary fund not an insurance com-
pany.
CHAPTER XIX.
PARTIES— MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES,
CONTINUED— POWER S.
§ 350. Power of mutual companies, societies, or associations affecting
the contract : ultra vires.
§ 350a. Same subject : power as to membership.
8 350b. Same subject: power to classify members: discrimination as to.
§ 350c. Same subject: power to restrict or extend classes of beneficiaries.
§ 350d. Same subject: limitation of amount of risk.
§ 350e. Same subject: limiting liability as to premiums and assessments.
§ 350f. Same subject: contract to return dues.
§ 350g. Same subject : paid-up or extended insurance : non-f orf eitable and
incontestable insurance.
§ 350h. Same subject: waiver by association, or mutual benefit company.
§ 350i. Same subject: estoppel: defense of ultra vires.
§ 350j. Same subject: reinsurance.
§ 350k. Same subject : power as to other business or risks.
§ 3501. Same subject : contract with amusement company valid.
§ 350m. Same subject : when company or society can change plan : im-
pairment of obligation of contract.
§ 350n. Same subject: when company or society cannot change plan.
§ 350o. Same subject: when change from mutual, etc., to joint-stock or
stock plan can be made.
§ 350p. Same subject: when change from mutual, etc., to joint-stock or
stock plan cannot be made.
§ 350q. Right to convert friendly society into company: injunction.
§ 350r. Same subject : consolidation or merger.
§ 350s. Same subject : reincorporation or reorganiation of mutual com-
pany on stock plan.
§ 350t. Same subject: reorganization or reincorporation: impairment of
obligation of contract.
§ 351. Same subject : guaranty or reserve fund.
§ 351a. Same subject: guaranty or reserve, ''mortuary reserve," "death
benefit," "reserve and emergency," funds: trust funds.
§ 352. Benevolent and fraternal organizations subject to laws of state
and jurisdiction of courts: conditions precedent to resort to
courts. .i
xxviii CONTENTS
§ 352a. Same subject.
§ 352b. Same subject: strict construction of such conditions precedent.
§ 352c. Same subject: Kelly v. Trimont Lodge.
§ 353. Absolute right to become member under charter of mutual com-
pany.
§ 354. Contributions by subordinate lodge to supreme lodge: specific
purpose: power of disposal of funds.
§ 354a. Right of subordinate circles or lodges to funds: rights of member
who has withdrawn.
§ 354b. Funds of subordinate circle or lodge: trust funds: cannot be di-
verted.
§ 354c. Duty of association to protect subordinate circle's funds against
diversion.
§ 355. Effect of decisionr by official body created by constitution of order.
§ 356. Delegation of jiower by supreme lodge: mutual benefit society.
§ 357. Subordinate association cannot be deprived of charter without
hearing.
§ 358. Member or officer of benevolent association cannot be expelled
without hearing.
CHAPTER XX.
MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES— BY-LAWS.
§ 364. Definition of by-laws.
§ 365. Power to enact by-laws inherent : how exercised.
§ 365a. Same subject.
§ 365b. When statutory power to adopt by-laws is exclusive.
§ 365c. Association may be estopped to assert by-law not properly adopted,
§ 366. Charter provisions concerning by-laws.
§ 367. Adoption of by-laws by custom or usage.
§ 368. Incorporated societies : unreasonable by-laws.
§ 369. Unincorporated societies : unreasonable by-laws.
§ 369a. When by-laws reasonable: continued.
§ 369b. Same sul)ject : police power.
§ 369c. When by-laws unreasonable: continued.
§ 369d. When member bound by unreasonable by-laws.
§ 370. By-laws must not be unequal: discrimination.
§ 371. By-laws, rules, and regulations : when valid.
§ 371a. By-law providing wedding gift valid : ultra vires.
§ 371b. When by-laws invalid.
§ 371c. By-laws valid in part and void in part.
§ 372. By-laws excluding resort to civil courts : constitutional provisions.
CONTENTS xxix
§ 372a. Same subject: when courts will not intervene: decisions.
§ 372b. Same subject: when courts will intervene: decisions.
§ 373. By-laws must not be contrary to laws of state or United States.
§ 374. By-laws against public policy are void.
§ 375. By-laws must not contravene terms of charter, constitution, or
articles of association.
§ 376. Enforcement of by-laws: penalty.
CHAPTER XXI.
MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES— CHANGE OF
BY-LAWS, ETC.— CONSTRUCTION.
§ 377. Power to alter or change by-laws.
§ 378. By-laws, constitutions, etc.: changes, how made.
§ 378a. Same subject.
§ 378b. Same subject : requirements as to notice.
§ 378c. Same subject: delegation of power.
§ 378d. Same subject: adoption of committee's report: validating unau-
thorized by-laws.
§ 378e. Same subject: right to exercise powers outside state of incor-
poration.
§ 379. By-laws : ' statutory or charter power to repeal, change, etc.
§ 379a. By-laws, constitution, etc.: amendments, changes, or repeal under
reserved power or agreement.
§ 379b. Same subject: decisions holding amendments, etc., binding.
§ 379c. Same subject: decisions holding amendments, etc., not binding.
§ 379d. Same subject: prohibiting extra-hazardous occupation.
§ 379e. Same subject: prohibiting engaging in liquor or saloon business.
§ 379f. Same subject: prohibiting use of intoxicating liquors or drugs.
§ 379g. Same subject: accidental injuries: total disability.
§ 379h. Same subject: deficiency or reserve assessments: delinquent as-
sessments.
§ 379i. Same subject: time limitation for suing.
§ 379j. Same subject: as to remedies within association.
§ 379k. Amendments, changes, or repeal must be reasonable even under
reserved power or agreement.
i> 3791. Reasonable amendments, etc., Ijindiiig.
§ 379m. When amendments, etc., are reasonable.
§ 379n. When amendments, etc., are unreasonable.
§ 379o. Amendments or changes must not operate retroactively: reserved
right or agreement to amend or change: vested rights.
§ 379p. Same subject.
■XXX CONTENTS
§ 379q. Same subject: instances.
§ 380. Change of by-laws, etc.: vested right.
§ 380a. Same subject.
§ 380b. Same subject : instances.
§ 380c. Same subject : changes in by-laws, etc. : increasing assessments or
dues or reducing amount payable.
§ 380d. Same subject : changes in "by-laws, etc., to prevent financial disas-
ter or dissolution.
§ 380e. Same subject: classification of risks: discrimination.
§ 380f. Right of member or beneficiary to object to amendmento : waiver
or estoppel.
§ 380g. Same subject: when waiver or estoppel not applicable.
§ 380h. Waiver by or estoppel against association, society, etc., or ofTicers
thereof: amendments.
§ 381. Construction of by-laws.
CHAPTER XXII.
AGENTS OF INSURER— APPOINTMENT, ETC.— POWERS.
§ 386. Corporations act through agents.
§ 387. Charter provisions concerning agents.
§ 388. Who are insurance agents.
§ 389. Classification of agents,
§ 390. Appointment of agents.
§ 391, Appointment of agents: statutes.
§ 391a. Statute confining business of agent or broker to certai class, un-
constitutional.
§ 392. Appointment of agents: territory: contract wi.; principal.
§ 393. Relative power of agents of stock and mutual companies.
§ 394. Same subject: powers after completion of contract,
§ 395. Who is general agent.
§ 395a. Same subject.
§ 396. Power of agents to delegate authority.
§ 397. Officers of insurance corporations and associations and their pow-
ers.
§ 398. Powers of officers of mutual benefit societies,
§ 399. Powers of president.
§ 400. Powers of vice-president.
§ 401. Powers of secretary.
§ 402. Powers of assistant secretary.
§ 403. Powers of treasurer.
§ 404. Powers of directors.
CONTENTS xxxi
§ 405. Powers of superintendent.
§ 406. Powers of g-eneral managers.
§ 407. Agency of subordinate lodges.
§ 407a. Same subject.
§ 408. Agency arising from necessity or emergency.
§ 409. Agent delegated for special purpose.
§ 410. Agency: person referred to by company.
§ 411; Powers of clerk.
§ 412. Powers of medical examiner.
§ 413. Whether one is agent or broker.
§ 414. Whether broker is agent of insured or insurer.
§ 415. Partnership as agent: joint agents.
§ 416. Powers of adjuster.
§ 416a. Fidelity bond : when not obligor's agent.
CHAPTER XXIII.
AGENTS OF INSURER-POWERS, CONTINUED.
§ 424. Powers of agents: generally.
§ 425. Authority which the agent is held out to possess.
§ 426. Agent's authority is coextensive with his employment.
§ 427. Authority which the agent represents himself to possess.
§ 428. Private restrictions upon agent's authority.
§ 428a. Same subject: subagents. ^
§ 429. Assured bound by knowledge of limitations upon agent's authority.
§ 430. Obligation to inquire as to agent's authority.
§ 431. What is not notice of agent's limited authority.
§ 432. Stipulation that only certain agents may waive.
§ 433. Limitation of agent's authority in policy is valid.
§ 433a. Statutory provisions: waiver: standard policy.
§ 434. Authorities holding that restrictions in policy on agent's authority
bind insured.
§ 434a. Same subject.
§ 435. Restrictions in policy as to the manner of exercising authority by
agent.
§ 436. That restrictions in policy on agent's powers only relates to acts
after policy delivered.
§ 436a. Same subject.
§ 437. That restrictions in policy on agent's powers only relate to acts
before loss.
§ 438. That restrictions in policy on agent's powers are only prima facie
binding.
xxxii CONTENTS
§ 439, Conclusion : agent may waive conditions notwithstanding inhibition
in policy.
§ 440. Opinions of courts upon waiver and estoppel : agents.
§ 440a. Same subject.
§ 441. Restrictions in policy : oral waiver.
§ 442. Same subject : cases contra.
§ 442a. Waiver: officers or agents of subordinate lodges.
§ 443. Where agent promises to make proper indorsement on policy, but
fails to do so.
§ 444. Restrictions in application on agent's authority.
§ 445. Agency : custom, etc. : course of business : similar acts.
§ 446. Agency : custom : signing for principal.
§ 447. Agency: custom, etc.: waiver of conditions.
§ 448. Agency : custom : alteration of contract.
§ 449. Agency : custom, etc. : submission to award.
§ 450. Agency : custom : proofs of loss.
§ 451. Agency : custom, etc. : surrender of policy.
§ 452. Agency : custom : transfer of insurance.
§ 453. Agency : custom, etc. : negotiation of drafts.
§ 454. Agency : custom, etc. : cancelation of policy.
§ 455. Ratification of agent's acts: generally.
§ 455a. Same subject.
§ 456. Ratification of agent's acts operates retroactively.
§ 457. Ratification of agent's acts must be entire.
§ 458. Ratification of agent's acts must be one which principal could have
authorized.
§ 459. Ratification of agent's acts: signing for principal.
§ 460. Ratification of agent's acts : the premium.
§ 461. Ratification of agent's acts: retaining benefits.
§ 462. Ratification of agent's acts: neglect to disaffirm.
§ 463. Ratification : agent must have assumed to act for claimed principal.
§ 464. Ratification of agent's acts: other insurance.
§ 465. Power to bind insurance company by contracts other than those
of insurance.
CHAPTER XXIV.
AGENTS OF INSURER— POWERS PRIOR TO ISSUE OF POLICY.
§ 472. Powers of agent concerning application : misrepresentations.
§ 473. Misrepresentations of agent : continued.
§ 474. Misrepresentations by agent in the application: statements made
warranties.
CONTENTS xxxiii
§ 474a. Same subject: medical examiner.
§ 474b. Same subject: effect of signature of applicant at beginning of
examination papers.
§ 475. Wbere true answers are given but agent inserts different ones m
application.
§ 47ja. Same subject.
§ 476. Same subject: cases.
§ 477. Where answers are unintentionally incorrect: agent's knowledge.
§ 477a. Where agent corrects old application or tills in new one therefrom
or from other applications.
§ 478. False answers by clerk of agent.
§ 479. Misrepresentations: application signed by agent without applicant's
authority.
§ 480. Where agent agrees to note fact in application.
§ 481. Omission or negligence of agent in filling out application.
§ 481a. Same subject.
§ 482. View that not question of waiver or estoppel, but whether condi-
tion attached.
§ 483. Mistake of agent in filling out application.
§ 484. Misrepresentations by agent with full knowledge of facts.
§ 485. Misrepresentations by agent : applicant signs in blank.
§ 486. Misrepresentations by agent: application sent unsigned to com-
pany.
§ 487. Where agent fills out application without inquiry or of his own
knowledge.
§ 487a. Question not answered or imperfectly answered and policy issued
without further inquiry.
$5 488. Where applicant has no knowledge of facts and agent fills out
application.
§ 489. Misrepresentations by agent: where applicant signs application
without reading or knowing contents.
§ 489a. Same subject.
^ 490. Misrepresentations by agent: where applicant is illiterate, etc.
§ 491. Fraud of agent in preparing application.
§ 492. Agent's knowledge of falsity or incorrectness of applicant's state-
ments.
§ 492a. Same subject.
§ 493. Where applicant is assured by agent that application is correct.
§ 494. Misrepresentations by agent: insured may rescind.
§ 495. Broker's misrepresentations: application.
§ 496. Oral application: agent's knowledge.
§ 497. Information obtained from others by agent: application.
§ 498. Where agent writes down such answers as he deems material:
application.
§ 498a. Agent's construction of answers: application.
xxxiv CONTENTS
§ 499. Where agent dictates or advises the answers : application.
§ 500. Where agent tells insured no answers are necessary : application.
§ 501. Policy issued on agent's representations or recommendations.
§ 502. Where application gives notice of agent's limited authority.
§ 503. ^lisrepresentations by agent : copy of application or by-laws an-
nexed to policy.
§ 504. Misre^jresentations : agent's collusion with applicant.
§ 504a. Same subject.
§ 505. Misrepresentation by agent : parol evidence admissible.
§ 506. Same subject : the opposing view.
§ 507. Same subject : wliere agent's authority is limited.
§ 508. Agent of insured: when such provision in policy is inoperative,
§ 508a. Same subject : standard policy.
§ 508b. Same subject: medical examiner.
§ 509. Same subject : mutual companies and benefit societies.
§ 510. Authority of subordinate officers of benefit association or rail-
road relief department to waive requirements as to application.
§ 511. Agents of insured : knowledge of insured.
§ 512. Statutes: soliciting agent is company's agent.
§ 512a. Same subject.
§ 512b. Same subject: stipulations conflicting with statute.
§ 512c. Who are insurer's agents : cases.
§ 513. Cases holding that agent is agent of insured.
§ 514. ^Misrepresentations of insurer's agent to induce insurance.
§ 515. Notice to and knowledge of agent : generally.
§ 515a. Same subject : rule applies to what agents.
§ 515b. Same subject : when certain agents not within rule,
§ 515c. Same subject : notice to one of firm of agents.
§ 515d. Same subject : brokers.
§ 515e. Same subject : manner, mode or place of notice,
§ 515f. Same subject : statutes.
§ 515g. Same subject : when insurer bound : instances.
§ 515h. Same subject : when insurer not bound : instances.
§ 515i. Same subject: mutual benefit, etc., societies or associations.
§ 516. Presumption as to agent's knowledge.
§ 517, Reformation of policy to 'conform with actual contract.
CHAPTER XXV.
AGENT OF INSURER— POWERS— THE POLICY.
§ 525. Agent : power to make oral contract.
§ 526. Power of agent to accept risks and make contracts.
CONTENTS XXXV
§ 526a. Same subject: credit guarantee insurance.
§ 527. Where contract of agent is personal.
§ 528. Power of agent to subscribe policy.
§ 529. Power of agent to execute retroactive policy.
§ 530. Countersigning policy by agent.
§ 530a. Same subject: mutual benefit certificate: execution by subordinate
officers.
§ 531. Where subagent signs for agent.
§ 532. Signature of assured: waiver by agent.
§ 533. Waiver and estoppel by acts of agents: generally.
§ 533a. Same subject.
§ 533b. Same subject: new agreement, consideration or estoppel.
§ 533c. Same subject : industrial insurance agent.
§ 533d. Same subject: mutual benefit, etc., companies or associations.
§ 534. Waiver and estoppel by agent: conditions precedent and subse-
quent.
§ 535. What agents may waive conditions: knowledge before and after
contract made.
§ 536. Waiver of forfeitures by agent: generally.
§ 537. Power of agent to bind company by construction of policy : agent's
conclusions or advice.
§ 537a. Power of attorney-at-law as agent to estop insurer by advice to
insured.
§ 538. Agent: power to renew.
§ 539. Revival of policy by agent.
§ 540. Power of agent to orally waive.
§ 541. Where agent fails to take advantage of forfeiture.
§ 542. Waiver by receiving premium: agent.
§ 543. Waiver by delivery of policy : agent.
§ 543a. Same subject : agent of local lodge of fraternal order.
§ 544. Knowledge not obtained in course of agent's employment.
§ 544a. Same subject: what evidence necessary to innd insuier.
§ 545. What agent might have learned by ordinary diUgence.
§ 546. Agent's knowledge obtained in individual capacity.
§ 547. Knowledge of company at whose instance another company issues
policy.
§ 548. Agent's power to grant permits affecting risk.
§ 549. Agents: pov.er to alter policy.
§ 550. Agents: powers in relation to the premium.
§ 551. Agent's authority to fix rates for premium.
§ 552. Agent's agreement to give notice wlien premium due.
§ 553. Agent's authority in regard to first and subsequent premiums.
§ 554. Agent's powers in relation to premium.s : what agent may waive.
§ 555. Agent's powers in relation to premium: when no waiver: cases.
§ 555a. Same subject.
xxxvi CONTENTS
§ 556. Agent's powers: other insurance: waiver,
§ 556a. Same subject.
§ 556b. Statutory policy: provisions as to agents and waiver by failure
to cancel : other insurance.
§ 557. Broker : other insurance : waiver,
§ 558. Agent's powers : other insurance : when no waiver : instances.
§ 558a. Same subject,
§ 559. Agent's powers: change of risk: waiver,
^ 560. Agent's powers : alienation : assignment : waiver.
§ 561. Alienation : assignment : when company not bound by agent's acts.
§ 561a. Agent's powers : alienation : change of interest : "in trust or on
commission, or sold but not removed :" chattel mortgage,
§ 562. Agent's powers : keeping prohibited articles : waiver.
§ 562a. Agent's authority: title and interest: waiver.
§ 563. Agent's authority: encumbrances: waiver: instances.
§ 563a. Same subject.
§ 564. Agent's authority : encumbrances : when no waiver.
§ 565. Agent's authority: vacant: unoccupied: waiver,
§ 565a. Same subject.
§ 566. Agent's authority : vacant : unoccupied : when no waiver.
§ 567. Agent's authority: cancelation.
§ 568. Agent's authority: location of property: removal of projDerty.
CHAPTER XXVI.
AGENTS OF INSURER— POWERS— THE LOSS,
§ 575, Agent's authority : notice of loss.
§ 576. Agent's authority: what is not sufficient notice of loss.
§ 577. Misstatements by agent in proofs of loss : estoppel.
§ 578. "Where agent aids in preparing proofs of loss : waiver.
§ 579. Agent : waiver of proofs of loss : condition conflicting with settled
rule of law.
§ 580. Where formal proofs are waived : agent.
§ 581. Delivery of proofs of loss to agent.
§ 582. Proofs of loss : place of delivery : waiver by agent.
§ 583. What agent may waive proofs of loss, or death.
§ 584. Waiver by acts of adjuster: proofs of loss or death.
§ 584a. Same subject.
§ 585. Where no waiver by adjuster of proofs of loss.
§ 586. Acts of agent in adjusting loss: how far binding on company.
§ 586a. Same subject.
CONTENTS xxxvii
§ 587. What agent may not waive proofs at loss.
§ 588. Proofs of loss : what is not a waiver : agent.
§ 589. Retention of proofs of loss by agent : failure to object.
§ 590. Proofs of loss : examination by agent : waiver.
§ 591. Proofs of loss : waiver : agent's denial of company's liability : other
grounds.
§ 592. Proofs of loss : delay caused by agent.
§ 593. Custom of other agents: proofs of loss: waiver.
§ 594. Fraud of agent in inducing settlement : waiver : proofs of loss.
§ 595. Adjustment of loss: agent.
§ 596. Particular account : loss : waiver by agent.
§ 597. Marine protest: waiver: agent.
§ 598. Agent's powers after loss: generally.
§ 599. Fraud of agent : settlement: award: assignment.
§ 600. Agent's authority : arbitration : appraisement.
§ 601. Agent's ^authority: subrogation.
§ 602. Agent's authority: time limit for suing: waiver.
§ 603. Abandonment to insurer's agent.
CHAPTER XXVII.
AGENT OF INSURED.
§ 608. Agent of insured: authority, how conferred.
§ 608a. Power of attorney: power to hypothecate policy.
§ 609. Right of general or special agent to insure.
§ 610. Agency arising from situation with reference to the property.
§ 611. Agency may be created by possession of the policy.
§ 612. Agency: possession of written application.
§ 613. Agent with general power to insure: mutual company.
§ 614. Authority of partner.
§ 615. Authority of part owner.
§ 616. Authority of joint owner.
§ 617. Authority of tenant in common.
§ 618. Authority of ship's husband.
§ 619. Agent effecting insurance "for whom it may concern."
§ 620. Right of agent to insure in case of emergency.
§ 621. Agency arising from custom or course of dealing.
§ 622. Del credere agents.
§ 623. Insurance by factors.
§ 624. Supercargo: power to insure.
§ 625. Authority of commission merchants: consignees.
§ 626. Bailee mav effect insurance: warehouseman.
xxxviii CONTENTS
§ 626a. Authority of bailee or agent in possession.
§ 627. Authority of trustees.
Treasurer of local lodge may be trustee.
Authority of prize agents to insure.
Agent : insurance by carrier.
Where husband acts as agent of wife.
Insured's agent : adjustment of loss.
Authority of insured's agent as to proofs of loss or death.
Authority of agent to make abandonment: master.
Broker not agent of insurer to receive notice of transfer of policy.
Agent or broker procuring insurance cannot cancel.
Notice of cancelation to agent or broker procuring insurance in-
sufficient.
Same subject.
Cancelation : condition that notice be given party procuring insur-
ance': provision that agent, etc., is insured's agent.
§ 639. Cancelation : when notice to insured's agent or broker is sufficient.
§ 639a. Same subject : where agency is general as to insured's business.
§ 639b. Notice of cancelation by or to agent or broker of insured : whether
cjue^tion for jury.
Cancelation : agent of both parties.
Agents of insured : cancelation: custom.
Ratification by insured of agent's acts: waiver.
Concealment by assured: general rule.
Concealment by principal from agent to effect insurance.
Concealment by principal from general agent.
Concealment by agent or broker to effect insurance.
Concealment by agent other than one to effect a policy.
Concealment where agency has ceased.
Concealment by agent : false advices : loss by another peril.
Degree of diligence required to communicate information : agent.
§
028.
§
629.
§
630.
§
631.
§
632.
§
633.
§
634.
§
635.
§
636.
§
637.
§
637a
§
638.
§
640.
§
641.
§
642.
§ 643.
§
644.
§
645.
§
646.
§
647.
§
648.
§
649.
§
650.
■"o"-
CHAPTER XXVIII.
AGENTS— DUTIES— LIABILITIES.
§ 655. Duties of agents: generally.
§ 656. Duties of insurer's agents: generally.
§ 657. Duty of agent of insured : generally.
§ 658. Duty of agent to inform principal.
§'659. Effect on insured of agent's neglect of duty to insurer.
§ 660. Agent cannot issue policy to himself.
§ 661. Agent cannot act for both parties.
CONTENTS xsxix
§ 662. Same subject: exception to rule.
§ 663. Agent should notify principal of refusal to accept order.
§ 664. Agent should notify principal of failure to effect insurance.
§ 665. Agent must follow instructions.
§ 665a. Same subject.
§ 666. Same subject : instructions to cancel.
§ 667. Where agent's orders vest him with a discretion.
§ 668. When agent is excused for noncompliance with instructions.
§ 669. Duty to insure.
§ 670. Agent's duty: more advantageous terms.
§ 671. Where agent departs from usage or usual form of the policy.
§ 672. Duty as to premium.
§ 673. Duty as to subagent.
§ 674. Degree of skill required from agents.
§ 675. Duty to effect other insurance in case of insurer's insolvency.
§ 676. Duty of agent to settle loss.
§ 677. Duty and liability as to payment of loss: agent.
§ 678. Liability of agent or brokers: generally.
§ 678a. Same subject : when agent not liable.
§ 678b. Liability of agent for subagent's acts or of broker for agent's
acts.
§ 679. Neglect to effect a valid insurance policy: insolvent, unauthorized,
nonadmitted companies.
§ 679a. Liability to insured of agent inducing insurance in insolvent, un-
licensed nonadmitted company: statute of frauds: defenses.
§ 679b. Statutory liability to insured of agent procuring insurance in
unauthorized company: defenses.
§ 680. Liability of voluntary or gratuitous agent.
§ 681. Liability of agent or broker for premium.
§ 682. Liability for concealment : agent.
§ 683. Liability of officers of company.
§ 683a. Same subject: mutual companies or fraternal associations.
§ 683b. Libel and slander of agent or insurer: privileged communications
of president of association.
§ 684. Liability of company for agent's frauds, illegal acts, etc.
§ 684a. Same subject:
CHAPTER XXIX.
AGENTS— RIGHTS AND REMEDIES.
§ 690. Agent's and broker's lien: when it attaches and what it covers.
§ 691. Agent's lien : assignment of policy by assured.
xl CONTENTS
§ 692. Lien of subagent or broker.
§ 693. How agent's lien may be lost or waived.
§ 694. Revival of agent's lien.
§ 694a. Advances to agent or subagent: lien.
§ 69.5. Agent's or broker's right to commissions : renewal commissions.
§ 69G. Subagent's right to commissions: renewal commissions.
§ 697. When agent not entitled to commissions or renewal commissions.
§ 697a. When subagent not entitled to commissions or renewal commis-
sions.
§ 697b. Same subject: contract procured jointly with or through another
agent.
§ 697e. Agent's right to commissions : cancelation : unearned premiums.
§ 697d. Stipulation not to engage in business with another company: for-
feiture of renewal commission.
§ 697e. Stipulation that commissions shall not apply to new forms of
policy.
§ 697f. Agent's right to contingent commissions : computation.
§ 697g. Agent's right to commissions where insurer puts it out of his
power to pay them.
§ 697h. Agent's right to commissions : deductions : novation.
§ 697i. Statutory limitation of expenses not retroactive: commissions:
reductions : police power : constitutional law.
§ 697j. Statute requiring license of agent or broker: when commissions
not recoverable : when recoverable : unconstitutional statute.
§ 697k. When agent's right to renewal commissions assignable : trustee in
bankruptcy.
§ 6971. Annuity in compromise of claim of manager for breach of employ-
ment contract : priority over general creditors.
§ 697m. Insurer not liable on oral contract of precident to pay agent annu-
ally for life.
§ 698. Rights of agents as to the premium.
§ 699. Set-off: agent.
§ 700. Same subject : English authorities.
§ 701. Same subject : English and American authorities.
§ 702. Agency: attorney of foreign company.
§ 703. Service of papers or process: agent of foreign company.
§ 704. Recovery back of loss paid by company's agent.
CHAPTER XXX.
AGENTS— RIGHTS AND REMEDIES— CONTINUED— TERMINA-
TION OF AGENCY.
§ 705. Action against receiver by agent.
CONTENTS xli
§ 705a. Agent's action for damages for anticipatory breach of contract.
§ 705b. Same subject: liability of purchasing insurer to agent of selling
insurer.
§ 705c. Action bj- agent for damages : breach of contract.
§ 705d. Action bj' agent : overpayments : time limitation in contract.
§ 705e. Action by agent for compensation for insurer's use of new system
of soliciting.
§ 706. Action against company by average adjusters.
§ 707. Indictment of agent for larceny.
§ 707a. Indictment of agent for unlawful conversion or embezzlement.
§ 708. Action on agent's bond.
§ 709. Same subject: laches of principal: notification of sureties.
§ 710. Action on agent's bond : prior defaults.
§ 711. Action on local agent's bond.
§ 712. Action on agent's bond : defenses.
§ 713. Actions against agents of foreign companies acting without license:
statutes.
§ 713a. Same subject.
§ 714. When agent's right may not be abridged though acting for unli-
censed companj'.
§ 715. Indictment of agent for paying rebate : statute.
§ 716. Reformation of policy for agent's mistakes, etc.
§ 717. Agent's defenses.
§ 718. Proof of agent's authority.
§ 719. Termination of agency : war,
§ 719a. Termination by destruction of subject matter: earthquake.
§ 719b. Termination of agency : death.
§ 720. Termination of agency as to assured.
§ 721. Termination of agency as to assurer : revocation.
CHAPTER XXXI.
BENEFICIARIES— GENERALLY.
WHO MAY BE— INTEREST— DESIGNATION OF— CHANGE OF.
§ 727. ''Beneficiary" defined : same, industrial insurance.
§ 728. Beneficiaries, generally : designation of : specified classes : equities.
§ 728a. Same subject : whether statutes or charter controls : by-laws :
same; foreign corporation.
§ 729. Insurable interest in beneficiary : necessity of.
§ 729a. Same subject.
xlii CONTENTS
§ 730. Interest of benefieiary in regular life policy is vested: cannot be
defeated without consent.
§ 730a. When beneficiary's vested interest under life policy dependent upon
its nonforfeiture.
§ 730b. Vested interest or beneficiary: industrial or burial insurance:
change of beneficiary : payment.
§ 731. Vested interest defeated by contract: right to change beneficiary.
§ 732. Statements as to beneficiary in application.
§ 733. When member may designate or change beneficiary by will.
§ 734. Disposition by residuarj' clause of widow's will : statute.
§ 735. When member may not desig-nate or change beneficiary by will:
effect of designation by will.
§ 735a. Disposal of benefit certificate by will.
§ 736. Right of insured under regular life policy to dispose of same by
will.
§ 737. Who may be benefieian.^ : order of Knights of Pythias : widow and
children : creditors' interest : Knights of Honor.
§ 738. Designation of beneficiary: how construed: analogous to testa-
mentary disposition.
§ 739. Where no beneficiary is designated: ineffectual designation: lapse
to society.
§ 740. When insured in regular life policy may change beneficiar>\
§ 740a. Provisions of life policy as to changing beneficiary .must be com-
plied with.
§ 740b. Industrial insurance: compliance with conditions as to change of
beneficiary.
§ 740c. Accident policy: reserved right and mode of changing beneficiary.
§ 740d. Change of beneficiary: statements as to age, etc., conditions as to
assignment : changes : waiver, etc., not applicable.
§ 741. Right to change beneficiary under mutual or fraternal benefit cer-
tificate: whether interest of beneficiarj' a vested interest.
§ 741a. Same subject: specified classes.
§ 742. Beneficiary may acquire vested interest under contract with mem-
ber.
§ 742a. Mutual promises of parents not to change beneficiaries: children
may not enforce contract.
§ 743. No vested right though beneficiary has possession of certificate.
§ 744. Provisions as to designation or change of beneficiary in charter,
by-laws, etc., must be complied with if possible.
§ 744a. Same subject : what is and is not sufficient compliance.
§ 745. When mode prescribed by charter differs from general rule of law.
§ 746. Change of beneficiary: exceptions to the rule that by-laws must be
followed.
§ 746a. Same subject: when formalities waived: estoppel.
§ 746b. Same subject : when no waiver or estoppel as to formalities.
CONTENTS xliii
§ 746e. Same subject: waiver by payment of fund into court.
§ 746d. Same subject: equity.
§ 747. Mere regulation or matter of practice not binding as to change of
beneficiary.
§ 748. Effect of subsequent change of by-laws or statutes.
§ 749. Amendment as to payee does not necessitate changing of benefi-
ciary.
§ 750. Where provision as to mode of change of beneficiary cannot be
complied with: loss or wrongful retention of certificate.
§ 751. Where member dies before change of beneficiary is complete.
§ 752. Where designation of beneficiary is invalid.
§ 753. Effect of an invalid or inoperative change of beneficiary.
§ 754. When society only can set up noncompliance with by-laws.
§ 754a. Eight of beneficiary to object to noncompliance with by-laws.
§ 755. Statutes relative to designation of beneficiary.
§ 756. Statutes relative to change of beneficiary.
CHAPTER XXXII.
BENEFICIAEIES-PARTICULAR DESIGNATIONS AND EFFECT
OF SAME.
§ 763. "Absent brother" as beneficiary.
§ 764. "Affianced wife:" betrothed as beneficiary.
§ 765. "As he may direct:" "shall direct:" "may have directed:" "as
directed by will." '
§ 765a. Brother: brothers and sisters.
§ 765b. Brother-in-law.
§ 766. "Children:" where no children survive.
§ 767. "Children" does not generally include grandchildren.
§ 767a. Same subject : "children surviving."
§ 7CS. "Children" does not include children of wife by former marriage.
§ 769. "Children :" where children are born subsequent to the issuance of
the certificate or policy.
§ 76Da. Same subject : children of first and second wife : or of second wife.
§ 769b. Posthumous child of second marriage.
§ 770. "Children," when includes adopted child : release of rights.
§ 771. "Children :" "his children :" who included generally : includes child
by former wife.*
§ 772. Children : "their cliildren."
§ 772a. Children : their children : subsequent man-iage of insured.
§ 772b. Church.
§ 773. "Dependents:" "legal dependent."
xUv CONTENTS
§ 773a. "Dependents:" who are: instances.
§ 773b. "Dependents:" who are not: instances.
§ 773c. "Dependents:" when relation terminated by marriage.
§ 774. "Devisees:" "devisees or heirs at law."
§ 775. "Devisees," or in case of their prior death, to "legal heirs or dev-
isees of certifieate holder."
§ 776. "Estate:" "my estate:" creditors.
§ 777. "Executor."
§ 778. "Executors and administrators."
§ 779. "Family" as benefieiarj'.
§ 779a. "Family:" "immediate family."
§ 780. "Families, widows, orphans, or other dependents."
§ 780a. "Family of deceased:" "family or families" in connection with
other class designations.
§ 781. "Friends."
§ 782. "Guardian."
§ 783. "Heirs:" "lawful heirs:" "legal heirs."
§ 784. "Heirs or assigns."
§ 785. Heir: husband as heir.
§ 786. "Heirs and legal representatives:" "heirs or representatives."
§ 787. "Himself, executors," etc.
§ 787a. Husband and children: sole and separate use.
§ 787b. Illegitimate child.
§ 788. Infant as beneticiary.
§ 788a. Legal heirs or representatives.
§ 789. "Natural heir."
§ 789a. Niece.
§ 790. "Orphans."
§ 790a. Parents.
§ 790b. Parents: putative father.
§ 791. Partnership as beneficiary.
§ 792. "Relatives :" "related to."
§ 793. "Representatives:" "legal representative."
§ 793a. Same subject: statutory' exemptions.
§ 794. "Resident brother" sCs beneficiary.
§ 795. Son as beneficiary.
§ 795a. Stepfather: stepson.
§ 796. "Survivor."
§ 796a. Trust created in equity for friend.
§797. "Trustees:" "in trust."
§ 797a. Undertaker as beneficiary.
§ 798. "Widow and children:" proceeds paid to administrator: extent of
his liability.
§ 799. "Widow and children :" proceeds paid to administrator of insured
a trust for widow and children.
CONTENTS xlv
§ 800, "Widow and children :" afterward in order named.
§ 801. "Widow, orphans, or heirs."
§ 802. "Widows, orphans, and heirs or devisees."
§ 803. "Widow or relatives," funeral benefit.
§ 804. "Wife and children:" "widow and children:" how they take.
§ 805. Wife and children : construction of contract by parties and bene-
ficiaries.
§ 805a. Wife and children : contract rights in benefits.
§ 806. Wife and daughters : survivor : who entitled to fund.
§ 807. "Wife, if living" and "if not living, to children."
§ 808. Wife or any wife that may survive, and minor children.
§ 809. "Wife" or "widow" as beneficiary.
§ 809a. Wife as beneficiary : creation of separate estate in her.
§ 809b. Wife's interest : endowment policy.
§ 809c. Wife's right as beneficiary in mortuary fund dependent on hus-
band's being member at death.
§ 809d. Widow : where insured compelled to marry.
§ 810. When wife entitled against husband to proceeds of surrender policy.
§ 811. Wife's rights: delivery of policy as security.
§ 812. When wife has only equitable lien.
§ 813. Wife's rights where husband's misrepresentations induce her to
join assignment.
§ 814. "Wife:" effect of payment to woman designated as wife while law-
ful wife living.
§ 815. "Wife" as beneficiary : no marriage ceremony performed.
§ 81."3a. Wife: agreement to become mistress.
§ 816. "Wife" or "widow" as beneficiary where insured has married when
lawful wife living.
§ 817. "Wife" or "widow" as beneficiary: regular life policy: effect of
divorce.
§ 817a. Same subject: statutes.
§ 818. "Wife" or "widow" a.s beneficiary : mutual benefit certificate : effect'
of divorce.
§ 819. Wife : articles of separation.
CHAPTER XXXIII.
BENEFICIARIES, CONTINUED.
§ 825. Subsequent marriage of insured.
§ 826. Widow and surviving children : second marriage.
§ 827. AVliere beneficiary under mutual benefit certificate dies before
assured.
xlvi CONTENTS
§ 828. Where beneficiary under life policy dies before assured.
§ 829. Where beneficiary dies before insured : life policy : conclusion.
§ 830. Death of wife: subsequent marriage of insured or member: effect
where wife is designated as beneficiary.
§ 830a. Where wife dies before husband: resulting trust in favor of
husband's estate.
§ 831. Where death of beneficiary occurs after that of insured but before
payment of fund.
§ 832. Death of beneficiary and insured: common disaster.
§ 833. Where beneficiary kills insured.
§ 834. Killing assured by insane beneficiary.
§ 835. Where killing is involuntary.
§ 836. Killing by sane assignee.
§ 837. Assignment by beneficiary.
§ 837a. Equitable assignment by beneficiary.
§ 838. Ratification by beneficiary of assignment.
§ 839. Assignment to creditor.
§ 840. Assignment of endowment policy : wife as beneficiary.
§ 841. Assignment by beneficiary of life policy to one having no insurable
interest.
§ 842. Lien of assignee on paid-up policy.
§ 843. Where wife joins in assignment of policy on husband's life.
§ 844. Same: statute forbidding married woman becoming surety.
§ 845. Assignment by wife of policy on husband's life.
§ 846. Classes entitled to benefit fund: control in case of assignment:
benefit certificate.
§ 847. Effect of permission permitting assignment.
§ 848. Beneficiary charged with notice of contents of policy.
§ 849. Possession by beneficiary of mutual benefit certificate.
§ 850. Beneficiary may be trustee of fund though not so designated.
§ 851. Where policy provides payment to insured if he lives to certain
date : if not to beneficiary designated.
§ 852. Maturity of poliej^ when beneficiary certain age: debt of associa-
tion.
§ 853. Polic}^ cannot be surrendered without consent of beneficiary in life
policy.
§ 853a. Surrender of policy: trustee of proceeds.
§ 854. Surrender of policy avoided for mental incapacity.
§ 855. Minor children beneficiaries : consent to surrender policy by in-
sured not binding.
§ 855a. Death of beneficiary before surrender of policy for reduction of
amount.
§ 856. Policy to wife and children : death of wife : executor has no power
to surrender policy.
§ 856a. Insured cannot delegate reserved power to surrender policy.
CONTEXTS xlvii
§ 857. "Wife and children:" "wife" deceased at time of issuance: paid-
up policy.
§ 858. Rights of creditors of insured: regular life polic\': exemptions:
statutes.
§ 859. Rights of creditors of members: benefit societies: exemptions:
statutes.
§ 860. Rights of creditors of wife when beneficiary.
§ 861. Creditor as payee in policy on debtor's life.
§ 862. Society not bound by secret agreements by member with children
as beneficiaries.
§ 863. Where bequest bj' wife will not pass interest in policy on hus-
band's life.
§ 864. Tontine policy: when beneficiary not bound by action of com-
pany's officers.
§ 865. Suspension of member: right of beneficiary to recover.
§ 866. Funeral benefits : who entitled : funeral expenses : same, industrial
insurance.
§ 867. Beneficiary : benefits payable in case of sickness or disability : in-
sanity of member.
§ 868. Railroad relief association: provision as to release of company
for damages : when beneficiary may not recover.
§ 868a. Same subject: rule modified by employers' liability acts.
§ 869. Beneficiary not liable for premiums paid by stranger.
§ 870. Whether payment of premiums or a.ssessments by beneficiary
gratuitous.
§ 871. Amount of policy and premiums or assessments: advancements to
beneficiary.
§ 872. Payment of benefit fund.
§ 872a. Same subject: general instances.
§ 872b. Same subject: presumption as to insured's death: compromise
agreement.
§ 873. Beneficiary entitled to fund : fund cannot be garnished.
§ 874. Two or more beneficiaries: joint tenancy.
§ 874a. Where one of two or more beneficiaries ineligible: contract not
invalid.
§ 875. Beneficiary may sue on policy.
§ 876. Where money due beneficiary has been paid administrator of
assured.
§ 877. Right of beneficiary: premiums paid with misappropriated money
or funds.
§ 878. Statutory provisions limiting beneficiaries of benefit certificates:
certain classes.
xlviii
CONTENTS
wife and children: exemptions.
§ 879. Statutes: beneficiaries;
(a) Alabama.
(b) California,
(e) Colorado.
(d) Florida.
(e) Georgia.
(f) Illinois.
(g) Indiana,
(h) Iowa.
(i) Kentucky.
(j) Louisiana.
(k) Maryland.
(I) Massachusetts. ,
(m) Michigan.
(n) Minnesota.
(o) Mississippi.
(p) Missouri.
(q) Nebraska.
(r) New Jersey.
(s) New York.
(t) North Carolina.
(u) Ohio.
(v) Pennsylvania.
(w) South Dakota.
(x) Tennessee.
(y) Texas.
(z) Washington.
(aa) Wisconsin.
(bb) Ontario.
§ 879a. Same subject: whether exemption applies after proceeds or funds
become payable: property purchased therewith.
§ 879b. Same subject : supplementary proceedings.
§ 880. Where amount exempted is unreasonable : unconstitutionality of
law.
§ 881. Statute : insurance of husband's life : sole benefit of wife : mutual
benefit society: vested interest in wife.
§ 882. Statute : rights of children : declaration of new trust.
CONTENTS xlix
TITLE V.
INSURABLE INTEREST.
CHAPTER XXXIV.
INSURABLE INTEREST, GENERALLY.
§ 887. Insurable interest defined.
§ 888. Insurable interest : generally.
§ 889. Necessity of an insurable interest.
§ 890. Insurable interest distinguisbed from the property or life insured.
§ 891. Insurable interest at common law.
§ 892. No insurable interest under unenforceable contract.
§ 893. Interest must be neither illegal nor immoral.
§ 894. Wager policies.
§ 894a. (§ 154) Wager policies: what are.
§ 894b. Wager policies: what are not.
§ 894c. Wager policies: industrial insurance.
§ 894d. Wager policies: title guaranty insurance.
§ 894e. Profit-sharing bonds issued by insurer not speculative or invalid.
§ 894f. Wager policy: illegality not pleaded or relied upon in defense:
deletion of vitiating clause.
§ 894g. Wager policies: incontestable clause.
§ 894h. Wager policies: foreign statute: extraterritorial effect.
§ 895. Insurable interest does not necessarily imply property.
§ 896. Legal or equitable title: qualified interest.
§ 897. Conditional or contingent interest: expectancy: inchoate rights.
§ 898. Liability to others: railroad companies, etc.
§ 899. Pecuniary interast: consanguinity or alfinity.
§ 900. Whether insurable interest need be stated.
§ 901. As to the time when the interest must exist.
§ 902. Same subject: life insurance.
§ 903. Continuity of interest.
§ 904. Where interest is devested : partial interest remaining.
§ 905. The interest need not be indefea.sible.
§ 906. Obligation of insurer to ascertain insurable interest in property.
CONTENTS
CHAPTER XXXV.
PARTICULAR INSURABLE INTERESTS CLASSIFIED.
§ 912. Different parties: several interests.
§ 913. Interest of administrators and executors.
§ 914. Whether assignee of life policy must have an insurable interest:
points involved generally.
§ 914a. Same subject: the Federal case of Grigsby v. Russell.
§ 914b. Same subject : assignment in furtherance of agreement.
§ 914c. Same subject : assignment as security or collateral : for advances,
etc., or to creditor.
§ 915. Same subject : paj-ment of premium as a factor.
§ 916. Same subject : consent of insurer to the aissignment.
§ 917. Same subject : mutual benefit societies.
§ 918. Same subject: conclusion.
§ 919. Same subject : summary of the decisions.
§ 920. Insurable interest : policy payable "as his interest may appear."
§ 921. Interest of donor or contributor.
§ 922. Interest of bailor and bailee : generally.
§ 923. Pledgor and pledgee : pawnbroker.
§ 924. Innkeepers.
§ 925. Carriers.
§ 925a. Pipe lines company.
§ 926. Warehousemen : wharfingers. >
§ 927. Commission merchants: consignees.
§ 928. Merchant furnishing dealer with stock.
§ 929. Agents.
§ 930. Consignor.
§ 931. Consignees and factors : supercargo.
§ 932. Trustees.
§ 933. Cestui que trust.
§ 933a. A cotrustee: joint trustee.
§ 934. Assignee or trustee of insolvent.
§ 934a. Receivers.
§ 935. Stockholders.
§ 935a. Corporation in life of stockholder.
§ 935b. Corporation in life of its officer.
§ 936. Sureties.
§ 937. Receiptor for goods attached : surety on appeal.
§ 938. Indorser of note.
§ 939. Holder of note or bill of exchange: drawee.
§ 940. Indorser and indorsee of bill of lading.
CONTENTS li
Inter&st of insurer: reinsurer.
Interest in solvency of insurer.
Interest in royalties.
Copartners: joint owners.
Partner: life risk.
Part owner.
General creditors.
Simple contract creditor in estate of deceased debtor.
Creditors as assignees.
Creditor attaching or levying execution.
Attaching- creditor must insure his interest.
Judgment creditor.
Creditor in life of debtor. .
Same subject: wager policy: amount recoverable.
Owner of goods concealed from creditors.
One whose goods are levied on.
Insolvent : life risk.
Insolvent debtor: property.
Officer serving attachment or making levy.
Lessor.
Lessee : sublessee.
Tenant, lessee or sublessee: improvements: right of removal.
Sub-tenant: lessee: insurance against loss of rents: wager policy.
Purchaser from lessee.
Tenant at sufferance.
Tenant at will.
Life tenant.
Life tenant; assignee of, in life of.
Remainderman.
Tenant for life and remainderman joining in insurance.
Tenant per autre vie: life risk.
Tenant in common.
Tenant by curtesy.
Vendee or one under contract for purchase or for deed of tenancy.
CHAPTER XXXVI.
PARTICULAR INSURABLE INTERESTS, CLASSIFIED,
CONTINUED.
§ 977. Vendee or one under contract for purchase, or for deed.
§ 978. Same subject: one holding possession under contract of purchase
from equitable owner.
§ 979. Same subject : parol agreement.
§ 980. Same subject: quahfications.
§ 981. Same subject: cases.
§
L/^ J..
942.
§
943.
§
944.
§
945.
§
946.
§
947.
§
948.
§
949.
§
950.
§ 9yL
§
952.
§
953.
§
954.
§
955.
§
956.
§
957.
§
958.
§
959.
§
960.
§
961.
§
9Gla.
§
961b.
§
962.
§
963.
§
963a.
§
964.
§
964a.
§
965.
§
966.
§
967.
§
968.
§
969.
§
970.
lii CONTENTS
§ 981a. Vendee or one under contract for purcliase: conditional sale.
§ 981b. Purchaser of goods on credit: same, married woman.
§ 981e. Parties under agreement to exchange property.
§ 982. Vendor or one who has contracted to convey.
§ 983. Vendor.
§ 983a. Seller or purchaser of goods to arrive.
§ 984. Vendee.
§ 984a. Vendor and vendee : improvements.
§ 985. Purchaser under execution or judicial sale.
§ 986. Purchaser in possession of land, title not to pass till building com-
pleted.
§ 987. One in possession under claim of right.
§ 988. One in possession with power of sale.
§ 988a. Government stamps : insurable interest in.
§ 989. One in possession to care for and rent property.
§ 990. One in possession or occupation : generally.
§ 991. Mere intruder or trespasser.
§ 992. Disseisor.
§ 993. Purchaser of legacy: life risk.
§ 994. Owner : absolute interest.
§ 994a. Easement of support in party wall.
§ 995. Owner of land : buildings constructing .under contract.
§ 996. Contractors : builders : materialmen : mechanics.
§ 997. Advances.
§ 998. Ship's general agent has no insurable interest in advances.
§ 999. Voluntary advances on vessels.
§ 1000. One expending money for his own benefit on another's property.
§ 1001. Liens.
§ 1002. Mechanic's lien.
§ 1003. Meelianics and materialmen in ship.
§ 1004. Shipowner in ship and cargo.
§ 1005. Shipowner in special cargo: lien,
§ 1006. Charterer.
§ 1006a. United States in vessel hired with option to purchase: war risk.
§ 1007. Vendor and vendee in ship and freight.
§ 1008. What interest of shipowner in freight includes.
§ 1009. Requisites of an interest in freight.
§ 1010. Sliipowner in freight.
§ 1010a. Chartered owners in freight : vessel subchartered.
§ 1011. Charterer who is part owner.
§ 1012. Charterer in expected freight.
§ 1013. Cliarterer and shipowner: separate risks.
§ 1014. Charterer insuring against special peril.
J5 1015. Advances by charterer on freight.
§ 1016. When charterer has no insurable interest in freight advanced.
CONTENTS
liii
§ 1017. Owner in case of bottomry or respondentia.
§ 1018. Lender in holtomry or respondentia.
§ 1019. Expected profits.
§ 1020. Profits made and earned.
§ 1021. Passage money.
§ 1021a. When interest insured is disbursements not passage money.
§ 1022. Mariners' wages.
§ 1023. Supercargo.
§ 1024. Fishing voyage: outfits.
§ 1025. Captors.
§ 1026. Mortgagor and mortgagee: generally.
§ 1027. Mortgagor.
§ 1028. Mortgagor of personal property.
§ 1029. Extent of mortgagor's insurable interest.
§ 1030. Mortgagor of ship.
§ 1030a. Owner of equity of redemption.
§ 1031. Mortgagee.
§ 1032. Mortgagee under mortgage only valid in equity.
§ 1033. Relation mortgagee's insurance sustains to the debt.
§ 1034. Mortgagee of ship.
§ 1035. Mortgagee of goods and freight.
§ 1035a. Mortgagee in possession of goods as security.
§ 1036. Extent of mortgagee's insurable interest.
§ 1037. Several mortgagees.
§ 1038. Mortgagor's interest after judgment or decree.
§ 1039. Mortgagor after foreclosure sale.
§ 1040. Effect of sale or conveyance on mortgagor's interest: devest-
ment of interest.
§ 1041. Cessation of mortgagor's interest.
§ 1042. Effect on mortgagee's interest of sale and assignment.
§ 1042a. Same subject: purchaser from vendee of note and trust deed.
§ 1042b. Assignment by mortgagor to mortgagee.
§ 1043. Disclosure of interest by mortgagee.
§ 1044. Assignee of mortgagee.
§ 1045. Mortgagor for mortgagee.
§ 1046. Mortgagee after foreclosure sale.
§ 1047. Interest in homestead.
§ 1048. Husband in personal community property.
§ 1048a. Estate by entirety.
§ 1048b. Husband and wife: wife's personalty: household furniture.
§ 1049. Husband in property of wife.
§ 1049a. Same subject: when husband has insurable interest: instances.
§ 1040b. Same subject: when husband has no insurable interest: instances.
§ 1049c. Husband in property held jointly with wife under contract: in-
surance authorized or ratified by wife.
liv CONTENTS
§ 1049d. Where statute permits husband to insure wife's separate property.
§ 1050. Husband in property of wife: disclosure of interest.
§ 1051. Husband in life of wife.
§ 1051a. Same subject : joint insurance by husband and wife : married
woman's property act.
§ 1052. Husband for benefit of wife or child.
§ 1053. Wife in her own property.
§ 1054. Wife in husband's life.
§ 1055. Wife without marriage ceremony in husband's life: mistress:
common-law marriage.
§ 1055a. ^lan in woman's life when not lawfully married to her.
§ 1055b. Holder of purchase-money mortgage, in wife of mortgagor.
§ 1055e. Wife: effect of divorce.
§ 1056. Dower interest.
§ 1057. In life of betrothed.
§ 1057a. In employee's life: employer's liability insurance.
§ 1058. In servant's life : actor's life.
§ 1059. In master's life.
§ 1060. Earnings of another: life.
§ 1€61. Promise of support one not a relative: life.
§ 1062. Promise to support relative: life.
§ 1062a. Person in loco parentis.
§ 1063. Parent and child: life.
§ 1063a. Same subject : mourning or funeral expenses : industrial or col-
lecting society : validating statute : fraud of agent : rescission.
§ 1064. Unborn child.
§ 1064a. Illegitimate children.
§ 1065. Son in father's property.
§ 1065a. Parent in child's separate property: .statute.
§ 1066. Son-in-law : mother-in-law : stepson : stepfather : life.
§ 1067. Grandparent and grandchild.
§ 1068. Brother and sister: brother-in-law: stepsister.
§ 1069. Uncle and nephew or niece : aunt and nejDhew or niece.
§ 1069a. Half-uncle.
§ 1070. Cousin.
§ 1071. Friend's insurable interest.
§ 1072. Religious societies in member's life.
§ 1072a. Building association in member's life.
§ 1072b. Undertaker in lives of members of burial association : statute.
§ 1073. Benefit societies: insurable interest.
CONTENTS Iv
TITLE VI.
PREMIUMS AND ASSESSMENTS.
CHAPTER XXXVII.
PREMIUMS, GENERALLY.
§ 1083. Premium, "net premium," "gross premium," defined,
§ 1084. Premium or rate per cent mu.st be expressed in policy.
§ 1085. Premium and conditions as consideration.
§ 1086. Premium is of the essence of the contract.
§ 1087. Premium not due unless risk attaches.
§ 1088. The rate of premium.
§ 1088a. Same subject: employers' liability insurance.
§ 1088b. Same subject: premium based on "traffic earnings" parol evi-
dence.
§ 1080. Premium as test of amount or character of risk.
§ 1090. Agreement as to rate must govern.
§ 1091. Discrimination as to rates of premium: rebate of premium.^
§ 1092. Same subject: such statutes constitutional.
§ 1092a. Same subject : object or intent of sucli statutes.
§ 1092b. Same subject: construction.
§ 1092c. Same subject: what companies or associations, etc., included
and excluded.
§ 1092d. Same subject : agreements for services.
§ 1092e. Same subject: agreements for services: advisory boards.
§ 1092f. Same subject: allowance by agent of commissions.
§ i092g. Same subject: what is not a discrimination or rebate: other in-
surances.
§ 1092h. Same subject : effect as to recovery of premiums, notes, or com-
missions.
§ 10921. Same subject: liability for penalty.
§ 1093. Premium to cover additional risks: augmentation or diminution
of premium.
Ivi
CONTENTS
CHAPTER XXXVTII.
PKEMIUMS— PAYMENT, FORFEITURE AND TENDER— LIENS.
§ 1097.
§ 1098.
§ 1098a.
§ 1098b.
§ 1099.
§ 1100.
§ 1101.
§ 1102.
§ 1103.
§ 1103a.
§ 1104.
§ 1104a.
§ 1105.
§ 1106.
§ llOGa.
§ 1107.
§ 1108.
§ 1109.
§ 1109a.
§ 1109b.
§ 1110.
§ 1110a.
§
1111.
§
1112.
§
111.3.
§ 1114.
§
1115.
§
1115a
§
1116.
§
1117.
§
1118.
§ 1119.
Payment of premium: generally.
No forfeiture for nonpayment of annual premium unless so
agreed : whether premium a debt.
Mere agreement to pay premiums insufficient to prevent forfeiture.
That policy lapses for nonpayment of premiums where no con-
dition for forfeiture.
Whether payment condition i^recedent.
Conditions as to payment of premium valid.
Whether contract entire when premium entire.
Whether life contract entire or from year to year.
Failure to pay premium on day stipulated, forfeits.
Same subject : incontestable provision.
Equity will not relieve from forfeiture so incurred.
Payment of weekly premiums: industrial insurance: forfeiture.
Subsecjuently enacted nonforfeiture statute : payment of premiums
into court.
No notice or formal declaration of forfeiture necessary.
That stipulation as to forfeiture means voidable only.
Premium payable on demand.
Forfeiture for nonpayment of instalments of premium when due.
Company may extend time of payment of premium.
Paj-ment of premium : days of grace.
Payment of premiums: days of grace: statutes.
Extension of time of payment: computation of time: days of
grace.
Extension by agent of time for payment of premiums : days of
grace.
Acceptance of entire annual premium in advance.
Prepayment of premiums.
Offset : premium and rents due from agent.
Part payment of premium will not prevent a forfeiture.
Nonpayment of j^remium may only suspend risk.
Conflicting dates: date from which computation as to forfeiturn
based : death of insured.
Death or loss after suspension : payment of premium.
Payment of overdue premium after loss, death, injury or sickness.
Death or loss within time extended for payment or days of grace.
Review of cases generally relied on as holding such payment of
no effect.
CONTENTS Ivii
§ 1120. Cases , supporting opposite view.
§ 1121. Same subject : conclusion.
§ 1122. Tender of premium: tender to agent.
§ 1123. Frequency of tender.
§ 1124. Tender after delivery up of policy fraudulently induced by agent.
§ 1125. Actual production of money unnecessary after peremptory refusal
to accept.
§ 1125a. Tender by bank cheek.
§ 112b'. Ratification of payment may relate back to time of tender.
§ 1127. Tender after payment of overdue premiums unconditionally re-
Cjuested.
§ 1128. Tender as prerequisite to action: judgment.
§ 1129. Payment due Monday when premium matures Sunday: death of
insured.
§ 1129a. Same subject: days of grace.
§ 1130. Holidays: Thanksgiving Day.
§ 1131. Lien for premium.
§ 1132. Maritime lien for premium.
CHAPTER XXXIX.
PREMIUMS— MANNER AND MODE OF PAYMENT— BY AND TO
WHOM PAYABLE— MORTGAGOR AND MORTGAGEE— MIS-
CELLANEOUS MATTERS.
§ 1137. In what the premium may be paid.
§ 1138. Cash premiums: mutual company.
§ 1139. Payment in depreciated funds, Confederate money.
§ 1140. Payment in foreign money: equivalent in United States money
may be shown.
§ 1141. Payment of premium: credit may be given.
§ 1142. Payment by order on third party.
§ 1143. Effect of order on third party: demand: notice of nonpayment:
forfeiture: order on employer.
§ 1144. Payment by check or draft.
§ 1144a. Premium paid out of income or rents: infant life tenant.
§ 1145. Payment with misappropriated funds.
§ 1146. By whom premium payable.
§ 1147. Premiums paid by debtor in fraud of creditors: husband and
wife.
§ 1148. Payment by and liability of third party: beneficiary: lien on
policy.
§ 1149. Same subject: rules stated in Leslie v. French.
Iviii CONTENTS
§ 1150. Payment by and liability for premium of agent or broker.
§ 1150a. Payment to agent or broker.
§ 1151. Premiums paid out of partnership funds during solveney.
§ 1152. Payment of premium by mortgagee: liability of mortgagee for
premium.
§ 1153. Payment of premium by mortgagor: right to proceeds.
§ 1154. When mortgagor may be charged for premiums paid by mort-
gagee.
§ 1155. When premiums not chargeable to mortgagor.
§ 1156. Payment of premium as connected with subrogation: mortgagor:
mortgagee.
§ 1157. Payment of premium by assignee of mortgage.
§ 1158. Forfeiture for nonpayment of premium by mortgagor: defense by
mortgagee.
§ 1159. Amount of premium for which mortgagor is chargeable may be
limitea.
§ 1160. Policy taken as collateral : right of mortgagee to charge pre-
miums : right to deposit premium.
§ 1161. Right of mortgagee to recover premiums paid after decree.
§ 1162. Purchaser of mortgaged premises: previously advanced premiums.
§ 1163. Payment of premium : sending by mail.
§ 1164. Check mailed on last day for payment.
§ 1165. Payment of premium : delivery to express company.
§ 1166. Payment of premium by dividends or profits.
§ 1166a. Payment of premium on new policy by surrender value: agent's
powers.
§ 1167. To whom premiums may be paid.
§ 1168. Place of payment.
§ 1169. Liability for premiums : liability after forfeiture.
§ 1170. Revival of policy.
§ 1171. Recovery of premiums by unauthorized company.
CHAPTER XL.
THE PREMIUM— PAID-UP AND NONFORFEITABLE POLICIES.
§ 1178. Paid-up and nonforfeitable policies: extended insurance: gen-
erally.
§ 1178a. Paid-up, extended and temporary insurance distinguished.
§ 1178b. Invalid contracts: surrender value: paid-up policies: loans.
§ 1179. Nonforfeiture statutes.
§ 1179a. Such statutes constitutional.
CONTENTS lix
§ 1179b. Whether policy becomes automatically paid up: extended in-
surance.
§ 1179c. Forfeiture rule not applicable to policy stipulating for loan
value charge: "automatically nonforfeitable clause."
§ 1180. Death as affecting right to paid-up policy.
§ llSOa. Insanity as affecting right to paid-up policy.
§ 1181. When only paid-up policy can be claimed, and when the full
amount of insurance.
§ 1181a. Paid-up policy: surrender cannot defeat beneficiary's rights.
§ 1182. Right to claim paid-up policy: demand: surrender value.
§ 1183. Right of infants: paid-up policy.
§ 1183a. Paid-up policy: husband and wife.
§ 1184. When right to claim paid-up policy must be exercised.
§ 1185. Right to paid-up policy must be exercised within specified time.
§ 1186. Exceptions to last rule and cases contra.
§ 1187. Whether payment of note required to entitle to paid-up policy.
§ 1188. When paid-up policy forfeited: eases.
§ 1189. When paid-up policy not forfeited: cases.
§ 1190. Whether it is new contract or continuation of old one.
§ 1191. Amount of premium under statutes "deducting indebtedness."
§ 1192. Amount of paid-up policy.
§ 1193. Endowment policy: nonforfeiture statutes.
§ 1194. Refusal to issue paid-up policy.
§ 1195. Refusal to issue paid-up policy: measure of damages.
CHAPTER XLI.
NOTES FOR PREMIUMS, AND PREMIUM, ETC., NOTES.
§ 1202. Payment by note.
§ 1202a. Same subject : to what extent note constitutes payment.
§ 1202b. Same subject: when note does not constitute payment.
§ 1202c. Same subject: receipt for premium.
§ 1202d. Same subject : note as equivalent to or in lieu of cash.
§ 1202e. Same subject: effect as loan where agent advances premium and
takes note.
§ 1202f. Same subject: stipulation that note not payment but extension
only.
§ 1203. Premium note and policy one contract.
§ 1204. Condition as to forfeiture for nonpayment of note at maturity :
generally.
§ 1204a. When such condition not applicable to note.
§ 1205. Validity of sucli provisions.
Ix CONTEXTS
§ 1206. Payment by negotiable paper: demand or notice, etc.: forfeiture.
§ 1206a. Same subject : that policy not ipso facto void for nonpayment of
note.
§ 1206b. Same subject: statutory notice.
§ 1206c. Same subject: place of payment,
§ 1207. Payment by negotiable paper: cases holding no demand or notice
necessary: forfeiture.
§ 1208. Same subject: the rule.
§ 1208a. When insurer not bound to notify assignee of maturity of note
of assignor.
§ 1209. When stipulation is that policy void or risk suspended for non-
payment of note.
§ 1210. Note for entire premium: suspension risk.
§ 1211. When condition for forfeiture is in note only.
§ 1212. When there is no condition as to forfeiture for nonpayment of
note.
§ 1213. Subsecjuent parol agreement: nonpayment of note: forfeiture.
§ 1213a. Right to loan after nonpayment of note.
§ 1214. Power of mutual company to take note.
§ 1215. Validity of notes for premium and premium notes.
§ 1216. Premium note given unauthorized company.
§ 1217. Premium, etc., notes: generally.
§ 1218. Negotiability of notes for the premium and premium, etc., notes.
§ 1219. When note is payable.
§ 1219a. Same subject: conflicting dates: erroneous date.
§ 1219b. Same subject: extension of time.
§ 1219c. Same subject: days of grace.
§ 1219d. Payment of note by mail.
§ 1220. Validity of provisions as to liability on premium, etc., notes.
§ 1221. Lien on premium notes and funds.
§ 1221a. When insured liable on note for premium.
§ 1221b. When insured not liable on note for premium.
§ 1222. Liability on premium, etc., notes : generally.
§ 1223. When liability absolute on premium, etc., notes: when not.
§ 1224. Liability for losses prior to membership.
§ 1225. When liability continues until policy surrendered and all assess-
ments paid.
§ 1226. Liability after termination of contract or surrender of policy.
§ 1227. Liability after suspension on note for entire premium.
§ 1228. Extent of liability after part payment of note.
§ 1229. Liability after loss.
§ 1230. Liability incurred by default in payment of assessment.
§ 1231. Liability in case of insolvency of company.
§ 1232. Insolvency of maker of note.
§ 1233. Interest on premium notes: forfeiture.
CONTENTS Ixi
§ 1234. Tender: premium notes.
§ 1235. Payment of premium notes or interest thereon by dividends or
profits.
§ 1235a. Application to unpaid notes, of amounts due for claims for
injuries : accident policy.
§ 1236. Effect of nonpayment of note upon beneficiary.
§ 1237. Deduction of note from loss.
§ 1238. Counterclaim on note of owner of vessel insured for benefit of
mortgagee.
§ 1239. Amount of recovery on premium notes.
CHAPTER XLII.
ASSESSMENTS AND DUES.
§ 1245. Assessment defined: consideration.
§ 1245a. "Assessments upon surviving members," construed.
§ 1245b. When decree is assessment and not an order for an assessment.
§ 1245c. Whether or to what extent assessments are debts.
§ 1246. Assessments: generally.
§ 1247. Distinction between premiums and assessments.
§ 1248. Membership fees and dues: generally.
§ 1249. Validity of provisions as to assessments and dues.
§ 1250. Assessment premium, etc., notes: generally.
§ 1251. Who liable to asses.sments : what membera.
§ 1252. Who liable to assessment : mortgagee : assignee.
§ 1253. Liability of member: generally.
§ 1254. Nonpayment of assessment or dues after date of accident insured
against.
§ 1255. Liability to assessments: agreement or provisions contrary to
statute.
§ 1256. Liability: prior and subsequent losses: liability after loss, for-
feiture or suspension.
§ 1256a. Same subject.
§ 1257. Members joining between loss and rendition of judgment against
company.
§ 1258. When dues payable: dues in arrears: forfeiture.
§ 1259, Assessment falling due on Sunday.
§ 1260. Assessments : suspension of member.
§ 1261. When nonpayment of dues or assessments forfeits or suspends:
self -executing provisions.
§ 1261a. Same subject.
§ 1262. Assessments paid in advance in excess of mortuary assessments.
Ixii CONTENTS
§ 12G3. No forfeiture: assessments in advance of death losses.
§ 1264. Forfeiture or suspension : when affirmative act of society necessary.,
§ 1265. When member is in good standing: when not.
§ 1266. Nonpayment of assessments : when no forfeitures.
§ 1267. Assessments by unauthorized company.
§ 1268. Liability to assessments : cancelation : surrender : withdrawal.
§ 1269. Right of member to withdraw and avoid liability for assessments.
§ 1270. Whether contract to pay assessments unilateral.
§ 1271. Right to deny liability for losses on policies to nonmembers.
§ 1272, Dues and assessments: effect of insolvency upon liability.
§ 1273. Assessments : receiver.
§ 127-4. What receiver may include in assessment : premium notes.
§ 1275. Assessments by trustee of unauthorized company.
§ 1276. Restoration to membership ; reinstatement : revival.
§ 1276a. Same subject : good health.
§ 1276b. Same subject : incontestable clause.
§ 1276e. Same subject : when reinstatement not effected.
§ 1276d. Same subject : when new contract, when not.
§ 1277, Reinstatement by way of waiver and not as new contract : cred-
itor's rights.
§ 1278. To whom dues and assessments are payable.
§ 1279. Mode of remittance.
§ 1280. Tender of assessments: frequency of tender.
§ 1281. Assessments and dues: death before time specified for payment
e:j(pires : loss after suspension.
§ 1281a. Days of grace: death within days of grace.
§ 1282. Death of member during suspension of lodge.
§ 1283. Death while ''dues in arrears."
§ 1284. Payment assessment after loss.
§ 1285. Right to have assessment- made.
§ 1286. No authority to receive less than the amount of assessment duo.
§ 1287. Assessments and dues : safety fund : reserve fund.
§ 1288. Refusal to pay assessments: right to have fund distributed.
§ 1289. Application or appropriation of funds by society or lodge.
§ 1290. Necessity for assessment must exist.
§ 1291. Prescribed mode must be followed in levj'ing assessment.
§ 1292. Who empowered to levy assessments.
§ 1293. Notice of intention to assess not necessary for directors' regular
meeting.
§ 1294. Power of directors to assess cannot be delegated.
§ 1295. When power to assess may be delegated : exceptions to rule.
§ 1296. Assessment by illegally elected board.
§ 1297. Intentional omission of members.
§ 1298. Assessments where risks are classified.
CONTENTS Ixiii
§ 12D9. Assessment invalid of certificate changed to life policy with regular
premiums.
§ 1300. When assessment may be made.
§ 1301. Assessment to pay unearned premium.
§ 1302. Slight errors do not invalidate : material errors or omissions do.
§ 1303. Second assessment of note.
§ 1304. Assessment: new policy substituted for old one through fraud.
§ 1305. Levying assessments : amount : inequality.
§ 1303a. Right to increase assessments.
§ 1306. Examination and allowance of claims.
§ 1307. What may be included.
§ 1308. What need not and may not be included.
§ 1309. Anticipated losses.
§ 1310. Regularity of assessment must be affirmatively shown: allegation
and proof : evidence.
§ 1311. Defenses to actions : assessments : premium notes.
§ 1312. Statute of limitations: assessments.
CHAPTER • XLIII.
NOTICE— PREMIUMS, ASSESSMENTS, AND DUES.
§ 1320. When notice must be given : generally.
§ 1321. When notice need not be given : generally.
§ 1321a. Notice necessary when insured entitled to profits or reduction
of premiums.
§ 1322. Failure to give written notice : tender unnecessary.
§ 1323. Statutory notice.
§ 1321. Stipulation contrary to statute- requiring notice: waiver.
§ 1324a. Waiver of notice in other cases.
§ 1325. Constitutionality of statute requiring notice.
§ 1325a. Statutory notice: place of contract.
§ 1325b. Statutory notice: effect of repeal of statute.
§ 1326. To what class of policies New York and other statutes apply.
§ 1326a. Same subject: paid-up policy.
§ 1327. Stipulation in guaranty fund note as to notice.
§ 1328. Sufficiency of notice.
§ 1329. Sufficiency of statutory notice. •
§ 1330. Authorities holding notice sufficient.
§ 1330a. Right to notice: effect of subsequently enacted by-law.
§ 1331. To whom notice should be given.
§ 1331a. Notice to assignee who had contracted to pay assessments: lia-
bility of assignee for failure to pay same.
Ixiv
CONTENTS
§ 1332. Ccoses holding that usage to send notice necessitates giving notice.
§ 1333. Authorities holding the contrary doctrine.
§ 1334. Same subject : conclusion.
§ 1335. Personal notice: whether notice must be actually received.
§ 1336. Service by mail.
§ 1336a. Same subject : validity of provisions as to.
§ 1336b. Same subject : last known address : change of address.
§ 1337. Notice wrongly addressed.
§ 1338. Notice by publication.
§ 1338a. Same subject : validity of provisions as to.
§ 1339. Computation of time.
CHAPTER XLIV.
PREMIUMS, ETC.— EXCUSES, WAIVER AND ESTOPPEL.
§ 1345. Whether war excuses nonpayment of premium.
§ 1346. What excuses nonpayment of premiums and assessments : gen-
erally.
§ 1347. Excuses : omitting customary statement : amount unknown.
§ 1348. Excuses : change of agency without notice.
§ 1349. Excuses: insolvency: company ceasing to do business.
§ 1349a. Acts ultra vires corporation's powers no excuse.
§ 1350. Act of God : sickness : death : accident : insanity : no excuse : ex-
ceptions.
§ 1351, Death of agent : failure to find agent : agent's neglect or misrep-
resentations no excuse.
§ 1352. What is not an excuse : absence of assured : lapse of policy by
accident: other instances.
§ 1353. Waiver of punctual payment of premiums, assessments, and dues:
estoppel : generally.
§ 1354. Waiver and estoppel: prior parol agreements as to payment of
premiums, etc.
§ 1355. Waiver and estoppel : subsequent parol agreements as to pay-
ments and premiums, etc.
§ 1356. Payment of premiums : waiver and estoppel, custom, acts, etc.
§ 1357. Waiver: holding overdue premium notes and demanding payment.
§ 1357a. Holding overdue notes and requesting payment.
§ 1358. Custom not to treat nonpayment of premium notes as forfeiture.
§ 1359. Enforcing payment of note after forfeiture.
§ 1360. Assured must liave known of custom.
§ 1361. Payment of assessments: waiver and estoppel, custom, acts, etc.
§ 1362. Waiver of prepayment.
CONTENTS Ixv
§ 1363. Where receipt of premiums and assessments is an act of favor.
§ 1364. Waiver and estoppel: acceptance and retention of overdue pre-
miums and assessments : cases.
§ 1365. Right or obligation to accept and retain overdue premium or
assessment : no waiver.
§ 1366. Unconditional offer to accept overdue premium: tender.
§ 1367. Conditional acceptance of overdue premiums, etc.
§ 1368. When custom to receive overdue payments may be availed of by
insured : general custom : proof. i
§ 1369. Waiver of forfeiture generally by receipt of overdue premiums,
assessments and dues.
§ 1369a. Demand or recjuest for payment.
§ 1369b. Express waiver: knowledge of assured.
§ 1370. Waiver by collecting assessments on notes or by collecting or
suing on notes.
§ 1371. Whether levy and receipt of subsequent assessments and dues
waive forfeiture.
§ 1372. Same subject : authorities holding a waiver.
§ 1373. Same subject : authorities contra.
§ 1374. Waiver: custom: acceptance of premium or assessment after
loss or death.
§ 1375. W^aiver: payment of premium note: generally.
§ 1376. Waiver by failure to declare a forfeiture.
§ 1377. Failure to insist promptly on payment of premium note.
§ 1378. Waiver: collecting loss: adjustment and allowance of loss.
§ 1379. Waiver by recognition of the policy as in force.
§ 1380. Waiver by giving credit for the premium.
§ 1381. Defense that waiver induced by fals.e representations.
§ 1382. Waiver by agents : subordinate lodges.
§ 1383. Waiver by assured of exemption from assessment : illegality of
assessment.
§ 1384. Waiver by assured of defective notice and service of same.
CHAPTER XLV.
RETURN OF PREMIUMS AND ASSESSMENTS.
§ 1390. Principles governing right to return of premiums where risk baa
not attached.
§ 1391. Stipulation for return of premium: generally.
§ 1392. Stipulations: statutes governing the right to a return of the
premium.
Ixvi CONTENTS
§ 1393. Return of proportionate premium: surrender, rescission, cancela-
tion, etc.
§ 1394. Stipulation may entitle to proportionate return of premium, al-
though there be a partial or total loss of goods, etc.: sailing
with convoy.
§ 1395. Where underwriter discharged before performance of condition
on which return of proportionate premium based.
§ 139G. Where condition satisfied but underwriters discharged from loss:
pi-emiums returnable although loss by excepted risk.
§ 1397. No return if risk has attached.
§ 1397a. Election to refund premium or pay insurance: waiver.
§ 1398. Premium returnable where policy ab initio void: generally.
§ 1399. Insurance contract with infant: return of premium.
§ 1400. Premium returnable where contract voidable or void for mis-
representations or fraud of assurer.
§ 1400a. Premium returnable where contract voidable or void fur misrep-
resentation or fraud of assurer's agent.
§ 1401. Premium returnable wlien paid by mistake of facts: policy based
upon mistake: mistake of law.
§ 1401a. Return of premium where policy does not conform with agree-
ment.
§ 1401b. Premium not returnable: voluntary payments under claim of right.
§ 1402. Whether premium returnable where foreign company has not
complied with state laws.
§ 1403. Return of premium: breach of warranty.
§ 1404. Premium returnable for misrepresentation or concealment of
assured without fraud.
§ 1404a. Same subject : knowledge of insurer's agent where both parties
act in good faith.
§ 1403. Premium not returnable: policy illegal: parties in pari delicto.
§ 1405a. Return of premiums: ultra vires contracts.
§ 1406. Premium not returnable: policy void for fraud or material
misrepresentations of assured or his agent.
§ 1407. Premium not returnable : material alteration of policy.
§ 1407a. Return of premiums: demand for additional medical examination.
§ 1408. Return of premium: breach of contract by assurer.
§ 1408a. Same subject : transfer of assets to another company : winding
up : reorganization : change of insurance plan.
§ 1408b. Same subject : insolvency.
§ 1408e. Same subject: insolvency of foreign nuitual fire insurance com-
panies.
§ 1408d. Same su!)jeet : insolvency of title insurance company: credit in-
surance company.
§ 1408e. Same subject: discrimination as to rates: rebates.
§ 1408f. Same subject : reduction of amount of insurance.
CONTENTS Ixvii
§ 1408g. Same subject: increase of assessments.
§ 1408h. Same subject: reinsurance.
§ 1409. Return where note is given.
§ 1409a. When no return where note is given.
§ 1410. Return for want of interest.
§ 1410a. Same subject: when no return.
§ 1410b. Return where insurance without consent of insured.
§ 1410c. Same subject: statutes,
§ 1410d. Payment by check of municipal corporation: misappropriated
funds : recovery back.
Proportionate return: overvaluation: short interest.
Whether premium returnable for overinsurance by several in-
surers: pro rata contribution.
Same subject: opinions of the text-writers.
Same subject: the case of Fisk v. Mastermaji.
Same subject: Code provisions.
Same subject: the rule as to double insurances.
Same subject : summary and conclusion.
Stipulations for return of premium: prior and subsequent in-
surances : the American clause.
When no return in case of several policies.
Premium not returnable when risk entire.
Premium returnable when risk divisible.
Return of premium: effect of usage: review of authorities.
Same subject: conclusion.
Stipulation for return of premium: "sold or laid up."
Return of premium: retention of a certain per centum by the
insurer.
Return of premium: insurance by voluntary agent.
Recovery back of premium from agent.
Who may recover back premium.
§ 1428a. Same subject: beneficiaries.
§ 1429. Return of premium: assignment: right of assignee.
§ 1429a. Tender or return of premium as prerequisite to defense or for-
feiture.
§ 1429b. Return or tender of premiums as affecting waiver.
§ 1430. Return of premium : miscellaneous authorities.
§
1411.
§
1412.
§
1413.
§
1414.
§
1415.
§
1416.
§
1417.
§
1418.
§
1419.
§
1420.
§
1421.
§
1422.
§
1423.
§
1424.
§
1425.
§
1426.
§
1427.
§
1428.
Ixviii CONTENTS
TITLE VII.
ATTACHMENT AND DURATION OF RISK.
CHAPTER XLVI.
ATTACHMENT AND DURATION OF RISK.
§ 1436. Attachment and duration of risk: generally.
§ 1437. ''Receipt' and acceptance" of application and fee.
§ 1438. Countersigning policy: death before.
§ 1439. Attachment and duration of risk : parol contract.
§ 1440. Necessity of fixing duration of the risk.
§ 1440a. Where duration of risk not specified.
§ 1440b. Attachment of risk by waiver of stipulation as to.
§ 1441. Attachment and duration of risk: date of contract.
§ 1441a. Date of policy : "issuance" of policy.
§ 1442. Attachment and duration of risk: the date: reinsurance.
§ 1443. Attachment and duration of risk: insurance retroactive.
§ 1443a. Attachment and duration of risk: fidelity guaranty insurance:
credit guaranty insurance.
§ 1444. Attachment of risk: time policy may be retroactive.
§ 1445. Risk may attach although mistake in description of property.
§ 1446. Attachment and duration of risk: computation of time.
§ 1447. Attachment of risk: goods shipped "between" two dates.
§ 1448. Attachment and termination of risk: necessity of an insurable
interest.
§ 1449. Termination by change of risk: breach of condition.
§ 1450. Policy may terminate by its own limitation or by actual loss or
death.
§ 1451. Where attachment of risk not postponed by condition as to
rejjair of vessel.
§ 1452. Attachment of risk: de facto and de jure existence of corporaliuii :
compliance with statutory requirements as to organization, etc.
§ 1453. Duration of risk : expiration of charter during life of policy.
§ 1454. Attachment and determination of risk: insolvency: dissolution.
§ 1455. Dissolution : reserve fund.
§ 1456. Termination of contract by expulsion of member of mutual
benefit society.
§ 1457. Termination by withdrawal of member of mutual benefit society.
CONTENTS • Ixix
§ 1438. Reinstatement by waiver not by new contract.
§ 1439. Renewal of policy : amount must be fixed.
§ 1460. Presumption that renewal policy is like original.
§ 1461. Misrepresentations and warranties in application for revival.
§ 1462. Immaterial oral representations not inducing risk: renewal valid.
§ 1463. Where renewal is on same terms and conditions as old contract.
§ 1464. Renewal : cases.
§ 1465. New policy may be only a renewal.
§ 1466. Renewal or revival may be conditional.
§ 1467. Agreement or waiver necessary to renewal or revival after for-
feiture.
§ 1468. Agreement to renew not within statute of frauds.
§ 1469. Renewal need not be under seal.
§ 1470. Agent's agreement to renew: delivering renewal receipt.
§ 1470a. Renewal: fidelity guaranty insurance: credit guaranty insurance.
§ 1471. Right to reinstatement may pass to beneficiary.
§ 1472. Reinstatement of member.
§ 1472a. When no reinstatement effected.
§ 1473. Suspension of risk.
§ 1474. Duration of risk: effect of war.
CHAPTER XLVII.
ATTACHMENT AND DURATION OF RISK— THE SHIP.
§ 1483. Attachment and duration of risk on ship: generally.
§ 1484. Detention by embargo after voyage commenced.
§ 1485. Attachment of risk: vessel building: "W^aterborne :" "safely
launched," etc.
§ 1486. Attachment of risk "at and from" home port.
§ 1487. Prior parol agreement as to time of commencement of risk can-
not change policy.
§ 1488. Attachment and duration of risk where voyage insured is changed
or abandoned.
§ 1489. Attachment and duration of risk: time policy.
§ 1490t Attachment and duration of risk: mixed policy.
§ 1491. Intent to insure vessel on time irrespective of place where she
may be.
§ 1492. Time specified for continuance of risk after arrival on voyage
insured.
§ 1493. Attachment and duration of risk under time policies, the voyage
being described.
Ixx CONTENTS
§ 1494. Attachment of risk "at and from : " delay in port should not be
unreasonable.
§ 1495. Attachment of risks: sailing on voyage: departure.
§ 1496. Attachment of risk "at and from" foreign port.
§ 1497. What is sufficient repair and seaworthiness for ship to lie in
safety "at" outport.
§ 1498. Whether ri.^k attaches upon first arrival "at" or after vessel
has been moored twenty-four hours, etc.
§ 1500. Same subject : cases and opinions of the courts.
§ 1501. Same subject : attachment and duration of risk "at and from"
island, etc.
§ 1502. Usage may suspend attachmeiit of risk "at and from" bej'ond
time of ship's first arrival.
§ 1503. Stipulation that risk commence "at and from" on termination
of cruise and preparing for voyage.
§ 1504. Opinions of the courts as to attachment of the risk in the
preceding cases.
§ 1505. Meaning of the word "port" generally: "port risk."
§ 1505a. "Port or ports," "place or places," construed.
§ 1506. Duration of risk: time policies "at sea:" "on a passage."
§ 1507. Attachment risk "at and from" vessel lying long in foreign port
or stated to be there in safety: where she now is.
§ 1508. Homeward policy "at and from:" general designation of ports:
case of island or district.
§ 1509. Homeward policy "at and from:" specific designation of port or
place.
§ 1510. Attachment of risk "at and from" foreign port : ownership ac-
cjuired while vessel lying in port.
§ 1511. "At and from" any one of several ports: voyage from one port
to another before risk attaches.
§ 1512. Attachment of risk "from" a port.
§ 1513. Attachment and duration of risk: entirety of risk.
§ 1514. The words "thence" or "from" used in reference to intermediate
ports.
§ 1515, "At and from" to a port named and "a market."
§ 1516. Commencement of voyage insured to specified port with liberty
to call at, etc.
CHAPTER XLVIII.
CONTINUANCE AND TERMINATION OF RISK— THE SHIP.
§ 1523. Continuance of risk: liberty to "touch and stay" etc.: interme-^.
diate voyage : usage of trade.
CONTENTS Ixxi
§ 1524. Termination of risk on ship to island, with liberty of several ports
or to port or ports of discharge.
§ 1525. Insurance to several successive ports of discharge : election of
port.
§ 1526. Continuance of risk where completion of voyage insured is com-
pelled to be temporarily delayed.
§ 1527. Risk continues although vessel be compelled to stop without the
harbor by municipal or like regulations : quarantine.
§ 1528. Ship insured to designated port without provision as to duration
of risk after arrival.
§ 1529. Insurance "at and from" a port: several ports within one clas-
sification.
§ 1530. Termination of risk : time policy.
§ 1531. Risk terminates by abandonment or change of voyage insured.
§ 1532. Risk terminates in case of island or district at first port of dis-
charge, etc.
§^1533. Continuance of risk while loading at specified port.
§ 1534. Continuance of risk on fishing voyage : part of cargo arriving
by another ship.
§ 1535, Continuance of risk on furniture, etc., of ship.
§ 1536. Putting into port other than that of original destination and dis-
charging small part of cargo.
§ 1537. Moored twenty-four hours in good safety.
§ 1538. What constitutes being moored twenty-four hours in good safety.
§ 1539. Limiffltion of the rule.
§ 1540. When vessel has arrived.
§ 1541. Ves.«5pl may have arrived and yet never have been moored in
saf*»ty.
§ 1542. Mere temporary mooring not sufficient.
§ 1543. Degree and kind of physical safety required.
§ 1544. Degree and kind of safety required : seizure, etc.
§ 1545. Ship moored at outer harbor or outside place of usual discharge
and unable to enter.
§ 1546. Mere liability to damage does not of itself prevent the ship from
being in safety.
§ 1547. Port of discharge : last port of discharge.
§ 1548. Until she shall arrive in safety in any port or harbor of a partic-
ular place.
§ 1549. Risk may be terminated by substituting another port of delivery.
§ 1550. To port or ports of discharge : usage of trade to keep cargo on
board for a time after arrival.
§ 1551. Ship insured to one or two ports in alternative.
§ 1552. Termination of risk by undertaking distinct voyage before com-
mencing voyage insured.
§ 1553. Loss incurred before expiration of risk : expense incurred there-
after to repair injury.
Ixxii CONTENTS
§ 1554. Mutual insurance association : termination of risk : nonpayment
of contribution.
§ 1555. Expiration by limitation of "binding" memorandum.
CHAPTER XLIX.
ATTACHMENT AND DURATION OF RISK ON GOODS.
§ 1562, Attachment and duration of risk on goods : generally.
§ 1563. Insurance on goods may be retrospective.
§ 1564. Risk will not attach until assured acquires an interest in the
goods : excejDtion.
§ 1565. Goods on shore in warehouses: on the wharf awaiting shipment:
for trading voyages: temporarily landed in government ware-
houses : landed for transportation to port : quarantine.
§ 1566. "Safely landed" defined and construed.
§ 1567. "Safely landed:" risk of craft while waiting for transshipment.
§ 1568. Goods "to be shipped :" time policy.
§ 1569. Goods in transit in boats or lighters, etc. : usage : attachment and
termination of risk.
§ 1570. Attachment of risk: substituted goods: goods laden at interme-
diate port: trading voyages.
§ 1571. Where goods subsequently loaded at intermediate port are not
substituted goods.
§ 1572. Outward goods and proceeds home : attachment risk.
§ 1573. "At and from :" undisposed of outward cargo may be protected
by the words "wheresoever loaded."
§ 1574. "At and from :" outward cargo to be considered homeward interest,
etc.: loading "at."
§ 1575. Laden or to be laden between designated points.
§ 1576. Shipments to be subsequently declared : risk attaches in order of
shipment: usage to correct declaration.
§ 1577. The insurance applies to tlie first voyage or the one commenced.
§ 1578. "At and from" a specified port : commencement of the risk from
loading, etc. : what is port of loading.
§ 1579. Cases relied on in support of the last rule.
§ 1580. Construction of jjolicy may warrant loading elsewhere than "at"
designated place.
§ 1581. Attachment of risk on goods "at and from."
§ 1582. "At and from" on goods: several ports within one legal classifi-
cation.
§ 1583. Goods on board ship or ships : certain ports named : attaches at
port where loaded, etc.
CONTENTS ' Ixxiii
§ 1584. Unloading and reloading goods to make vessel seaworthy or for
other purposes.
§ 1585. Attachment and duration of risk on goods: abandonment and
change of voyage insured.
§ 1580. Homeward policy "at and from:" case of island or district: from
the loading aboard ship "at" port or ports.
§ 1587. Duration of risk: liberty to make port or ports: insurance to
several ports, island or district.
§ 1588. Attachment of risk from a port from loading: duration of risk:
usage.
§ 1589. To specified port : anchoring outside of harbor.
§ 1590. Till safely landed: final or last port of discharge.
§ 1591. Goods partly landed : whether the risk is entire.
§ 1592. Within what time goods must be landed.
§ 1593. Termination of risk: voyage stopped or delayed by ice: inland
navigation.
§ 1594. Risk terminates where goods are transshipped without necessity
or agreement.
§ 1595. Risk does not terminate where goods transhipped from necessity.
§ 159G. Risk does not terminate when transshipment is by agreement.
§ 1597. Termination of risk : outfits of whaling voyage.
§ 1598. Till arrival of goods to a market at final port of discharge.
§ 1599. Termination of risk by consignee or owner taking possession :
consignees : lighters.
CHAPTER L.
ATTACHMENT AND DURATION OF RISK ON FREIGHT.
Attachment and duration of risk on freight : generally.
The case of Tonge v. Watts.
Risk on freight will only attach from loading of the vessel where
so stipulated.
Risk on freight will attach only on goods laden where no contract
for the goods exists.
Risk on freight attaches under valued policy where part only of
goods are laden.
Risk on freight under valued policy may attach only proportion-
ately to goods and freight actually at risk.
Risk attaches on freight if cargo purchased or contracted for,
and both ship and cargo are ready.
Risk on freight will not attach where loss is incurred on voyage
other than that insured.
§ 1G06.
§
1607.
§
1608.
§
1609.
§
1610.
§
1611.
§ 1612.
§
1613.
Ixxiv
CONTENTS
§ 1614. Risk on froight "at and from:" homeward voyage.
§ 1615. Valued policy on freight outward and homeward covers each
voyage.
§ 1616. Freight where voyage insured consists of distinct or successive pas-
sages: valued policy.
§ 1617. Risk terminates where freight is earned: freight partly earned.
§ 1618. Risk on freight terminated by assured accepting goods at inter-
mediate port.
§ 1619. Risk on freight against total loss only not terminated by delivery
of some goods at intermediate port.
§ 1620. Termination of risk on freight at port or ports of discharge.
§ 1621. General rule as to attachment of risk on freight : chartered freight.
§ 1622. Extension of the rule last stated.
§ 1623. Attachment of risk where vessel is being fitted at place of loading
to receive contraeted-for cargo.
§ 1624. Risk on chartered freight attaches by inception of voyage even
in ballast to port of loading.
§ 1625. Contract stipulation may supersede the abov* rule.
§ 1626. Where there is a second charter party at and from outport.
§ 1627. Outward and homeward freight where contract for freight is
entire.
CHAPTER LI.
RESCISSION AND CANCELATION.
§ 1634. Rescission and cancelation generally.
§ 1634a. Construction of cancelation provision against insurer.
§ 1635. Statutory provisions relating to rescission or cancelation.
§ 1635a. Same subject: mortgagee included and consent of necessary.
§ 1636. Rescission or cancelation before contract delivered or finally com-
pleted.
§ 1637. Rescission or cancelation by consent.
§ 1637a. Action for breach of agreement to surrender and cancel lost
policy.
§ 1638. Agreement to cancel marine risk need not be in writing.
§ 1639. Option reserved by company to cancel.
§ 1640. Cancelation for nonpayment of premiums or assessments, or other
breach of condition.
§ 1640a. Cancelation or rescission for misrepresentations, breach of war-
ranty or fraud.
§ 1641. Cancelation where policy is assigned.
§ 1642. Effect as to cancelation of repeal of charter.
CONTENTS Ixxv
§ 1643. Cancelation by mutual company: authority of directors or secre-
tary.
§ 1644. Rescission and cancelation: insolvency: appointment of receiver:
teraiination of business and transfer of assets.
§ 1644a. Cancelation: insolvency: appointment of temporary receiver.
§ 1645. Cancelation by receiver : statutory provision : certificates of in-
debtedness.
§ 1646. What acts do not effect a cancelation : instances.
§ 1646a. Surrender and cancelation : guardian and ward : infant.
§ 1647. Rescission by assured and surrender of policy.
§ 1648. Cancelation by request of assured under terms of policy or statute.
§ 1648a. Surrender and cancelation by person insane or mentally incompe-
tent.
§ 1649. Right to reject policy not of class ordered.
§ 1649a. Surrender and cancelation where policy does not conform to appli-
cation.
§ 1650. Rescission and surrender: mutual company: withdrawal of mem-
ber.
§ 1650a. Cancelation : unincorporated association : withdrawal of member.
§ 1650b. Surrender and cancelation : effect of death of assured.
§ 1651. Right of assured to surrender life policy dependent upon bene-
ficiary's consent.
§ 1652. Proposition to cancel must be accepted or declined as a whole if
indivisible.
§ 1653. Want of insurable interest as a ground of rescission or cancela-
tion.
§ 1654. Rescission or avoidance of com}-)romise or release.
§ 1655. Right of agent to rescind or cancel : notice of cancelation to
agent or broker.
§ 1655a. Cancelation: when other insurance or substituted policy does not
attach.
§ 1655b. Cancelation : when other insurance or substituted policy attaches.
§ 1656. Cancelation by mistake of agent.
§ 1657. Partner's consent to cancelation or substitution binds firm.
§ 1658. Release by part of the insured parties.
§ 1659. Wrongful cancelation or termination of contract by assurer.
§ 1659a. Rescission or cancelation : increase of assessments or reduction of
policy amount.
§ 1660. Strict compliance with stipulation as to rescission or cancelation
required unless waived : wlien stipulation not binding.
§ 1661. Rights relating to rescission or cancelation must be exercised with-
in a reasonable time.
§ 1()()2. Company cannot cancel when loss is imminent.
§ 1663. Cancelation and rescission after loss or forfeiture.
§ 1664. Cancelation in equity after iiolicy lias become void or inoperative.
Ixxvi CONTENTS
§ 1665. May the policy be terminated eo instanti on notice: reasonable
time.
§ 1665a. Same subject: specified time must intervene: computation of time.
§ 1665b. Entire or divisible contract : notice.
§ 1666. Cancelation of parol contract: notice.
§1667. Cancelation: notice to insurer.
§ 1668. Cancelation: notice to the assured: to mortgagee: to one of
several.
§ 1668a. Notice by publication: decree of foreign court.
§ 1669, Cancelation : notice by mail must be received.
§ 1669a. When mailing notice and unearned premium to foreign company
sufficient.
§ 1669b. Notice of registered letter: when insured not put on inquiry.
§ 1670. Cancelation': company must give notice: sufficiency and service
of same.
§ 1670a. Same subject : when notice sufficient.
§ 1670b. Same subject: when notice insufficient.
§ 1671. Cancelation: company must return or tender unearned premium.
§ 1672. Cancelation: what is not a sufficient payment or tender of the
unearned premium.
§ 1673. Cancelation: when actual payment or tender of unearned premium
unnecessary.
§ 1673a. Cancelation: waiver.
§ 1673b. Same subject : surrender of policy upon assurer's request.
§ 1674. When equity will rescind or cancel: generally.
§ 1675. When equity will rescind or cancel : cases.
§ 1676. When equity will not rescind or cancel : cases.
§ 1677. Equity may rescind cancelation made by mistake.
§ 1678. Where equity will refuse to cancel after loss or death.
§ 1679. When equity will cancel after loss or death.
§ 1680. Same subject: conclusion.
§ 1680a. Effect of cancelation upon liability.
§ 1681. Proof as to cancelation or rescission.
§ 1682. Whether question of rescission or cancelation is one of law or fact.
CONTENTS Ixxvii
TITLE VIII.
SUBJECT OF INSURANCE.
CHAPTER LIT.
DESCRIPTION OF PARTIES AND SUBJECT MATTER.
§ 1689. Description of parties.
§ 1690. Description of the property : general rule.
§ 1691. Extent of interest need not be specifically described.
§ 1692. Same subject: carriers: shipowner: consignee: undivided inter-
est : assignee.
§ 1692a. Same subject : bailees, or agents.
§ 1693. Same subject: joint owners: partners.
§ 1694. Same subject : trustee : tenant by curtesy : administrator : execu-
tor : agent : charterer.
§ 1695. Same subject: mortgagor and mortgagee: reinsurer.
§ 1696. Goods shipped by carriers: owner's interest covered.
§ 1697. Specific description, how far exclusive: the terms "including" and
"consisting of."
§ 1698. When specific designation of interest or property is required.
§ 1699. Same subject : particular words and phrases : instances.
CHAPTER LIlI.
DESCRIPTION OF PROPERTY.
§ 1705. Accounts : evidences and securities of property.
§ 1706. Advances: advancements by charterer and master: advances on
freight.
§ 1707. "All or either :" "both or either."
§ 1708. Alterations and repairs of property.
§ 1709. Banknotes and bills of exchange.
§ 1710. Bottomry and respondentia.
§ 1711. Captor's interest : prize of war.
§ 1712. Cargo.
§ 1713. Contingent or special interest in property of others.
§ 1714. Contraband of war: belligerent and neutral property.
§ 1715. Curiosities: scientific cabinets and collections.
Ixxviii CONTEXTS
§ 1716. Equitable interest may be covered by the term "property."
§ 1717. Freight must be insured eo nomine.
§ 1718. Freight : right reserved by owner and vendor : whether such
interest covered by insurance on freight.
§ 1719. Freight: wiiether charterer may insure eo nomine: difficult to
formulate a rule.
§ 1720. Same subject : eases.
§ 1721. Same subject : opinions of the text-writers.
§ 1722. Same subject : conclusion.
§ 1723. Freight : designation of shipowner's interest.
§ 1724. Fi'eight : other interests.
§ 1725. Goods, wares and merchandises: cargo.
§ 1726. Goods laden on deck.
§ 1727. Goods, wares and merchandise "in trust or on commission :" on
consignment.
§ 1728. Clause "in trust or on commission" may be limited and controlled
by other words in the policy.
§ 1729. Goods, etc.: "sold but not delivered:" "sold but not removed."
§ 1730. Goods, etc. : "in trust or on commission :" on storage : where policy
requires specific declaration or separate insurance.
§ 1731. Where policy stipulates specific insurance of goods "in trust" and
specifies what interests those words cover.
§ 1732. Goods and merchandise : shifting and successive cargoes.
§ 1733. Goods or merchandise : shifting and successive goods : after ac-
quired property : fire risks.
I 1734. What goods are covered maj- be determined by custom between the
parties.
§ 1733. What goods are covered may be determined bj- known usage of
a particular place.
§ 1736. Goods or merchandise to be described by indorsement : approval
of risks: goods to be thereafter declared and valued: marine
risks.
§ 1737. Gunpowder : marine risk.
§ 1738. House of building: dwelling house.
§ 1739. Houses and buildings: connected structures and additions.
§ 1740. Household furniture: hotel furniture.
§ 1741. Live stock : marine risks.
§ 1742. Locality important in fire risks.
§ 1743. Locality : property "contained in."
§ 1744. Locality : property "contained in" connected or adjoining build-
ings : new buildings substituted for old.
§ 174o. Locality: "contained in:" goods in dift'erent parts of building. '
§ 1746. Locality: "contained in:" removal of goods from a specified loca-
tion : permanent removal.
§ 1747. Locality: temporary removal of property from specified location.
§ 1748. Locality: i^roperty on premises.
CONTEXTS Ixxix
Locality: premises owned and occupied: property on wharf.
Locality: occupation, ownership, or use of premises acquired sub-
sequently to issuing policy.
Manufactories : factories : mills.
Materials not included in "building:" unfinished vessel.
Medals: models: specific description : standard policy.
Money, specie, bullion, coin, treasure, jewels.
Paintings : patterns : specific description : standard policy.
Passage money.
Personal effects : money, jewelry, etc. : master's effects.
Personal property: wearing apparel: master's clothes: baggage.
Plate : specific description : standard policy.
Profits and commissions.
"Property."
Provisions and provender under marine risk.
Scientific cabinets and collections: sculpture: specific descrij:)-
tion : standard policy.
Ship.
Ship's stores and outfits: what ship includes.
Ship's boat or launch.
Ship: character or kind, of vessel: rating.
Ship's name important: master's name.
Change of ship or master or name of ship.
Shiji's enrolment as affecting validity of policy.
Ship as privateer or letter of marque.
Ship or ships.
Shij) or ships: right to apply policy in case of different shipments
and losses.
§ 1774. Stock of goods, etc., in manufacturing: stock in trade of
mechanic : fire risk.
§ 1775. Stock in trade : goods or merchandise for sale : fire risks.
§ 1776. Stock in trade: stock in building: owner and goods of others.
§ 1777. Stock in trade, etc., may cover property specifically excluded or
the keeping of which is prohibited.
§ 1778. Whaling and fishing voyages : outfits : stores, catchings, etc.
CHAPTER LIY,
CONCEALMENT— MARINE RISKS.
§ 1786. Concealment in marine insurances: generally.
§ 1787. Concealment arising from negligence, accident, mistake, etc.,
avoids.
§ 1788. Concealment: voluntary ignorance will not excuse.
§
1749.
§
1750.
§
1751.
§
1752.
§
1753.
§
1754.
§
1755.
§ 1756.
§^
1757.
§ 1758.
§
1759.
§ 1760.
§
1761.
§ 1762.
§
1703.
§
1764.
§
1765.
§
1766.
§
1767.
§ 1768.
§
1769.
§
1770.
§
1771.
§ 1772.
§
1773.
Ixxx CONTENTS
§ 1789. A specific and full disclosure is required, not an evasive one or
one in general terms.
§ 1790. Concealment is referred to the time of making the contract.
§ 1791, What constitutes a "material fact :" must it be a fact material to
the risk.
§ 1792. Same subject: opinions of the text-writers.
§ 1793. Same subject : conclusion.
§ 1794. Whatever affects the state and condition of the ship at the time
is material.
§ 1795. Facts and information affecting the condition or safety of the
ship on her voyage : subsequently occurring events.
§ 1796. Suspicions: rumors: reports: apprehensions: opinions: general
intelligence.
§ 1797. Same subject: cases.
§ 1798. Facts implied from, or underwriter put on inquiry by informa-
tion given : waiver.
§ 1799. Information, belief, or expectation of third person.
§ 1800. Failure to communicate a fact which would show known informa-
tion is material.
§ 1801. Where intelligence or report proves untrue.
§ 1802. Intelligence, reports, or rumors of loss.
§ 1803. Whether time of sailing must be disclosed: opinions of text-
writers.
§ 1804. Same subject : cases.
§ 1803. Same subject : the general rule.
§ 1806. Underwriter i^resumed to know causes which occasion natural
perils.
§ 1807. Kestrictions on commerce: commercial foreign regulations.
§ 1808. UndeiTvriter presumed to know causes which occasion political
peril.
§ 1809. Degree of publicity which will bind underwriter with knowledge of
material fact.
§ 1810. Same subject : the English rule.
§ 1811. Same subject : the case of Bates v. Hewitt.
§ 1812. Same subject: opinions of Mr. Arnould and Mr. Maclachlan.
§ 1813. Usage need not be disclosed.
§ 1814. Exceptions to last rule.
§ 1815. Ownership of vessel need not be stated when not material and
insurance is on cargo.
§ 1816. Nature and condition of cai'go.
§ 1817. Cases where entire contract is not vitiated, but only that part
relating to risk concealed.
§ 1818. Whether it need be disclosed that goods are contraband: belliger-
ent risks : neutral : national character.
CONTENTS Ixxxi
§ 1819. Presumption concerning underwriter's knowledge of ports and
places.
Repairs consequent upon outward voyage.
Disclosure of interest in ship or goods.
Must an equitable title be disclosed.
Facts not within assured's knowledge : degree of diligence re-
quired of assured.
Need not disclose matters of express or implied warranty.
Whether information which falsifies a warranty must be disclosed.
Mode of construction of vessels.
Destination of vessel : port or ports.
By-gone calamities : previous condition of ship : latest intelligence.
That goods are to be stowed on deck need not be disclosed.
Particular language of bill of lading.
Excepted risks.
Ship's papers: false clearance, etc.
Whether the fact that letters of marque are on board need not be
disclosed.
Ship's true port of loading.
Other matters not necessary to be disclosed.
Other matters necessary to be disclosed.
Where inquiries are made.
CHAPTER LV.
CONCEALMENT IN OTHER THAN MARINE RISKS.
§ 1844. Concealment in other than marine risks: absence of inquiries:
fraud : materiality : other tests : generally.
§ 1845. English decisions.
§ 1846. Assured's knowledge : nondisclosure aifecting increase of risk
or rate.
§ 1847. Assured's knowledge: concealment arising from negligence, acci-
dent or mistake, etc.
§ 1848. Assured's knowledge : his belief as to materiality of facts.
§ 1849. Same subject : conclusion.
§ 1850. Insurer's knowledge.
§ 1851. Insurer's knowledge: constructive knowledge from examination
by surveyor.
§ 1852. Insurer's knowledge : use of insurance map in fire risks.
§ 1853. Insurer's knowledge : public records of title.
§ 1854. Insurer's knowledge : political perils.
§ 1854a. Knowledge of insurer's agents.
§ 1820
§
1821,
§
1822,
§
1823
§
1824.
§
1825.
§
1826.
§
1827,
§
1828.
§
1829.
§
1830.
§ 1831,
§
1832.
§
1833.
§
1834.
§
1835.
§ 1836.
§
1837.
Ixxxii CONTENTS
•
§ 1855. A specific and full disclosure is required, not an evasive one.
§ 1856. Concealment must l)e referred to I he time of making the contract
and not to a subsequent event.
§ 1857. Disclosure of assured's interest.
§ 1858. Same subject : exception to rule.
§ 1859. Must an equitable title be disclosed.
§ 1860. Unusual or extraordinary circumstances of peril to which property
is exposed.
§ 1801. Same subject : distinctions to be observed.
§ 1862. Apprehensions that property is exposed to danger: suspicions,
rumors, opinions, and speculations.
§ 1863. Where insured's belief, apprehension, or fear of danger is the
moving cause in effecting insurance.
§ 1804. When moral character of assured may become material : rein-
surance : moral risk.
§ 1865. Belief that property has been destroyed.
§ 1806. Facts implied fi-om or assurer put on inquiry by information
given : waiver.
§ 1867. Whatever affects the state or condition of the property at time:
materiality: facts affecting risk or premium.
§ 1868. What constitutes a material fact: must it be material to the risk:
facts affecting risk or premium as test of materiality.
§ 1869. Inquiries. •
§ 1870. Inquiries: no inquiries: limited inquiries: questions in application
unanswered or incompletely answered: waiver.
§ 1871. Same subject continued.
§ 1872. Same subject : distinctions to be observed.
§ 1873. When subsequent reception of premium no waiver of concealment.
§ 1874. Concealment of same facts from other insurers.
§ 1875. Other matters: Code provisions, etc.: general statements.
CHAPTER LVI.
REPRESENTATIONS AND MISREPRESENTATIONS.
§ 1882. Representations: misrejiresentations: distinction between repre-
sentations and warranties: generally.
§ 1883. Representations defined.
§ 1884. Misrepresentation defined.
§ 1885. Representation may be oral or written.
§ 1886. Representation precedes the contract.
§ 1887. Representation is collateral to but no part of the contract.
CONTENTS Ixxxiii
§ 1888. Same subject : the view that representations are a part of the
contract.
§ 1889. What weight should be given the theory that representations are
a part of the contract.
§ 1890. Statements "Avhich are part of contract may sometimes be repre-
sentations by express stipulation, or implied : construction.
§ 1891. When statements in application are representations: references
to application : generally.
§ 1892. Test of materiality of representation: facts affecting risk or
premium.
§ 1893. Re])resentation only relates to material facts except it be other-
wise stii^ulated.
§ 1894. False representations in regard to material matters avoid contract.
§ 1894a. Same subject : presumptions.
§ 1895. Misrepresentations or false rep'resentations must be of material
facts.
§ 1896. Same subject: where statement is intentionally false: effect of
the fraud as to materiality of fact to risk : burden of proof.
§ 1896a. Material false representations vitiate binding slip.
§ 1897. Where positive representation is false and material fraud need not
be proven.
§ 1898. Representation may be of facts actually material to the risk:
question for jury.
Representations may be of facts in no way material to the risk.
Representation may be of facts intentionally false: when material.
Positive statement of fact which assured does not know to be true.
Representations through mistake, ignorance, or negligence.
Cases qualifying the last rule.
Representations : expectation, belief, or opinion, without fraud.
False representations owing to fault, etc., of agent : knowledge
of agent : waiver and estoppel.
Statements founded on information from agent.
Positive statements founded on information derived from others.
Statements not positive based on information from others.
Positive statement defining time of commencement of risk.
Facts actually material but not relied on by insurer.
Matters of description or facts relating to property.
§ 1912. Facts rendered material by stipulation: stipulation to be true
and basis of contract: statement stipulated.
§ 1913. Statement limited as to its effect by assured.
§ 1914. Facts stated in answer to inquiries.
§ 1914a. Same subject: presumptions: false answers.
§ 1914b. Same subject : where answer incomplete or inaccurate.
§ l!)14c. Where no inquiries made.
§ 1914d. Statements in other applications.
§
1899.
§
1900.
§
1901.
§ 1902.
§
1903.
§
1904.
§ 1905.
§ 1906.
§
1907.
§ 1908.
§
1909.
§
1910.
§
1911.
Ixxxiv CONTENTS
§ 1914e. Adoption of original insured's representations by assignees on
renewal.
§ 1915. When the stipulated materiality of statements is qualified: war-
ranties thereby construed as representations.
§ 1915a, Qualified statements continued: best of assured's knowledge and
belief: other qualifications.
§ 1915b. Same subject : fidelity guaranty insurance.
§ 1916. Statements under statutory provisions.
§ 19i7. Promissory representations : ^statement of proposition.
§ 1918. Opinions of text-writers as to promissory representations.
§ 1919. Same subject : eases and opinions.
§ 1920. Same subject: conclusion.
§ 1921. To what time the representation refers.
§ 1922. Representation falsified in the future does not operate retro-
actively.
§ 1923. Representations true when made, but untrue when contract com-
pleted.
§ 1924. Representation must be substantially true.
§ 1925. Loss need not be connected with misrepresentation to avoid
contract.
§ 1926. Misrepresentations to other insurers.
§ 1927. Representation must not be evasive.
§ 1928. Statements volunteered and irrelevant : iri'esponsive answers.
§ 1929. Ambiguous or doubtful representations.
§ 1929a. Answer illegible or ambiguous in original application but plain
in attached copy.
§ 1930. Answers to ambiguous or doubtful questions.
§ 1931. Representations false as to part of property : entire or severable
contract.
§ 1932. Representations of third parties: parties referred to.
§ 1933. Representations may be changed, modified, altered or withdrawn.
§ 1934. Construction of representation.
§ 1934a. Construction of questions.
§ 1935. Rules as to representations apply to modification of contract.
CIJAPTER LVII.
WARRANTIES.
§ 1942. Warranties: general statement.
§ 1943. Division of warranties.
§ 1944. Express warranty defined.
§ 1945. Implied warranty defined.
§ 1946. Affirmative warranty defined.
CONTENTS Ixxxv
§ 1947. Promissory warranty defined.
§ 1948. Warranty of intention: the ease of Bilbrough v. Metropolitan
Insurance Company.
§ 1949. Form of warranty : distinctions : construction.
§ 1950. In cases of doubt construction against warranty: intention of
parties.
§ 1951. Warranty in effect condition precedent.
§ 1951a. Same subject : other views : special distinctions, etc.
§ 1952. Condition j^recedent continued: loss occurring prior to breach
of promissory warranty : whether contract ab initio void.
§ 1953. Same subject: decisions on which proposition based.
§ 1954. Same subject: additional authorities.
§ 1955. Same subject: conclusion.
§ 1956. Express warranty must appear on face of policy or be made a
part of contract.
§ 1956a. Material or immaterial statements made warranties by stipulation.
§ 1956b. Same subject: such stipulations reasonable.
§ 1957. Warranties : statements in application.
§ 1958. Applications and other papers: what constitutes a sufficient
reference : marginal writings on policj^, etc.
§ 1959. Reference to application, plan, survey, etc., eoiitinued.
§ 1960. Same subject : cautionary suggestions.
§ 1961. Whether stipulation on face of policy as to preservation of
property after loss is warranty.
§ 1962. Wan-anty not necessarily material : its materiality not subject
of inquiry.
§ 1963. Materiality of fact to the risk may in certain cases be subject
of inquiry.
§ 1964. Warranty : mistake : want of knowledge of untruth : fraud : good
or bad faith.
§ 1965. Warranty may be qualified by other words in the contract.
§ 1966. When matters of description or facts relating to property are
warranties.
§ 1966a. Time to which warranty refers.
§ 1966b. Warranties subsequent to completion of contract.
§ 1967. Where time to which affirmative warranty relates is specified.
§ 1968. Where time to which affirmative warranty in life risk relates
is indefinite.
§ 1969. Partial answers.
§ 1970. Breach : warranty must be strictly true and exactly and liter-
ally fulfilled.
§ 1971. Is there a tendency to relax the above rule?
§ 1972. Exceptions to above rule : what excuses compliance with warranty.
§ 1973. What excuses compliance : waiver and estoppel.
§ 1973a. Same subject : when no waiver or estoppel.
Ixxxvi CONTENTS
§ 1974. Neglect to read or have ajiplication read no excuse.
§ 1975. Breach of warranty avoids though not cause of loss.
§ 1976. Policy avoided hy breach o£ warranty is not revived by subse-
quent compliance.
§ 197Ga. Warranties by infant : recovery by beneficiary.
§ 1977. Burden of proof: express warranties.
CHAPTER LVllI.
PARTICULAR REPRESENTATIONS AND WARRANTIES.
§ 1987. General statement.
§ 1987a. "Abortions:" inquiry concerning.
§ 1988. Account of stock: not continuing warranty.
§ 1989. Merchandise accounts: inventory,
§ 1990. Accounts settled monthly : guaranty against embezzlement.
§ 1991. Age and character of building.
§ 1991a. Age and tonnage of ves.sel.
§ 1991b. Age of automobile: "year model:" "year of manufacture."
§ 1992. Age of insured: age of relatives: life risk.
§ 1992a. Same subject: good or bad faith, intention, mistake.
§ 1992b. Same subject : statements qualified : best of assured's jinowledgo
. and belief.
§ 1992c. Same subject: statutes.
§ 1992d. Same subject : waiver and estoppel.
§ 1992e. Same subject: mistake or knowledge of assurer's agent.
§ 1992f. Same subject : when recovery may be based on amount premium
would have purchased.
§ 1992g. Age of beneficiary: "double indemnity insurance."
§ 1993. Anchorage ground: marine risk.
§ 1994. Armament of ship : warranty.
§ 1995. Ashes.
§ 199oa. Automatic sprinkler system.
§ 1996. Bodily or mental infirmities: life and accident policy.
§ 1997. Books of account : keeping books in safe.
§ 1997a. Books and accounts : burglary insurance.
§ 1997b. Building: dimensions and material of.
§ 1998. Cargo of .ship : warranty.
§ 1998a. Carrier: warranty that insurance shall not inure to benefit of.
§ 1998b. Clear space clause : w-arranty.
§ 1998c. Same subject : waiver.
§ 1999. Convoy: warranty to sail or depart with.
§ 2000. "Depart," warranty to, in marine risk.
CONTENTS Isxxvii
§ 2000a. Dividends, earned: misrepresentations as to.
§ 2001. Examination of property after work: representation.
§ 2001a. Explosives: warranty tliat none used: indemnity policy.
§ 2002. Fires: heating: stoves: continuing warranty,
§ 2002a. Guaranty insurance.
§ 2003. Health: disease: life risk.
§ 2004. Health: "good health:" "sound health:" "sound body:" "perfect
health," etc.
§ 2005. Same subject : renewal of policy.
§ 2006. Same subject: refusal of assured to accept renewal receipt con-
ditioned as to good health.
§ 2007. Health of assured need not be disclosed at time of renewal ex-
• cept on inquiry.
§ 2008. Health: "spitting of blood:" consumption.
§ 2009. Health: previous sickness or disease.
§ 2010. Health: assured's knowledge: latent disease.
§ 2011. Health : parents : relations.
§ 2012. Health: rupture: hernia: wearing truss.
§ 2013. "In port," as relating to commencement of risk: marine policy:
warranty.
§ 2014. Incendiarism : tire risk.
§ 2015. Encumbrances: disclosure of title not necessary unless asked
or otherwise required : fire risk.
§ 2016. Encumbrances: generally.
§ 2017. Encumbrances on property by verbal agreement.
§ 2018. Encumbrances made after the policy.
§ 2019. Encumbrances: judgments: execution.
§ 2020. Encumbrances: lien: mechanic's lien: judgment lien, etc.
§ 2021. Encumbrance: lien for taxes: delinquent taxes.
§ 2022. Encumbrances: mortgage.
§ 2023. Encumbrance: mortgage: knowledge of insurer or his agent.
§ 2024. Encumbrance: mortgage obtained by fraud.
§ 2025. Encumbrance pending litigation.
§ 2026. Interest and title : no disclosure necessary where no inquiry.
§ 2027. Interest and title : generally.
§ 2028. Interest and title: title which will enable assured to transfer by
abandonment: marine risk.
^ 2029. Interest and title: assignee's policy.
§ 2030. Interest and 'title: as interest may appear for account of.
§ 2031. Interest and title: bill of sale.
§ 2032. Interest and title: collateral.
§ 2033. Interest and title: contract of purchase.
§ 2034. Interest and title: conditional sale.
§ 2035. Interest and title: deed as related to title.
§ 2036. -Interest and title: devisee: charge created by will.
§ 2037. Interest and title: dower right.
Ixxxviii CONTENTS
§ 2038. Interest and title: easement in property.
§ 2039. Interest and title : equitable interest.
§ 2040. Interest and title: fraudulent as against creditors.
§ 2041. Interest and title: homestead.
§ 2042. Interest and title: joint owners: undivided interest.
§ 2043. Interest and title: judgment creditor: execution sale: foreclosure
sale: sheriff's sale.
§ 2044. Interest and title : leasehold interest : building on leased ground.
§ 2045. Interest and title: lien.
§ 204G. Interest and title: minor child's interest.
§ 2047. Interest and title: mortgage: mortgagor and mortgagee.
§ 2048. Interest and title: ownership: property.
§ 2040. Interest and title : partnership interest : exclusive ownership.
§ 2050. Interest and title: pending litigation.
§ 2051. Interest and title: possession.
§ 2052. Interest and title: trust deed: parol trust.
§ 2053. Interest and title: in trust or on commission.
§ 2054. Interest and title: stored property.
§ 2055. Interest and title: tenant by the curtesy: joint occupancy.
§ 2056. Interest and title: tenant for life: tenant in tail.
§ 2057. Interest and title: united interests of assured.
§ 2058. Interest and title: vendee under contract for purchase: bond
for deed.
§ 2059. Interest and title: wife's property.
§ 2000. Intention to navigate: marine risk.
§ 2061. Insanity: life risk.
§ 2002. Insurance beyond specified amount contrary to agreement.
CHAPTER LIX.
PARTICULAR REPRESENTATIONS AND WARRANTIES, CON-
TINUED—IRON-SAFE, INVENTORY, BOOKKEEPING CLAUSES.
§ 2063. Iron-safe clause reasonable, valid and enforceable.
§ 2063a. Object or purpose of iron-safe clause: to what applicable.
§ 2063b. Nature of iron-safe clause: whether representation, warranty, etc.
§ 2063c. Iron-safe clause: account of stock: not continuing warranty.
§ 206.3d. Construction of iron-safe clause.
§ 2063e. Iron-safe clause: whether contract divisible or entire: effect of
breach.
§ 2063f. Whether strict or substantial compliance with clause required.
§ 2063g. Iron-safe clause: custom of place: customary business methods.
CONTENTS Ixxxix
§ 2063h. Iron-safe clause: effect of assurecFs negligence or inadvertence
as to compliance.
§ 2063i. Iron-safe clause: effect of statutes: generally.
§ 2063J. Iron-safe clause: inventory generally.
§ 2063k. Iron-safe clause: inventory defined.
§ 20631. Iron-safe clause: "last preceding inventory" defined.
§ 2063m. Iron-safe clause: "complete" "itemized" inventory defined.
§ 2063n. Iron-safe clause: "inventory" and "invoice" distinguished.
§ 2063o. Invoice not a substitute for inventory.
§ 2063p. Same subject: whether new store with new goods constitutes
exception or qualification.
§ 2063q. Inventory: compliance with reference to location of property.
§ 2063r. Iron-safe clause: what constitutes substantial or sutFicient com-
pliance as to inventory : instances.
§ 2063s, Iron-safe clause: what does not constitute substantial or suffi-
cient compliance as to inventory: instances.
§ 2063t. Bookkeeping clause: ordinary intelligence as test of compliance.
§ 2063u. Bookkeeping clause : what constitutes substantial or sufficient com-
pliance : instances.
§ 2063v. Bookkeeping clause: what does not constitute a substantial or
sufficient compliance : instances.
§ 2063w. Computation of time : inventory and bookkeeping clauses.
§ 2063x. Iron safe: keeping of books, etc., in.
§ 2063y. What constitutes a fireproof safe.
§ 2063z. Keeping books, etc., in safe "or in some secure place:" "some
place not exposed to a fire."
§ 2063aa. Removal of inventories, etc. : emergency created by threatened
fire.
§ 2063bb. Demand by assurer for production of books, etc.
§ 2064. Iron safe : keeping books, etc., in : waiver and estoppel.
§ 2064a. Same subject : agent's knowledge, etc.
§ 2064b. Same subject : agent's knowledge, etc. : when no waiver.
CHAPTER LX.
PARTICULAR REPRESENTATIONS AND WARRANTIES
CONTINUED.
§ 2065. Iron shutters: fire risk.
§ 2066. Lading: dunnage: registered tonnage: marine risk.
§ 2067. Lights: fire risk.
§ 2068. Location.
§ 2069. Master's certificate : warranty : marine risk.
xc CONTENTS
§ 2070. Medical attendant : medical treatment : life risk.
§ 2071. Medical examiner: statements to.
S 2072. Medical examiner: subject of inquiry.
§ 2073. Moored safely in certain harbor: warranty: marine risk.
§ 2074. Occupation : life and accident risks : representation and warranty :
continuing warranty.
§ 2075. Other insurance : refusal of other insurers : prior applications,
etc.
§ 2076. Opium habit: life risk.
§ 2077. Personal, accidental, or serious injury: wounds: hurts: prior
losses: prior indemnity.
§ 2078. Pumps : water : tanks filled, etc. : fire risk : continuing warranty.
§ 2079. Residence : birthplace : life risk.
§ 2080. Relative situation and distance : other buildings : variance in de-
scription no warranty that location of other buildings shall
remain unchanged.
§ 2081. Relationship: life risk.
§ 2082. Sailing: warranty to sail: marine risk.
§ 2083. Sailing : representation as to time of.
§ 2C84. Sailing: representation as to time of may be merely of expecta-
tion or belief.
§ 2085. Sailing: warranty to sail may not be engrafted on policy by
parol evidence.
§ 2086. Sailing: what constitutes.
§ 2087. Sailing: what does not constitute.
g 2088. Sheathing vessel.
§ 2089. Ship's safety: warranty: marine risk.
§ 2090. Smoking on premises: continuing warranty: fire risk.
§ 2091. Spirits on board ship : carrying prohibited articles : reasonable
construction : marine risk.
§ 2092. Stay of vessel at certain place limited by warranty : marine risk.
§ 2093. Stock kept up to specified amount.
§ 2094. Stowage of cargo : warranty : marine risk.
§ 2095. Suicide: effect of warranty against.
§ 2096. Temperate habits : drunkenness : use of intoxicating liquors.
§ 2097. Tobacco: moderate use of.
§ 2098. Trade and employment of ship : marine risk.
§ 2099. "Uninsured:" policy on another subject matter: "honor policy."
§ 2100. Unmarried: married: widoAver: wife.
§ 2101. Use and occupation : whether continuing warranty : fire risk.
§ 2102. Use and occupation : constantly worked : unlawful act not im-
plied.
§ 2103. Use and occupation : dwelling-house : boarding-house : hotel, etc.
§ 2104, Use and occupation : hazardous trade or business.
§ 2105. Use and occupation : house of ill-fame : disorderly or bawdy
house.
§ 2106. Use and occupation : manufactory.
CONTENTS xci
§ 2107. Use and occupation : manufactory' : incidental uses.
§ 2108. Use and occupation : running factory nights.
§ 2109. Use and occupation : stores : storehouse : storage.
§ 2110. Use and occupation : stores : when continuing warranty.
§ 2111. Use and occupation : tenants : continuing warranty.
§ 2112, Watchman on premises : watch-clock : sleeping in store : continu-
ing warranty.
CHAPTER LXI.
NEUTEALITY AND NATIONAL CHARACTER.
§ 2122. Warranty of neutrality : generally.
§ 2123. Object and meaning of this warranty.
§ 2124. Neutral property defined : who is a neutral : domicil.
§ 2125. Warranty true when made not forfeited by subsequent hostili-
ties.
§ 2126. Warranty of neutrality as affected by barratry.
§ 2127. Documents, papers, etc., required.
§ 2128. Character of documents and insignia of national character re-
quired.
§ 2129. Description in policy or representation as to national character.
§ 2130. Goods shipped from, a neutral to a belligerent.
§ 2131. Goods shipped from a belligerent to a neutral: transfer after
capture.
§ 2132. Agreement to claim property as neutral in ease of capture.
§ 2133. Neutral vessels employed in belligerent ser\dce.
§ 2134. May neutrals avail themselves in time of war of trade prohibited
during peace?
§ 2135. Vendee of vessel.
^ 2136. Neutrality violated by breach of blockade.
§ 2137. Notice to neutral of blockade required.
§ 2138. AVhere existence of blockade is notorious or it has long continued.
§ 2139. What constitutes a blockade.
§ 2139a. Same subject : British orders in Council, etc.
§ 2140. Continuance of blockade.
§ 2141. Effect of sailing for blockaded port: intention to enter: breach
of blockade: what is and is not.
§ 2142. Simulated or false papers: concealment, suppression, or spoli-
ation of papers.
§ 2142a. Same subject: "liberty to run blockade:" seizure.
§ 2143. Carrying contraband goods: contraband of war: breach of neu-
trality.
§ 2144. Breach of neutrality from resistance to lawful right of search.
xcu CONTENTS
CHAPTER LXII.
SEAWORTHINESS.
§ 2151. Warranty of seaworthiness implied: voyage policy: general rule.
§ 2152. Whether warranty of seaworthiness implied in time policies:
the English rule.
§ 2153. Whether warranty of seaworthiness in time policies in this
country.
§ 2154. Same subject: conclusion.
§ 2155. Implied warranty of seaworthiness in time policies: code pro-
visions : stipulation.
§ 2155a. Warranty of seaworthiness: policy on cargo or freight.
§ 2156. Innocence of assured: unknown defects.
§ 2157. Effect of exception of losses occasioned by unseaworthiness:
knowledge.
§, 2158. Effect of previous survey : certificate of seaworthiness : subsequent
survey: condemnation.
§ 2159. Different degrees of seaworthiness.
§ 2160. What constitutes seaworthiness.
§ 2161. What constitutes seaworthiness and unseaworthiness: cases.
§ 2161a. Seaworthiness: refrigerating plant: insurance on insulation for.
§ 2161b. Loss of vessel while moored: duty of assured: negligence.
§. 2162. Effect of noncompliance with statute.
§ 2162a. Injury in collision as evidence of unseaworthiness: statute.
§. 2163. Effect of usage upon seaworthiness of foreign vessel in foreign
port.
§ 2163a. Overloading: effect of practice or custom to understate measure-
ments.
§ 2164. Manning vessel.
§ 2165. Whether inferior officers must be competent to fill master's posi-
tion.
§ 2166. Whether vessel must .when she sails have a full complement of
men engaged for whole voyage.
§ 2167. Negligence or misconduct of master or crew: continuing war-
ranty.
§ 2168. Employment of pilot.
§ 2169. Warranty may be superseded by stipulation: waiver and estoppeh
latent defects.
§ 2169a. Latent defects: Inchmaree clause.
§ 2169b. When warranty not superseded by stipulation.
§. 2169c. Same subject : effect of Harter act.
CONTENTS xciii
§ 2170, Seaworthiness: estoppel against insurer: certificate of board of
underwriters.
§ 2170a. Assurer's knowledge of condition of vessel and nature of risk.
§ 2171. Successive voyages or stages of the voyage.
§ 2172. To what time the warranty of seaworthiness refers.
§ 2173. Continuing warranty as to seaworthiness: the English rule.
§ 2174. Continuing warranty as to seaworthiness: the rule in this
country.
§ 2175. Continuing warranty as to seaworthiness : time policies.
§ 2176. Continuing warranty as to seaworthiness: repairs.
§ 2177. Whether cases as to necessity for repairs can be reconciled with
other doctrines and cases apparently in conflict therewith.
§ 2177a. Moored in safety: breach of warranty: repairs.
§ 2178. Assurer's approval of ship at port of departure : subsequent re-
pairs.
§ 2179. Subsequent noncompliance as to seaworthiness no retrospective
effect.
§ 2180. Vessel seaworthy for port.
§ 2181. Whether original unseaworthiness may be cured before loss.
§ 2182. Policy at and from vessel sailing unseaworthy: may defect be
remedied before loss ?
§ 2183. Vessel becoming unseaworthy after commencement of risk and
defect cured before loss.
TITLE IX.
CONDITIONS VOIDING THE POUCY.
CHAPTER LXIII.
CONDITIONS VOIDING THE POLICY— GENERAL CONDITIONS.
§ 2190. Conditions in policy : generally.
§ 2191. Alterations and repairs: employing mechanics, etc.: generally.
§ 2192. Permission to make alterations or repairs.
§ 2193. Whether loss was occasioned by the alterations cannot be inquired
into: materiality of alteration,
§ 2194. Materiality of alteration.
§ 2195. Alteration by act of proprietors.
, xciv CONTENTS
§ 2196. Alteration conditioned to be at risk of insured.
§ 2197. Repairs upon the insured premises: builder's risk.
§ 2197a. Unauthorized additions to building-: proximity to other houses.
§ 2198. Specially prohibited articles under policy on stock of goods,
etc. : generally.
§ 2199. "Stock in trade:" "goods usually kept."
§ 2200. Storing of prohibited articles.
§ 2201. Keeping of prohibited articles: hazardous and extrahazardous.
§ 2202. Specially prohibited articles : benzine : burning fluid : camj^ihene :
dynamite : fireworks : gasolene.
§ 2203. Specially prohibited articles : gunpowder : hay : kerosene : lights :
naptha.
§ 2204. Specially prohibited articles: petroleum: saltpeter: spirituous
liquors : turpentine.
§ 2205. Erection of buildings adjacent to insured premises.
, § 2206. Erection of adjacent buildings to which insured is not a party.
§ 2206a. Erection or occupation of adjacent buildings : change in exposure.
§ 2206b. Requirement to build chimneys.
§ 2207. Increase or change of risks.
§ 2207a. Same subject : conspiracy to burn property : fraud.
§ 2207b. Same subject : attempt to burn property.
I § , 2208. Notice of increase of risk : waiver.
§ 2209. Prohibited use of premises.
§ 2210. Meaning of "premises" as used in condition.
§ 2211. Prohibited uses: hazardous and extrahazardous.
§ 2212. Where policy is only suspended during a temporary prohibited
use.
§ 2213. Uses not violation of the conditions as to prohibited use.
§ 2214. Change in "situation or circumstances affecting the risk."
§ 2215. Condition as to smoking upon the premises,
§ 2216. Ceasing to operate factory, etc. : operating factory, etc., at night.
§ 2216a. Same subject : when condition violated : instances.
§ 2217. Use of stoves on premises : fires. •
§ 2218. Use of premises for unlawful purposes.
§ 2219. Prohibited uses which will avoid the policy.
§ 2220. Waiver of forfeiture on account of prohibited use.
§ 2221. Notice in case of change of use : waiver.
§ 2222. Effects of acts of tenant upon insured property.
§ 2223. Change of occupancy: tenancy.
§ 2224. Effect of nonoccupation of insured premises where policy only
prohibits increase of risk.
§ 2224a. Increase of risk : material to risk : clauses as to vacancy, etc.
§ 2225. Vacant or unoccupied and similar clauses : validity, construction
and meaning' thereof.
CONTENTS xcv
§ 2225a. "Vacant, unoccupied and uninhabited:" "vacant, unoccupied or
uninhabited,"
§ 2225b. "Untenanted or vacant."
§ 2225c. Temporary vacancy or absence: owner, tenant, or occupant.
§ 2225d. Vacancy, etc.: several buildings or kinds of property: entirety
or divisibility of risk.
§ 2225e. Premises untenantable or unfit for occupancy : vacancy enforced.
§ 2226. Provision as to notice in case premises become vacant or unoc-
cupied: permit.
§ 2227. "Unoccupied premises."
§ 2228. "Vacant" premises.
§ 2228a. Vacant by removal: personally unoccupied.
§ 2229. Conditioned to be void if premises become "vacant and unoc-
cupied."
§ 2230. Conditioned to be void if the premises become "vacant or un-
occupied."
§ 2230a. Same subject : when premises "vacant or unoccupied :" instances.
§ 2230b. Same subject: when premises not "vacant or unoccupied:" in-
stances.
§ 2230c. Same subject: watchman acting under legal process.
§ 2231. Waiver of condition as to premises being vacated.
§ 2232. Restrictions in life policy as to residence: travel, etc.: waiver.
§ 2233. Same subject: construction of phrase "settled limits of the United
States."
§ 2234. Restriction as to travel: construction of permit to go beyond
prescribed limits.
§ 2235. Where insured is prevented by sickness from returning within
time limited by permit.
§ 2236. Prohibiting change of occupation: prohibited occupations: haz.
- ai-dous, extra-hazardous: construction of clauses as to.
§ 2236a. Same subject.
§ 2236b. Engaging in liquor or saloon business.
§ 2236c. Prohibited occupations: waiver and estoppel.
§ 2237. Prohibition as to entering military or naval service.
§ 2237a. Same subject: subsequently enacted prohibitory law by successor
society.
§ 2237b. Same subject: armed resistance or insurrection in territory of
United States.
§ 2238. Change in possession, title, or interest.
§ 2239. Effect of temporary increase of risk: temporary violation of
condition.
§ 2240. Same subject: authorities.
XCVl
CONTENTS
CHAPTER LXIV.
ALIENATION.
§ 2246. Alienation: generally.
§ 2246a. Conditions as to alienation change of title, etc., valid.
§ 2247. Conditions as to alienation : construction of.
§ 2248. Consent to transfer or sale and assignment : notice to company.
§ 2248a. Notice continued : sale, transfer or mortgage : mortgage clause.
§ 2248b. Alienation: encumbrance: statutes.
§ 2249, Void sale: deed of insured property.
§ 2250. Voidable and set-aside sale no alienation.
§ 2251. Sale of part of subject of insurance where policy contains no con-
dition as to alienation,
§ 2252. Sale of part of proi3erty insured where policy stipulates against
alienation or transfer of subject of insurance.
§ 2252a. Sale or deed with reservation of interest : reversion of title.
§ 2253. Alienation of part where contract severable.
§ 2254. Alienation of part: whether contract entire or severable.
§ 2255. Conclusion : alienation of part of subject of insurance.
§ 2255a. Alienation : where title or possession does not pass, or is not
intended to pass.
§ 2256. Changes by encumbrances on property.
§ 2257. Meaning of clause "encumbrance in any way:" liens created by
operation of law.
§ 2258. Lease of insured property.
§ 2259. Conveyance by deed of property as collateral.
§ 2260. Sale of insured property with mortgage back: change of interest
or title.
§ 2261. Sale and mortgage back where policy prohibits alienation of in-
terest.
§ 2261a. Conveyance and reconveyance.
§ 2262. Deed and reconveyance in trust to secure payment of purchase
money.
§ 2263. Trustee, purchaser at his own sale under power of sale in mort-
gage: no alienation.
§ 2263a. Conve3'ance from mortgager to mortgagee.
§ 2264. Mortgage not alienation, sale or transfer of title.
§ 2264a. Same subject: decisions contra.
§ 2264b. Same subject: effect of accumulated interest on mortgage.
§ 2265. When mortgage not encumbrance.
§ 2266. Mortgage under different conditions in different policies.
CONTENTS xcvii
§ 2267. Mortgage an "alteration."
§ 2268. Chattel mortgage under alienation clause.
§ 2269. Chattel mortgage by partner: change of interest.
§ 2270. Commencement of foreclosure proceedings.
§ 2270a. Same subject: validity and construction of clause: "knowledge:"
"be commenced."
§ 2270b. Same subject: advertisement for sale: "proceedings on sale:"
notice of sale.
§ 2270c. Same subject: when policy avoided, when not: instances.
§ 2271. "Entry of a foreclosure of a mortgage:" advertisement and sale:
construction.
§ 2272. Decree of foreclosure: sale thereunder.
§ 2273. Notice may operate as consent to mortgage.
§ 2274. Judgment generally: mechanic's lien: judgment lien.
§ 2275. Sale of equity of redemption : where policy assigned to mortgagee.
§ 2275a. Expiration of time limit for redemption not an alienation-
§ 2275b. Transfer of equitable title.
§ 2276. Writ of attachment: "process."
§ 2277, "Levied on:" "taken into possession or custody:" construction.
§ 2278. Levy of execution : sale on execution.
§ 2279. Waiver of forfeiture: sheriff:'?, sale.
§ 2280. Effect of dissolution of partnership: receiver.
§ 2281. Accident insurance on lives of partners: dissolution.
§ 2282. Sale between tenants in common: eotenants.
§ 2283. Partition of insured property: effect of.
§ 2284. Executory contract of sale: conditional sale.
§ 2284a. Option contract.
§ 2284b. Contract to exchange property.
§ 2284c, Unconsummated sale in satisfaction of mortgage.
§ 2284d. Bill of sale.
§ 2285. Acts of vendor where person holds under contract of purchase.
§ 2286. Where sale not confirmed as required.
§ 2286a. Judicial sale confirmed.
§ 2286b. Administrator's sale confirmed.
§ 2287. Where insurance on changing stock of goods.
§ 2288. Effect of bankruptcy or insolvency.
§ 2288a. Same subject: appointment of receiver.
§ 2289. Death of insured: descent of title to heirs.
§ 2290. What amounts to an alienation, sale, transfer, or change of title;
instances.
§ 2291. What does not amount to an alienation, sale, transfer, or change
of title: instances.
§ 2291a. Alienation, change of title, etc.: waiver,
§ 2292. Change in possession.
§ 2293. Sales by partner: alienation, assignment, and change of title or
possession clauses.
XCVlll
CONTENTS
§ 2293a. Sale by one partner to another: introduction of new partner:
Federal decisions.
§ 2293b. Sale by one partner to another: Alabama.
§ 2293c. Sale by partner to third party : California.
§ 2293d. Sale by one partner to another: Colorado.
§^ 2293e. Introduction : new partner : Connecticut.
§ 2293f. Introduction of new partner: Florida.
§ 2293g. Sale with reservation of interest to partner: mortgage of entire
interest : Georgia.
§ 2293h. Sale to partner or third person : Illinois.
§ 2293i. Sale by one partner to another: Indiana.
§ 2293J. Sale with reservation of interest to partner: sale by one partner
to another : division of goods : Iowa.
§ 2293k. Sale by one partner to another: Louisiana.
§ 22D31. Sale by one partner to another and mortgage back: Massachusetts.
§ 2293m. Introduction of new partner: Michigan.
§ 2293n. Sale by one partner to another: Mississippi.
§ 2293o. Sale by one partner to another: mortgage back: Missouri.
§ 2293p. Sale by one partner to another: Nebraska.
§ 2293q. Sale by one partner to another: New Hampshire.
§ 2293r. Sale by one partner to another: introduction of new partner:
New York.
§ 2293s. Introduction of new partner: North Carolina.
§ 2293t. Sale by one partner to another: introduction of new partner:
Ohio.
§ 2293u. Sale by one partner to another: Pennsylvania.
§ 2293v. Sale by one partner to another: business sold but continued
under trade name : Tennessee.
§ 2293w. Sale by one partner to another : sale with mortgage back : sale
with vendor's lien : Texas.
§ 2293x. Sale by one partner to another: bequest by partner: Virginia.
§ 2293y. Agreement for partnership not consummated : Washington.
§ 2293z. Sale by one partner to another : Wisconsin.
§ 2294. Summary of decisions.
§ 2295. Conclusion.
CHAPTER LXV.
ASSIGNMENT AND TRANSFER OF POLICY.
§ 2304. Assignment of policies: fire insurance.
§ 2305. Assignment of fire policies : "loss if any payable to."
§ 2306. Assignment of fire policies : consent : generally.
CONTENTS xcix
§ 2306a. Same subject : statutes.
§ 2306b. Distinction between assignment and executory contract: covenant
to keep property insured.
§ 2307. Sale of property does not transfer policy to purchaser.
§ 2307a. Adoption of policy by vendee: "for account of whom it may con-
cern."
§ 2308. Assignment: legal effect of assent to in fire policy.
i 2309. Manner of procuring assent to assignment of policy: same:
mutual company.
§ 2309a. Consent by assurer's agent.
§ 2309b. Agreement of vendor to obtain insurer's consent to assignment.
§ 2310. Notice of assignment : fire : marine.
§ 2311. What constitutes equital)le assignment of fire policy.
§ 2312. Indorsements upon policy.
§ 2313. Fraud in ma-king assignment: in procuring assent thereto.
§ 2314. Assignment to mortgagee: rights of mortgagee.
§ 2314a. Same subject : instances.
§ 2314b. Assignment by mortgagee : form of : effect of.
§ 2315. Assignment of fire policy as collateral.
§ 2316. Assignment to partner.
§ 2317. By-laws of mutual company as affecting assignment of policy.
§ 2318. Rights of creditor of assignor attaching subsequently to assign-
ment of fire policy.
§ 2319. Effect of acts of assignor upon rights of assignee : generally.
§ 2320. Effect of acts of assignor upon rights of assignee who is mort-
gagee.
§ 2321. Effect of acts of mortgagor after loss upon rights of assignee.
§ 2322. Legal effect of assignment after loss.
§ 2323. Assignment of void policy.
§ 2324. Limitation clauses: assignment.
§ 2325. Clause as to assignment : waiver of breach thereof : forfeiture.
§ 2325a. Same subject : agent's acts or knowledge.
§ 2326. Assignment of life policies : generally : written assignment : parol
assignment.
§ 2326a. Life policies: right to assign.
§ 2326b. Life policies : nature of assignment : construction.
§ 2326c. Life policies: consideration for assignment.
§ 2326d. Life policies : valid and invalid : assignments.
§ 2326e. Life policies: material alteration of assignment
§ 2326f . Life policies : executory contract to assign.
§ 2326g. Life policies: equitable assignment.
§ 2326h. Life policies : assignment by assignee : generally.
§ 23261. Assignment to undertaker, tradesmen, etc.
§ 2326J. Life jDolicies : rights of assignee: generally.
§ 2326k. Life policies: reassignment.
e CONTENTS
§ 23261. Life policies: gift.
§ 2327. No assignment by insured where interest in policy has vested in
beneficiary.
§ 2327a. Distinction between assignment and change of beneficiary.
§ 2328. No assignment if policy forbids.
§ 2329. Notice of assignment: life policy.
§ 2330. What is sufficient notice: life.
§ 2331. Assignment of life policy: consent.
§ 2331a. Same subject: manner or mode of assignment.
§ 2332. Delivery of assignment of life policy.
§ 2333. Possession of policy: life.
§ 2334. Assignment of mutual benefit certificate.
§ 2335. Fraud in procuring or making assignment of life policy.
§ 2335a. Assignment: mental capacity: undue influence.
§ 2336. Absolute assignment of life policy to creditor: agreement to re-
tain only amount due.
§ 2336a. Assignment of life policy to creditor: amount recoverable: con-
tinued.
§ 2337. Assignment of life policy as collateral.
§ 2337a. Power of attorney: pledge of policy: loan obtained by forgery:
set-off.
§ 2338. Assignment of policy payable to executors, administrators, or
assigns : estate.
§ 2339. Assignment of policy to trustees.
§ 2340. Assignment of policy pro tanto.
§ 2341. Effect of insolvency or bankruptcy upon policy: assignment for
benefit of creditors: rights of assignee or trustee.
§ 2342. Rights of company where policy assigned.
§ 2343. Assignment by husband to wife of life policy.
§ 2344. Assignment of life policy to wife or dependents by insolvent
bankrupt: creditors' rights.
§ 2345. Right of husband to assign policy issued for benefit of wife or
children.
§ 2346. Right of guardian to assign policy issued for benefit of ward,
§ 2347. Right of wife to assign a policy on life of husband.
§ 2347a. Same subject : where wife has contingent interest only.
§ 2348. Assignment by wife of policy on husband's life: continued.
§ 2349. Assignment by husband and wife jointly of policy on husband's
life: joint assignment by husband, wife and children.
§ 2349a. Assignment to husband and wnfe: joint ownership: survivor's
rights.
§ 2349b. Assignment of employers' liability policy.
§ 2350. Assignment and transfer of marine policy: generally.
§ 2351. Assignment of marine policy where assignor has parted with entire
interest in property insured.
CONTENTS ci
§ 2352, Assignment of marine policy subsequent to absolute sale and
transfer oC subject of insurance.
§ 2333. Assignment of marine policy: delivery to assignee.
§ 2354. Notice of assignment of marine policy.
§ 2355. Prohibition in marine policy as to assignment.
§ 2350. Rights of insurers to set-off against assignee.
§ 2357. What constitutes assignment : cases generally.
§ 2358. What is not an assignment: cases generally.
CHAPTER LXVI.
CHANGE OF VOYAGE— DEVIATION— LIBERTY CLAUSES
Description of the voyage.
Distinction between voyage of ship and voyage insured.
Where course of voyage insured is not fixed by mercantile usage.
Determination as to which of two routes is usual one: case of
several routes.
Deviation defined.
Effect of deviation and basis of underwriter's discharge.
Insurer liable for prior loss.
Temporary deviation and return to course prior to loss.
Same subject : certain class of cases distinguishable.
Time policy: navigation limited.
Intention to deviate: change of voyage.
Abandonment of voyage: peril not insured against.
Effect of intention fixed at or after sailing to change destination.
Voyage shortened.
Voyage "at and from" port or ports.
Preliminary voyage: completing loading at different ports.
Alternative ports of destination.
The word "thence" from port or ports of discharge in two speci-
■ fied localities will cover either locality.
§ 2383. Election of ports: specified or geographical order of visiting ports
of discharge.
§ 2384. Ports of discharge: revisiting or returning to port.
§ 2385. Returning to terminus a quo for clearance.
§ 2386. "Near open port" refers to geographical order.
§ 2387. To an island and a market.
§ 2388. To a port in an island or district, thence to a port of advico
or discharge.
§ 2389. Vessel captured and carried out of her course: false papers.
§ 2390. Deviation to supply or repair defect in fitting for original voyage.
§
2365.
§
2366.
§
2367.
§
2368.
§
2369.
§
2370.
§
2371.
§
2372.
§
2373.
§
2374.
§
2375.
§
2376.
§
2377.
§
2378.
§
2379.
§
2380.
§
2381.
§
2382.
cii CONTENTS.
§ 2390a. Placing vessel in drydock without maritime necessity.
§ 2391. Reshipment of goods on the voyage not of itself a deviation
under liberty to reship.
§ 2392. Transshipment.
§ 2393. Liberty of port and places: purposes of voyage.
§ 2394. Distinction between purposes of voyage and acts done to insure
success of adventure,
§2395. When trading, etc., at port may be allowed, although not in fur-
therance of adventure.
§ 2396. Liberty of ports: course of voyage: change of voyage.
§ 2397. Liberty of ports: trading, discharging, or taking in cargo.
§ 2398. Liberty of ports and to tow and assist vessels.
§ 2399. Liberty to touch and stay or of port or ports may be limited
by other words in policy.
§ 2400. Prohibited ports or waters: restricted waters.
§ 2401, Liberty of ports where employmeht of ship is limited by the
policy.
§ 2402. Not touching at privileged port.
§ 2403. River navigation : departure from river channel.
§ 2404. River navigation : vessel may make usual stops for landing and
loading goods, etc,
§ 2404a, Vessel constructed for river navigation : trial trips : delay : usual
course of voyage.
§ 2405. Masters and mariners : negligence or mismanagement : remote
cause.
§ 2406. Departure from course through ignorance of master.
§ 2407. Master's judgment and discretion,
§ 2408. Instructions to master: generally.
§ 2409. Departure from route to avoid seizure in pursuance of instructions,
§ 2410. Liberty of ports for orders : revisiting port.
§ 2411. Visiting port for information or orders.
§ 2412. Delay or departure from route for political infoi'mation.
§ 2413. Delay to await orders as to port of discharge under permission
in policy,
§ 2414. Instructions to deviate: whether must be disclosed.
§ 2415, "Whether an act be deviation, change of voyage, or barratry.
§ 2416. Vessel forced to deviate by barratrous acts.
§ 2417. What justifies deviation generally: statutory or code provisions.
§ 2417a. Agreement or clause permitting deviation : "due notice" of devia-
tion,
§ 2418. Effect of usage and exigencies of trade.
§ 2419
§ 2420
§ 2421
§ 2422
Necessity for repairs.
Stress of weather: port of necessity.
Stress of weather: vessel need not return to point whence driven.
Compulsory delay or deviation by superior authority.
CONTENTS ciii
§ 2423. Turned away: blockade.
§ 2424. Compulsory delay or deviation by acts of crew.
§ .2425. Departure from route or delay to save life or property.
§ 2426. Delay at port or place or in prosecuting voyage.
§ 2427. Delay for towing vessel.
§ 2428. Vessel turned away, and delay in port which she has entered.
§ 2429. Departure from route or delay to avoid da^ger, cruisers, or cap-
ture.
§ 2430. Vessel delayed by ice.
§ 2431. Deviation to comply with warranty.
§ 2432. Departure from course or delay to seek protection of convoy.
§ 2433. Eight to convoy prize under liberty clauses to cruise, capture, etc.
§ 2434. Deviation to recapture vessel.
§ 2435. Letter of marque: cruising and making prizes.
§ 2436. Instructions as to cruising.
§ 2437. Understood purpose for which letters of marque taken is im-
portant.
§ 2438. Liberty clauses to cruise, capture, etc.: construction.
§ 2439. Carrying letters of marque no deviation in itself.
§ 2440. Liberty clauses to cruise, capture, etc. for designated time.
§ 2441. Whether the peril which will justify a deviation must be one
insured against.
§ 2442. Loss need not be connected with deviation.
§ 2443. Whether any exception exists to last rule.
§ 2444. Waiver of deviation.
§ 2445. Deviation: acts of third person.
CHAPTER LXVII.
OTHER OR DOUBLE AND OVER INSURANCE.
§ 2455. What is other or double insurance.
§ 2456. Overinsurance.
§ 2456a. "Existing insurance:" marine: mutual societies.
§ 2457. Conditions as to other insurance.
§ 2458. Construction of conditions as to other insurance.
§ 2459. Where other insurance is only temporary.
§ 2460. Subsequent marine policy susj .ended where property fully covered
by other insurance at time of issuance.
§ 2461. Warranted "uninsured :" "honor policy :" marine risk.
§ 2462. Representations or concealment concerning other insurance.
§ 2462a. Effect of want of knowledge of other insurance.
§ 2462b. Same subject: mortgagor and mortgagee.
§
2464.
§
2465.
§
2466.
§
2467.
§
2468.
§
2469.
§
2470.
§
2471.
§
2472.
civ CONTENTS
§ 2463. Policy outstanding at time of application for insurance surren-
dered befox'e issuance of subsequent policj'.
Subsequent policy must cover same or part of same property.
Insurance on ship and on advances.
Insurance against ditt'erent perils.
Where insurances are upon different interests or do not cover
same subject.
Policy to different joint owners of property: tenants in common.
Insurance by owner of land and person holding- under contract
for deed.
Different interests : mortgagor and mortgagee.
Insurance by stranger will not constitute other insurance.
Subsequent insurance covering propert}' first insured and other
property.
§ 2473. Where part of insured property covered by subsequent policy:
entire or divisible contract.
§ 2473a. Other insurance : whether contract divisible or entire : statute.
§ 2474. Where insured goods are removed and joined with other goods
also insured.
§ 2475. Where other insurance is void or voidable : prior or subsecjuent
policies conditioned against other insurance.
§ 2476. Effect of interim receipts.
§ 2477. Where subsequent voidable policy is treated as valid after a loss.
§ 2478. Prohibition against other insurance, whether "valid or invalid."
§ 2479. Renewals of prior policies.
§ 2480. Where policies are simultaneous : concurrent insurance : fire risks.
§ 2480a. Distinction between concurrent insurance and coinsurance.
§ 2481. Rule where marine policies of same date are issued: jiriority in
date may be shown.
§ 2482. Provisions in charter or by-law§ as to other insurance.
§ 2483. Notice of other, etc.. insurance : what is and is not sufficient.
§ 2484. Permission to obtain other insurance.
§ 2484a. Permission continued: concurrent insurance.
§ 2485. Consent to other insurance : indorsement on policy.
§ 2485a. Same subject : when indorsement effects new contract.
§ 2486. Return of premium in case of refusal to indorse consent to other
insurance.
§ 2487. Waiver of provisions as to other insurance: estoppel: notice:
consent : indorsement on policy.
§ 2487a. When no waiver of provisions as to other insurance.
§ 2487b. Waiver continued: agents.
§ 2488. Insurer is chargeable with knowledge of prior policies issued by it.
§ 2489. Recovery: prior policies: marine insurance: contribution: where
iio pro rata clause.
CONTENTS cv
§ 2490. To enforce contribution policies must cover same interest to same
property.
§ 2491. Rules as to recovery and contribution in fire insurance where
there are several policies constituting other insurance.
§ 2492. Rule where fire policy contains pro rata clause.
§ 2493. Specific insurance and general policy.
§ 2494. Agreement between insurers to share expenses of defense pro rat;i.
§ 2495. Effect under pro rata clause of payment by any company of more
than its share.
§ 2496. "American clause:" "shall only be liable for deficiency."
§ 2496a. Other insurance as affected by coinsurance: "average" or "dis-
tribution" clause.
§ 2496b. Effect of three-fourths value provisions : valued policy hiws :
concurrent insurance : other or double insurance : coinsurance :
prorating.
'§ 2497. Where policies of different dates attach and property subsequently
diminished.
§ 2498. Presumption as to basis of settlement where settlement made
with one of two insurers.
§ 2499. Double insurance for "whom it may concern."
TITLE X.
VOID AND ILLEGAL INSURANCES AND EXCEPTED
RISKS AND LOSSES.
CHAPTER LXVIII.
VOID AND ILLEGAL INSURANCES.
§ 2506. General principles as to void or illegal contracts.
§ 2507. Distinctions to be observed.
§ 2508. Sanitary inspection of buildings not within insurance law.
§ 2509. Life insurance a valid contract.
§ 2509a. Policy payable to "estate" valid.
§ 2509b. Policy on life of minor.
§ 2509c. Policy issued to person over age limit: statute.
§ 2509d. Insurance without insured's consent.
cvi CONTENTS
§ 2510. Stipulation valid suspending policy while matured premium note'
remains unpaid.
§ 2511. Waiver of condition rendering policy void from inception: title
insurance.
§ 2512. Insurance contract based on fraud invalid.
§ 2513. Marriage insurance.
§ 2514. Constitutionality of statute regulating printing conditions in
policies.
§ 2515. Statute requiring insurer to pay losses in full constitutional.
§ 2516. Illegality of contract insuring mercantile credits.
§ 2517. When insurance of growing grain ultra vires.
§ 2518. When endowment insurance by beneficiary association ultra vires.
§ 2519. Stipulations limiting place of bringing suits: ousting courts of
jurisdiction.
§ 2520. Statute may effect right of recovery by enlarging rights of assured
under its stipulations.
§ 2521. Where assured has no such interest as statute requires.
§ 2522. Navigation and convoy acts of England.
§ 2523. Effect upon valid contract of statute laying embargo.
§ 2524. Effect of subsequently enacted statutes upon void or illegal in-
surances.
§ 2525. Whether policy void: stamp, when required by statute.
§ 2526. Engaging in trade in expectation of repeal of existing law in-
terdicting it.
§ 2527. Effect of subsequently enacted prohibitory law.
§ 2528. Same subject: cases.
§ 2529. (Omitted).
§ 2530. Effect of arbitration clauses.
§ 2531. Insurances contrary to policy of the law : public policy.
§ 2531a. Insurance against capital conviction or execution for crime is
void.
§ 2531b. Fidelity guaranty: validity of.
§ 2531c. Usury.
§ 2532. Condition upholding suicide is void.
§ 2533. Insurance by common can-ier against losses from negligence, etc.,
not against public policy.
§ 2534. Policy executed on Sunday.
§ 2535. Newspaper company cannot carry on accident insurance business.
§ 2536. Where traffic insured unlawful, or unlawful business can'ied on
upon insured property : fire risk.
§ 2537. Illegal use of property when susceptible of legitimate use:
public policy.
§ 2538. Illegal occupation of insured: life risk.
§ 2539. Goods the importation or exportation of which are prohibited.
§ 2540. Trade prohibited by foreign laws: effect of treaties.
CONTENTS cvii
§ 2541. Exportation otherwise legal may become illegal by subsequent
execution of agreement in evasion of revenue laws.
§ 2542. Effect of prohibitory statute imposing penalty : collateral acts.
§ 2543. Trade which would otherwise be invalid because interdicted may
be valid through necessity.
§ 2544. Contract of indemnity against embargo valid.
§ 2545. Effect of violation of embargo.
§ 2546. Cargo procured with proceeds of former illegal cargo: prior
separate voyage illegal.
§ 2547. Trade with enemy : prior valid character of cargo.
§ 2548. Where prior part of same voyage is illegal.
§ 2549. Illegality after risk attaches "at and from."
§ 2550. Where subsequent part of same voyage is illegal.
§ 2551. Effect of partial illegality upon contract.
§ 2552. Last rule qualified where illegality removed as to part of cargo
by permission of government.
§ 2553. Partial illegality : shipowners under same policy.
§ 2554. Insurance by common agent covering goods of hostile and neutral
owner.
§ 2555. Effect of illegal employment of ship where neutral goods trans-
ported therein.
§ 2556. Goods of several owners under same policy effected by common
agent.
§ 2557. Transportation by same vessel: lawful and unlawful goods.
§ 2558. Effect of intention to do illegal act.
§ 2559. Trade with enemy, absence of intent to violate law no excuse.
§ 2560. When possibility of executing illegal intention is removed.
§ 2561. Insurance upon a cartel ship while employed as such.
§ 2562. Insurance to ports some hostile some not.
§ 2563. Contract excepting interdicted port unlawful.
§ 2564. Subject of one or two or more allied powers may not trade
with common enemy.
§ 2565. Trade with port occupied by enemy's forces: power of govern-
ment to determine what are hostile relations.
§ 2566. Illegality to which insurer is in privity may affect his rights.
§ 2567. Goods shipped to neutral port.
§ 2568. Insurances on contraband of war.
§ 2569. Wliat articles contraband of war.
§ 2569a. Same subject : British Orders in Council, etc.
§ 2570. Definition of license and autlHuity conferred thereby.
§ 2571. By what authority license granted.
§ 2572. Misdescription of land on which building located does not avoid
policy.
§ 2573. When failure to name destination does not avoid marine risk.
§ 2574. Policy to himself by agent of insurer and receiver void.
CVIU
CONTENTS
CHAPTER LXIX.
EXCEPTED RISKS AND LOSSES.
§ 2581.
§ 2582.
§ 2582a.
§ 2582b.
§ 2582c.
§ 2582d.
§ 2582e.
§ 2582f.
§
2582g,
§ 2583.
§ 2583a.
§ 2583b.
§ 2584.
§ 2585.
§ 2586.
§ 2587.
§ 2588.
§
2589.
§
2590.
§
2591.
§
2592.
§
2593.
§
2594.
§
2595.
§
2595a
§
2596.
§
2596a.
What constitutes invasion, insurrection, riot, civil commotion, or
usurped power.
Excepted risks: fire caused by invasion, insurrection, riot, or
mobs, civil commotion, or by military or usurped power.
Same subject: waiver.
"Directly or indirectly" by "riot:" dynamite explosions: unless
fire ensues.
Loss directly or indirectly caused by order of any civil authority.
Same subject: loss of rentals: "interruption of business."
When policy excepting one of a number of like accidental causes of
damage covers damage from other like causes : floods.
Effect of specially excepted peril : immediate cause of loss : earth-
quake : statute.
Earthquake: fire started on other property and spread by con-
flagTation.
Falling of building except as result of fire.
Same subject : earthquake.
Falling of building : explosion : lightning clause.
Explosion: no stipulation: insurers not liable.
Insurers not exempt where building blown up to prevent spread
of conflagration.
Explosion occurring upon other premises : loss to insured property
result of earthquake only.
Explosion occurring upon other premises from which fire ensues
communicating to insured premises.
"Loss by explosion of any kind:" insurer's liability under such
clause where fire ensues : New York rule.
Same subject: rule in Ohio.
Same subject: rule in Illinois.
Same subject : rule in Pennsylvania.
Same subject: conclusion.
No liability for explosion "unless fire ensues."
Construction of other provisions as to explosion.
Conclusion as to excepted liability in case of explosion.
Liability excepted where fires built within specified limits: es-
toj^pel.
Loss by theft excepted.
Exception of liability: duty of assured to preserve or save prop-
erty.
CONTENTS eix
§ 2597. Exception of liability for "fire caused by hurricane."
§ 2598. Exception of liability for fire resulting from use of steam-
engine.
§ 2598a. Excepted liability: fires from locomotives.
§ 2599. Credit insurance : insolvency of debtors : exception of liability :
discontinuance of business: death of partner.
CHAPTER LXX.
EXCEPTED RISKS AND LOSSES— LIFE, ACCIDENT, CASUALTY
AND TORNADO.
§ 2606. Death "in known violation of law."
§ 2607. "Death in known violation of law:" construction: refers to vol-
untary criminal acts.
§ 2608. Same subject : refers to both civil and criminal law.
§ 2609. Same subject : conclusion.
§ 2610. Death or injury in violation of law.
§ 2610a. Same subject : carrying concealed weapons.
§ 2610b. Conviction of felony.
§ 2611. Excepted liability where death occurs "by the hands of justice."
§ 2611a. Same subject : killing adulterer by husband : wife's paramour.
§ 2612. Death : use of intoxicants.
§ 2613. Intemperance: "if the insured becomes so far intemperate as to
impair his health."
§ 2613a. If insured becomes "so far intemperate or use drugs to such an
extent as to impair his health."
§ 2613b. "Under the influence" of intoxicants or narcotics: limitation of
liability.
§ 2613c. Intemperance: degree of intoxication.
§ 2614. Death : intemperance : waiver of provision.
§ 2615. Death : intemperance : use of drugs : by-laws of society.
§ 2616. Death caused by submission to illegal operation.
§ 2617. Accident policy: injuries where no visible mark.
§ 2617a. Visible marks of contusions or wound.s: "wounds" defined.
§ 2618. Excepted liability where death or injury "may be caused by in-
tentional injuries inflicted by assured or any other person."
§ 2619. Dueling or fighting.
§ 2619a. Death in assault, quarrel, or fight.
§ 2619b. Assault: death or injury in self-defense: aggressor: offending
party.
§ 2619c. Assault upon oflieer of the law : resisting arrest.
§ 2619d. Injuries while hunting.
ex CONTENTS
§ 2620. Excepted liability: taking of poison: contact with poisonous
substances : inhaling gas.
§ 2621. Poison or anything accidentally taken, administered or inhaled.
§ 2622. Entering or leaving moving train or car: riding as passenger:
standing or riding on steps or platform.
§ 2623. Rules and regulations of common carriers and employer: vio-
lation of "a rule of corporation."
§ 2624. Voluntai'y exposure to obvious or unnecessary danger.
§ 2624a. Same subject: negligence or contributory negligence.
§ 2624b. Voluntary exposure to unneciessary danger: death in attempt to
save life : negligence.
§ 2624c. Voluntary exposure to unnecessary danger: waiver.
§ 2625. Walking or being on railway bridge, track, or "roadbed."
§ 2625a. Walking or being upon a railroad track or bridge: voluntary ex-
posure to unnecessary danger.
§ 2626. Instances within the exception of voluntary exposure.
§ 2627. Instances not within the exception of voluntary exposure.
§ 2628. Death by disease excepted: fits,
§ 2629. Disease caused by accident : death superinduced by other causes
not death by excepted disease.
§ 2629a. Pre-existing disease: disease and accidental injury concurring.
§ 2629b. Death from disease as primary, secondary or final cause.
§ 2630. Death from disease as a "secondary- cause" not death by accident.
§ 2630a. Death by drowning excepted : presumptions.
§ 2631. Death caused by "medical treatment for disease" or "surgical
treatment," excepted.
§ 2631a. Unnecessary lifting and voluntary overexertion.
§ 2632. Occupation : exception of liability for "wrecking."
§ 2632a. Employers' liability policy: injuries while making extraordinary
repairs.
§ 2632b. Employers' liability policy: violation of law.
§ 2632c. Same subject : waiver.
§ 2633. Accident to property : loss by fire excepted.
§ 2633a. Excepted risks : automobiles or motor vehicles : fires : violation of
law.
§ 2634. Plate glass: fire: explosion: tornado insurance.
§ 2634a. Automatic fire extinguishers: exception of injury from leakage:
earthquakes, cyclones, etc.
CHAPTER LXXI.
EXCEPTED RISKS AND LOSSES, CONTINUED— SUICIDE.
§ 2635. Effect of words "sane or insane" in suicide clause.
CONTENTS cxi
§ 2635a. Same subject: validity and nature of stipulation.
§ 2635b. Same subject: effect of voluntary starvation.
§ 2636. "Sane or insane:" that suicide committed deliberately or hastily
immaterial.
§ 2637. Suicide "felonious or otherwise, sane or insane."
§ 2638. Suicide while intoxicated.
§ 2G39. Suicide: accidental or unintentional self-killing.
§ 2640. Doubt as to "suicide" or accidental or unintentional self-killing.
§ 2641. Suicide under clause benefiting third parties acquiring interests
prior thereto.
§ 2642. Suicide as defense in connection with statute.
§ 2642a. Same subject: validity of statute: stipulation contrary thereto:
statute part of contract.
§ 2643. Suicide: option reserved to pay amount of insurance or refund
premiums: recovery limited to amount of premiums.
§ 2644. Stipulation as to part payment or incontestability after specified
time.
§ 2644a. Validity of stipulations limiting amount of recovery or time
within which policy void for suicide: incontestability.
§ 2644b. Suicide: incontestability after specified time: substituted policy
or new policy.
§ 2644c. Stipulation that liability suspended while insured insane: dis-
tinction.
§ 2645. Suicide: by-law as part of contract.
§ 2646. Taking his own life by unlawful act : dies by his own hand, etc. :
by-laws.
§ 2647. Amendment or changes in by-laws,' etc.: adoption of by-law
against suicide after contract made.
§ 2648. Suicide: policy to be void in case of death by violation of law.
§ 2648a. Suicide: external, violent and accidental means.
§ 2649. Suicide: intentional injuries by assured or another.
§ 2650. Suicide in absence of stipulation : contra.
§ 2651. Suicide by insane person in absence of stipulation against suicide.
§ 2652. Suicide where policy obtained with that intent: fraud: creditor.
§ 2653. Suicide for benefit of assured's estate or third person.
§2654. Suicide: temporary insanity.
§ 2655. Suicide: temporary insanity: "sane or insane, voluntary or in-
voluntary."
§ 2656. Suicide: temporary insanity, "felonious or otherwise, sane or
insane."
§ 2657. Suicide: "self-destruction," "in any form:" "disease:" "voluntary
act of insured."
§ 2658. Stipulation as to "suicide:" death "by his own hand," and the
like.
§ 2659. "Suicide" and like clauses: rule in United States Supreme Court.
cxii CONTENTS
§ 2660. Same subject: English rule.
§ 2661. Same subject : rule in this country.
(a) Same subject: rule and eases in United States courts.
(b) Same subject: English rule and cases.
(c) Same subject: rule in Alabama.
(d) Same subject: rule in Georgia.
(e) Same subject: rule in Illinois.
(f) Same subject: rule in Indiana.
(g) Same subject: rule in Iowa.
(h) Same subject: rule in Kentucky.
(i) Same subject: rule in Louisiana.
(j) Same subject: rule in Maine.
(k) Same subject: rule in Maryland.
(1) Same subject: rule in Massachusetts.
(m) Same subject: rule in Michigan.
(n) Same subject: rule in Minnesota.
(o) Same subject: rule in Missouri.
(p) Same subject: rule in New York.
(q) Same subject: rule in Ohio.
(r) Same subject: rule in Pennsylvania.
(s) Same subject: rule in Tennessee.
(t) Same subject: rule in Texas.
(u) Same subject: rule in Vermont.
§ 2661a. Whether suicide question for court or jury.
§ 2661b. Waiver of defense of suicide.
CHAPTER LXXII.
EXCEPTED RISKS AND LOSSES— MARINE.
§ 2670. Excepted risks and losses : marine risks generally.
§ 2671. Excepted risks and losses: repugnant stipulations.
§ 2672. Excepted liability for loss caused by negligence, want of ordi-
nary care, etc. : gross negligence.
§ 2673. Excepted liability for damage unless caused by negligence of ship.
§ 2674. Warranted free from mortality.
§ 2675. Exception of loss from specified cause followed by qualifying
clause,
§ 2676. Exception of loss or damage from ice.
§ 2677. Exception of loss by barratry.
§ 2678. Excepted liability in bill of lading from damages arising from
sweating, heat, steam, etc.
CONTENTS exiii
§ 2678a. "Warranted "free from any claim consequent upon loss of time:"
freight.
§ 2679. Explosion : loss from bursting- of boilers or breaking or derange-
ment of machinery : steamboat clause.
§ 2679a. Perils of the harbor: exclusion of loss from bursting or explosion
of boilers, unless, etc.
§ 2680. Warranted free from insurrection.
§ 2681. Limited or prohibited trade : prohibited waters.
§ 2681a. Risk suspended while loading at specified island.
§ 2682. Warranty against illicit, prohibited, or contraband trade: against
seizure therefor.
§ 2683. Exception of perils of the sea.
§ 2684. Warranted free from capture, etc. : capture by authority of de
facto government.
§ 2685. A technical or actual capture or seizure not necessarily within
the exception of these risks.
§ 2686. Capture and seizure may be synonymous.
§ 2687. Exception of loss by detention.
§ 2688. Other cases as to exception of capture, seizure, and detention.
§ 2689. Exception none the less binding because written on margin of
policy.
§ 2690. Illegal seizure or attempt to seize within exception.
§ 2691. Warranted free from loss or damage arising out of collision of
foreign powers or of our government with others.
§ 2692. Exception of loss from existing regulations does not include sub-
sequently enacted decrees.
§ 2693. Warranted free from confiscation in ship's ports of discharge.
§ 2694. Exception of risk of blockaded port: turned away, etc.: free
of loss if not permitted entry, etc.
§ 2695. Exception of loss or damage to goods or property on deck unless,
etc.
§ 2696. The memorandum clause : generall}^
§ 2697. What articles are within the clause.
§ 2697a. ''Free from particular average:" "average unless general:" when
the ship has stranded : statutes.
§ 2697b. Loss from defective condition of frozen meat cargo: "free from
particular average and loss," etc.
§ 2697c. Effect of rider: "free of particular average:" "absolute total loss
of part" amounting to — per cent.
§ 2698. W^arranted free from average unless general.
§ 2699. Or the ship be stranded or burns : "unless the vessel be sunk^
burned, stranded."
§ 2699a. Where the words "on fire" instead of "burned," or "burnt" are
used.
cxiv CONTENTS
§ 2700. Warranted "free from average under — per cent unless general"
and like clauses.
§ 2701. Unless it amounts to — per cent and happens by stranding.
§ 2702. Exception of "loss or average" under specified per cent: expense
of repairs.
§ 2703. Percentage: aggregate of losses in case of collision.
§ 2704. Value only of cargo at risk and not of whole cargo forms basis
of percentage.
§ 2705. "Each ]>ackage subject to its own average" and similar clauses:
separately valued.
§ 2705a. Same subject: effect of rider.
§ 2706. '^Average recoverable on each package separately or on the whole."
§ 2707, Effect of separate valuation of each package, etc. : when there is
and when not an insurance on each separate package, etc.
§ 2708. Where articles of different kinds are each separately valued.
§ 2709. Where percentage is fixed for each particular class or impliedly
fixed upon each enumerated article.
§ 2710. Where insurance is upon cargo in bulk: general designation of
"all other goods:" goods of distinct kinds under one general
designation.
§ 2711. The cjuestion of addition of successive losses to reach the limita-
tion : cases.
§ 2712. Same subject : conclusion.
§ 2713. Where liability is limited to invoice value.
§ 2714. Particular and general average losses cannot be aggregated, nor
are general average charges included in partial loss.
§ 2715. Addition of loss by jettison and salvage expenses.
§ 2710. Percentage clause qualified by agreement as to salvage and ex-
penses.
§ 2717. Whether certain other charges and expenses may be added.
§ 2718. Exception of loss under specified percentage : other insurers.
§ 2719. Exception as to leakage, breakage, dampness, etc.
§ 2720. Wfiether under exception of loss under specified percentage the
premium should be deducted.
§ 2721. Exception of liability under specified percentage: deviation.
§ 2722. Exception of claim arising from canceling of charter.
CONTENTS cxv
TITLE XL
RISKS AND LOSSES.
CHAPTER LXXIII.
RISKS AND LOSSES.
5 2730. What risks and losses may be insured against : liability: generally.
§ 2731. Abortion: public policy.
§ 2732. Accident disabling ship: chartered freight.
§ 2733. Advances: bottomry draft: entire contract: freight earned at
intermediate port: salvage: owner's liability.
§ 273-1. "All risks:" general policy: war risks.
§ 2734a. "All risks" mortality: policy on dog.
§ 273.5. "All other perils," etc. : "all unavoidable perils :" "all such perils."
§ 2736. Same subject : instances.
§ 2737. "Arrests, restraints, and detainments," etc.: marine risk.
§ 2738. "Arriving in port" does not cover arrival in cove.
§ 2739. "Unlawful" arrests, restraints, detainments, etc.
§ 2739a. Automatic sprinkler system: location: leakage: notice of defects.
§ 2739b. Automobile or motorcycle: "collision."
§ 2739c. Automobile or motorcycle: rented or used for passenger service
or for hire: temporary use.
§ 2740. Bank's default: money deposited in bank: vested rights upon
default.
§ 2740a. Bankers' policy: Lloyd's: loss through forged bills: fraud.
§ 2741. Barratry defined: marine risk.
§ 2742. Barratry covers what : instances.
§ 2743. Barratry, what losses are not covered : general rules.
§ 2744. Barratry, what losses are not covered: instances.
§ 274."). Bilging: marine risks: "all other perils," etc.
§ 2746. Birth of issue.
§ 2747. Breach of promise of third party does not render insurer liable.
§ 2748. Capture or seizure: marine risk.
§ 2749. Cargo : taking on board additional cargo : marine risk.
§2750. Carriers: liability of warehousemen : conflict of laws.
§ 2730a. Carriers: insurance against derailment during transportation of
goods : auto truck.
§ 2751. Collision: marine risk: generally.
cxvi CONTEXTS
§ 2
§ 2
§ 2'
8 o
§ 2
§ 2
§ 2
§ 2
§ 2'
§ 2'
§ 2'
§ 2'
§ 2'
§ 2'
§ 2'
§ 2'
§ 2
§ 2'
8 5»
§ 2
8 o
§ 2
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§ 2
§ 2'
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§ 2
'^'^52. What does and does not constitute collision : generally : instances.
53. Collision with "piers or stages or other structures," when not
stranding.
54. Collision as loss by perils of the sea :- proximate cause : damage to
other vessel.
55. Collision : running down clause.
■55a. Collision : sums paid for removal of obstructions : statutory com-
missioners.
2756. Confounding of goods by breaking open o£ packages, etc.: marine
risk.
57. Contingent liability of insurer: carrier: construction of policy.
58. Conversion: recovery and disposal of property by underwriter.
59. Decayed, rotten, etc.: marine risks.
60. Delay in voyage.
61. Electrical machinery and fixtures: electric lighting: fire risk:
knowledge of insurers.
62. Embargo, w^hat constitutes.
63. Embargo : effect upon charter party.
64. Embargo: domestic and foreign.
65. Embargo : acts of foreign assured's own government.
66. Employee's fidelity: fidelity guaranty.
67. Expenditures necessitated by the loss: marine risk.
68. Explosion defined.
68a. "One explosion:? boilers in battery form: "explosion" defined in
policy: Pabst Brewing Co. Case.
69. Explosion under fire risks: steam boiler.
70. Same subject : spontaneous combustion.
71. Same subject : where combustion and explosion inseparably con-
nected.
72. Same subject: where fire precedes or causes the explosion.
■72a. Boiler explosion "caused by unavoidable external violence:" ma-
rine risk.
73. Fallen building: what constitutes.
74. Falling walls, buildings, and structures.
75. Fallen building, etc.: wall weakened by previous fire.
76. Fear of danger: blockade: apprehension of embargo, etc.: mar-
ine risk.
77. Same subject : cases.
78. Same subject : conclusion.
79. Fire.
'80. Fire: marine risk.
81. Freight.
82. Hail.
83. Hire: chartered freight: delay: derangement of machinery or
engines : want of repairs : "free from any claim consecjuent
on loss of time."
CONTENTS exvii
§ 2784. "Hull and machinery" does not cover "disbursements."
§ 2784a. Hull and machinery: "latent defects:" perils of "trial trips."
§ 2785. Improper navigation of ship.
§ 2786. Insolvency of purcha-sers: returns from trade: credit insurance.
§ 2787. Insolvency of debtors: meaning of "loss:" credit insurance.
§ 2788. Land dangers: marine risks.
§ 2789. Leakage and breakage: marine risks.
§ 2789a. Ordinary leakage and "extraordinary leakage" distinguished.
§ 2790. Lightning.
§ 2791. Live stock: same slaves classed as animals.
§ 2792. Loss after termination of risk consequent upon injury during life
of policy.
§ 2793. Same subject : conclusion.
§ 2794. Mortgage: unmarketableness by reason of liens, defects of title,
etc.
§ 2794a. Mortgage clause: distinctions, validity and construction: gener-
ally.
§ 2794b. Mortgagor's and mortgagee's rights: generally.
§ 2795. When mortgagee's interest not affected by mortgagor's acts.
§ 2795a. Same subject: instances.
§ 2795b. When mortgagee's interest affected by mortgagor's acts: when
mortgagee not insured party, but appointee.
§ 2796. Overheating without combustion.
§ 2797. Perils of the seas and rivers: dangers of navigation.
§ 2798, Same subject: what losses are covered.
§ 2799. Same subject: what losses are not covered.
§ 2800. Personal injuries to employees: against liability or for losses paid.
§ 2801. "Personal injury and loss of human life" caused by explosion:
recovery back of money paid therefor by insured.
§ 2802. Personal injuries to several by one cause constitutes separate acci-
dents and not one accident.
§ 2803. Personal injuries to persons not employees: against liability or
for losses paid.
§ 2804. Pirates, rovers, assailing thieves : marine risks.
§ 2805. Passage money: loss of.
§ 2805a. Plate glass insurance.
§ 2805b. Plate glass insurance: window bioaking by suffragists: "civil
commotion" or "rioting."
§ 2806. Profits.
§ 2807. Profits of lessee.
§ 2808. Promise of insurer to pay although loss not covered by policy.
§ 2809. Promissory note.
§ 2810. Railroad, right to recover from, although insurance paid.
§ 2811. Removal of goods in case of threatened fire: damages and expenses
incurred.
exviii CONTENTS
§ 2812. Same subject: duty of assured : stipulation.
§ 2813. Same subject : how far assured must exert himself to save
property.
§ 2814. Rents.
§ 2814a. Repairs of building by assurer : assured's liability to third persons.
§ 2815. Ship-owner's liability.
§ 2815a. Smallpox: assumption by assured of ri.sk of: warranty.
§ 2816. Stranding defined: marine risk.
§ 2817. Stranding: cases.
§ 2818. Sue and labor clause : rescue clause : marine risk.
§ 2819. Telegi-aph cable.
§ 2820. Tenant's liability to pay rent: release of insurer.
§ 2821. Theft : fire risk, burglary or automobile risks.
§ 2822. Title insurance: same mortgagee: defects in mortgagor's title.
§ 2823. Warehouseman : storage of goods in which assured has no inter-
est : limited liability.
§ 2824. Water used to extinguish fire and save property.
§ 2824a. Water supply system useless.
§ 2825. Wind : tornado : hurricane.
§ 2825a. W^orkmeu's compensation : insurance risk.
CHAPTER LXXIV.
PROXIMATE AND REMOTE CAUSE— NEGLIGENCE, ETC.
§ 2832. Proximate and remote cause of loss : generally.
§ 2832a. Same subject : opinions of courts.
§ 2832b. Same subject : statutes.
§ 2833. Same subject : cases.
§ 2833a. Same subject : earthquake-caused fire : explosion.
§ 2834. Same subject : rules.
§ 2835. Same subject : consequential losses.
§ 2836. Same subject : pro rata freiglit : increase of freight.
§ 2837. Proximate, etc., cause : effect of qualifying or enlarging words.
§ 2837a. Proximate cause: accidental death: "not the result of assured's
own vicious conduct :" assault.
§ 2838. Negligence: proximate and remote cause: marine risks.
§ 2838a. Same subject : opinions of courts.
§ 2839. Same subject : cases.
§ 2840. Negligence: proximate and remote cause: fire risks.
§ 2840a. Same subject : opinions of courts.
§ 2841. Same subject : cases.
§ 2842. Negligence : acts of insane person : fire risks.
CONTENTS cxix
§ 2843. Negligence: habitual carelessness of servants.
§ 2844. Negligence partly ascribable or aseribable to insurer.
§ 2845. Negligence: accident insurance.
§ 2846. Same subject : where policy stipulates for due care.
§ 2846a. Negligence : accident to property : automatic sprinkler.
§ 2846b. Negligence: duty to save and preserve property: accident to
property.
§ 2847. Negligence : fidelity guaranty.
§ 2848. May gross negligence evince a fraudulent design.
§ 2849. Shipowners' protective associations: indemnity for losses by neg-
ligence, etc.
§ 2850. Loss directly caused by negligence of assured or his agents: ma-
rine risks.
§ 2850a. Negligence insured against : exception of "want of due diligence
by owners" etc. : marine risk.
§ 2851. Wrongful, fraudulent and criminal acts of assured: attempts to
defraud : burning vessel.
§ 2852. Malicious acts of insurance officers in refusing to insure.
CHAPTER LXXV.
SPECIAL RISKS AND LOSSES— ACCIDENT INSURANCE.
§ 2862, Risk and loss in accident insurance: generally.
§ 2863. "Accident" defined: distinction between accidental death and
accidental means.
§ 2803a. "Accident" and "accidental" defined by the courts, etc.
§ 2864. What constitutes an accident : cases.
§ 2805. When presumption against suicide.
§ 2866. What does not constitute an accident : cases.
§ 2867. Locomotive engineer may be protected by general ticket covering
accidents to travelers : construction : intent of parties.
§ 2868. Against accidental injuries which shall not be fatal : computation
of time : construction.
§ 2869. Accident to employee in performance of services or while doing
acts incident to employment.
§ 2870. Occupation of insured : loss of time : change of occupation.
§ 2870a. Same subject : limitation of liability.
§ 2871. Accident while boarding moving conveyance : commencing or con-
tinuing travel: traveling: "passenger."
§ 2871a. "In" "in or on" a "public conveyance:" "passenger convej'anee"
etc.
§ 2871b. "Passenger car:" train "used for passenger service."
exx CONTEXTS
§ 2872. Walking as part of a continuous journey to make necessary con-
nections while traveling by i^ublic or private conveyance.
§ 2873. Traveler not bound to remain inside cars stopping several minutes
at intermediate station.
§ 287-4. Accident while doing necessary act as passenger at time of com-
pletion of journey.
§ 2875. Accident after completion of travel as passenger on a public con-
veyance.
§ 2876. Walking not for purpose of making traveling connections, but
to terminate journey after leaving public conveyance.
§ 2876a. "Walking on a public highway:" when includes platform of rail-
way station.
§ 2S76b. Accident: riding in automobile, taxicab or carriage as "public
conveyance" for passenger service : common carrier.
§ 2876c. "Passenger" in elevator.
§ 2877. Taking poison or an overdose of medicine.
§ 2878. Character of death, whether accident or disease caused from con-
tact with "bacilli," putrid matter, etc., malignant pustule: in-
oculation of virus : blood poisoning.
§ 2879. Disease causing death "directly or jointly with such accidental
injury."
§ 2879a. Where death is not by disease but from accident.
§ 2880. Where death is not from accident but by disease.
§ 2881. Asphyxiation caused by the action of water or inhaling gases.
§ 2882. Injury or death inflicted through felonious act of another or in-
flicted by wrongdoer.
§ 2883. Internal injury: voluntary act for convenience, pleasure, or in
daily routine duties unaccompanied by extraneous accidental
cause : rupture : strains, etc.
§ 2884. Same subject : conclusion.
§ 2885. Other cases of external, violent, and accidental means.
§ 2885a. Burning building: injury to assured.
§ 2885b. Miscellaneous cases of special risks and losses in accident insur-
ance.
CHAPTER LXXVI.
ABANDONMENT AND TOTAL LOSS— MARINE RISKS.
§ 2892. Abandonment and constructive total loss : generally.
§ 2892a. Loss and abandonment : marine insurance act of 1906 of England.
§ 2893. Abandonment and total loss in case of freight : generally.
§ 2894. Distinction between absolute and constructive total loss : absolute
total loss: srenerallv.
CONTENTS • cxxi
§ 2895. Election to abandon: recovery for total or partial loss.
§ 2896. Election to abandon necessary to recovery of constructive total
loss.
§ 2897. Election to al)andon necessary, notwithstanding fifty per cent and
actual or technical total loss clause.
§ 2898. When abandonment may be made: generally,
§ 2899. How far right to abandon favored by courts.
§ 2900. Invalid abandonment of no effect.
§ 2901. Abandonment unnecessary in ease of absolute total loss: same,
goods, commission, and profits : freight.
§ 2902. Abandonment by owner of part interest: joint owner: eotenant:
mortgagor : mortgagee : lienor.
§ 2903. Successive perils.
§ 2904. Effect of clause requiring assignment and transfer of interest:
extent of interest transferred.
§ 2905. Abandonment extends to assured's interest or amount of risk.
§ 2906. Part of cargo discharged, balance on board: freight at risk.
§ 2907. Actual freight pending less than valuation: freight on board or
not on board.
§ 2908. Freight earned or due: successive passages: freight valued:
freight out or home.
§ 2909. Freight valued: loss of vessel and specie on board to purchase
cargo.
§ 2910. Freight valued in excess of value of carriage of goods.
§ 2911. Assured must have some interest to abandon : consignee.
§ 2912. Abandonment of profits: total and partial loss: commissions.
§ 2913. Several kinds of merchandise insured for one sum, parts cannot
be abandoned.
§ 2914. Several kinds of merchandise insured distinctly and separately:
separate valuation.
Separate interest in ship, cargo, and freight.
Constructive total loss : outfits of whaling ship.
Abandonment and constructive total loss of ship and freight:
apportionment : English doctrine.
Abandonment and constructive total loss : ship and freight : ap-
portionment : doctrine in this country.
Assignment to assured by underwriters on vessel on compromise:
recovery of freight loss pro rata.
Insurer as assignee of owner of cargo may be liable for freight
money to owner who has settled with insurer on vessel.
How far freight upon cargo a charge upon underwriter on cargo
as between insured and insurer.
Surrender of cargo or voluntary abandonment of voyage where
freight due or might have been earned : master's right to earn
freight and dutv to forward goods.
§
2915.
§
2916.
§
2917.
§
2918.
§
2919.
§
2920.
§
2921.
§
2922.
cxxii CONTENTS
§ 2923. Freight earned.
§ 2924, Claim for pro rata freight.
§ 2925. Freight earned: goods transshipped: new or substituted voyage.
§ 2926. Freight earned: part of cargo reaching abandonee on cargo
equivalent to reaching owner.
§ 2927. Freight for forwarding less than original freight.
§ 2928. Freight for forwarding same as original freight.
§ 2929. Freight for forwarding same as original freight: river risk.
§ 2930. Freight for forwarding in excess of original freight.
§ 2931. Clause not to abandon vessel except loss exceeds one-half value
not applicable to freight claim based on loss of cargo: same,
cargo.
§ 2932. Vessel arriving: obligation of consignee to obtain permission to
land cargo : freight earned.
§ 2933. Freight {)aid in advance: specie and returns thereof: "cash on
account of freight."
§ 2934. Freight valued: carried or not carried: laden or to be laden:
part of cargo laden.
§ 2935. Affreightment: freight which might have been earned: cargo
partly loaded : contract for freight : cargo ready, etc.-
§ 2936. Policy against "absolute" or "actual" total loss only.
§ 2937. "Absolute and total loss only" and jettison.
§ 2937a. "Disbursement"' policy : actual or constructive total loss paid by
insurers: clause construed.
§ 2938. Whether abandonment excluded by clauses "free from partial
loss," "free of average," etc.: same perishable goods.
§ 2939. Same subject: cases favoring a constructive total loss and aban-
donment.
§ 2940. Same subject: opinions of textwriters.
§ 2941. Same subject: conclusion.
§ 2942. Total loss of value.
§ 2942a. Freight: abandonment: constructive total loss: "free from par-
tial loss and particular average:" expenses of transshipment.
§ 2943. Shall not abandon until "ascertained that the recovery and re-
pairs of said vessel are impracticable."
§ 2944. Peril removed before loss takes place.
§ 2945. Ultimate state of facts when action brought control in England
as to abandonment.
§ 2946. State of facts existing at time of abandonment controls here.
§ 2947. Total cannot be changed into a partial loss by acts of insurer or
agent after justifiable abandonment.
§ 2948. Recovery or restoration of property or indemnity received before
abandonment.
CONTENTS cxxiii
CHAPTER LXXVII.
ABANDONMENT AND TOTAL LOSS— MARINE RISKS,
CONTINUED.
§ 2955. Abandonment has reference to property at risk at time.
§ 2956. Effect of parting with interest.
§ 2957. Abandonment to second or different assurers: salvage apportion-
ment.
§ 2958. Cargo and profits insured separately: double abandonment.
§ 2959. Voyage defeated or loss caused by a peril not insured against.
§ 2960. Notice and proof of abandonment necessary: object and pur-
pose of notice: how far claim for total loss implies aban-
donment.
§ 2960a. Abandonment and constructive total loss: reinsurance: notice:
"pay as may be paid :" compromise.
§ 2961. Assured must not await results: must abandon in reasonable time..
§ 2962. Where property would perish before notice could be received..
§ 2963. What constitutes reasonable time.
§ 2964. What is not reasonable time.
§ 2965. How far notice in reasonable time affected by available means of
speedy communication.
§ 2966. Abandonment by mortgagee: reasonable time.
§ 2967. Effect of stipulation as to time of abandonment or agreement
keeping right in abeyance.
§ 2968. How far delay affected by fact that insurer not prejudiced thereby.
§ 2969. Loss total at date of abandonment : revival of right to abandon.
§ 2970. Advice of loss necessary : source and means of information au-
thorizing notice.
§ 2971. Character of the information: actual state of facts.
§ 2972. Abandonment not validated by subsequent events: new aban-
donment.
§ 2973. Sufficient grounds and true causes must be assigned: bound by
cause assigned.
§ 2974. Though wrong cause assigned may recover actual loss.
§ 2975. Noncommunication of additional causes or of all causes when suffi-
cient cause stated. '
§ 2976. Sufficiency of abandonment and cases.
§ 2977. Sufficiency of abandonment : subject matter clearly indicated
though not expressly named : "advances on board."
§ 2978. Abandonment must be positive, absolute, and unconditional : as-
sured's acts of ownership: form immaterial and writing unnec-
essary.
cxxiv CONTENTS
§ 2979. How far abandonment transfers title,
§ 2980. Liens, encumbrances, contracts with third persons: charges, ex-
penses, and liabilities arising from abandonment.
§ 2981. Freight valued: accounting for freight as salvage: goods of as-
sured and other shippers on board.
§ 2982. Abandonment where assured's possession has never been parted
with : salvors as agents of assured.
§ 2983. Abandonment: English registry acts: vesting of title to ship.
§ 2984. Sails, etc., saved not a fund in assured's hands to defray expenses
of getting off stranded vessel.
§ 2985. Acceptance binds both parties.
§ 2986. Acceptance under circumstances of doubt as to right to abandon.
§ 2987. Implied acceptance: taking possession of vessel.
§ 2987a. Stipulation to recover and repair vessel : duty of assured and as-
surer: abandonment: implied acceptance.
§ 2988. Constructive acceptance regardless of fifty per cent total loss
rule.
§ 2989. Acquiring and holding title under distinct right not an acceptance.
§ 2990. What acts of assurer by his agents do and do not constitute ac-
ceptance.
§ 2991. Merely taking possession of vessel and deficiency of repairs as
affecting acceptance.
§ 2992. Assured not bound to refuse acceptance: silence: cases of non-
acceptance.
§ 2993. Abandonment validly made continuing though acceptance refused.
§ 2991. Retroactive effect of abandonment and acceptance.
§ 2995. Effect upon assured's rights and assurer's liabihty of nonaccept-
ance: disclaimer of interest in salvage.
§ 2996. Arrests, restraints and detainments: embargo, etc.
§ 2996a. Declaration of war as "restraints" of princes, etc. : abandonment :
loss of "adventure:" goods remaining in assured's possession.
§ 2997. Blockade.
§ 2998. Freight: stipulation not to abandon: case of blockade.
§ 2999. Abandonment, how far justified by fear of danger: capture,
detention, etc.: imminent danger.
§ 3000. Same subject : acceptance of cargo at another port by consignee.
§ 3001. Right to abandon may be taken away by capture after right
accrues.
>§ 3002. Abandonment for capture: how far restrained by stipulations.
§ 3003. Capture and seizure.
§ 3001. Recapture.
§ 3005. Vessel and cargo held as security, captured and recaptured, and
expensive and doubtful litigation necessary to recover her.
§ 3000. Abandonment: jettison: contribution need not be first demanded.
§ 3007. Stranding: submersion.
CONTENTS cxxv
§ 3008. Fifty jDer cent rule: repairs.
§ 3009. Extreme and imminent danger of destruction.
§ 3010. Fraudulent and designed exposure to peril distinguished from
mere negligence of master and mariners.
§ 3011. Vessel deserted by mariners because of inability to extricate her
from peril, or in ease of mutiny or to save tlieir lives, etc.
§ 3012. Place of peril may enhance probability of total loss.
§ 3013. Arrival of ship: continuation of risk: completion of voyage:
ship on arrival not worth repairing or repairs exceeding fifty
per cent : freight.
§ 3014. Arrival of part of goods: fifty per cent rule in .'^ucli case.
§ 3015. Loss or retardation of voyage: ship, cargo, and freight.
§ 3016. Total, subsequent to partial loss: successive losses.
§ 3017. Waiver of abandonment : purchase by assured, etc.
§ 3017a. Abandonment : non-waiver clause.
§ 3018. Waivei", revocation, and estoppel : insured and insurer generally :
miscellaneous cases.
CHAPTER LXXVIII.
TOTAL LOSS AND TOTAL DISABILITY— FIRE AND ACCIDENT.
§ 3025. Total loss, building: fire risk.
§ 302G. "Wholly destroyed:" "totally destroyed:" fire risk: how far
marine cases analogous.
§ 3027. "Wholly destroyed:" "totally destroyed," continued: how far
valued policy cases analogous.
§ 3028. "Wholly destroyed:" "totally destroyed:" cases.
§ 3029. "Wholly destroyed :" "totally destroyed :" conclusion.
§ 3030. Total loss under policj' issued after loss by fire, and before build- .
ing repaired.
§ 3031. "Total disability:" "permanently disabled:" "wholly disabled,
etc. ; accident and benefit insui'ances.
§ 3032. Construction of the words, "total and permanent disability."
§ 3033. "Wholly disabled," insured under two occupations.
§ 3034. "Total" and "partial total" disability : loss of a foot or feet, eye
or eyes.
§ 3035. "Permanent" disability excludes that which is merely temporary.
cxxvi CONTENTS
CHAPTER LXXIX.
REPAIRS— FIFTY PER CENT RULE— SALE— TRANSSHIPMENT-
MARINE.
§ 3040/ Repairs of sliip: generally.
§ 3041. Ship not worth repairing: cost of repairs exceeding repaired
value.
•§ 3042. Abandonment after repairs by assured.
§ 3043. Repairs by mortgagor in possession of vessel.
§ 3044. Repairs and retaining control by owner.
§ 3045. Insurer's right to repair.
^ 3046. Same subject continued.
§ 3047. Same subject: conclusion.
§ 3048. Repairs, etc., by insurer under nonwaiver, etc., clause giving
right to interfere.
§ 3049. Same subject: deficiency in repairs.
§ 3050. Shipowners obligation to repair to send on cargo.
§ 3051. Assurer's agreement with wreckers or salvors to save vessel:
assured on ship or cargo.
§ 3052. Salvors: sale of part of jettisoned cargo saved: total loss: dili-
gence to avoid sale.
§ 3053. Underwriter's objections to repairs.
i§ 3054. "Not to be liable for repairs made" at specified place.
i§ 3055, Liability of several underwriters for repairs separate and not
as partners.
§ 3056. Character of repairs.
§ 3057. Want of materials, etc., at place: impossibility of repairs there.
§ 3058. Failure to make complete repairs at intermediate port.
§ 3059. Repairs: liability of insurers where funds raised therefore on
bottomry.
§ 3060. Liens for repairs, etc., bottomry.
§ 3061. Where loss exceeds fifty per cent.
§ 3062. Where loss is less than fifty per cent.
§ 3063. Whether loss must merely equal or must exceed fifty per cent.
§ 3064. Stipulation affecting fifty per cent rule.
§ 3064a. ''Disbursement" policy: conflicting stipulations: rider: fifty per
cent rule.
§ 3065. Code provisions as to abandonment for half value.
§ 3066. Exceptions to fifty per cent rule.
§ 3067. Fifty per cent rule: cargo: memorandum and other articles.
§ 3068. Fifty per cent rule: free of partial loss.
§ 3069. Fifty per cent rule: arrival of vessel or cargo.
CONTENTS cxxvii
§ 3070. Fifty per cent rule: value at time and place of loss or repairs:
same freight.
§ 3071. Stipulation that valuation in policy the test under tifty per cent
rule.
§ 3072. Rule in England as to valuation in policy and repairs.
§ 3073. Rule in this country as to valuation in policy: fifty per cent rule
and repairs.
§ 3074. Opinions of text-writers as to valuation or value of vessel being
test.
§ 3075. Conclusion: repaired value and not valuation in policy the test.
§ 3076. Fifty per cent rule : expense of raising vessel and taking to port
of repairs.
§ 3076a. Test of constructive total loss: whether value of wreck may be
included: cost of repair: effect of English statute.
§ 3076b. Where stipulated that cost of repairs shall exceed seventy-five
per cent exclusive of raising vessel, etc.
§ 3077. Stipulation: liability exceeding half amount insured "under ad-
justment as of a partial loss:" one third new.
§ 3078. Repairs: particular average adjustment: one-third new.
§ 3079. One-third new: interior and steamboat navigation: iron ships.
§ 3080. One-third new: labor and materials included: steamboat towage,
and like incidental expenses excluded.
§ 3081. One-third new : Code provisions.
§ 3082. One-third new: anchors, remetaling, dockage, calking, ironwork,
etc.
§ 3083. Recalking and recoppering exceeding vessel's repaired value.
§ 3084. One-third new : five per cent stipulation.
§ 3085. One-third new: new ship: rule here.
§ 3086. Same subject : English rule.
§ 3087. One-third new: shij) worth more repaired than before disaster.
§ 3088. One-third new : proceeds of old materials : rule here.
§ 3089. Same subject: English rule.
§ 3090. One-third new: temporary and permanent repairs.
§ 3091. Decisions that one, third must be deducted from cost: repairs:
three-fourths value: fifty per cent rule.
§ 3092. Same subject: deci-sions that one-third need not be deducted.
§ 3093. Same subject: opinions of text-writers.
§ 3094. Same subject: conclusion.
§ 3095. One-third new: marine interest: bottomry or respondentia money
for repairs: repairs defrayed by sale of goods.
§ 3096. Addition of salvage charges due salvors: estimation of repairs:
half value.
§ 3097. When expenses of temporary repairs enter into general and
when into particular average.
§ 3098. Repairs: general average: jettison and fifty per cent rule.
cxxviii CONTENTS
§ 3099. Cargo: transshipping, etc.: aggregation of losses, etc.
§ 3100. Expenses for insuring cargo from wreck to destination: fifty
per cent rule.
§ 3101. Loss of goods by jettison : fifty per cent rule : contribution.
§ 3102. Allowance for custody of vessel during repairs.
§ 3103. Depreciation in value when added to expense of repairs.
§ 3101. Repairs: averages: age, unsoundness, decay of vessel: one-third
new : fifty per cent rule.
§ 3105. Where repairing injurj' will place vessel though unsound in same
condition.
§ 3106. Expense of survey to ascertain extent of repairs.
§ 3107. Expenses consequent upon peril necessarily incurred preparatory
to repairs : averages : constructive total loss.
§ 3108. Expense of raising submerged vessel: averages: contribution
by cargo.
§ 3109. Commissions and disbursements: repairs.
§ 3110. Premium and fifty per cent rule : repairs.
§ 3111. Increased expense of repairs abroad over what they might have
cost at home.
§ 3112. Vessel disabled at sea and expenses consequent upon seeking port
of distress.
§ 3113. Obligation to employ master of skill and judgment.
§ 3114. Obligation of master to inform owner of vessel's loss.
§ 3115. Master's agency prior to abandonment.
§ 3116. Master's agencj^ after abandonment.
§ 3117. Abandonment not accepted: agency or trusteeship of insured.
§ 3118. Funds for repairs.
§ 3119. Master's authority: pledge of owner's credit for necessaries, etc.,
to procure repairs, etc.
§ 3120. Sale of cargo or part thereof to repair.
§ 3121. Sale after abandonment.
§ 3122. Sale, when justifies an abandonment.
§ 3123. Sale : when abandonment necessary to recover total loss.
§ 3124. Sale : when abandonment unnecessary to recover total loss.
§ 3125. Sale : total and partial loss.
§ 3126. Sale : unreasonable exertions not required to prevent.
§ 3127. Illegal sale and abandonment confers no rights.
§ 3128. Sale, whether justifiable: cases.
§ 3129. Sale whether justifiable: opinions of text-writers.
§ 3130. Sale, whether justifiable: the rule.
§ 3131. Sale : master, owner, or part owner.
§ 3132. Bottomry bond and sale: assurer's refusal to pay bond.
§ 3133. Sale : obligation to communicate with owner or insurers : notice.
§ 3134. Sale of cargo: how far justifiable.
§ 3135. Sale of cargo : cases.
§ 3136. Sale: right or obligation to transship or forward goods.
CONTENTS cxsix
CHAPTER LXXX.
REPAIRS AND REBUILDING: FIRE RISK
§ 3150. Repairs and rebuilding : nature of condition : stipulated indem-
nity not exhausted.
§ 3151. Contract to repair or rebuild is between insurer and insured only.
§ 3152. Right to rebuild must be expressly reserved.
§ 3153. Character of repairs obligated by reservation.
§ 3154. Character of repairs may be affected by ordinance.
§ 3155. Construction of clauses to rebuild and that specif\4ng time of
payment.
§ 3156. Assignment of loss and right to rebuild.
§ 3157. No time specified, election must be made in reasonable time.
§ 3158. Option exercised to repair or rebuild : effect of election : defense :
pleading.
§ 3159. Repairs unauthorized unless election made.
§ 31G0. Time specilled for exercise of option after proofs of loss com-
pleted : corrected proofs.
§ 3161. Delay followed by refusal after notice of election.
§ 3162. Rebuilding or repairs: delay: reasonable time.
§ 3163. Remedy: damages: unreasonable delay in rebuilding: failure to
complete : defective work.
§ 3164. Assured, refusal to permit rebuilding or repairs.
§ 3165. What constitutes an election to rebuild.
§ 3166. Rebuilding: several insurers.
§ 3167. Rebuilding : arbitration clause : waiver,
§ 3168. Parol waiver of right to rebuild: arbitration.
§ 3169. Election to rebuild waives defense of misrepresentation.
§ 3170. Rebuilding prevented by ordinance or municipal authority.
§ 3171. Rebuilding clause : equities : widow's life interest.
§ 3172. Rebuilding: injunction.
§ 3173. Action by assurer against building contractor.
§ 3174. ProjDerty destroyed after rebuilding and v.'ithin term of policy.
cxxx • CONTENTS
TITLE XII.
CONDITION AFFECTING LOSS AND ACTIONS.
CHAPTER LXXXI.
LIMITATION CLAUSES AFFECTING ACTIONS.
§ 3181. Stipulations as to the time of bringing suit are valid: construc-
tion of.
§ 3182. Provision making loss payable after certain number of days.
§ 3183. Waiver of limitation may be by agent of insurer.
§ 3184. When limitation as to time of bringing suit may be void.
§ 3185. Provision making time dependent on act of insurer.
§ 3186. When time of limitation commences to run : life : mutual benefit.
§ 3187. When action is deemed to be commenced.
§ 3188. Limitation to certain time "after the loss shall occur."
§ 3189. "After the happening of the death on account of which the
action is brought."
§ 3190. Within a certain time "after the fire."
§ 3191. After the loss "shall have become due."
§ 3192. "One year from the time of the alleged injur}-."
§ 3193. "Unless prosecuted within one year from the date of the loss."
§ 3194. Effect of stipulation in contract limiting action to particular
forum.
§ 3195. Effect of provision in charter limiting action to particular foi-um.
§ 3196. Limitation runs against infant beneficiaries.
§ 3197. Effect of limitation on action to recover back premiums.
§ 3198. Limitation does not bar action against company for fraud.
§ 3199. Mistake in date of policy no excuse.
§ 3200. Plaintiff's prosecution for arson no excuse.
§ 3201. Validity of charter provision limiting time for issuing execu-
tion.
§ 3202. Where last day of time limited falls on Sunday.
§ 3203. Effect of garnishment proceedings.
§ 3204. Dismissal of suit brought before expiration of time and bring-
ing of another suit after expiration of period limited.
§ 3205. Same subject : exceptions in statutes of limitation not appli-
cable.
§ 3206. Effect of attempt to sue in foreign court having no jurisdiction.
CONTENTS exxxi
§ 3207. Waiver by acts of insurer: negotiations for adjustment.
§ 3208. Provision that if adjustment not satisfactory suit must be brought
within certain time: effect of adjustment.
§ 3209. Request for further proof waives limitation as to time of bring-
ing suit.
§ 3210. Effect of waiver of proof where policy provides that no suit can
be brought until certain number of days after proofs furnished.
§ 3211. That denial of liability waives provision that suit cannot be
brought until a certain time.
§ 3212. That denial of liability does not waive bringing suit within speci-
fied time.
§ 3213, Effect of injunction preventing payment and receipt of money.
§ 3214. Where impossible to comply with provision on account of war.
§ 3215. Where suit commenced within time but summons cannot be served :
absence of defendant.
§ 3216. Payment to mortgagee of his amount of loss no waiver of limi-
tation as to mortgagor.
§ 3217, Effect of clause where company insolvent.
§ 3218. Substitution of new party plaintiff or defendant after expira-
tion of time.
§ 3219. Where insurer agrees to transfer of action to another court :
waiver.
§ 3220. W^hat will excuse failure to comply with limitations: other in-
stances.
§ 3221. When failure to comply with limitation is not excused: cases
generally.
§ 3222. Bill for reformation of policy,
§ 3223. Breach of condition is matter of defense: excuses for noncom-
pliance need not be pleaded.
§ 3224. Where time for bringing action is controlled by statute.
CHAPTER LXXXII.
ARBITRATION AND AWARD.
§ 3231. Arbitration and award clauses : generally.
§ 3232. Validity of provision: condition precedent, when.
§ 3233. Same subject: cases.
§ 3234. Same subject: cases contra.
§ 3235. Other provisions as to arbitration and award: invalidity of.
§ 3236. General rule as to validity: arbitration and award clauses.
§ 3237. When compliance is not condition precedent.
§ 3238. Same subject: "At written request."
cxxxii CONTENTS
§ 3239. What constitutes proper request for.
§ 3240. Manner of obtaining an award should comply with policy pro-
visions.
§ 3241. Provision as to arbitration where loss is total.
§ 3242. Who is disinterested person : competency of appraisers.
§ 3243. Demand for appraisal: notice of.
§ 3244. Demand where loss occurs by distinct fires.
§ 3245. Where se\eral insurers liable for same loss : separate demand.
§ 3246. Estimate of loss: prerequisite to arbitration.
§ 3247. Award binding, when.
§ 3248. Award not binding, when.
§ 3249. When mortgagee bound by award.
§ 3250. Agreement for arbitration subsequent to loss.
§ 3251. Additional award, where prior award approved.
§ 3252. Where company elects to build or repair.
§ 3253. Where arbitrators exceed authority.
§ 3254. Arbitration clause: limitation of time for bringing suit.
§ 3255. Refusal to appoint appraisers or comply with arbitration clause.
§ 3256. Refusal to comply with provision except on new terms.
§ 3257. Denial of liability is waiver of provision.
§ 3258. Instances of waiver of arbitration provision by company.
§ 3259. When there is no waiver of provision.
§ 3260. Failure to agree upon arbitrators.
§ 3261. Arbitration waives defects in proof of loss.
§ 3262. Award may be set aside, when.
§ 3263. Averments in complaint as to arbitration clause.
§ 3264. Noncompliance : arbitration and award clauses : defense.
§ 3265. Where insured dies after submission.
§ 3266. Appraisers may call in experts.
CHAPTER LXXXIII.
NOTICE AND PROOFS OF LOSS.
§ 3275. Notice and proofs of loss: generally: fire: substantial compli-
ance only necessary : construction.
§ 3276. Proofs of loss : parol contract.
§ 3277. Notice and proofs of death.
§ 3278. Notice and proofs of death condition precedent to recovery.
§ 3279. Proof of loss : marine risk : certification by insurer's agent.
§ 3280. Notice and proofs must be in time limited by policy, when.
§ 3281. Notice and proofs within certain specified time: insured must
show compliance.
CONTENTS cxxxiii
Where stipulation for notice and proofs within certain time, but
no forfeiture imposed for failure to furnish.
Accident policy: notice "within ten days" from date of injury
or death construed.
Accident policy: injury causing total disability: death resulting
therefrom: proof of death when time for notice commences.
Proofs of loss may operate as notice, but notice alone will not dis-
pense with proofs.
Notice and proofs of death: condition precedent to right of ac-
tion: both notice and proofs must be furnished.
Place of notice and proofs.
Notice of loss in writing.
Notice: proofs: "As soon as possible."
Nature of the proofs of death: "due notice and proof of death."
Notice "forthwith."
"Immediate notice."
"Immediate notice:" when verbal notice is sufficient.
"Give immediate notice and render particular account."
"Immediate notice:" reinsurance.
"Satisfactory proof:" what constitutes.
Where policy does not prescribe time within which notice and
proofs must be furnished.
Provisions in by-laws of company as to notice and proofs.
Furnishing of proof required is a demand for payment.
Notice and proofs: service by mail.
Nature of interest need not be stated in proof s .unless required
by jDolicy.
By whom notice and proofs should be given.
Proofs of loss by creditor.
Mortgagor and mortgagee: who may furnish proofs of loss.
Policy to trustee: change of tiiistee: who may make proofs of
loss.
Proofs of loss Avhere policy is issued to partners.
Proofs of loss signed by insured.
Policy payable to another than original insured: when proof
must be by original insured.
Notice and proofs of death: life policy: who may furnish.
Where constitution of fraternal order requires subordinate lodge
or secretary of such lodge to make proofs of death.
Notice and proofs: accident policy: who may furnish.
To whom notice or proofs may be given: notice to. "secretary,"
agent.
§ 3313. Stipulation that proofs of loss must state other insurance.
§ 3314. Where statute requires notice to be accompanied by affidavit as
to cause of loss.
§
3282.
§
3283.
§
3284.
§
3285.
§
3286.
§
3287.
§
3288.
§
3289.
§
3290.
§
3291.
§
3292.
§
3293.
§
3294.
§
3295.
§
3296.
§
3297.
§
3298.
§
3299.
§
3300.
§
3301.
§
3302.
§
3303.
§
3304.
§
3305.
§
3306.
§
3307.
§
3308.
§
3309.
§
3310.
§
3311.
§
3312.
cxxxiv CONTENTS
§ 3315. Where policy requires proofs to state origin of fire.
§ 3316. Policy covering goods in separate building : form of proofs.
§ 3317. Notice and proofs of loss: loss during war.
§ 3318. Before whom verification shall be made.
§ 3319. Statements in proofs of loss: how far conclusive: mistakes.
§ 3320. Statements in proofs of loss as to amount of loss : mistakes.
§ 3321. Notice and proofs may be condition precedent to garnishment.
§ 3322. Magistrate's certificate: construction of this provision generally.
§ 3323. Magistrate's certificate : "if required."
§ 3324. "Nearest" magistrate or notary : generally.
§ 3325. Magistrate or notary "nearest to the fire:" "most contiguous" to
the fire : rule.
§ 3326. Certificate of magistrate "not concerned in the loss."
§ 3327. Sufficiency of magistrate's certificate.
§ 3328. Effect of statements in certificate of magistrate or notary.
§ 3329. Statements by physician as part of proofs of death.
§ 3330. Submission of insured to an "examination under oath."
§ 3331. Copies of bills, invoices, etc. : books of account.
§ 3332. Where books of account, invoices, etc., are lost.
§ 3333. "Particular account:" "Full and detailed statement."
§ 3333a. Notice of sickness or disease.
§ 3333b. Accident policy: notice and proofs: generally.
§ 3334. Accident policy: full particulars: does not require details of sub-
sequent injuries.
§ 3335. Accident policy : notice of injury causing total disability : death
resulting therefrom.
§ 3335a. Employer's liability insurance,
§ 3335b. Live stock insurance.
§ 3336. Notice and proofs of loss : notice affecting loss : guarantee in-
surance.
§ 3337. Must furnish all "documentary evidence."
§ 3338. Where loss is total, "sufficiency of proof."
§ 3339. Fraud and false swearing: generally.
• § 3340. Effect of false statements as to amount of loss where actual loss
exceeds amount of insurance.
§ 3341. Discrepancy between amount claimed in proofs and amount of
verdict.
§ 3342. Where fraud and false swearing enters into some of the items
only.
§ 3343. False statements by agent of insured in proofs of loss.
§ 3344. False swearing: after commencement of suit.
§ 3345. Subsequent proofs to be taken in connection with former proofs.
§ 3346. Where laws of association require approval of subordinate
lodge : power to reject.
§ 3347. Statutory' provisions.
§ 3347a. Separation of damaged from undamaged goods.
§ 3354.
§
3355.
§ 3356.
§
3357.
§
3358,
§
3359,
§
3360,
§
3361,
§
3362,
CONTENTS cxxxv
CHAPTER LXXXIV.
WAIVER AND ESTOPPEL— PROOFS OF LOSS.
Waiver of notice of proofs of loss.
Acts amounting to waiver or estoppel: proofs of loss: cases.
Acts not amounting to waiver" or estoppel: proofs of loss: eases.
Waiver by agent of company: by adjuster.
Waiver of notice not waiver of proofs.
Acting on oral notice waives written notice.
Stipulations in policy that waiver must be in writing do not
apply to proofs of loss.
Mere silence no waiver.
Failing to give notice of defects within reasonable time and
specifying particular defects: retention of proofs.
§ 3363. Only defects specified can be relied on as defense, othei^s not
specified are waived.
§ 3364. Where insurer objects to proofs and refers to policy.
§ 3365. Failure of insurer to respond to inquiries.
§ 3366. Where insurer requires corrections which cannot be made in
time limited for furnishing proofs.
§ 3367. Receipt of proofs after time limited by policy for furnishing
same.
Request by insurer that proofs be furnished.
Same subject : conclusion.
Effect of requiring additional proofs.
Waiver not acted upon, etc.
Where person insured dies without knowledge of beneficiary or
insurer and proofs are not furnished within time limited.
Denial of liability is waiver of proofs or defects in proof.
Denial of lia])ility: charge of incendiarism.
Denial of liability may not operate as waiver.
Refusal to pay loss because of pendency of garnishment proceed-
ings.
Denial of liability may be by agent.
Refusal by insurer to accept proofs of loss on ground of no
liability is waiver.
§ 3379. Where company declines to receive proofs as not 'being in time
or not by .proper person.
§ 3380. Refusal to furnish blanks: life policy.
§ 3381. Examination under oath as waiver of notice or proofs.
§ 3382. Waiver of provision as to particular account of loss.
§
3368.
§ 3369.
§
3370.
§
3371.
§
3372.
§
3373,
§
3374,
§
3375,
§
3376,
§
3377
§
3378,
cxxxvi CONTENTS
§ 3383. Waiver of magistrate's certificate.
§ 3384. Where insurer estopped from setting up that insured has sworn
falsely in his proofs: adjustment of loss.
§ 3385. Adjustment as waiver.
§ 3380. Promise to pay: waiver.
§ 3387. Offer by company to pay in settlement of loss part of amount
claimed.
§ 3388. Payment of part of loss.
§ 3389. Submission to arbitration: waiver.
§ 3390. Appearance and pleading by insurer: waiver.
§ 3391. Statutory provisions: notice and proofs.
§ 3392. Letters showing waiver of proofs of loss.
§ 3393. Waiver: right to insist that proofs were not furnished by
proper person.
§ 3394. Company estopped after payment of money into court to claim
proofs insufficient.
TITLE XIII.
AVERAGE, ADJUSTMENT, AND DAMAGES OR
RECOVERY.
CHAPTER LXXXV.
GENERAL AVERAGE— ADJUSTMENT AND DAMAGES OR
RECOVERY.
Art. I. General Average and Jettison: Generally.
Art. II. General Average, Jettison and Adjustment.
Suhdiv. I. York- Antwerp Rules.
Siihdiv. II. Other Matters Relating to General Average.
Art. til Adjustment and Measure of Damages or Recovery.
Art. I. General Average and Jettison: Generally.
§ 3400. Contribution: laws of Rhodians and Romans: Oleron: generally.
§ 3401. Etymology of the word "average."
CONTENTS cxxxvii
§ 3402. Divergent usages among maritime countries.
§ 3403. Jettison generally.
§ 3404. Jettison defined.
§ 3405. Essentials of general average.
§ 3406. Claim to contribution is equitable one.
§ 3407. General average defined.
§ 3408. Distinction : general and particular average.
§ 3409. General average : fire policies.
§ 3410. Previous consultation not prerequisite to sacrifice.
Art. IL General Average, Jettison and Adjustment.
Subdiv. I. York-Antwerp Rules.
§ 3417. Cautionary remarks.
§ 3418. Jettison of deck cargo.
§ 3419. Exceptions to last rule.
§ 3420. Damage occasioned by jettison : water getting down hatches, etc.
§ 3421. Damage by fire or consequent thereupon.
§ 3422. Cutting away wrecks or remains of spars, etc.
§ 3423. Voluntary stranding or running ship on shore.
§ 3424. Damage or loss : sails and sjjars : ship's engines : press of sail :
refloating ship.
§ 3425. Expense of lightening to refloat ship and of reshipping.
§ 3426. Sacrifices' made for fuel.
§ 3427. Port of refuge expenses.
§ 3428. Port of refuge expenses : English rule.
§ 3429. Cost of repairs : deductions allowed : temporary repairs : new for
old.
§ 3430. When loss of freight shall be made good as general average.
§ 3431. Loss of goods : amount to be made good as general average.
§ 3432. Basis and amount of contributory values and deductions.
§ 3433. Adjustment as affected by general average clause in contract:
affreightment.
o*
Suhdiv. II. Other Matters Relating to General Average.
§ 3440. To what extent sacrifice must be successful : subsequent accident.
§ 3441. Other sacrifices and expenses in general average.
§ 3442. AVhat is not included in general average.
§ 3443. Who contributes.
§ 3444. What contributes.
Art. III. Adjustment and Measure of Damages or Recovery.
§ 3451. Settlement includes adjustment: fifty per cent of goods of sound
value delivered.
cxxxviii CONTENTS
§ 3452. Adjustment of partial loss: measure of damages or recovery.
§ 3453. General average: adjustment: values.
§ 3454. Measure of damages or recovery.
§ 3454a. Employers' liability: measure of indemnity.
§ 3454b. Guaranty insurance.
§ 3455. Damages or recovery: deductions: exchange: duties.
§ 3456. Same subject: continued.
§ 3457. Compound policies: prorating loss.
§ 3458. Damages or recovery: interest on amount of loss.
§ 3459. Same subjects: continued.
§ 3459a. Refusal to pay loss: attorneys' fees.
§ 3460. Measure of damages or recovery: proportionate amounts: limit-
ed liabilities.
§ 3461. Same subject: continued.
§ 3462. Same subject: continued.
§ 3463. Damages or recovery: mutual insurance companies, benefit socie-
ties, etc.
§ 3464. Law of place or termination of adventure governs adjustment:
general average.
§ 3465. Adjustment settled in foreign port.
§ 3465a. Compromise or settlement: accord and satisfaction: release.
TITLE XIV.
RIGHTS, REMEDIES, PROCEDURE AND EVIDENCE.
CHAPTER LXXXVI.
RIGHTS AND REMEDIES.
§ 3467. Rights and remedies: preliminary statement.
§ 3468. Right of action by insured : commencement of action or suit : gen-
erally.
§ 3469. Action when contract completed but policy not delivered : trover for
policy executed.
§ 3470. Forms of action,
§ 3470a. Form of remedy : anticipatory breach or renunciation of contract.
§ 3471. No action against insurers : refusal to insure : conspiracy.
§ 3471a. Conspiracy to ruin competitor insurer's business by employing its
agents.
§ 3471b. Fraudulent combination to obtain policy : one party cannot recover
share of proceeds from the other.
CONTENTS cxxxix
§ 3472. Several policies upon same property: double insurance: pro rata
clause.
§ 3473. Failure or refusal to levy assessment : action for breach of contract.
§ 3473a. Same subject : decisions.
§ 3474. Failure or refusal to levy assessment: mandamus: conclusion.
§ 3474a. When insurer not obligated to continue issuing assessment policies.
§ 3474b. Right of action to compel issuance of paid-up policy.
§ 3475. Election of insurers to rebuild : garnishment.
§ 347(3. Attachment and garnishment.
§ 3476a. Garnishment of judgment: employers' liability policy.
§ 3477. Recovery : insurer in one state, company cannot be garnished in
another.
§ 3478. Action against foreign company : quo warranto : mandamus.
§ 3479. Action by foreign company to recover money paid agent.
§ 3480. Action where insured enters into contract induced by fraud.
§ 3481. Action by insured after settlement.
§ 3482. Carriers : rights of : remedies against.
§ 3483. Transfer of member to another class: wrongful refusal of benefit
society.
§ 3484. Wrongful refusal to transfer policy.
§ 3484a. Beneficiaries' rights and remedies: generally.
§ 3484b. Beneficiary not entitled to personal judgment for money contracted
to be paid for erection of monument.
§ 3484c. Right of wife to proceeds: ante-nuptial contract: right by succes-
sion.
§ 3484d. Right of action for fraudulently inducing member to change bene-
ficiary.
§ 3485. Rights and remedies of assured: general matters.
§ 3485a. Lloyds and individual underwriters: right of action and recovery.
§ 3486. Recovery back by insurer of money: payment made or procured
by fraud: mistake of facts.
§ 3487. Actions for assessment : premium notes.
§ 3488. Recovery by creditor as beneficiary or a.ssignee of life policy.
(a) General statement.
(b) Where recovery limited to debt, advances, etc.
(c) Recovery when transfer absolute in form.
(d) When tru.st against creditor created under agreement.
(e) When policy proceeds may be recovered.
(f) Recovery where debt barred by limitation: presumption of
payment.
(g) Other matters affecting recovery.
§ 3488a. Same subject : illegality of contract.
§ 3488b. Same subject: recovery limited by policy clause.
§ 3488c. Riglit to i)roceeds: vendor and vendee.
§ 3488d. Bailor: right to benefit of insurance.
cxl CONTENTS
§ 3488e. Right to dividends: surplus.
§ 3488f. Right to abandon contract.
§ 3J89. Where "sue and labor" clause furnishes additional remedy for sal-
vage claims.
§ 3490. Actions by insurers: generally.
§ 3491. Right to make post mortem: exhumation: accident risk.
§ 3491a. Examination of person of assured in respect to injury: negligence
of medical examiner.
CHAPTER LXXXVII.
JURISDICTION INCLUDING REMEDIES IN EQUITY.
§ 3495. Jurisdiction : generally.
§ 3495a. Jurisdiction and venue: statutes affecting accident insurance:
same, guaranty insurance.
§ 3495b. Ousting jurisdiction: policy stipulations as to jurisdiction.
§ 3496. Jurisdiction: judgment in Federal court after property in custody
of state courts.
§ 3497. Statute as to foreign companies: service of process and exclusive
jurisdiction of state court.
§ 3498, Statute as to foreign companies: removal to Federal court.
§ 3499. Administrators appointed in different states : separate actions.
§ 3500. Jurisdiction: marine insurance: admiralty.
§ 3501. Provision in charter of company as to where suits are to be
brought.
§ 3502. Jurisdiction of tribunals of mutual benefit societies: resort to
courts.
§ 3502a. Same subject : distinctions as to gTounds of action.
§ 3502b. Jurisdiction of tribunals of railway relief associations or depart-
ments : resort to courts.
§ 3503. Jurisdiction : where action may be brought : generally.
§ 3503a. Same subject: mutual companies or associations.
§ 3503b. Mutual company: when court will not entertain jurisdiction.
§ 3504. When court may order exhumation: accident policy.
§ 3505. Jurisdiction: garnishment.
§ 3506. Same subject: foreign insurer: agent in state.
§ 3507. Submission to jurisdiction: appearance: waiver: practice.
§ 3508. Jurisdiction of equity: generally.
§ 3508a. Equity: multiplicity of suits: several insurers.
§ 3508b. Equity: multiplicity of suits: suit by receiver of insolvent insur-
ance company.
§ 3508c. Equity jurisdiction: fraud and misrepresentation.
§ 3509. Reformation of policy.
§ 3510. Mistake in name, or date, or description of property.
CONTENTS cxli
§ 3511. Correction of mistakes : reformation of policy : generally.
§ 3512. Correction of mistake of agent of insured in procuring policy.
§3513. Mistake in stating interest of insured.
§ 3514. Reformation of renewal policy to conform to former one.
§ 3514a. Reformation or cancelation of policy after loss or death.
§ 3514b. Ecjuity : revival or restoration of policy.
§ 3515. When equity will not reform policy.
§ 3516. Specific perforaiance of contract of insurance: mutual benefit
societies.
§ 3517. Action to compel delivery of policy where contract has been com-
pleted.
§ 3518. Accounting: same, bill for discovery: apportionment: tontine
policy.
§ 3519. Decree apportioning loss.
§ 3519a. Equity: enforcement of rights under mutual benefit certificates,
§ 3519b. Equity : failure or refusal to levy assessment.
§ 3520. Where member has been expelled.
§ 3521. Change of beneficiary : bill of interpleader.
§ 3522. Rejection of claim by tribunal of society.
§ 3523. Equitable lien by mortgagee on insurance money.
§ 3524. Recovery by mortgagor where insurance paid to mortgagee : appli-
cation money on mortgage debt.
§ 3525. Right to proceeds: vendor and vendee: trustee.
§ 3526. Right to proceeds: creditors.
§ 3527. Injunction cases: generally.
§ 3527a. Bill in equity against insolvent insurer by person injured by auto-
mobile : third party policy.
§ 3528. Particular cases where equity will grant remedy to insured.
§ 3529. Particluar cases where equity will grant remedy to insurers.
§ 3530. Cases where equity will not act.
CHAPTER LXXXVIII.
SUBROGATION.
§3537. Subrogation: right to, of insurer: generally.
§ 3538. Payment of total loss or entire destruction of subject insured
equipollent with abandonment in giving right of subrogation:
negligence: third parties.
§ 3539. Insurance on advances : rights of insurer.
§ 3540. Effect of release by insured to third parties upon insurer's right of
subrogation where release is prior to execution of insurance con-
tract.
§ 3541. Same subject : where release is subsequent to execution of insurance
contract and before payment of loss.
cxlii CONTENTS
§ 35-ila. Same subject : where insurer has knowledge of pending settlement
or of settlement.
§ 3541b. Same subject: refusal to assign insurer: release to wrongdoer:
defense.
§ 3542. Effect of reservation of rights to indemnity in release to wrong-
doers.
§ 3543. Where policy provides as to effect of release by insured to third
parties.
§ 3544. Release to third party who has knowledge of payment of loss by
insurer.
§ 3544a. Release by insured: effect of, upon his right of action against in-
surer.
§ 3544b. Payment: insurer to receive what insured recovers: insured as
trustee: when insurer equitable assignee.
§ 3545. AgTeements between insured and carriers for benefit of insurance
to latter may be valid.
§ 3546. Same subject: no violation of provision in policy against sale or
transfer of interest.
§ 3546a. Can-iers : rights of insurers : where policy excludes subrogation.
§ 3547. Abandonment: right to be subrogated subjects insurer to agree-
ment and equities under carrier's contract.
§ 3547a. Provisions in bill of lading : carrier to have benefit of insurance.
§ 3548. Provisions in bills of lading: carrier to have benefit of insurance:
effect where insurer pays loss.
§ 3549. Rights of insurers against carriers: where no provision for subro-
gation.
§ 3550. Pohcy providing for subrogation: contract with carrier limiting
value of consignment.
§ 3551. Where provision in bill of lading giving carriers benefit of insur-
ance conflicts with policy provisions.
§ 3552. Stipulation for benefit of insurance where loss caused by carrier's
negligence.
§ 3553. Stipulation in bill of lading that carrier shall have benefit of insur-
ance does not compel owner to insure.
§ 3554. Where no stipulation for subrogation of carrier.
§ 3555. Where owner has insurance but refuses carrier the benefit thereof.
§ 3555a. Whether money advanced is loan and repayable, or a payment by
insurer : receipt : subrogation.
§ 35.36. Subrogation of insurer to rights of mortgagee: policy to mort-
gagor: "loss payable to" mortgagee.
§ 3557. Same subject : policy void as to mortgagor, valid as to mortgagee :
stipulation for subrogation.
§ 3557a. Same subject : acquisition of legal title by mortgagee.
§ 3557b. Same subject : refusal of mortgagee to assign to insurer.
CONTEXTS
cxliii
§ 3j57c. Same subject : rights of assignee : purchaser of equity of redemp-
tion.
§ 3558. Same subject: where deficiency due on debt after foreclosure sale
exceeds amount of insurance.
§ 3558a. Sale by owner, subject to trust deed: vendor's lien reserved: in-
surer's right of subrogation.
§ 3559. Insurance by mortgagee where mortgagor pays or under provision
of mortgage may be chargeable with premium.
§ 35G0. Same subject: conclusion.
§ 3561. Policy to trustees: agreement to subrogate insurer.
§ 3562. Policy payable to sureties: subrogation of debtor on payment of
debt.
§ 3563. Right of insurer to subrogation where no provision therefor in
policy issued to mortgagee and nothing inconsistent therewith:
contract between mortgagor and mortgagee.
§ 3564, Same subject : Massachusetts decisions : contrary view.
§ 3564a. Rights of one of several insurers: settlements by mortgagee with
other insurers.
§ 3564b. Same subject : effect of contribution clause.
§ 3565. Effect upon insurance right to subrogation when mortgage debt
exceeds amount of loss.
§ 3566. When mortgagor entitled to subrogation against insurer.
§ 3567. Policy to mortgagor: mortgagee no right of subrogation.
§ 3568. Foreclosure proceedings: subsequent loss: sale under foreclosure
and deficiency.
§ 3568a. Subrogation of insurer to rights of creditors of assured.
§ 3568b. Policy payable to lien holder: when insurer not entitled to subro-
gation.
§ 3568c. Judicial bond: joint or severable liability: surety's right of subro-
gation.
§ 3569. Rights of insurer, vendor and vendee: where sale incomplete:
executory contract of sale.
§ 3570. Vendor and vendee: goods: seller's risk.
§ 3571. Repairs: insurer's right.
§ 3572. Rights of insurers to subrogation to contract rights of insured
with third parties.
§ 3572a. Insurer's right of subrogation: illegal contract with city to fur-
nish water supply.
§ 3573. Insurance by lessor: rights to proceeds.
§ 3573a. Insurance by lessee: liability of lesser: subrogation: defense.
§ 3574. Loss by negligence: wrongdoer: carrier: rights of subrogation:
fire and marine insurance.
§ 3574a, Same subject liability of railroads for fires, etc.: subrogation of
railroad or insurer: constitutional law: retroactive statute.
§ 3575. Same subject: marine insurance: collision.
exliv CONTENTS
§ 3575a. Effect of part payment by insurer : negligence of third person.
§ 3576. Collision between vessels owned by same person : insurer's rights.
§ 3577. Fidelity guaranty : right to subrogation.
§ 3578. Foreign company : failure to comply with statutory requirements :
right to subrogation against wrongdoer.
§ 3578a. Right of subrogation against wrongdoer: insurer member of un-
lawful combination : defense.
§ 3579. Deatli caused by negligence or wilful act of another: insurer's
rights.
§ 3579a. Personal injury: negligence, etc., of another: accident policy with-
out stipulation for subrogation.
§ 3579b. Right of subrogation under emploj^ees' liability insurance.
§ 3580. Subrogation of insurer's agent to their rights : premium.
§ 3580a. Right of subrogation of insurer's agent who pays premiums under
a mortgage clause.
§ 3581. Contract by bailee to insure goods: right of company insuring
owners.
§ 3581a. Theft of an automobile : insurer's right of subrogation.
§ 3582. Vessel impressed into naval service: subrogation of insurer against
government.
§ 3583. Insurance of pretended interest : recovery : real owner no rights.
§ 3583a. Waiver : insurer's right of subrogation : adjuster.
§ 3583b. Subrogation : form of remedy.
CHAPTER LXXXIX.
BANKRUPTCY— INSOLVENCY— DISSOLUTION.
§ 3590. Bankruptcy and insolvency.
§ 3591. Effect of insolvency.
§ 3592. General powers of receiver: assignee.
§ 3593. Powers of receivers : collection of assets : receiver in state of domi-
cil of company.
§ 3594. Trustee in insolvency may recover where company has released a
stockholder in violation of creditor's rights.
§ 3595. Rights of policyholders after dissolution : generally.
§ 3596. Priority of claims: where death of insured occurs before insol-
vency of company: after insolvency: preferences.
§ 3597. Payment and priority of claims: cheek given before insolvency:
dividend declared before: generally.
§ 3598. Dissolution of benefit society: mutual companies.
§ 3598a. Mutual marine insurance company: effect of insolvency upon
policies : cancelation.
§ 3598b. Credit guaranty insurance: insolvency of insurer: excess losses.
CONTENTS cxlv
§ 3599. Insolvency of maker of premium note of debtor holding life
policy.
§ 3600. General matters in bankruptcy and insolvency.
§ 3601. Distribution of assets.
CHAPTER XC.
PARTIES— PLEADINGS— PRACTICE— DEFENSES.
SuBDiv. I. Parties — Practice — Rights and Remedies.
II. Pleadings.
III. Practice,
IV. Defenses.
SuBDiv. I. Parties — Practice — Rights and Remedies.
§ 3607. Who' may be parties to the action: generally.
§ 3608. Contract under seal: who may sue.
§ 3609. "For whom it may concern:" who may sue.
§ 3610. Parties: in name of a.ssured.
§ 3611. When mortgagor may sue.
§ 3612. When mortgagee may sue.
§ 3613. Same subject: mutual companies.
§ 3614. Same subject : mortgagee clause.
§ 3615. Assignor and assignee: who may sue.
§ 3616. Same subject: life policies.
§ 3617. Parties: assignee: mutual companies.
§ 3618. Sale of property : assignee of, may sue.
§ 3619. Parties: assignor and assignee: collateral security.
§ 3620. Parties: assignment after loss.
§ 3621. Parties: trustees: "sold but not removed:" "their own but held
in trust."
§ 3622. Parties: consignor and consignee.
§ 3623. Parties: carriers.
§ 3624. Beneficiaries: who may sue.
§ 3625. Same subject: wife: widow.
§ 3626. Same subject: children.
§ 3627. Same subject: children: guardian.
§ 3628. Same subject: partners.
§ 3629. Insurance as members of a club.
§ 3630. Parties: personal representatives: administrator: executor.
§ 3631. Same subject : mutual companies.
§ 3632. Parties: agents.
§ 3633. Parties : principal : disclosed : undisclosed.
§ 3634. Parties: policy to husband on wife's property.
cxlvi CONTENTS
§ 3634a. Parties: joinder: husband and wife: community property: home-
stead.
§ 3634b. Partiei^: husband: wife: mistake in name.
§ 3635. Parties: partners.
§ 3636. Parties: part owner: owner.
§ 3637. Renewals: who may sue.
§ 3638. Parties: sale under sheriff's certificate.
§ 3639. Joinder of parties: who may be joined.
§ 3640. Same subject : nominal partners.
§ 3641. Joinder : owner, agent, or otherwise : "for whom it might concern."
§ 3642. Joinder : mortgagor and mortgagee.
§ 3643. Joinder : heirs : children : husband : wife.
§ 3644. Libelant : insurer may be made colibelant or joined with insured
or made party defendant in certain cases.
§ 3645. Joinder: jDolicy as collateral: stockliolders.
§ 3646. Joinder of parties: statutes.
§ 3646a. Joinder of parties : guaranty insurance.
§ 3647. Misjoinder of parties: who need not be joined.
§ 3648. Open policy: who may sue.
§ 3649. Double insurance: parties defendant.
§ 3650. Parties : charterers.
§ 3651. Parties: bonds with state treasurer.
§ 3652. Suit by treasurer of mutual insurance company.
§ 3653. Parties : insolvency : stockholders : attorney general.
§ 3654. Parties : manager of mutual insurance company.
§ 3655. Parties: receivers.
§ 3656. Corporate franchise: usurpation: parties.
§ 3657. Parties defendant: mutual insurance company.
§ 3658. Parties : insurance company against wrongdoers.
§ 3658a. Parties : indemnity against liability, or for losses paid employees
or third persons.
§ 3658b. Same subject : privity of contract : employee against insurer.
§ 3658c. Same subject : employee against insurer continued.
§ 3658d. Same subject : employee against insurer continued : insolvency of
assured.
§ 3658e. Same subject : stipulation that insurer defend.
§ 3658f . Same subject : withdrawal of insurer from defense of suit.
§ 3658g. Same subject: dismissal of parties.
§ 3658h. Same subject : employer against insurer.
§ 36581. Real party in interest: legal owner: beneficial owner: elevator
policy.
§ 3658J. Same subject: assignee of insured: misjoinder.
§ 3658k. Same subject: joinder: insurer and employee: employee and re-
ceiver.
CONTENTS cxlvii
§ 36581. Privity of contract: parties: lessee or his assignee against in-
surer.
§ SG.jSai. Parties: insurer: intervention.
SuBDiv. II. Pleadings.
§ 3665. Declaration: complaint or petition.
§ 3666. Sufficiency of declaration, complaint, or petition,
§ 3667. Declaration, etc.: benefit societies: mutual companies.
§ 3668. Declaration: under statutes or codes.
§ 3669. Declaration : foreign companies.
§ 3670. Embodying the terms of the policy in the declaration.
§ 3671. Declaration: application.
§ 3672. Averment of interest.
§ 3673. Averment of interest : life policies.
§ 3674. Averment : performance of conditions precedent.
§ 367."). Conditions precedent: statutes.
§ 3676. Declaration: conditions: notice and proof of loss.
§ 3677. Declaration: conditions: suing after proofs of loss furnished.
§ 3678. The loss: damage: value of property.
§ 3679. Loss by barratry not recoverable under averment only of loss by
capture.
§ 3680. Averment of ownership.
§ 3681. Declaration, etc., insufficient.
§ 36S2. Insufficient declaration, etc.: mutual benefit societies.
§ 3683. Declaration, etc. : pleading waiver.
§ 3684. Declaration, etc.: need not aver matters of defense: conditions
subsequent.
§ 368.3. What declarations need not aver: generally.
§ 3686. Admissions by the pleadings: what they do not admit.
§ 3687. Amendments.
§ 3688. Multifariousness.
§ 3689. The answer.
§ 3690. Answer: insufficient; no defense.
§ 3690a. Replication.
§ 3691. Matters specially pleaded: general issue.
§ 3692. Plea in l)ar : abatement.
§ 3693. Demurrer.
§ 3693a. Demurrer to answer.
§ 3694. Bill of particulars: of discovery.
§ 3695. Bill of interpleader.
§ 3696. Replication: traverse.
§ 3697. Variance.
cxlviii CONTENTS
SuBDiv. III. Practice.
§ 3705. Practice.
§ 3706. Service of process.
§ 3707. Consolidation of actions.
§ 3708. Interrogatories.
§ 3709. Order of reference of case.
§ 3710. Admission of newly discovered evidence after evidence bad closed.
§ 3710a. Whether question for court or jury.
§ 3711. Instructions to jury.
§ 3712. Instructions: cases where not erroneous.
§ 3713. Instructions: cases where erroneous.
§ 3714. Arguments of counsel.
§ 3715. Special findings: special verdict.
§ 3715a. Objections to findings.
§ 3710. Defects in declaration cured by verdict.
§ 3717. Judgment of trial court final as to matters of fact.
§ 3718. Verdict : contrary to evidence : excessive damages : new trial.
§ 3718a. Verdict : correction of, after separation of jury.
§ 3710. Appeals : discretion of court as to motions.
§ 3720. Appeals : questions not raised at trial of ease,
§ 3721. Appeals.
§ 3722. New trials.
§ 3723. Incidental matters of practice.
SuBDiv. IV. Defenses.
§ 3731. Waiver: estoppel.
§ 3732. Fraud and deceit.
§ 3733. Fraud between third party and assured no defense in action
against the company.
§ 3733a. Incontestability: fraud: false and fraudulent misrepresentations
or warranties: review of decisions.
(a) Arkansas.
(b) California,
(e) Georgia.
(d) Idaho.
(e) Illinois.
(f) Indiana.
(g) Iowa.
(h) Kentucky,
(i) Louisiana,
(j) Massachusetts.
(k) Missouri.
CONTENTS cxlix
§ 3733a— cont'd.
(1) New Jersey.
(m) New York.
(n) Rhode Island.
(o) Tennessee,
(p) Texas.
(q) Wisconsin.
§ 3733b. Same subject: summary and conclusion.
§ 3733c. Incontestability: insured not in good liealth when contract in-
cepted.
§ 3733d. Incontestability: other instances.
§ 3733e. Incontestability: statutory provisions.
§ 3733f. Incontestability: what parties entitled te protection.
§ 3733g. Incontestability: when period of, begins: computation of time.
§ 3733h. Incontestability: renewal or revival of policy: reinstatement.
§ 3734. Sufficient defenses to actions on premiums, etc., notes.
§ 3735. Defenses which are not good to actions on premium, etc., notes
or assessments.
§ 3736. Set-off: recoupment: counterclaim.
§ 3737. Set-off in action on premium notes.
§ 3738. Defense to action by mortgagee: tender.
§ 3739. Policy to cover consignor's interest.
§ 3740. Noncompliance with by-laws as a defense: conditions subsequent.
§ 3741. Election by company to repair.
§ 3742. Amount of loss received from another than insurer: no defense
in action against company.
§ 3743. Matters of defense after adjustment of loss.
§ 3744. Defenses: general matters.
CHAPTER XCI.
EVIDENCE.
§ 3755. Best evidence.
§ 3756. Proof in support of pleadings: evidence admissible.
§ 3757. Admissions by pleadings: payment of money into court.
§ 3758. The policy or certificate.
§ 3759. Application in evidence.
§ 3760. Oral contract: contract to insure.
§ 3761. Insurable interest: generally.
§ 376] a. Same subject : wager policy.
§ 3762. Insurable interest in ship : the ship's register.
§ 3763. Insurable interest: goods, bill of lading, freight: generally.
§ 3764. Insurable interest : burden of proof.
§ 3765. Evidence of sufficient proofs of loss: receipt of by company:
burden of proof.
§ 3766. Proofs of loss as evidence.
el CONTENTS
§ 3767. Marine insurance: proof of loss: master's protest.
§ 3768. Evidence of loss: proximate and remote cause: within tbe
policy.
§ 3769. Evidence of value of property : amount of loss : fire insurance.
§ 3769a. Evidence of loss to growing crops and extent thereof : hail in-
surance.
§ 3770. Evidence to show what goods are covered : case of shifting and
successive goods.
§ 3771. Evidence of loss: amount of: value of property: marine in-
.surance.
§ 3772. Evidence of death : proofs of as evidence : disease.
§ 3772a. Evidence of death : coroner's verdict or finding.
§ 3773. Presumption as to suicide or murder.
§ 3774. Suicide: evidence of.
§ 3775. Insanity : presumption against : evidence of.
§ 3776. Proof of matter in defense: life insurance: burden of proof:
character.
§ 3777. Proof of matters in defense: fire insurance: burden of proof:
increase of risk: breach of conditions.
§ 3778. Evidence of other insurance.
§ 3779. Proof of matters in defense: marine insurance.
§ 3730. Misrepresentations : materiality of.
§ 3780a. Misrepresentations as to age : presumptions : evidence.
§ 3781. Evidence: clause in policy as to false swearing or attempt at
fraud.
§ 3782. Evidence to show fraud : wilful burning.
§ 3783. Evidence of fraud : generally.
§ 3784. Burden of proof: compliance with conditions and warranties:
fire insurance.
§ 378o. Marine insurance: compliance with warranties: burden of proof.
§ 3786. Presumption as to seaworthiness and unseaworthiness: burden of
proof.
§ 3787. Same subject: cases.
§ 3738. De<?rees and surveys: rotten clause: evidence of seaworthiness.
§ 3739. Other matters of evidence and practice : seaworthiness.
§ 3790. Burden of proof: life insurance.
§ 3791. Burden of proof: death as result of external, violent, and acci-
dental means : accident insurance generally : instances.
§ 3792. Evidence whether insured was temperate: application.
§ 3793. Evidence : fidelity guaranty : breach of warranty : dishonest acts
of employee.
§ 3794. Evidence: burglary insurance. ,
§ 3795. Evidence: live stock insurance.
§ 3796. Evidence: prohibited employment or occupation.
§ 3796a. Excepted risks: burden of proof: evidence as to.
CONTENTS eii
§ 3797, Life and annuity tables: mortality tables.
§ 3798. Oilers of compromise or settlement.
§ 3799. Burden of proof of waiver: evidence of,
§ 3800. Judicial notice of custom as to written application, etc: life in-
surance,
§ 3801. Evidence to show who are beneficiaries.
§ 3802. Ambiguities: evidence.
§ 3803. Evidence to identify subject of insurance.
§ 3804. Parol evidence: waiver and estoppel: custom or usage.
§ 3805. Evidence to correct mistake.
§ 3806. Parol evidence to ascertain intention.
§ 3807. Parol evidence to explain phrase and words.
§ 3808. Parol evidence to explain contract.
Jj 3809. Parol evidence: when inadmissible.
§ 3810. Expert and opinion evidence.
§ 3811. Expert and opinion evidence: increase of risk.
§ 3812. Expert and opinion evidence: life insurance.
§ 3813. Experts: physicians and surgeons: life insurance.
§ 3814. Opinions of nonexperts.
§ 3815. Evidence : expert and opinion : as to premium : material facts.
§ 3816. Evidence: expert and opinion evidence: marine insurance.
§ 3817. Evidence: expert and opinion: generally: when admissible.
§ 3818. Evidence: expert and opinion: generally: what is not admissible.
§ 3819. Declarations and admissions of insured or beneficiary.
§ 3820. Declarations of member of mutual benefit society: to physician.
§ 3820a. Statements to physicians: prolonged communications: physicians'
certificates.
§ 3821. Res gestae : declarations.
§ 3821a. Hearsay.
§ 3822. Declarations and acts of agents.
§ 3823. Evidence: agents: conversations.
§ 3824, By-laws: rules of company: prospectus: books: surveys: dia-
grams, etc,
§ 3825. Letters : correspondence : ship's papers.
§ 3826. Evidence: assessments: levy of: forfeiture.
§ 3827. Payment of premium: receipts.
§ 3828. Payment of premium : recital in policy : generally.
§ 3828a. Payment of premiums by wife: statutory exemptions: burden
of proof.
§ 3829. Foreign judgment.
§ 3830. .Judgments: authentication of: conclusiveness of.
§ 3831. Assignment of policy.
§ 3832. Corporation estopped from denying its authority to act.
§ 3833. Presumptions,
3
clii CONTENTS
§ 3834. Evidence of consent of partner to insurance procured by one
with money stolen from the firm.
§ 3834a. Emj)lo\'ers' liability.
§ 3834b. Credit guaranty.
§ 3835. Other cases of admissibility of evidence.
§ 3836. Other cases of inadmissibility of evidence.
§ 3837. Evidence : general matters.
^ 3S38. Competency of witnesses.
APPENDICES.
A. Federal War Risk Insurance Statutes.
B. Form of Policy under War Risk Statute.
C. English Marine Insurance Act of 1906.
D. Rules of Practice of Associations of Average Adjusters.
LAW OF INSURANCE
TITLE I.
PRELIMINARY CHAPTER.
THE SOURCES AND ORIGIN OF INSURANCES.
§ I. Sources of insurance.
§ II. Orig-in of insurance generally.
§ III. Origin of marine insurance.
§ IV. Adoption of marine insurance in modern times.
§ IVa. Marine insurance continued: origin of Lloyds.
§ IVb. Marine insurance : summary.
§ IVc. Lloyds associations in United States: American Lloyds.
§ IVd. Inter-insurance: reciprocal insurance: inter-indemnity contracts.
§ Y- Origin of mutual insurance system.
§ Va. Origin of cattle insurance societies.
§ VI. Origin of fire insurance.
§ Via. Boards of fire or marine underwriters.
§ VII. Origin of life insurance.
§ Vila. History of industrial insurance.
§ Vllb. History of workmen's industrial insurance: state insurance:
compnlsorv ijisurancc : workmen's compensation.
§ VITc. Savings liank insurance and annuity law of Massachusetts.
§ VIII. Oi'igin of accident insurance.
§ Villa. History of casualty insurance.
§ Vlllb. History of employers' liability insurance.
§ IX. Origin of guaranty, fidelity guaranty, etc., insurances.
§ IXa. History of title guaranty insurance.
§ IXb. History of credit guaranty insurance.
*; X. Origin of other insurances.
§ I. Sources of insurance. — TUv princii);!! sources of insurance
law are to be fuinid in the marine law and the cnstoms of mer-
ehantvs, to be collected from ancient and modern codes or ordi-
nances of commercial law, elementary treatises? on the subject in
Joyce Ins. Vol. I. — 1. l
§ I. JOYCE ON INSURANCE
our own and foreign languages,^ and the judicial decisions in the
courts of this and other countries which follow the general marine
law and tho law of nations. ^ The origin of insurance, however,
necessarily includes a reference to many of its sources, and we
shall hereafter mention them in the consideration of that question.
Whatever may have been the origin of insurance, this much is
true, that it is to marine law and marine insurance that we nuist
look for a long period of time, especially in England, for the most
certain developments of the system of insurance and the enuncia-
tion and regulation of the principles governing the contract.^ Jus-
tice Park, writing in 1796, says that where insurance is mentioned
by professional men, marine insurance is meant.^ Hopkins de-
clares that the indemnity afforded by insurance was for a long
period confined to the dangers of marine insurance,^ and Walford
asserts that it is admitted by all writers that maritime casualties
were the first to which the principles of assurance, as distinguished
from the mutual protection idea, were applied.^ Other authors,
writing on the subject, refer it to such sources that it is through
the medium of marine insurance that we must look for the funda-
mental principles governing the contract. Thus Emerigon ' de-
clares that ''the ancient laws of the sea ^ are the sources which are
open to them, and the same whence they should draw wlio wish
to recur to first principles ;" and, he adds, that research into the
antiquity of maritime jurisprudence is necessary, since many of
the ancient doctrines, though now obsolete, are still the founda-
tion of those now in force, and that it is difficult to comprehend
many rules of the modern law without recourse to the ancient.*
As to legislative action, or particular ordinances, Marshall says
these have seldom gone further than to define and sanction those
principles which were already received in all commercial coun-
tries ; that some have added regulations dictated by national policy
or particular interest, but these are disregarded elsewhere. Al-
though the ordinances of other countries are not in force in Eng-
land, or this country, they are of authority as expressing the
usage of other countries upon a contract which is presumed to be
1 Tor history of insurance treatises, * Park on Ins. (4th ed.) "Intro-
see 3 Kent's Comm. (13th ed.) *342, duction." ii.
342, 487, *487; 1 Duer on Ins. (ed. ^ Hopkins' Mar. Ins. (ed. 1867) 47.
1845) lect. ii. pp. 45 et seq.; 1 Mar- MValford's Ins. Guide (2d ed.) 4.
shall on Ins. (5th ed.) 15 et seq. See "^Emerigon on Ins. (Meredith's ed.
note at end of this section. 1850) xxsi.
^1 Duer on Ins. (ed. 1845) 19 ^ See note 8, pp. 4, 5, to this sec-
et seq.; 1 Marshall's Ins. (5th ed.) tion.
13. * Emerigon on Ins. (Meredith's ed.
^ See note at end of this section. 1850) xli.
2
SOURCES AND ORIGIN OF INSURANCES § L
governed by general rnles that are understood to constitute a branch
of pubhc la\v.^° Iveferring again to Emerigon,^^ he says that while
the contract of insurance, and the mode for interpreting the obli-
gations it involves, belong to the usage of mercantile places rather
than to the civil law, or what was known to Blackstone and other
English writers as municipal law, yet, ''though it did not become,
till very late, the special object of legislation, it is not the less regu-
lated by the general principles of justice and equity that abide in
the written reason of the law." ^^ He also declares that the con-
tracts of maritime loan and insurance often depend on the same
principles. This author,^^ and Marshall,^* both give an account
of the various systems and progress of marine law^ promulgated by
the different maritime states of Europe, state at about what period
laws for the regulation of the contract of insurance first began to
make a part of these systems, and show that the law of insurance
is a branch of the law of merchants and the marine law.^^ The
French writers also assert that marine insurance, in its essential
principles and leading maxims, is a part of the law of nations; ^^
to these may be added the authoritative statement of Blackstone,
that in ''all marine causes relating to freight, average, denmrrage,
insurance, bottomry . . . the law-merchant, which is a branch
of the law of nations, is constantly adhered to," and that "there
is no other rule of decision but this great universal law" (the law
of nations), "collected from history and usage, and such writers
of all nations as are generally approved and allowed of." ^'^ Flan-
ders ^* also declares that the maritime jurispmdence of England is
founded on the law-merchant, which is a branch of the law of
nations. That the foregoing should be so is reasonable, since
navigation is a state matter. ^^ and necessarily all maritime states
would be interested in fostering and promulgating laws which
would tend to encourage adventures at sea and commerce between
nations. Justice Park ^o referring, from the context, to 1756,
io:Marshairs Ins. (5th ed.) 13. i' Blackstonc's Comm. Book iv. c.
11 Emerigon on Ins. (Mererlith's ed. 5; Jd. 4 Hammond's ed. (18f)()) 89;
1850) 1. Id. Chase's 2d ed. 880.
12 See note at end of this section. i^ Flanders' Maritime Law (ed.
13 Emerigon mi Ins. (Meredith's ed. 1852 ) 26.
1850) xxxi. et seq., 19 et seq. i^ Emerigon on Ins. (Meredith's
1* Marshall on Ins. (5th ed.) 3 el. ed. 1850) 4, 5. See also opinion of
seq. Mr. Chief Justice Marshall, in Gih-
1^ See also Mr. Justice Bradley in hons v. Ogden, 9 Wheat. (22 U. S.)
Insurance Co. v. Dunham, 11 AVall. 1, 189 et seq., 6 L. ed. 23.
(78 U. S.) 1, 31. 34, 20 L. ed. 90. 20 gee Park on Ins. (4th ed.) xliii.,
1^ Emerigon on Ins. (Meredith's ed. xlif., xlviii., xlix.
1850) 19 et seq.; 1 Duer on Ins.
(ed. 1845) 2.
3
§ I. JOYCE OX INSURANCE
asserts "tliat as there ba\e been but few positive regulations upon
insurances, the principles on which they were founded could never
liave been widely diffused nor very generally known;" that no ques-
tion had arisen upon them in the superior courts; that, as late as
the 30th and 31 st Elizabeth, it became a question where an action
upon a policy should 1)6 tried, and speaks of a certain case ^ as tlie
most ancient one he had ever found on insurance. lie fiu'tber
d(M-Uires that, down to IToG, there were not more than sixty de-
cisions upon insurance, and "even those cases which are reported
are such loose notes . . . that little information can be gathered
uj)on the sul)ject," and Marshall ^ is an authority for the stateuient
that insurance was little litigated in the courts of Westminster till
toward the close yf l"]lizabeth"s reign, speaks of the decisions of tlie
superior courts as of.nonbinding effect, and adds, that before the
statute 43 l^^lizabeth. chapter 12, of date 1601, almost all disputes
were settled by arbitration.^
Such being the state of the law of insurance in England in 1756,
Eord Mansfield, who in that year came to the bench, where he
continued till 1788, had recourse to marine law, foreign treatises
and authorities, as well as to the customs and usages of merchants,
for those leading principles upon which the English authorities
then furnished little or no information.* In writing of this learned
jurist. Parsons* says that he set a wise example in this res[)ect,
and since then the jurisprudence of England and .Vmerica has
done little else than adopt the usage of merchants, and given it
the force of authority.^
As illustrations of the above we find that Brough v. Whitmore ''
refers to Eombard Street as giving a construction to policies of
insurance, which tlie uniform practice of merchants and under-
writers had made intelligible. So the Khodian Laws, the Con-
solato del Mare, the laws of Oleron and Wisby, Iloccus, and the
Ordonnance of Louis XiV. (1681),* are cited in Luke v. Lyde,'
1 Decided. 1588; 4 Inst. 142, cited ^See note 5, p. 16, § IV. herein,
in Dowdale's case, Coke's Rep. pts. "An exhaustively critical edition
(i. 46, 48; Id. (3 Frazer) 351. See of the Rhodian sea law (given in vol.
note 13, p. 11), *^ IV. herein. I. of Pardessus) by W. Ashburner,
2 ]\raishall on Ins. (5th ed.) 16, appeared in 1909 (Oxford, University
17, 19. Press). It contains valuable material
' See Maylnes' Lex Mercatoria, not only on the Rhodian sea law, but
106. on the various other sea laws in force
^ See note at end of this section, on the IMediterranean coast.'' 24
, sp.^i.pons' Mar. Ins. (ed. 1868) 5. Ency. Britannica (11th ed.) p. 537.
^ See Marshall on Ins. (5th ed.) Consolato del Mare, see note 11,
20; Flanders' ^Ntaiitime Law (ed. p. 14, § IV. herein.
1852) 25. Laws of Oleron. "This justly eele-
■^4 Dum. & E. 206-9 (1791). hrated Code was originally promul-
SOURCES AND ORIGIN OF INSURANCES
§ 1.
by Lord Mansfield. Tlii.s ca.se is cited in Bork v. Norlr-nj^" as are al-
so the laws of Oleron; " T.uke v. I.yde is also cited in The Sarato-
ga,"* as are likewise Koccus, Straccha, Clcirac, INjthier, Emerigon,
gated by Eleanor, Duchess of
(luienne, the mother of Richard I. of
lOno-laiid, . . . who inherited the
dukedom of Guienne from his moth-
er.'' This Code was improved by him
"and introduced into England. Some
additions were made to it by King
John; it was promulgated anew in
the 50th year of Henry HI." Laws
of Oleron (with headnote) 1 Pet.
Adm. (U. S.) Append, i.-lxiii., .30
Fed. Cas. Append, pp. 1171 et seq.
See also 24 Ency. Britannica (11th
ed.) pp. 535, 536. Laws of Oleron
are usually ascribed to Richard I., but
it is declared that no satisfactory au-
thority exists therefor. There are
forty-seven articles or short regula-
tions, for average, salvage, etc., said
to have been copied from the ancient
Rhodian maritime laws, or perhaps
from those of Barcelona. Larned's
Hist, for Readv Ref. and Topical
Reading, "Oleron," p. 2398, citing D.
Macpherson, Annals of C'ommerce,
. vol. 1, p. 358. See Harpers Book of
Facts (1906) "Oleron," for brief
mention only that alleged fact of
tliese laws having been enacted b.v
Richard I. in 1194 is "now doubt-
ed." Compare 24 Encj'. Britannica
(11th ed.) "Sea Laws,"*pp- 535, 536.
Wisby, Visby, or AVisbuy. "The
town of Wisby, situated on the west
coast of the Island of Gotland, ...
is chiefly famous from its nanu^ hav-
ing become identified with a Code of
maritime laws that was long of jjara-
niount authority in the Baltic. . . .
The jirincipal noiihern jurists and
historians regard the Wisby Code
or compilation, as anterior to the
Code or coni])ilation deiu)minated the
Rules or Judgments of Olei-on. and
as being in fact the most ancient
monument of the maritime laws of
the ^Middle Ages. But no learning
or ingenuity can give plausibility to
so iinpi'ol)abl(' a Iheorv." Larned's
Hist, for Heady Ref." and Topical
R^^ading, "Hansa Towns," pp. 1624-
1626, (fuoliuff \'vom History of the
Hanseatic League (Foreign Quart.
Rev. Jan. 1831), citing also other
authorities. "Wisbuy was the an-
cient capital of Gothland, an island
in the Baltic." "Northern writers
have contended that the laws of Wis-
buy are more ancient than the Role
d'Oleron and have even asserted the
('onsolato del Mare to have been
composed subsequent to them. These
claims are opposed with some irrita-
tion by Cleirac, who denies their hav-
ing been promulgated prior to the
year 1266. In this opinion he is sup-
ported by many historical facts."
Laws of Wisbuy (with brief historv),
1 Pet. Adm. (IJ. S.), Append. Ixvii.-
xc, 30 Fed. Cas. pp. 1189 et seq. See
24 Ency. Britannica (11th ed.) "Sea
Laws," p. 536.
Laws of Hanse Towns were found-
ed evidently on those of the neigh-
lioring city of Wisbuy and the cele-
brated Role d' Oleron. They appear
lo have been first enacted and pro-
mulgated in the year 1597, at Lii-
beck, which is stvled the "Mother of
the Hanse Towns." 1 Pet. Adm.
(U. S.) Append, xciii-exi. 30 Fed.
Cas. Append, pp. 1197 et seq.
Marine Ordinances of Louis XIV.
To the genius of Colbert, the cele-
brated minister of Louis XIV., France
is indebted for this excellent Code.
The ordinances were published "by
the Fi-encli King in 1681." Marine
Oi'dinaiK-es of Louis XIV. (witii
headnote) 2 Pet. Adm. (U. S.) Ap-
pend, iii., .'K) Fed. Cas. Append, pp.
120:; et seq.
9 2 Bui-r. 882, 889.
10 2 McLean (U. S. C. C.) 422,
42(), Fed. Cas. No. 1659.
11 See note 8, ante, under this sec-
11*2 Gall. (U. S. C. C.) 164, 179,
Fed. Ca.s. No. 12,355.
§ I. JOYCE ON INSURANCE
Valin, and the laws of Oleron, which laws are an authority in the de-
cisions of Walton V, Ship Neptune,"^ and Sims v. Jackson. ^^ In
Davy V. Hallett," Kent, C. J., relies upon Emeri,<>on, A'alin,
and Pothier. So in Franklin Ins. Co. v, Lord,^* Story, J.,
.says the doctrines of Valin, Pothier, and Emerigon are en-
titled to great weight and cites from Emerigon, whose treatise
is also considered in Vandenheuvel v. United Ins. Co. ^* Of
the repoi*ts of Mason and Gallison, in which appear two of
the above ca.^^es. Chancellor Kent ^^ declares that they may
fairly be placed upon a level with the best ])roductions of English
admiralty, for deep and accurate learning, as well as for the high-
est ability and wisdom in decision. So, in the Star of Hope " the
court, in discussing the question of general average, cites Emeri-
gon. Again, the Ordonnance of Louis XIV. (1681),^* and the
commentary thereon by Valin, is referred to by the court in Mor-
gan V. The Insurance Company of North America, ^^ decided in
1806. It says: ''These ordinances and the commentaries on them
l-ave been received with great respect in the courts both of England
and the United States, not as containing any authority in them-
selves, but as evidence of the general marine law. Where they are
contradicted b}' judicial decisions in our own country they are
not to be respected, but on points which have not been decided
they are worthy of great consideration. I am strongly inclined
to adopt the rule laid down by Valin. because I think it reason-
able.'' This case is cited on the point decided, on the above authori-
ties, in King v. The Debuvare Insinance Company. '^^ In Odlin
v. The Insurance Company of Pennsylvania,^ the court says the
opinions of French jurists on the question there under consid-
eration had no inconsiderable weight with it, and although founded
u]^on positive ordinances, yet they were evidence of the general
law of merchants upon the subject, no judicial decision and no
custom appearing to the contrary. "The sea laws and state ordi-
nances of many of the maritime countries of Europe have, with
some exceptions, gradually become incorporated with the coni-
ng 1 Pet. Adni. (U. S.) 142. Fed. U. S.) 203, 230, Ifl L. ed. 638, per
Cas. No. 17,135. Mr. Justice Clitt'ord.
12 1 Pet. Adni. (U. S.) 157, Fed. ^^ ^ec uote 8, ante, under this sec-
Cas. No. 12,801. tion.
"3Caines (N. Y.), 21. ^^ 4 Ball. (4 U. S.) 455, 458, 1
1*4 Mason (U. S. C. C.) 248, 255, L. ed. 907, per Tilghman, C. J.
Fed. Cas. No. 5,057. 20 -^ ^Vash. (U. S. C. C.) 300, 307,
«2 Johns. Cas. (N. Y.) 127, 150 Fed. Cas. No. 7,788.
etseq. ^2 Wash. (U. S. C. C.) 312, 315,
16 3 Kent's Comm. (13th ed.) *20. Fed. Cas. No. 10,4.33.
"The Star of Hope, 9 Wall. (76
6
SOURCES AND ORIGIN OF INSURANCES § I.
mercial law of England by a kind of tacit adoption, and are in
these cases considered as evidence of the customs of merchants.
These regulations are used in the British and American courts,
and have frequently furnished rules of decision where the posi-
tive law of the country or former decisions upon the point had
not prescribed a different one." And the court refers to Roccus,
Le Guidon, A'alin, Emerigon. Pothier, and the Ordonnance of
Louis XIV.2 S5 in Hone v. Tlie Mutual Safety Insurance Com-
pany ^ the court considers the Ordonnance de la Marine of Louis
XIV.,* Valin, Emerigon, Boulay Paty, and Alauzet, upon the
question of reassurance. An examination of the insurance cases
of England further shows that for the most part, certainly until
comparatively recent times, they have concerned marine insur-
ance ; ^ and the earlier statutes of England, which legislate con-
cerning insurance as such, relate to marine insurance.
It is, therefore, these ancient usages and customs of merchants,
digested and compiled into sea laws, ordinances, and treatises,
which have furnished the leading principles for the adjudication
of insurance cases, and which are the sources from which Lord
Mansfield, Story, and other learned jurists, have drawn in the
determination of marine cases of insurance, and so marine law
and marine insurance for a long period of time furnished the most
certain developments of the principles governing the contract of
insurance.^*
2 See note 8, ante, under this sec- "The legal principles of marine in-
tion. surance, siu-li as those relating- to
3 1 Sand. (N. Y.) 137, 145. fraud, coueealment, misrepresenta-
* See note 8, ante, under this see- tion, warranties, subrog-ation, agency,
tion. reinsurance, rectitication of policy,
^ For cases down to 1795, see and return of premium, apphj, with
Beawes' Lex Mercatoria, 302, et seq. certain few exceptions, to all insur-
5a "Until the year 1907 the law of auccs, so far as their application is
marine insurance was derived mainly not excluded or modified by the terms
from the decisions of the courts and of the policy. , . . The main ex-
the treatment of textwriters ; but its ceptions above referred to are: (1)
leading principles are now contained The doctrine of constructive total loss
in the marine insurance act 1906 (6 and notice of abandonment, the rules
Edw. VII. c. 41), the full title of as to adjustment of a partial loss,
which is 'An Act to Codify the Law and the doctrine that a policy may be
Relating to Marine Insurance' (the ratified after a loss. (2) Life insur-
title of an act of Parliament is now ance is not a contract of indemnity,
part of the act, and may be taken and the prin('ii)le of subrogation does
into consideration for the purpose of not apply to it. The practice as to
construing it). The act came into discovery of ship's papers is peculiar
force on the 1st of January, 1907." to marine insuraiu-e, and does not
1 Arnould on Marine Ins. (8th ed. extend to any other cases of insui--
Hart & Simev) see. 1. ance." 17 Earl of Halsbury's Laws
7
§§ II., III. JOYCE ON INSURANCE
§ II. Origin of insurance generally. — The origin of insurance is
wrapped in such obscurity that an exliau.stive examination of the
works of the most learned authors on this subject fails to discover
the exact time when insurance Avas first known or practised. Some
of the most eminent Avriters contend that it was known to the
ancients; others, that it had its inception in the necessities of mari-
time commerce, and the risks and hazards consequent tliereon ;
although none of these fix detinitelv the date of its invention and
first practice. It is, however, argued by other prominent writers
that tlie present nuitual insurance system had its origin in those
artilicial alliances or clubs, which are said to have existed from
time immemorial for nuitual benefit and assistance in different
exigencies, in China, among the Teutons, the early Christians, and
the ancient Greeks and Romans. That from these alliances or
clubs sprang what were known as "guilds," between which and the
Friendly Societies of England, mutual benefit societies, and the
nuitual insurance system, the connection can be traced. There are
certainly many points of resemblance between some of the alli-
ances or clubs and the mutual insurance system, as will be noticed
hereafter; and, if mutual insurance is a lineal descendant there-
from, then the date of the earliest existence and practice of insur-
ance can be somewhat more definitely fixed than it can upon the
theory that it owes its inception to maritime commerce.
In view, then, of the preceding remarks, we will consider spe-
cifically the origin of the ditt'erent kinds of insurance, placing
marine insurance first, because the most replete references, legal
and historical, are to that branch of the contract of true insur-
ance, and also because that concrete idea known as marine insur-
ance first took tangible shape, grew, and was more extensively
known and practised among nations than any other kind of inT
surance until, perhaps, recent times. We shall next consider the
origin of the mutual insurance system, and follow with the origin
of the several kinds of insurance in that order which their priority
of existence, coupled with their relative development and growth,
as governed by the weight of authority, 'shall warrant.
§ III. Origin of marine insurance. — Whether insurance .was
used among the Koniaus is a disputed question, and one upon
which there is no certain evidence.
of Engf. p. 513 {citing Tannel)aum & papers is peculiar to marine insur-
Co. V. Heath, [1908] 1 K. B. 1032, ance"). See also Id. p. 335, as to
C. A. 77 L. J. Iv. B. 634, 99 L. T. construction of marine insurance act
237, 13 Com. Cas. 264, 24 T. L. R. 1906, and extent of legal principles
450-C. A., wliei-e Eai'well, L. J., says: embodied therein. See also note 2,
"It appears from all the cases that ante, herein,
the right to claim discovery of ship's
8
SOURCES AND ORIGIN OF INSURANCES § III.
The pi'iiieijial armmieiits adduced in its favor are: 1. Pa.s'^ages
from Livy ® and Suetonius,''^ iini)lying that the government of
Home, during tlie Kepubhc on two occasions, and the reign of the
Emperor Claudius on one occa^fion, had assumed the risk of losses
that might arise during the course of certain voyages, by storms
oi- enemies. 2. That Cicero, in a letter Avritten to the Proqua_\stor
Caninius Sallust. at Laodicea, asks him to procure himself sure-
ties for treasure he should be sending home.* 3. That the laws
i-elating to usury in the Justinian Code and Pandects,^ and else-
where, specified the rate of interest granted to nautical insurance.
4. That the extensive u.^^e of bottonny and respondentia affords a
strong presumption that insurance in its simpler forms was known
and practised among the ancients. 5. That the nauticum fanms,
the trajectitia, or nautica pecunia, which were terms used to indi-
cate a form of obligation connected with carriage by sea or marine
adventure, wherein entered the element of risk, resembled insur-
ance. 6. That the Romans possessed ships and commerce, and
wherever foreign connnerce was introduced some protection or se-
curity of the nature of insvu'ance would be necessitated, especially
in times of war, to encourage merchants to undergo the risks and
hazards of adventures at sea. 7. That insurance, as a wager, was
not unknown to the Romans. 8. That the above evidences, scat-
tered through the Roman law and Roman history, if not suflicient
in themselves, taken separately, are the several constituents which,
aggregated, disco\er the existence among the Romans of the sys-
tem of insurance.
Opposed to these facts and the proposition they are advanced to
prove are arguments to .show: 1. That the passages from Livy and
Suetonius have no application to insurance; that the inference
therefrom is that contractors were only to transport the stores i)ur-
chased of them to their destination at the risk of the government,
or, in other words, that the government became purchasers of the
commodities or merchandise before embarked, and consequently
the actual owner during the voyage. 2. That no inference is to
be deduced from Cicero's letter in favor of the proposition, but
that the reference therein has a nnich stronger atlinity to bills of
exchange than to insurance. 3. That the laws relating to usury
6 T. Livius, lib. 23, n. 49; lib. 25, n. Facts, p. 378; Id. (1900) "Insurance,"
3. whore it is said: "Siu-tonius conjec-
' Lib. 25, n. 21. "The origin of lures that Chuidius, the Koman Kni-
insuraiice is unknown; it has, on the peroi-, was (he first contriver of the
authority of Suetonius, been ascribed insurance of ships, 43 A. D."
fo the Emperor Claudius, .\. n. 43." * Cicero, lib. 2, epis. 17.
Haydn's Diet, of Dates (25th ed.) ^ pubiiyij(>j respectively A. D. 529,
p. 728. See also Harper's Book of 533.
9
§ III. JOYCE ON INSURANCE
in the Code and Pandects deferred only to maritime interest, the
fonyideration given in a bond of bottomry or hypothecation, and
not to premium of insurance. 4. That impignoratio embraced
what is knoAvn as bottomry, hypothecation, and respondentia ; that
the foundation of these was merely a loan or pledge, either per-
sonal or on property. 5. That foenus nauticum, trajectitia, or
nautica pecunia were only payments for money advanced, or were
terms used to indicate the loan, and as the creditor ran a risk
during the voyage, and as the risks might apply to the ship or part
of it, or to the cargo pledged for the payment of the debt, the rate
of interest nauticum foenus usurse maritimae might be higher than
ordinary. 6. That there is no evidence that any premium was
paid in these transactions. 7. That ancient maritime commerce
was limited and exposed to a paucity of risk, and that the naviga-
tion of the Romans was for war, and not for peace or commerce.
8. That insurance is not a Avager, and the knowledge of wagers
among the Romans would not imply a knowledge of insurance.
9. That there is no positive information, historical or otherwise,
that insurance was in use among the Phoenicians, Carthaginians,
or Greek republics, and that the Roman laws, the laws of Oleron,
of Wisby, and of the llanse Towns, are silent as to insurance.
It is also argued that Coke, in 1588,^° notices the practice as a
novelty.
With some or all of the above aflrirmative facts as the principal
basis, it is deduced that insurance existed among the Romans by
Emerigon," Rcklarride,^^ Duer,^^ Elliott," and others. Gibbon ^^
1° Rep. pt. 6, pp. 46, 48. of law. With the Italians it is held
11 Emerigon on Ins. (Meredith's in the highest credit," and he also
ed. 1850) xxxii. Emerigon, the refers to other authorities which show
French jurist, had a well-earned rep- the great value of the work. Valin,
utation for skill and learning in the the coniiuentator of the Ordonnanee
maritime law, and his researches as de la Marine, speaks of Emerigon's
to the origin and law of insurance learning, and Justice Park (Park on
were laborious and exhaustive. In Insurance, 4th ed., xv.) refers to him
the early part of 1783 his work on as a distinguished writer, and lie is
"Marine Insurances" was published, cited as an authority in the courts
"It is a work that has long been botli in England and this country,
held in esteem in all commercial coun- ^^ Comm. de Code de Commerce,
tries in Europe and America," says sec. 1004.
Meredith in the introduction to his ^^ Diier on Ins. (ed. 1845) 7 et
edition of date 1850 of the work (p. seq.
xxix.), and he adds ( id., n. 1.) : "Es- i* Elliott on Ins. (ed. 1907) sec. 2,
trangin (Disc, prelim., p. 32) af- p. 7, where he says : "It is thus more
firms that in France it is regarded as than probable that the Romans were
a sure oracle in the matter of insur familiar with the practice of insur-
ance; that it is cited in the tribu- ance. . . . Insurance seems to
nals as an authority having the force grow naturally out of an extensive
10
SOURCES AND ORIGIN OF INSURANCES § III.
connects the. usury liuv-^ with nautical insurance. Walford,^^ rely-
ing upon Ilendriks," docs not go as far as Gibbon, but .states that
the contract of nautical interest or loan on bottomry or respondentia
was used from very remote ages by the Greeks, Romans, and other
nations as their ordinary insurance contract, and that it formed the
traditionary groundwork of the insurance system; and this author
quotes from Leybourn's Parnarithmologia that insurance was es-
tabhshed by a law under Claudius Csesar; and Maylnes ^' declares
Claudius "did bring in this most laudable custom of assurances."
Richards ^' has briefly declared that the practice of underwriting
by individuals lays claim to great antiquity, although he adds that
its origin is a matter of doubt ; ^° while among those who assert
that insurance was unknown to the Romans, Hopkins ^ admits
tbat the transactions relating to interest or usury and maritime
loans, above mentioned, bore a resemblance to insurance in the in-
troduction of risk as an element in the pretium or rate of interest.
He also says: ''Unquestionably within the compass of the Roman
law and the details of Roman history may be found scattered the
se\eral constituents which, when built together, form the system of
marine insurance."' So, Marshall ^ also admits that the observa-
tion of Ulpian in the Pandects gives color for insurance having
been known among the Romans; that bottomry was a species of
insurance, and was well understood by them; and we would add
that it is generally conceded that bottomry and respondentia were
well understood by the ancients; and the American Cyclopedia
says it is possil)le that in.surance was common among merchants
centuries before it was recognized by law.^ Again, in answer to the
negative argument of silence of the Roman laws and Ronian juri.sts
on this subject, Duer,* by an exhaustive course of reasoning, and
Meredith,* in an excellent short note, show that this argument is
commerce, and it is almost impossil)lc Diet, of Dates (25tli ed. 1911) ^p.
to believe that without its protection 728; Harper's Diet, of Facts, p. 378.
the tlourishing commerce of Tyre, i^ Richards on Ins. (ed. 1892) .sec.
Carlhage, Corinth, Athens, Rhodes, 5, p. .5.
and Alexandria could have been sue- ^'^ f^ee Id. (3d ed.) sec. 9, p. 12,
cessfuUy carried on through so many where it is said: "Loans on bottomry
ages." tire of ancient date, and from this
15 Decline and Fall (Milnuiu's ed. maritime usage the earliest forms of
18(^0 ) vol. 4, 368. . insurance may have developed."
16 Watford's Ins. Guide (2d ed.) 3. ^ Hopkins' Mar. Ins. (ed. 1867) 6,
" Assur. Mag. vol. ii. 9, 10.
"Lex Mercatoria (ed. 1(322) 146. 2 T^farshall's Ins. (.jth ed.) r, et seq.
As to bottomry being conunence- ^9 American Cyclopedia, 314.
ment of marine insurance, see ^Mar- ■* Duer on Ins. (ed. 1845) 7 et seq.
tin's History of Lloyds & Marine * Eraerigon on Ins. (Meredith's ed.
Ins. pp. 3 et seq. See also Haydn's 1850) xxxiii. n. a.
11
§ 111. JOYCE OX INSURANCE
not conclusive, and that notwithstandinii; there is, says the former,
a fair presumption, and the hitter, an extreme probability, that in-
surance was known to the Eomans. That insurance is of great
antiquity is further evidenced by the works of Bacon,^ and also
by the jn-eamble to the earliest English statute on insurance, of
date 1()017 in both of which it is spoken of as a usage which
had existed "•time out of mind."
In support of some or all the propositions for the negative above
mentioned and of the claim that insurance was unknown to the
Romans, are Marshall,^ Park,» Hopkins,i° Parsons," and the Ameri-
can Cyclopedia.^^
Kichards ^^ says the practice of marine underwriting probably
started in the r2thor loth century. Hunter ^^ speaks of maritime
loans pecunia trajectitia. and says Justinian fixes in them the
maximum of interest. Ortolan ^^ defines trajectitia or nautica pe-
cunia as a loan or pledge duinng a voyage, and asserts that on ac-
count of the risk a higher rate of interest was allowed. The same
author also says the .Justinian Code hxed the rate of interest for
maritime loans,^^ and Justice ^"^ speaks of money lent to sea or
upon the sea as foenus nauticum, pecunia trajectitia, usura mari-
tima, and translat&s foenus nauticum, naval interest, and gives as
a reason that "there seems to be such a difference between the foenus
nauticum of the Rhodians and our bottomry that the latter would
not be a proper term for the other."
From an examination of the authorities and of the arguments
on both sides we are strongly inclined to the belief that there are
many traces of the existence among the Romans of the contract
of insurance, and we are more especially led to this conclusion by
reason of the learning and laborious researches of Emerigon and
the great value of his work on insurance, as also by the arguments
adduced in favor of tlie proposition by Meredith, Duer, and others,
as well as by the admissions of those of the opposite view. But we
are unal)le to determine to what degree of perfection the system
6Biif-oii"s Abnd<rment (4th vd.) ^3 i^idnirds on Ins. (ed. 1892) sec.
598, 599. O, p. 5; Id. (3rd ed.) sec. 9, p. 12.
743 p^iix. c. 12. ^* Hunter's Roman Law, 472, uote.
8 Marshall's Ins. (5th ed.) 2 et seq. ^^ Ortolan's Roman Laws (Mears'
9 Park on Ins. (4th ed.) iii. et seq. cd. 18 ^(i) 258.
10 Hoi)kins' Mar. Ins. (ed. 1867) ^^ id. 300, n. 1658.
2-1(1 I'.lustice's Treatise on the Sea (ed.
" iiJParsons' Mar. Ins. (ed. 1868) 1 1705) iii. 259, and see Id. 255.
et seq. See 1 Parsons' ^larilinie Law,
c. 1.
12 9 American Cyclopedia, 314.
12
SOUKCKS AND OiilGIN OF 1NSUKANCP:S § IV.
niay liavc attaiiiod, or to conieetare lliat it existed in anv other
tliaii a most siiii[)le form, because of the absence of positive ju'oof
thereon.
§ IV. Adoption of marine insurance in modern times. — As to
marine insurance in modern times, altliougli tliere is no certain
evidence as to the exact time and place of its adoption, nor as to the
exact period of its introduction into the several countries of Eu-
rope, nevertheless it is generally agreed that the best evidences of
its lirst recognition, or, as some writers say, of its invention, point
to Italy and the latter part of the 12th or the beginning of the
loth centuries as the place and time.^* So Emerigon.i^ speaking
of the Ordonnance de la Marine, says: "It was principally for the
contract of insurance that the franiers of the Ordonnance had re-
course to the laws of the middle ages," etc. It is supposed by
some that insurance was invented by the Jews, who found a refuge
in Italy after their exile from France by Philip 'Augustus, a. d.
1182,^° and that the merchants in northern Italy .saw its success
and extended its use.^ Justice Fark,^ however, says that if tlie
Lombards were not the inventors, they were the first who brought
the contract to perfection and introduced it to the world. But
Emerigon ^ declares that it may be that the contract only from thai
time acquired a name and particular form, but that the policy
or instrument is another matter from the contract. Hopkins ^
considers that the idea may not be rejected, but that it is con-
jectural only, and adds that it is possible the Florentines received
the germ of the system from the Jews, although insurance was in
general use in Italy, a. d. 1194, four years earlier tlian even the
date of the Florentine Republic, and Marshall * rejects the narra-
^* Marshall's Ins. (5tli ed.) 7 et ishment of the Jews as A. d. 1143.
seq.; 1 Duer on Ins. (ed. 1845) 28; 1 Historv of Commerce, 82.
1 Parsons' Mar. Ins. (ed. 18(18) 2; ^1 Diier on Ins. (ed. 1845) 33;
1) America Cyclopedia, 314. See 8 Walford's Insurance Guide (2d ed.)
Americana "Insurance; Marine," Id. 5, 6; Jacobs' Law Diet, title "In-
2 Suppl. (1911), p. G68. "■Marine in- surance.''
surance was in use at the l)('<i^inniiig ^ Park on Ins. (4lh ed.) xxvii.
of the 15th century." Havdn's Diet. ^ I^merigon on Ins. (Mt^reditli's
of Dates (25th ed.) "Insurance," p. ed. 1850) 2.
728. ■* Hopkins' Mar. Ins. (ed. 18G7) 17
"Villani, a 14th century Florentine et seq.
historian, speaks of marine insur- ^ I^tarshaH's Ins. (5th ed.) 2, 3.
ance as havinpf originated in Fvom- See also Knierigon on Ins. (Mere-
hardy in 1182." 14tli Ency. Britan- dith's ed. 1850) 10, 11: 14th Ency.
nica (11th ed.) p. 674. Briiannica (11th ed.) p. ()74 (quoted
^^ Emerigon on Ins. (Meredith's from in tirst note under this sec-
ed. 1850) xxxi. tion); Harper's Book of Facts
2° Anderson fixes the date of ban- (lf)06) "Insurance."
13
§ IV. JOYCE ON INSURANCE
tive as improbable. He further declares that the word "assecuratio"
is a barbarism adopted in Italy about the 12th or 13th century.
It also appears that the word ''policy" or "polizza" is of Italian
derivation, and signifies a note or memorandum in writing, or
note or bill of security, creating an evidence of a legal obligation,®
althougli Lord Mansfield declares that "policy" is derived from a
French word which means a promise.' The Ordonnances of AVis-
by * are said to mention the contract of marine insurance.^ As
to the date of these Ordonnances there is much doubt, one writer
jilacing it as early as 1250.^° Other.s declare that it is more an-
cient than the Consolato del Mare, which was recognized at Rome
in 1075,^^ while some refer its date to a period near 1288, and
others to a time anterior to or about 1320. ^^ ^Nlarshall,^^ however,
criticizes Cleirac's version of the laws of AVisby, which version
mentions insurance, and says Maylnes's translation does not men-
tion it. He further asserts that the earliest ordinance on the sul)-
ject of insurance is that of Barcelona, which he considers must
have been published about the year 1435, differing herein from
Emerigon,^* who fixes its date as 1484. It is also said that a ''Cham-
6 1 Duer on Ins. (ed. 1845) 29; (ed. 1852) 12, wliich asserts that the
Angell on Fire and Life Ins. (2d ed.) Spaniards cfaim paternity of the
3, sec. 4; Marshall's Ins. (5th ed.) Consolato del Mare, and that it Avas
228. proDuilgated in the Catalan tongue
"The earliest form of policy j^bout the middle of the 13th cen-
Inown is that given in the Floren- tnr\-. Meredith, however, in his in-
tine statute of 1523.'' 14th Ency. Iroduction to Emerigon's Insurance
Britannica (11th ed.) p. 674. For (ed. 1850) xiv. says that the oldest
form of "Marine policy, established copy of this Ordonnance exists in the
by statute of Florence, January 28, Catalan tongue, which is taken to be
1523," see Richards on Ins. (3rd ed.) a translation from a long lost and
p. 766. unknown original, and that the age
' Cited in Good v. Elliot, 3 Durn. of the Ordonnance ranges from a
& E. 703, 12 Eng. Rul. Cas. 389. period anterior to 1075 to 1150, or
^ "The Ordonnances made by the 1220; but Emerigon, who translated
merchants and masters of the mag- a large portion of it, says it was rec-
nificent town of Wisby, a city of ognized as law in Rome in 1075.
Sweden, in the Island of Gotland, See also next note,
formerly the most renowned fair and ^^ Emerigon on Ins. (Meredith's ed.
market in Europe, but at this day 1850) xxxv., xxxviii., 157, n. a. 160,
almost in ruins:" Emerigon on Ins. n. b, and authorities cited; 9 Ameri-
( Meredith's ed. 1850) xxxviii. See can Cyclopedia, 314; Flanders' Mari-
note 8, pp. 4, 5, § I. herein. time Law (ed. 1852) 11, 12, 21, 28; 3
^9 American Cyclopedia, 314; Kent's Comm. (13th ed.) 13; Park on
Emerigon on Ins. (Meredith's ed. Ins. (4th ed.) xxxii. et seq.; 1 Smith's
1850) xxxviii. 160, n. b; Flanders' ^Fercantile Law (Macdonell & Hum-
Maritime Law (ed. 1852) 21; Park phrev's ed. 1890) Ixviii.
on Ins. (4th ed.) xxxiii. ^^ Marshall's Ins. (5th ed.) 12 et
^•^ 9 American Cyclopedia, 314. seq.
^^ But see Reynolds' Maritime Law ^* Emerigon on Ins. (Meredith's
14
SOURCES AND ORIGIN OF INSURANCES § IV.
ber of Assurance" was established in the city of Bruges as early
as 1310,^^ Hopkins ^^ cites Bedarride, commentator on the French
Code de Commerce, as asserting that the insurance system ''takes
no place in legislature till the 14th century." While Duer " de-
clares that no certain inference arises that the existence of insur-
ance is owing to express legislation. An early document, of dale
1411, refers to insurance as an established practice, recites that a
dangerous custom of the inhabitants and citizens of Venice to in-
sure foreign vessels had been introduced, and prohibits such in-
surances.^^ Although Hopkins ^^ asserts that the attempt is fruit-
less to ascertain the exact time when insurance was first introduced
and practised in England ; although Anderson 2° and Maylnes ^
both declare that insurance was in use in England earlier than
upon the Continent, and even though Marshall ^ supposes that in-
surance must have been in use in that country long before the
middle of the l~)th century, yet we can safely say that the most
certain indications' of its first use in England point to its intro-
duction there by the Lombards or Italians from Lombardy, who
settled in London somewhere about the 13th century.^ In this
connection it is also noted that policies issued at Antwerp in 1620
refer to insurances made in Lombard Street, London.* In view
of the above facts it can be reasonably concluded that marine in-
surance came into general use as a system or contract as early as
the 12th or 13th centuries, although there is much which points
to an anterior date for its existence and use.
Passing over the growth of insurance in other foreign countries,
except to notice that the Ordonnance of Louis XIV., established
ed. 1850) xxxix.; see Park on Ins. 2 ^yjaj-j^iu^n-^ j^js. (5th ed.) 7.
(4th ed.) xxxiv. ; Griswold's P'ire Un- ^ ^^ngell on Fire and Life Ins. (2d
derwriters (ed. 1872) 10; 2 Araeri- ed.) 4, see. 4; Mayhies' Lex Meroa-
can Cyclopedia, 303, 304; Walford's toria, ed. 1622, 146; 1 Duer on Ins.
Insurance Guide, (2d ed.) 3; 1 (ed. 1845) 33; Griswold's Fire Un-
Smith's Mercantile Law (Mac-donell dcrwnters (ed. 1872) 13; Park on
& Humphrey's ed. 1890) Ixviii. Ins. (4th ed.) xlii. See Marshall's
"Richards on Ins. (ed. 1892) 6, Ins. (5th ed.) 6, 7; 1 Smith's Mer-
see. 5; Id. (3rd ed.) note to sec. 9, cantile Law (Macdonell & Humpli-
p. 12; Griswold's Fire Underwriters rey's ed. 1890) Ixviii.; Insurance Co.
(ed. 1872) 10. v. Dunham, 11 Wall. (78 U. S.) 1,
16 Hopkins' Mar. Ins. (ed. 1867) 32, 20 L. ed. 90; 13 New Inernat.
19. Ency. (1908) p. 64.
"1 Duer on Ins. (ed. 1845) 33. * Waif ord's Ins. Guide (2d ed.) 5;
18 Hopkins' Mar. Ins. (ed. 1867) GriswoWs Fire Underwriters (ed.
20. 1872) 13; see also Justice's Treatise
1^ Hopkins' Mar. Ins. (ed. 1867) on the Sea (ed. 1705) appendix and
28. forms; Angell on Fire and Life Ins.
202 History of Commerce. 109, 203. (2d ed.) sec. 4; 1 Duer on Ins. (ed.
1 Maylnes' Lex Mereatoria, 105. 1845) 33.
15
§ IV.
JOYCE OX INSURANCE
ill 1G81, contains lengthy regulations concerning insurances, as
does also the Ctuidon de la Mer, of date somewhere between 1556
and 1584,^ we find in England that in 1512 a Venetian merchant
ofi'ected insurance there on property from Candia, capital of the
island of Crete; that in 1548 and 1558 insurance is mentioned in
luigland; ® that in 1560 or 1561 Guicciardini an Italian historian,
speaks of the commerce between England and the Netherlands,
and the insuring their merchandise from losses at seaJ
The earliest English statute on insurance is the 43 Elizabeth,
chapter 12, of date 1601, by virtue of wliich commissioners con-
sisting of the judge of admiralty, the recorder of Eondon, two doc-
tors of the civil law, two common lawyei's, and eight merchants, or
any five of them, were appointed to hear and determine causes
arising upon policies of assurance in the city of Eondon. The
])0wers of these commissioners were, however, so limited and the
statute so defective, that the act 13 and 14 Car. IE, chapter 23,
was pa,ssed in 1662, enlarging their powers and otherwise attempt-
ing to remedy the defects of the prior enactment. But a judgment
of the commissioners was held no bar to an action at law ; ^ "prti-
hibitions to restrain them were issued, and tlie court fell into
disuse." ^
* Of date 1578, says Griswold :
Griswold's Fire Underwriters (ed.
1872) 9. Written not long before
the loth century, says Marshall: Mar-
shall on Ins. "(oth ed.) 15. While
Meredith fixes the date somewhere
l)etween 1556 and 1584: Emerigon
on Ins. (Meredith's ed. 1850) 157,
n. a.
For a translation on the sea laws
of the Rhodians, the Romans, of
Oleron, of the Hanse Towns, and the
sea laws of the French of 1681, see
Justice's Treatise on the Sea, also
.Maylnes, also translations with head-
notes as follows : Laws of Oleron
(47 articles) 1 Pet. Adm. (U. S.),
Append, i.-lxviii. 30 FetT Cas. Ap-
pend, pp. 1171 et seq. ; Laws of
Wishuy, 1 Pet. Adm. (U. S.)
Append. Ixvii.-xc.
pend. pp. 1189
30 Fed. Cas. Ap-
et seq.; Laws of
Hanse Towns, 1 Pet. Adm. (U. S.)
Append, xciii.-cxi. 30 Fed. Cas. Ap.
pend. pp. 1197 et seq.; Marine
Ordinance of Louis XIV. 2 Pet.
Adm. (U. S.) Append, iii., 30 Fed.
IG
Cas. Append, jip. 1203 et seq. As to
the Rhodian and other ancient sea
laws see also 24 Ency. Britannica
(11th ed.) p. 537. See also note 8,
pp. 4, 5, § I. herein.
^ Walford's Insurance Guide (ed.
1867) 5; Richards on Ins. (ed. 1892)
sec. 5; Id. (3rd ed.) sec. 7, p. 12.
U Parsons' Mar. Ins. (ed. 1868)
10; 2 Anderson's History of Com-
merce, 108, 109; Hopkuis' Mar. Ins.
(ed. 1867^ 29. See Marshall's Ins.
(5th ed.) 7,
8 Carne v. Moye, 2 Sid. 121 (1658) ;
3 RIackstone's Com. c. vi. 75 (Ham-
mond's ed. 1890) p. 102.
^1 Smith's Mercantile Law (Mac-
donell & Humphrey's ed. 1890) Ixix.:
4 Bacon's Abridgment (4th ed.) 251;
Beiidyr v. Oyle, Sty. 166, 172
(1()49) case of lite assurance. Pro-
hibition granted to court of assurance
on ground that it had jurisdiction
only on such contracts as related to
merchandise; Dalbve v. Proudfoot, 1
Show. .396 (1692). Rule to show
cause why prohibition should not be
SOURCES AND ORIGIN OF INSURANCES § IV.
The statute 6 George I., chapter 18, of date 1719, under pre-
tense of remedying certain alleged evils ari.^ing by reason of "many
particular persons," insurers, becoming bankiaipt and otherwise
failing to meet their losses, granted to two companies the monopoly
of marine insurance and lending money on bottomry. The stat-
ute did not extend to private persons, and also contained some
other exceptions. However, the statute 5 George IV., chapter 114,
of date 1824, repealed so much of the prior act as restrained other
corporations from underwriting, but did not otherwise abridge
the rights or privileges of the tw^o companies which had been en-
hirged by other enactments, especially that of the 11 George I.,
chapter 30, of date 1724, by virtue of which the right to plead the
general issue was granted.^" This privilege would, however, seem
to be impliedly abrogated, or at least so far abrogated as to be of
little or no practical value by the changes resulting in the present
system of pleading in England." The other statutes affecting
these companies were those of 7 George I., chapter 27, passed in
1720, and that of 8 'George I., chapter 15, enacted the next year
under the first of which a large proportion of the sum which each
company had agreed to pay was remitted each company, and un-
der the latter tliey were excepted from liability to certain costs
and damages. In 1746. the statute 19 George II., chapter 37, pro-
vided that any insurance made on ships or on "any goods, mer-
chandises, or effects laden, or to be laden, on board any such ship
or ships, interest or no interest, or without further proof of in-
terest than the policy, or by w^ay of gaming or w^agering, or with-
out benefit of salvage to the assurer," should be void, with certain
exceptions. This act further prohibited reassurance, unless the in-
surer be insolvent, become a bankrupt, or die. In 1864 the 27
and 28 Victoria, chapter 56, amended the last act by providing
that reassurance of sea risks might lawfully be made.^^
granted "was issued: Park on Ins. panies, formed soon after 1824;
(4th ed.) xliv., xlv., xlviii. necessity of companies being regis-
^^ See Carr v. Royal Excli. Assur. tered under companies acts, see §§
Co. 31 L. J. Q. B. '93; 1 Best & S. IV. 178, herein; 5 Earl_of Hals-
956; 17 Earl of Halsbury's Laws of bnry's Laws of Eng-. p. 61 (.
England, p. 339; 5 Id. p. 620, and The insurance statutes in England
note 17 under § VII. herein. "Fir.'^t in force in 1889 Avere: 1745-46 (E.
marine insurance, the Royal Ex- S.) 19 Geo. II. e. 37 (marine) ; 1774
change and the London Insurance," (E. S.) 14 Geo. III. c. 48 (life);
1720, Harper's Book of Facts (1906) 1774 (E. S.) 14 Geo. III. c. 78, sec.
"Insurance." 83 (fire) ; 1787-88 (E. S.) 28 Geo.
" See 5 and 6 Vict. e. 97, sec. 3; III. c. 56 (nuirine) ; 1854-55, 18 & 19
22 Earl of Halsbury's Laws of Eng- Viet. c. 119, sec. 55 (emigration) ;
land, pp. 417 ot seq. amended, 26 & 27 Vict. c. 51; 35 &
^^ As to illeqal insurance com- 36 Vict. e. 73; 36 & 37 Vict. c. 85;
Joyce Tiis. Vol. T.— 2. 17
§ IV. JOYCE ON INSURANCE
Passing from these statutory regulations in England to the ad-
judicated cases, we find in that country no reported decision prior
38 & 39 Viet. c. 66; 39 & 40 Viet. 1876, see. 7(m) (39 & 40 Viet. c.
c. 80; 18G2, 25 & 26 Viet. c. 63, see. 22); also employers liability ins.
55 (merchant shipping) ; 1866 (I.) eo.'s aet 1907 (7 Edw. VII. c. 46). 2
29 & 30 Vict. c. 42 (life); 1867, 30 Butterworth's 20th Cent. Stat. (1900-
& 31 Viet. e. 23 (inland reyenne) ; 1909) "Insurance," pp. 394, 427, 428,
3867, 30 & 31 Viet. e. 144 (assign- 430, 446, 476. Under the sayings
ment of life) ; 1868, 31 & 32 Vict. c. clause of the marine ins. act of 1906,
86 (marine) ; 1870, 33 & 34 Vict. c. the stamp aet 1891 (54 & 55 Vict.
97 (stamps); 1876, 39 & 40 Vict. c. e. 39) or reyenue acts in force; the
6 (marine); 1880 (S.) 43 & 44 Viet, companies act 1862 (25 & 26 Viet.
c. 26 (life, maiTied women); 1881, e. 89) and amendts. thereto; the pro-
44 & 45 Viet. e. 12, sec. 44 (inland visions of statutes not expressly re-
reyenue) ; 1881 (E. I.) 44 & 45 Vict, pealed; and the rules of the common
e. 41, see. 14 (tire); 1882 (E. I.) law, including the law merchant, not
45 & 46 Viet. e. 75, sec. 11 (married inconsistent, to appl}\ Id. p. 423.
women's property) ; 1884, 47 & 48 See also 15 Chitty's Stat. Eng. pp.
Vict. e. 62, sees. 8, 11 (marine life); 881 et seq.; 17 Earl of Halsbury's
1887, 50 & 51 Viet. e. 15, sees. 5, 6 Laws of England, "Insurance." "Be-
( marine) ; 1889, 52 & 53 Viet. e. 42, fore 1907 three statutes only (all now
see. 20 (accident). See also act 1892, repealed) relating to life insurance
55 Viet. e. 39. From Chronological companies were in force, most of
Table and Index, Statutes (11th ed.) these provisions are re-enacted with
title "Insurance." That these stat- more or less modifieation by the as-
utes were not greatly changed in suranee companies act of 1909." Id.
1895 appears from Chronological p. 513. See note 18, § IVa. herein.
Table and Index of Statutes (13th As to marine insurance aet of 1906,
ed.) covering the years 1235-1895. embodying some but not all the legal
In 1906 the marine insurance act of principles of marine insurance, see
that date (6 Edw. VII. c. 41) in 17 Earl of Halsbury-'s Laws of Eng.
effect January 1, 1907, repealed the p. 335.
following acts: 19 Geo. II. c. 37 The nssiironce companies act 1909
(whole aet); 28 Geo. IIL e. 56 (7 Edw. VII. e. 49) entitled "An
(whole act so far as relates to mar- Aet to Consolidate and Amend and
ine insurance) and 31 & 32 Viet. e. Exterfd to Other Companies Carry-
86 (whole act — the policies of marine ing on Assurance or Insurance Busi-
assurance aet 1868). For other ness the Law Relating to Life Assur-
statutes see: employers liability ins. anee Companies, and for Other Pur-
company's act 1907 (7 Edw. VII. e. poses Connected Therewith,'' applies
46) ; marine ins. (gambling policy) to all companies, coi-porate or uniu-
act 1909 (9 Edw. VII. e. 12) and corporate, not being registered under
the assurance companies aet 1909 (9 the acts relating to friendly societies
Edw. VII. e. 49) in effect July 1, or to trade unions, who carry on
1910, except see. 36, which went into within the United Kingdom assur-
effect on passage of the act. This anee business of all or any of the
last statute repealed the following life following classes: Life assurance
assurance company's acts: 33 & 34 business, including granting of an-
Viet. e. 61 (1870); 34 & 35 Vict. c. unities; fire insurance business; ae-
58 (1871); 35 & 36 Vict. c. 41 eident insurance business; employers'
(1872). Said last act of 1909 also liability insurance business; and bond
repealed the trade union amdt. act investment business; subject as re-
18
SOURCES AND ORIGIN OF INSURANCES § IVa.
to 1588,^3 ai-jj the number of cases down to the middle of the 18th
century are com]>aratively few.^*
We have mentioned the earliest grant to insurance companies in
England, and it may be stated here that in the United Sfates it
appears that a marine insurance office, which did underwriting un-
der Lloyds system, was established in New York in 1754; and
that in 1794 the Insurance Company of North America and the
Insurance Company of the State of Pennsylvania were the first
corporations that undertook marine underwriting.^** In New York
the first general statute in relation to marine insurance was passed
in 1849.""
§ IVa. Marine insurance continued: origin of Lloyds. — A con-
sideration of the origin of marine insurance would not be complete
without a mention of Lloyds, which may be referred in the be-
ginning to the date 1688, in which year appears the earliest notice
thereof. In 1692 Lloyd removed his cofteehouse to Abchurch lane,
London, Avhich became the resort for underwriters and merchants,^*
B
ness
peets any class of assurance busi- Cavalicant v. Maynard, in 1550, Id.
less to the special provisions of this p. Ixxiii. The case of Emerson v.
act relating to that class. Tiie act Sallanova, which was a claim upon
(with exception of sec. 36 which an indemnity given against the with-
came into operation on passage of drawal of a safe conduct by the King
act) went into operation July 1st, of France 1545, is thus briefly mtu-
1910. See 5 Earl of Halsbury's tioned in 11 Id. p. Ixvi. as having
Laws of Eng. pp. 620 et seq.; 2 been litigated in admiralty, altliougb
Butterworth' 20th Cent. Stat. p. 430. not elsewliere mentioned in said vol-
^'4 Inst. 142; cited in Dowdale's umes.
ease. Coke's Rep., pt. 6, 46, 48, Id. "See Park on Ins. (4th ed.) xliii.
3 Frazer, 351. Crane v. Bell, 7 "« 13 New Internat. Ency. (1908)
Coke's Inst, (part 4) cap. 22, p. p. 64.
139, sometimes cited to this point as As to legislation, statistics, etc.,
of an earlier date, Avas a case where, marine insurance (1912) see New
according to Coke, a promise was International Year Book, pp. 333, et
made at Dartmoutli that a ship seq.; Id. (1911) pp. 360 et seq.; Id.
should pass safely without taking and (1910_) pp. 376 et seq.; Id. (1909)
surprising, etc., which ship was after pp. 3/4, 375: Id. (1908) pp. 3G1 et
taken by the Spaniards super altum se(|.; Id. (1907) p. 400 et seq.; 2
mare: Held, not determinable in ad- Suppl. Americana (1911) "Insurance
miralty for that albeit the taking was IMarine," p. 668. As to history of
upon the high seas, and yet the prom- nuu'ine, see 8 Americana (1905)
ise was made u|)on the land and the "Insurance-^Marine." As to increase
action was at common law. This case of marine insurance in United States
is, however, incorrectly reported ex- from 1880 to 1889, see Harper's Book
cept as to the words ""that the prom- of Facts (1906) "Insurance."
ise was made ui^on land and within "" N. Y. Laws 1849, c. 308, p. 441.
the body of a county." 6 Pul)lica- For wording of this act, see note at
tions of Selden's Soc, y>\). Ixxviii. ; end of § 5 herein,
see also Id. pp. 129, 229. Tlie first ^^ ]\f j^^.tin's History of Lloyds &
libel upon a policy of insurance is Marine Ins. p. 57; 16 Ency. Bri-
19
§ IVa
JOYCE ON INSURANCE
marine insurance having been carried on for a long time prior
thereto by individual merehants,^^ in Lombard street. The name
"Lloyds," therefore, was identified with the underwriters and in-
surance, and so became known throughout tlie insurance world. ^'''
The name had become so attached to the house as a resort of un-
derwriters that it clung to them when they removed in 1774 to the
Royal Exchange, where, with the exception of a period from 1838
to 1844, they permanently located an office for carrying on their
business. This society was incorporated by an act passed in 1871.^*
tannica (11th ed.) "Lloj'ds," pp.833, Britannioa, 180; Hopkins' Mar. In.«;.
834. See also 11 Id. "Insurance," (ed. I8(i7) ;i2; Reynolds' Life Ins.
subhead "Lloyds," p. 661, as to the (ed. 1853) 3. But the statute of
practice of insurance at Lloyds be- 1719, 6 George I., chapter IS, would
inj? the earliest which was successful warrant the inference that corpora-
as business, etc. See also 11 New tions had carried on insurance as a
Internat. Encv. (1903) "Lloyds," p. business Ions: before its date, althouri:h
398, 12 Id. (1908) "Lloyds,"' p. 368. Watford's Insurance Guide (2d ed. )
"In the time of William HI. and 10, speaks of the two companies a-
of Queen Anne, Lloyd's Coffeeliouse, the first marine corporations. See
at the corner of Abchurch lane, in further on first point §§ 325 et scq.
Lombard street, became the celebrat- herein.
ed resort of seafaring men and those ^^ As to Lloyds; competition and
that did business with them. There, conflict* within England, ending in
and subsequently in Po]je's Head Al- 1720 in compromise and monopoly,
lev, and ultimately on the west side see 6 Insurance Times (Ncav York
of the old Royaf Exchange, at this 1873) pp. 201-203.
coffeehouse congregated the under- ^^34 Vict. c. 21; see also schedule
writers of London. . . . Llovd's of act for fundamental rules of so-
underwriters now meet and caiTy on
their business in spacious rooms over
the Royal Exchange." 1 Arnould on
Mar. Ins. (9th ed. Hart & Simev)
.sec. 77, p. 101; Id. (6th ed. Mac-
hichlan's) pp. 148 et seq.
"The Austrian Llovds, an asocia-
ciety.
For many years prior to its act of
incorporation in 1871, Lloyds had
existed as a voluntary incorporation
in the nature of a club consisting of
underwriters, insurance brokers, mer-
chants, and others, for the purpose
tion for general commercial and in- of effecting marine insurance and for
dustrial purposes, was founded at
Trieste, by Baron Bruck, in 1833.
It has regular connnunication be-
tween Trieste and the Levant,- by
means of a fleet of steamers carrying
other purposes. In 1863, under the
bA'-laws then in force, Lloyds was a
voluntary association, governed by
certain by-laws, imder wliich a per-
son once admitted a member could
the mails, and publishes a journal." not be excluded from membership ex-
ITavdn's Diet, of Dates (25th ed.)
p. 835, "Austrian Llovd's." See 11
New Internat. Encv. (1903) p. 398;
12 Id. (1908) p. 368.
^^ As to insurance being carried on
by individuals, see Richards on Ins.
(ed. 1892) sec. 5, pp. 5, 7; Id. (3d
ed.) sec. 9; Griswold's Fire Under-
writers (ed. 1872) 11, 35; 13 Enc}^
cept in the case of his bankruptcy or
insolvency. The association consist-
ed of (1) underwriting members (2)
nonunderwriting members, (3) an-
nual subscribers and (4) none but
merchants, shipowners, 1)anker3,
traders, underwriters, and insurance
agents were eligible as members of
Llovds or annual subscribers. The
20
SOURCES AND ORIGIN OF INSURANCES § IVa
Their affair.'^ are managed by a committee appointed from their
members, wjiieli appoints agents who are located in all the prin-
cipal ports of the world. It is the duty of these agents to keep
the society constantly informed of all matters of importance re-
lating to the departure and arrival of ships, losses, casualties, and
general shipping and insurance information/^ and these accounts
practice of the underwriting mem- Lloyds v. Harper [1880] 16 Ch. D.
hers was to underwrite policies of 290, 1 Eng. Rul. Cas. 686, C. A.; 17
marine insurance for the benetit of Earl of Halsbury's Laws of England,
various owners of property, both p. 339, note i.
members of tlie association and out- "Lloyds is supported by subscrib-
siders, but the policies with out- ers who now pay annually 5£ 5s."
siders could only be et¥ected Haydn's Diet, of Dates (25th ed.)
through the agency of insurance p. 835.
brokers who were either members of "The members are of two classes,
or subscribers to the association. The underwriting members who pay an
association as such incurred no lia- entrance fee of £100 and are required
bility on the policies underwritten by to deposit securities to the value of
its members. In 1871 (34 & 35 Vict. £5,000 to £10,000 as a guaranty of
c. xxi.; entitled "An Act for Incor- their engagements, and nonunder-
porating the IMembers of the Estab- writing members who pay a fee of
lishment or Society Formerly Held 12 guineas. Subscribers pay an an-
at Lloyds Coffee House, in the Boyal nual subscription of 5 guineas, but
Exchafige, in the City of London for no entrance fee, and have no voice in
the Etfecting of Marine Insurance, the management of the affairs of the
and Generally Known as Lloyds and association." 11 New Internat.
for other purposes"). The society Ency. (ed. 1903) "Lloyds," p. 308;
was incorporated by act of Parlia- 12 Id. (1908) "Lloyds" p. 368.
ment, all the rights of the committee 19 Lloyds Agents — "The associa-
on behalf of the members being tion appoints agents in all the prin-
vested by the act in the corporation, cipal parts of the world, whose duty
Llovds V. Harper (1880) 16 Ch. D. is to forward regularly to Lloyds ae-
290', 1 Eng. Rul. Cas. 686, C. A. counts of all departures from and ar-
lu 1871 an act was passed "grant- rivals at their ports, as well as of
ing to Lloyds all the rights and priv- all losses and casualties and general
ileges of "a corporation sanctioned information relating to shipping and
by Parliament." 16 Ency. Britan- insurance, but these agents are ap-
nica (11th ed.) "Lloyds," pp. 833, pointed hy tJie corporation of Lloyds,
8.34. See also 14 Id. "Insurance" and are not agents of the underwrit-
subhead "Lloyds," p. 661; 11 New ers (Wilson v. Salamandra Assur-
Tnternatl. Encv. (1903) p. 398, 12 ance Co. of St. Petersburg [1903] 8
Id. (1908) p. 3G8. Com. Cas. 129)" 88 L. T. 96, 9 Asp.
"The peculiar value of such a pol- M. C. 370 ; Id. N. S. 370. 17 Earl
icy" (Lloyds) lies in the fact that of Halsbury's Laws of England, p.
great care is exercised in the election 339, note i.
of members of the society, and that "By the derelict vessels (report)
each member is required on election act 1896, masters of British ships are
to deposit securities of the value of required to give notice to 'Lloyds
at least £5,000 to cover his engage- agents of derelict vessels, which in-
ments." Arnould on Mar. Ins. (9th formation is published by Lloyds."
ed Hart & Simey) sec. 10, p. 17. See 16 Ency. Britannica (11th ed.)
21
§ IVa JOYCE ON INSURANCE
are forwarded by the agents and posted ujd in Lloj^d's rooms.^°
The information, thus daily received and posted, is methodically
compiled and at once published in a newspaper known as the
"Shipping and Mercantile Gazette," which incorporates therein
what was formerly "Lloyds List," and is easily available by means
of numbered columns and indexed volumes.-' As to the subjects of
insurance undertaken at Lloyd's, it is asserted by eminent authority
of recent date that there is scarcely any risk that cannot be insured
"Lloyds," pp. 833, 834. See also 14 shipping" 9 Americana (1904)
Id. "Insurance," subhead "Lloyds," "Llovds;" see also 11 New Internat.
p. 661. Ency. (ed. 1903) p. 398; 12 Id.
20 These rooms at Lloyds over the (1908) "Lloyds," p. 368.
Royal Exchange are: the underwrit- "Lloyds Register of British and
ing rooms where the "slips" are sub- Foreign Shipping is a society whose
mitted; an apartment where the primary object is the classification of
latest telegrams are exhibited for the vessels. It is managed by a commit-
information of members, and a large tee composed of merchants, shipown-
reading room containing tabulated ers, and underwriters, elected at the
and alphabetically arranged vol- principal ports of the country,
uraes of information. 1 Arnould on . . . Lloyds Register maintains a
Mar. Ins. (9th ed. Hart & Simey) large and highly skilled staff of sur-
sec. 77, p. 102. veyors at the principal ports of every
"The books kept here contain an country." 7 Nelson's Ency. (1907
account of the arrival and sailing of "Loose Leaf" ed.) p. 362. See also
vessels, and are remarkable for their 11 New Internat. Ency. (1903)
early intelligence of maritime af- "Lloyds," p. 398.
fairs," Haydn's Diet, of Dates (25th "A register of ships began about
ed.) p. 835. 1764; and the terms 'A. I.' etc. were
^ Arnould on Mar*. Ins. (9th ed. used about 1775. Two societies (un-
Hart & Simey) sec. 77, p. 102. derwriters and merchants) were
As to "Llovds Written Lists," imited and one register issued Oct.
"Lloyds Books,'"' and "Lloyds Print- 1834. Jubilee celebrated, Oct. 31,
ed Lists," see 1 Parsons' Mar. Ins. 1884. . . . Lloyds have many
(ed. 1868) 12; Hopkins' Mar. Ins. signalling stations. First annual is-
(ed. 1867) 33; Richards on Ins. sue of their 'Universal Shipping
(ed. 1892) sec. 6; Griswold's Fire Register' published here May, 1886."
Undenvriters (ed. 1872) 14, et seq., Haydn's Diet, of Dates (25th ed.)
10; 1 Arnould on Mar. Ins. (Per- p. 835. "Earliest copv extant" is
kins' ed. 1850) 83, 84, *82. *83, sec. dated 1761-65-66, 11 New Internat.
50; Id. (Maclachlan's ed. 1887) 148- Ency. (1903) "Lloyds," p. .398. See
51; 14 Enev. Britannica (9th ed.) also Id. as to classification of ves-
741, title "Llovds" Century Diet. sets. See 12 Id. (1908) "Lloyds," p.
3490, "Llovds." 368.
As to "Lloyds News," "Lloyds "By Lloyds signal station act 1888.
Lists," and "Lloyds Registry of powers were conferred on Lloyds to
Shipping," their origin and history, establish signal stations with tele-
see Martin's Ilistorv of Llovds & graphic communications" 16 Enev.
Marine Ins. pp. 76, 104-120', 324- Britannica (11th ed.) Lloyds," pp.
354. 833, 834. See also 14 Id. "Insur-
"Lloyds Registry is an independent ance,'' subhead "Lloyds," p. 661.
association for the classification of
SOURCES AND ORIGIN OF INSURANCES §§ IVb, IVe
against by that corporation, and that ahiiost all insurances in the
United Kingdom are framed on Lloyd's policy.^
§ IVb. Marine insurance: summary. — We have traced, so far as
the main facts enable us, the origin of marine insurance, as well
as its adoption in modern times down to the date of the earliest
reported English case, also to that of the earliest English statute,
mentioned, in addition, the statutes in England, down to the pres-
ent time, relating to the subject, together with a brief statement of
some other facts bearing upon its growth in that country, and have
also considered the origin and history of Lloyds in England. From
the dates whicli we have given the sources of the law are easier of
access to those who wish to recur to principles, and will be referred
to hereafter, as far as necessary in treating of the law governing
the contract.
§ IVc. Lloyds associations in United States: American Lloyds. —
As we have before stated, a marine insurance oflice was established
in the United States in 1754 in New York, which did underwrit-
ing under Lloyds system.^ A case was also decided in South Caro-
lina in 1802, upon a policy issued in 1777 by the South Carolina
Insurance Company, which was formed by several subscribers or
members upon lines somewhat similar to the plan of some of the
later Lloyds associations or underwriters in the United States.
And in a case decided in New York, in 1806, the United
Insurance Company were insurers on the cargo and freight,
and S. and twenty-two others were separate underwriters on
the ship under a policy issued in 1798.* It was not. how-
ever, until the latter part of the nineteenth century that asso-
ciations designated as "American Lloyds" and also by various
names using the word "Lloyds" as a part thereof, organized in any
number in this country. But for a number of years thereafter
they were before the courts principally, though not exclusively, up-
on the question of their right to do business which was opposed
under state insurance laws. As long as tliey were not under super-
vision or control of the insurance departments they flourished, and
this seems to have been especially true in New York, where they
were expressly exempted for a time, and were so favored that they
were in 1892 granted certain privileges.^
^ 17 Earl of Halsbury's Laws of * The general provisions of the
England, pp. 340, r)12; examine 1-t New York Insurance Laws of 1892
Eney. Britannica (11th ed.) 661. ( fn.s. Laws N. Y. 1892, c. 690, sec. 57.
^§ lY., at end of section. Approved May 18, 1892. In effect
* United Ins. Co. v. Scott, 1 Johns. Oct. 1. 1892) were expressly made
(N. Y.) 106. not applicable "to any individual or
23
§ IVc JOYCE ON INSURANCE
A case was, however, determined in 1898 in that state, wherein
the protection afforded by the statute of 1892 was denied a Lloyds
association. It was as follows: Certain individuals had, about
six months prior to October 1, 1892, organized thirty different
Lloyds associations identical in form, except that the names dif-
fered, with one attorney and a general manager for the whole.
The original organization was not made for the bona fide purpose
of conducting the insurance business through the thirty different
organizations, but for the purposes of sale to purchasers to be
found. Such original associators were not actually engaged in
business, and were not within the protection of the statute, and an
assignee or transferee, in 1894, of the rights of the original associa-
tors, said original associators having then resigned and so sus-
pended business, was held to take no better right than the assignor,
and so was unlawfully engaged in transacting the business of in-
surance, and was not within the statutory exception.^ This case
was cited in a decision rendered in 1910, where four individuals
pai'tnership or association of under- death, retirement, or withdrawal of
writers known as Lloyds, or as in- any such underwriters, or by the ad-
dividual underwriters which, at the mission of others to said assoeia-
time of the passage of this chapter, is tion' " Laws 1892, c. 690, 57, Laws
lawfully engaged in the business of 1894, c. 684. The privileges con-
insurance within this state, and not fei-red upon such Lloyds comijanies,
required by law to report to the su- and not before especially referred
perintendent of insurance or the in- to, are described as consisting 'of an
suranee department, or subject to exemption from the conditions and
their supervision or examination, nor prohibitions prescribed and provided
to any such association, notwith- bj^ section 54 of said chapter 690,
standing any change hereafter made Laws 1892, whereby they may trans-
therein by the death, retirement, or act the business of fire insurance and
withdrawal of any such underwriters, issue policies in the state of New
or by the admission of others to such York without being possessed of the
association." capital required of a lire insurance
The N. Y. Laws of 1894, c. 684, corporation doing biLsiness in this
see. 57, changed the words in the law state, and invested in the same man-
of 1892; "at the time of the passage ner, and without a certificate to the
of this chapter" is lawfully to the effect that they have complied with
words: "on the first day of October, all the provisions which a fire insur-
1892 was" lawfully. This law went ance corporation doing business in
into effect IMay 12, 1894. this state is required to observe, and
Lloyds associations were so favored that the business of insurance speci-
in New York "that those which on fled therein mav be safelv intrusted
October 1, 1892, were lawfully en- to them.'" Balli v. White (1897)
gaged in the business of insurance 47 N. Y. Supp. 197, 203, 21 Misc.
were granted certain privileges, and 285, 292, per McAdam, J.
exempted from supervision by the ^ People v. Loew, 52 N. Y. Supp.
insurance department, and not re- 799, 23 Misc. 574, 44 N. Y. Supp. 42,
quired to report thereto, 'notwith- 19 Misc. 248, 26 Civ. Proc. 132.
standing anv change made therein by
"24
SOURCES AND ORIGIN OF INSURANCES § IVc
claimed "to own a sort of charter or franchise to do business as
individual underwriters, under the name" of the New York &
New En[!,land Underwriters at Lloyds of New York City, ''which
they used as merchandise, granting rights to do business there-
under to successive individuals, preferably, apparently, those who
are financially irresponsible. These four so-called owners do not
underwrite themselves, and in the contract with or licenses to
others carefully protect themselves against any liability upon in-
surance losses." '
It is noteworthy, that Lloyds rapidly decreased in numbers in
that state from one hundred and twenty-five companies in 1895 to
seven companies in 1904 oAving to their having been made sub-
ject, to a certain extent, to the insurance department.^
■^ In re Hotcbkiss, 123 N. Y. Supp. of underwriters to file annually a
511, 138 App. Div. 877, per Scott, J. verified statement of its affairs with
8 See 7 New Internat. Eney. (1908) the superintendent of insurance,
p. 640, where it is also said tliat ''dur- N. Y. Laws 1905, c. 566 (in effect
ing the last few years, however, May 19, 1905), further amended said
Lloyds have been appearing in con- insurance law by inserting therein
siderable numbers under the lax pro- two new sections, requiring (sec. 138)
visions of the lUinois insurance law." every such individual or partnership,
See also 10 Id. p. 685. etc., to create and maintain a reserve
On restriction on insurance by un- fund equal to its liabilities. It also
incorporated associations or individ- (sec. 139) contained provisions as to
uals; Lloyds .associations, see note in change of name; as to similar names;
25 L.R.A. 238. establishment of branches under dif-
Advance in state supervision over ferent names; changes in subscribing
Llot/ds in New York, since the above underwriters or their attorneys in
favoring and exempting statutes of fact; false or fraudulent reports;
1892 and 1894 appears from the fol- right of attorney general to enjoin ;
lowing enactments : also certain exceptions as to attorneys
N. Y. Laws 1902, e. 297 (in effect in fact or agents; failure to comply
April 2, 1902), amended the preced- Avith requirements a misdemeanor,
ing laws by requiring every such as- These two new sections (sees. 138,
sociation 'lawfully engaged in the 139) were made applicable (sec.
business of insurance in that state 162) to every individual or partnev-
on April 1, 1902, to file on Sept. 1, ship or association of individuals
1902, with Uie superintendent of in- known as Lloyds or as individual
surance a verified copy of its undenvriters then authoiazed to do
original articles of association or eo- marine insurance business in the state
partnership agreement, with any as defined (sec. loO) and to every
'amendments, staling where its princi- agent or attorney in fact for the
pal office was located, the kinds of same.
business in which engaged, and the N. Y. Insurance Law, Consol. Laws
name or names under which it was or 1909, c. 33, sec. 57 (as amended by
had been doing business. Laws 1909, c. 240, sec. 48, in effect
N. Y. Laws 1903, c. 471 (in effect April 22, 1909), contains the same
May 7, 1903), further amended said provision or exemption as the above
insurance laws by requiring such in- law of 1892, as amended by the Law
dividual partnership or association of 1894, and also requires such asso-
25
§ IVc JOYCE OX INSURANCE
In Alabama under the Civil Code of 1907, Lloyds are permitted
to transact insurance business, other than life, upon the same terms
and conditions as other companies regularly organized, but if they
are without paid up cash capital they are required to make a de-
|)o.sit.^ In Louisiana, under the statute of 1902, a deposit, etc., is
required of Lloyds associations.^" In Maine under the statute of
elation to file annually a verified (e) as to reserve fund; (f) as to in-
statemeut of its affairs with the su- vestment of assets; (g) requiring
lierintendent of insurance. Sees. 142. each underwriter to be worth in his
143, 162, are same as sees. 138, own right not less than $20,000 above
139, 162, of above Laws of 1005. all liabilities. Provisions were also
N. Y. Laws 1910, c. 638 (in effect made as to change of location of
June 24, 1910), amends c. 33, Laws principal office; as to change in un-
1909 (constituting Consol. Laws derwriters, inter-insurers, or at-
1909, e. 28), by adding new article tornej-s in fact; and as to deposits
(art. 10, Lloyds and Inter-insurers) and liability in reports. See. 303
which provides (sec. 300) that not- specifies what other sections of the
withstanding sec. 54, c. 28, Consol. chapter are applicable.
Laws, 1909, '"persons, partnerships, N. Y. Laws 1911, c. 502 (in effect
()r associations which on Oct. 1, 1892, July 1, 1911) sec. 300, changed tlic
were lawfully and actually engaged clause in the Law of 1910 as to ob-
in the business of insurers as Lloyds taining the certificate, under sec. 301
or inter-insurers or individual un- thereof, to obtaining a license under
derwriters, may, after Jan. 1, 1911, sees. 304, 305, of Laws 1911, Laws
continue to do the business of in- 1911 only amended sec. 302 of Laws
surers in this state, provided" they of 1910, by adding the word<
then became authorized to engage in "licensed under the preceding section''
the business of insurance as Lloyds to the headline. It also added the
or inter-insurers. Agents, subagents, words, "who claim that they were
and representatives of such persons, lawfully and actually doing the busi-
etc., were included. Noncompliance ness bt insurance in this state as
with provisions of article constituted Lloyds or inter-insurers on October
a misdemeanor. Sec. 301 required 1, 1892." Otherwise provisions of
(a) an application for a certificate; Law of 1911, sec. 302, were same as
(b) a verified statement of condi- Laws 1910, sec. 302.- Laws 1911, e.
tion; (c) an agreement providing for 502, added two new .sections; sec.
personal service of process; (d) 304 being general provisions affect-
"such other matters as the superin- ing Lloyds and inter-insurance as-
tendent of insurance may prescribe." sociations organized after July 1,
An examination of the financial con- ]911, and sec. 305 being provi-
dition of such persons, etc., and the sions for the admission of Lloyds and
granting of a certificate of authority inter-insurers associations domiciled
was also provided for. Sec. 302 in other states. Said Law of 1911
contained provisions (a) as to filing also provided for the forwarding of
original verified certificate of articles process by the superintendent of in-
of association, copartnership agree- surance.
ment, or inter-insurance contract, ^ 2 Ala. Code (Civ.) 1907, sec. 4568
with amendments; (b) as to chang- (2592) Id. 4563 (2587).
ing name; (e) as to establishing i" Wolff's Const. & Rev. Laws La.
branches; (d) as to similar names; 1904, p. 884 (acts 112, 1902, p. 181.
26
SOURCES AND ORIGIN OF INSURANCES § IVc
1903,1^ Lloyd's associations, for the purpose of transacting marine
insurance business, were granted all rights, powers, privileges, etc.,
under the Massachusetts laws ^^ these associations are authorized
to transact insurance business, other than life. The ]Minne-
sota Statute also contains provisions as to Lloyd's associations." In
Tennessee, in 1896, companies on Lloyd's plan, ^'whereby each as-
sociate underwriter becomes liable for a proportionate part of the
whole amount insured by policy/' were authorized to do business,
but were required to make deposit ''where they have not an actual
paid-up cash capital." ^*
In Mississippi in 1910 a law was enacted entitled "An Act to
Raise Revenue and to More Clearly Define what are Insurance
Companies in This State and to Place a Tax and Bring a Class of
Companies, Associations, and Organizations under Supervision^ of
the Insurance Department, Heretofore Claiming Exernption," ^^
and it included within fire and marine insurance companies or cor-
porations "all corporations, partnerships, individuals, associations,
or organizations, known as Lloyds, engaged in placing, writing, or
soliciting any and all kinds of fire and marine insurance." Said
statute of 1910 authorized such corporations, etc., known as Lloyds,
to solicit, sign, issue, deliver, and to execute policies of insurance,
contracts, and guaranties against loss by fire, water, lightning, or
tornado, etc. It also made it unlawful for any corporation, part-
nership, individual association, known as Lloyds, to solicit insur-
ance, make such contracts and guarantee against loss by fire, water,
lightning or tornado: rate or classify- risks, etc., except upon au-
thority of the commissioner and compliance with the law.^^
Another reason given for the early failure of so many of these
associations was that it was not due to the practice of individual
underwriting in itself, but that the ostensible reserve for the pro-
tection of the policy holders was usually of little or no value." And
^^ P. 471 e. 49, sec. 1. "luter-insurance contracts to be re-
12 Rev. Laws 1902, 1908, p. 1211 ported under oath once a year— Tax-
(R. L. 118, sec. 86), sec. 91, cited in ation of same."
Opinion of the Justices, 190 ]\Iass. ^^ See State v. Alley, 96 Miss. 720,
603, 85 N. E. .545, upon point of ex- 51 So. 402, 39 Ins. L. J. 629. In
cise tax against "Individuals" and "a this case an organization of inter-in-
person" as well as corporations. snrcrs claimed that they were not do-
13 Minn. Rev. Stat. Suppl. 1909, ing insurance business in the state,
Annot. p. 592, sec. (1647—) 1 (Minn, and that they were not an "insurance
Laws 1913, c. 534, sees. 1-4, pp. 772- company, corporation, partnership,
3.) association of individuals," within
1* Shannon's Annot. Code Laws Code 1906, sec. 2559. See § 336a
1896 (p. 766), sec. 3298. herein.
15 Chap. 103, Laws 1910, p. 76, "10 New Intemat. Ency. (1908)
amending Code 1900, cliap. 69. jp. 685.
27
§ IVd JOYCE ON INSURANCE
there would seem to be no reason why such practice of individual
underwriting shoidd not be successful, even though subject to law-
ful state supervision intended to protect the insured.
The plan of insurance or the system upon which these associa-
tions carry on their business, and the distinction between the Eng-
lish Lloyds and the Lloyds in the United States, will be herein-
after fully considered.
§ IVd. Inter-insurance: reciprocal insurance: inter-indemnity
contracts. — The contract of inter-insurance involved in a Missis-
sippi cafie, decided in 1910, is declared to be the first of its kind ever
reviewed by any court.^*
In Missouri a case was decided in 1912, in w^hich it appeared
that in 1906 certain copartnership firms and individuals organized,
under the name of "The Printers' and Publishers' Reciprocal Un-
derwriters at Printers' Exchange," for the purpose of insuring
each other's business establishments. One hundred and seven dif-
ferent concerns in different cities became members of the associa-
tion.^'
In California a statute was passed in 1911 entitled "An Act De-
fining Certain Classes of Contracts for the Exchange of Indemnity,
Prescribing Regulations Thereof, and Fixing a License Fee," and
it provided that "individuals, partnerships, or corporations may ex-
change reciprocal or inter-insurance contracts providing indemnity
among each other from fire loss or from other damage to their-
property in accordance with" the provisions of the act.^°
" State V. Alley, 96 Miss. 720, 51 Mo. Laws 1913, p. 382 ; Mo. Laws
So. 462, 39 Ins. L. J. 629, per Mayes, 1915, p. 321.
J. As to inter-insurance: It.s legal 2° Cal. Stat. 1911, c. 669 (in effect
aspects and business possibilities, see July 1, 1911), Stat. & Amdts. to
Article by Mr. Robert J. Brennen, in Codes of Cal. 1911, p. 1279; Id. (ex-
58 Cent. "Law Jour. pp. 323-329. tra session 1911, p. Ill) chap. 22
"Isaac H. Blanchard Co. v. (approved Dec. 24, 1911). Plans
Hamblin, 162 Mo. App. 242, 144 S. known as reciprocal or inter-insur-
W. 880. ^nce or interindemnity contracts be-
On contracts bv which individuals ^ween tirms and corporations not af-
or firms undertake to indemnify each ^^(^^^(^ by Cal. Stat. 1913, c. 177, sec.
other as insurance, see note in 47 ' P' ' ^;,.?^*^' ^' ?i-,^^?TV
LRA (NS) "^97 '^'' ^ 1909, p. 311 (Herrons
' Inter-indemnity contracts not to ^^^jf'' ^f^^'^^''':^^^^^' ^,^^^^^^
... , • • , . . ,,. 1910, Lit. o8, c. 17, sec. 17). does not
constitute insurance business m Mis- „ i (u i 1" • i.
. rpu- 1 • ^ ^PPly to purely co-operative inter-
soun This covers making of con- i^Surance and reciprocal exchanges
tracts between individuals, firms, or ^^^.^ed on by members thereof solely
corporations providing indemnity for the protection of their own prop-
among each other from casualty or erty, and not for profit."
other contingency, or from fire loss tnter-insurance : See Laws Me.
or other damage to their own prop- 1913, p. 172, c. 135; Laws Minn,
erty. Mo. Laws 1911, p. 301. See 1913, p. 671, c. 464.
28
SOURCES AND ORIGIN OF INSURANCES § V.
§ V. Origin of mutual insurance system. — The mutual insurance
system is claimed to be of very ancient origin. This claim is based
upon the assumption that there is an analogy between it and the
Friendly Societies of England; that bet\Yeen the latter and the
guilds there is a great similarity, and, to go one step farther, the ori-
gin of guilds is attempted to be traced to those artificial alliances or
clubs which existed in ancient times, in China, among the Teutons,
the German tribes of Scandinavia, the ancient Greeks and Romans,
and the early Christians, for mutual protection and assistance in
various exigencies, and for other purposes. The eflort, however, to
discover the origin of guilds, as well as of the word ''guild" itself,
has been productive so far only of disagreement.^ It is not neces.^ary.
though, to inquire here as to the origin of guilds or of the word
''guild." It is sufficient that the essence of the guild was mutual
protection or benefit, social, political, or pecuniary. We may also
note tliat guilds are said to be mentioned in the laws of Ina and
Alfred.2 While Brentano^ speaks of the guilds shown by the Judi-
cia Civitatis Lundoniae, the statutes of the London guilds reduced
to writing in King Athelstan's time,* and says one might call these
guilds "assurance companies against theft," owing to their regula-
tions against violence, especially of theft; and guilds have also
been defined as "the nmtual assurance societies of the poorer
classes." * The Fortnightly Review^ states that the "Fraternitie,"
or "Bretherede," of "St. James at Garlekhith, London," begun in
1 Lambert's Two Thousand Years ^ gj-pntano on Guilds, etc. 11.
of Guild Life, and see bibliographic * 925 a. d. to 941 a. d.
note appended thereto; 11 Encv. ^ Baton's Benefit Societies and Life
Britannica, 259, "Guilds; " 9 Id. 780, Ins. (ed. 1888) sec. 10; Id. (3rd ed.)
"Friendlv Societies ; " 12 Id. ( 11th sec. 10.
ed.) "Gilds;" 11 Id. (11th ed.) As to Saxon Guilds, see Irancis
"Friendly Societies," p. 217. Brent- Annals of Life Assurance (ed. 1853)
ano on Guilds and Trades Unions; y.p. 27 et seq. See also chapters on
Old Guilds and New Friendlv Trades Medieval Guilds of England (188/)
Societies, Fortnightly Review, N. pp. 113 et sec].; Jack's Introduction
S Oct. 1869, p. 391; Workmen's Ben- to History of Life Assurance (ed.
efit Societies. Quarterly Review, Oct. 1912) sub-title "The Gild System,"
18(54, p. 318; Bacon's' Benctit Socio- pp. 15-149.
ties and Life Ins. (ed. 1888) sec. 10, As to Guild's Sick Clubs under
Id. (.'?rd ed. 19041 .^^ecs. (5, 10; sec German laws prior to 1911, see
Cvclopedia of Fraternities (1899) Boyd's Workmen's Compensation
pp 112 et seq.; Walford's Insurance (ed. 1913) sec. 581: as to same under
Guide (2d ed.) 3. German Code of 1911, see Id. sec.
2 Ina, In i, or Ine, 688 A. D. to 72(1 001. ,. , .„ ^ o
A. D.; Alfred, 871 A. n. to 901 A. d. ^ Vol. 6, N. S. or Vol. 12, 0. S.
See Lambert's Two Thousand Years Ludlow's article on Old Guilds, etc.
of Guild Life, 43; Walford's Ins. Oct. 1869, p. 394.
Guide (2d ed.) 3.
29
§ V. JOYCE ON INSURANCE
1375, provided for relief in sickness, for old age, for burial, arbi-
tration clauses, and relief under false imprisonment. The same
author' asserts that "the whole vast group of Friendly Societies
scarcely looks back beyond the first act which authorized the forma-
tion of such bodies toward the close of the last century, 1793, * and
if the existence of a Friendly Society here and there can be estab-
lished in the earlier years of the century, it is reckoned a matter
worthy to be recorded." Notwithstanding this assertion, there is
authority for stating that the system of Friendly Societies in Eng-
land may be traced to within a few years of the suppression of re-
ligious guilds in the 16th century, since the last recorded guild was
in 1628, and Friendly Societies existed in 1634, and although there
is no directly connecting link between the two, yet it may reason-
ably be believed that the latter are an outgrowth of the former.^
Numerous acts have been passed in England containing provisions
in relation to these societies.^"
'Id. 391. See article bv same (1863) 26 & 27 Vict. c. 87, sees. 60,
writer on Guilds and Friendly Socie- 68; (1870) 33 & 34 Vict. c. 61. sec.
ties, 21 Contemp. Rev. 553, 737. 2; (1875) 38 & 39 Vict. c. 60; (1870
8 The act was 33 Geo. III. c. 54; 40 & 41 Vict. c. 13, sees. 16, 17;
repealed 1855, 18 & 19 Vict. c. 63, (1882) 45 & 46 Vict. c. 72, sec. 21;
sec. 1; latter act repealed 1875, 38 & (1883) 46 & 47 Vict. c. 47; (1884)
39 Vict. c. 60, sec. 5, but see sec. 7: 47 & 48 Vict. c. 43, sec. 4: (188/) 50
this act amended 1876, 39 & 40 Vict. & 51 Viet. c. 56; (1888) 51 & 52 Vict.
c. 32; last act repealed 1887, 50 & c 15, sec. 6; (1889) 52 & 53 Vict. c.
51 Vict c 56, sec. 17. 22. Acts were also passed in 1819,
9 9 Encv. Britannica, 780, "Friend- 1829, 1834, 1846, 1850. 1855 and
Iv Societies;" 11 Id. (11th ed.) 1876. These acts, from 1819 to 1850,
''Friendly Societies," pp. 217, 221. inclusiye, as well as the act of 1793
Examine 12 Id. p. 14, and see Bib- (already noted), were repealed by
liography, 12 Id. p. 17; see also 6 act of 1855 (18th & 19th Vict. c. 63,
Ludlow 'on Old Guilds and New sec. 1), but as to acts of 1829 and
Friendly Trade Societies, Fortnioflit- 1834, see 17 & 18 Vict. c. 56, and 6
ly Reyiew, N. S. Oct. 1869, p. 391; & 7 Will. IV. e. 32 (1836), and as to
Workmen's Benefit Societies. Quar- acts of 1846 and 1850, see 17 & 18
terlv Reyiew, Oct. 1864, p. 318: 16 Vict. c. 56. The act of 1855 was re-
Am" & Eng. Ency. of Law, 19; Ba- pealed by act of 1875 (38 & 39 Vict,
con on Benefit Societies and Life Ins. c. 60), which was amended in 1876
(ed. 1888) 16, 17. by 39 & 40 Vict. c. 32, which in 1887
I'* For synopsis of Friendly Socie- was repealed by 50 & 51 Vict. c. 56,
ty statutes prior to 10 Geo. IV. c. 56, sec. 17; Chronological Table and In-
see 4 Crabb's Dig. & Index (of Eng- dex of Statutes (11th ed.) title
lish Stat. ed. 1847) p. 257; Id. Part "Friendly Societies." As to statutes
11. p. 653. in force in 1895, see Id. (13th ed.
A.s to the acts relating to Friendly 1235-1895). See Bunyon on Ins.
Societies which were in force in (ed. 1854) 176, 177. As to the assur-
1889. see: (1833) 3 & 4 Will. TV. c. ance companies act. 1909 (9 Edw.
14, sec. 25; (1854) 17 & 18 Vict. c. VII. c. 49, sec. 36) ;.the Friendly Soc.
56; (1860) 23 & 24 Viet. c. 137: act 1896 (8 Edw. VII. c. 32), amd'g
30
SOURCES AND ORIGIN OF INSURANCES % V.
The purpose of Friendly Societies under the English insurance
corporation act of 1892 was mainly by voluntary subscriptions, with
or without donations, for relief in sickness or other infirmity, in
old age, widowhood, or orj^hanhood, for payments on birth or
death, for payments in distress, to seekers for employment, and in
case of damage or shipwreck at sea, for endowments and for insur-
ance of tools against fire, and these societies include under the act
every such corporation not required by law to be licensed for the
transaction of insurance, and if the contract it offers to undertake
is a contract of insurance, the society is an insurance corporation."
In so far, then, as the object of guilds and Friendly Societies is
mutual benefit and assistance, pecuniary and otherwise, there are
many points of resemblance in them to the mutual insurance sys-
tem, even if there were no other connecting link.^^ Taking this
analogy as a basis, then, upon the question of priority between this
^3'stem of insurance and marine insurance, there is more direct and
certain evidence in favor of the mutual system. Tlius, Hopkins, ^^
who gives credit therefor to a paper read ^* before the Institute of
Actuaries, in 1864, notices to some extent a Latin inscription on a
marble slab found at Lanuvium, an ancient town in Latium, a short
distance from Rome, dated during the reign of Hadrian, a. d. 117-
138; This inscription shows that the club Avas ostensibly for the
worship of Diana and Antinous, but in reality it was to provide a
sum at death of a member for burial. There was also an entrance
fee provided. It was constituted under a decree of the Roman sen-
ate and people, granting it the privilege of assembling and acting
collectively. It met not more than once a month ; whoever omitted
payment for a certain number of months had no claim on the so-
ciety for his funeral rites, although he should have made a will.
No claim was allowed by the club to any patron, patroness, master,
act 1890 (59 & 60 Vict. e. 25, sec. 2), Friendly Societies— statistics show-
and the collecting society and indus- ing membership, funds, etc. 1897-
trial assurance companies act 1896 1907, in United Ivingdom, see Webb's
(59 & 60 Vict. c. 26, which consoli- New Diet, of Statistics (ed. 1911),
dated the enactments relating to pp. 292 et seq. See also as to Friend-
Friendly Societies and industrial as- ly Societies, Jack's Introduction to
surance companies), see Butter- History of Life Assurance (ed.
worth's 20 Cent. Stat, of England, 1912), "pp. 223 et seq. •
pp. 243; 2 Id. p. 446. As to present ^^ As to development of the insur-
statutes of England, see also 15 Earl ance idea from the early guilds, Ger-
of Halsburv's Laws of England, pp. many, see Boyd's Workmen's Com-
119-204; Chitty's StAtutes of Eng. pensation (ed. 1913) see. 30.
see note 12. pp. 17, 18, § IV. herein. ^^ Hopkins' Mar. Ins. (ed. 1867)
" Act 1892, 55 Vict. c. 39 ; Hunt- 7-11.
ers' insurance corporation act 1892, ^* By M. N. Adler.
12, 13.
31
§ V.
JOYCE ON INSURANCE
mistress, or creditor except lie were named in a will, and no funeral
rites could be had by one who had inflicted death upon himself.
The resemblance between this club's system and that of the modern
benefit society is noticeable. Hopkins remarks that it is "probably
the nearest api)roximation on record to the insurance system dur-
ing the Roman period, and a,« containing the feature of a present
payment for a larger deferred sum," but he adds that it difiers from
insurance in some important respects. There also existed in the
third century, at Alexandria, a Christian brotherhood for nursing
the sick.^* Other instances might be mentioned, but the above are
sufficient to show that this system may claim more positive evidence
of an anterior date when compared with marine insurance in this
respect than can the latter.
We have already noted the granting by statute, in England in
1719, monopolies to two companies for insuring sea risks and loan-
ing money on bottomry. It appears that while these monopohes
existed, clubs or associations of shipowners were established in many
of the seaports of England for the insurance of ships of their mem-
bers, being in fact mutual insurance clubs.^^ These clubs, however,
i^Bi-entano on Guilds and Trades
Unions, 9.
16 Marshall on Ins. (5th ed.) 35.
Origin and history of mutual in-
surance chihs. "In 1719 two com-
panies, the London Assurance Com-
pany and the Royal Exchange As-
surance Company, were incorporated
with the exclusive right of making
marine insurances in their corporate
capacity. This monopoly gave rise
to shipowners' clubs for the mutual
insurance of their own vessels. In
such clubs each member is both as-
sured and insurer; he is insured as
to his own property in the club by all
the other meml)ers in proportion to
their respective properties in it, and
he is at the same time an insurer in
the proportion of his own property
in the club for the property of eacli
of the others, their mutual agreement
being the consideration of the con-
tract. By reason of the monopoly of
the two' insurance companies aliove
mentioned, it was essential to the
legality of the mutual insurance clubs
that their members should be liable
individually, only, each for his own
proportion and not jointly, or one for
others of them. Moreover the man-
agers of the club had no right of ac-
tion against a member for premiums
or for his contributions to losses paid.
. . . The monopoly granted to the
two insurance companies was taken
away in 1824, and thenceforth until
1862 no restriction was placed on tho
formation of mutual associations or
joint stock companies to carry o!i
the business of marine insurance.
But the companies act of 1862 (25
& 26 Vict. c. 89, sec. 4, repealed and
re-enacted by the companies [consol-
idation] act, 1908 [8 Edw. VII., c.
69] sec. [1] 2) produced the result
that, as a marine insurance associa-
tion is a comi)any for the acquisition
of gain within the meaning of that
act, it is when consisting of more
than twenty members, an illegal as-
sociation unless registered as a com-
pany. Mutual insurance associations
are now, therefore, always registered
under the companies acts, usually as
a company limited by shares or as a
company limited by guaranty. . . .
In general, it is now the association
itself which is the insurer, and the
assured's right of action is against
32
SOURCES AND ORIGIN OP^ INSURANCES § Y.
while they may still retain their mutual feature, are obligated to be
registered in order to carry on the business of insurance. ^''^ There
are many reported cases in which such clubs or associations were
interested, and in which various questions, including that of their
legality, the subscription to the policy, its validity, the liability of
members, etc., are considered." The premiums on insurance in
these clubs, so far as their liability could be called premiums, were
merely nominal, the absence of regular premiums being one fea-
ture of their organization, the liability of each member being based
upon the expenses and their contributions to losses.^^ Hopkins,^"
speaking of mutual iur^urance clubs or societies, says their nature
is that of benefit societies. He distinguishes the protection they
afford from insurance properly so-called, and adds, ''their resem-
blance to true assurance consists in the protection mutual clubs give
against similar losses and contingencies subject to local rules and
usages, and in their attaching their 'rules' frequently to the com-
mon form' of the policy with some necessary modifications." In
this connection we notice a statement of Guicciardini, before re-
ferred to, of date loGO or 1561, that a vast commerce existed be-
tween England and the Netherlands, and that the merchants had
"fallen into a way of insuring their merchandise from losses at sea
by joint contribution." This passage is cited by Anderson and also
Ihe association and not aj^ainst the N. 543 (1858) ; Bromley v. Williams,
other members." Earl of Halsburv's 32 L. J. Ch. 716 (18G3) ; Turnbull
Laws of England, Vol. 17, pp. 504, v. Woolfe, 9 Jur. N. S. 57 (1863) ;
505 and notes; 4 Td. i)p. 405 et seq. In re London Mar. Ins. Assn.
1'^ See the companies' act 1862; 25 (Smitli's case) L. R. 4 Ch. 611
& 26 Vict. e. 89; 30 & 31 Vict. c. 26, (1869) ; In re London Mar. Ins.
sec. 9; 7 & 8 Vict. c. 110. See also Assn. (Andrews' case) L. R. 8 Eq.
last preceding note herein, and § IV. 176 (1869) ; Re Arthur Average
herein for English statutes. Assn. L. R.. 10 Ch. 542 (1875) ; Mar-
As to illegal insurance companies ine Mutual Ins. Assn. v. Young, 43
in England— necessity of being regis- L. T. N. S. 441 (1880) ; Re Padstow
tered' under companies' acts 1862- Total Loss Assn. L. R. 20 Ch. D. 137
1908, see 17 Earl of Halsburv's Laws (1882) ; Lion Assn. v. Tucker, L. R.
of England, pp. 339, 340 and notes. 12 Q. B. D. 176, 53 L. J. Q. B. 185
"Reed v. Cole, 3 Burr. 1512 (1883); Ocean Iron Steamship Ins.
(1754) ; Hari'ison v. Millar, 7 Term Assn. v. Leslie, 6 Asp. Mar. Rep. N.
Rep. 340 (1796) ; Lees v. Smith, 7 S. 226 (1887) ; Jones v. Bangor Mut.
Teim Rep. 338 (1797) ; Dowell v. Shipping Ins. Soe. Lim. 6 Asp. Mar.
Moon, 4 Camp. 166 (1815); Strong Rep. N. S. 456 (1889).
V. Harvey, 3 Bing. 34 (1825) ; Mead ^^ See Marsliall on Ins. (5th ed.)
V. Davison, 3 Ad. & E. 303 (1835); 35; Hopkins' Mar. Ins. (ed. 1867)
Turpin v. BiUon, 5 Man. & G. 455 405.
(1843); London Monetary Advance 20 ]Xopkins' Mar. Ins. (ed. 1867)
and Life Assn. v. Smitli,*:! Hurl. & .3:)1, 392.
Joyce Ins. Vol. I.— 3. 33
§ V. JOYCE ON INSURANCE
by Plopkins, who speaks of it as being a meager account of insur-
ance.^
Mr. Justice Bradley ^ says the earliest form of the contract of in-
surance was that of mutual insurance. Griswold ^ says mutual in-
surance was earliest in use,* and Richards * asserts that back in An-
glo-Saxon times there is evidence of attempts among friendly guilds
to guarantee protection against fire and other calamities by mutual
contribution,^ and that in 1710 the earliest mutual and stock com-
pany was organized in London.' Other companies had, however,
fonned prior thereto on the mutual plan; thus, in 1686, the
''Friendly Society for Insuring Houses from Fire" was formed; in
1696 the "Amicable Contribution for the Assurance of Houses and
Goods from Fire" was organized, and the policy of this company
is said to contain the germ of perpetlial insurance, and to throw
some light upon the decisions of the courts upon successive losses. ^
and in 1706 the "Amicable Society for a Perpetual Assurance Of-
fice," a life company, was founded. The scheme was mutual, and
provided for a fixed rate of contribution, which was the same lor
all members, the ages of whom were limited from twelve to fifty,
afterward changed to forty-five, and a certain sum was distributed
each year among representatives of deceased meml>ers. The plan
was, however, changed in 1734, so as to fix more definitely the sum
to be paid at death, but it was not until 1807 that the company be-
gan rating members according to age and other circumstances.^
Coming to the United States, the earliest insurance company was
^2 Anderson's History of Com- ^ Richards on Ins. (ed. 1892) sec. 9;
merce, 109; Hopkins' Mar. Ins. (ed. Id. (3rd ed.) sec. 13; Hoplvins' Mar-
1807) 29. ine Ins. (ed. 1867) 392, 393; 13 En-
2 Insurance Co. v. Dunham, 11 cyclopedia Britannica, 1 80-82 ; 9
Wall. (78 U. S. 1) 32, 20 L. ed. 90. American Cyclopedia, 424 ct seq.;
^ Griswold's Fire Underwriters (ed. Bliss on Life Ins. (ed. 1872) sees. 1,
1872) 74, 84. 2; Reynolds' Life Ins. (ed. 1853) 4,
* See also Watford's Insurance 5; Watford's Insurance Guide (2d
Guide (2d ed.) 198. ed.) 25; Harpers Book of Facts
^ Richards on Ins. (ed. 1892) see. (1906) "Insurance" Amicable So-
8; Id. (3rd ed.) sec. 12, p. 16. ciety was oldest English company es-
^ See also Watford's Insurance tablished at Sergeants Inn London.
Guide (2d ed.) 3, 13. See Historical Sketch of the Corp.
' See also 13 Enev. Britannica, 180, for Relief of Widows, etc., bv John
182; 11 Id. (llth ed.) ; Griswold's Wm. Wallace (Phila. 1870) 'p. 12.
Fire Underwriters (ed. 18/2) 24; Amicable Society incepted at begin-
Walford's Insurance Guide (2d ed.) ning of 1705, obtained charter on
25. ^ July 25, 1706, Jack's Introduction to
* Griswold's Fire Underwriters (ed. History of Life Assurance (ed.
1872) 20, 23. See § VI. herein. 1912) p. 234.
34
I
SOURCES AND ORIGIN OF INSURANCES § V.
the "Philadelphia Contributionship for the Insurance of Houses
from Loss by Fire," organized on the mutual jjlan in 1752.^°
As to fraternal societies in the United States, including su(!h asso-
ciations as rely upon benefit features for relief and aid in case of
sickness, etc., or what are known as Friendly Societies in England,
in fact including all kinds of benefit and mutual insurance associa-
tions, their history may, it seems, be started at a period beginning
within the last half of the nineteenth century. ^^
^° Griswold's Fire Undorwriters Assessment system made its ap-
(ed. 1872) 36 et seq. See § M. liere- pearance about 1865 as an insurance
in. For the history of mutual eompa- business aside from fraternal organ-
nies and their phins of organization izations, and has rapidly extended,
in New York, and the statutes relat- Harpers Book of Facts (1906) "In-
ing thereto down to and including surance."
that of 1849, see opinion of Denio, C. History, etc., Assessment com-
J., in White v. Haight, 16 N. Y. 310. panies were started in the United
As to date of organization of mutual States over thirty years ago. 8
companies in United States to 1845, Americana (tOO")) "Insurance-life-
see Jack's Introduction to History assessment." Flan of meeting cost of
of Life Assurance (ed. 1912) p. 245. life insurance by assessments was
^^11 Eney. Britannica (11th ed.) fir.st used in United States about
p. 221. 1867 by local bodies. Id.
For History of Missouri State In the United States, "Three acts
legislation as to fraternal beneficiary passed in 1907 relative to assessment
associations (lodge system), see State life insurance, deserve special men-
(ex rel. Supreme Lodge K. of P.) v. tion, namely, those of Iowa ('07 c.
Vandiver, 213 Mo. 187, 204 et seq., 83), Wiscoiisin ('07, e. 447), and
111 S. W. 911; Kern v. Supreme Minnesota ('07, c. 318). The Iowa
Council Amer. Legion of Honor, 167 and Wisconsin acts seek to place as-
Mo. 471, 479 et seq., 67 S. W. 2.")2. sessment life insurance upon a safer
The assessment plan or si/sfem of basis, by forbidding all such soeie-
insurance: — A new form of benefit ties, other than fraternal beneficiary
organization, said to have come into associations, from transacting any
existence about 1870, assessments business in the state, unless they shall
being levied when a member dies; value their assessment policies or
but this plan not having proved sue- certificates of membership as yearly
eessful, assessments were then levied renewable term policies, according to
in advance of death. "There arc the standard of valuation of life pol-
about 200 mutual benefit insurance licies prescribed by the laAvs of the
companies or organizations in the states." Year Book of Legislation,
United States conducted on the 'lodge Vol. 10 (New York State Library,
system.' . . . This form of in- Legislation Bulletins 37-39) ]). 323;
surance may be called co-operative. Review of Legislation on Insurance,
and has many elements which make 1907-1908, by S. Huebner. See also
the organizations practising it 9 Id. p. 366.
stronger than the oixlinarv assess- For hislory of legislation as to
ment insurance companies having no assessment insurance companies in
stated meetings of members." 11 Missouri, see Aloe v. Fidelity Mutual
Ency. Britannica (11th ed.) p. 222. Life Assoc. 164 Mo. 675, 681 et seq.
See also Id. as to the advantages and 55 S. W. 993.
disadvantages of these svstems. When policy is on assessment plan
35
§ V. JOYCE ON INSLTvA>iCE
In New York, fraternal beneficiary societies, orders or associa-
tions were recognized by the act of 1883,^2 ^^(j ^q 1339 is ^i^q\^. fo^..
mation and regulation, fis a separate and distinct class, was first
provided for.^^ In 1881, however, an act ^^ entitled "An Act Con-
cerning Charitable Benevolent and Beneficiary Associations,
Societies, and Corporations." was passed in that state, relating
to associations and societies issuing certificates to members,
promising to pay, upon disease, sickness, or other physical disabil-
ity, relief or aid, etc., to such member, or to others dependent upon
him, or beneficiary designated by him, where such money, relief,
or aid, etc., were derived from admission fees, dues, and assessments,
etc. This statute was, however, not applicable to life insurance com-
panies; that is, only certain societies and associations were subject
to the provisions of the act.
The earliest benefit assurance case in the United States appears
to be of date 1871.^^ and the next decision seems to be of date 1875."
While, therefore, the idea of mutual protection or mutuality as
a principle of insurance is of very ancient origin, yet it has not ap-
proximated to true insurance until within a comparatively short
time,^^ and it furnishes no 'adjudications in this country until' re-
cent years. It appears, then, that the principle of mutuality or
reciprocity had been applied to protection against various emergen-
cies certainly before marine insurance came into general use, if not
before it had been used at all, and that even in England it became
the basis of incorporation of several life and fire companies before
marine insurance had assumed any proportions as an organized
system, and thus, also, before marine insurance decisions com-
menced, under that eminent jurist. Lord Mansfield, from 175G. to
make that marked progress which they then did in establishing
leading principles of insurance. Whatever defects may have exist-
and not an endowment policy, see ment; the. growth of the system: the
Haydel v. ^Mutual Reserve Fund Life requirements for soundness and per-
Assoc. 104 Fed. 718, 44 C. C. A. 109. manence, set forth in a series of ar-
12 Chaj^ter 175. tifles, see The Fraternal Monitor
13 Laws of 1889, c. 520, p. 711." (Rodiester, K Y.) in 31 pages.
"Report of Board of Statutory ^^ Laws 1881, e. 2.3G.
Consolidation, N. Y. vol. 3 (1907) ^^ ^Vetmore v. Mutual Aid & Be-
p. 2950. Such societies are now gov- nevolent Life Ins. , Assoc. 23 La.
erned by Consol. Laws, Laws 1909, Ann. 770.
c. 33, art. 7, sees. 230 et seq. which " IVIaryland Mut. Ben. Soc. v.
latter is repealed, and a new art. 7, Clendinen, 44 Md. 429, 22 Am. Rep.
sees. 230-249, added bv Laws 1911, c. 521.
198, ]). 448 ; sees. 242, 245, ain'd ^^ See Tabor's Three Systems of
Law.s 1913, c. 410. Life Ins. 11, 120 et seq.
For historv of fraternal develop-
36
SOURCES AND ORIGIN OF INSURANCES § Va
ed in the infancy of the assessment system or mutual system of in-
surance, great strides have been made toward placing the same on
a scientific basis, so that now some of the largest and most success-
ful companies are mutual companies.^^
§ Va. Origin of cattle insurance societies. — It is proper to men-
tion here the origin of cattle insurance societies, which in their con-
stitution and management resemble Friendly Societies. They were
introduced during the panic caused by the cattle plague, and were
established and regulated under the Friendly Societies act of ISTo.^'^
Their purpose is to provide, by insurance against loss of neat cattle,
sheep, swine, horses, and other animals by death from disease or
otherwise.^ In New York the first general law which provided for
insurance upon the lives of domestic animals was passed in 1853.^
It is noteworthy, however, that in 1873 it was declared in a New
York periodical that every attempt or trial that had been made to
introduce or conduct ''live stock insurance" or "cattle" insurance
in the United States had proved an utter failure, and had resulted
in the downfall of the companies who had endeavored to create this
class of insurance.^ But coming down to 1889 we find that the laws
of that state * provided for the organization and regulation of co-op-
erative or assessment companies for insurance of domestic animals,
and these are now regulated by statute,^ the Laws of 1912 provid-
ing for insurance upon the lives of horses, cattle and other live
stock.^
19 See Tabors' Three Systems of " Co^goi La^g, N. Y. Laws 1909,
Life Ins. 24; Richards on Ins. (ed. c. 33, art. 8, as am'd by Laws 1910,
3892) sees. 7, 9, p. 14. c 318, p. .504; Id. c. 63^ see. 70, sub-
20 38 & 39 Viet. c. 60, sec. 8, subd. div. 8, p. 1702; Laws 1911, c. 324, see.
2. See Friendly Society act 1896 70, subd. 8, p. 758. See Report of
(59 & 60 Vict, e." 25) ; see. 8 (2) ; 15 Board of Stat. Consol. N. Y. vol. 3
Earl of Halsbury's Laws of England, (1907) p. 2950.
p. 125, see. 2.33. ^ Laws N. Y. 1912, e. 2.32, p. 444
iRapalje & Lawrence's Diet. 179; (in effect April 9, 1912). /The Laws
15 Earl of Halsbury's Laws of Eng- of 1912, c. 231, p. 444, provide for
land, p. 125. "Cattle insurance so- insurance upon the lives of horses,
cieties" are among the class of cattle and other live stock, or against
Friendly Societies capable of regis- loss by theft of any such property or
tration""The expression 'other ani- both, but this amendment is disre-
mals,' it is conceived, includes only garded in the above amendment, c.
animals ejusdcra generis."' Id. p. 125. 232.
On animal insurance, see note in 44 A company authorized to issue pol-
L.R.A.(N.S.) 569. ieies against accidents to individuals
2 Laws N. Y. 1853, c. 463, p. 887. may likewise issue policies against
'6 Insurance Times (New York, accidents to live stock. In re Penn-
Dee. 1873) p. 859. sylvania Casualty Co. 36 Pa. Co, Ct.
* Laws N. Y. 1889, c. 454. p. 635 (Opinion of Att'y Gen.).
37
§ VI. JOYCE OX INSURANCE
§ VI. Origin of fire insurance. — Although Hfe assurance may
claim an earlier date for its origin, yet the idea of security in
case of fire seems to have followed more closely upon marine
insurance than the adoption of life insurance. It is said that
efforts were made among the early Saxon guilds to guarantee
protection against fire, and we have seen that Friendly Societies
offer this indemnity in some measure. It is also said that in-
sui-ance was applied to fire risks as early as 1G09; that there is
a recorded proj)osal made in 1635 for the estahlishment of a fire
insurance company; and in 1670 there is a record of a comi)any
formed at Edinburgh for "Friendly Assurance against Fire."
But it was not, however, till after 1666, when the great fire in
London occurred, that the idea of fire insurance assumed in lOng-
land any organized shape as a system and the earliest office for in-
suring property was opened in 1667, in London, on the plan of
individual underwriting. In 1680 a proprietary company, the
"Fire Office," formed in London. In 1681 the corporation of Lon-
don opened books for securing and entering sul<scri])tions, for fire
insurance, although the scheme was dropped, but in that year there
was also a joint stock company organized for protection against fire
losses. Then came in 1686 the "Friendly Society for Insuring
Houses from Fire." But the first regular office which is said to
have transacted any business was the "Amicable Contribution," or-
ganized in 1696. The LTand in Hand, however, appears to date
l)ack to 1696 as the first or oldest regular office in London, founded
in that year. In 1710 the first mutual and stock company, "The
Sun Fire Office," was formed, while the Union is declared to have
been the second fire office, under date 1714. Passing down to the
two companies, the Royal Exchange and London Assurance, char-
tered in 1720, we find that they added fire risks to their scheme of
insurances.''^
In the United States fire insurance took an early start, since an
agency or fire office is said to have existed in Boston in 1724. It
is stated, however, that the Sun, an English company, at Boston,
1728, was the first insurance company. But the earliest fire com-
pany organized here was the Philadelphia Contributionship of date
1752, incorporated 1768; although it is asserted that the first fire
policy was issued at Hartford, Connecticut, in 1794, by a company
designated as the Hartford Fire Insurance Company, which organ-
ized subsequently, in 1810.* ■
'See authorities cited next follow- 1872) 19-48; 13 Encyclopedia Brit-
in^ note. annica, IGl et seq.; 14 Id. (lltb ed.)
"8 Reynold's Life Ins. (ed. 1853) 2; pp. 057, 660; Richards on Ins. (ed.
Griswold's Fire Underwriters (ed. 1892) sec. 8; Id. (3rd ed.) sec. 12, p.
38
I
SOURCES AND ORIGIN OF INSURANCES § VI.
In New York, as we have stated elsewhere, the earlier jstatutes
consisted of charters to individual companies, etc., and in that state
the first general statute relating to the incorporation of fire insur-
ance companies was passed in 1849.^ This was followed by another
enactment in 1853,^" and these Laws now form Article Nine of the
Consolidated Laws ^^ as amended by inserting a new article to be
Article Nine.^^ In 1857 a law was passed in that state authorizing
the formation of town mutual fire insurance companies. ^^ County
and town co-operative companies were first authorized in 1879 ^*
I'or the purpose of co-operative insurance against loss or damage by
lire or lightning, and also by Laws of 1880,^^ which were consolida-
ted by Laws of 1886,^^ and now form Article Nine as amended of
the present general law.^'^
It is noteworthy that the first fire companies also undertook to
extinguish fires. ^^
The above facts show that fire insurance, as a systemized plan,
cannot date its growth from a date anterior to 1G66 in England,
nor does it appear to have become an organized system in this coun-
16; Watford's Insurance Guide (2d equivalent; conduct of business
ed.) 3, 13, 14; Hopliius' Mar. Ins. tlirough United States mails, etc., see
(ed. 1867) 47, 48; Jacobs' Law Diet. 31 Reports of American Bar Assoc,
title "Insurance, v." Harper's Book (1907) p. 654; 33 Id. (1908) pp.
of Facts (1906) "Insurance." 529-531; discussion of, Id. p. 51;
List of oldest e.^isting fire assur- draft Of act on, Id. p. 534. As to
ance companies, see 7 New Internatl. meaning of "ivildcat" insurance com-
Ency. (1908) pp. 638-9. pany when used with reference to
It is claimed in "A History of The the standing of another insurance
Insurance Company of North Amer- company, see Wells v. Payne, 141
iea of Philadelphia," published in Kv. 578, 133 S. W. 575.
that city, that said company is "the '^ Laws N. Y. 1849, e. 308, p. 441.
oldest fire and marine insurance com- ^° Laws N. Y. 1853, c. 466, p. 904.
pany in America;" that it "began ^^ Consol. Laws (Laws N. Y. 1909,
business as an association in 1792, c. 33) sees. 260-280.
Incorporated 1794." 12 j^^^^g 1910^ ,,. .328, sec. 2.
As to legislation, history, etc. fire " Laws N. Y. 1857, c. 739, p. 574,
insurance, see New International repealed by Laws 1862, c. 347, sec. 1,
Year Book (.1912) pp. 333 et seq.; p. 559. But companies in existence
Id. (1911) pp. 360 et seq.; Id. (1910) at the time of such repeal were ex-
pp. 376 et seq.; Id. (1909) pp. 374- cepled from effect thereof, and were
5; Id. (1908) pp. 361 et seq.; Id. continued in existence by subsequent
(1907) pp. 400 et seq. amendments of original act.
As to increase of fire and tornado ^* Laws N. Y. 1879, c. 287, p. 378.
insurance in United States, from ^^ Chapter 362, p. 540.
1880 to 1889, see Harper's Book of ^^ Chapter 573, p. 801.
Facts (1906), "Insurance." ^^ See Report of Board of Stat.
As to Underground or Wildcat In- Consol. N. Y. vol. 3 (1907) p. 2949.
surance: — Incorporation of insur- "^^ 1?) Eucy. Britannica, 166; Wal-
ance companies, both stock and mu- fords Insurance Guide (2d ed.) 25.
tual, without cash deposit or its
39
§ via JOYCE ON INSURANCE
try prior to 1752. It is also said that there was no organized system
of insurances against losses of houses by fire in England, outside
of London and We^itminster, until the organization of the Sun Fire
Office above mentioned, and that there were no insurances against
losses of goods by fire prior to that time, and that the insurances
issued by this office were contracts only between it and the persons
insuring, the loss being confined to the contracting parties only.^'
§ Via. Boards of fire or marine underwriters. — It is said that it
is a matter of connnon knowledge that, prior to any legislation on
the subject, associations called "boards of underwriters" (either fire
or marine) existed in various cities. These were voluntary associa-
tions, composed exclusively of those engaged in that particular line
of business. Their general object was consultation and co-opera-
tion in matters aft'ecting their common business.^"
An act to incorporate the New York Board of Fire Underwriters
was passed May 9, 1867,^ the purpose being : "To inculcate just and
equitable principles in the business of insurance; to establish and
maintain uniformity among its members in policies or contracts
of insurance, and to acquire, preserve, and disseminate valuable in-
formation relative to the business in which they are engaged." Said
corporation has power to provide a fire patrol with a competent su-
perintendent to discover and prevent fires, with suitable apparatus
to save and preserve property or life at and after a fire ; with other
powers to enable them to act with promptness and cfliciency, etc. :
but they are not permitted to interfere with firemen in their duties,
and are subordinate to the fire commissioners. Power is also given
to require a statement to be furnished, semiannually, by all corpora-
tions, associations, underwriters, agents, or persons engaged in the
business of fire insurance in the city of New York, of the aggregate
amount of premiums received for insuring property in said city.
A penalty is provided for failure of fire associations, etc., to make
said statement. The corporation created by this act was also given
the general powers, and was subject to certain restrictions under
the then Revised Statutes.^
^^ Lynch v. Dalzell, 3 Bro. Par. Cas. concerning the business of fire insur-
497. ance in the city of New York. It has
^° Childs V. Firemens Ins. Co. 66 the power to require a statement
Minn. 393, 35 L.R.A. 99, 69 N. W. to be furnished semiannually by all
141, per Mitchell, J., citing 13 Ency. corporations, associations, and per-
Brit. "Insurance;" Ency. Ins. U. S. sons respecting the aggregate
1894, 1895. amount of premiums received for
^ Laws N. Y. 1867, c. 846, p. 2113. insuring property in the city of
^ As is declared in a comparatively New York, in order to make a ratable
recent ease, the purpose of the cor- assessment to supply fimds for the
poration is to exercise supervision maintenance of its business of super-
40
SOURCES AND ORIGIN OF INSURANCES
§ VII.
In Illinois a statute was passed in 1874 entitled "An Act to En-
able Boards of Underwriters Incorporated by or under the Laws of
Illinois to Establish and Maintain a Fire Patrol.^
§ VII. Origin of life insurance. — It is asserted by some writers
that life insurance had its beginning in the 16th century.* Life
insurance is said to claim a very ancient origin. Meredith ^ asserts
that the Ordinance of Wisby mentions insurance upon life. As we
vision. Amongst other things it Rev. Stat. (111.) 1912, p. 2351, Rev.
maintains a fire patrol for the pur- Stat. 111. 1874, p. 1087, c. 142 ; Myers
l)ose of minimizino- loss by tire. ed. 1895, p. 1519; Starr & Curtis's
New York Board of Fire Underwrit- Annot. Stat. p. 2437.
ers V. Higgins (1909) 130 App. Div. As to boards of fire underwriters,
78, 114 N. Y. Supp. 506, aff'd (1910, etc., see also 2 Burns's Annot. Ins.
without opinion) 198 N. Y. 634, 92 Stat. (Rev. 1908) pp. 518, 519,
N. E. 1093, per Houghten, J., a case sec. 4853 (4959)— see. 4856 (4962)
where attorneys in fact or agents of (1877 sec. p. 21, in force March 14,
an incorporated association known as 1877) ; Mass. Laws 1874, c. 61; Wis.
the "United States Lloyds," doing Law.s 1870 (Sanb. & B. Annot. Stat.)
business in the city of New York, sees. 1922 et seq.
were held liable for the penalty ere- Insurance Patrol New York Corps
ated by said law of 1867 for failure was organized in 1835 ; controlled by
to furnish said board of fire under- insurance companies through board
writers a semiannual report of the of fire under^vriters, 8 Americana
aggregate amount of premiums re- (1905) "Insurance Patrol."
ceived for insuring property in said
city.
When company is engaged in busi-
ness of insuring property in city
against fire within above statute.
See New York Board of Fire Under-
Fire insurance patrol of New Or-
leans is not a public charitable or-
ganization, and is liable for its serv-
ants negligence in so driving its
patrol wagon as to collide with a city
truck and cause injury. Rady v.
writers v. Higsins (1909) 130 App. Fire Ins. Patrol, 126 La. 273, 52 So.
Div. 78. 114 N. Y. Supp. 506, aff'd 491.
(1910, without opinion) 198 N. Y. As to fire prevention bureau, see
634, 92 N. E. 1093. Wolff's Const. & Laws La. 1904, p.
As to board of fire underwriters in 900 (act 183, 1902, p. 350).
Minnesota under Laws 1895, c. 175, "An Act to Incorporate the 'New
e. 178, see Childs v. Firemen's Ins. York Underwriters Guild'" was
Co. 66 Minn. 393, 35 L.R.A. 99, 66 passed May 9, 1867, Laws N. Y.
N. W. 141, deciding that the Minne- 1867, c. 847, p. 2118, giving power to
apolis Board of Fire Underwriters New York fire insurance companies,
and the Merchants Board of Fire not less than five, to associate to-
Underwriters were not boards of fire gether for the purpose of guaranty-
underwriters within the meaning of ing the contracts of insurance which
the above statute of 1895. either of them may lawfully make.
Fire insurance patrol is neither a * See 14 Ency. Britannica (11th
public corporation nor a public char- ed.) "Insurance," pp. 658, 665,
ity. Coleman v. Fire Ins. Patrol of Harper's Book of Facts (1906) "In-
New Orleans, 122 La. 626, 21 L.R.A. surance."
(N.S.) 810, 48 So. 130. ^ Emerigon on Ins. (Meredith's
^Act was approved March 28, ed. 1850) 160, n. b.
1874, in force July 1, 1874. Kurd's
41
§ YII.
JOYCE ON INSURANCE
have already stated, there is much disagreement as to the date of
this Ordinance, it being placed anterior to 1075, and as late as 1320.
It is said that about the time of the division of the Roman Em-
pire,^ a table was in existence by which annuities could be valued,'
and this is noteworthy in this connection since annuities are based
upon the principles of life contingency upon calculations made by
means of the mortality tables,^ although an annuity transaction is
the very reverse of a life transaction, it being to the interest of a
life company that the insured should live, but contra in the ca^e of
an annuitant.^
The Guidon de la Mer, of date somewhere between 1556 and
1584, mentions life assurance as a long-established and familiar
custom in certain countries. Saccia, in De Commerciis, in an edi-
tion of 1620, which is not the earliest, refers extensively to the con-
tract, and gives a form of policy then in use. France and several
other countries prohibited insurances on lives. Although it was
forbidden in France from an early period, and such assurances were
void upon the proposition that "man cannot be estimated at a price,"
and that '"'the life of man is not an object of commerce, and it is
odious that his death should form matter of mercantile specula-
tion ; " and although such contracts were considered mere wagers
by Emerigon, yet at Naples, Florence, and other places life assur-
ances were permitted; and even in France ''all navigators, pa.ssen-
gers, and others" were permitted to insure the freedom of their
persons ; that is. the liberty of persons and not the persons were per-
mitted to be insured by fixing in the policy a definite sum to be paid
as a ransom, or to stipulate generally that the insurers should pro-
cure the freedom of the person. It is also conjectured that insur-
ance was employed during the Middle Ages in assuring the personal
liberty of pilgrims to the Holy Land. However, insurance on life
has been permitted in France since 1820.^° It is to the year 1706,
though, that we must look for the first definite scheme of life as-
^ This date is variously fixed at
A. D. 305, 364, 395. See Montes-
(|uieu's Grandeur and Decline of the
IJomans, Baker's Notes (ed. 1882)
358, et seq., 3G8, et seq. ; Gibbon's
Decline and Fall, vol. 2, 529, vol. 3,
127, 165; Smith's Gibbon, 98, c. 8;
14 American Cyclopedia, title
"Rome," 408; 8 Chambers' Encyclo-
pedia, title "Rome," 793; 6 Histor-
ians' History of the World, pp. 535
et seq. ; Id. pp. 433 et seq.
' Wal ford's Insurance Guide (2d
ed.) 15.
8 13 Eney. Britannica, 161, 14 Id.
(11th od.) p. 665 et seci.
^ Watford's Insurance Guide (2d
ed.) 25.
As to rents or annuities, see .Tack's
Introduction to Historv of Life As-
surance (ed. 1912) pp. 165-187.
See note at end of § 7 herein.
1° Elmerigon on Ins. (Meredith's
ed. 1850) 157 et seq., and notes a
and b; Bliss on Life Ins. (ed.
1872) sees. 1, 2. Life assurances
were forbidden in France by the
Ordonnance of Louis XIV., of date
42
SOURCES AND ORIGIN OF INSURANCES § VII.
surance, which was that of the amicable company ah-eady noted,
whicli society changed its system in 1734, and again in 1807, wliich
last lease of corporate life was based more upon the scientific prin-
ciples of true insurance than it had before possessed. ^°^ It is prob-
ably upon the basis of the establishment of this company that Hop-
kins declares that life insurance did not take its rise before the 1 8th
century. The progressive step taken by the Amicable in 1807 was
the rating of new members '^according to age and other circumstan-
ces.'"' This plan, however, had been anticipated by the Royal Ex-
change and London Assurance Companies, chartered in 1720; while
the Equitable, started in 1762, is said to have "possessed from the
. outset all the essential features of a life assurance office." " It is
unnecessary to pursue our investigations further as to foreign coun-
tries other than England, and there we find that Maylnes,^^ in the
edition 1622, mentions assurance upon life, although earlier and
later dates for such an assurance are given, it being asserted tliat
the first life policy of which there is any positive information was
made in London, in the Royal Exchange, on .June 18th, lo83,i^
by several underwriters acting individually,^* while 1697 has also
been fixed as the earliest recorded date of an insurance upon a life.^^
However, the fipst life company had its birth in 1698 by the
Mercers, as a widow's fund, an annuity scheme, and this was quick-
1681 ; in the Netherlands by the Jack's Introduction to History of
Ordonnance of Philip II. of 1570; Life Assurance (ed. 1912) p. 236;
by the civil statutes of Genoa, of 12 New Internat. Ency. (1908) p.
1588; by the Amsterdam Ordonnance 224. In 1762, Equitable Assurance
of 1598, and by the Rotterdam Or- Society of London, began to rate
donnances of 1604 and 1635; Reyn- m.embers according- to ase. Harper's
old's Life Ins. (ed. 1853) 10: Wal- Book of Facts (1906) "Insurance."
ford's Insurance Guide (2d ed.) 22; The first meeting of the Equitable
Bunyon'.s Life A.ssurance (ed. 1854) for assurance of life and survivor-
7. The last author says life assur- ship was held at the White Lion in
ance was not reintroduced in France Cornhill in 1762, when only four as-
till the latter part of the 18th cen- surances were etfeeted and in the next
tury. four months the members did not ex-
^°* See § V. herein, and notes. ceed thirtv. Francis' Annals of Life
11 Bliss on Life Ins. (ed. 1872) Assurance (ed. 1853) p. 108.
sees. 1,2; 13 Encv. Britannica, 169, ^^ Marines' Lex Mercatoria, 149.
180, 182: 14 Id. (llth ed.) : Hopkins' "24 Encv. Britannica (11th ed.)
Marine Ins. (ed. 1867) 32. 33. 47, p. 658.
48; Richards on Ins. (ed. 1892) sec. 1^2 New Internat. Ency. (1908)
9; Id. (3rd ed.) sec. 13; Reynolds' p. 224. Policy insured life of Wil-
Life Ins. (ed. 1853) 2, 4, et seq.: 9 liam Gibbons for 12 months.
American Cyclopedia, 424 ; Walford's ^^ Francis' Annals of Life Assur-
Insurance Guide (2d ed.) 24, 25; Ja- ance (ed. 1853) p. 56. Policy issued
cobs' Law Diet, title "Insurance, v.; " on life of Sir Robert Howard.
33 Geo. III., c. 14 (1793). See
43
§ VII.
JOYCE ON INSURANCE
ly followed in 1699, when a "Society of Assurances for Widows and
Orphans" was formed.^^
In 1774, it having ''been found by experience that the making
insurances on lives or other events wherein the assured shall have
no interest hath introduced a mischievous kind of gaming, for
remedy whereof," etc., says the preamble, an act was passed in Eng-
land," prohibiting insurance on lives or any other event or events,
w^herein the person to be benefited should have no interest, "or by
way of gaming or wagering." The act further provided that the
name of the beneficiary should be inserted in the policy." In the
^^ Bliss on Life Ins. (ed. 1872) or nearly one every twelve days. See
sees. 1, 2; 13 Encj'clopedia Britan- "abstracts of all the documents reg-
nica, 180, 182; 14 Id. (11th ed.) p. istered by London life assurance
(558; Reynolds' Life Ins. (ed. 1853) eomi^anies from act 7 and 8 Vict.
3 et seq. ; Watford's Insurance Guide Cap. 110 ( Sept. 5, 1844, to Feb. 5,
(2d ed.) 24; 9 American Cyclopedia, 1852) "with alphabetical index of
424 et seq.; Haydn's Diet, of Dates names" of London life assurance
(25th ed.) "Insurance." The Inde- institutions, by Robert Christie. See
pendent & West Middlesex Co, Historical and statistical account of
is claimed to have been founded in different svstems of life assurance bv
1696, 9 Dublin Review (1840) p. 86. Alfred Burt (London, 1849).
"Reference is usually made to the See article: "Prospectuses of New
Amicable Society as the earliest in- Life Assurance Companies (various)
stitution for the assurance of lives; and "necessity of legislation for life
but the Mercers companj', in 1698, assurance," 9 Dublin Review (1840).
commenced a scheme for granting Etidowment insurances increased in
life annuities to the nominees of the the United Kingdom, in amount from
assurers, in place of paying down a less than three per cent of the total
fixed sum" Francis' Annals of Life life business in 1870, to nearly
A.ssurance (ed. 18531 p. 56. See twentv-five per cent in 1900. "Webb's
note 9, p. 34, § V. herein. New Diet. Statistics (ed. 1911) "In-
See further as to the "Mercers," surance," pp. 337 et seq.
Jack's Introduction to History of Tontine insurance history of, see
Life Assurance (ed. 1912) p. 233; Jack's Introduction to History of
12 New Internatl. Ency. (1908) p. Lif« Ins. (ed. 1912) pp. 211 et seq.
224. 17 14 Geo. III., c. 48. As to wager
At close of 18th centurv, there were policies; gambling act of 1774. See
eight companies in Great Britian and 17 Earl of Halsbury's Laws of Eng-
Ireland, Harpei''s Book of Facts land "Insurance," pp. 514 et seq.
(1906) "Insurance."
It appears that there were 105 as-
surance companies registered, 44 ex-
As to gambling insurances, see
Jack's Introduction to History of
Life Assurance (ed. 1912) pp. "196-
elusively life companies being in 205.
London, between June 1845 and De- ^^ Life insurance statutes will be
cembor 31st, 1851 ; that the life insur- noted hereafter under their appropri-
anee institutions in operation in the ate heads.
LT^nited Kingdom in February, 1852 As to bubble life companies and
were about 180 in number, and that list of assurance projects of South
from 1844 to 1852, no fewer than 241 Sea era, see Francis' Annals of Life
new insurance offices were projected Assurance (ed. 1853) pp. 63, 81.
44
SOURCES AND ORIGIN OF INSURANCES § VII.
United States a charter was granted in 1759 to "the Coq)oration for
the Relief of Poor and Distressed Presbyterian Ministers, and of the
Poor and Distressed Widows and Children of Presbyterian IMinis-
t<3rs; " and in 1769 there was incorporated ''the Corporation for the
Relief of Widows and Children of Clergymen of the Protestant
Episcopal Church, '^^ and in 1784 a society for the benefit of Episco-
pal clergy was established in New Jersey.^" But the Pennsylvania
Company for Insurance upon Lives and Granting Annuities was
the first general life company. It was chartered in 1812, in Phil-
adelphia.^ Reynolds, however,^ says that life insurance was intro-
duced here by a company formed in 1814, followed by anotlier com-
pany in 1815, both of which added life to marine and fire risks.^
and that it was not till 1818 that a corporation was formed in the
United States having for its sole object the insurance of lives.*
19 Historical Sketch (of the last States, 1880-1905, covering number
named corporation) by John Wm. of companies; number of policies; in -
Wallace, Phila. 1870; Id. p. 14 (cleri- surance in force; assets; and sur-
cal life annuity). -See also 9 Ameri- plus, see 12 New Intemat. Ency.
can Cyclopedia. 424 et seq.; Richards (1908) p. 225.
on Ins. (ed. 1892) see. 9; Harper's As to history, legislation, statistics,
Book of Facts (1895) p. 380; Id. etc., life insurance, see New Interna-
(1906) "Insurance;" 12 New tional Year Book (1912) pp. 333 et
Internatl. Eney. (1908) p. 22.'). seq. Id. (1911) pp. 360 et seq.; Id.
20 12 New Internatl. Encv. (1908) (1910) pp. 376 et seq.; Id. (1909)
p. 225. ' pp. 374-5; Id. (1908) pp. 361 et
1 Harper's Book of Facts (1906) seq.; Id. (1907) pp. 400 et seq.: 2
"Insurance;" 12 New Internatl. Suppl. Americana (1911) "Insur-
Ency. (1908) p. 225. ance;" 8 Americana, "Insurance,
2 Reynolds' Life Ins. (ed. 1853 ;i Ufe, statistics."
7, 8. As to history of legislation in ]\Iis-
^Viz. : The Dutchess County Insur- souri upon subject of life insurance,
ance Company, chartered in 1814, see brief of counsel for appellant in
and the Union Insurance Companv Logan v. Fidelity & Casualty Co. 146
in 1815. ^ ]\ro. 114, 115, 47 S. W. 948 (but
* Viz. : The Massachusetts Hospital brief not giyen in S. W.). See also
Life Company, Boston. See also Aloe y. Fidelity Mutual Life Assoc.
Harper's Book of Facts (1906) "In- 164 Mo. 675. 681 et seq., 55 S. W.
surance;" 12 New Intemat. Ency. 993. 29 Ins. L. J. 679.
(1908) p. 225. In New York the first general law
As to life insurance companies or- relating to the incorporation of com-
ganizod in the United States to date panics "to make insurance upon the
1845, see Jack's Introduction to His- health or liycs of individuals and
tory of Life Assurance (ed. 1912) every insurance appertaining thereto
p. 244. or connected with health or life risks.
As to "old-line" insurance compan- and to grant, purchase, or dispose of
ies in United States fx'om 1830 to annuities," was enacted in 1849.
1867, see list with date of charters, Laws 1849, c. 308, p. 442. The next
Harper's Book of Facts (1906) "In- general law which ])rovided for the
Burance." incor])oration of life and iiealth in-
As to life insurance in United surance companies in that state was
45
§ Vila
JOYCE ON INSURANCE
At the beginning of the present century but few cases of value
on life insurance had been reported in the EngUsh books,^ while
the earliest life case in the United States was decided in ]\Iassachu-
setts.^ Life assurance, therefore, did not assume any great import-
ance, either in a legal aspect or as a business, until within a com-
paratively few years. In fact, it is asserted that its growth did not
become marked in the United States till as late as 1843 or perhaps
1858.'
§ Vila. History of industrial insurance. — The system of indus-
trial insurance, or insurance issued upon life for small sums with
weekly or other short periodical payment of premiums,' seems to
relate back in its origin to the early guilds, burial societies, or clubs.^
It is said to be the business of the burial societies over again on a
large scale, occupying a position between the friendly society as to
its objects, and the ordinary life assurance office as to its organiza-
tion. A Parhamentary Report in 1853 gave it impetus by drawing
attention to the insufficiency of the protection afforded the working
class by burial clubs and friendly societies.^"
The collecting societies and industrial assurance companies act
of England of 1896 " consolidated the enactments relating to
Friendly societies and industrial assurance companies.^^ In that
passed in 1853. Laws 1853, e. 463,
p. 887. See also Laws 1912, c. 232,
sec. 70, subd. 1. See § 9 (V.)
lierein. The earliest statutes eon.sist-
c(\ of charters to individual com-
panies. See Keport of Board of
Stat. Consol., N. Y. vol. 3 (1907) pp.
2040, 20.30.
5 Jacobs' Law Diet, title "Insur-
ance," which is apparently compiled
from Justice Parks" work on Insur-
ance (ed. 1802) notes only twelve
cases, while Comyn's Digest (4th ed.)
published in 1800, notes only four
cases. In 1649 the case of Bendye v.
Oyle, stj'. 166, 172, was a life case,
although no principle of life insur-
ance was involved, it being only a
question of prohibition to the court
of commissioners. For insurance
cases to 1705, sec Beawes' Lex 'Sler-
catoria, 302 et seq.
6 Lord V. Dall, 12 Mass. 115, 7 Am.
Dec. 38.
■^ 9 American Cycloiiedia, 424 et
seq.
® See Definition, § 7b herein,
"The German term for it, 'insurance
of the peo]de' (volksversicherung), is
an apt one." Jack's Introduction to
History of Life Ins. (ed. 1912) p.
239. it is also called family insur-
ance of laboring people (14 Ency.
Britannica [11th ed.] p. 671), and
"family insurance at retail." (8
Americana,. "Insurance : Industrial" ) .
See article by Louis D. Brandeis
(now Justice of United States Su-
preme Court), in Bvdlock's Selected
Articles on Compulsory Insurance
(1912) p. 43.
' As to guilds, "the mutual assur-
ance societies of the poorer classes,"
burial societies, friendly societies,
etc., see § V. herein. See 8 Ameri-
cana "Insurance: Industrial."
^•^ Jack's Introduction to History
of Life Ins. (ed. 1912) p. 239.
"59 and 60 Vict. c. 26. As to
English statutes on this subject, see
§ V. herein.
^2 See also the assurance companies
act 1009 (0 Edw. VII. c. 49, sec. Mi)
2 Butterworlh's 20 Cent. Stat. p. 446;
46
SOURCES AND ORIGIN OF INSURANCES
§ Vila
country (lie first company formed was the Prudential Assurance
Company in 1848, although it did not undertake industrial insur-
ance until 18.")4. The Industrial and General was founded in 1849,
and in 1852 the Britisli Industry Life Insurance Company was or-
ganized.^^ In the United States, in 1873, the Insurance Times of
New York urged that companies be established in that stat€ to carry
on the business of industrial life insurance/* and the system is said
to have been introduced here in 1876.^*
In 1873, however, "the Widows and Orphans Friendly Society"
was organized by a special act of the legislature of New Jersey ap-
proved April 3. In 1875 its name was changed to "the Prudential
Friendly Society," by another special legislative act, and on March
30, 1877, by a certificate pursuant to a statute then in force it again
changed its name to "the Prudential Insurance Company of Amer-
ica." In 1907 the company had outstanding three classes of pol-
icies: (1) industrial policies; (2) ordinary policies; (3) deferred
dividend policies. ^^
Earl of Halsbury's Laws of Eng.
See Engli.sh Statutes given under see.
§ V. herein.
^^ 8 Americana, "Insurance : In-
dustrial ; " Jack's Introduction to
Ilistorv of Life Ins. (ed. 1912) p.
239.
1*6 Insurance Times (N. Y. 1873)
p. 83.
"14 Ency. Britannica (11th ed.)
p. 671.
"The most simple and primitive
form of industrial insurance is found
in the numerous mutual benefit asso-
great firms or corporations. (3)
Private insurance companies which
sell sickness and accident insurance
to workmen, 'industrial insurance
companies' collecting small premium
weekly or montlilv. and furnisiiing
chiefly funeral benefits. . . . (4)
Organizations of municipal, state,
and Fodci-al employee^; for pension
funds, as those of teachers, firemen,
policemen," etc. Henderson's In-
dustrial Insurance in United States
(ed. 1911) p. 308. The Appendix
contains regulations of several im-
ciations which exist everywhere and portant schemes of insurance drawn
under many forms. Some of these up by actuaries with legal advice.
are aided by the employers, and
others are supported entirely by the
contributions of tlie members." Hen-
derson's Industrial Insurance in the
United States (ed. 1911) p. 63.
"Systems and Schemes of Indus-
trial Insurance. (1) The working-
men have themselves created ore:ani-
Aa to industrial insurance gener-
ally. See Dryden on Life Insurance,
etc., as follows: (1) The inception
and early problems of industrial in-
surance. (2) The first quarter cen-
tury of industrial insurance ia the
United States. (3) The social econ-
omy of industrial insurance. (4) The
zations for insurance . . .; local practice of industrial insurance,
mutual benefit societies, with or with-
out aid from employers, national
brotherhoods or fi'aternals, and trades
unions with local branches. (2) Em-
ployers have promoted the movement
by various methods; local societies of
1^ See Blanchard v. Prudential Ins.
Co. 78 N. J. Eq. 471, 472, 79 Atl. 733,
per Howell, V. C. (s. c. on app^l
80 N. J. Eq. 209, 83 Atl. 220).
In 1875 the Prudential Insurance
Company of America, then a small
employees, insurance departments of corporation in New Jersey known as
47
§ Vllb JOYCE ON INSURANCE
§ Vllb. History of workmen's industrial insurance: state insur-
ance: compulsory insurance: workmen's compensation. — Within
very recent times there has been an extended and comprehensive
movement in this country for the purpose of providing, upon some
specific basis, compensation for industrial accidents, non-fatal and
fatal, also for sickness, disability, etc., suffered by employees, and a
number of slates have enacted statutes embracing what are gener-
allv designated as workmen's industrial insurance, state insurance,
compulsory insurance, and workmen's compensation. Inasmuch,
however, as these statutory provisions, except where they provide
for insurance which is not compulsory, either express or implied,
as we liave stated elsewhere,-^''' relate rather to economic or sociologic
conditions than to the principles governing the contract of insur-
ance, or, at the most, create new remedies or are but an evolution
of the employers' liability principle, covering the law of master and
servant, we shall only briefly notice here and only in the appended
notes the history of the development of this class of compensation
or insurance.^^
the Widows & Orphans Friendly So- 229; Id. p. 409 Id. (1908) p. 228;
C'iety, changed its name to the Pru- Id. (1907) p. 246.
dential Friendly Society. This was On the constitutionality appliea-
followed by the John Hancock Mu- tion and etfeet of the federal em-
tual Life Insurance Com))any of Bos- plovers' liability act, see notes in 47
ton, the Germania Life Insurance L.R.A. (N.S.) 38, L.I\.A.191.')C, 47.
Company of New York, which did On workmen's compensation acts
not follow up the business, and the generally, see note in L.R.A. 1916 A,
Metropolitan Life Insurance Com- 23 and notes following,
pany of New York, 8 iVmericana "In- As to ^'Recent European legisJa-
surance: Industrial." tion with regard to compenfation for
The Prudential Insurance Com- inchtslrial accidents," including com-
pany of America, organized in New pulsory insurance instituted by Ger-
Jersey, conducted, under a decision in many in 1883, followed by Austria,
190.') (Russell X. Prudential Ins. Co. Norway, Finland, and the workmen's
176 N. Y. 178, 98 Am. St. Rep. 656, compensation act in Enc'land in
()8 N. E. 252), two classes of insur- 1897, followed by Denmark, Italy,
anee, one known as the "industrial" and France in 1898, by Spain in
and the other "ordinary insurance." 1900, by Holland, Greece, and
Under the former plan small policies Sweden in 1901, and by Russia and
were issued, upon which weekly pay- Belgium in 1904, and the workmen's
ments were made; under the latter compensation act in England in 1906,
large policies were issued, the ]n'em- — see article by Ivenelm E. Digby
iums Ijeing payable annuallj', semi- in 17 Yale L. Jour. pp. 485-498.
annually, or quarterly. -Great Britain enacted lier emplov-
" See § 7d herein."' • ers' liability act in 1880 (43 & 44
^^ Progress of Employers' Liabilitg Viet. c. 42), her compensation acts in
and Workmen's Compensation. See 1897 and 1900 (60 and 61 Vict. c.
New Internatl. Year Book (1912^ pp. 373; 63 & 64 Vict. e. 22; 6 Edw. VII.
209-212; Id. (1911) pp. 238-243; Id. c. 58, in effect Julv 1, 1907), which
(1910) pp. 232-235; Id. (1909) p. was foUowed bv the insurance law '
48
SOURCES AND ORIGIN OF INSURANCES § VIIc
§ VIIc. Savings bank insurance and annuity law of Massachu-
setts.— In 1907 a statute was enacted in Massachusetts entitled "An
(Lloyd George) National Insurance funds. The employers pay the whole
act i911 (1 & 2 Geo. V.) c. 55, 49 cost of the latter funds." Webb's
Brit. Stat. p. 337 (operative Julv 15, New Diet, of Statistics (1911) "In-
1912), am'd 1913 (3 & 4 Geo. V.) surance," pp. 343 et seq.
c. 37; 1914 (4 & 5 Geo. V.) e. 57; Stale insurance. "In view of the
1914 (5 Geo. V.) c. 15 (as respects great activity shown in foreign coun-
present war) ; 1915 (5 Geo. V.) e. 29. tries during recent years in favor of
See 28 Earl of Halsbury's Laws of government insurance it is a note-
England 905 ; 14 Ency. Britannica worthy fact that very little legislation
(11th ed.) p. 358; 7 New Internatl. was attempted along this line in
Ency. p. 52; New Internatl. Year America during the years 1907 and
Book (1911) pp. 800-803. 1908." Year Book of Legislation
"Insurance against accidents is (1908) vol. 10, pp. 332-3, article by
compulsorv for certain workpeople, S. Huebner.
in Germany, Austria. Hungary, It is said by a recent writer that
France, Italy, Denmark, Holland, "every civilized nation in Europe,
Belgium. Norway, and other conn- ^^^^ "^^^^ o^her nations m other
tries. The classes of workpeople in- gf ^ ^^ ^^'^ T^^^ T^^x! *'?^ ^"'/'"^
, J in , States, have discarded the old system
volved vary much from one country ,, , , ,. , .,., , , -^
,, -^ T T-i ^ i" ot employers hability based upon
to another. In France, for example, ^^^^^j^^ and substituted a system under
seamen are affected; in Belgium ^,^^^^^ ^^^^ industry bears the bur-
rainers; in Hungary, agricultural ^^^ ^f relieving the distress caused
laborers; in Germany, workers in y^^, injuries to workers in any given
many trades and industrie.s, such a.s industry, practically without litiga-
mining, building agriculture, ship- ^-^^ „ '^^^.^^^ Workmen's Compen-
ping, etc. The obligation to insure ^^^^^^^ j^j^^^^ j„^ ^^^^^ ^^^ ^^^
IS generally restricted to persons re- ^g^g^ ^^ ^^^^ §_ rp,^-^ ^^,^-^^^ ^j^,,
ceiving less than a certain defined in- (.^nsiders the origin and development
come. ..... In Austria and Hoi- ^f industrial insurance from the early
land no limit is fixed. . . fhe Qei^an guilds (Id. pp. 47-51, sees,
system IS most highly developed in 30^ 31) . discusses the economical ba-
Germany and Austna-Hungarv-. In .^jg ^f ^^^^^ j^ws, with statistics (Id.
Germany all accidents in the course pp. 53.82, sees. 33-53) ; states that
of work are covered, except those in- ^he workmen's insurance acts of Ohio,
tentionally brought about by the Washington, and even of Ma^^sa-
worker, and (since 1900) those due chnsetts, are specific adaptations of
lo gross misconduct. In Austria only the German industrial' insurance law
the first t.vpe of accident appears to of 1884, and that the compensation
be excluded from the benefits of in- acts of California, Illinois, Kansas,
surance. In the earlier period of dis- Nevada, New Hampshire, New Jer-
ablement the injured workers are sey, New York (Law unconstitution-
oompensated out of the sickness in- al, see Ives v. South Buffalo Ry. Co.
surance funds, to which workers con- 201 N. Y. 271, 284, Ann. Cas. i912B
tribute two thirds and the employers 150, 34 L.R.A.(N.S.) 162, 94 N. E.
one third. This period of compensa- 431, 40 Ins. L. J. 637) Rhode Island,
tion out of the sickness insurance and Wisconsin, are adaptations of
funds lasts in Germany for thirteen the British workmen's compensation
weeks, after which the liability is acts. (Id. pp. 412, 413, sec. 167.)
transferred to the accident insurance Employers' Liability — Proposed
Joyce In3. Vol. I. — 4. 49
VIIc
JOYCE ON INSURANCE
Act to Permit Savings Banks to Establish Life Insurance Depart-
ments; " the words "savings and insurance bank" meaning a sav-
Constitntional Amendment (to art.
I. of the State Const.) rolating.there-
to passed by New York Legislature
of 1912, to be known as sec. 19. Laws
1912, vol. 2, p. 1382. Becommenda-
tion of committee (dated March 17-
'13) that such proposed amendment
he disapproved. (Judge Dillon,
chairman of committee.) See 48 N.
Y. Law Jour. No. 140, of date March
20th, 1913. Amendment to Constitu-
tion of New York, art. 1, by adding
at the end a new section (sec. 19) to
road : "sec. 19. Nothing contained in
this constitution shall be construed to
limit the power of the legislature to
enact laws for the protection of the
lives, health, or safety of employees;
or for the pa^Tuent, either by employ-
ers, or by employers and employees
or otherwise, either directly or
through a state or other system of in-
surance, or otherwise, of compensa-
tion for injuries to employees or for
death of employees resulting from
such injuries, without regard to fault
as a cause thereof, except where the
injury is occasioned by the wilful in-
tention of the injured employees to
bring about the injury or death of
himself or of another, or where the
injury results solely from the intoxi-
cation of the injured employee while
on duty; or for the adjustment, de-
termination, and settlement, with or
without trial by jury, of issues which
may arise under such legislation; or
to provide that the right of such
compensation, and the remedy there-
for, shall be exclusive of all otlier
rights and remedies for injuries to
employees or for death resulting
from such injuries; or to provide
that the amount of such compensa-
tion for death shall not exceed a
fixed or determinable sum; provided
that all monies paid by an employ-
er to his employees or their legal rep-
resentatives, by reason of the enact-
ment of any of the laws herein au-
thorized, shall be held to be a proper
charge in the cost of operating the
business of the employer." 2 Laws of
New York, 1912, Appendix, p. i:J82.
But amendment was adopted Nov. 4,
1913, and became sec. 19, art. I. of
Constitution.
Workmen's Compensation Law,
Consol. L. N. Y. C. 67, Laws 1914,
e. 41, is constitutional. Jensen v.
Southern Pacific Co. 215 N. Y. 514,
L.R.A.1916A, 403, 109 N. E. 600,
aff'g 152 N. Y. Supp. 1120, 167 App.
Div. 945.
Insurance against unemployment.
"The insurance of workingmen
against unemployment has been most
largely tried in Switzerland. An in-
surance scheme was first started in
Berne in 1892 by the League of Man-
ual Laborers. Municipal aid, how-
ever, was soon asked for, and in 1893
the scheme passed under control of
a municipal bureau. Insurance in
this bureau is voluntary, and is open
to all ablebodied Swiss citizens not
over sixty years of age, living in
Berne." The monthly premium pay-
able by those insured is about 7d. If
insured for eight months, and all
premiums are paid, and if in employ-
ment for at least six months in the
year, insurers may claim, during the
winter months, a daily allowance of
about Is. 2d. if single, and Is. 7d. if
married. The allowance continues
for a maximum period of ten weeks.
Incapacity to work gives no claim
to the benefit. Germany has also one
or two examples of insurance schemes
against unemployment. That of
Cologne is most important. A
bureau was opened at Leipzig in 1903.
In several towns and provinces
in Belgium, s^'stems of insurance
against unemployment have been in
force for several years. The best-
known scheme is that at Ghent. The
Ghent system was copied in Ant-
werp in 1902. In France a some-
50
SOURCES AND ORIGIN OF INSURANCES
§ YIIc
ings Lank which has established an insurance department; and the
words ''insurance department"' meaning the department of a sav-
what similar sclieme to tliat at Ghent, 1907. Contents : — British Statistics
paying unemployed benefits, was for 1906. The new British act in
adopted, although prior to that date common paralance; bibliography —
many local authorities had been niak- Avorknien's compensation acts ; a list
ing subsidies to funds. Webb's New of sources where either the English
Diet. Statistics (ed. 1911) pp. 613- or French texts of all workmeirs
614. compensation acts, excepting those of
Bibliography : Workmen's Indus- Great Britian, can be found. Also,
trial Insurance: State Insurance: Compensation for Industrial Acci-
Workmen's Compensation Laivs: dents, Report of Commission, 1911.
Compulsory Insurance. The follow- Mavor (Jumes). Report on work
ing brief bibliography covers in itself men's compensation for injuries,
and by reference a very complete list Toronto, 1900. Printed by order leg-
of authorities. Atkinson (J. M.) islative assembly of Ontario, with
Law of Industrial Insurance. Com- bibliography. Great Britain. Seag-
parative review of employers' liabili- er {Henry R.) Professor Political
ty insurance in European countries Economy, Columbia University, Ar-
and United States. (1909) Missouri tide by, New York Tribune, January
Bar Assoc. Boyd (James H.) AVork- 11, 1914, on New York workmen's
men's Compensation Direct Pay- compensation act passed Dec. 12,
ment. State Insurance. Procedure. 1913. Snoiv (Alpheus H. [United
Forms, with text of statutes. (1913). States delegate to International Con-
Bradhury {Harry B.) Workmen's ference on Social Insurance held at
Compensation and State Insurance The Hague, Sept. 1910] ) Art. on So-
Law with text of statutes. (1912). cial Insurance, 43 Chicago Legal
Brooks {John Graham) Report on News, 280. United States. "Library of
German Workingmen's Insurance
Nat. Conference of Charities and
Correction Proceedings, 1905, pp.
452-7; also, by same author, Com-
pulsory Insurance in Germany 1895
Congress — Select List of References
on Employers Liability and Work-
men's Compensation, complied under
direction of Herman Henry Bernard
Meyer, Cliief Bibliographer," Wa-sh-
Bullock {Edna D.) Selected Articles ington. Government Printing Ottiee,
on Compulsory Insurance (1912) 1911. Covering also, especially as to
with bibliography, pp. XVII. foreign countries, other forms of so-
XXXV. Henderson {Charles Bich- cial insurance. — sucli as insurance
-mond) Industrial Insurance in Unit- against unemployment, sickness, and
ed States. (1909-1911) ; also Id. (ed.
1911) Bibliography pp. 323-326;
also (same autlior) Amer. Jour.
Sociol., 1907-08, Id. vol. 12, pp. 470-
old age. The Library of Congress al-
so published in 1906 a "Select list of
works relating to employers' liabil-
ity," and in 1908, a "Select list of ref-
486, 757-778; Id. vol. 13, pp. 34-47, erences on workingmen's insurance."
183-199, .349-379, 489-507, 584-016, The list of 1911 (above noted) is based
841-854; Id. vol. 14, pp. 64-77, 194- on the recent literature, certain titles
212, 451-464. Lloyd-George (Darid) being also drawn from the lists of
People's insurance explained (Bri- 1908 and 1906. See also Employer's
tish act, 1911, operative July 15th, Liability and Workmen's Compensa-
1912). Speech in House of Com- tion Commission Report. Govern-
mons. Massachusetts. — Bureau of ment Printing Office, 1912. Mem-
labor statistics, workmen's compensa- orandum showing law and conditions
tion acts. Its labor bulletin, Oct. in United States, Germanj', and Eng-
51
§ VIII.
JOYCE ON INSURANCE
ings and insurance bank in which the business of issuing life in-
surance and the granting of annuilies is conducted. ^^
§ VIII. Origin of accident insurance. — We have abeady noted
under jDreceding sections cattle insurance,^" and that form of casual-
ty insurance known as insuring the liberty of persons/ but insur-
ance which relates to the loss of life or limb, or other personal in-
jury by accident, is of modern origin. Accident insurance, in its
original form, seems to have comprehended railway accidents only,
for which purpose a compan}'^ was established in London in 1840.
known as the liailway Passengers' Assurance Company, but in
1856 it extended its plans to embrace accidents of all kinds, and the
first American company was said by a writer in 1873 to have been
then onh' ten years old.^ The first accident insurance company in
land (by Mr. Packer, Secy, of Com- compulsory old age insurance more
miss.) : also Bureau of Labor. Work- than a quarter of a century ago, di-
men's insurance and compensation viding the burden between employer,
systems in Europe. Washington, employee, and the state. England
Government Printing Office, 1911 has just txu'ned to old age pensions
(Annual Report of Commissioner of charged wholly upon general taxa-
Labor. Bibliography at end of each tion, a sort of general outdoor relief,
section) ; also Library of Congress — Massachusetts is seeking to avoid
Division of bibliography. Select both alternatives. The aim of the
list of works relating to employers' recent savings bank insurance and
liability. Complied under direction annuity law is to secure to her wage-
of Appleton Prentiss Clark Griffin, earners voluntary instead of compul-
Wishington. Government Printing sory old age insurance." Louis D.
Office. 1906. Brandeis (now Justice of United
19 Rev. Stat, of Mass. (Suppl. States Supreme Court) in 42 Amer.
1902-1908) pp. 1088 et seq. acts and Law Rev. (1908) p. 904.
Resolves of Mass. 1907, pp. 7i5, et ^°§ Va. herein,
seq. 561. ^ S VII. herein.
See article as to merits and demer- ^ Bunyon's Life Assurance (2d ed.)
its of plan, .42 Amer. Law Rev. pp. 100; 13 Ency. Britannica, 101, 14 Id.
901-4, by Alfred L. Aiken. (11th ed.) p. 659; 1 Am. & Eng.
Bank Commissioners' Re^jort of Ency. of Law, 87; Richards on Ins.
Massachusetts for 1912, summarizing (ed. 1892) sec. 9; Id. (3ded.) sec. 14;
savings bank insurance in 1909, Walford's Ins. Guide (2d ed.) 10, 11;
shows that the two savings banks 1864, 27 & 28 Vict. c. 125; 7 Amer-
writing such insurances issued 1299 ican Law Review, 585 ; Porter's Law
policies (People's Savings Bank) and of Ins. (ed. 1884) c. 24, 431. See
1,710 policies (The Whitman Sav- Travelei-s' Insurance Machine Co. v.
ings Bank). The kind of policies is- Travelers' Ins. Co. 142 Ky. 523, 528,
sued are also set forth. See sum- 134 S. W. 877, 879, per Lassing, J.
mary 27 Banking L. J. 1076, 1077, by "The insurance of railicaij travel-
W. H. Kniffen, Jr. ers against injury upon trains was
"Massachusetts is the first of the the first form of accident insurance
slates to recognize by legislation that whidi proved widely acceptable." 14
an adequate system of old age annui- Ency. Britannica (11th ed.) "Insur-
ties for wage-earners is a pressing ance," p. 659. As to in:*urance
social need. Germany resorted to against accidents and death from
52
SOURCES AND ORIGIN OF INSURANCES § Villa
the United States was the Travelers of Hartford, Connecticut in
1863.3
Accident ingurance was first ofiered in Massachusetts in 1864 by
a foreign corporation. In 1865 an accident insurance company
was specially chartered there, but seems never to have written any
policies. The business, however, was carried on by a number of
foreign companies, eleven being represented in it in 1867, although
all but two had retired in 1869. The form of accident policy at
lirst introduced was substantially that known as the general accident
policy insuring against accidents to the person of insured.'*
§ Villa. History of casualty insurance. — Inasnuich as a distinc-
tion has been made, in decisions based on certain statutes, between
accident and casualty insurance, the former being held to relate to
accidents resulting in bodily injury or death, and the latter to
property losses resulting from accident or casualty, such as insur-
ances in reference to boilers, plate glass, injury to property by street
cars, etc., and perhaps injury to domestic animals,^ we may state
here that the first steam boiler insurance company existed in Hart-
ford, Connecticut, and was chartered in 1866.^ The first plate
glass insurance company in the United States Avas organized in
New Jersey in 1868, and the first New York company was started
in 1874.' In Massachusetts, casualty insurance against explosion
of steam boilers and the breakage of plate glass appeared some
yesiTQ prior to 1879,* although it is stated that plate glass was first
traveling, see N. Y. Laws 1879, c. 485, ^ Employers' Liability Assurance
p. 530. See also § X. herein. Corp. v. Men-ill, 155 Mass. 404, 406,
''Since the passings of the employ- 29 N. E. 529, per Barker, J.
ers' liability act, 1880 (43 & 44 Vict. History of legislation in Missouri
c. 42) and the workmen's compensa- 9ipo)i subject of accident insurance.
tion act 1897 (60 & 61 Vict. c. 37, See brief of counsel for appellant in
now replaced bv tlie workmen's com- Logan v. Fidelitv & Casuakv Co. 14(i
pen.sation act 1906 [6 Edw. VI T. c. Mo. 114, 115, 47^S. W. 948 (brief not
58]) tlie practice of insuring against given in S. W. Rep.),
liability for accidents to ihird per- ^ fiee §§ VIIL, Villa, herein. As
sons has been very largely extended." to origin of cattle insurance societies,
17 Earl of Halsbury's Laws of Eng- see § Va. herein,
hnul, p. 571. 6 jj.ii,p(.^.'g p,,^„i, yf Pjjgj.g (1906)
3 Harper's Book of Facts (1906) "Insurance;" 8 Americana (1905)
"Insurance;" 8 Americana (1905) "Insurance."
"Insurance." On January 1, 1904, '^ 8 Americana (1905) "Insurance."
twenty-five stock companies were As to s|)rinkler leakage insurance,
writing accident and health insurance and tly-wheel insurance, see Id.
in the United States. Id. As to nnm- 8 Employers' Liability Assuranr-e
her of accident policies, and amount, Co. v. Merrill, 155 Mass. 404, 406,
in force at end of ]907, see AVebb's 29 N. E. 529, per Barker, J.
New Diet. Statistics (ed. 1911).
53
§ Vlllb
JOYCE ON INSURANCE
insured in 1879.' As to legislation in New York, it appears that
the formation of companies to insure against breakage of plate glass
WHS provided for by the Laws of 1877,^° now covered by provisions
of law relating to life and casualty companies. ^^
In New York in 1883,^^* the formation of life and casualty com-
panies on the co-operative or assessment plan was authorized. ^^
§ Vlllb. History of employers' liability insurance. — The Em-
ployers' Liability Assurance Corporation of London, founded for
that purpose, in 1880 very shortly after the enactment of the em-
ployers' liability act of that year/' which was the earliest statute of
that character modifying the common law, was the first company
to undertake on a large scale the insurance of employers against
liability or loss on account of personal injury from accidents sus-
tained by their employees while engaged in their service.^* In
America, liability insurance, such as employers' liability, seems to
have been unknown earlier than 1887.^^
^Harper's Book of Facts (1906) As to laws of Iowa authorizing-
"Insurance." casualty insurance for tlie benefit of
^^ Chapter 439, p. 506. enaployers of labor, the repeal Ihere-
^^ Report of Board of Stat. Consol. of, and the law including- insurance
N. Y. Vol. 3 (1907), p. 2950. See against personal injuries generally.
Laws 1912, c. 232, sec. 70, subdiv. 6; as well as indemnity against the lia-
Laws N. Y. 1916, pp. 292-4, sees, bility of employers on account of
204— 204a. See § V. herein. As to the acts or omissions of their em])loy-
legislation, statistics, etc., — casualty ees, see statutes noted, in connection
insurance, see New Internat. Year with "casualty" insurance and the
Book (1912), pp. 333 et se(|.; Id. different kinds of insurance author-
(1911) pp. 360 et seq.; Id. (1910) ized by the Iowa statutes, in Bank-
pp. 376 et seq.; Id. (1909) pp. 374- ers Mutual Casualty Co. v. First Nat.
5; Id. (1908) pi). 361 et seq.; Id. Bk. 131 Iowa, 456, 459, 460, 108 N.
(1907) pp. 400 et seq.; as to number W. 1040.
of policies in force at end of 1907, Right of mutual insurance compa-
see Webb's New Diet. Statistics (ed. nies organized prior to April 0, 1911,
1911). to transact employers' liability busi-
"« Laws N. Y. 1883, e. 175, p. 172. ness, see Mass. acts 1912, e. 311,
^^ Report of Board Stat. Consol. amd'g acts 1911, c. 251, sec. 1.
N. Y. Vol. 3 (1907) p. 2949. An English publication (56 Solic-
it 34 & 44 Viet. c. 42. itors' Journ. & W'kly Reporter, p.
1*14 Ency. Britannica (11th ed.) 249) under date Feb. 3, 1912, says:
p. 659; 5 Universal Cyc. "Guarantee "Recent attacks by American judges
Companies," p. 327, article by Clar- upon employers' liability policies as
ence H. Kelsey (designated in said infringing the law of maintenance,
article as Employers' Liahilily Guar- aiid, so far as employees are con-
antee) ; 7 New Internatl. Ency. cerned, encouraging listlessness, in-
"Employers' Liability," p. 52. ditlerence, and neglect, have not, we
1*8 Americana (1905) "Insur- lielieve, received much attention in
ance." this country. We are, indeed, dis-
On question whether employers' in- posed to lliink tliat some of the abus-
demnity contract constitutes insur- es which have been referred to in the
ance, see note in 47 L.R.A.(N.S.)
294.
54
SOURCES AND ORIGIN OF INSURANCES § IX.
§ IX. Origin of guaranty, fidelity guaranty, etc., insurances.^^'* —
These and kindred insurances have become an important and useful
branch of the system of insurance. ^^ The earhest mention of fidel-
ity guaranty insurance appears to have been an advertisement in
1720 in the London Daily Post, giving notice of the opening of books
for subscriptions to stock for the information of a company to in-
sure masters and mistresses for whatever loss they might sustain by
theft from servants, ticketed and registered in the society.^''' But
although certain security was required by statute to be given by per-
sons appointed to oflices of public trust under the Crown, or by
those concerned in the collection, etc., of public monies,^^ and even
though in 1840 the ''Guarantee KSociety," the earliest organized
company, was first started,^^ still up to 1842 persons appointed to
United States have no existence in ited after the Grant of such Offices,"
the United Kingdom." requiring' a "Bond or Bonds, or other
An employees' guaraiitij company Security or Securities in such Sum
for the purpose of hghling employers and with such suFlicient Surety or
is said to have been formed in 1889 Sureties as shall be approved of by
in New York, although without sue- the Ijords Commissioners" etc. The
cess, and in 1892, a ''legal pro- 52 Geo. III. c. 66 (June 9th, 1812)
tection guarantee company," having extended same to Scotland. The act
the same purpose, was started in Lon- 6 & 7 Wm. IV. c. 28 (1836) was en-
don, 5 Universal Cyc. "Guarantee titled "An Act to enable Persons to
Companies," p. 327, article by Clar- make Deposits of Stock or Exchequ-
encc H. Kelsey. er Bills in lieu of giving Security by
15a "Guarantee" is. the word used Bond to the Postma.ster General anil
in English statutes, text books, etc., Commissioners of Land Revenue,
although in the United States "guar- Customs, Excise, Stamos and Taxes."
anty" is used. The act 1 & 2 Vict! c. 61 (Julv
1^9 Am. & Eng. Ency. of Law, 65; 31st, 1838) was an act entitled the
13 Ency. Britannica, 161 ; 14 Id. (11th same as, and amending 6 & 7 Wm.
ed.) p. 659; Richards on Ins. (ed. IV. c. 28 (July 4, 1836).
1892) sec. 10; Id. (3rd ed.) sees. 466 ^^ Francis' Annals of Life Assur.
et seq. pp. 652 et seq. p. 285.
^'Frost's Law of Guaranty Ins. It is also worthy of note that a
(ed. 1909) pp. 1, 2, giving copy of writer, in 1840, (Dublin Review of
advertisement. Francis states that 1840, vol. 9, p. 61, in an article en-
the "Guarantee Company" adopted a titled : "Prospectuses of New Life
scheme for "insuring to all masters Insurance Co.'s (Various)" and tlie
and mistresses the losses they may "Necessity of Legislation for Life As-
sustain by their servants." Francis' surance.") states that "we have some
Annals of Life Assur. p. 83. reason to suppose tliat an attempt
^* Under the following acts: Act will be made to establish a society
50 Geo. III. c. 85 (June 15th, 1810) : for insuring the honestij of clerks,
"An act to regulate the taking of Se- secrelaries, collectors, and all those
curities in all Oflfiees in respect to i^ei-sons who usually are obliged to
which Seciirity ought to be given and find a friend to become security (that
for avoiding the Grant of all such is insurance) for them. This at first
Offices in the Event of such Securi- sight may seem a strange and haz-
tv not being within a Time to be lim- ardous undertaking; but a little con-
55
§ IX.
JOYCE OX IXSUKAXCE
or employed in offices of trust were usually obliged to rely upon
private individuals, friends, or relatives for sureties, when re-
quired for their integrity, fidelity, faithful discharge of their duties,
and good conduct.^" But in that year an act was passed wherein
it was declared that "it is expedient, as well for the greater Ea.se of
Persons required to give Security as aforesaid, as for the better se-
curing the public Interest, the further Provisions should be made
in this respect," etc., and a statute was enacted granting to the
"Guarantee Society" the power to issue and to certain public of-
ficers the power to accept the security of said society for persons
appointed to certain offices oC trust under the Crown. Further
provisions were made as to the form of the policy, subject to the
approval of said public officers, in whose name the policy should
be; also that a certificate of loss should be granted, specifying the
nature of its contents, its conclusive elfect as proof in an action and
the recover}'- thereupon; and a final provision relieving such public
ofiicers from personal liability.^ Fidelity guaranty insurance may,
sideration will make it obvious that
all objections which appear inciden-
tal to the scheme might have been
made to a life assurance company, if
such a thing were now to start for
the first time," and the writer adds in
a note -that "gince thi.s was written,
the office has begun to act." That
lidelity guarantee, as the first devel-
opment of this class of insurance
originated in London in 1840, see 5
Universal Cyc. "Guarantee Compa-
nies," p. 326, art. by Clarence H.
Kelsey.
^° See Pamphlet on Private and
Public Guarantee for persons Ap-
pointed to Otlices of Trust, by James
Knight, London, 1847.
1 In 1842 an act entitled "An Act
for Regulating Legal Proceedings by
or again.st 'The Guarantee Society,'
jind for Granting Certain Powers
thereto," was passed in England,
(local & personal acts, 5 Viet. Sess.
2, c. Ixiv. June 18, 1842.) This en-
actment mentions the fact of the as-
sociation of several persons into a
company under the name of "The
Guarantee Society," the objects
thereof "being, in consideration of
an annual Premium, to become Sure-
ty for the Integrity of Clerks, Col-
lectors, Receivers, and other Persons
of Reputation approved by the said
Society, in whom pecuniary Trust is
or shall be imposed." The statute,
in addition to the provisions therein
regulating legal proceedings, empow-
ered the lords of the treasury, or the
principal oflRcers of any other pub-
lic office, to accept the security of
said "Society" for persons appoint-
ed to certain offices or employments
of public trust under the Crown, "or
wherein he shall be concerned in the
Collection, Receipt, Disbursement, or
<'xpenditure of anj' public Monies."
"The Guarantee or Security of the
said Guarantee Society, to be given
and executed in and by their Policy
or Policies, in the usual Form of such
Policy or Policies, or in such other
Form and subject to such Condi-
tions" as the said lords of the treasu-
ry or said princijial officers of any
public office "shall require, approve,
and direct" Said security to be in
lieu of the securitv required bv acts
50 Geo. in. c. 8.5;"52 Geo. IILc. 66;
6 & 7 Wm. IV. c. 28 ; 1 & 2 Vict. e.
61). It Avas further provided that
tho.se policies should be in the name
of the secretary or any other officer
named bv said lords of tlie treasury
4
56
SOUKCKS AND OKIGIN OF INSURANCES
§ IX.
lliorefure. in so far a^ it offers security for the integrity, fidelity, or
lionesty of persons holding otlices of public trust and concerned
with the receipt, disbursement, or control of public monies, be
traced directly to this act as its source, and to Ihis act, also for the
iirst statement showing that even at this early date the contract, at
least as to its form or terms, was subject to the supervision of public
officers of the state. The "British Guarantee Association" was es-
tablished in Edinburgh in February 1845, and in London was in-
c(jrporated under an act passed in 1846.^ Later on ''The European
Society's act 1859" was passed, reciting that the People's Provident
Assurance Society was established in 1854, with power to transact
every description of business ordinarily transacted or capable of
being transacted by an assurance or guaranty company or societ}'.^
A certificate of
to be granted to
or principal officers
loss sustained was
enable the assured to recover the
same with costs. Said certificate un-
der the respective hands or hand of
Ihe said lords of the tveasary or prin-
cipal ollicers or ollicer of the oJllce or
department under which the policy
was taken and accepted was "to de-
clare that the Revenue has been dam-
nified, and to state the Amount of the
Loss occasioned by any Act done, or
any Payment or Duty omitted, in
contravention of the Duty or Pur-
]iose for the Performance of which
sucli Policy shall have been taken
and accepted; and that the Produc-
tion of sucli Certificate, and Proof
of the Handwriting- of the Person or
Persons subscribing- the same (whom
it shall not be necessary to prove to
have been at the Date of such Sub-
scription, or to be, an Officer or Offi-
cers of the Office or Department in
wiiich such Policy shall be taken and
accepted as aforesaid), shall be final
and conclusive Evidence, in every
sucli Action, Snit, or Proceeding, of
the Truth of the Contents of the said
Certificate, and that the said Policy
lias become forfeited tliereby to the
Amount of the Loss stated in the
said Certificate; and thereupon the as-
sured shall be entitled to recover
such Amount, together with the Costs
of sucli Action, suit, or other Pro-
ceeding.'' Tlie said lords of the
treasury and other principal officers
were, by said Act, relieved from all
personal liability for any act done
by them or any of them under the
Act. Other powers were also grant-
ed to said "Guarantee Society."'
29 & 10 Vict. c. 375 (Aug. 13th,
1846), entitled "An Act to Incorpo-
rate the British Guarantee Society,"
by which the proprietors and share-
holders of the Company were incor-
porated by designation of the "Brit-
ish Guarantee Association." See
Pamphlet on Private and Public
Guarantee for Persons Appointed to
Offices of Trust, by James Knight,
of London, 1847.
^ "The European Assurance Socie-
ty'.s act 1859" (22 Viet. c. xxv. 1859,
vol. 42, Stat, at Large p. 401) re-
cites that the People's Provident As-
surance Society was established and
regulated by a deed of settlement
dated Sept. 2, 1854, and the objects
for which it was established com-
l^rised in addition to life assurance,
endowment, annuity, fire insurance
and other business, the "guarantee-
ing and becoming Security or Sure-
ty to such Extent or witliin sucli
Limits as the Directors for the Time
being' of the Society deem expedi-
ent, for the Integrity, Honesty, and
Fidelity, and the Absence of Negli-
gence, Defaults, and Irregularities in
the Conduct of Persons holding or
about to enter into Offices or Situa-
57
IX.
JOYCE OX IXSURANX'E
The ''guarantee Ijy companies act'' was j^assed in 18G7.* This act
was repealed with certain exceptions, and other provisions in lieu
thereof made by the government officers (security) act 1875.^
Prior to 187-' attempts to carry on fidelity guaranty insurance in
the Uriiled ►States were a failure,^ although a Canadian corpora-
tions of pecuniary Trust or Confi-
dence, and the guaranteeing' against
Loss of Persons bound as Sure-
ties, or otherwise responsible for
others liolding such Offices or Situa-
tions, and generally the transacting
of every Description of Business or-
dinarily transacted or capable of be-
ing transacted by an Assurance or
Guarantee Company or Societ}"-, or
appertaining or incidental thereto,
and the uniting and combining to-
gether of those Several Objects or
Purposes, and to that Intent the
making or granting of Assurances,
of any Kind or Description, respec-
tively dependent or conditional upon
the integrity, Honesty, or Fidelity,
or the Absence of Negligence, De-
faults or Irregularities in the Con-
duct of Persons in or about to enter
into Offices or Situations of pecuni-
ary Trust or Confidence, and for
whose Honesty, Fidelity or Integri-
ty or the Absence of Negligence, De-
faults, or Irregularities in whose
Conduct the Society might be, or be
about to, become directly or indirectly
responsible; that the Society ob-
tained a Certificate of complete Reg-
istration under the Act for Registra-
tion, Incorporation, and Regulation
of Joint Stock Companies, and be-
came and are incorporated thereun-
der accordingly," etc. It was pro-
vided also that the guarantee of the
society might be taken instead of
other security required from persons
in public offices and employments
(Id. see. 10) ; also, instead of security
required from persons administering
the poor laws (Id. sees. 13, 14) ; also
from officers of savings banks (Id.
§ 17) : public officers not to be per-
sonally liable for anything done un-
der act (Id. see. 15). An act to effect
a settlement of the affairs of the
European Assurance Society and of
other companies, .35 & 36 Vict. c.
cxlv. 1872, is noted in The Law Re-
ports, 1872, Statutes, vol. VII.
^Havdn's Diet, of Dates (25th
ed.) p. C49. Under the 30 & 31 Vict.
c. 108 (1867) (The Law Reports
1867, Statutes, Vol. 2.) entitled "An
Act to Provide for the Guarantee of
Persons holding Situations of Trust
under Government by Companies,
Societies, or Associations," cited as
"the guarantee bv Companies Act
1867." "The Term 'Company' shall
mean, and include any Company,
Corporation, Society, or Association
incorporated by Act of Parliament
or by Royal Charter, or under any
Act relating to Joint Stock Compa-
nies." It provided that security for
certain officers ("Office or Emploti-
ment in the Public Service") might
be accepted from companies comply-
ing with cei'tain conditions.
5 38 & 39 Vict. c. 64. The Law
Rep. Stat. 1875, vol. X. Every cer-
tificate granted by the Treasury to a
company under said act canceled.
Security given by any company be-
fore passing the act was to continue
to be received as security subject to
the power of the officer of the de-
partment to require other security.
Power was vested in the Treasury
(commissioners thereof) to vary se-
curity in respect to pei"sons holding
office or employment in the public
service.
^ As late as 1873 it was declared
that it would seem that the fidelity or
guarantee insurance business oueht
to be introduced into the United
States, but that it "has been tried al-
ready in America, and has proved an
utter failure. . . . Every trial that
has been made to conduct 'guarantee'
insurance ... in the United
58
SOURCES AND ORIGIN OF INSURANCES § IXa
tion, the Guarantee Company of North America, had introduced
this insurance here in 1872, it having existed in Canada from 18»)8.
In 1875, however, a company chartered in New York was the first
to actually undertake this business.' In 1880 "an act to authorize
the Knickerbocker Casualty Insurance Company of New York to
chanoe the name thereof to 'the Fidelity and Casualty Company of
New York.' " was passed.'
§ IXa. History of title guaranty insurance. — The Law Property
A.«surance and Trust Society is mentioned in a work published in
1853, the purpose of said society being the insurance of defective
titles, and guaranteeing repayment of loans and mortgages. It was
said to be similar in character to rent insurance.^ In the United
States in 1871 there was published ^^ ''a plan for the insurance of
titles and mortgages" by means of a corporation to be called the
Title Warranty Company." In 1876 title guaranty insurance was
undertaken in Philadelphia by the Real Estate Title and Trust
Company, said to be the pioneer in the United States, and the for-
mation of that company was followed in Washing-ton, then in suc-
cession in Baltimore, Boston, and New^ York, and then throughout
the principal cities in this country. In 1883 the Title Guarantee
and Trust Company was organized, its purpose being to copy the
records of real estate, in the counties of New York and Kings and
to examine and guarantee titles. In 1885 the Lawyers' Title In-
surance Company of New York was organized under the general
act of 1885, noted below, to examine and insure titles, and has car-
ried on business since 1887.^2 j^ iggS an act ^^ f^j. ^i^q organiza-
States has resulted in llie downfall ^ Francis' Annals of Life Ins. p.
of the companies nnderlaking- to ere- 291. "Copyholds, lifeholds, and
ate this class of insurance. The truth leaseholds are made equal to free-
is the losses by defalcations in 'guar- holds for all purposes of sale or
antee' busine.ss would break down mortgage." Id.
any company making the attempt to i° By Theodore Aub.
do' fidelity business)' 6 Insurance " "Several features of some of the
Times (N. Y. Dec. 187.3) 850. l)ranches of the proposed company's
'See 5 T^niversal Cvc. "(Juaran- 1)usiness are borrowed from the by-
tee Companies," p. .320,' art. by Clar- laws .of the 'Prussian Insurance
ence H. Kelsey. Stock Company.' " Id.
"Passed March 31, 1880, to take ^^ .') Universal Cyc. "Guarantee
effect immedialelv. 1 Laws N. Y. Companies," p. 326, art. by Clar-
1880, p. 109, c. 87. In New York once H. Kelsey. See also History of
the first guarantee insurance act au- Title Insurance in New York and
thorizing'the guaranteeing lidclily of Brooklyn, Title Guarantee & Invest,
persons holding places of public or Co., Lotus Press, 1890. The Title
private trust was passed in 1879. Guarantee and Trnst Company, or-
Laws N. Y. 1879, c. 485, p. 530, ganized on the same principle as the
amd'g Laws 1853, c. 403. See § X. Real Estate Title Insurance ami
note 13 herein, for N. Y. statutes. Trust Company of Philadelphia, the
59
§ IXb
JOYCE ON INSURANCE
lion of title guaranty companies was enactecl, for the purpose of
examining titles to real estate, of procuring and furnishing infor-
mation in relation there-to, and of guaranteeing or insuring bonds
and mortgages, and the owners of real estate and others interested
therein against loss by reason of defective titles and other encumb-
rances of or upon such real estate. This law was revised and ap-
pears in the Consolidated Laws.^*
§ IXb. History of credit guaranty insurance. — The Commercial
Credit Mutual Assurance Company is mentioned in 1853 as fairly
representing in England the insurance of bad del)ts.^^ Credit
guaranty was first tried, though without success, in 1887, in New
York. The United States Credit System Company in New .Jersey,
however, tried a safer plan of insurance in 1889.^^ The statute
of 1886 was the first general enactment in New York to provide
for the incorporation of credit guaranty and indemnity companies.
They were authorized by that act to incorporate for the purpose
of guaranteeing and indemnifying merchants, manufacturers,
traders, and those engaged in business and giving credit, from loss
or damage by reason of giving and extending credit to their cus-
tomers and those dealing with them.^''^ This law was revised and
pioneer company in the United and mortgages (Francis' Annals of
States, the Baltimore Title Company, Life Ins. (lSo3), p. 288), is said to
and the Boston Title Insurance Com- have originated as an independent line
pany, to examine titles to real estate, in New York in 1892, although com-
and issue an insurance or guarantee panics in Great Britain, formed for
policy on the same, and to pay loss other purposes, had undertaken it
np to amount of policy. From prior tliereto as part of their busi-
]jamphlet issued by Company. Date ness. Investment guarantee authori-
does not appear, but prior to 1899.
13 l.aws N. Y. 1883, c. 338. ]i. 905.
" Consol. Laws, Laws 1909, art. v.
sees. 170-184, as am'd Laws 1911, e.
tatively classed as offering corporate
protection to lenders on mortgage
and ]nirchasers of bonds against loss
by reason of poorly selected invest-
.525. p. 1198. See Laws 1912, c. 232, meiits, is said to have been first ap-
sec. 70, subd. 4; sec. 170 am'd LaAvs plied in London in 188G. 5 Univer-
1913, c. 81, c. 215 : sec. 172 am'd Laws sal Cyc. "Guarantee Companies," p.
1913, c. 49: sees. 181, 182 am'd Laws 327, art. by Clarence H. Kelsey.
1913, c. 182; sec. 183 rep. Laws 1913, On contract insuring against loss
c. 182 ; sec. 184 am'd and renumbered ; of rents as insurance contract, see
sec. 183, Laws 1913, c. 182. See Re- note in 47 L.R.A.(N.S.) 29fi.
port of Board of Slat. Cons(»l. N
Y. Vol. '3 (1907), p. 2950. See §§
X. 13 herein.
lient (iuaranlee and Investment
16 -;
Guarantee Insurances. Rent guaran- 293.
tee. wl)icli is mentioned by a Avritor in
]853 as being of a cliaracter similar
to the insurance of defective titles and
the guaranteeing repayment of loans
1^ Francis' Annals of Life Assur.
(ed. 1853), p. 283. On securing
against loss Ijy giving ci'edit as in-
^urance, see note in 47 L.R.A.(N.S.)
.) T"^niversal Cyc. "Guarantee
Companies," p. 327», art. by Clarence
H. Kelsev.
17 Laws N. Y. 1886, e. Gil, p. 871.
60
SOURCES AND ORIGIN OF INSURANCES § X.
a^jpears in the Consolidated Laws.^' In England a decision was
made in 1858, which seems to be the earliest case of insurance of
mercantile credits. It apj^eared that defendants had delivered to a
guarantee compan}^ a declaration in writing containing a statement,
of the amount of their business and losses thereon for a certain num-
l)er of years preceding, and they were desirous of being guaranteed
hy the company in respect of their future annual sales in their busi-
ness, in accordance with the deed of settlement of the company and
tlie rules and by-laws thereof, and that the company had agreed to
enter into the giiarantce thereinafter contained, upon the terms
thereinafter mentioned. There were certain conditions, upon the
fulfilment of which by defendants the subscribed funds of the conir
pany were to become liable to pay a proportionate share of tlieir
losses ill respect to goods sold by them during a specified term of
years up to a designated date, and diu'ing any further period upon
compliance with certain conditions. There were other provisions
as to notice of renewal, etc. No notice having been given, the
agreement was held to have continued for the agreed period. An-
other point decided was that it did not appear that the company
was not empowered to amalgamated^ It is declared, however, in a
case decided in the United States Circuit Court of Appeals, that
''insurance against mercantile losses is a new branch of the business
of underwriting, and but few cases dealing with policie:? of that
character have as yet found their way into the courts. The neces-
sarily nice adjustments of the respective proportions of loss to be
borne by insurer and insured, the somewhat intricate provisions
which are required in order to make such business successful, and
the lack of experience in formulating the stipulations to be entered
into by both the parties to such a contract, have naturally tended
to make the forms of ])oli('y crude and difficult of interpretation." ^^
§ X. Origin of other insurances. — In England the earliest
schemes of insurances covered almost every conceivable subject or
contingency,^ but the progress of modern insurances and the safe-
See Re]:)ort of Board of Stat. Con- ^^ Solveiiev Guarantee Co. v. York,
sol. N. Y. Vol. .3 (1907) p. 2950. 3 Hurl. & Norm. 588.
^8 Laws 1909, c. 33, art. 5, sees. 20 Xebbets v. Mercantile Credit
170-184, as am'd Laws 1911, c. .525, Co. (U. S. C. C. A. 189G) 73 Fed. 95,
p. 1198. See Law.s 1912, c. 232, see. 9(j, 19 C. C. A. 281, quoted in People
70, subdv. 4; sec. 170 am'd Laws'{exrel. Kasson) v. Rose (1898) 174
1913, c. 81, c. 215; see. 172 am'd Laws 111. 310, 315, 44 L.R.A. 124, 51 N.
1913, e. 49; sees. 181, 182, am'd Laws E. 24(), per Wilkin, J.
1913, c. 182; see. 183, Rep. Laws ^ See Watford's Insurance Guide
1913, c. 182; see. 184, am'd and re- (2d ed.) 1-3, 24 et seq. As to the
numbered .sec. 183, Laws 1913, c. 182. act of 1774 in England against gam-
See § X. 13 herein, ing or wagering, and as to gaml)ling
61
§ X. JOYCE ON INSURANCE
guards thrown around them for the protection of the public have
done much to place insurance on a legitimate basis, and the neces-
sities of business have given rise to the outgrowth of many branches
of the system designed to cover special emergencies. In England,
in addition to the insurance already considered herein, such as
marine, fire, life, accidents to insured and third persons, insurance
of animals, plate glass, and other property, industrial, employers'
liability, and workmen's compensation insurances, and guarantee
insurance against loss by dishonesty or insolvency, there are at the
present time insurances against theft or burglary, also against birth
of issue, and as we have before stated there is scarcely any risk that
will not be underwritten at Lloyds.^ Throughout the United
States there are also numerous statutory provisions intended to
cover almost every contingency to which insurance is or may be
applicable.^ It is unnecessary, however, to enumerate them, al-
though some of the enactments may be briefly considered. To
illustrate: In Michigan an act was passed iii 1887 providing for
the organization and regulation of log and timber insurance conn
panics. Such insurances are intended to indemnify against the
risk of lake and river navigation in the transporting and towing of
such property.* And in that state there are also certain enact-
ments as to Michigan millei^s' fire insurance companies; manufac-
turers' fire insurance comj^anies; merchants' fire insurance com-
insurances, see §§ VI., VII. herein ^ "Few branches of industry were
and notes. As to prohibition of gam- characterized during the years 1907
bling on loss by maritime perils, see and 1908 by such a mass of new leg-
marine insurance (gambling policy) islation as the insurance business,
act 1909 (9 Edw. VII. c. 12). See During these two years the legisla-
2 Buttcrworth's 20th Cent. Stat, tares of forty-two states passed 400
(1900-1909) "Insurance," 428. As acts covering a great multitude of
to avoidance of wagering or gaming subjects. ... Of these 400 acts,
contracts, see Marine Insurance, act 333 were passed in the year 1907 and
1906 (6 Edw. VII. c. 41) sec. 4; 2 67 in 1908. ... Of these 400
Buttcrworth's 20th Cent. Stat, acts, 317 or nearly SO per cent of the
(1900-1909) p. 399. As to gam- total number, were passed by the
bling insurances, see Jack's Introduc- Western and Southern States, and
tion to History of Life Ins. (ed. only 83 were enacted by the New
1912) pp. 196-205. As to insurance England and Middle Atlantic States."
at lotteries, Besant's London in the Year Book of Legislation, Vol. 10
181 li Cent. (1903) pp. 460-462. As (N. Y. State Library, Legislation
to bubble life companies and list of Bulletins 37-39) p. 311. Review of
projects of South Sea era, see Fran- Legislation on Insurance, 1907-1908
cis' Annals of Life Assurance (ed. bv S. Huebner.
1853) pp. 63, 81. On what consti- " * Act Mich. April 16, 1887; acts
tutes insurance, see note in 47 L.I^.A. 1887, act 73, p. 80. See Howell's
(N.S.) 290. Annot. Stat. I\Iich. Suppl. 1883-1890,
2 17 Earl of Halsbury's Laws of pp. 3436 et seq., sees. 4323, c. 4 et
England, p. 512. seq.
62
SOURCES AND ORIGIN OF INSURANCES § X.
panics ; cyclone and windstorm insurance companies; live-stock
co-operative insurance companies; plate glass, accident, live-stock,
steam boiler, and fidelity insurance companies; integrity and fi-
delity insurance companies ; ^ hail insurance ; ^ insurance of auto-
mobiles, motor cars, and other vehicles, by fire and marine insur-
ance companies; insurance against bodily injury and disease; and
shoe dealers' mutual fire insurance companies, insurance of shoe
stocks^ In New York the earlier statutes consisted of charters to
individual companies, acts relating to their dissolution, and pro-
hibiting foreign companies from doing business in that state. And
the first general insurance law was passed in 1849.^ At the risk
of repetition to g certain extent it may be stated here that in that
state the insurance law of 1909 ^ contains certain general provi-
sions ; provides for life, health, and casualty insurance corporations ;
tire insurance corporations; marine insurance corporations; title
guaranty, securities guaranty, and credit guaranty corporations;
life or casualty insurance corporations upon the co-operative or as-
sessment plan; Lloyds and int«r-insurers ; fraternal beneficiary so-
cieties, orders, or associations; corporations for insurance of domes-
tic animals; and town and county co-operative insurance corpora-
tions.^" The Laws of New York, of 1913 contain provisions as to
rate-making associations;^^ and the Laws of 1912 provide as to
5 Howell's Annot. Stat. Mich. Gen'l Index Laws N. Y. (1777-
Suppl. 1883-1890, pp. 3423 ct seq. 1901), pp. 754-781.
See also public acts Mich. 1899- ^ Laws 1909, c. 33, c. 28 of Consol.
1913. Laws.
6 Public acts Mich. 1911, No. 16, ^ 2 Birdseye's, Cum. & Gilb. Con-
pp. 18-21. sol. Laws N. Y. Annot. pp. 2510-
' Public acts Mich. 1911, No. 15, 2705; 7 Id. (Suppl. 1910) pp. 546-
p. 18, No. 68, p, 93. 599; 8 Id. (Suppl. 1911) pp. 423-
As to the different kinds of insur- 495; 9 Id. (Suppl. 1912) pp. 268-.
ance authorized by laws of Iowa un- 304. See also Laws 1910, c. 634,
der McClain's Code sec. 1695, and Laws 1911, c. 150, Laws 1911, c.
amendments, see Bankers' Mutual 525, p. 1198.
Casualty Co. v. First Nat. Bk. In New York, county and town
(1906) 131 Iowa, 456, 459, 460, 108 co-operative companies were au-
N. W. 1046. thorized in Laws 1879, c. 287, and
8 Laws 1849, e. 308, p. 441. Re- Laws 1880, c. 362, Avhieh were revised
port of Board of Stat. Consol. N. Y. and consolidated by Laws 1886, c.
Vol. 3 (1907), pp. 2949, 2950. 573, Avliich amended fonn art. 9, of
For list of New York statutes re- the present general law of 1909 as
lating to insurance corporations and amended. Report of Board of Stat,
associations (alphabetically arranixed Consol. Vol. 3 (1907) p. 2949.
by name of corporation or associa- ^^ Laws N. Y. 1913, c. 26, amd'g see.
tion, and date of enactment), see 2 341 (in effect Feb'y 19. 1913) amd'g
63
§ X. JOYCE ON INSURANCE .
co-operative fire insurance corporations transacting business upon
the advance prennuni plan.^^ A statute enacted in 1912 further
provides for the formation of corporations for the purpose of mak-
ing any of tlie following kinds of insurance: (1) Upon lives or
health, and to grant, purchase, or dispose of annuities. (2) Against
injury, disablement, or death resulting from traveling or general
accident, and against disablement resulting from sickness, and
every insurance appertaining thereto. (3) Against lo.<s or damage
resulting from accident to or injury suffered by an employee or
other person, and for which the person insured is liable, and against
loss or damage to property caused by horses or by any vehicle
drawn by animal power, and for which loss or daniage the person
insured is liable. (4) Guaranteeing the fidelity of persons holding
])laces of public or i)rivate trust. Guaranteeing the performance of
contracts other than insurance policies; guaranteeing the perform-
ance of insurance contracts where surety bonds are accepted by
states or municipalities in lieu of actual deposits ; and executing or
guaranteeing bonds and undertakings required or permitted in all
actions or proceedings or by law required. Guaranteeing and in-
demnifying merchants, traders, and those engaged in business and
giving credit, from loss and damage by reason of giving and ex-
tending credit to their customers and those dealing with them.
(5) Against loss by burglary, or theft or both. (6) Upon glass
against breakage. (7) Upon steam boilers and pipes, fly-wheels,
engines and machinery connected therewith or operated thereby,
against explosion and accident, and against loss or damage to life
or property resulting thereupon, and against lo.«s of use and oc-
cupancy caused thereby. (8) Upon the lives of horses, cattle, and
other live stock. (9) Against loss or damage to automobiles (ex-
cept loss or damage by fire, or while being transported in any con-
veyance by land or water), including loss by legal liability for
damage to property resulting from the maintenance and use of J
automobiles. (10) Against loss or damage by water to any goods m
or premises, arising from the breakage or leakage of sprinklers, ™
])umps, or other apparatus erected for extinguishing fires, and of
Laws 1912, c. 175, p. 317, sec. 141 12 Laws N. Y. 1912, c. 90, p. 159
(in effect April 5, 1912) anid'g (in effect April 3, 1912) amd'o^ Laws
Laws 1909, e. 33 (e. 28 of ConsoL 1909, c. 33, sec. 267, as added by
Laws) sec. 141, as am'd by Laws Laws 1910, c. 328, and am'd by Laws
1911, c. 460. See 9 Birdseye's Cum. 1911, c. 323. See 9 Birdseye's, Cum.
& fiilb. Consol. Laws N. Y. Annot. & Gilb. Consol. Laws N. Y. Annot.
(Suppl. 1912) pp. 280-282. . (Suppl. 1912) pp. 289-29L
64
SOURCES AND ORIGIN OF INSURANCES
§ X.
water pipes, and against accidental injury to such sprinklers, pumps
or other apparatus.^^
13 Chapter 232, Laws N. Y. 1912, p.
444 (in effect April 9, 1912) amd'g
Laws 1909, c. 33, see. 70 ; sec. 70 ara'd
by Laws 1909, c. 302, Laws 1910, c.
<)37. and Laws 1911, c. 324, also by
Laws 1912, e. 231, p. 444, the amd'ts
effected by that act being: disregarded
I'.ere. See also: Laws 1914, pp. 504
et .seq. art. 2, sec. 70; Vol. 9 (Suppl.
1912) Birdseye's Cum. &_Gilb. Con-
sol. Laws, Annot. j). 27/ ; Id. Vol.
8 (Suppl. 1911) p. 434; Id. Vol. 7
(Suppl. 1910) p. 568; Id. Vol. 2, p.
2554. See § 13 herein.
As to sources of the various New
York .statutes relating to insurance,
see 2 Birdseye's, Cum. & ■Gilb. Con-
Joyce Ins. Vol. I. — 5.
sol. Laws N. Y. (Insurance Law
1909, c. 33) Annot. pp. 2510 et seq.;
Id. Vol. 9 (Suppl. 1912), pp. 2(38
et seq.; Id. Vol. 8 (Suppl. 1911) p.
423 et seq.; Id. Vol. 7 (Suppl. 1910)
pp. 2555; Id. Cumulative Suppl.
1910-1913 Vol. 1, pp. 1297 et seq.;
Cummings' & Gilbert's Gen'l Laws &
Statutes covering the Insurance Law
of 3892, c. ()90. See also: Report
of Board of Statutory Cousol. Vol.
3, N. Y. (1907) Schedule of Laws
reported. Id. pp. 2929-2948, cover-
ing laws repealed thereby, also pre-
vious repeals. See further, notes to
Schedule of Repeals, Id. pp. 2953-
2963.
65
TITLE II.
GENERAL TERMS AND DEFINITIONS.
CHAPTER I.
TERMS AND DEFINITIONS.
§ 1.
§ 2.
§§ 3,
§ 5.
§ 6.
Va
7b
7c.
7d
8.
9.
9a
10.
11.
12.
13.
13a.
13b
"Insured" and "assured" synonymous.
Definition of insurance.
4. (transferred to §§ 338d, 339c herein).
Definition of marine insurance.
Definition of fire insurance.
Definition of life insurance.
. Definition of assessment insurance.
. Definition of industrial insurance.
Definition of burial insurance.
. Definition of workmen's industrial insurance : state insurance :
pulsory insurance : workmen's compensation.
Definition of accident insurance.
Definition of casualty insurance.
, Definition of employers' liability or indemnity insurance.
Definition of endowment insurance.
Definition of tontine insurance.
Definition of guaranty insurance.
Definition of real estate and title insurance.
Definition of rent insurance : rent guaranty insuraneie.
, Definition of strike insurance.
com-
§ 1. "Insured" and "assured" synonymous. — Some writers have
attempted to distinguish between the terms '^insured" and "as-
sured." ^ But an examination of the eai'ly English cases and stat-
utes does not di.^eover any distinction between them as applied to
the subject of insurances.^ Lord Bacon ^ says this "kind of con-
^ Babba,2e on Assurance of Lives; to draw tlie parties assured to .seek
13 Encvelopedia Britaiinica, 169. their moiiov.s of everv several assur-
2 See" preamble, 4."> Eliz. c. 12 er." See also Stat. 6 Geo. I. c. 18
(1001) which reads: Whereas, here- (1719) ; Stat. 19 Geo. II. c. 37
tofore, "assurers," etc., "have souglit (1746); Stat. 14 Geo. 111. c. 48
6G
TERMS AND DEFINITIONS
§1
tract is commonly called 'policy of assurance' or 'insurance.' " Mr.
Hopkins * asserts that their meaning is identical, and bases his state-
ment on the derivation of the words. Mr. Arnould * says: ''The
party indemnified, called the a.ssured in the act,® is sometimes also
called the inspired." "^ Other writers use the term indiscriminately.
jMr. Justice Field, in Connecticut Mutual Life Insurance Co. v.
Luchs,* declares that "there are undoubtedly instances where this
distinction between the terms 'assured' and 'insured' is observed,
though we do not find any judicial consideration of it." In this case
a ])olicy was issued on I/s application, by which the company agreed
to insiu'e the life of D., and to pay the money to the "assured"
after due notice and proof of D's death, and it was decided that the
term "assured" must be held as applicable to L., as being the party
for whose benefit the insurance was intended, the court saying:
"The application of either term to the party for whose benefit the
insurance is effected or to the party whose life is insured has gen-
erally depended upon its collocation and context in the policy." ^
(1774) ; Tlie assurance companies act
1909 (7 Edw. VII. c. 49) noted under
§ 4 lierein.
"Asfiuraiices" related formerlif to
the conveyance of property in Eng-
land, as is evidenced by Sfieppard's
worlv entitled "The Touchstone of
Common Assurances ... or con-
veyances of the Kingdom." So, in
!1627, Charles I. introduced a pro-
ject "for . . . making and regis-
tering . . . assurances."
^Bacon's Abi'idgement (ed 1778)
598, r)99.
* Hopkins Marine Ins. (ed. 1867)
4C.
^Arnould on jVIar. Ins. (8th ed.
Hart & Simey) sec. 1, p. 3.
6 Marine Ins. act 19()() (G Edw.
YII. c. 41) entitled "An Act to Codi-
fy the Law Relating to Marine in-
surance."
'In the earlier edition of Arnould
(6th ed. Maelachlan's) it is said:
"The party interested in the proper-
ly insured is called the insured or as-
sured," p. 16.
8 108 U. S. 498, 504, 27 L. ed. 800,
2 Sup. Ct. 9-19.
^ See also Cvrenius v. Mutual Life
Ins. Co. 73 Hun (N. Y.), 365, 26 N.
Y. Supp. 248, 55 N. Y. St. Rep. 897
(aff'd 145 N. Y. 576, 50 N. E. 225).
In this case the court said: "It is
to be observed that in the policy the
amount is payable 'to the said a.s-
sured, his executors, administrators,
or assigns.' The question is. Does
the term 'assured' refer to George A.
Cvrenius, who is recited to have paid
the consideration, or to Alvin Cvreni-
us, whose life was the subject of the
insurance? In determining this qttes-
lion the application may properly be
referred to. That was executed by
both Alvin and George A., and on
its face stated that it was the basis
and part of the contract. It is re-
ferred to in the policy as furnishing
in part the consideration. The iiolicy
is staied to be issued upon the faitli
of the statements and declarations
made in the application. Both are
jiart of one transaction, and are to
ite read together in determining its
character and effect. Reading the
policy and application together, it ap-
]>ears that George A. Cyrenius wa.s
the ai)idicant for the insurance, and
was the person for whose benelit it
was to be effected. Tlie policy re-
cites that the money consideration is
received from liim, and in the com-
plaint it is alleged that he paid it.
67
II
§ 1 JOYCE ON INSURANCE
This case was expressly followed in Brockway v. Connecticut Mu-
tual Life Insurance Company,^" which latter case wii^s based upon
substantially the same material facts and precisely the same policy,
the court holding that the same construction should be given the
term "iissured"' as was given in Connecticut Mutual Life Insurance
Company v. JaicIis.^^ So in other cases this term has been held
to mean the person for whose benefit the insurance was made,
rather than the one upon whose life it dei>ends,^2 On the other
Sueli being- the ease, aecording to the ers Ins. Co. v. Pacaud, 150 III. 245,
doctrine laid down in Smith v. Aet- 41 Am. St. Rep. o55, 37 N. E. 400
na Life Ins. Co. 5 Lans. (N. Y.) 545, (policy was on o-rain, "assured's
the a.ssured should be deemed to be property, or held by assured in trust
George A. Cyrenius. A similar view or on fomniission or sold but not dc-
is taken in Connecticut Mutual Life livered." it was held that where the
Ins. Co. V. Luchs, 108 U. S. 4!)8," 27 party contracts for the insurance
L. ed. 800, 2 Sup. Ct. 049. It also ])a\s the premium, and the company
appeared in this case that the father makes tiie loss i)ayable to such i)arty,
iurnished the money for the fir.st pre- the agreement to pay is a contract
mium and tlie greater part of the with the person who pays the con-
other premiums, and that the policy sideration, and he has a right of ac-
was delivered by the son to the fath- tion in his own name, altliough the
er, but there was no evidence of an insurance is in the name of another,
intent to transfer the title, and no no discussion as to "assured" or "in-
assignment was alleged in the com- sured") ; Washington Life Ins. Co. v.
plaint. Hanev, 10 Kan. 525 (declarations of
1° (U. S. C. C.) 29 Fed. 766. partv" where life is insured for the
" 108 U. S. 498, 504, 27 L. ed. 800, benelit of another, made long after
2 Sup. Ct. 949. In tlie Brockway applicniion and policy cannot be re-
Case it was held that "assured'.' re- ccived in evidence against assured
ierred to the one on wiiose applica- to impeach application. Party in-
tion the policy was issued, who was sured was not a party to the record,
the beneficiary and paid the i)remium, No discussion as to distinction be-
and that the personal representative tween assured and insured cited and
of the per.son on whose life the ])oli- qnoled from in N'allcy Mutual Lite
cy was issued could not maintain an Assoc, v. Teewall, 79 Va. 421, but
action on the contract. the question there was only as to the
See the following cases: ^Vav- admissibility of certain evidence and
nock V. Davis, 104 U. S. 775, 26 L. there was no discussion as to insured
ed. 924 (question here was one of or assured). In Irving v. Manning
right of person wiio lias insured his 4 II. L. Cas. 303, 1)07, in the opinion
own life to assign it to parties hav- of the judges the words '"assured"
ing no insurable interest. Mr. .Ins- and "policy of assurance'' are used,
lice Field, who delivered the opinion. ^^ Ilogle v. Guardian Life Ins. Co.
[he also delivered the opinion in the 4 Abb. Pr. N. S. (X. Y.) 346, 348,
Connecticut Mutual Life Ins. Co. 6 Rob. (29 N. Y. Sup. Ct.) 567;
Ca.se above noted] uses the word "as- ^I'^tua L. Ins. Co. v. France, 94 V. S.
sured" throughout in reference to 5()2, 24 L. ed. 287. In this ca.se the
the fiarty on whose Hie the |)olicy ])olicv provided that the sum insured
was issued, but there is no discussion should be paid "to the said assured,
as to "assured" or "insured ") ; Trad- her executors," etc., and the policy
68
II
TERMS AND DEFINITIONS
hand, in Campbell v. New England Mutual Life Insurance Corn-
was effected by a brother for a sis- son who must pay the premiums, and
ter's benefit. Reynolds on Life Ins. is therefore obligated to pay all out-
sec. 22. See also Ferdon v. Cantield, standing indebtedness in case the
104 N. Y. 143, 145, 10 N. E. 140 policy should lapse, and whose de-
(Rapailo, J. said: "Although the fault forfeits the policy, that . . .
life of" C. "was the life insured by in order to effect a forfeiture of the
the policy, he was not the party a,s- policy it was necessary to be shown
sured thereby. His life was the sub- in the language of section 3 of chap-
.ject of insurance but the contract ter 341 of the Laws of 1876 'that
does not, on its face, purpoi't to have the notice to the assured has been
been made either with hiui or for his f\^^\y addressed and mailed by the
benefit, nor does he appear to have
had any interest therein which he
could assign." Policy was on the
Tontine plan and question wa.s of
the rights of assignee of the person
whose life was insured. The policy
company is.suing such policy to
the assured,' and that in this case the
person 'assured,' and to whom the
policy was issued, wa.s the plaintiff,
and that she, in this case also answers
whose lite was insured ine poncy ^^^^ description of the 'person whose
was taken out by and the premiums » ^^ ^g-_„
were paid by the beneficiaries
to whom the amount of insurance
was payable) ; Rowe v. Brooklyn
Life Ins. Co. 38 N. Y. Supp. 621, 16
Misc. 323 (upon the application of
the wife, a policy was issued and de-
livered to her upon her Inisband's
life is assured' in the act of 1877") ;
New York Life Ins. Co. v. Ireland,
— Tex. — , (1891) 14 L.R.A. 278,
281, 17 S. W. 617 (a person is not
entitled to the benefit of a tontine
policy payable to his wife and chil-
dren as the "a.ssured." He has
life, she paid the premiums, and was neitiier any nght.s as tru.stee to said
to receive the amount of the insur
ance in the event of her husband's
death, or in case she died first, then
said insurance was to be paid to her
heirs, etc. She as beneficiary was
held to be the "assured" within the
statute of 1876 of that state requir-
ing, in order to effect a forfeiture
of" the policy for nonpayment of
benefits, nor any legal title to the
])()]icy even though he has always
held possession and control thereof,
has paid the premiums and the bene-
liciaries have never known of the in-
surance).
"Beneficiar}i'- and "assured," said
io be syiwni/mous terms Fnion
Fraternal League v. Walton, 109 Ga.
premiums a "notice to the assured" 1, H, 77 Am. St. Rep. 350, 46 L.R.A.
and also that she was the "person 424, 34 S. E. 317, dissenting opinion
whose life is assured" under the of Lumpkin, P. J., contract was bv
statute 1877. Wright, J., said (Id.
p. 623) : "Under the statutes, and the
authorities construing the legislative
intent, it must be held, where the
contract is made with the beneficiary.
benefit society with member, and
said by court to differ from ordinary
life insurance.
The word "assured" is sometimes
applied to the beneficiary; but it is
to whom the policy is delivered, and generally synonymous with the
to whom it is payalile during lier word "insured," and the meaning of
life, and after her death to her ex- the term "assured" is to be derived
ecutors and administrators, and from the connection, as well as upon
where the pereon on whose life the 1 he fact of who procured the policy,
policy risk is taken has no interest— and with whom the contract was
present, future or contingent— there- made, thus a third party may be the
in, and where the beneficiary is "a.ssured." Chandler v. Traub, 159
designated in the policy as the per- Ala. 519, 49 So. 241, the court, per
69
§ 1 .lOYCK OX INSLl.'ANCE
paiiy/^ the polu y was issued upon tlic life of A. to him, as '•'the
assured," and the promise was to pay the sum insured to the as-
sured, his executors, etc.. lor the henetit of his brother's wife, and the
court dechn-ed that tlie phiintiff did not, by virtue of the clause de-
claring the policy to be for her benefit, become the assured; that
she was merely the person designated by agreement of the parties
to receive the proceeds of the poHcy on the death of the assured.
There was, however, no discussion as to the meaning of tliese
terms." In a Massachusetts case ^^ tlie words "insured" or ''as-
sured" in a mutual fire insurance policy were held to apply to the
person who owned the property, applied for the insurance, paid the
premium, and signed the deposit note, and not another to wIkhu
the money was payable in case of loss, although he might have a
lease of the premises. Under the standard policy the word '"in-
sured" includes ''legal representatives." ^®
Simpson, J., says, however: "We wood v. Agricultural Ins. Co. 73 N.
lliink that, in our statute, the word Y. 447. 451. Cited in Matthews v.
applies to the person whose life is American Central Ins. Co. 154 N. Y.
insured." Id. -Vi^. 449, 452, 39 L.R.A. 433, 48 N. E.
1^98 Mass. 381, 389. '51, upon point as to legal repre-
" See also Hurlburt v. Pacifle sentatives of assured, including heirs
Ins. Co. 2 Sum. (C. S. C. C.) 471, at law, etc., cited in Matthews v.
479, Fed. Cas. No. 6919. American Central Ins. Co. 41 N. Y.
15 Sanford v. Mechanics' Mutual Supp. 304, 308, 9 App. Div. 339,
Fire Ins. Co. 12 Cash. (66 Mass.) 344; Lawrence v. Niagara Fire Ins.
541. Co. 37 N. Y. Supp. 8il, 812, 2 App.
16 Under a standard policv pro- Div. 267, 269, affirmed (mem.) 154
vision that the word "insured," N. Y. 752, 49 N. E. 1099, which
wherever it occurs, shall be held to holds that where a fire policy upon
include the "lesal rein-esentatives of real propertv runs to insured's legal
the insured," the term "legal repre- representatives, his executor or ad-
sentatives" refers to tliose who sue- ministrator may properly bring an
ceed to insured's legal rights, by action for loss after his death. This
reason of his death or the transfer of last case is cited in Matthews v.
the policy, and should not be eon- American Central Ins. Co. 41 N. Y.
strued to include anyone wlio is Supp. 304, 308, 9 App. Div. 339,
authorized to act for insured. Metz- 344, as simply holding that action
ger V. Manchester Fire Assur. Co. may be brought by personal repre-
102 ]Mich. 334, 63 N. W. 650. See sentatives. The Wyman case is also
Wvman v. Wvman (de<'ided in cited in Kanes Estate, In re, 77 N.
1863) 26 N. Y.' 253, where it was Y. Supp. 874, 878, 38 Misc. 276.
decided that if one ha.s effected in- Legal representatives as bene-
surance upon a house against loss by ticiaries, see §§ /86, 793 herein,
fire, the interest in the policy de- The Georgia Code uses as part
volves upon liis lieirs at law, and the of the detinition of insurance upon
damages accrue to them in case of life the words: "The life may be
loss. Distinguished in Herkimer v. that of assured, or of another in
Rice, 27 N. Y. 163. 166, see also Id. whose continuance the assured has
180, as to effect of judgment in the an interest." Ga. Civ. Code, sec.
Wyman ease. Distinguished in Sher- 2114 (Code 1911, sec. '2496). Union
70
TERMS AND DEFINITIONS , § 1
In determining whether the word "insured" or "assured" ap-
plies to u mortgagor or mortgagee, the circumstances will be con-
sidered and the words construed and applied in the sense in which
they were understood by the immediate parties to the contract
whereby the insurance was effected.^'^
But the words '"insured"* and "assured" may both apply to a
grantee with a lien back to the grantor.^*
Fraternal League v. Walton, 109 inserted in the policy, citing Eddv
Ga. 1, 3, 77 Am. St. Rep. 350, 46 v. London Assur. Co. 143 N. Y. 311,
L.R.A. 424, 34 S. E. 317. Under 25 L.R.A. 686, 38 N. E. 307; Hast-
Herron's Savle's Tex. Civ. Stat, ings v. Westchester Fire Ins. Co. l'.\
(Suppl. 1908-1910, p. 233) Tit. 58, N. Y. 141, 147, 154; I^wis v. Guardi-
chap. 11. .sec. 1, Tex. Rev. Stat. 1895, an Ins. Co. 181 N. Y. 397, 106 Am.
Art. 3096a, "The 'insured' or 'policy' St. Rep. 557, 74 N. E. 224) ; De Witt
holder is the person on whose life v. Agricultural. Ins. Co. 89 Hun (96
the policy of insurance is effected." N. Y. Sup. Ct.) 229, 36 N. Y. Supp.
^' Liveri^ool & London & Globe 520 (where an owner of property
Ins. Co. V. Davis, 56 Neb. 684, 77 N. obtains insurance thereon, and then
W. 66 (where, as I)et\veen the parties sell.s said property with a mortgage
to the contract wlien the insurance back, and the policy is indorsed to
was effected, the protection of the said vendee as the owner, with loss
policy was applied and paid for payable to the mortgagee as interest
solely on behalf of the mortgagee, the may appear, and said vendee and
'■insured;' in a clause voiding the mortgagor contracts to sell to an-
policy for concealment or misrepre- other party, who enters into posses-
sentation, will be construed to mean sion, and obtains a policy in another
the mortgagee, and not the mort- company, and thereafter the original
gagor. In this case it was also held policy is indorsed to him as owner,
that where a policy was made out but without his knowledge at the time
describing the mortgagor as owner, it was made, said last owner of the
with a mortgage slip, making loss or property is not, at the time of
damage payable "for the account of the issuance of the second policy, the
the fissured" to the mortgagee, such insured under the policy issued to the
clause does not make the loss pay- first owner, although he was the in-
ai)le to the mortgagor, but to the sured, if at all, a.s of the time said
mortgagee to be applied to the mort- original policy was indorsed to him) ;
gage indebtedness) : Watertown Fire Armstrong v. Agricultural Ins. Co.
Ins. Co. V. Grover'& Baker Sewing 56 Hun (63 N. Y. Super. Ct.) 399
Mach. Co. 41 Mich. 131, 32 Am. Rep. ("assured'' is mortgagee where the
146, 1 N. W. 961 (mortgagee Avas policy to owner makes loss payable
held one of the jiarties "assured," un- to former as interest may appear,
der provision of policy that "in case and as such "assured" must deliver
of loss the assured shall give imme- preliminary proof of loss) ; Hastings
diate notice") ; Lewis v. London v. Westchester Fire Ins. Co. 12 Hun
Ji Lancashii-e Fire Ins. Co. 137 N. (19 N. Y. Super. Ct.) 416 {''assured"
Y. Supp. 887, 78 Misc. 176 {''in- held to apply only to the owner and
sured" under sec. 122 of N. Y. Ins. moitgagor, and not to the morl-
Law, providing for cancelation of gagee's interest).
policy upon request of "insured/' ^* The grantee with lien back to
etc., includes a mortgagee for whose grantor to whom original policy is
benefit a mortgage clause has been assigned, with insurer's consent, be-
71
§ 1 JOYCE ON INSURANCE
Again, the circumstances and construction of the policy may
show that the owner of the cargo is meant by the "assured," ^' or
that forwarders of tlie cargo are the "a.ssured,'" ^° or that a towing
company, and not the cargo owner, is the assured.^
Where the loss was payable to the "assured" under an agree-
ment to reinsure, it was decided that by "assured" was meant the
company reinsured, and not the assured under the original policy.^
And if parties agree to "reinsure" loss if any, "payable to the as-
sured upon the same terms juid conditions, and at same time as
contained in the original policies," the word "assured" means the
reinsured company, and not the assured in the original policies.^
The construction, however, does not appear in any of these cases
to have turned upon any distinction between the terms themselves,
but rather upon the relation which they sustained to the other
words of the policy, and were construed as they were for the pur-
pose of effectuating the intent of the parties to the contract, and de-
termined that the loss was payable to the party whose interest was
intended 'to be covered where the description might apply to iixjre
romes the "insured'' under the new
contract thereby created Avith the
insurer, within a clause against
other insurance, etc. Such grantee
is also the "assured" under a rider
with a provision making the loss
proven due "assured" payable to the
grantor (original policy holder) "as
interest may appear." Dumphy v.
Commercial Union Assur. Co. Ltd.
— Tex. Civ. App. — (1911), rehear-
ing denied (1912) 142 S. W. 116.
^^ Under a clause, "the insurers are
to be subrogated to all the rights of
the assured under their bills of lad-
ing or transportation receipts," the
words following "assured" show that
the owner of the cargo is meant by
the "assured," where also the premi-
um was added to the freight and
paid by the owners of the cargo, and
it is evident from the facts and the
construction of the policy and the
certificate that said policy was in-
tended to protect them, and the in-
surer was entitled to subrogation to
said assured's rights. Merchants &
Miners Transp. Co. v. Robinson-
Baxter-Dissowav Towing & Transp.
Co. 113 C. C. A. 427, 191 Fed. 7C9.
^^ Loss was payable to *'the assured
or order, and return of this certifi-
cate." The forwarders of a cargo
insured it as part of the price of
freight agreed upon. A certificate
payable to order was issued to them,
and they indorsed and delivered thi.s
to the owners. The name of the
forwarders alone was entered in the
policy book wiiliout any additional
words as "for whom it may concern,"
nor did the certificate contain th^se
or any equivalent words, nor were
they descnbed as agents. It Avas
held that said forwarders, the per-
sons named, were the "assured."
The Sidney (U. S. D. C.) 23 Fed.
88
in. A. Baxter, The (U. S. D. C.)
182 Fed. 030. Policy was +akon out
by towing company on barge cargo,
but loss was payable to cargo owner;
case of subrogation to assxred's
rights, but recovery not authorized
against towing company for in-
surer's benefit for fault for collision.
^ Carrin2:ton v. Commercial Fire
& Marine Ins. Co. 1 Bosw. (N. Y.)
152.
^ Carrington v. Commercial Fire &
Marine Ins. Co. 1 Bosw. (N. Y.) 152.
72
I
TERMS AND DEFINITIONS § 1
than one. We cannot discover that any distinction of practical
vakie has ever been made by the text-writers or the courts in the
use of these words, except in those cases where their meaning or ap-
phcation has depended upon the construction of some particuhi:
policy, and we shall therefore use the terms throughout this work
as synonymous.*
§ 2. Definition of insurance. — Insurance, strictly defined, is a
contract wliereby one for a consideration agrees to indonmify an-
other for liability, damage, or loss by certain perils to which the
subject may be exposed, but the contracts of life insurance and of
accident insurance covering death are not strictly contracts of in-
demnity.* Emerigon ^ defines insurance as ''a contract by which
one promises indemnity for things transported by sea, deducting a
price agreed upon between the assured, who makes or causes to be
made the transport, and the insurer, who takes upon himself the
risk and burdens himself with the event," and he adds: "This
definition is taken from the Guidon la jMer, and is the doctrine of
all our authors."' He also says that it "is a contract by which one
takes upon himself the peril which the property of others encoun-
ters upon the sea.' This definition, of course, relates to marine in-
surance, as do the early definitions. Many other definitions of
insurance have been given.^ It is said in Funke v. Minnesota
*See Bouvier's Law Diet.: Bacon's person." This definition is given by
Benefit Societies and Life Ins. (ed. Gray, J., in Commonwealth v.
1888) see. 19, p. 22; Id. (ed. 1894) Weatherbee, 105 Mass. 149, 160,
see. 19, p. 27; 13 Am. & Eng. Eney. cited or quoted with approval in the
of Law, 630. following cases :
5 See sees. 24 et seq. for this dis- A labama. — Suj^reme Commandery
tinction. On what constitutes in- Knights of the Golden Rule v. Ains-
:-.urance see note in 47 L.R.A.(N.S.) worth, 71 Ala. 430, 443, 46 Am. Rep.
290. 332, per Brickell, C. J.
6 Emerigon on Ins. (Meredith's Jvawsas.— State (ex rel.) v. Vigi-
ed. 1850) "c. i. p. 2. lant ln.s. Co. 30 Kan. 585, 587, 2 Pac.
' Emerigon on Ins. (Meredith's ed. 840, per Brewer, J.
1850) c. i. p. 4. Kentucky. — Sims v. Commonwealth,
8 "A contract of insurance is an I'l-* Ky. 827, 828, 71 S. W.
agreement bv which one party, for 929. r^^ a- tt ■ i
a consideration (which is usually Massachusetts.— C\&^m v. United
paid in monev either in one sum or States Credit System Co. 16o Mass.
at different times during the con- 501, 52 Am, St. Rep. 528, 43 N. E.
tinuance of the risk), promises to 293.
make a certain payment of money il//.s.soMr/.— State v. Merchants
upon the destruction or injury of Exch. Mut. Ben. Soe. 72 Mo. 146, 159,
something in which the other party per Napton, J.; State (ex rel.
has an interest. In fire insurance Beach) v. Citizens Benefit Assoc. 6
and marine insurance the thing in- Mo. App. 103, 169.
■ sured is property; in life or accident Nebraska.— ^iiviQ v. Farmers Ben.
insurance it is the life or health of a Assoc. 18 Neb. 276, 281, 25 N. W. 81.
73
-f»l
§ 2
JOYCE OX INSURANCE
Suittli Dakota. — Masonic Aid As-
soc. V. Taylor, 2 S. Dak. 324, 329,
50 N. W. 93.
"An insurance in relation to prop-
erty is a contract whereby the in-
surer becomes bound for a definite
consideration, to indemnify tlie in-
sured asrainst loss or dama2:e to cer-
Commonweahh, 87 Pa. 173, 183, 30
Am.- Rep. 352.
Insurance is a contract of in-
demnity, in which the parties may
stipulate for the manner and time in
which that indemnity sliall be made,
and the law will enforce such con-
tract. Commonwealth Ins. Co. v.
tain property named in the ])olicy, by Sennett, 37 Pa. St. 205, 78 Am. Dee.
rea.'Jon of certain perils to which it 418.
may be exposed." Dover Glass Insurance "is a contract whereby
Works Co. V. American Fire Ins. Co. one party agrees to wholly or
1 ilarv. (Del.) 32, 45, 65 Am. St. partially indemnify another for loss
Rep. 264, 29 Atl. 1039, per Wolcott, or damage which he may suffer
Chan. from a specified peril." Shakman v.
"Insurance is an agreement by United States Credit System Co. 92
which the insurer, for a con.'iidera- Wis. 366, 374, 53 Am. St. Rep.
lion, agrees to indemnify the assured
against loss, damage, or prejudice to
certain property de.'^cribed in the
agreement, for a specified period, by
reason of specified perils." Barnes
V. People, 168 111. 425, 429, 48 N. E.
91.
Insurance is "an agreement bv
920, 32 L.R.A. 383, 66 N. W. 528.
"Insurance is a contract by which
the one party, in consideration of a
price paid to liim adequate to the
risk, becomes security to the other
that he shall not suffer loss, damage,
or prejudice by the happening of
the perils specified to certain things
which one party, for a con.sideration, which may be expo.sed to them. If
])romises to make a certain payment this be the general nature of the con-
of money upon the destruction or tract of insurance, it follows that it
injury of something in which the is applicable to protect men against
otlier party has an interest."
Rensinhouse v. Seelev, 72 Mich. 603,
617, 40 N. W. 765. '
"A contract of insurance is intend-
ed as an indemnity against an un-
certain event, which, if it occurs, will
cause loss to the assured." Cross v.
uncertain events which may in any
wise be of disadvantage to them; not
only those persons to whom posi-
tive loss may arise by such events,
occasioning the deprivation of that
which they may possess, but those
also who in consequence of such
National Fire Insurance Company, events may have intercepted from
132 N. Y. 133, 30 N. E. .390.
Insurance is a contract whereby,
for an agreed premium, one party
undertakes to com))ensate the other
for loss on a specified subject by
specified perils (conclusion of defi-
nition is same as that given in Dover
Class Works case, ante). State (ex
them the advantage or jirofit, which
but for such events they would
acquire according to the ordinary
and probable cour.se of things."
Lucena v. Craufurd, 5 Bos. & P. 269,
300, 301, per Lawrence, J. This
definition down to and including
the words "mav be exposed to them"
rel. Sheets) v. Cincinnati, Chicago & is quoted with approval in Cum-
St. Louis Rv. Co. 68 Ohio St. 9. 30, mings v. Cheshire Countv Mut. Fire
90 Am. St. Rep. 635, 64 L.R.A. 405, Ins. Co. 55 N. H. 457, 458, per Fos-
67 N. E. 93, quoting Bouvier's Law ter, C. J., although the court gives
Diet. (Rawle's Rev.) 1668. preference to the definition of Black-
"A contract of insurance is mere- stone (2 Blaekstone's Commentaries,
ly a guaranty against loss of prop- 458: 2 Hamond's ed. 696: Chase's
erty by fire or marine disaster." In- Blackstone, 567) which is this: "A
surance Co. of North America v. policy of insurance is a contract be-
74
i
TERMS AND DEFINITIONS § 2
Farmers' Mutual Fire Insurance As.<ociation ® that "{he word 'in-
surance' in coininon speech and with propriety is used quite as
often in the sense of contract of insurance or act of insuring, as in
that expressing tlie abstract idea of indemnity or security against
tween A and B, that upon A's paying
a premium equivalent to the liazard
run, B will indemnify or insure liim
against a particular event." See
Paterson v. Powell, 9 Bing. 320, per
Tindal, J., and Mr. Sergeant Cole-
ridge's argument.
Mr. Marsh (ill (Marshall on Ins.
[ed. 1810] 1) defines the contract as
one "whereby one party, in con-
sideration of a stipulated sum, under-
takes to indenuiify the other against
certain perils or risks to which he is
exposed, or against the happening of
some event." Mr. Mail's (May on
Ins. [3d ed.] sec. 1) definition of in-
surance is : ''A contract whereby
one for a consideration undertakes to
compensate another if he shall sutfer
loss," and he says it is substantially
the definition given long ago by
Roecus. This last definition is also
liiven by Mr. Field: (Field on Dam-
ages [2d ed.] see. 561.) Mr. Phil-
lips (Phillips on Ins. [3d ed.] sec.
1) says: "Insurance is a contract
whereby, for a stipulated considera-
tion, one party undertakes to in-
denmify the other against darnage
or loss on a certain subject by certain
])erils." See Bacon's Abridg. (4tli
ed.) 598, 599; Rapalje & Law-
rence's L. Diet. 667; Smith's Com-
mon Law, 299.
For other definitions of insurance
see the following cases :
-Ufiited States. — Physicians Defense
Co. V. Cooper, 47 L.R.A.(N.S.) 290,
199 Fed. 576, 578, 579, 118 C. C. A.
50, case affirm.s 188 Fed. 332 (under
Cal. Civ. Code, sec. 2527).
California. — Whitney Estate Co.
V. Nortliern Assur. Co". irjT) Cal. 521,
101 Pac. 911; Union' Ins. Co. v.
American Fire Ins. Co. 107 Cal. 327,
330, 28 L.R.A. 692 (both qvotiug
Cal. Civ. Code, sec. 2527).
Tlli>wis. — People (ex rel. Kasson)
V. Rose, 174 111. 310, 312, 316, 44
L.R.A. 124, 51 N. E. 246; Vreden-
burgh V. Physicians Defense Co. 126
111. App. 509, 512.
7Hf//f/«a.— State v. Willett, 171
Ind. 296, 23 L.R.A.(N.S.) 197, 86
N. E. 68.
Kentiicki/. — New York Life Ins.
Co. V. Klopton, 7 Bush. (70 Ky.)
179, 185, 3 Am. Rep. 290.
Maine. — Buffalo Fertilizer Co. v.
Aroostook Mutual Fire Ins. Co. 109
Me. 483, 84 Atl. 1078 [quoting Me.
Rev. Stat. 1903, p. 471, c. 49, sec.
Minnesota. — Physicians Defense
Co. V. O'Brien, 100 ]\Iinn. 490, 495,
111 N. W. 396 {quoting Minn. Rev.
Laws 1905, .sec. 1596).
Missouri. — Isaac H. Blanchard Co.
V. Ilamblin, 162 Mo. App. 242, 144
S. W. 880.
Sew Jersey. — Piries v. First Rus-
sian Slavonic Greek Catholic Benev.
Soc. 83 N. J. Eq. 29, 89 Atl. 1036.
Pennsiilvamia. — Commonwealth v.
Provident Bicvde Assoc. 178 Pa.
636, 638, 639, 36 L.R.A. 589, 36 Atl.
197; Commonwealth v. Equitable
Ben. Assoc. 137 Pa. 412, 418, 18 Atl.
1112.
South Dakota. — Lawver v. Globe
.Alut. Ins. Co. 25 S. Dak. 549, 560,
127 N. W. 615.
Tennessee. — American Surety Co.
V. Folk, 124 Tenn. 139, 141, 135 S.
W. 778, 40 Ins. L. J. 1074 {quoting
Tenn. acts 1895, c. 160, sec. 2; acts
1899, c. 31, regulating the business of
all insurance other than life and
casualty. The case gives also a
general definition of insurance).
Texas. — American Legion of Hon-
or v. Larmour, 81 Tex. 71, 16 S. W.
633.
9 29 Minn. 347, 354, 43 Am. Rep.
216, i3 N. W. 164, per Dickinson, J.
75
§§ 3-5 JOYCE ON INSURANCE
loss." This construction was in a case where tlie condition was
against making any insurance in any other coniijany. Insurance
was early delined by statute in Knghuid,^" and it is now defined
under the statutes in several of the United States."
§§ 3, 4. (Transferred to ^S :'.;*.Sd, 839c herein).
§ 5. Definition of marine insurance. — Marine insurance is a con-
tract whereby one for a consideration agTees to indemnify another
for loss or damage on a certain interest, subject to marine risks by
certain perils of the sea or specified casualties during a voyage or a
fixed period. This branch of insurance includes risks of river navi-
gation and of raihvay and other land carriage connected with sea
transit. ^2 Another definition is this: "INlarine insurance is a con-
i"The statute 43 Elizabetli, cliap- Codes (Civ.) 1902, Porto Rico, sec.
ler 12, declares tliat a policy of as- l(i93.
surance is when a merchant a:ive.s a See also the following statutory
consideration in money to othei-s to definitions :
assure his goods, sliip, or other Alabama. — 2 Ala. Code (Civ.)
things by him adventured, upon such 1907, sec. 4544 (2596).
terms as may be agreed between the Dakota. — Codes (Levisee) p. 1027,
merchant and assurers. see. 1474.
^^ Insurance is a contract whereby Massachusetts. — Suppl. 1902-1908
one undertakes to indemnify another to Rev. Laws, p. 1159, sec. 3 jRov.
against loss, damage, or liability aris- L. 118, sec. 3 ; Laws 1907, c. 576, p.
ing from an unknown or contingent 840).
event: Cat. Civ. Code, see. 2527. Montana. — Rev. Codes (Civ.) 1907,
"A contract of insurance — life ex- sec. 5545 (sec. 3370).
cepted — is an agreement by which North Dakota. — Rev. Code, 1899,
one party for a consideration sec. 4441.
promises to pay money or its equiva- Oklahoma. — Snyder's Comp. Laws
lent or do some act of value to the 1909, sec. 3722, p. 883.
assured upon the destruction or in- South Dakota. — Rev. Codes (Civ.)
jury of something in which the other 1903, sec. 1703, p. 805.
party has an interest." Me. Rev. Tennessee. — Shannon's Annot.
Stat. 1903, p. 471, c. 49, sec. 1. Code 1896, sec. 3275 (Laws 1895, c.
Insurance is "any agreement where- 160, sec. 2) Laws 1899, c. 31.
by one party for a consideration ^^ gp^ Hopkins on Ins. (ed. 1867)
undertakes to indemnify anotlier to a 53. Commonwealth v. Weatherbee,
specified amount against loss or dam- 105 Mass. 149, 160. See also defini-
age from specified causes, or to do tion of insurance by Kmerigon, given
some act of value to the assured in under § 2 herein,
case of such loss or damage." Minn. Application of principles of ma-
Rev. L. 1905, sec. 1596. line insurance to all insurances, see
"An insurance contract is. one by note at end of § I. herein,
which the underwriter is liable for "Insurances mail he divided into
the fortuitous damages which may general and special. A general in-
occur to the insured personal or real surance is Avhere tlie perils insured
property, in consideration of a cer- against are such as the law would im-
tain price, which may be unre- ply from the nature of a contract of
strictedly fixed by the parties." Rev. a marine insurance considered in
76
TERMS AND DEFINITIONS
§ 5
tract of indemnity against all losses accruing to the subject-matter
of the policy from certain perils during the adventure." ^^ Marine
itself, and supposing none to be ex- [Stli ed. Hart & Simey] ) defines
pressed in the policy. A special in- this contract as that ''whereby one
suranee is where, in addition to the party, for a stipulated sum, under-
implied perils, further perils are ex- takes to indemnify the other against
pressed in the policy; and they may loss arising from certain perils or
be specified or the insurance may be sea risks to which his ship, merchan-
agaiiist all perils." Vandenheuvel v. dise, or other interest may be exposed
United Ins. Co. 2 Johns. Cas. (N.
Y.) 127, 150, a policy on freight.
13 Llovd V. Fleming, L. R. 7 Q. B.
D. 299, 302, per Blackburn, J.
during a certain voyage or a certain
period of time." Mr. Duer's defini-
tion (1 Duer on Ins. [ed. 1845]
1) is very brief, being this: "Marine
"Insurance has been described as insurance is a contract of indemnity
'a fixed sum as the price of risk.' " jvgainst the perils of the sea." While
Barnstable, Tlie (U. S. D. C.) 84 Chancellor Kent (3 Kent's Commen-
Fed. 895, 897, 898, a case where taries [13th ed.] 25) defines marine
there was a stipulation in a charter insurance as "a contract whefeby
party that "the owner shall pay for one parly, for a stipulated premium,
the insurance on the vessel," and the undertakes to indemnify the other
construction of the charter party was against certain perils or sea risks to
involved, and it was determined tliat which his ship, freight, and cargo, or
as between said owner and the some of them, may be exposed (luring
charterers the risk of a collision lien a certain voyage or for a fixed period
was cast upon the former. of time." This is the same definition
"A policy of marine insurance is a given by Mr. Field in his work on
contract by wliich, for a considera- Damages, ( 2d ed.) sec. 562. Anoth-
tion stipulated to be j)aid by one er definition, given by Mr. Marshall
interested in a ship, freight, or cargo, (Marshall on Ins. [ed. 1810] 2) is
subject to marine risks, another as follows : "Marine insurance is that
undertakes to indemnify him against which is applied to maritime com-
.some or all of those risks during a merce, and is made for the protection
certain period or voyage ; in other of persons having an interest in ships
words, that, so far as the perils in- or goods on board from the loss or
sured against are concerned, the sub- damage which may happen to them
jcct insured shall remain, through- from the perils of the sea during a
out the terra of the policy, of tlie certain voyage or a fixed period of
value which it had at the beginning lime." Mr. Phillips (Pliillips on Ins.
of the adventure." Matheson v.
Equitable Marine Ins. Co. 118 Mass.
209, 211, 19 Am. Rep. 441, per Gray,
C. J. See Commonwealth v. Weatli-
erbee, 105 Mass. 149, IGO.
1 ) says: "Marine insurance is aeon-
tract whereby, for a consideration
stipulated to be ])ai(l by one interest-
ed in a ship, freight, or cargo subject
to marine risks, another undertakes
A contract of insurance is merely to indemnify him against some or all
a guaranty against loss of property those risks during a certain period or
by marine disaster. Insurance Co. voyage." For other definitions, see 2
of North America v. Commonwealth, Parsons on Contracts (7th ed.) 350;
87 Pa. 173, 30 Am. Rep. 352. Rapalje & Lawrence's Law Diet. 668;
Mr. Arnould (Arnould on Marine Bacon's Abridgement (4th ed.) 598,
Ins. [6th ed. Maclachlan] p. 161, Id. 599, 13 Encye. Britannica, 184.
77
§ 5
JOYCE ON INSURANCE
insurance is also defined under the English statute of 1906.^*
under the statutes of several of the United (States.^*
And
^*"(1) A contract of marine insur-
ance is a contract whereby the insur-
er undertakes to indemnify the as-
sured, in manner and to the extent
thereby agi-eed, against marine losses;
that is to say, losses incident to ma-
rine adventure. (2) A contract of
marine insurance may, by its express
terms or by usage of trade, be
extended so as to protect the assured
agaiiits losses on inland waters or on
any land risk wliich may be incident-
al to any sea voyage. (3) Where a
ship in the course of building, or the
launch of a ship, or any adventure
analogous to a marine adventure, is
covered by a policy in the form of a
marine policy, the provisions of this
act, in so far as applicable shall ap-
ply thereto." Marine Ins. act 1906
(6 Edw. VII. c. 41); Butterworth's
Twentieth Cent. Stats. (1900-1909)
pp. 394 et .seq.; 15 Chittv's Stats.
Eng. (1902-1907) pp. 881 et seq.
* IMaritime perils is also defined
Marine insurance act 1906, 6 Edw.
VII. c. 41; 2 Butterworth's 20tli
Cent. Stat. pp. 397, :398; 17 Earl of
Hals1)urv's Laws of Eng. "Insur-
ance," pp. 335, 336. The stamp acts
(30 Vict. c. 23, sec. 4; 47 & 48 Vict.
c. 62, sec. 8, defined sea insurance).
See further as to stamp acts, 17 Earl
of Halsburj^'s Laws of Eng. "Insur-
ance."
^^ Marine insurance is an insurance
against risks connected with naviga-
tion, to wliich a ship, cargo, freight-
age, profits, or other insurable
interest in movable property may be
exposed during a certain voyage or a
fixed period of time. Cal. Civ. Code,
see. 2655; Cal. Laws 1913 c. 269, see.
3, p. 484, amd'g c. 594 of Polit. Code.
"A contract of marine insurance is
one by which a pei'son or corporation,
for a stipulated premium insures an-
other against losses occurring by the
casualties of the .sea." Ga. Code
1911, p. 658, sec. 2515 (sec. 2120).
See also Levisee's Dak. Code sec.
1563; Mont. Rev. Codes (Civ.) 1907,
sec. 5638 (sec. 3540); N. Dak. Rev.
Codes (Civ.) 1899, .sec. 4537; S.
Dak. Rev. Codes (Civ.) 1903, sec.
1883.
The insurance laws of New York
provide for the incorporation of ma-
rine insurance companies "for the
purpose of making insurance upon
\essels, freights, goods, wares, mer-
chandise, specie, bullion, jewels, prof-
its, commissions, bank-notes, bills of
exchange, and other evidences of
debt, bottomry and respondentia in-
terests, and every insurance apper-
taining to or connected with marine
risks and risks of transportation and
navigation including the risks of lake,
river, canal, and inland transporta-
tion and navigation (above wording
is same as that of the first general
insurance in corporation act in New-
York, Laws 1849, c. 308, p. 441. It
is also the same as the California
Stat. 1913, c. 269, sec. 3, p. 484,
amd'g c. 594, of Polit. Code.) insur-
ance upon automobiles, whether sta-
tionary or being operated under
their own power; which shall include
all or any of the hazards of fire, ex-
plosion, transportation, collision, loss
liy legal liability for damage to prop-
erty resulting from the maintenance
and use of automobiles, and loss by
burglary or theft or both, but shall
not include insurance against loss by
reason of bodily injury to the per-
son." N. Y. Laws 1911, p. 190, c.
126, sec. 150 (entitled "An Act to
Amend the Insurance Law, in Rela-
tion to tlie Character of the Automo-
bile Indemnity which may be As-
sumed by Eire and Marine Insurance
companies.") See also Laws N. Y.
]912, p. 444, c. 232, sec. 70, subdivs.
9, 10. Examine 1 Wolff's Const. &
Rev. Laws La. 1904, p. 845.
TKKMS AND DEFINITIONS
§ 6
§ 6. Definition of fire insurance. — Fire insurance is a contract
whereby one for a consideration agrees to indemnify anotlier for
loss or damage on pro],)erty by fire.^*
16 Fire Insurance is a contract by Ihe damage. The .sum payable can
which the insurer undertakes in con- in no case exceed the amount named
sideration of the premium to indem- in the policy; but as the contract is
nify the insured against all losses a contract of indemnity, if the loss is
■which he may sustain in his house, less, the amount for which the insur-
<>oods, or merchandise by fire within er is liable will also be lesi^." Or for
t^he time limited in the policy : 11 Pet- a proportionate share under average
clauses. 5 Renton's Ency. of Laws
of Eng. p. 348.
For other definitions see the follow-
crsdorft's Abridgement, 9, note "In-
surance." "Fire insurance is a con-
tract to indemnify, in whole or part,
one having an insurable interest in
property from loss or damage caused
by fire to the property insured:"
Sharp's Lectures on Fire Ins. 1. "In-
surance against fire is a contract to
indemnify the insured for loss or
damage to his property occasioned by
that element during a specified peri-
od:" Flanders on Fire Ins. 1, 17.
See also Wood on Fire Ins. (2d ed.)
p. 4; 2 Mar.sliall on Ins. (ed. 1810)
*784; 2 Parsons on Contracts (Vth
ed.) 418; 7 Am. & Eng. Ency. of
Law, 1002. "A contract of fire insur-
United States. — Lveoming Fire
Ins. Co. V. Haven, 95 U. S. 242, 24
L. ed. 473 ; Durham v. Fire & Marine
Ins. Co. (U. S. C. C.) 22 Fed. 468,
470, 471.
Maine. — Donnell v. Donnell, 86 Me.
518, 520, 30 All. (i7.
Massachusetts. — Commonwealth v.
Weatherbee, 105 Mass. 149, 160;
Wilson v. Hill, 3 Mete. (44 Mass.)
66, 68.
Mississippi. — Lee Mutual Fire Ins.
Co. V. State, 60 Miss. 395, 399.
Pennsylvania. — Insurance t'o. of
ance is a contract by which the insur- North America v. Commonwealth, 87
cr agrees, for valuable consideration Pa. 173, 30 Am. Rep. 352 (said to
(usually called a premium), to in- be merely a guaranty against loss of
demnify the assured, up to a certain property by tire or marine disaster),
amount and sut).ject to certain terms Wisconsin. — See Johannes v._Phoe-
and conditions, against loss or injury nix Ins. Co. 66 Wis. 50, 56, 5< Am.
by fire which may happen to the Kep. 249, 27 N. W. 414 (where the
property nisurcd during a specified (-(.urt says: "By such contract the
period." 17 Earl of Halsbury's Laws msurer agrees to compensate the in-
of Eng. "Insurance," p. 516. "Fire sured for'loss by fire of certain prop-
insurance is a contract whereby, in erty for a given time"),
consideration of the ])ayment of an The insurance laws of New York
agreed premium, the insurer under- provide for the incorporation of fire
lakes to make good to the assured any insurance companies, "for the ])ur-
loss or damage which may happen to po^e of making insurances on dwell-
specified property during a stipulat- inghouses, stores, and all kinds of
ed period. Fire policies — in this re- buildings and houseliold furniture
spect differing from marine policies ;,,]d other property against loss or
— are usually for a specific sum, (hiuiage by tire, lightning, Avind,
which bears no necessary relation to storm, tornadoes (same as in Laws
the value of the property insured, of 1849, c. 308, p. 441) and earth-
The amount payable in case of a loss, quakes, and against loss or damage
therefore, is not determined by the by water to any goods or premises
value of the property insured and in- arising from the breakage or leak-
jured, but simply by tlie amount of age of sprinklers, pumps, or other
79
§ 7
JOYCE OX INSURANCE
Fire in^ul■an(•e includes ''insurance against lo^s or damage by
fire, liglitning. windstorm, tornadoes or eartliquakes." ^"^
§ 7. Definition of life insurance. — Life insurance is a contract
dependent upon lunnan life, whereby one for a consideration agrees
to pay another a certain sum of money upon the happening of a
given contingency, or upon the termination of a specified period.^^
apparatus erected for extinguishing " Cal. Stat. 1913, c. 269, sec.
lires, and of water pipes, and against 2, p. 483, amd'g c. 594 of Polit.
accidental injury to such sprinklers, Code.
puuip.s, or other apparatu.s, and, up- 18 "Life insurance imports a niutu-
on vessels, boats, cargoes, goods, mer- ^1 agreement, whereby the insurer, in
chandise, freights, and other proper- consideration of the payment by the
ty against loss or damage by all or assured of a named sum annually, or
jtny of the risLs of lake, river, canal, at certain times, stipulates to pay a
iind inland navigation aand transpor- larger sum at the death of the as-
tation (Laws of 1849 also provided sured. The company takes into con-
ngainst the risks of inland naviga- sideration, among other things, the
tiou and transportation) as well as age and health of the parents and rel-
hy any or all ol the risks specilied in atives of the applicant for insurance,
section one hundred and hfty of this together with his own age, course of
cliapter" (see last note to § 5 herein) lif^^ habits, and present pl"-sical con-
"including insurance upon automo- flition; and the premium exacted
biles, whether stationary or oper- fj-ojn the assured is determined by the
aled under their own power, w.hich probable duration of his life, calcu-
shall include all or any of the haz- lated upon the basis of past experi-
ards of tire, explosion, transporta- pnee in the business of insurance,
tion, collision, loss by legal liability The results of that experience are dis-
for damage to property resulting closed by standard life and annuity
from the maintenance and use of au- tables, sliowing at any age the prob-
lomobiles, and lo.'^s by burglary or g^ie duration of life." Ritter v. Mu-
Uu'tt of hoth, but shall not include ti^al Life Ins. Co. I(i9 U. S. 139, 151,
msuranoe against loss by reason of ig gup. ct. 300, 42 L. ed. 693, 27
bodily injury to the person." N. Y. j^s. L. J. 804, 813.
Laws 1910, p. 39(, c. 168, sec. IIU ^ contract of life insurance or of
(entitled "An Act to Amend tlie In- ■^^^^^,,^,,^^ , ^n a life in the ordinarv
surance Laws m relation to hre and ^ ...^ ^ contract to pav a certain
.Marine Insurance Corporations ) ^^^^ ^^ ^^^^^^. ^,^ ^^^ ^^^^j^ ^^- ^^^^
amending sec. 22 c. o3 Laws 1909 ^^^^^^^^r g^ate (ex rel. Clapp) v.
(entitled "An Act in Relation to In- ^^^^^^,^^ Investment Co. 48 Minn,
surance Corporations Constituting ^^^ -^j^ -^ j^. yr -^Q.^g
Chapter Twentv-eight of the Consoh- , ' .. . • >.>.*.
dated Laws") "as amended bv chap. "Life insurance is a con ract to
301, of Laws of 1909, N. Y. Laws pay a certain specihc sum on the hap-
1911, p. 189, c. 126, sec. 110 (en- P^""!"? ^^^ a particular event, which
titled "An Act to Amend the Insur- may or may not occa.sion a pecuniary
ance Law, in Relation to the Char- lo««- , Trenton Mutual Life & F^re
acter of the Automobile Indemnity J"!- ^ »• v- Johnson, 24 ^. J. L. 5^0,
which mav be Assumed by Fire and ^°'^-
■ :\Iarine Insurance Companies"). N. Life insurance is a contract to pay
Y''. Laws 1912. pp. 444 et seci. c. 232. money upon the death of the assured,
See Laws 1913, c. 296. See also Ga. in consideration of certain payments
Code (Civ.) 1911, see. 2470 (2089). being dulv made at fixed periods dur-
80
II
TERMS AND DEFINITIONS § 7
ing: his life. Reed v. Provident Sav- of a reversionary sum in consider-
iii<is Life Assurance Soc. 1!J0 N. Y. ation of a present payment of money,
111, 82 N. K. 734, 73(5, quoted in or, as is generally tlie ca.se, on the
VVayland v. Western Life Indemnity payment of an annuity during the
Co.KHJ Mo. App. 2'21, 148 S. W. ti26, life of the person insuring;" and al-
().)(). .so says it is not a disposition of prop-
Life and accident insurance is a erty at all, as "a mere covenant to
contract wliereljy one i)arty, for a pay money is not a disposition of
stipulated consideration, agrees to in- pi'opeity in the ordinary sense. The
demnify another against injury l)y insurance company does not die, and
accident, or death from any cause not therefore a covenant to pay money
excepted in tlie contiact. State (ex on the death of some other person is
rel. Sheets) v. Pittsburg, Cincinnati, a mere contract to pay money."
Cliicago & St. Louis Ry. Co. (58 Ohio "The term 'life insurance' Ls not
St. 9, 30, 96 Am. St. Rep. 635, (J4 alone applicable to an insurance of
L.K.A. 40,'), (57 N. E. 93. the full term of one's life. On the
A contract of life insurance con- contrary, it may be for a term of
templates a payment by tlie insurer years, or until the iussured shall ar-
on the death of insured, as the ])ri- rive at a certain age." Briggs v. Mc-
niary intent, although a secondary Cullough, 3G Cal. .")42, 550, 551. In
question may arise as to when the this ca.se pulici/ uas to become paija-
payment is (hie. Smith v. Metropoli- tie on death of person insured, pro-
inn Life Ins. Co. 222 Pa. 22(5, 20 cided he ^ied within ten years.
L.R.A.(N.S.) 928, 128 Am. St. Rep, "Life insurance may be defined as
799, 71 Atl. 11. a contract by which the insurer
"Life insurance is the promise to agrees upon the death of the person
pay a certain sum on the death of whose life is insured (commonly
the assured." Ellison v. Straw, 119 called the life insured) to pay a given
Wis. 502, 508, 97 N. W. 1(58. sum, in consideration of the jiayment
In an Englisli case it is said life by or on behalf of the assured during
insurance "is simply a contract that the continuance of the life of certain
on the consideration of a certain an- sums called premiums." 17 Earl of
nual payment the company will pay Halsbury's Laws of Eng. "Insur-
at a future time a fixed sum, calcu- ance," p. 543. In Bumjon on Life
lated by them with reference to the Ins. (ed. 1868) 1, cited in State ex
value of the premiums which are to rel. v. Mechanics' Exchange Mut.
be paid in order to purchase the post- Ben. Soe. 72 Mo. 146, 159, the con-
poned payment. Whatever event tract is "defined to be that in which
may happen meanwhile is a matter <>ne party agrees to pay a given sum
of indilterence to llie com})any. They upon the happening of a particular
df) not found their calculations on event contingent upon tlie dni'ation
that, but simply upon the probahili- of human life, in consideration of the
ties of human life, and they get paid immediate payment of a smaller sum
the full value of that calculation." or certain equivalent periodical i)ay-
Law V. London Indisputable Life ments by another." Mr. Marshall,
Policy Co. 1 Kay & J. 229, per Wood. (2 Marshall on Ins. [ed. 1810] 766,
V. C. says: "The insurance of a life is a
In Fryer v. Morland, L. R. 3 Ch. contract wheieby the insurer, in con-
675, 685, Jessel, M. R., in constru- .sidciation of a certain premium,
ing the succession duty act (1(5 & either in a gross sum or periodical
17 Vict. c. 51), and the meaning of jtayments. underlak(>s to pay the per-
"policy of insurance on the life," etc., son lor whose benetit the insurance
says those words mean "a contract, no is made a stipulated sum or an an-
doubt, for money. If is a ]Hirchase nuity equivalent upon the death of
Joyce Ins. Vol. L — G. 81
§ 7
JOYCE ON INSURANCE
Life insurance has also been defined by statutes in some of the
states.^^
the person whose life is insurecl, Ohio. — Koekley v. Coshocton Glass
whenever this shall iiappen, if the in- Co. 86 Ohio St. 213, 225, 226, 99 N.
snranee be for the whole life, or, in E. 299.
case this shall happen within a cer- Virginia. — Cosmopolitan Life Ins.
tain period, if the insurance be for Assoc, v. Koegel, 104 Va. 619, 52 S.
a limited time." "A contract by E. 166 (within sec. 3251 of Code),
which the insurer, in consideration of England. — Dalby v. India & Lon-
a certain premium, either in a gross don Life Assur. Co. (1851) 15 C. B.
sum or by annual payments, under- 365, 387, 13 Eng. Rul. Cas. 383, per
takes to pay the person for whose Parke, B.
benefit the insurance is made a cer- As to indemnity see §§ 24 et seq.
tain sum of money or annuity on the herein.
death of the person whose life is in- ^^ "An insurance upon life is a con-
sured:" 1 Smith's Mercantile Law, tract by wliich the insurer, for a stip-
( Macdonell & Humphrey's ed. 1890) ulated sum, engages to pay a certain
491. amount of money if another dies
See Bliss on Life Ins. (ed. 1872) within the time limited by the policy,
sec. 3; Cooke on Life Ins. (ed. 1891) The life may be that of the assured,
.«ee. 1; Petersdorff's Abridgement, or of another in whose continuance
title "Insurance," 16. • the assured has an interest.'' Ga.
For other definitions see the follow- Code (Civ.) 1911, p. 654, sec. 2496
ing cases: (sec. 2114). Life insurance includes
California. — Briggs v. McCullough, "insurance upon the lives of persons
36 Cal. 542, 551. and every insurance appertaining
Connecticut. — Fuller v. Metropoli- thereto, and the granting, purchasing
tan Life Ins. Co. 70 Conn. 647, 663, and disposing of annuities." Cal.
675, 41Atl. 4. Stat. 1913, c. 269, see. 1, p. 183,
Georgia. — Rylander v. Allen, 125 amd'g c. 594 of Polit. Code.
Ga. 206, 6 L.R.A.(N.S.) 128, 53 S. Life annuities. An aleatory eon-
E. 1032, 35 Ins. L. J. 724; Union tract of annuity binds the debtor to
Fraternal League v. Walton, 109 Ga. pay a pension or annual rent to one
1. 3, 77 Am. St. Rep. 350, 46 L.R.A. or more specified persons during
424, 34 S. E. 317 (both cases quoting their lives, for a principal in per-
Ga. Civ. Code, sec. 2114 [Code 1911, sonal or real property, the ownership
sec. 2496] ) ; Cason v. Owens, 100 Ga. of which is at once transferred to
142, 143, 28 S. E. 75. said debtor "charged with the in-
Massacliusetts. — Mutual Life Ins. come." Rev. Codes (Civ.) Porto
Co. V. Allen, 138 Mass. 24, 27, 52 Am. Rico 1902, sec. 1704. "An annuity
Rep. 246; Commonwealth v. Weath- may be constituted on the life of the
erbee, 105 Mass. 149, 160. person who gives the capital, on that
J/i.ssoMr/.— State (ex rel. Atty. of a third person, or on that of sever-
Genl.) V. Merchants Exchange Mut. al persons. It may also be consti-
Benev. Soc. 72 Mo. 146, 159.
New Jerseg. — Merchants and Min-
ers Transp. Co. v. Borland, 53 N. J.
Eq. 282, 285, 31 Atl. 272.
Neiv York. — Columbia Bank v.
Equitable Life Assur. Soc. 80 N. Y.
tutefl in favor of the persons for
whose life it is granted, or in favor
of another or other different persons."
Rev. Codes (Civ.) Porto Rico, 1902,
sec. 1705.
That deferred annuity policii redid
Suppl. 428, 431, 79 App. Div. 601; and not contrary to public policy
St. John V.American Mutual Life Ins. though payments to commence in f u-
Co. 13 N. Y, 31, 38, 64 Am. Dec. 529. ture during beneficiary's lifetime, see
82
i
TEKMS AND DEFINITIONS § 7a
§ 7a. Definition of assessment insurance. — Assessment insurance
is that where tlie benefit to be paid is dependent upon the collec-
tion of such assessments as may he necessary for paying the amount
insured, it constitutes assessment insurance when the payments are
not unalterably lixed by the contract. In old-line policies the
amount of the premiums is fixed unalterably, and the insurer's lia-
bility is definitely fixed. ^^* A mutual benefit association provides
insurance "upon the assessment plan," even though it agrees to
pay a definite sum and has fixed rates of assessment which it
has authority to receive in advance, where it has no "legal resei've,"
but only an "emergency fund," and it has the reserved right,
under its contracts, to increase or lower the rates of assessment.^"
In insurance and business circles the words "assessment company,"
as distinguished from "old-line mutual" company, means that
in such first-named company the money to pay a death loss is
collected by an assessment made upon those members who sur-
Mutual Life Ins. Co. v. Smitli, 184 Stat. 1909, see. 6959 (Rev. Stat. 1899,
Fed. 1, 106 C. C. A. 593, 33 L.R.A. see. 7901; Rev. Stat. 1889, sec.
(N.S.) 439. 5800, was enacted in 1887). quoted
^^^ Knott v. Securitv Mutual Life and applied in Moran v. Franklin
Ins. Co. 161 Mo. AppI 579, 592, 144 Life Ins. Co. 160 Mo. App. 407, 140
S. W. 178, quoting from Haydel v. S. W. 955, liolding nonforfeiture law
Mutual Reserve Fund Life As.soc. of that state not applicable to life
(U. S. C. C.) 98 Fed. 200, 203, case policy in that case, as it Avas an as-
aff'd 104 Fed. 718, 44 C. C. A. 169. scssnient policy (see note to above
Ai^sessment or co-operative plan, cited Stat. 1909, sec. 6950). See
life insurance defined; statutes con- Haydel v. Franklin Life Ins. Co. 136
^ trued. Mutual insurance on the as- Fed. 285, 69 C. C. A. 423, constru-
sessment plan is defined under Laws ing Mo. Rev. Stat. 1899, sec. 7901,
Cal. 1891, p. 126, c. 116, sec. 1. The deciding when policy is one under as-
slatute is construed in Engwicht v. sessnient plan, and not an ordinary
Pacific States Life Assur. Co. 15:'. life ])oliey, and not within the non-
Cal. 183, 96 Pac. 87, a case determin- forfeiture law. Examine also Hay-
ing the rights of members or "con- del v. Mutual Reserve Fund Life As-
ti-act holders," and that a certain see. 104 Fed. 718, 44 C. C. A. 169,
debenture was not such a contract, aff'g 98 Fed. 200, determining when
Assessment or co-operative insurance, contract is not an endowment policy,
see Wolff's Const. Rev. Laws La. Ijut one on the assessment plan. Co-
1904, p. 845. "Every contract where- operative or assessment plan, life in-
by a benefit is to accrue to a person surance defined. Minn. Rev. Laws,
or persons named therein, upon the Suppl. 1909, Annot. p. 443, sec.
<leath or pliysical disability of a per- [1702] 1. (Act 1907, c. 318, see. 1).
son also named therein, the payment ^o State (ex rel. Covenant Mutual
of whicli said benefit is in any man- Benefit Assoc.) v. Root, 83 Wis. 667,
ner or degree dependent upon the col- 19 L.R.A. 271, 54 N. W. 33, case of
lection of an assessment upon per- petition for mandamus to compel in-
sons holding similar contracts, shall surance commissioner to issue li-
be deemed a contract of insurance up- cense; writ issued,
on the assessment plan." Mo. Rev.
83
§ 7b JOYCE ON INSUKANCE
vive llie nieiiibcr, tlie insurance ii|)()n wlioso life is paid.^ The
insurance law of New York clearly distinguishes between casualty
companies on the co-operative a.ssessment plan, and fraternal or
beneficiary societies? or associations; one may be conducted for
profit, and the other for charity only. In the one the right to con-
tract to make payments at a certain fixed ])eriod of old age exists,
while in the other it does not.^ A relief department of a railroad
is not carrying on the business of life or casualty insurance on the
co-operati\e or assessment plan, where the "relief fund" for tlie
payment of definite amounts to employees in the event of accident
or sickness, or to their relatives in case of death, is formed by
voluntary contributions from employees, appropriations by the
company when necessary to make up deficits, income or profits
from investment of the fund, and gifts or legacies, and where mem-
bership is voluntary and confined to employees.'
A secret and fraternal society which relies for the means of pay-
ing the stipulated benefits on assessments levied by no fixed rule
upon the ditterent branches of the order, under a system which,
after it ceases to be a "going concern," is incapable of application,
and which does not rely upon the accumulation of premiums paid,
does not stand in the same relation to its certificate holders as that
occupied by a life insurance company to its policy holders.*
§ 7b. Definition of industrial insurance. — Industrial insurance
is, except where otherwise del hied by statute, an insurance upon
life, for a small or limited amount in consideration of a premium
payable in small instalments and collectable weekly, or at some
other short periodical interval. It includes both adult and child
^Ahitual Benefit Life Ins. Co. v. Woll'stcrn v. Pennsylvania Kailroad
JMarye, 85 Va. G4:j, 045, 8 S. E. 481, Vofuntary Refief Dept. 76 N. J. Eq..
per Lacy J., case of apjilication for 78, 74 Atf. 533, on associations pro-
mandamus to compel auditor to li- viding relief for railroad employees
cense, assessment fife insurance com- as insurance, see note in 47 L.K.A.
])auy without depositing bonds; de- (N.S.) 299.
nied. * Fawcett v. Supreme Sitting of
2 People (ex ref. ]Mount) v. Cliap- the Order of the Iron Ilafl, G4 Conn,
ter Generaf of America, Kniglits of 170, 24 L.R.A. 815, 29 Atl. 614.
St. John & Mafta (1910) 198 N. Y. Compare dissenting opinion of Ham-
15, 90 N. p]. 1134. mersiey, J., wlio deciares tliat such
' Coiaizzi V. Pennsylvania Rd. Co. business is cfearly distinguishabfe
208 N. Y. 275, 101 N. E. 859, aff'g from legitimate insurance, an(f afso
128 N. Y. Supjd. 312, 143 App. Div. from tfiat quasi insurance busine.ss
638 (Consol. Laws N. Y. 1909, c. 28, whicli reaily partakes more of the
sec. 201). See 129 N. Y. Supp. nature of inve.stment or savings bank
1116, 145 App. Div. 909. l)usiness, cailed endowment insurance,
Railroad relief association contract and also from that of fraternal and
?« not irlthin insurance laws, but may mutuai aid societies. Id. pp. 204—
be enforced as between the i)ai-tie^. 206.
84
TERMS AND DEFINITIONS
§ 7b
insurance, and amounts in fact to burial insurance. Industrial or
prudential insurance is more fully defined under the statutes of
Georgia, ^ Louisiana,^ Missouri,' and Virginia.'
^Industrial life iiisuranr-e is that less, or whioli provide for the attend-
insuraiice lor whicli the stiinihited ance of a pliysician or sui)ply of
premiums, advance assessments, or di'ugs, or furnisliiug a funeral." La.
dues, ai'e legulai-lv i)ayabK' and col- act 1906, p. 101, No. (io, sec. 1. .Sec.
lectable weekly or biweekly, and the 2, of .same act sjiecities what corapa-
])olicies or benelit certificates for nies shall be held and deemed to be
which are for sums of not more tiian doini? industrial life insurance bnsi-
.tr)00 on a single life, and which poli- ness. Act 1!)08, p. 3(i(i, art. 24(),
cies or benefit certihcates may j)ro- further regulates organization of in-
vide a weekly benefit for disability, duslrial life insurance companies,
caused by sickness or accident, not Tiie act of lilOd considered in State
greater than $20 per week." Code (ex rel. Unity Industrial Life Ins. &
Ga. 1911 (Civ.) sec. 2502 (acts 190.'), Sick Ben. A.ssn.) v. Michel, 121 La.
1>. 96, .sec. 250G). "All corporations, 3.')0, 46 So. 37^2, 37 Ins. L. J. 587.
associations, relief organizations, so- "^ "Industrial" and ''FrudentiaV
cieties, or fraternal orders, with or companies defined — patrers. "Indus-
without capital stock, and haxing or trial or i)rudential life insui'ance com-
not having a ritualistic form of gov- panics under the meaning of this
crnment, whether operating under the article are such life insurance compa-
present insurance laws as insurance nies that issue policies not exceeding
(♦ompanies. or operating under the .$50(1 in amount, the pi-emiums on
laws governing fraternal bencliciary wliich are cominited at a weekly rate
ordei-s, and issuing policies or bene- and are collected and paid weekly
fit certificates, and conducting their under the terms of the policies of the
business in the manner and within the c(imi>any issuing the same. Rut the
meaning an(T definition .set forth in the coin]ianies organized under the pro-
preceding ]iaragraph, shall be held visions of this article may also issue
and deemed to be doing an industrial life ]iolicies, not exceeding .$1,000 in
life insurance business, and shall be amount, the premiums on wliicli shall
subject to this section and all the be computed at a monthly rate, and
other laws of this state not repugnant by the terms of the policy shall be
to this .section, res'ulaling the business paid monthly to such company." Mo.
of life, health, and accident-insurance Rev. Stat. 1909, sec. 6993 (Rev. Stat,
in this state." Code Ga. 1911, p. 6.V) 1899, sec. 7943) art. 5, title "Tndus-
tCiv.) sees. 2.")02, 2.')03. liial and Prudential Insurance." Ar-
^ "Industrial life insurance is here- tide was enacted by Law 1897, p.
by defined to be that insurance for i;{8.
which the sti])ulated premiums, ad- * lUflustrial sick Ix'iiefit associations
vances, assessments, or dues are regu- cndiiace associations that collect
larly payable and collectable every weekly dues and assessments, and is-
tour weeks, tri-weekly, bi-weekly, sue ])olicies ])roviding weekly indem-
semi-weekly or at any other staled nity on account of sickness or acci-
terms less than a month aiiart, and dent, in addition to benefit in case of
the. policies or benefit certificates for death and associations not j-equircd
which are for sums of $500 or less on to maintain legal reserve for death
a single life on which policies or bene- l)enefits: certain fi'alernal beneficiary
fit certificates i)rovide a weekly ca.sh associations excepted: corporations,
benefit for disability, caused by sick- joint -stock companies, or a.^socialions
ness or accident, of $20 per week or are included. Va. acts 1910, p. 438,
85
§ 7b JOYCE ON INSUKANCE
In England in the collectino; societies and industrial assurance
companies act of 189(),^ entitled "An Act to Consolidate the En-
uctnienLs lielating to Eriendly So.cieties and Industrial Assurance
Companies which IJeceive Contributions and Premiums by Means
of Collectors," the term "industrial assurance company" refers to
any person or body of persons, corporate or unincorporate, grant-
ing- insurance on any one life for a less sum than twenty pounds.
And the assurance companies act of 1909 ^" provides for insuring
money to be paid for the funeral expenses of a parent, grandparent,
])ayment dependent upon the length of time between the issuance
the life is insured for a specified sum, still, whether the entire
amount, or a proportionate part thereof, or any sum whatever shall
be paid, may be governed by a limitation or restriction making such
]»ayinent dependent upon the length of time between the issuance
of the policy and the death of the insured. This is illustrated by
the limitation that one half the benefit is to be paid if death oc-
curs within six months from date of tlie j)olicy, and the full
amount if death occurs thereafter; that one half is to be paid
if death occurs after six months and within one year; that one
fourth is to be paid if death occurs after three months and within
six months, and that no benefit is to be paid if death occurs within
three months. There are said to be two reasons for such restric-
tions, namely to keep out fraudulent risks, and at the same time
to keep the expense of investigations duly proportional to the
amount of insurance, and to kee]) the amount of prei^iiums paid
always within a reasonable proportion to. the premiums collected,
in view of the fact that only a small instalment, a.s in case of a
weekly premium, is paid in advance, differing therein from the
premium due in advance imder an ordinary life policy.
A policy or contract is industrial, and not accident, insurance
where it contains the liniitation first above stated, and also the pro-
vision that in the c\ent of death from accident within six months
from date of the policy "the full amount of insurance named in the
first schedule will be paid." It is not the giving of direct afiirma-
tive benefits of a special kind on account of the accident. It con-
stitutes 'iimply an excei)tion of this class of cases from the ordinary
rights of an insured person, which limitation was established to
prevent fraud of a kind bearing no relation to deaths by accident."
c. 201. entitled "an Aet to Define Supp. 540, 145 Ai)p. Div. 704; Laws
and Classify Industrial Sicl^ IJenelit X. Y. 1892, c. 600, see. 55.
Companies and Associations." ^ 59 & 60 Yict. c. 2().
As to statutori/ limUation of ^° Edw. VTT. c. 49. s<?c. 36; 2
amount payuble on Ures of children; Butterworth's 20tli Cent. Stat. p. 446;
ag2:regate of two or more policies 15 Jvul of llalsburv's Ijaws of Eng-
may exceed sum. Flynn v. t^ruden- land, pp. llf) et see}.
tial Ins. Co. of America, 130 N. Y. " Metiopolitan Life Ins. Co. v.
86
TERMS AND DEFINITIONS §§ 7c, 7d
A policy with premiums payable monthly, expiring one year after
its issuance unless renewed, and which provides for the payment of
a weekly indemnity in case of accident or injury from violent or
external means in the industry and special class of employment in
which the insured was engaged at the time, is an industrial or acci-
dent insurance policy, and, even though it covers loss of life from
''external violent and purely accidental means," it is not a life or
endowment policy, within the meaning of a legislative act exclud-
ing industrial policies from certain conditions as to the application
being made a part of the policy.^^
§ 7c. Definition of burial insurance. — Burial insurance is a con-
tract based upon a legal consideration, whereby the obligor under-
takes to furnish the obligee, or one of the latter's near relatives, at
death, a burial reasonably worth a fixed sum. It is a valid con-
tract, and constitutes life insurance. ^^ Such a contract has, how-
ever, been held void as against public policy and in restraint of
trade, where the purpose of the association was to provide at their
death a funeral and proper burial for the members, and the associa-
tion was organized on the mutual plan, the members contributing
u stipulated sum weekly, and the funeral, certain funeral furnish-
ings and outtit w^ere to be furnished by and through a designated
undertaker, or otticial undertaker.^*
§ 7d. Definition of workmen's industrial insurance; state insur-
ance; compulsory insurance; workmen's compensation. — The terms
"workmen's industrial insurance, state insurance, compulsory insur-
ance, and workmen's compensation," mean those statutory provi-
sions which cover the relation of master and servant and industrial
accidents suffered by employees. The several systems embrace
accidents, nonfatal or fatal to employees, sickness, unemploy-
ment, old age, and invalidity. ExcejU wliere such enactments
])rovide for insurance which is noncompulsory, either express or
implied, they relate rather to economic or sociologic conditions
than to the contract of insurance or to the principles governing
that contract, or, at the most, they create new remedies or are but
llardison, 208 Ma.ss. 380, 94 N. E. " State v. Willett, 171 Ind. 29G, 23
477, 40 Ins. L. J. 901. Decided un- L.E.A.(N.S.) 197 and note, 8G N.
der Mass. Stat. 1907, e. 576, sec. 34, E. 68. Sec State (ex rel. Attorney
under wiiicli contracts of insurance Gen'l) v. Wichita Mutual Burial As-
t'oi- each of the classes of in.surance see. 73 Kan. 179, 84 Pac. 757.
specified in sec. 32, must be in sepa- ^* Robl)ins v. Ilennesey, 86 Ohio
rate iiolicies. St. 181, 99 N. E. 319, void under 99
^2 Pride v. Continental Ca ndtv Oliio Laws, p. 131.
Co. 69 Wash. 428, 125 Pa-c. 78/, un-
der Rem. & Bal. Code, sees. 6155,
6159.
87
§ 7d
JOYCE ON INSUKANCE
an evolution of the employer's liability principle. These enact-
ments, in there general nature are dei^ignated as either compulsory
or elective or voluntary insurance or purely compensation laws,
with an element that mi.i>,ht be construed as coercive or in the nature
of a penalty.^* it is said in connection with governmental insur-
^' It is said in a case holding the also, through fear of discharge if he
Wisconsin act constitutional, that did not accept.
'Mionc can say what the practical "Workmen's compensation is at
operation ot the law will be. ]t is present t)eing presented to the Anieri-
cnough for our present purpose that can people in three forms, viz.:
no one can say with certainty tiiat it First: In a. form merely optional,
will operate to coerce either employ- i. e., contemplating that the employ-
er or employee." Borgnis v. Falk ers and employees should bring theni-
County, 147 Wis. 327, 37 L.K.A. selves under its provisions (which,
(N.S.) 489, 133 N. W. 209, per AVins- except in the Ohio bill, provides for
low, Ch. J. The decision in this ca,se direct liability of the employer, in-
was under the workmen's compensa- stead of insurance) by tiieir own
lion act. Laws 1911, c. .30; Laws action; or quasi-optional, i. e., re-
1911, e. 485, and so far as is neces- (luiring them, if not desiring to be
sary to state here,, it divided all pri- Ijouud by its provisions, to take af-
ate em])loyers of labor into two class- firmative action indicating their
es: (1) Tliose who elected to come election. . . . Second: A law sub-
under the law; and (2) those who did stituting for the present employers'
not so elect. It took away the defens- liability law, a sj'stem of workmen's
es of assumption of risk, and negli- compen-sation, the employer to be
gence of a coemj)loyee from the sec- liable for the payment of the com])en-
ond class (except that where there sations, and the same to be api)lica-
were less than four co-employees the ble to all employments. . . . Tb.ird :
latter defense was not disturbed), but A system of compulsory insurance
left both defenses intact to the tirst in wliich the state lends its sovereign
class. It prescribed the manner in ] tower to afford at least the compul-
\\ Inch an emi)loyer might elect to sion, and in wiiich it either may or
come under its terms, and how an may not also a.'^sume the management
employee might make his election, and conduct of tiie business." Art.
and when silence on the part of an by Miles M. Dawson, in Bnllock's
employee would be considered an elec- Selected Articles on Compulsory
tion; but it did not in terms compel Ins. (1912) pp. 88, 90, 93. On work-
either em])loyer or employee to sub- men's compensation a<-ts generally see
mit to its provisions. It Avas urged note in L.R.A.191GA, 23. The eonsti-
as an objection that the law. wliile tutionality of workmen's comitensa-
in its words presenting to employer tion and industrial insnrajice statutes
and employee a free choice to accept is discussed in notes in 37 L.K.A.
or not accept its terms, was in fact (N.S.) 466; L.R.A.1916A, 409.
coercive, so that neither employer nor "There are two classes of workmen's
employee could be said to act volun- compensation laws: One imposes
tarily in accepting it. As to the em- the liability upon the individual em-
ployer the argument was that the ab- ])loyer, wiiile tlie other is l)ased upon
olition of the two defenses was a the principle of mutnal insurance.
club forcing him to accept: and as to I^iws of the first class may be either
the employee it Avas argued tliat if optional or comiuilsory," etc. New
his employer accepted the law the eiu- Internat. Year Book (1911) p. 239.
ployee would feel compelled to accept "In the states of the civilized world
88
I
TERMS AND DEFINITIONS
§ 7d
juiee covering accident, sickne.<s, old age, and invalidity: "That
it is only by the loose use of language that tlie term 'insurance'
can be applied to the system. It is in realty an elaborate sys-
tem of poor relief, and its success or failure has little significance
for the qnestion of practicability of the public management of
insurance on scientilic pnncii)les.^^ It is also said that "compul-
Iherc are two systems of eraplovors' contributing to said fund. Act is en-
liabiiitv for accidental injuries. The titled "An Act to Authorize Eniploy-
first, which formerly iirevailed in all, ers and Employees to Eslalilish ('o-
l)ut which now survives in the United oi)erative Retirement, Annuity, or
States, and, in a transition stage in Pension Systems." See aets & res.
Switzerland, is that of tort, or more liUl, p. 54(), c. 532, (am'd acts & res.
Darticularlv the ma.ster and servant tfTi, c. 3(53) ; Id. c. ()28, sees. 29a-33,
L-ly
i)ranch of the law of negligence. The
second is that of 'eompensation'
which embraces both 'simple compen-
sation' and also its more comjdex
form of V'ompulsory insurance.' "
Ai'ticle by Tecumseh Slierman, in
Bullock's Selected Articles on Com-
R. L. !()(), 110 (see acts & res. litll,
c. 751, sees. 23, 24; Id. 1912, c. 82).
Examine acts & res. 1912, c. 571;
1(1. c. 311; Id. c. 6(5(i; Id. c. 721. In
(ieterinining the constitutioiu^lity of
the workmen's comjiensation act of
Massachusetts it is said by the
pulsory Ins. (1912) p. 72. Many of justices who rendered that opinion
these statutes, however, contain cer- on July 24, 1911, that "it is to be ob-
tain provisions relating to insurance, served that no lial)ility insurance
such as providing for the creation of company is obliged to insure, and
an insurance or state insurance fund, that if it chooses to do so there is
or for direct insurance, or for nothing unconstitutional in requii'ing
jnutual insurance associations or com- that it and the policy liolder shall l)e
l.anie.s, or they involve the doctrine governed by the provisions of the act
of subrogation with resjject to insur-
ance companies, or re(|uire casualty
insurance corporations insuring em-
ployers to report industrial acci-
dents to certain state boards or of-
so far as applicable." Opinion of Ihe
.Justices, 209 Mass. (J()7, tUi N. E. 308.
Act declared constitutional on ques-
tions submitted.
As to insurance a;j<u)ist claims
arisi>i(j under workmen's compensa-
ticials, or make insurance contracts
subject to the statute, or even by the tion act of England 1900 (ni force
character of tlieir provi.sions preclude July 1, 1907) see Wilkinson v^ Car
h conti'acts, etc. An act was & General Ins. Corp. 108 L. T. 512
SU(
16 10 New Internat. Ency. (1908)
]>. 088. ''The recent agitation in the
Cnited States lias been confined
anv corporation, tirm, or i)ra,ctically to the compensation of
individual, i'md tiie corporation, woi'kmen for injuries received in in-
firm, or individual by wliich they were dust rial accidents and the liability of
employed, to form an a.ssociation for employers
])assed in Massachusetts in 1910 (c.
.559) acts & res. 1910, p. 538, au-
employecs, oflicers, and
or
tlionzing
agents of
the purpose of pi'oviding annuities,
jjcnsions, or endowments for em-
ployees retiring from their employ-
ment on account of age, the i)artici
for the same." As to
foreign countries, the subject is
"interwoven with other forms of
social insurance — such as insurance
against unemidoyment and old age,"
l)ating employees to contribute to tlie etc. Preface to Meyers Select List of
funds a certain percentage of tiu'ir Reference.s, etc., noted in bililiog-
wages or salaries, to be deducted by raphy in note p. 51, § VII b herein,
the employer, and the employer also
89
§ Td JOYCE ON INSUKANCE
sory insurance, wlicre and in so far as it is at the expense of
employers, is in effect simply a liability to pay compensation
for accidental injuries to employees, with a legal obligation added
to insure its payment," and "the principles of the compensation
law are developments of the negligence law." " Again, it is de-
clared as to workingmen's compensation, that it ''is a term used
to designate that form of compensation for industrial accidents
which has come to replace employers' liability. . . . Most of
the American legislation still takes the form of employers' liability
laws." ^* INIr. Bradbury states, in the preface, that the introduction
to his work shows the evolution of the employers' liability principle
into the workmen's compensation and the state insurance doc-
trines.^' Mr. Boyd considers the distinctions between the common
law, employers' liability laws, and workmen's compensation laws as
remedies for compensating workmen injured in the due course of
their employment; he also states that the relation imposed by the
workmen's insurance acts is purely economic in character as distin-
guished from the creation of a new right in the employee sounding
in tort, and that the obligation fall? within the domain of contract,
one thrust upon the employer, as part of the contract of employ-
ment, to become a party to an insurance policy created by law,
to be entered into as an additional consideration for services rend-
ered by the employee. ■ The same writer also notes the fundamental
differences between the ])rinciples of workmen's industrial insurance
and those of employers' liability laws or compensation acts in cer-
tain states.^" It is said of the workmen's compensation act of
England of 1906 that: "That act has rendered it practically neces-
sary for all who desire to avoid the risk of bankruptcy, and who
cannot afford to be their own insurers, to insure. Tens of thous-
ands of small shopkeepers wdth one assistant, lodging-house keep-
ers, and others with one 'general', small farmers, tenants of small
buildings, and the like with one man, are driven to insure." ^
1'^ Article by P. Tecumseli Sherman seq.; pp. 13, 14, sec. 6; p. 155, sec.
in Bullock's Selected Articles on 67.
Compulsory- Ins. (1912) pp. 72, 73. ^ Bradley & E.ssex & Suffolk Acci-
See also Bovd'.s Workmen's Compen- dent indemnity Soc, In re, 81 L. J.
,<.ation Direct Payment & State Ins. K. B. 523, 530, [1912] 1 K. B. 415,
(ed. 1913) p. 205, sec. 100. 105 L. T. 919, 28 T. L. R. 175, [1912]
18 New Internal. Year Book (1912) W. Kep. 6, per Farwell, L. J., case
"Workmen's Compensation," p. 815. of construction of policy taken out
1' BradhuryV Workmen's Compen- 1)y a earner and small farmer aaaiusl.
sation & State Ins. Law (ed. 1912). liability for accidents under work-
Preface, p. VI. men's compensation act of 1906.
2" Boyd's Workmen's Compensa- Proviso here was for keeping wages
lion, Direct Payment & State Ins. book.
(ed. 1913) pp. 1 et seq. sec. 1 et
90
TKftMS AND DEFINITIONS
§ 8
§ 8. Definition of accident insurance. — Accident insurance is a
contract whereby one for a consideration agree? either (1) to in-
demnify another against personal injury resulting from accident,
or (2) to pay another a certain sum of money in case of dcatli
caused by accident. It is said that accident insurance is intended
to indemnify for injury resulting from accident or to compensate
by payment of a fixed sum where death results to the insured in
consequence of accident, and that the contract closely resembles
that of life insurance.^ It is also declared by the court, in Healey
27 American Law Review, 585, dental death, constitute accident in-
.'87. See Cominonweallli v. Weatlier- surance nnder the Statute 1007, c.
bee, 105 Mass. 149, KiO; see also deti- 576, see. 32, el. 5, specifying kinds of
nition of life and accident insurance accident insurance that companies
in State (ex rel. Slieets) v. Pittsburg, may transact.
Cincinnati, Chicago & St. Louis l?d. What constitutes an accident or in-
Co. 68 Ohio St. D, 30, 96 Am. St. dustrial policy, and not a life or en-
Rep. 635, 64 L.R.A. 405, 67 N. E. dowment policy, see Pride v. Conti-
93, is given under, § / herein, nental Casualty Co. 69 Wash. 428,
What accident insurance covers, see 125 Pac. 787, nnder Rem. & Bal.
17 Earl of Halsburv's Laws of Eng. Code, sees. 6155, 6159.
"Insurance," pp. 566, 571; compare Under a decision in New Jersey in
§ 9 herein. See also Miller v. 1908 it is determined that a contract
JVIarvland Casualty Co. 193 Fed. 343, for life insurance cannot nnder the
113 C. C. A. 267. statute of that state be included in the
As to last point in text, see Logan .same policy with insurance against
V. Fidelity & Casualty Co. 146 Mo. bodily injury or death by accident.
114, 47 S.' ^X. 948 ; Maryland Casual- ^tna Life Ins. Co. v. Watkins. / 7
ty'Co. y. Gehrmann, 96 'Md. 634, 650, N. J. L. 223, 71 Atl. 325, 38 Ins. L.
54 Atl. 678; compare Tictin v. Fi- J. _125. Under Pub. Laws 1902, p.
delity & Casualty Co. (U. S. C. C.) 40/, as am'd 1907 Pub. Laws, 128,
87 Fed. 543; Standard Life & Acci. specifying among the classes of ni-
Ins. Co. V. Carroll, 86 Fed. 567, 30 C. surance for which companies might
C. A. 253, 41 L.K.A. 19; National be formed in that state : "(3) Upon
Life & Accident Ins. Co. v. Lokey, the lives or health of persons and
166 Ala. 174, 52 So. 45. every insurance appei-taining there-
"An ordinary life policy includes to, and to grant, purchase, or dis-
the occurrence of death by accident i)o.se of annuities. (4) Against
as one of the conditions which call bodily injury or death by accident
for a payment by the company, as (and upon the health of ])ersons)."
well a.s death from any other cause, (^iting ^Etna Life Ins. Co. v. Ilardi-
and ordinary accident policies in- son, 199 Mass. 181, 85 N. E. 40 < .
dude injuries by ai-cidenl causing Company authorized to i.-^sue
death, and to that extent they pro- i)()licics against accidents to individu-
vide insurance for life." ]\letropoli- als may likewise issue policy against
tan Life Ins. Co. v. Hardison, 208 accidents to live-stock. Pennsyl-
Mass. 386, 389, 94 N. E. 477, 40 Ins. vania Casualty Co. In re, 36 Pa. C_o.
L. J. 901, per Knowlton, Ch. J., Ct. 635, under Pa. act May 1, 18/6
holding that certain jirovisions in a (Pul). L. 53) as am'd by act July 9,
life and industrial policy did not, 1897 (Pub. L. 239) classifying in-
even though providing against acci- surance. /
91
§ 9 JOYCE ON INSUKANCE
V. Mutual Accident. Association,' tliat ''a policy of accidental in-
surance is issued and accei)ted for the ])urpose of furnishing in-
demnity against accidents and death caused by accidental means." *
Under the Massachusetts act of 1887* accident insurance policies
include ''liorse or vehicle policies," ''general liability policies,"
"outside liability policies," and "elevator policies," all being in-
tended to coA'er accidental injuries to persons arising from different
causes, or under which the indenniity is paid for loss to the assured
by an accident for the effects of which he is legally responsible and
which results in bodily injury or death, as s])ecified within the
policy classification, and the issuance of said policies is not carrying
on more than "one class or kind of insurance." ®
A statute |)ermitting the insurance of the health of persons and
against accidental injuries, etc., resulting from traveling and gen-
eral accidents by land or water does not authorize the issuance of a
policy covering liability imposed by law by reason of bodily inju-
ries, including death, accidentally sustained by reason of the main-
tenance, use, etc., of automobiles.'
§ 9. Definition of casualty insurance. — Casualty insurance has
been defined as an insurance against loss through accidents or
casualties resulting in bodily injury or death,* In a case decided in
Massachusetts a distinction" is made by the court between "accident"
3 133 111. 550, 560, 9 L._R.A.(N.S.) Stat. 1879, which foreign companies
.171, 23 Am. St. Eep. 637, 25 N. E. might cariv on). Under Ilerron's
52. Suppl. 1908-1910 to Sayle's Tex.
* See Employers' Liability Assur. Stat. p. 233, accident insurance re-
Corj). Lim. v. Merrill, 155 Mass. late.s to the injury, disablement, or
404, 29 N. E. 529; Bunyon on Ins. p. death of persons resulting from
100; Black's Law Diet. 632; Rapalje traveling or general accidents by land
& fjawrence's Law Diet. 668. or water.
5 Cliapter 214, sec. 29, ck 5, same "^ American Fidelity Co, v. Bleak-
also as to Pub, Stat. c. 119, sec 201; k'V, 157 Iowa, 442, 138 N. W. 508.
Stat. 1887, c. 214, sec. 80; Stat. 1889, ''Travelers' insurattce" is recog-
c. 356; Stat. 1891, c. 195. nized as a line applicable to that class
^ Einployer.s' Lialiilily As.sur. Corp. as a distinct line of insurance. Most
Tjim. v. Merrill, 155 Ma.ss. 404, 29 N. accident companies make a specialty
Vj. 529. As to Rev. Laws Mass. of it. It is a generic term, and no
Suppl. 1902-1908 (acts 1908) p. .,ne has an exclusive right to its nse
1176, .see note under next section wlien sucli use by another is not made
(§ 9 herein). See People (ex rel. to operate to the former's detriment.
Ocean Accident & (luarantee Corp.) Travelers Insurance Machine Co. v.
V. Van Cleave. 187 III. 125, 58 N. E. Travelers Jns. Co. 142 Ky. 523, 528,
422 (as to kinds oE l)usiness casualty 529, 134 S. W. 877, a cause of action
conipanies may transact, under act to enjoin use of name.
1899); Peoi)le (ex rel. Stevens) v. « State (ex rel. Clapp) v. Federal
Fidelity & Casualty Co. 153111.25,26 Tnve.st. Co. 48 Minn. 110, 111, 50 N.
L.R.A. 295, 38 N. E. 752 (as to mean- AV. 1028.
ing of "any kind of business," under
92
TERMS AND DEFINITIONS § 9
and "casualty" insurance, it being said that the "distingui'^liino;
feature of what is known in our legislation a.s 'accident insurance'
is that it indenmilie.s against the eti'ects of accidents resulting in
bodily injury or death. Its field is not to insure against loss or
damage to property, although occasioned by accident. 80 far as
that class of insurance has been developed it has l)een with reference
to Ijoilers, plate-glass, and injnries to property by street-cars, etc.,
and ])erhaps injury to domestic animals, and is known as 'casualty
insurance.' " ^ In an Iowa case,^" the court, per A\'eaver, J., in con-
sidering the statutes of that state and the words ''other casualty,''
"casualty," an<l "casualty insurance," says: "It cannot be said that
their definition has been very accurately settled by the courts.
Strictly and literally 'casualty' is i)erhaps to be limited to injiu'ies
which arise solely from accident without any element of conscious
human design or intentional human agency; or, as it is sometimes
expressed, inevitable accident, something not to be foreseen or
guarded against." But in ordinary usage 'casualty,' like 'accident,'
^ Employors' Lialiility Assar. Corp. age to proi)erty insured shall lie tried
Lim. V. Merrill, 155 Mas.s. 404, 29 N. in a certain county, etc. Mullen v.
E. 520. Under Rev. Laws Mass. Northern Accident Ins. Co. 20 S.
Suppl. 1902-11)08 (acts 1908) p. Dak. 402, 128 N. W. 483, 40 Jus. L. d.
117(3, accident insurance companies 122.
are authorized to insure ai^ainst CasnaUji insurance on assessment
breakage of plate glass. As to Mass. plan apjilies to accidental deatli or
Statute 1907, c. 57(), sec. 32, cl. 5, physical disability from accident or
specifying kinds of accident insurance sickness. Me. Rev. Stat. 1903, ]>.
that companies may tran.sacf. See 497, c. 49, sec. 122. "Casualty insur-
Metropolitan Life Ins. Co. v. Ilardi- ance'' defined, under detinition of as-
son, 208 Ma-ss. 380, 389, 94 N. E. 477. sessnieid plan of insurance: Suppl.
40 Ins. L. J. 901, considered under 1888, Pub. Stat. Mass. c. 183, pp. 291,
note to last ])receding section herein. 292. Casualty insurance, upon co-
Accident and casualty insurance in- operative or assessment i)lan, includ-
clude-s plate glass insurance. JMetro- ed in accident insurance covering ac-
politan Casualty Ins. Co. v. Basford, cident, sickness or other physical
31 S. Dak. 149,' 139 N. W. 795. See disability. Minn. Rev. Laws, Suppl.
also Laws S. Dak. 1911, c. 170, 1909, annot. p. 443, sec. (1702—] 1
amd'g Laws 1905, c. 73. Under (act 1907, c. 318, sec. 1). By N. Y.
Herron's Sup|)l. (to Sayle's Tex. Civ. Laws 1883, c. 175, the formation of
Stat.) 1908-1910, p. 233, accident in- life and ca.sualty companies in co-
surance is conditioned upon Uie in- operative or assessment plan was
jury, disablement, or deatli of persons authorized. Report of Board of
resulting from traveling, or general Statutory Consol. (covering insur-
accidenti5 by land or water. iince) vol. 3, p. 2949. See i>resent
Suits on accident policies insui'ing N. Y. Stat, considered under J; X.
against accidents to human beings are herein, notes 8-13, pp. 03-05.
not within South Dakota Code Civ. i" Bankers Mutual Casualty Co. v.
Proc. sec. 99, subd. 5, providing that First Nat. Bk. 131 fowa, 4,')G, 401,
all actions brought on a policy of in- 108 N. W. 1040.
suranee to recover for loss or dam- ^^ Cititiq Standard Diet.
93
§ Oa
JOYCE OX IXSUKANCE
is quite commonly applied to losses and injuries which happen sud-
denly, unexpectedly, not in the usual course of events, and without
any design on the part of the })erson suft'erino; from the injury. Nor
does the fact that the conscious or intended act of some other per-
son produces it take from such injury its character of an accident
or casualty." ^^ The court concludes that the insurance against
casualty under the laws of that state has no reference whatever to
other than ]»roperty losses,' as distinguished from losses by personal
injury, or those through accidents resulting in bodily injury or
death, and insurance against loss by burglary was held included
within the words ''other casualty" under the Code.^^
§ 9a. Definition of employers' liability or indemnity insurance. —
An employers' liability or indemnity insurance is a contract which,
for a consideration or premium and for a specified term, insures an
employer against liability to an employee for damages, or which
agrees to indemnify the employer for the loss or damages actually
sustained by him, by reason of his liability to the employee.^*
This insurance is considered a distinct branch of accident insur-
ance.^^ The usual provision seems to be one whereby the insurer
'^^Citing Richards v. Travelers Ins. Assur. Corp. v. Merrill, 155 Mass.
Co. 89 Cal. 170, 23 Am. St. Rep. 455, 404, 29 N. E. 529, where, in differenti-
26 Pac. 762; Accident Ins. Co. v.
Crandal, 120 U. S. 527, 30 L. ed. 740,
7 Sup. Ct. 685; Schneider v. Provi-
dent Lif^ Ins. Co. 24 Wis. 28, 1 Am.
Rep. 157.
atin<i' Ijetween accident companies
and casualty companies, it classes
under the latter head companies in-
suring against the explosion of steam
boilers and breaking of plate glass.
13 MeClain's Iowa Code, sec. 1695, A casualty by which a loss of prop-
providing what kinds of insurance erty is occasioned is not necessarily
contracts might be made by com- restricted to a conflagration by which
panics organized under the laws of the property is consumed, and we can
that State. The language of the see no rea.son why, in the absence of
court in concludins: is as follows: other restrictive provisions in the
"In State (ex rel. Clapp) v. Federal statute, it may not as well include
Investment Co. 48 Minn. 110, 50 N. lightning, toraado, flood, hail, or
W. 1028, 'casualty insurance' is said other force or violence by which such
to have 'a well-defined meaning as property is injured, destroyed, or
insurance against loss through acci-
dents resulting in bodily injury or
death.' But it is perfectly apparent
that the insurance against casualty
provided for by our state . . .
has no reference whatever to injuries
or _loi?ses of this class, for it is ex-
pressly treating of propertj'^ losses, as
lost without the agency or design of
the owner."
1* This insurance is classed as guar-
anty insurance. See 5 Universal Cyc
"guarantee companies," p. 327, ar-
ticle by Clarence H. Kelsey. Consid-
ered in note 19, p. 56, § IX. herein.
1^ Employers' liability "is insur-
distinguished from los.ses by personal ance taken out by an employer to
injury. It comes rather within the protect him against loss on account
definition of the phrase which is given of injury to his employees while en-
by the supreme court of Massa- gaged in his servic.e. It is recognized
chusetts in iMnployers' Liabilitv as a distinct class of the accident in-
■94
TERMS AND DEFINITIONS
§ 9a
agi-ees to indemnify the employer, or assured, against loss from
conmion law or statutory liability for damages on account of bodily
injuries, fatal or nonfaUal, accidentally suffered by any eniployee
or employees of the assured. Another condition or provision is
that whereby the insurer agrees to reimburse or indemnify the as-
sured only for losses actually sustained and paid by him in satis-
faction of a judgment after a trial of the issue, and it requires the
action to be brought by assured himself.^^ The nature or character
surance business, and yet it is com- 17 Earl of Halsbury's Laws of Eng.
raon knowledge that most accident in- "Insurance," p. 571.
surance companies can-y a line of
(•raployers' liability." Travelers In-
surance Machine Co. v. Travelers
Ins. Co. 142 Ky. 523, 531, 134 S. W.
877, 881, per Lassing, J. Employ-
As to insurance of clmms arising
under workmen's compensation act of
1906 in England, see Wilkinson v. Car
& General Ins. Corp. 108 L. T. 512.
On insurance against injuring prop-
ers' liability is accident insurance, erty or person of third person as m-
Employers' Liability Assur. Corp. v. demnity or liability insurance see
Merrill, 155 ]\Iass. 404, 40G, 29 N. E. note in 48 L.R.A.(N.S.) 184. On
529. "Employers' Liability" is a injuries covered by employers m-
de.'^criplive term generally used to demnity policy, see notes in 30 L.R.A.
designate a certain well-known branch (N.S.) 1192; L.R.A.1915C, 155.
of the insurance business. Employ- ^^ ^,.7,.^„,5c^,_American Employ-
ers' Liability Assur. Corp. Ltd. ers' Liability Ins. Co. v. Fordyce, 62
V. Employers' Liability Ins. Co. Ark. 562, 54 Am. St. Rep. 305, 36 S.
16 N. Y. 'Supp. 397, 61 Hun (68 W. 1051 (agreement to pay "all dam-
N. Y. Supr. Ct.) 552, 10 N. Y. ages with whicli the insured might be
Supp. 845, 24 Abb. N. C. 368, ease legally charged, or required to pay, or
of action to enjoin use of name. Em- for Avhich it might become liable;"
ployers' liability insurance is but a construed)
branch of accident and casualty in-
surance, and a foreign company, in
the absence of restrictive words in
California. — Taxicab Motor Co.
v. Pacific Coast Casualty Co. 73
Wash. 631. 132 Pac. 393 (what
its charter, may engage in the former constitutes payment of judgment),
business under an authority to do the Maine. — Fry v. Bath Gas & Elec-
matter. Metropolitan Casualty Ins. trie Co. 97 Me. 241, 94 Am. St. Rep.
Co. v. Basi'ord (1913) 31 S. Dak. 149, 500, 59 L.R.A. 444, 54 Atl. 39, 32
139 N. W. 795, under S. Dak. Laws Ins. L. J. 656 (construing both provi-
1911, c. 176, amd'g Laws 1905, c. 72. ^ions).
See People v. ^tna Life Ins. Co. — Minnesota. — Kennedy v. Fidelity
111. — , 35 Chicago Leg. N. 423, 27 & Casualtv Co. 100 Minn. 1, 9 L.R.A.
Nat. Corp. Rep. 6. (N.S.) 478, annot. 110 N..W. 97
Insurance against liability for ac- (last above clause construed) ; Anoka
cidents to third person; — employer's Lumber Co. v. Fidelity & Casualty
liability. "Under a policy of this de- Co. 63 Minn. 286, 30 L.R.A. 689, 65
scription the insurance company N. W. 353.
undertakes to indemnify the assured Missouri. — Conqueror Zinc & Lend
against his liability to pay damages Co. v. ^tna Life Ins. Co. 152 Mo.
and costs, in case any person may App. 332, 133 S. W. 156, 40 Ins,
sustain injury by accident, and claim L. J. 721 (clauses construed),
compensation against the assured." New Hampshire. — Sanders v.
95
§ 9a.
JOYCE ON INSURANCE
of til is class of insurance may be further illustrated by certain
clauses in the diflcrent contracts which cover liability for such in-
juries as are sustained: While the employee is on duty; or while
prosecuting his work; or while on duty in the occupation specilied;
Frankfort Marine, Accident & Plate reason of liability imposed by law
(Mass Co. 72 N. II. 485, 101 Am. St. upon tlie a.ssured for damajjes on ac-
Hep. 088, 57 Atl. 635 (last clause count of bodily injuries" sutfered by
construed). iuiy employee tlirough accident, etc-.
New Jersey. — Travelers Ins. Co. Also tliat no action sludl lie against
V. Moses, (5:5 N. J. Eq. '2t)(), 92 insurer for los.s "unless it sball
Am. St. \W\^. 663, -19 Atl. 720 be brougbt by the a.ssured for
(clauses construed); Ross v. Ameri- loss actually sustained and paitt
can Employers' Liabilitv Ins. Co. 56 in money by him after actual
N. J. Eq. 41, 38 Atl. 22 '( undertaking trial of the i.ssue," Avith an atjsolute
was "that said company Avill pay to right in the company to determine
tlie insured all damages with which whether an appeal should be taken,
the insured may be legally charged Saratoga Trap Kock Co. v. Standard
under the common law, or any stat- Accident A.ssoc. 128 N. Y. Supp. 822,
ute [not exceeding the amounts here- 143 App. Div. 852. See also London
inafter limited], for, or by rea.«on of, Guarantee & Accident Ins. Co. v.
anv accidental injuries, fatal or Morris, 156 111. App. 533 ( first above
i.P
otlierwise, ha])pening to any em-
ployee or employees of the insured").
Oregon. — Eenton v. Eidelitv & Cas-
naltv Co. 36 Ore. 283, 48' L.R.A.
770.' 56 Pac. 1096 (clauses con-
clau.se does not cover injuries suffered
by child emploijed in riolation of
law.) See as to exception of loss or
expense arising on account of, or re-
sulting from injuries or death to or
strued; wlien indemnity is created), caused by any person empJoi/ed in
Tennessee. — Cavard v. Robertson violation of law, Buffalo Steel Co. v.
& Hobbs, 123 Tenn. 382, 30 L.R.A.
IN.S.) 1224, 131 S. W. 864, 40 Ins.
L. J. 144 (clauses construed; also
tiiat employee could not sue indem-
nity company though employer in-
.l^tna Life Ins. Co. 141 N. Y. Supi).
1027, 156 App. Div. 453 (aff'g 136 N.
Y. Supp. 977), aff'd (mem.) 215 N.
Y. 638. Insurance against loss to by
reason of injury to tliird persons
solvent); Finley v. United States while employee violating city speed
ordinance, not against puhlir poli<\ii.
Taxicab ^lo'tor Co. v. Pacitic Coast
Casualty Co. 73 Wash. 631, 132 Pac.
393. As to excepted loss or expense
for injuries or death caused by failure
Casualty Co. 113 Tenn. 592, 83 S. W.
2, 34 Ins. L. J. 179 (clauses con-
st rued ) .
Washington. — Seattle & San Fran-
cisco R. & Nav. Co. V. Maryland
Casualty Co. 50 Wash. 44, 18 L.R.A, of assured to observe ana statute aj-
(N.S.) 12L 96 Pac. 509 (last clause
construed ) .
Wisconsin. — Stenborn v. P>rown-
Corliss Enijine Co. 137 Wis. 564,
20 L.R.A.(N.S.) 956, 110 N. W.
308 (la.^t clause construed) ; Hoven v.
Emplovers' Liability Assur. Corp. 93
AVis. 201, 32 L.R.A. 388, 67 N. W.
4(i (agreement to pay "all sums for
which it shall become liable to its em-
ployees," construed).
Another form is "again.st loss by
96
fecting safety of persons, see Butler
Bros. V. American Fidelity Co. 120
Minn. 157, 44 L.R.A.(N.S.) 609, 139
N. Y. 355).
Massachusetts. — Hood & Sons v.
:\Iarvland Casualty Co. 20(i Mass.
223,' 30 L.R.A.(N.S.) 1192, and
note, 138 Am. St. Rep. 379, 92 N.
E. 329 (fii-st clause construed).
Minnesota. — Butler Bros. v. Ameri-
can Fidelity Co. 120 Minn. 157, 44
L.R.A.(N.S.) 609, and note 139 N.
TEKMS AND DEFINITIONS
§ 9a
or while actually engaged in the performance of duty in the trade
or occupation for which employed ; or only for loss or liability iov
injuries sustained during the innnediate doing of certain construc-
tion work ; " or wliile engaged in certain specilied work within cer-
tain territorial limits; ^^ or for injuries in a designated place; ^^ or
while on duty at the places, or at any of the places specified: or
covering all operations connected with the business including cer-
tain designated clashes of employees;^" or against liability on all
inside or shop work, and general liability on outside work, includ-
ing liability to persons other than employees; ^ or for injuries acci-
dentally suffered by any person not employed by assured, while at
or about certain described work of assured during the prosecution
of the latter's work at the place or places specihed; ^ or for injuries
accidentally suffered by any person or persons not employed by
assured, in and during the period of construction of certain specified
work;' or to cover, in addition to employees, the liability of as-
sured to thd public only for personal injuries, only caused by as-
W. 355 (loss to be paid in money^
etc.) ; Patterson v. Adan (Philadel-
phia Casualty Co.) 11!) .Minn. iiOS, 48
L.R.A.(N.S.) 184, and note, 138 N.
W. 281 (niitomohile policif ; injury
etc. caused by : los.s payable in money,
etc.: applies only when insui'er de-
nies liability and refuses to defend).
Ndiih Carolina. — Cannon ^lanu-
facturins: Co. v. Employers Indemni-
ty Co. 161 N. C. 19, 76' S. E. 530 (to
reimburse for loss sustained and paid
in money under a final judgment:
what constitutes final judgment).
Ohio. — Garrett v. Travelers Ins.
Co. 20 Ohio Dec. 181, 55 Ohio L.
above clause con-
indemnity against
injured employee cannot
Bull. 181. (Last
strued as one of
loss, etc.
sue ) .
Tihofle Island. — Herbo-Phosa Co.
V. Philadelphia Casualty Co. 34 R. I.
567, 84 Atl. 1093 (what constitutes
payment though not "in money").
See Taxicab Motor Co. v. Pacific
Coast Casualty Co. 73 Wa.^^h. 631, 132
Pac. 393, icliat confilitules ■payment of
judgment; case of insurance against
loss on account of bodily injuries or
death accidentally sull'eved by any
person from operation of taxicabft.
^"^ Construed in Camden & Atlantic
Joyce Ins. Vol. I. — 7. 9
Teleph. Co. v. United States Casualty
Co. 227 Pa. 242, 75 Atl. 1077. Con-
tract here covered only pei'sons not
employed by assured in and during
certain construction Avork.
^^ Construed in connection with the
right to recover additional premium.'^,
in Pacific Coast Casualty Co. v. Home
Teleph. & Tclcg. Co. 11 Cal. App.
712, 106 Pac. 262.
13 Construed in JEtna Life Ins. Co.
V. DuParquet, Huot & ]\Ioneuse Co.
65 Misc. 551, 120 N. Y. Sup p. 759.
^^ Con.strued in Humes Const. Co.
V. Philadelphia Casualty Co. 32 P. I.
246, 79 Atl. 1. See also Hoven v.
West Superior Iron & Steel Co. 93
Wis. 201, 32 L.R.A. 388. 67 N. W.
46.
1 Construed in Cornell v. Travelers
Ins. Co. 175 N. Y. 239. 07 N. E. 578,
32 Ins. L. J. 769. See also Butler
Bios. V. American Fidelity Co. 120
Minn. 157, 44 L.R.A.(N.S.j 609, 139
N. W. 355.
2 Construed in Henderson Ligliting
& Power Co. v. Maryland Casualtv
Co. 153 N. C. 275, 30' L.R.A. (N.S.)
1105, and note, 69 S. E. 234.
' Construed in Camden & Atlantic
Teleph. Co. v. United States Casual-
tv Co. 227 Pa. 242, 75 Atl. 1077.
§ 9a
JOYCE ON INSURANCE
siired or his workmen ; * or the policy may be one indenniifying
l)laintifl' again.st loss from liability imposed by law upon assured
for damages on accoimt of bodily injuries, including death result-
ing therefrom, accidentally suffered by any person or persons
whomsoever, while within or upon the described premises or the
premises or wings adjacent thereto.^ The contract may also agree
to indemnify assured in a certain sum against liability for damages
on account of fatal or nonfatal injuries accidentally suffered by
employees, and also against liability to workmen employed by other
contractors and the public, arising out of personal injuries caused
by them or their workmen, but not caused by a subcontractor or
subcontractor's workmen.^ An indemnity policy may also be is-
sued to a earner to protect it against loss on account of injuries sils-
tained by its employees.' A liability policy may also agree to in-
demnify against loss on account of accidental injuries suffered by
persons using elevators} .A casualty policy against explosion of
stexim boilers may cover employers, employees and other persons;
as, where it is taken out to indemnify the employer against injury
or loss of life, ''whether to the assured, to employee, or to any other
person or persons," "payable to the assured for the benefit of the
injured person or persons, or to their legal representatives in case
of death, and not contingent upon the legal liability of the as-
sured." ^ But a law authorizing insurance of employers against loss
* Construed in Creem v. Fidelity & alty Co. of America, 166 Mo. App.
Casualty Co. 126 N. Y. Supp. 555, 567, 149 S. W. 1049.
141 App. Div. 493, 40 Ins. L. J. 600; Elevator policy to indemnifj' own-
s. c. 118 N. Y. Supp. 1102, 134 App. er of legal title to building from lia-
Div. 949; s. e. 116 N. Y. Supp. 1042, bility for damages resulting from ac-
132 App. Div. 241. See Lewinthau eident or injury in elevator, when
v. Travelers' Ins. Co. 61 Misc. 621, only record or legal owner and not
113 N. Y. Supp. 1031. beneficial owner, within protection of
^ Harbor & Suburban Bldg. & Sav- policy, the latter owner not being
ings Assoc, v. Employers' Liability named therein. McCarl v. Travelers
Assur. Corp. 140 N. Y. Supp. 117, 79 Ins. Co. 151 Iowa, 669, 132 N. W. 12,
Misc. 150. See also Graustein & Co. 40 In.'^. L. J. 1820.
V. Employers' Liability Assur. Corp. ^ Emliler v. Hartford Steam Boiler
Ltd. 214 Mass. 421, lOi N. E. 1073. Inspection & Ins. Co. 158 N. Y. 431,
6 Tolraie V. Fidelity & Casualty Co. 44 LR.A. 512, 53 N. E. 212, aff'g 40
88 N. Y. Supp. 717, 95 App. Div. N. Y. Suppl. 450, 8 App. Div. 186.
352. Insured was a contractor for In this case recovery against an em-
erection of a city building. ployer for an employee's death pre-
' New Orleans & C. R. Co. v. Mary- eluded recovery by latter's legal
land Casualty Co. 114 La. 154. 6 representatives. Policy was issued
L.R.A.(N.S.) 562 and note, 38 So. prior to the New York statute of
89. 1892, under which an employer was
8 Nesson v. United States Casualty expressly authorized to take out a
Co. 201 Mass. 71, 87 N. E. 191. policy of accident insurance covering
See also Scarritt Estate Co. v. Casu- liis employees collectively, for the
98
TERMS AND DEFINITIONS § 10
in congequence of accidents or casualties to employees or other per-
sons or to property or both, resulting from employees' acts occurring
in connection with the transaction of business or from the operation
of machinery connected therewith, does not authorize the issuance
of a policy covering liability imposed by law by reason of bodily in-
juries, including death accidentally sustained by reason of main-
tenance, use, etc., of automobiles}'^
In policies limited to employees' injuries, the premiiun is based
upon or bears a direct ratio to the gross amount of wages paid by
the insured.^^
§ 10. Definition of endowment insurance. — Endowment insur-
ance is, in general, a contract to pay assured a. specitied sum of
money at the termination of a certain designated period, if he is
then living, but to a person named if assured dies before the speci-
fied time.^^ There are, however, several forms of endowment pol-
benefit of such as might be injured. AUhama.—llo\-)kms v. Northwesl-
The Insurance Law (Laws 1892, c. em National Life Ins. Co. 41 Wash.
600) see. 55. 592, 83 Pae. 1019, 35 Ins. L. J. 267,
^"American Fidelity Co. v. Bleak- 269 (contract here provided iiii-
ley, 157 Iowa, 442, 138 N. AV. 508. equivocally for endowment policy and
On insurance against liability for for endowment fund, expres.sly [iro-
automobile accidents, see notes in 44 viding- that if holder of certititate
L.R.A.(N.S.) 73; 51 L.K.A.(N.S.) kept same in force and survived un-
584; L.R.A.1915E, 575. lil a certain date he should surrendei-
As to different kinds of insurance certificate to association and receive a
other than life, authorized in Iowa, certain sum from the endowment
see Iowa Code, Suppl. Annot. 1907, fund; question was one of waiver of
p. 356, sec. 1709; acts 1913, p. 150, right to endowment).
c. 143, p. 151, e. 144. Id. pp. 165-171, California.— Bviggs v. McCnllough,
c. 147 (mutual benefit— under Em- 36 Cal. 542, 5.50, 551.
jiloyers' liability and Avorkmen's com- Illinois. — Rockhold v. Canton Ma-
pensation act)." sonic Benev. 8oc. — 111. — , 19 N. E.
11 So, in Palmer & Hardin v. Pi- 710, aff'd 129 111. 440, 2 L.R.A. 420,
delity & Casualty Co. 137 Ky. 139, 21 N. E. 794 (contiact was to ])ay in-
125 S. E. 270, 39 Ins. L. J. 554; sured upon arriving: at seventy years
Pacific Coast Casualty Co. v. Home of age, or after he had been a mem-
Teleph. & Teleg. Co. 11 Cal. App. her in good standing- for twenty-five
712, 106 Pae. 262; Empire State years, or, upon liis death, to his wif<^
Surety Co. v. Moran Bros. Co. 71 if living-, if not, then to his children
Wash. 171, 127 Pae. 1104, case of or legal representatives; benevolent
action to recover balance of premium : society held to have no power to is-
amount of premium was based upon sue endowment insurance; see, in this
entire amount of compensation paid connection, Boyd v. Southern Mutual
to employees: "kind of business" and Aid Asso. 145 Ala. 167, 41 So. 164).
"kind of work" defined in connection Indiana. — Union Central Life Ins.
wifli rate of premium. Co. v. Woods, 11 Tnd. App. 335, 37
12 State (ex rel. Clapp) v. Federal N. E. 180, 26 Ins. L. J. 151 {qnolinn
Investment Co. 48 Minn. 110, 111, 50 definitions from And. L. Diet, and
N. W. 1028. Bliss on Ins. [2d ed.] p. 6, sec. 6).
See the following eases: Missouri. — State (ex rel. Supreme
99
§ 11
JOYCE ON INSURANCE
icic.^, or rather, plans of endowment insurance. ^^ So a policy may
he issued on what is called the endowment plan comhinino- an in-
surance of the life and an investment of the moneys paid.^^
§ 11. Definition of tontine insurance. — Tontine insurance, strictly
so called, derives its name from Tonti, an Italian, to whom its in-
vention is accredited. It is based upon survivorship) among a num-
ber who share an annuity, or ratlier participate in an apportionment
Lodge of Fraternal Union of Amer-
ica) v. Orear, 14J: Mo. 157, 45
Si W. 1081. (In this ease the time
for payment was arbitrarily fixed
with reference to the age of assured.
The amount being ])ayable at the end
of a fixed period was, therefore, held
to be an endowment insurance.)
Endowment policy is one j^ayable
at a certain time at all events, or
sooner if tlie party sliould die sooner ;
the premiums all to be paid within a
certain limited time; amount payable
to the person whose life is insured or
to liis assigns on a day certain, or it
he sliould die before that time, then
■ to be payable to a person or persons
designated. Carr v. Hamilton, 129
U. S. 252, 253, 32 L. ed. 669, 9 Sup.
Ct. 295.
Endowment insurance has been de-
fined as "that quasi insurance busi-
ness which really partakes more of
the nature of investment or savings
bank business." Fawcett v. Supremo
Sitting of tlie Order of tlie Iron Hall,
(U Conn. 170, 205, 24 L.R.A. 815. 29
Atl. 614, dissenting opinion of Ham-
mersley, J.
IVhen polici/ not endoicment in-
mtrance. In Haydel v. iMntual Re-
serve Fund Life Assoc. 104 Fed. 718,
44 C. C. A. 169. 30 Ins. Law. Jour.
289, 291-293, certain "five-year
Combination option policies" were
claimed to be endowment policies be-
cause "the company undertook to pay
or make return of a specified sum of
money at the termination of certain
designated periods during the lifetime
of the assured," but they were de-
clared not endowment policies in that
they lacked some of the essential fea-
tures of sucli contracts, and that tliey
were not so far variant from ordinarv
policies issued on the co-operative or
assessment plan as to warrant a rul-
ing that a company, rest'"cted to busi-
ness on the assessment plan, exceeded
its power in issuing them.
When policy not an endowment or
life jjolicy, but an industrial or acci-
dent insurance policy, see Pride v.
Continental Casualtv Co. 69 Wash.
428, 125 Pac. 787, under Rem. & Bal.
Code, sees. 6155, 6159.
^^ As to reserve dividend plan of
W. P. Stewart, see Fuller v. jNIetro-
politan Life Ins. Co. 37 Fed. 163.
Participatiny tontine endowment
policy upon "reserve dividend plan"
— form of, see Fuller v. Metropolitan
Life Ins. Co. 70 Conn. 647, 056-659,
41 Atl. 4. Most of these policies were
foi' a term oE ten vears.
14 Miller V. Campbell, 140 N. Y.
457, 462, 463, 35 N. E. 651. In this
case the policy ditfered from an ordi-
nary life insurance, a certain period
being fixed within which the obli-
gation of the insurer accrued to the
wife, children, or pei'sonal representa-
tives, and they had no rights to re-
ceive payment under it beyond that
]ieriod. It combined an insurance of
the life and an investment of the
moneys i:>aid, in that it provided for
a state of widowhood or orphanage in
case of the death of the person whose
life was insured pending a specified
period, and it also secured to the
person effecting the insurance upon
his life for a certain period for the
benefit of liis family, a presumably
]irofi table return of the original in-
vestment of his moneys with the in-
surer, and might thus be regarded as
a provision for an advanced period
of liis life.
100
I
TERMS AND DEFINITIONS § 11
of the profits upon the lapse of certain intervals, and the sum rep-
resenting the share of one deceased is enjoyed by those who survive
to this extent, that the profits to be apportioned among the survivors
must, theoretically at least, increase as the deaths increase, until
final division made among the survivors, or the last survivor may
take the whole according as the terms of the agreement may pro-
vide.^* A tontine contract of insurance is more than a policy of
life insurance. In addition it is an agreeenmt on the part of the
insurer to hold all the premiums collected on the policies forming
^5 See Pierce v. Equitable Life unity or a loan raised on life annui-
Assur. See. 14.j Ma.ss. 56, 1 Am. St. ties with benefit of survivorship:"
Rep. 433, 12 N. E. 858, per Devens, 2 Rapalje & Lawrence's Law Diet.
J.; Uhlman v. New York Life Ins. 1280, title "Tonline." See definition
Co. 109 N. Y. 421, 4 Am. St. Rep. in Bouvier's Law Diet. "Insurance,"
482, 17 N. E. 363; Jacks' Introduc- quoted in Romer v. Equitable Life
tion to History of Life Ins. (ed. Assur. Co. 102 111. App. 621. See, al-
1912) pp. 211 et seq. "A species of so, 2 Abbott's Law Diet. 572; Whart-
life annuity propounded by Lorenzo on's Law Lexicon, 826, title "Ton-
Tonti, about 16.')0, as a mode by which tine."
governments might obtain loans. The The system of Tontines was "in-
general idea is that property is vented by Lorenzo Tonti or Tontine,
loaned, owned, or invested for the a Neapolitan, in 1653. The plan was
benefit of a certain number of per- this: A certain number of persons
sons who at first receive its income, clubbed together a specified sum (with-
the share of a deceased member in- out reference to age or sex) annual-
creasing the sum divisible among the ly, and at the expiration of each year
.'survivors; the last survivor taking the interest of this fund was divided
the whole income or principal, as the among the subscribers who were liv-
case may be:" Anderson's Diet, of ing; and so on from year to year, un-
Law 1039, title "Tontine." "A spe- til the last survivor received the whole
cies of association or partnership interest. Tliis novel scheme had all
i'ormed among persons who arc in re- the appearance of a profitable invcst-
ceipt of perpetual or life annuities, nient, until an inquiry was instituted
with tlie agreement that the shares or ^f, ascei-tain whal liecame of the pvin-
annuities of those who die sluill ac- ^^.-j^.^j g^^j^-, subscribed, as the interest
crue to the survivors :" B/rtc/.:'.s Law of the fund only was awarded. This
Diet. 1178, title "Tontine." "Besides ^^,.^^ ^^^^^ ^^ .^^ invention. ... A
the provision for payment by the m- jj^^^-^^^^ number of vears was fixed
sured on the ha.ppening of the event ^,^^. ^j^^ eontmuation of the tontine,
on which the liability of the insurer ^^^^^^ ^,^^ ^^_^^^^^^ originally subscribed
becomes consummated, P^'ovision is ^^^^_^;^,^^.^. ^,^^^ ,^^^^,^^
.sometimes made tor appropriation ^^ ^^ t i/-on ,\ ^ 4 ■ f
for the benefit of the insmvd of divi- ■ • • • . I^\l<>8^' "•^' 1'^^^ ■^^^^•^■'^» "^
dend. or i.rofits from ihe business •' tontine m I ranee was a widow,
conducted 'bv the insurer. This is ^vlio at the period of her death, at
commonlv done in what is known as Hie age of ninety-six, enjoyed an in-
a 'tontine policy,' wherein iirovi«ion come of 73,500 livres (£3,062, 10s.)
is made for the distribution of such for her original subscription of 300
profits at the expiration of a sjiecified livres, of the value of only £12, 10s."
period:" Cooke on Life Ins. (ed. Burt's Life Assur. Historical & Sta-
1891) 200, 201, sec. 110. "A life an- tistical, etc. p. 45.
101
§ 11 JOYCE ON INSURANCE
that class for I lie specified period, which is called the tontine period
or period of distribution, and after paying death losses, expenses, and
other losses out of the fund so accumulated, to divide the remain-
der among those who are alive at the end of the tontine period, and
who have maintained their policies in force. ^® In this, as in other
kinds of insurances, several plans have been devised which dilfer in
a greater or less degree from ''Tontine" insurance strictly so called."
^^ Equitable Life Assur. Soo. v. dend period tlie policy was an ordi-
Winn, 137 Kv. 641, 048, 28 L.R.A. iiarv life policy. Columbia Bank v.
(N.S.) 558 and note, 126 So. 153. Equitable Life Assur. Soc. 80 N. Y.
^""''Tontine savings fund policy Supp. 428, 79 App. Div. 601 (ca.'^e
plan." Provisions were in substance of action in aid of an attacbment)
as follows: Insurance was during rev'g 61 App. Div. 594, 70 N. Y.
natural life. If the person whose Su])p. 767. See also as to Tontine
life was insured should die before a Savings Fund plan with term of fif-
eertain specified time, said amount teen years; Equitable Life Assurance
was to be paid to his surviving chil- Soc. v. Spellnian, 22 Ky. L. Rep. 18)),
dren share and share alike; for non- 56 S. \V. 710, 29 Ins. L. J. 651.
])ayment of premium, policy was to question as to right to paid up poli-
lapse. Prior to the completion of the cy and waiver. Gadd v. Equitable
tontine dividend period as above Life Assurance Soc. (U. S. C. C.) 97
stated, no benetit could be derived Fed. 834.
from the policy by either the assured "Tontine savings fund plan" Con-
or his beneficiaries except in case of sidered with reference to right to sur-
as.sured's death. Said policy had no render value or paid-up insurance,
sui-render value, either in cash or in and forfeiture for nonpayment of
a paid-up policy. No dividends premiums see Banner v. Equitable
were payable upon the policy except Life Assurance >Soc. 141 N. Y. Supp.
assured survived the completion of 442, 156 App. Div. 502.
the tnntine dividend period, and un- Fifteen-gear iontine investment
less tlie policy was then in force.. All plan. If insured survived said peri-
surplus or profits derived from such od, the proceeds or value were never-
policies, on said plan, as .should cease Iheless to be paid; no dividend was
to be in force before completion of to be allowed or i)aid on the policy
their respective tontine dividend peri- unle.^s insured survived until eorn-
ods. were to be apportioned equitably pletion of the tontine dividend peri-
among such i^olicies as should com- od, and unless I lie policy was then in
])lete their tontine dividend periods, force; suri^lus or profits derived
Certain options were to accrue to from sucli ])olicies on said plan as
the legal Imldcr or liolders of the should not be in force at the eomple-
policy ujton assured's deatli, or upon tion of their respective tontine divi-
the termination of the tontine divi- dend periods were to be apportioned
(lend period, such as wiilidrawal in eijuitaljly among such policies of the
ca.sh of policy's entire share of the same dale as should complete their
assets; receiving a paid-up ]iolicy; tontine dividend periods; premiums
continuing the insurance and pur- were paid semi-annually in advance,
chasing an annuity; and withdrawal IT assured survived the tontine peri-
in cash of accumulated surplus and od, and the policy was then in force,
continuing policy in force on ordi- the face of tlie policy was to be paid
nary plan. It would seem that prior and also a share of all accrued di-
to the completion of the tontine divi- vidends on the policy. New York
102
TEILMS AND DKFlXITiONS § 11
An insurance company which by a policy agrees that the surplus or
profits derived from policies on the tontine savings fund assurance
plan, that shall cea.se to be in force before the completion of their
tontine dividend periods, shall be apportioned equitably among such
policies as shall complete their tontine dividend periods, does not
hold such surplus or profits as a trust. The amount to be appor-
tioned is not a dividend in the limited sense in which that word is
used in its application of dividends to stockholders. The assured
is not a member of the corporation, but its creditor who has con-
tracted with it. At tbe end of the fixed period, having complied
with the contract on his own behalf, and made the payments re-
quired, he is entitled to have apportioned to him his share of a cer-
tain fund to be computed.. This share, or its equivalent in value,
is the assured's own property.^* In Bogardus v. New York Life In-
Life Ins. Co. V. Miller, 22 Ky. L. don v. Northwestern Mutual Life
Rep. 230, 56 S. W. 975, 29 Ins.L. J. Ins. Co. 199 N. Y. 188, 92 N. E. 440.
1033. Where tontine insurance void as
''Free tontine policy" maturing' in gamblirifj contract. Fuller v. Metro-
ten years. If insured then living politan Life Ins. Co. 70 Conn. 647,
and the policy in force he was enti- 41 Atl. 4.
tied to certain options, among them Tontine debenture certificates.
being the right to withdraw in cash Contracts of investment security de-
such policy's entire share of the as- bentures or certificates, when contra-
sets; tliat is, of the accumulated re- ry to public policy and unlawful,
serve and in addition thereto the sur- State v.' Interstate Savings Inv. Co.
plus apportioned by the society to 64 Ohio St. 283, 52 L.R.A. 530, 60
such policy. Donoho v. Equitable N. E. 220.
life Assurance Soc. 22 Tex. Civ. App. ^' Pierce v. Equitable Life Assur.
192, 54 S. W. 645, a case whether Soc. 145 Mass. 56, 61, 62, 1 Am. St.
representations of agent as to sur- Rep. 433, 12 N. E. 858, per Devens, J.
plus were false and fraudulent or a Right to accounting in equity of
matter of estimate and opinion only, holder of matured tontine dividend
Held the latter. l^olicy, see Peters v. Equitable Life
"Tontine policy and tontine install- Assur. Soc. 200 ;\Iass. 579, 86 N. E.
ment policy;" meaning of terms may 885 (under Rev. Laws Mass. c. 159,
be shown by oral evidence. Thomp- .sec. 3, d. 5) See also Ev'erson v.
son V. Thorne, 83 Mo. Ai)p. 241. Life Assur. Soc. 71 Fed. 570, 18 C.
Semi-tontine policy with option to C. A. 251, aff'g 68 Fed. 258, semi-
purchase annuity, with other options tontine policy {quoting from F^hl-
if policyholder alive and policy in man v. New Yoi'k Life Ins. Co. 109
force at' end of tontine period. See N. Y. 421, 432, 17 N. E. 363, and cit-
Timlin v. Equitable Life Assurance ed in Grieb v. Equitable Life Assur.
Soc. 14] Wis. 276, 124 N. W. 253, Soc. [ U. S. C. C] 189 Fed. 498,
40 Ins. L. J. 295 (case of effect of 502, which is aff'd [U. S. C. C. A.] on
writing attached to policy, and nat- opinion below in 194 Fed. 1021) ;
ure of relation of parties to con- Ilunton v. E(|uitable Life Assur. Soc.
tract). (U. S. C. C.) 45 Fed. ()61 ; Equitable
Fifteen-year semi-tontine policy Life Assurance Soc. v. Winn, 137 Ky.
with' certain options at terniiiialion (i41, 28 L.R.A. ( X.S.) 558. 126 S. W.
of accumulative i^eriod. See Lang- 15.3; Hackett v. Equitable Life As-
103
§ n JOYCE ON INSURANCE
surance Company ^^ tlie policy was on the tontine or '^ten-year divi-
dend system;"" annual i)iemiums were to be paid each year for a ten
years' policy, to be voided in case of default, dividends to be allowed
assured only in case he survived the ten-year dividend period, the
policy being then in force. Aside from the provision for payment
of amount at death, it was stipulated, in case of surviving the period
specified and the policy remained in force, that there should be a
payment in cash or annuity bonds of a proportionate share of divi-
dends, accretions, etc.. from a fund to be created by a certain class of
policyholders, consisting of those effecting insurance on the same
plan in the same year, and that the surplus and profits from certain
funds of that class should be equitably apportioned among survivors
of that class holding jDolicies, and it was held that the policy did not
require a separate investment of the funds of that class to which the
policy belonged, and that the consent of assured to placing of divi-
dends in a reserve fund did not extend its obligations in this respect.
The court said: ''No ex])ress obligations are assumed by the defend-
ant, either in the policy or by the application, with reference to the
management or investment of the funds in question, and the tontine
plan is referred to as a known and understood system of insurance
pursued by all life companies of similar character to determine in a
certain contingency the extent of the company's liability to a special
class of its policyholders. It contem])lates the union of the interests
of a large number of persons, and the administration of a fund for
their mutual benefit, and from its very nature is incapal)le of being
molded and managed to meet the special requirements of particular
individuals. Upon the accession of every person to this class, he be-
Ijecomes interested in the contributions of every other member, and
neither of them can afterward withdraw his contribution without in-
juiy to the rights of all others interested in the fund. . . . We
therefore think that the use of these moneys in connection with its
other funds, and their investment and management according to the
mode Avhich in the judgment of the defendant was best adapted to
promote the interests of all of its policyholders, was entirely legiti-
sur. Soe. 63 N. Y. Sv^pp. 1092, 50 contention that remedy in equity un-
App. Div. 266, atf'g 63 N. Y. Supp. tenable. Hac-kett v. E(iuitable Life
847, 30 Misc. 523. Assur. Soe. 63 N. Y. Supp. 847, 30
Tontine polici/ — Apportionment hrj Misc. 523, aff'd 63 N. Y. Supp. 1092,
societif not reviewaJiIe bi/ courts in 50 App. Div. 260, case of eom|ilaint
action to recover distributive share at law by policyholder on "semi-ton-
without showing fraud or irregulari- tine' plan to reach reserve and sur-
tv in procedure. Oadd v. Equitable plus, — demurrer.
Life Assurance Soc. (U. S. C. C.) ^^ 101 N. Y. 328, 4 N. E. 522, per
97 Fed. 834, 30 Tns. L. J. 281. Ruger, C. J.
When accounting unnece^san/ ami .
104
TERMS AND DEFINITIONS
§ 12
mate, and in accordance with the true meaning of the contract. The
tontine plan nndoul)ledly contemplated such action on the part of
the in>^urer.s a.« would enaljle them at the expiration of the ten-year
dividend period to determine the aggregate of such dividends, accre-
tions, and interest, and to divide the same among the survivors of
the class to which they belonged according to their respective rights
therein ; but it seems to us that it does not involve the necessity of
keeping separate from its other funds either the premiums paid by
such class or their profits or accuumlations, or the duty of separately
handling, investing, or accunmlating such funds. "" 2°
§ 12. Definition of guaranty insurance. — (uiaranty insurance is
a contract whereby one for a. consideration agrees to indemnify
another against loss arising from the want of integrity, fidelity, or
insolvency of employees and persons holding positions of trust,
against insolvency of debtors, losses in trade. I'osses from non]tay-
ment of notes and other evidences of indel)tedncss, or against other
breaches of contract. It includes other forms of insurance which
are specifically cla.s.<ified, such as "lidelity gtiaranty," "credit guar-
anty," etc.^ As we have seen, the first English statute covering
20 As to uncertainty of amount to 583, 85 Atl. 325 (bond to indemnify
be received, see Avery v. Equitable fraternaf order for any toss it miglit
Life Assur. Soe. 117 N. Y. 451, 459,
23 N. E. 3. per Gray, J.; Uhlraan v
New Yorlc Life Ins. Co. 109 N. Y
421, 430, 431, 4 Am. St. Rep. 482,
17 N. E. 363, per Peckliam, J.
^ See Bunyon on Ins. 107; 9 Am.
& Eng'. Ency. of Law, 65; 13 Ency.
Britannica, 161. See People (ex rel.
Kasso'n) v. Rose, 174 111. 310, 312,
sustain by reason of the dishonesty
of its treasurer with certain condi-
tion.s or requirements).
A policy may insure against dis-
honesty or fraud of a factor of in-
sured in his management of money
intrusted to him to buy merchandi.se.
Clifton Manufacturing Co. v. Unit-
ed States Fidelity & Guaranty Co. 60
44 L.R.A. 124, 51 N. E. 246; Ameri- S. Car. 128, 38 S. E. 790.
can Surety Co. v. Folk, 124 Tenn. As to cases wliere policy protects
139, 135 S. W. 778, 40 Jns. L. J. against pecuniary loss re'^nlting
1074; Hogan, In re, 8 N. Dak. 301, from fraud or dishonesty of an em-
73 Am. St. Rep. 759, 45 L.R.A. 166, ployee or private corporation officer
78 N. W. 1051, 28 Ins. L. J. 520. amounting to embezzlement or lar-
For illustrative cases showing kind ceny, see American Bonding & Trust
of policy, see the following: Crystal Co. v. Burke. 3(1 (\)lo. 49, 85 Pac.
Ice Co. V. United Surety Co. 159 692; Canton National Bk. v. Auu'ncan
Mich. 102, 123 N. W. 619 (policy Bonding & Trust Co. Ill I\ld. 41, (3
indemnified againsi loss Ihrouuh or Atl. 684; Champion Jce Manufacfur-
by default of" employee) ; Rankin v. ing & Cold Storage Co. v. American
United States Fidelity & Guaranty Px.nding & Trust Co. 115 Ky. 86.3,
Co. 86 Ohio, 267. 99 N. E. 314 (bond lOi? Am. St. Rep. 350, 75 S. ^V. 19/,
to indemnify bank for a certain peri- 32 Ins. L. J. 810; Farmers State Bk.
od against dishonesty or fraud of its v, Title Guaranty & Trust Co. 133
cashier) ; Atlantic C'itv Aerie No. 64, Mo. App. 705, 113 S. W. 1147; Unit-
Fraternal Order of Eagles v. Inter- cd American Fire Ins. Co. v. Anieri-
national Fidelity Ins. Co. 83 N. J. L. can Bonding Co. 146 Wis. 573, 40
105
§ 12 JOYCE ON INSURANCE
guarantee insurance related to fidelity guarantee, or the insuring
the integrity, fidelity, or honesty of persons holding ofRces of pub-
lic trust and concerned with the receipt, control, or disbursement of
public money.-. ^
A credit indemnity or a guaranty policy or agreement may pro-
vide that general assignments of, or attachments against, insolvent
debtors, the absconding of debtors, or executions returned nulla
bona shall constitute insolvency, and that, the appointment of a
receiver, a sell out on the death of a debtor does not establish in-
solvency.^
"Loss sustained by the insolvency of debtors" includes losses up-
on sales made by insured to debtors who have made a general as-
signment for the benefit of their creditors. The scheme of indem-
nity may cover two classes of losses, one an initial loss to be first
L.Pt.A.(N.S.) 661, 131 N. W. 994, 1891, entitled "An Act to Aiathorize
40 Ins. L. J. 805. Certain Corporation.s to Become Sur-
Larceny or emhe^zlemenl defined, ety upon Bonds Required to be Fur-
See John Lee Clarke v. Fidelity & nislied bv Law, and Prescribing- the
Depo.sit Co. 73 Wash. 62, 131 Pac. Conditions under Which They May
468. "Embezzlement" in policy con- Do So." Wolff's Const. & Laws La.
strned same a.s in indictment. Deb- 1904, p. 896 (act 41, 1894, p. 45).
enhams (Lim.) v. Excess Ins. Co. 28 There is a statutory provision in that
T. L. R. 505, Hamilton, J. state as follows: ^''Third—To guar-
Bank cashiers guarantee bond wo' antee the fidelity of persons in posi-
afjalnst public poJicy because it lim- tions of trust, private or public, and
its insurance liability to losses occur- to act as surety on official bonds, and
ring: and discovered within specified for the performance of other obliga-
time. Ballard County Bank's As- tions." . . . ^'Ninth — to carry on
sig-nee v. United States Fidelity & the bi;siness commonly known as
Guaranty Co. 150 Ky. 236, 150 S. credit insurance or guarantee, either
W. 1. agreeing to purchase uncollectable
2 See § TX. herein. debts, or otherwise to insure against
In New York, guarantee corpora- loss or damage from the failure of
tions are divided into: (1) Title persons indebted to the assured to
guarantee; (2) Securities guarantee; meet their liabilities. Wolff's Const,
and (3) credit guarantee corpora- & Rev. Laws La. 1904, p. 845.
tions. See § 13 herein." See also Mr. Frost divides guarantee insur-
§ X. herein. ance into "fidelity," "commercial"
In Georgia, fidelity in.suranee com- and ".judicial" insurances, and dc-
panies insure against losses caused fines each. Frost on Guaranty Ins.
by the defalcation, default, neglect, (2d ed.) sees. 1, 2. Sec. 2 is quoted
or dishonesty of a trustee, officer of as to classification, and definitions
the law, officers of courts, agents, or noted in Cowles v. United States Fi-
olher employees and such other per- delity & Guaranty Co. 32 AVash. 120,
sons as may be required to give 98 Am. St. Rep. 838, 72 Pac. 1032,
bonds, or other obligations as indi- (case aff'd 37 "Wash. 695, 79 Pac.
viduals do who sign as sureties. Ga. 1134).
Code (Civ.) 1911, p. 665, sec. 2550 ^Construed and insolvency defined
(see. 2141). in Strou.se v. American-Credit Indcm.
In Louisiana an act was passed in Co. 91 Md. 244, 46 Atl. 328, 1063.
106
TP]1{MS AND DEFINITIONS § 13
l)orne by assured, and the other a loss in excess of said initial sum,
to be borne by the indemnitor, both resulting from the insolvency
of debtors who owe the indemnified; — as where policy provides for
an indemnity not exceeding a certain sum resulting from the in-
solvency of debtors over and above a net loss of a specitied amount
lirst to be borne by assured.*
A guaranty in>urancc Wond may guarantee or secure the faith-
ful performance of a private or public building contract; ^ or guar-
antee payment of all claims for labor or material on a construction
contract;^ and there may be an insurance of securities, or a con-
tract to insure the payment of a sum of money deposited with a
bank if the bank should default in paying the sameJ
I'olicies of life insurance and .^hip policies are contracts for secur-
ing against losses to be incurred under circumstances entirely dif-
ferent from the loss contemplated under guaranty policies.*
§ 13. Definition of real estate and title insurance. — Title guar-
anty insurance is a contract whereby one agrees for a consideration
* People V. Mercantile Credit & v. United States Credit-System Co.
Guarantee Co. 166 N. Y. 416, 419, 60 64 N. J. L. 34, 44 Atl. 96().
N. E. 24, rev'^^ .55 App. Div. 594, ^ A. R. Shorthiil Co. v. x?:Ctna In-
meaning' of 'Unsolvenci//' see Strouse demnity Co. — Iowa, — , 124 N. W.
V. American Credit-In'denuiitv Co. 91 613; Hornel & Co. v. American Bond-
Md. 244, 46 Atl. 328, 1063," 29 Jns. ins' Co. 112 Minn. 288, 33 L.K.A.
L. J. 980. See also Steinwender v. (N.S.) 513, 128 N. W. 12, 40 Ins. L.
Philadelphia Casualtv ('o. 141 App. J. 137; First National Bank v. School
Div. 432, 126 N. Y." Supp. 271, 40 District, 77 Neb. 570, 110 N. W. 349
Ins. L. J. 128. (school district) ; Illinois Surety Co.
I'oliditij of insurance against in- v. Ilildebrand, 126 N. Y. Supn. 651
solveiicji or credit inaarance. In (municipal).
Minnesota the business of insuring' ^ Knennan v. United States Fideli-
against lo.sses resulting' from the in- ly (luaranty Co. 159 Mich. 122, 123
solvency of those to whom goods are N. ^\ . 799.
sold oil credit was authorized 1)V ''Dane v. Mortgage Ins. Corp.
Laws 1881, c. 123 (G. S. 1894, sees. Law Rep. [1894] 1 Q. B. 54. Surety
3331-3337, inclusive) entitled "An companies have legal right to insure
Act to Authorize and Regulate with- payment of bank deposits. Reyioi-t
in this State the Business of Insur- of Attorney . General oi' New \oik
ance Other than Life, Fire, and Mar- (1893) p. 266.
ine," such enactment l)eing broad And a bond may guarantee- that a
enough to authorize any kind of in- person against whom a judgment has
sui-ance that is not against good mor- l)eeii rendered will perform the judg-
als or piildic policy. Ilayne v. Met- ment of the court. United States
ropolifan Trust Co. 67 'Minn. 245. Fidelity & Guaranty Co. v. Barrett,
59 N. W. 916. See also Genl. Stat. 140 Ky. 697, 131 S. W. /96, what
Minn. 1894, sees. 333 et se(|. Credit allegations suHicient to show breach
insui'ance unlawful in Massachusetts, of bond.
Claflin y. United States credit Svs- « 'Powle v. National Guardian Ins.
tern Co. 165 Mass. 501, 52 Am. St. Co. 7 Jur. (N. S.) 618, 623.
Rep. 528, 43 N. E. 293; Rosenbaum
107
§ 13 JOYCE ON INSURANCE
to guarantee or protect another's title to real estate,^ or which in-
sures against all loss or damage, not in excess of a specified sum,
which assured may sustain by reason of existing defects or unmar-
ketableness of title to a described estate, mortgage, or interest, or
because of liens and encumbrances changing the same, as of the date
of Ihe policy, with certain exceptions; or by reason of defects in the
title of a mortgagor in the mortgaged estate, or mortgage interest.^"
9 See Hogan, In re, 8 N. Dak. 301, v. California Title Ins. Co. 153 Cal.
73 A. S. 7.39, 45 L.R.A. 166, 78 N. 718, 96 Pae. 500 (from all loss or
W. 1051, 28 Ins. L. J. 520. Mr. Rich- (Uunage not in excess of a certain
ards says: "The Title Guarantee'' sum which assured shall sustain by
& Trust Co. of New York by its reason of defects of title of assured
Ijoliey obligates the insurer in sub- to the described estate or interest, or
stance to do three thing's for the pro- by reason of liens or encumbrances
tection of the insured: (1) To de- affecting the same on the date of the
fend suits against the title at the i>olicy with certain express excep-
expense of the insurer; (2) To pay lions); Minnesota. — Place v. St.
adverse judgments therein rendered; Paul Title Ins. & Trust Co. 67 Minn.
(3) and, if 'the in.-=ured contracts to 126, 64 Am. St. Rep. 404, 69 N. W.
sell or if he negotiates a loan, and 706 (to indemnify not in excess of
the title is refused, to test its validity a certain amount against all loss or
in court at the exj^ense of the insurer, damage sustained by rea'Jon of de-
and, if defeated, either to pay dam- iects in the title of mortgagors in
ages or else to take the property at the mortgaged estate with certain
the contract price where the insured specified exceptions) ; New Yorlc—
has contracted to sell it or to make Trenton Potteries Co. v. Title Guar-
the loan where he has negotiated a antee & Trust Co. 176 N. Y. 65, 68
loan." Richards on Ins. (3rd ed.) N. E. 132 (against all loss or dam-
sec. 467, p. 653; Id. (ed. 1892) sec. age not in excess of a stipulated
10, ]). 14. amount which insured may sustain
^° United States. — Equitable Trust l)y reason of any defect in the title of
Co. V. ^tna Indemnity Co. (U. S. the described premises, or by reason
C. C.) 168 Fed. 433 (to insure ti- of nnnmrketability of the title of in-
tles of mortgagees of a builder and sured, or by reason of liens and en-
nwner and of purchasers of build- cnmbrances charging the same as of
ings to be erected on the builder's tlie date of the policy) ; Pennsi/Jra-
land, to protect tliem from the own- 'nia. — Foehrenbach v. German-Ameri-
or's defaults in building operations, can Title & Trust Co. 217 Pa. 331,
and fi'om liens, the indemnity com- 118 Am. St. Rep. 9, 12 L.R.A.(N.S.)
pany being secured by bond executed 465, 66 Atl. 561 (to indenniity and
by the owner to a trust company) ; insure against all loss or damage not
Banes v. New Jersey Title Guaran- exceeding a specified sum which the
tee & Trust Co. 142 Fed. 957, 74 C. insured shall sustain by reason of
C. A. 127 (a policy or contract of the defects of the title of insured to
guarantee against loss or damage the estate mortgage and interest de-
wliich assured may sustain on account scribed, or because of liens or incum-
of existing defect.s of title to a mort- brances charging the .same at the
gage interest, or because of liens and date of the policy) : Wheeler v. Eqni-
encumbrances alfecting his interest at table Trust Co. 206 Pa. 428, 55 Atl.
the date of guarantee and against all 1065 (to indemnify and insure
loss or damage not exceeding a cer- against all loss or damage not exceed-
lain amount) ; California. — Bothin ing a specified sura arising from de-
108
TERMS AND DEFINITIONS § 13
The sole object of title insurance is to cover possibilities of loss
through defects that- may cloud or invalidate titles. It is an as-
sumption for a premium, of risk based on a careful examination of
the muniments of title and the exercise of jiKl2,ment by skilled con-
veyancers. It means the opinion of the company issuing it, as to the
validity of the title, and an agreement to indemnify or make the
title good in case loss should result in consequence thereof to as-
sured. ^^ The risks of title insurance end where those of other kinds
begin. The purpose or intent of title insurance is to protect or save
the insured harmless from loss through defects, liens, or encumbran-
ces, ett'., that may burden his title when he takes it, and it is not
designed as a protocfiou to him against matters that may arise dur-
ing a stated period after the policy is issued. As a general rule,
therefore, it would follow that when insured gets a good title, the
covenant of the insurer has been fultilled and there exists no lia-
bility. ^2
Such a i)olicy guarantees only the record title where it excepts
the tenure of present occupantsS and liens and encumbrances, judi-
cial proceedings, etc., not shown by any public record. ^^ Under the
New York statute, title guaranty corporation.s iriay be formed for
the purpose (1) of examining title to real property and chattels
real, to procure and furnish information in relation thereto, to make
and guarantee the correctness of searches for all instruments, liens
or charges affecting the same, guarantee or insure the payment of
l)onds and mortgages, invest in, purchase, and sell, with such guar-
antee or with guarantee only against loss by reason of defective title
or encumbrances, such bonds and mortgages as are lawful invest-
feets or uiimarketableness of title, of liens, a l)uil(ling being then in
snbject insured was a mortgage on iiroeess of erection on the mortgaged
ground rents issuing out of certain premises it being so set fortli in the
h)ts and buildings said mortgage was policy).
taken as collateral security also ^^ Foehrenbach v. Gernian-Ameri-
against loss from failure to com- can Titk & Trust Co. 217 Pa, 331,
plete certain buildings according to 336, 33/, 118 Am. St. Rep. OKi, 12
plans and specitications mentioned); L.R.A.(N.S,) 4G5, GO Atl. 561, per
"Wheeler v. Real Estate Title Ins. & Potter, J., Id. 336, 337.
Trust Co. 160 Pa. 408, 28 Atl. 849 12 Trenton Potteries Co. v. Titl_c
(construction of policy upon a mort- Guarantee & Trust Co. 176 N. Y. 65,
gage. The covenant in it was to in- 72, 68 N. E. 132, per Werner. J.;
deranify the holder again.st "all loss Foehrenbach v. German-Anierican
. . .' by reason ot defects or un- Title & Trust Co. 217 Pa. 331, 336,
marketableness of the title to the es- :!37, 118 Am. St. Rep. 016, 12 L.R.A.
tate or interest insured ... or (N.S.) 465, 66 Atl, 561, per Potter,
because of liens or encumbrances J.
charging the same at tlie date of this ^^ Bothin v, California Title Ins, &
policv," with one cla,'^s excepted: un- Trust Co. 153 Cal. 718, 96 Pac. 500.
marketability by reason of possibility
109
§ 13a JOYCE OX INSURANCE
nieiits for insurance companies under tlie act, and guarantee and
insure the owners of real property and chattels real, and others in-
terested therein, against the loss by reason of defective titles thereto
and other encunibi-ance thereon. 8uch corporation to be known as a
title "rju-firantee''^^'' corpora' Ion. (la) To guarantee the validity
and legality of bonds or other evidences of indebtedness issued by
any state or by any city, county, town, village, school district, mun-
icipality, or other civil division of any state, or by any private or
public corporation ; to act as registrar or transfer agent, but not iis-
cal, of any such corporation, and to transfer and countersign its
certificates of stock, bonds, or other evidences of indebtedne.ss. Such
corporation to be known as a securities gmiranty corporation. (2)
To guarantee and indemnify merchants, trader.s, and those engaged
in business and giving credit, from loss and damage by reason of
giving and extending credit to their customers and those dealing
with them. Such corporation to be known a.s a credit guaranti/ cor-
poration.^* As to the nature of this contract it is said in Minnesota
Title Insurance and Trust Company v. Drexel.^^ ^\^^^^ ^'tj^g insurer
is not a surety.^^ In that case the defendant company for an ade-
quate consideration agreed to 'indemnify, keep harmless, and in-
sure, Drexel. the mortgagee, 'from all loss or damage not exceeding
fifty-five thousand doUai-s.' the amount of the mortgage debt, which
he or his assigns might sustain by reason of defects in the title to
the mortgaged premises, or by rea.«on of liens or encumbrances
thereon existing at the date of the policy. The contract is plain
and explicit on this point. In a word, it is a guaranty that the mort-
gagee should not suft'er any loss or damage by reason of defects in
the title to the property, or liens or encumbrances thereon existing
at the date of the policy, under this guaranty, if the mortgaged
property with a clear title and free from encumbrances was worth
the amount of the mortgage debt, the mortgagee could confidently
rely upon the sufficiency of his security."'
§ 13a. Definition of rent insurance; rent guaranty insurance. —
Rent insurance is that class of underwriting which oftVrs indemnity
or a guarantee to the les.sor, against loss of rents resulting from fire
rendering the property untenantable; or against loss to a tenant,
where his lease does not exempt him therefrom, by reason of an
obligation to pay rent while the premises, as the result of fire, re-
12* So in oripnal. ^^ Laws applicable to sureties do
" Law.s N. Y. 1911, c. 525, p. 1198, not apply to guaranty and .'lurety
amd'o; T^ws 1909. e. 33, see. 170, as eorapanies to indemnify against
am'd by Laws 1909. c. 20'2. See 2 los.ses by bad debts: Tebbets v.
Birdseve's Cum. & Gilb. Consol. Laws :\[ercantile Credit Guarantee Co. 7.3
N. Y. Annot. pp. 2635 et seq.; 7 Id. Fed. 95. 19 C. C. A. 281, 38 U. S.
(Supp. 1910-13) p. 1386. App. 431. This question, however, is
15 70 Fed. 194, 198, 17 C. C. A. 56, considered elsewhere herein.
iKT Caldwell. J.
110
TERMS AND DEFINITIONS
13b
main untenantable ; " or to vendors, against loss of rentals in case
the vendee fails to make certain improvements on realty and com-
plete certain buildings within a specified time." Insurance against
loss of rentals is in the nature of or analogous to insurance on prof-
its/^ and also to a valued policy.^"
§ 13b. Definition of strike insurance. — Strike insurance may be
defined as a contract whereby-, for a consideration, the insurer agrees
to indemnify and guarantee firms^ corporations or other persons
carrying on manufacturing, against damage or loss, directly or in-
directly, resulting from any interference with, or suspension or in-
terruption of l)usincss or the use and operation, wholly or partly of
a manufacturing establishment by reason of employees strike.^
"See Whitney P:state Co. v.
Northern Assurance Co. 155 Cal.
521, 523, 23 L.R.A.(N.S.) 123, and
note, 101 Pac. 511. Examine also:
Amusement Syndicate Co. v. Prus-
sian Nat. Ins.' Co. (1911) 85 Kan.
97, 116 Pac. 620, 40 Ins. L. J. 1882
(case of insurance measuring lia-
bility by loss of rents while building-
being rebuilt or repaired, unless in-
sured elected not to rebuild or repair,
when time necessary therefor de-
termined amount of loss; also ques-
tion involved as to effect of valued
policy law and insurance on rents
being insurance on ''real property") ;
Palatine Ins. Co. v. O'Brien (1908)
109 Md. 100, 16 L.R.A.(N.S.) 1055
and note, 71 Atl. 775, 38 Ins. L. J.
482, s. c. (1907) 107 Md. 341, 16
L.R.A.(N.S.) 1055, 68 Atl. 484, 36
Ins. L. J. 616 (case of insurance
against loss of rent by fire; loss to
be computed from date of flre and
to cease upon premises becoming
tenantable, with agreement to re-
build or repair within such a sliort
time as the circumstances permitted,
but rents were not re-established
owine to delay by civil authority) ;
Helkr v. Roval Ins. Co. (1896) 177
Pa. 262, 34 L.R.A. 600, 35 Atl. 726
(insurance by tenant for loss by
reason of payment of rent while
premises untenantable. Same case,
same insurance (1892) 151 Pa. 101,
25 Atl. 83; (1890) 133 Pa. 152, 7
L.R.A. 411, 19 Atl. 349; Carey v.
London Provincial Fire Ins. Co.
(1884) 33 Hun (40 N. Y. Supr. Ct.)
315 (insurance upon lease-hold inter-
est; action for profits on subleases;
loss by fire) ; Cushman v. North-
western Ins. Co. (1852) M Me. 487
(insurance by lessee of interest ac-
quired by lease).
Insurance against loss of rents
authorized: Iowa acts 1911, p. 12,
c. 18, sec. 4, amd'g sec. 1709, par. 1,
of Supp. 1907.
This contract classed as rent guar-
antee insurance. See 5 Universal
Cyc. ''Guarantee companies," p.
327, Article by Clarence H. Kelsey.
See also Francis' Annals Life Assur.
(1853) p. 288.
^^ Young V. American Bonding Co.
228 Pa. 373, 77 Atl. 623; German-
American Title & Trust Co. v. Citi-
zens Trust & Suretv Co. (1899) 190
Pa. 247, 42 Atl. 682 (a ease of insur-
ance against actual loss which miglit
result to one as purchaser of gi-ound
rents upon unimproved land, by
reason of noncompleticm of buildings
to be erected. No policy was issued,
l)ut settlement certificate was treated
by parties as complete agreement).
■ 19 See note 38 Ins. L. J, 491, and
sections on profits under chapters
herein covering Description of Prop-
ertv and Risks and Losses.
20 Whitnev Estate Co. v. Northern
Assurance Co. 155 Cal. 521, 23
L.R.A. (N.S.) 123, 101 Pac. 511,
under definition in Cal. Civ. Code,
see. 2596.
1 Buffalo Forge Co. v. Mutual Se-
curitv Co. 83 Conn. 393, 76 Atl. 995,
39 Ins. L. J. 1347.
Ill
TITLE III.
CONTRACT AND POLICY.
CHAPTER 11.
NATURE OF THE CONTRACT.
§ 16. Risk is an esseiitial element.
§ 17. Division and distribution of loss are essential.
§ 18. Insurance is an aleatory contract.
§ 19. Insurance is a voluntary contract.
g IHa. Standaid tire policy a voluntary contract.
§ 20. Insurance is an executory contract.
§ 21. The contract is synalla2:matic.
§ 22. Insurance is a conditional contract.
§ 23. Insin-ance is a personal contract.
§ 24. Insurance other than that of life and' accident is a contract of in-
demnity.
§ 24a. Standard Are policy is contract of indemnity: collateral contracts:
mortgasres.
§ 25. Indemnity — stipulation as to value in policy.
§ 26. Life insurance not a contract of indemnity.
§ 27. Accident insurance is not a contract of indemnity in all cases.
§ 27a. That emploj-ers' liability insurance is contract of indemnity.
§ 27b. Same subject: whether contract one of indemnity or liability or both.
§ 27c. Injui-y to property or to employees and others: to what extent con-
tract i.s one of indemnity.
§ 27d. Englisli w(n'kmen's compensation act grants complete indemnity.
§ 27e. Insurance of carriers against losses from injuries to passengers is
contract of indemnity.
§ 27f. Insurance against burglary and loss or damage to property are con-
tracts of indemnity.
§ 27g. Insurance against accidents, death, and theft of animals is contract
of indenmity.
§ 27h. Fidelity guaranty insurance is contract of indemnity.
§ 27i. Title guaranty insurance is contract of indemnity.
112
i
NATURE OF THE CONTRACT § 16
§ 27j. Rent or rent guaranty insurance is contract of indemnity.
§ 27k. Insurance on "use and occupancy" of an elevator: when not a con-
tract of indemnity.
§ 271. Credit guaranty insurance is contract of indemnity.
§ 27m. Whether contract to defend physician against suits for malpractice
is one of insurance and indemnity.
§ 27n. Employees' benetit and reliftf association : contract not one of in-
demnity.
§ 28. Reinsurance is a contract of indemnity.
§ 29. Other incidents of the doctrine of indemnity.
§ 16. Risk is an essential element. — There must be a rislc, since
that is an essential element. It is of the very essence of insurance
and forms the principal foundation of the contract. In other words,
the insurer takes upon himself the peril which the property or in-
terest of others is liable to encounter. The very life of the contract
involves the presumption that the thing is or will be exposed to
some danger. But the risk should be of a real loss which neither
the insurer nor insured has the power to avert or hasten.^ If the
term ''risk" is used in a contract of insurance or reinsurance, the
court must in case of doubt determine what the parties intended,
having in view the whole contract, and the sense in which the word
is used and the precise contract relations sustained by the parties
to each other is important. The word, as ordinarily used, describes
the liabilit}' a^ssumed as specified on the face of the policy.^ This
risk or cause of loss against which it is intended to indemnify the
assured* ma}', as a general rule, be any uncertain event which may
^ See Emerigon on Ins. (Mere- ' Continentnl Tns. Co. v. ^tna Ins.
dith's ed. 1850) c. i. pp. 4, 5; Hop- Co. 138 N. Y. l(i, 20, 33 N. E. 724,
kins' Marine Ins. (ed. 1867) 53, 55; i)er O'Brien, J., reversing, as to the-
13 Ency. Britannica, 101; Nye v. construction of the word "risk" un-
Grand Lodge A. O. U. W. 9 Ind. der the facts of the case, 17 N. Y.
App. 131, 140, 141, 36 N. E. 429; Supp. 106. See also Pitcher v. Hen-
l)er Latz, J. Hart v. Delaware Ins. nessey, 48 N. Y. 415, where "risks of
Co. 2 Wash. (U. S. C. C.) 346, 350, navigation" were hold broader than
I'ed. Cas. No. 0150; Stern v. Rosen- "perils of navigation." But see defi-
Uial, 128 N. Y. Sup)). 711, 713, 71 nition of the word "peril" in Mar-
Misc. 422; Jones & Abbott v. Insui-- sliall on Ins. (ed. 1810) 2, note a,
ance Co. of North America, 90 Tenn. wliich is: "In insurance the word
()04, 25 Am. St. Rep. 706, 18 S. W. 'peril' generally signifies the liappen-
260. ing of the event or misfortune of
As to meaning of "sum at risk" in which danger was apprehended."
marine policy, see Standard IMarine "Perils of the Seas," see §§ 2797-
1ns. Co. V, Nome Beacli Lio'literage 27(10 lierein.
& Transp. Co. 133 Fed. 636, 67 C. C. *1 Phillips on Ins. (3d ed.) sec.
A. 602, 1 L.R.A.(N.S.) 1095. 905.
Joyce Ins. Vol. I. — S. 113
§ 17 JOYCE ON INSURANCE
in anywise be of di.'^advantagc to the party insured.* provided al-
ways that said party has an insurable interest which is exposed
thereto, or which may suffer damage or loss therefrom, and pro-
vided further that the risk is a legal one not in contravention of the
provisions or obvious policy of the law, nor an infringement upon
the rights of persons not parties to the contract, and tiuit it doe,« not
arise from the fraud of the insured.^ These points will, however,
be fully considered under insurable interest, void and illegal insur-
ances, wager policies, description of subject matter and property,
risk and loss. etc.
§ 17. Division and distribution of loss are essential. — Another
most important principle miderlying the contract of insurance is
that which minimizes the loss to the individual by a division and
distribution of liability among a large number of persons who are
subjected to like risks, and it folloAvs as a neces.<ary corollary, that
the peril ought to happen only to a comparatively small number.
This principle of division and distribution of loss is fully recognized
by the te.xt-writers and courts as fundamental. Thus, Maylnes
writes: "This most laudable custom of assurances whereby the dan-
ger and adventure of goods is divided, repaired, and borne by many
])ersons consenting and agreed upon between them what part everie
man will be contented to assure, make goode, and pay if any lo.ss
or casualtie should happen to the goods adventured, or to l:>e adven-
tured, at the seas as also by land, to the end that merchants might
enlarge and augment their trafficke and commerce, and not ad-
venture all in Bottome to their loss and overthrow, but that the same
might be repaired and answered for by many." '^ Substantially the
same language was used in 1601, in the preamble to the st<atute 43
Elizabeth, chapter 12, and also by Lord Bacon in his Abridgment.'
So Willes, Lord Chief Justice, in Pole v. Fitzgerald,' says: Insur-
ances 'Svere at first invented for the benefit of tiade. that if a mer-
chant miscarried in one voyage he might not be ruined forever, but
by giving premiums to other per.-^ons to insure either his i^hip or his
goods, the loss, if it happened, might be divided amongst them, and
so the merchant might be enabled to try his fortune in another voy-
age." Again, the court, in Kew York Life Insurance Company v.
Statham,^" declares that "the business of insurance is founded on
the law of average, that of life insurance eminently so. . . . By
SLucena v. Craufovd, 5 Bos. & P. 'Vol. ?> (4th ed.) 598, ."309.
.^ni, per Lawrence, J. ' Willes, 641. 64-5.
«See 1 Phillip.s on Ins. (3d ed.) i° 93 U. S. 24, 31, 32, 23 L. ed
905 et seq. ' 789.
'Maylncs' Lex Mercatoria (ed.
1C22) 146.
114
NATURE OF THE CONTRACT § 18
."Spreading; their risks over a large niiinljer of oases the companies
calculate on this average with reasonable certainly and safety," And
tlie court also says: "The insured parties are associates in a great
scheme. This associated relation exists whether the company he a
mutual one or not. Each is interested in the engagements of all,
f)ut of (he coexistence of many risks arises the law of average which
underlies tlie whole business. An essential feature of this scheme
is the mathematical calculations referred to on which tlio ])ieiiiiums
and amounts assured are based." " It is also said (hat: '"The con-
ditions necessary to the business of insurance are: (a) The exist-
ence of a known danger to which all property owners are exposed,
and against which they cannot efl'ectually protect themselves; (b)
the strong probability that loss from this danger will fall upon but
few^ of these who are exposed to it; (c) the certainty that when the
loss happens it will fall so heavily on those to whom it comes as to
make pecuniary indemnity a matter of great importance; (d) some
knowledge of the relative value of the property annually destroyed
by fire to serve as a basis for calculating the risk assumed b}' the
insurer, and the amount of premium required to enable the insurer
to meet losses and expenses and secure a fair return for the capital
employed." ^^
§ 18. Insurance is an aleatory contract. — The derivation of this
word embodies the idea of chance or uncertainty, and the contract
is aleatory in the 'sense that it is dependent upon some contingent
event: That the obligation of the insurer is subordinated to certain
perils. As we have already stated,^' risk is an essential element of
insurance, and neither the assurer nor insured can know whether
the event will or will not h;ippen, nor can either control the event
to avert or hasten it. Therefore, since insurance depends upon some
contingent event again>t the occurrence of which the contract is
intended to provide, although it may never occur, it is an aleatory
contract. It must he inidei'stood, however, that true insurance is
always concerned with real value; it is not merely speculative, as in
case of Avager policies, but is intended to protect actual interests
from possible losses. It is based u|)on certain facts and data re-
quired to be made known as far as a.scertainal)le. It does not pro-
ceed upon concealed facts, since the chance or probability of the
uncertain event hai)poning or of the ])eril must he estimated before-
hand with an approximate degree of certainty.^*
*^ New York Life Ins Co. v. Stat- ^* See Emerigon on Ins. (Mere-
liam. OiVU. S. :U, 23 L. ed. TSfl. (lilh"s ed. 1850i e. i. see. 3, pp. 11,
^^Commonwealth v. Viooman, 13; 1 May on Ins. (3d ed.) sec. 5;
164 Pa. 300, 318, 44 Am. St. Rep. Ilopkin.s' Marine Ins. (ed. 18G7) 53,
(in3, 2.") L.K.A. 2.')0. 30 All. 217. 58, 59, 290.
^' § 16 herein. ''Contrac t.s of life insurance fall
115
§§ 19-21
JOYCE ON INSURANCE
§ 19. Insurance is a voluntary contract. — Insurance is a volun-
tarx' contract, and insurer.s have the right to inii)o;;e conditions
therein. If the assured objects to them, he is not-bound to close
the contract, but if he voluntarily enters therein, he wih be bound
thereby.^* This of course relates to valid conditions, and those
not jirohibiled ])y positive law nor against ])nbUc policy.
§ 19a. Standard fire policy a voluntary contract. — Although
the form of a standard policy is prescribed b}^ statute, nevertheless
its force and efficacy is derived from the consent of the parties,
and upon acceptance by them it is to be treated as a voluntary con-
tract, and not as a legislative enactment. ^^
§ 20. Insurance is an executory contract. — The contract of insur-
ance is an executor}^ contract in the sense that it is executed by the
payment of the sum insured on a loss.^''' And a benetit society's
contract entered into with a member is executory. ^^ It is said in a
New York case that ''the contract (life) was not as to all its stip-
ulations and- as to botli ])arties executory. It was executed by the
plaintiff by the payment of the amuial premiums from 1849 to and
including 1801, while it was wholly executory on the part of de-
fendant, its undertaking being to pay the amount specified upon the
death of the insured." ^^ A parol contract of insurance must, it is
held, take effect in praesenti, and must not be executory. It is dis-
tinguished in this respect from a i)arol agreement to issue a jjolicy.^"
§ 21. The contract is synallagmatic. — Inasmuch the contract of
insurance is a nuitual agreement imposing certain reciprocal ob-
ligations upon the insurer and insured, it may be said to be synal-
lagmatic whether the subject matter be of a marine character or a
within the ciass of aleatory con- the legislatnre intended by preserib-
traets.'' 17 Karl of llalsbnry'.^ Laws ing the form of contract, and [)ro-
of England, "Insurance," p. .')14. liibiting any other, to give it effect
1^ Keim v. ilunie Mut. Fire *.^' 'SI. in depriving a party of rights, which,
Ins. Co. 42 ^lo. 38, 43, 97 Am. Dec. as a contract, it would not have.' "
201. 1'' IMutual Life Ins. Co. v. Wager,
i^Dunton v. Westchester Fire Ins. 27 Barb. (N. Y.) 354, 3(57. See New
Co. 104 :\le. 372, 20 L.R.A.(N.S.) York Life Ins. Co. v. Statham, 93 U.
1058, 71 Atl. 1037, 38 Ins. L. J. 600. S. 24, 23 L. ed. 789.
Policy in standard form prescril)ed ^* Union Fraternal League v,
1)V Me. Kev. Stat. c. 49, sec. 4, par. Walton, 109 Ga. 1, 77 Am. St. Rep.
7'. The Court, per Whitehouse, J., 350, 44 L.K.A. 424, 34 S. E. 317.
savs: "As stated bv the court in ^^ Cohen v. New York Mutual Life
Reed V. Washington Ins. Co. 138 Ins. Co. 50 N. Y. (510, 10 Am. Rep.
Mass. 572, Avith reference to the
standard policy then prescribed by
their statute: 'It is tiieir contract.
As such it does not deprive the plain-
tiff of his action and his trial by
juiy. It is not to be presumed that
IIG
522, per Allen, J.
20 Hartford Fire Ins. Co. v. Whit-
man, 75 Ohio St. 312, 9 Am. & Eng.
Ann. Cas. 218, 79 N. E. 459.
On validity of oral contract of in-
surance, see note in 22 L.R.A. 768.
II
NATURE OF THE CONTRACT § 22
building or the life or health of a person, or any other insurable
interest. 'Tothier says that 'the contract of insurance is synal-
lagmatic, for it produces reciprocal obligations. The insurer enters
into an obligation to the aSvSurcd to guarantee and indemnify him
against the perils of the sea, and the assured binds himself in turn
to the insurer to pay him the premium agreed upon.' "^
§ 22. Insurance is a conditional contract. — Insurance is a con-
ditional contract in the sense that the contract may never attach
even though the terms be agreed upon, as where the payment of
the premium is a condition precedent or where some act is required
to be performed by the assured in relation to the risk before the con-
tract is completed. It is also conditional in the sense that the in-
surer is not obligated to pay unless the loss arises from the specified
perils or Avhere no risk attaches and no premium is due.^ If the
contract stipulates that in certain contingencies it shall be void and
insures "against all direct loss or damage by fire except as herein-
after provided," it is a conditional contract. It is also conditional
when it insures against loss to property ''while located and con-
tained as described herein and not elsewhere." ^ The court said in
this case: "(a) The contract is declared upon as absolute and un-
conditional; it is alleged that by it the defendant did insure the
plaintiff against all direct loas or damage by fire upon or to the prop-
erty, etc. The contract in proof insures 'against all direct loss or
damage by fire except as hereinafter provided,' and there are subse-
quent stipulations which provide that in certain contingencies the
policy shall be void, such as loss caused by riot, etc. By the very
terms of the contract it is conditional ; it insures the plaintiff only in
case the loss does not occur from the excepted causes. A contract to
insure without limitation is not a contract to insure only in certain
cases, (b) In another respect, the contract in proof is a conditional
or qualified one. The declaration is upon a contract to insure the
tinshop building and its contents. The company would be liable
if the property burned, situated as described, when the policy was
issued, and it might be liable in case of loss if the building was lo-
cated elsewhere and the personal property contained in some other
building.* The contract in proof insured the property 'while lo-
^Emeriq'on on Ins. (Meredith's v. Snow, 3 Burr. 1237. See Hart v.
ed. 1850) ^c. i. see. 2, pp. 5, 6. Delaware Tns. Co. 2 Wash. (U. S.
2Enieri?on on Ins. (MenMlitli's C. C.) 346, 350, Fed. Cas. No. 6150;
ed. 1850) c. i. sec. 3, p. 11; 1 Mav Jones & Abbott v. Insurance Co. of
on Ins. (3d ed.) see. 4; McKee v. North America, 00 Tenn. 604, 25 Am.
Metropolitan Life Ins. Co. 25 Hun St. Rep. 706, 18 S. AV. 260.
(N. Y.) 583, 584; Tyrie v. Fletcher, 3 Cooledge v. Continental Ins. Co.
2 Cowp. 666, 668, 14 Eng. Rul. Ca.s. 67 Vt. 14, 30 Atl. 708.
502, per Lord j\ran.«field ; Steven.son ^Citing Felly v. Royal Exchange
117
§ 23
JOYCE ON INSURANCE
cated and coiilaincd a.< dc.-^crihed herein and not elsewhere.' This
latter clause qualilies tlie contract, making it conditional." ^
§ 23. Insurance is a personal contract.— It is well settled that
insurance is a personal contract, whatever the subject matter of the
insurance may be,^ Jt is a "contract by which the insurer under-
takes to indemnify or pay money to the insured in the manner and
subject to the conditions agreed upon. This liability of the insur-
er to pay money is not altered by the fact that such money may l)e
expended in rebuilding under certain circumstances, as in a hre
Assur. Co. 1 Burr. 341, 14 Eng. Rul. Michigan. — Hall v. Niag'ara Fire
Cas. 30; Lyons v. Providence Ins. Co. Ins. Co. 93 Mich. 184, I'JU, 32 Am.
14 R. I. idi). St. Rep. 497, 18 L.R.A. 135, 53 N.
* Cooledo-e v. Continental Ins. Co. W. 727; Disbrow v. Jones, Mar.
C7 Vt. 2^ 28, 30 Atl. 798, per (Mich.) 48.
Taft, J. Nebraska. — P'armers & Merchants
^ United States. — Hurst v. Spring- Ins. Co. v. Jensen, 56 Neb. 584,
tield Fire & Marine Ins. Co. 196 U. 44 L.R.A. 861, 76 N. W. 577, aliC'd 58
^5. 47, 25 Sup. Ct. 179, 49 L. ed. 381; Neb. 522, 44 L.R.A. 862, 78 N. W.
Royal Ins. Co. v. Stinson, 103 U. S. 1054.
25, 28, 26 L. ed. 473; Carpenter v. New Hampshire. — Lahitf v. Ashue-
Providcnce Washington Ins. Co. 16 lot Ins. Co. 60 N. H. 75.
Pet. (41 U. S.) 495, 503, 504, 10 L. New Jersey.— Kase v. Hartford
ed. 1044, per Story, J. ; Columbia Ins. Co. 58 N. J. L. 34, 32 Atl. 1057.
Ins. Co. V. Laurence, 10 Pet. (35 U. New York. — Lett v. Guardian Fire
S.) 507,512, 9 L. ed. 512; Northern Ins. Co. 125 N. Y. 82, 25 N. E.
Trust Co. V. Snyder, 76 Fed. 34, 37, 1088, per Gray, J. ; Wyman v. Wy-
22 C. C. A. 47. man, 26 N. Y. 253; Wvman v. Pros-
Alabama.—8hadgett v. Phillips & ser, 36 Barb. (N. Y.) 368; iEtna F.
Crew Co. 131 Ala. 478, 90 xVni. St. Ins. Co. v. Tvler, 16 Wend. (N. Y.)
Rep. 95. 56 L.R.A. 461, 31 So. 20. 385, 397, 30 Am. Dec. 90.
Illinois.— Undley v. Orr, 83 111. 0/t/o.— McDonald v. Black, 20
App. 70. Ohio, 185, 192, 55 Am. Dec. 448;
Indiana. — Nordyke & Marmon Co. Hubbard v. Winshel, 6 Ohio N. P.
V. Gery, 112 Ind. 535, 2 Am. St. Rep. Rep. (41 Weekly Law Bull.) 249;
219, 13 N. E. 683. Hubbard v. Austin, 9 Ohio C. P. Dec.
Kentucky. — See Cook v. Kentucky 111.
Growers Ins. Co. 24 Ky. L. Rep. Tennessee.— American Steam Laun-
1956, 72 S. W. 764. dry Co. v. Hamburg-Bremen Fire
iUame.— Adams v. Rockingham Ins. Co. 121 Tenn. 13, 21 L.R.A.
Mutual Fire Ins. Co. 16 Shep. (29 (N.S.) 442, 113 S. W. 394.
Me.) 292, 294, per Tenney, J.; White- rffl/*.— McLaughlin v. Park City
house V. CargiU, 88 Me.'479, 34 Atl. Bank, 22 Utah, 4/3, 54 L.R.A. 343,
276. ' 63 Pac. 589.
Man/hnid.—S.Vmnor & Sons Ship- TT'/.s^;OH.siw.— Stanbilber v. Mutual
building & Drv Dock Co. v. Hough- :\Iill Ins. Co. 76 Wis. 285, 291, 45
ton, 92^ Md. 68, 86, 84 Am. St. Rep. N. W. 221.
485, 48 Atl. 85; Heller v. National England. — Rayner v. Preston, L.
Marine Bank, 89 Md. 602, 73 Am. R. IS Cb. D. 1, io, per Brett, L. J.
St. Rep. 212, 45 L.R.A. 438, 43 Atl. See note 135 Am. St. Rep. 743.
800.
118
NATUKE OF THE CONTRACT § 23
policy, nor tnat it may be paid out in defending suits against the
title, or in testing its validity or in paying judgments rendered, as
in ease of title insurance. It is nevertheless a contract either to in-
demnify the assured or to pay him a certain sum of money in case
a certain casualty happens.' This obligation does not run with the
property whether it be real estate or personalty, neither does it pass
with the title unless assigned with the consent of the insurer,* or
' See Rayner v. Preston, L. R. 18 Mut. Fh-e Ins. Co. 43 Vt. 497, 500, 5
Ch. D. 1, 9, per Brett, L. J. Am. Rep. 207.
Fire insurance is a purely person- Enghind. — Rayner v. Preston, L.
al contract, by which the insurer R. 18 Ch. D. 1, 9.
agrees to indenuiiiV iu.sured again.st "A contract of fire insurance is a
any loss he may sustain by destruc- personal contract with the assured,
lion of his interest in the property and is not a contract passing- with the
insured. Nordvke & Alarnion Co. v. ]iroperty insured," 17 Earl of Hals-
Gery, 112 Ind.' 535, 2 Am. St. Rep. bury's Laws of England, "Insur-
219,' 13 N. E. (583. anee," p. 517.
' United States.— llxmi v. Spring- A contract of insurance does not
field Fire & Marine Ins. Co. 196 U. run with the land nor pass as an
S. 47, 50, 25 Sup. Ct. 179, 49 L. ed. incident to it. Carpenter v. Provi-
381; West Norfolk Lumber Co., In dence Washington Ins. Co. 16 Pet.
re, 112 Fed. 759. (41 U. S.) 495, 10 L. ed. 1044, cited
Alabama. — Shadeett v. Pliillips & in:
Crew Co. 131 AlaT 478. 90 Am. St. United States.— City of Norwich,
Rep. 95, 56 L.R.A. 461, 31 So. 20. The (Place) v. Norwich & New York
California.— Xyxw-'xi^ v. Phoenix Ins. Transp. Co. 118 U. S. 494, .30 L. ed.
Co. Ill Cal. 409, 415, 43 Pac. 1115. 144, (J Sup. Ct. 1150; West Norfolk
Illinois.— Lm^ley v. Orr. 83 III Lumber Co. In Re, 112 Fed. 763.
Ai)p. 70. California. — Davis v. Phopuix Ins.
.l/„/„^._Wliitehouse v. Cargill, 88 Co. Ill Cal. 409, 415. 43 Pac 1115.
Me. 479, 34 Atl. 276; Adams V. Rock- J/fssoxW.— Sauner v. Pliot>nix Ins.
iiigliam Ins. Co. IG Shep. (29 Me.) Co. 41 Mo. App. 480, 486.
292 294. .V<'(c Hampshire. — Laliiff v. Ashue-
3/a.s.sar7tMse».9.— Wilson v. Hill, 3 lot Ins. Co. 60 N. H. 76; Cummings
Met. (44 Mas'^.) 66, 69. v. Cheshire County Mut. Fire Ins.
.l//r///.7rrH.— Disbrow v. Jones, Co. 55 N. H. 458; Folsom v. Bel-
Har. (Mich.) 48. knap County Mut. Fire Jns. Co. 30
^'ew numpsliire.—{A\\n'& v. Ash- N. H. 240.
nclot Ins. Co. 60 N. H. 75; Cumming O/^/o.— McDonahl v. Black, 20
V. Cheshire Countv Mut. Fire Ins. Ohio 193, 55 Am. Dec. 448.
Co. .55 N. H. 457, 459. Pen»si/lranin. — Nippc's App. 75
Neiv York. — Lett v, Guardian Fire Pa. 479.
Ins. Co. 125 N. Y. 82, 86, 25 N. E. h'liode Island.— B.oxs{e v. Provi-
1088; .T.tna Fire Ins. Co. v. Tvler, dence Mut. Fire Ins. Co. 16 R. I. 529.
16 Wend. (N. Y.) 385, 397. 30 Am. South Carolina.— Sieinmeyvr v.
Dec 90 Steinmever, 64 S. Car. 420, 92 Am.
r>/no.— l\rcDonald v. Black. 20 St. Rep.' 809, 59 L.R.A. 323. 42 S. E.
Ohio St. 185, 192, 55 Am. Dec. 448. 184; Graliam v. American Fire Ins.
Sotith Carolina.— Anneh' v. De Co. 48 S. Car. 218, 59 Am. St. Rep.
Saussure, 26 S. Car. 497. 505, 4 Am. 707. 26 S. E. .323; Annely v.
St. Rep. 725, 2 S. E. 490. De Saussure, 26 S. Car. 50.), 4 Am.
T'ermonf.— Plimpton v. Farmers St. Rep. 725, 2 S. E. 490.
119
§ 23 JOYCE ON INSURANCE
unless by extraordinary or special and express stipulation of the
parties it is made to run with the subject matter,^ or unless it be so
framed as to be inseparably attached to the property and follow the
successive owners during the continuance of the risk, such succes-
sive owners being in turn the parties really assured, as w'here the
insurance is on account of the "owners,"' or for whom it may con-
cern, or where the loss happens to be payable to ''bearer," although
this latter form rarely exists.^" So where one insured real property,
the insurance payable to himself, his executors, administrators, and
assigns, the interest in the policy was held to pass to his executors
in preference to his heirs. ^^
But neither a mortgagee nor any other lien creditor has any riglit
to claim the benefit of a policy underwritten for the mortgagor or
owner of the property unless there is an express agreement permit-
ting it.^^ So a contract of insurance upon property sold at a fore-
^ Cummings v, Cheshire County Michigan. — Hall v. Niagara Fire
Mutual F. Ins. Co. 55 N. H. 457, 459. Ins. Co. 93 Mich. 184, 32 Am. St.
See also the following eases: Rep. 497, IS L.R.A. 135, 53 N. W.
United States. — West Norfolk 727.
Lumber Co., In re, 112 Fed. 759. South Carolina. — Annely v. De
California. — Davis v. Phoenix Ins. Saussure, 26 S. Car. 497, 505, 4 Am.
Co. Ill Cal. 409, 415, 43 Pac. 1115. St. Rep. 725. 2 S. E. 490.
Illinois.— Undley v. Orr, 83 lU. C'^aZ/.—MoLaughlin v. Park City
App. 70. Bk. 22 Utah, 473, 54 L.R.A. 343, 03
Maryland. — Heller v. National Pae. 589.
Marine Bk. 89 Md. 602, 73 Am. St. FermoH^— Plimpton v. Farmers'
Rep. 212, 45 L.R.A. 438, 43 Atl. 800. Mnt. Fire Ins. Co. 43 Vt. 497, 500,
Tennessee. — American Steam Laun- 5 Am. Rep. 297.
dry Co. V. Hamburg-Bremen Fire On right of mortgagee to benefit
Ins. Co. 121 Tenn. 13, 21 L.R.A. of insurance taken in name of
(N.S.) 442, 113 S. W. 394. mortgagor, see note in 25 L.R.A. 305.
Utah. — McLaughlin v. Park City A contract of insurance is not in
Bank, 22 Utah, 473, 54 L.R.A. 343, any manner incident to the estate,
63 Pac. 589. running therewith, but a special
^° See Rogers v. Tradei-s' Ins. Co. agreement with the underwriters
6 Paige (N. Y.) 583, 588; 2 Duer on against loss or damage which as-
Ins. (ed. 1846) pp. 49, 50, sec. 31. sured may sustain, and not the loss
i^Wyman v. Prosser (N. Y.) 36 or damage which may fall upon any
Barb. 368. other person having an interest as
12 Heller v. National Marine Bk. grantee, mortgagee, or creditor, or
89 Md. 602, 73 Am. St. Rep. 212, 45 otherwise. Adams v. Rockingham
L.R.A. 438, 43 Atl. 800. Examine ^Mutual Fire Ins. Co. 16 Shep. (29
§ 24a herein. Me.) 292, 294; Plimpton v. Farmers
See also the following cases: Mut. Fire Ins. Co. 43 Vt. 497, 500, 5
United »S'<afes.— Northern Trust Am. Rep. 297; Ca_ ..enter v. Provi-
Co. V. Snyder, 76 Fed. 34, 37, 22 C. dence Washington Ins. Co. 16 Pet.
C. A. 47. (41 U. S.) 495, 10 L. ed. 1044.
Maine. — Whitehouse v. Cargill, 88 Cited in :
Me. 479, 34 Atl. 270. Illinois. — Pinekneyville Mutual
120
NATURE OF THE CONTRACT § 23
closure sale between the purchaser and an insurance company is a
personal contract of indemnity between such purchaser and the
company alone, which does not inure to the benefit of the party
entitled to redeem, and the purchaser, having collected the insur-
ance money after the property has been destroyed by fire, is under
no obligation to account for it to such redemptioner.^^ The dis-
tinction winch underlies this construction is that the thing is not
insured but the right appertains to the person since the contract is
not in its nature an incident to the property. The term formerly
u.-^ed was "aversio peviculi," it being the intention of all insurances
to avert any damages or loss the insured might sustain.^* In the
case of Lynch v. Dalzell/^ Chancellor King says: ^^ ''These policies
are not insurances on the specific things mentioned to be insured,
nor do .^uch insurances attach on the realty or in any manner go
with the same as incident thereto by any conveyance or assignment,
but they ai'e only special agreements with the persons insuring
against such loss or damage as they may sustain. The party in-
.sured must have a property at the time of the loss. Or he can sustain
no loss, and consequently can be entitled to no satisfaction," ^'' So,
Fire Ins. Co. v. Kimmell, 59 111. renee, 10 Pet. (35 U. S.) 507, 512, 9
App. 535; Miller v. German Ins. Co. L. ed. 512; Wilson v. Hill, 3 Met. (41
54 111. App. 58. Mass.) 66, 69; Lab iff v. Ashuelot Ins.
Maine. — Donnell v. Donnell, 86 Co. 60 N. H. 75; Cumming-s v.
Me. 518, 520, 30 Atl. 67. Cheshire County Mut. Fire Ins. Co.
New York. — Loos v. Wilkinson, 55 N. H. 457, 459; Saddlers' Co. v.
113 N. Y. 500, 10 Am. St. Rep. 496, Badcofk, 2 Atk. 557; Patterson v.
4 L.R.A. 359, 21 N. E. 392; Loos v. Powell, 9 Bing. 320, 322, per Cole-
Wilkinson, 51 Hun, 83, 5 N. Y. ridge, J., who says: "Every policy
Supp. 410; AVyman v. Prosser, 36 of insurance must insure some thing
Barb. 371. or person from some risk to which
North Carolina. — Stamps v. Com- that thing or person is liable "
mercial Fire Ins. Co. 77 N. Car. 210, " 4 3^0. Cas. Pari. 432.
24 Am. Rep. 443. ^^ This quotation is as reported in
Pennsylvania. — Nippe's Appeal, Parke on Insurance (ed. 1800) 453,
31 Phila. Leg. Int. 276. and ascribed by iiim to Chancellor
As to lien creditors, see also West King, while in the above report it is
Norfolk Lumber Co., In re, 112 Fed. apparently ascribed to counsel.
759. ^'' Cited in Carpenter v. Provi-
^^ Deming Investment Co. v. Dick- dence Washington Ins. Co. 16 Pet.
erman, 63 Kan. 728, 88 Am. St. Rep. (41 U. S.) 49o, 503, 10 L. ed. 1044.
265, 66 Pac. 1029. See Farmers See also Columbian Ins. Co. v. Law-
Loan & Trust Co. v. Penn Plate rence, 10 Pet. (35 U. S.) 507, 9 L.
Glass Co. 186 U. S. 434, 453, 46 L. ed. 512. Cited in:
ed. 1245, 22 Sup. Ct. 842. United States.— Ynrmen^ Loan &
On right to proceeds of insurance Trust Co. v. Peini Plate Glass Co.
where loss occurs after foreclosure, 186 U. S. 434, 453, 46 L. ed. 1245,
but during period of redemption, see 22 Sup. Ct. 842; Citv of Norwich,
note in 6 L.R.A.(N.S.) 448. The (Place v. Norwich & New York
1* Columbian Fire Ins. Co. v. Law- Transp. Co.) 118 U. S. 468, 494, 30
121
§ 23
JOYCE ON INSURANCE
in a Ma^pacluisetts case ^^ the court declared that "it has been re-
peatedly decided here that under the forms of our policies none but
the parties to the contract or their legal representatives in case of
their death ciiu avail themselves of the contract although others may
in fact have an equitable or even legal interest in the property in-
sured. The only exception to this rule which has been admitted
exists where a policy has been bona fide and for a valuable consid-
eration assigned with notice to the underwriter and an assent on
his part, either express or implied." And again it is said that the
contract of insurance ''appertains to the person or party to the con-
tract, and not to the thing which is subjected to the risk against
which its owner is protected. It is not a contract running with the
land in the case of real estate nor running with the i)ers()ualty, so
to speak, in the case of a chattel interest of the insured." ^^ There
is, however, another class of cases where the question arises whether
certain covenants to insure made between certain parties relative to
land run with the land. Thus, a covenant to effect insurance and
apply the proceeds in case of loss by fire to the reparation of the in-
sured property is held such a covenant as may run with the land.^"
-iVgain, it is determined that a contract to }yrocure insurance will
bind legal representatives, successors, and assigns, where it specially
so provides.^
L. ed. 144, 6 Sup. Ct. 1150; West premises to tlie extent of his interest
Norfolk Lumber Co., In re, 112 Eed. in tlie lease, tlie policy does not iu-
763; Farmers Loan & Trust Co. v. ure to the benefit .of the lessor or his
Penu Plate Glass Co. 10.3 Fed. 132, assiiins, nor does it make the biulder
156, 43 C. C. A. 138, 5(i L.R.A. 718. liable on the covenant of insiu-ance
Illinois. — Miller v. German Ins. in the lease. Merchants' Ins. Co. v.
Co. 54 111. App. 58. Mazange. 22 Ala. 168.
Kentucky. — Spalding v. .Miller, A covenant to keep premises in-
103 Ky. 413, 45 S. W. 462. sured for a certain sum during- the
Massachusetts. — Harrison v. Pep- term, in companies ap)iroved by the
per, 166 Mass. 289, 55 Am. St. Rep. lessor or lease to be forfeited, does
404, 33 L.R.A. 241, 44 N. E. 222. not tend to renew prior policy cover-
Missouri.- — Saniicr v. Phoenix Ins.
Co. 41 Mo. App. 486.
^' Carroll v. Boston Marine Ins.
Co. 8 Mass. 515, 517.
^' Cummings v. Cheshire Countv
ing lessor's own interest, but lessee
may insure respective interests of
lessor and self. Sherwood v. Harral,
30 Conn. 333
See, furtlier, as to covenants to in-
Mut. Fire Ins. Co. 55 N. H. 457, 458. sure : Whitaker v. Hawlev, 25 Kan.
^OThomas V. Yonkaptfs, 6Gill & J. 674, 37 Am. Rep. 277:'Kberts v.
(Md.) 372; Masonry v. Southworth, Fisher, 54 Mich. 204; Rhone v. Gale,
n Ohio St. 340. Where interest need 12 Minn. 54. Examine Hidden v.
not be ])ersonal, see § 800 herein. Slater Mutual Fire Ins. Co. 2 Clifi'.
A builder who has entered into (U. S. C. C.) 266.
j)ossession without a sale under a ^ Tannebaum v. Greenwald, 73 N.
decree upon his contract of building Y. Supp. 873, 67 App. Div. 473.
made with the lessee, and insures the
122
NATURK OP THE CONTRACT § 24
§ 24. Insurance other than that of life and accident is a con-
tract of indemnity. — It is elementary that the contract of insur-
ance, other than tliat of hfc and of accident where the injury re-
sults in death, is one of indemnity.^ By indemnity is meant that
the party insured is entitled to l)e compensated for such loss -as is
occasioned by the perils insured against, in precise accordance with
the principles and terms of the contract of insurance. The right
^United States. — Tnjpeiial Fire Atl. 801, Am. & Eng. Ann. Cas.
Ins. Co. V. Coos Countv, 151 U, S. 1913E, 648n.
452, 14 Sup. Ct. 379, 38 L. ed. 231 Maryland.— FaUt'me Ins. Co. v.
(is contract of indemnity upon O'Brien, 107 j\ld. .341, 16 L.K.A.
lerms and conditions specified in (N.S.) 10,').'), 08 Atl. 484: Heller v.
policy) ; Plupnix Mutual Life Ins. Co. National Marine Bk. 89 Md. (502, 73
V. Bailev, 13 Wall. (80 U. S.) 616, Am. St. Rep. 212, 4') L.R.A. 438, 43
618, 20 'L. ed.'oOl, per Clifford, J.; Atl. 800 (policy against lo.ss by lire
British & Foreign Marine Ins. Co. i.s a personal contract of indemnity) :
Ltd. V. Maldonado & Co. 183 Fed. 744 Bosley v. Chesapeake Ins. Co. 3 Gill
(C. C. A.) (policy insuring- against & J. (Md.) 468, per Dor.sey, J.
general average contribution is con- Massachusetts. — Eager v. Atlas
tract of full indemnity against loss Ins. Co. 14 Pick. (31 Mas.';.) 141. 25
within insured valuation) ; Western Am. Dec. 363; Wilson v. Hill, 3 Met.
A.ssurance Co. v. Redding, 68 Fed. (H Mass.) 66, 68.
708, 714; Hedger v. Union Ins. Co. Minnesota.- Stale v. Federal In-
17 Fed. 498; Spare v. Home Ins. Co. vestment Co. 48 ]\Iinn. 110, 111, .lO
15 Fed 707 708 ^^- ^^'- 1^-^ ("the very essence ot any
' Californi,^.— Whitney Estate Co. ^lefinition of insurance is indemnity
V. Northern Assur. Co". 155 Cal. 521, '«!;. ^«,^f. ^^ ^^'^^^^'^ *^ ^ specified
.">24, 18 Am. & f^ng. Annot. Cas. .512, ^""^J^^'V-. . ^j , , j ^ „
.,.1 T i> * /XT o \ ?oo ini o mi Mississippi. — Natchez Ins. Co. v.
23 L.H.A.(N.S.) 123n, 101 Pac. 911 ^, , ^Vr , r at „^ \ a-i -o
.^ . /-I 1 Vi- n J Buckner, 4 How. (5 Miss.) 63, lif.
{,,uol,n<j mpavtCal. Civ. Code, sec. ,i/,,,o„^/._Mc.rrison v. Teun. Ins.
2.).)1) ; Davis v. Phoenix In.s. Co. Ill ^^ jg ^j^^ 262, 59 Am. Dec. 299.
Cal. 409. 41.), 43 Pac. lllo. i\>?,/-«.s^a;— Bassett v. Farmers &
(■oiinerticut.—Beym v. Connecti- Merchants Ins. Co. 85 Neb. 85, 19
cut Mut. Life Ins. Co. 23 Conn. 244, j^^^ ^ p^,^o._ Ann. Cas. 252, 122 N.
251; (Ik'iidalc \Vot)leii Co. v. Protec- ^y^ 703; Stanisics v. Hartford Fire
linn Ins. Co. 21 Conn. 19, 30, 31, 54 ]„s. Co. 83 Neb. 768, 120 N. W. 435.
Am. Dec. 309. JSfew Hampshire. — Hunt v. New
Jllinois. — Illinois IMutual Fire Ins. Hampshire Fire Underwriters A.'jsgc.
('... V. Andes Ins. Co. 67 111. 362, 16 cs N. H. :}05. 308. 73 Am. St. Rep.
-Vm. Kcp. (520. _ (;()2, .38 L.R.A. 514, 38 Atl. 145;
/y(r//Vn/rf. State v. Willett, 1 rl Ind. Cumniings v. Cheshire Countv ]\Iut.
296, 23 L.K.A.(X.S.) 197, 86 N. E. Fire Ins". Co. 55 N. H. 457, 458.
68. New York. — Cross v. National
Kentiuhi/.-^Uome Ins. Co. v. Fire Ins. Co. 132 N. Y. 133. 135, 30
Gaihlis, .3 Ky. L. Rep. 160. N. E. 390; Embler v. Hartford
Louisiana. — Marche.'iseau v. ?*Ier- Steam Boiler liis|>ection & Ins. Co.
chants Ins. Co. 1 Rob. (La.) 438. 40 N. Y. Supp. 450, 452, 8 App. Div.
Maine.-^(\e\c\\e\\ v. Mercantile & 186, case aff'd 1.58 N. Y. 431, 4 1
Manufacturers Mut. F. Ins. Co. 109 L.K.A. 512, 53 N. E. 212; Rawls v.
Mc. 274, 42 L.R.A.(N.S.) 135, 83 American Life Ins. Co. 36 Barb. (N.
123
§ 24
JOYCE ON INSURANCE
to recover beinc: comniensuralc with the lo'^s sustained.^ or with
the amount spet-ilied, as in cases of life insurance and valued poli-
cies. It is not intended by insurance that the party insured shall
be put in exactly the same situation as he might have been, had
there been no loss, although he may be restored as nearly as may
be to tlie condition he was at the outset.'* So in marine insurance
Y.) 357, 362, 84 Am. Dec. 280. See Fleminc:, L. R. 7 Q. B. 299, .302;
Holmes V. Gilman, 138 N. Y. 369, Dariell v. Tibbitt.^^. L. R. 5 Q. B. D.
381, 34 Am. 8t. Rep. 463, 20 L.R.A. 560, 562, 563; Powles v. Innes, 11
566, 34 N. E. 205. Mees. & W. 10, 13, 13 Eng. Rul. Ca«.
Ohio. — Farmers' Tns. Co. v. Butler, 356; Dalby v. India & London Life
38 Ohio St. 128, 133; Commercial As.sur. Co. 15 Comm. B. 365, 387, 13
Mutual Ins. Co. v. Detroit Fire & I'^ns-. Rul. Cas. 383. See Aitcliison v.
Marine Ins. Co. 38 Ohio St. 11, Lohre, 4 L. R. App. C. 755, 761, 49
15, 43 Am. Rep. 413 ; McDonald v. L. J. Q. B. D. 123, 41 L. T. 323, 14
Black, 20 Ohio St. 185, 55 Am. Dec. Eng. Rul. Cas. 449.
448. ^ United States. — Carpenter v.
Peunsijlvania. — Seheel v. German- Providence AYashington Ins. Co. 16
American Ins. Co. 228 Pa. 44, 76 Pet. (41 U. S.) 503, 10 L. ed. 1044.
Atl. 507; Meigs v. Insurance Co. of Connecticut. — Glendale Woolen Co.
North America, 205 Pa. 378, 385, 54 v. Protection Ins. Co. 21 Conn. 19,
Atl. 1053 ; Eureka Ins. Co. v. Robin- 54 Am. Dee. .309.
son, 50 Pa. St. 256, 269. 94 Am. Dec. Indiana.— ^i-Aie v. AYillett, 171
65; Commonwealth Ins. Co. v. Sen- Ind. 296, 23 L.R.A. (N.S.) 197, 86 N.
nett, 37 Pa. St. 205, 208, 78 Am. Dec. E. 68.
418. See Kaijtfman Bro.s. v. Stand- Maryland. — Franklin F. Ins. Co.
ard Fire Ins. Co. 21 Lancaster Law. v. Hamill, 6 Gill & J. (Md.) 87, 95.
Rev. 249. Ohio. — State (ex rel. Physicians
South Carolina. — Graham v. Defense Co.) v. Lavton, 73 Ohio
American Fire Ins. Co. 48 S. Car. St. 90, 97, 76 N. E. :)67.
218, 59 Am. St. Rep. 707, 26 S. E. Pennsylvania. — Commonwealth
323; Annelv v. De Saussure, 26 S. Ins. Co. v. Sennett, 37 Pa. St. 205,
Car. 497, 505, 4 Am. St. Rep. 725, 78 Am. Dec. 418.
2 S. E. 490. See Crosswell v. Con- England. — Kulen Kemp v. Yigne,
neeticut Indemnity Assoc. 51 S. Car. 1 Term. Rep. 309.
103, 112, 28 S. E. 200. Insurance is a contract of indem-
Tennessee. — Deming v. Merchants nity, the object being to reimburse
Cotton Pi-e.ss & Storage Co. 90 Tenn. insured for his actual loss not exceod-
306, 13 L.R.A. 518, 17 S. W. 89. ing an agreed sum. Getchell v. Mer-
Vermont. — Plimpton v. Farmers cantile & Manufacturers ilut. Fire
Mut. Fire Ins. Co. 43 Yt. 497, 500. Ins. Co. 109 Me. 274, 42 L.R.A.
5 Am. Rep. 297. (N.S.) 135, 83 Atl. 801.
Virginia. — Han-is v. Common- The general object or purpose of
weiilth. 113 Ya. 746, 38 L.R.A. (N.S.) an insurance company is to afford
458, 73 .S. E. 561. indemnity or security against loss.
Wisconsin. — Stanhilber v. Mutual Commonwealth v. Equitable Benefi-
Alill Tns. Co. 76 Wis. 285, 291, 45 N. cial Assoc. 137 Pa. 412, 419, 18 Atl.
W. 221 ; Johannes v. Phoenix Ins. Co. 1112, distinguishing between insur-
66 Wis. 50, 53, 57 Am. Rep. 248, 27 ance companies and benevolent so-
N. W. 414. cicties a.s to indemnity etc.
England. — Castellain v. Preston, * Commonwealth Ins. Co. v. Sen-
L. R. 11 Q. B. D. 380, 386; Llovd v. nett, 37 Pa. St. 205, 208, 78 Am. Dec.
124
N/VTURE OF THE CONTRACT
§§ 24a, 25
the recovery may exceed or be less than a complete indemnity, and
therefore it is not a perfect contract of indemnity.*
§ 24a. Standard fire policy is contract of indemnity; collateral
contracts; mortgages. — A contract for lire insurance in tlie form
prescribed hy tlie Massachusetts statute is a contract of indenniity,
and a.-^sured is only entitled to \)e put in the same condition pe-
cuniarily that he would have been in had there been no fire. Nor
are his damages to be diminished because he has collateral contracts
or relations with third pers(ms which relieve him wholly or partly
from the loss against which the insurance company agreed to in-
denniify him. This principle, as applied to mortgages is now nn-
important in that state by reason of the standard policy provisions
requiring the mortgagee to assign his mortgage to the insurance
company if so requested upon payment of the mortgage debt to the
mortgagee.^
§ 25. Indemnity — stipulation as to value in policy. — It has been
said that insurance is not a ])erlVcl contract of indemnity in that
the parties may agree beforehand in estimating the value of the
subject assured as the measure of damages.''' The fact, however,
that the sum to be paid is agreed upon beforehand makes in itself
the contract no less one of indenmity, because the value is so fixed
in order that the insured may have an indenmity and no more,
since if there be a gross and fraudulent overvaluation it may be
inquired into, and it is ordinarily to the insured's advantage to see
418; Hopkin.s' ]\Iarine Ins. (ed.
1867) 59; 2 Phillips on Ins. (3d ed.)
36, sec. 1220. See Woods' Mayne on
Dama.S'os (1st. Am. ed.) sec 430; 2
Sedgwick on Dama<res (Stii ed.) sees.
722 et seq. ; Times Fire Assur. Co. v.
H:i\vke, 1 Fost. & F. 400.
^17 Earl ot Ilalsl)ury's Ijaws of
England, p. 336, note; Id. ])p. ;!80,
402, et sc(|. See also 15 Id. |)p. 443.
444, title "Guarantee."
^ Tabbut V. Americiiii Ins. Co. 185
Mass. 41!), 202 Am. St. Rep. 353, 70
N. E. 430 (case is cited in Ryan v.
Agricultnral Ins. Co. 188 INIass. 11.
13, 73 N. E. 841), where facts almost
identical). See also on last point
Jenks V. Liverpool. tJc Linulon &
Globe Ins. Co. 206 Mass. 591, 597. 92
N. E. 998.
' "A policy of assnrance is not a
perfect contract of indenmity. It
mu.st be taken with this (|naIilication,
that the parties ma\^ agree before
hand in estimating the value of the
.subject assured Ijy way of li(|uidat-
cd damages, as indeed they may in
any other contract to indcnniify:"
Jr\ing V. Manning, 1 H. L. Cas. .■!03,
307, opinion of the judges. This ease
is cited in Aitcluson v. Lolire, L. R.
4 App. Cas. 755, 7(11, per Blackburn,
J., and one of the qualilications stat-
ed is that of the allowance of one
lliird new foi- old in marine risks:
See Hamilton v. Mendes, 2 Bun-.
1198, 1210. iier Lord Mansfield: 17
Earl of Halsburv's Laws of England.
]i. 33(), note; Id.'i)p. 380, 462 et seq.;
15 Id. pp. 443, 444, title "guarantee."
See also Delaware Ins. Co. v. Hill
(1910) — Tex. Civ. App. — , 127 S.
W. 283, 292, 39 Ins. L. J. 908, 927.
Valued ])olicits, see §§ 159-168
herein. On law governing a.s to ex-
tent of recoverv on policv, see note
in 03 L.R.A. 808.
12.=
25
JOYCE ON INSURANCE
that there is not an undervahuilion, and that the amount be fixed
suflieiently large to constitute an indemnity.® If, however, a vahicd
policy is bona fide meant 'ds an indenmity, the courts will not in-
quire very minutely whether the valuation be very near the true
interest of the avssured. This is the rule stated by Marshall, and
accords with that given by the courts.^ So it is held in New York
that an overvaluation does not per se render a valued marine policy
void. In the absence of fraud, accident, or mistake the valuation
agreed upon is conclusive and Ijinding, however largely in excess
of the true value. Overvaluation is simply presumptive evidence
of fraudulent intent strong in proportion to the excess, which pre-
sumption may be repelled by proof; ^° and it must appear, in order
to avoid a policy for oven'aluation, that such overvaluation was in-
tentional, fraudulent, and not an honest expression of opinion."
Again, in case of partial loss in valued policies an inquiry may
be made as to the amount of loss as a basis upon which to indemni-
fy the assured. ^^ Therefore, the fact that the amount is Hxed in a
^United Siates.— Marine Ins. Co. 3 L. ed. 201, 7 Cranch (10 U. S.)
v. Hodo-son, (3 Craneh (10 U. S.) 3;]2, 3 L. ed. 262; Hodoson v. Marine
206, 220. 3 L. ed. 201, 204, 7 Cranch Ins. Co. 5 Craneli (<) U. S.) 100, 110,
(11 U. S.) 332, 3 L. ed. 362.
Colorado. — Duncan v. National
Mutual Fire Ins. Co. 44 Colo. 472,
20 L.R.A.(N.S.) 340, 98 Pa". 634.
Louisi(t}ia. — Natcliez & New Or-
leans Packet & Navis^ation Co. v.
3 L. ed. 48. See §§ 159-168 here-
in.
10 Helbig- V. Svea Ins. Co. 54 'Cal.
156, 35 Am. Rep. 72 and note, 74,
76; Borden v. Hins'ham Mutual Fire
Ins. Co. 18 Pick. (35 Mass.) 523, 29
Louisville Underwriters, 44 La. Ann. Am. Dec. 614, and note, 616, 621.
714, 11 So. 54, where actual value Under following heads: " 'Overval-
exceeded value specified, and assured nation of insured property,' 'fraud-
was held Ijound by value stated. ulent overvaluation avoids policy,'
^[a■ssac]n(setts. — Clark v. Ocean 'rule applies both to valued and to
Ins. Co. 16 Pick. (33 Mass.) 289; open policies,' Svliere overvaluation
Wolcott V. Eagle Ins. Co. 4 Pick. (21 not fraudulent,' 'overvaluation con-
Mass.) 429. Irarv to warranty or condition in
New York. — See Yoison v. Com- ])olicy,' 'examinations of property by
mercial Mutual Ins. Co. 62 Hun (N. agent;'" Sturm v. Atlantic Mutual
Y.) 10, 1], per Daniels, J., 41 N. Y. Ins. Co. 63 N. Y. 77; Watson v. In-
889. surance Co. of North America, 3
Te.ro,';.— Delaware Ins. Co. v. Hill Wash. (U. S. C. C.) 1, 2. See In-
(1910) — Tex. Civ. A)ip. — , 127 surance (^). of Nortli America v.
Coombs, 19 Ind. App. 331, 49 X. E.
471: Delaware Ins. Co. v. Hill
(1910) — Tex. Civ. App. — , 127
S. W. 283, 292, 39 Ins. L. J. 908,
S. W. 283, 39 Ins. L. J. 908, 927
fJnqlmid. — Lewis v. Rucker. 2
Burr.' 1171. 14 Eno-. Kul. (^u^. 215;
Shawe v. Felton, 2 East, 109.
See Marsliall \m Ins. (ed. 1810) 927.
288.291. See also §§ 159-168 herein. " Wlieaton v. North Britisli &:
^ Mar.shall on Marine Ins. (ed. Mercantile In.';. Co. 76 Cal. 41."). 9
1810) 291 ; ^Tiner v. Tagert, 3 Binn. Am. St. Rep. 216, 18 Pac. 758.
(Pa.) 204. See also Marine Ins. Co. ^^ Watson v. Insurance Co. of
V. Hodo-son, 6 Cranch (10 U. S.) 206, North America, 3 Wash. (U. S. C.
126
4
NATURE OF THE CONTRACT § 26
valued policy whcrc^ llie pecuniary value of the subject of insurance
is capalfle (if hcint; c-timated makes the contract none the less one
of stricl iudeuinity. the only difference being that the money value
or indenmity is, as far as may be possible, determined before in-
stead of after the loss. So Mr. Phillips ^^ says: ''The valuation in
a valued policy is a mere substitute as between the parties for the
<(iiiiputation or estimate of the value of the subject in an open
|»olicy."' ^* Nor does the valuation preclude an inquiry as to the
amount of interest at stake, for it may be shown that only part of
the property was at risk,^^ the valuation being assumed to be based
u|)on the principles of indemnity in all valued policies.
§ 26. Life insurance not a contract of indemnity. — Although
the question of indemnit}^ as related to life insurances has been
prolific of much discussion by both text-writers and the courts, yet
the weight of authority' is that life insurance is not a contract of
indemnity. In Godsall v. Boldero,^^ which was for a long time a
leading case, a creditor insured his debtor's life. After the debt-
or's death and before action brought, his executors paid the del)t.
and the court held that such payment took away the ground of
action." The court relied upon the case of Hamilton v. INIendes.^^
which was a case of marine insurance. The ruling was followed in
other cases, although there were conflicting decisions until the law
became settled upon the authority of Dalby v. India and London
Life Assurance Company," wdiich expressly overruled Godsall v.
Boldero. The question was well considered both by the court and in
the arguments of counsel, and it was there determined that life in-
surance ill no way resembled a contract of indemnity.^" While a
C.) ], •_'; Cljiik V. United Ins. Co, 7 (the insured) were wliolly obviated
-Mass. 30.'), 5 Am. Dee. 50. See 1 by the payment of his debt to tliem,
Arnouhl on Miirinc Ins. (Perkins' flie foundation of anv action on
ed.) 30!), *304 et scq. (heir (the plaintilTs') 'part, on the
*^ 2 Phillips on Ins. (3d ed.) see. ii^round of sueli insnranee, fails:"
1188. Godsall v. Boldero, !) East, 72, 81.
1* See also 1 Arnold on Marine Ins. ^^ o Burr. 1210, 1 En^-. Rul. Cas.
(Perkins' ed. 1850) 315, *309 et 312.
seq.; Id. ( Maclachlan s ed. 1887) 200 1M5 Coin. B. 3n."). 13 En^. Rul.
et seq.; Eorbes v. As{)inall, 13 East, Ca.s. 383.
327, 13 Eng'. Rul. Cas. ti73. ^° ^t was there declared that "the
^* Forlies v. Aspinall, 13 East, 327, contract coninioidy called life assur-
13 Eng'. liul. ('as. 073. See §§ aiice, when ])roperly considered, is a
150-108 herein. mere contract to pay a certain sum
^^0 East. 72. of money on the death of a ]ierson in
"Lord f>llenboi-oiigh, C. J., de- consideration of the due jiayment of
clared "that if, before the action was a certain annuity for his life, tiic
brought, the damage which was at amount of the annuity being calcu-
first supposed likely to result to the lated in the first instance according
creditor from the death of Mr. Pitt to the proVjable durafion of the life;
127
26
JOYCE ON INSURANCE
life is not a subject of valuation itself/ nor the loss adjustable on
any principle of indenmitv, still the amount of insurable interest
in a life can sometimes be estimated as in case of the insurance by
a creditor of the life of his debtor, so much so that it has been held
that in case of a gross disproportion between the amount of the in-
surance and the debt secured thereby it may be declared a wager
policy.^ 80, perhaps, in other cases where the insurable interest
is a pecuniary one it may be valued in the sense that the interest
might be assumed to be equal in amount to the sum insured.^ and
therefore a life policy might be said to resemble a valued marine
policy, and in so far a.s the insurable interest in the former is ca-
])able of being approximately estimated upon a pecuniary basis that
that establishes a measure of indemnity, and therefore constitutes
life insurance a contract of indemnity, and that the fact that the
amount is fixed in a life policy makes it differ in no wise from a
valued marine policy. This conclusion, however, cannot follow
when it is considered that the nature of the two contracts differs in
many respects. Thus, in life risks the premium depends upon
data based upon the duration of human life, and the event must
and when once fixed it is constant contract "really is what it is on the
and invariable. The stipulated face of it, a contract to pay a certain
amount of annuity is to be uniformly •''""i i" the event of death. It is val-
paid on one side,' and the .'^nni to be id at the common law, and if it is
liaid in the event of death is always, made by a person having an interest
except when bonuses have been oiven in the duration of the life, it is not
by prosperous offices, the same on prohibited by the statute 14 George
the other. This species of insurance HI- c. 48." Dalby v. India &. Lon-
in no way resembles a contract of in- don Life Assur. Co. 15 Comm. B.
denniity." The reasoning in this case 365^13 Eng. Rul. Cas. 383, per opin-
seems to be based upon the construe- ion, Parke, B.
tion of the statute 14 George III., ^ The court in Connecticut j\[ut.
chapter 48. clause 3, which provides Life Ins. Co. v. Schaefer, 94 V. S.
"tliat in all cases Avhere the insured 45 (, 460, 24 L. ed. 231, declares that
hath interest in such life or lives, event "In life insurance the loss can sel-
or events, no greater .'^um sliall be re- dom be mea.^ured by pecuniary val-
covered or received from tlie insurer ues." Per Bradley, J.
or insurers than the amount or value Life insurances are, says Mr. Bun-
of the interest of the assured in such yon, independent of the value of the
life or lives or other event or events." subject • matter: Bunyon on Life
This was held to mean that "if there Ins. (ed. 1867) 7.
is an interest at the time of the poli- ^ Cooi^er v. Schaeffer (Pa.) 11 Atl.
cy, it is not a wagering policy, and 548, 20 Week. Notes Cas. 123, 9 Cent,
that the true value of that interest 60L But see Grant v. Kline, 115 Pa.
may be recovered in exact conformi- St. 618, 9 Atl. 150. where the insur-
tv with the words of the contract it- once was for $3,000, and the debt
self;" that "the only effect of tlie less than $800. and the disproportion
statute is to make the assured value was not considered too great,
his interest at its true amount when ^ See 2 Phillips on Ins. (3d cd.)
he makes the contract," and that the 35, sees. 1216, 1217.
128
NATURE OF THE CONTRACT
§ 26
liappcn. In other risks the data for fixing rates of premium de-
pends upon an uncertain event which may or may not hapjjen.'*
Again, in the one ca.sc the contract is based on a pecuniary interest,
while in a hfe risk the interest need not necessarily be strictly and
exchisively a j)ecuniary one, as in case of consanguinity or affinity.^
Another distinction is that in marine, fire, and other insurances of
like nature the interest must exist at the time of the loss, or there
* Loss certain to occur in life and est in life not necessary. See as to
not in fire and marine insurances, necessity of pecuniary interest, Car-
Nyo V. Grand Lodop A. O. U. W. 9 j.eiiter "v. United States Life Tns.
Ind. A))]). 131, 140, 3() N. E. 429, per Co. Itil Pa. St. 9, 1.5, 16, 28 Atl. 94:],
Lotz, J. per Dean, J.; Nye v. Grand Lodse,
5 "An insurance upon life has in 9 Ind. App. 131." 142, 36 N. E. 429.
fact but a remote re.sendjlance to a Insurable interest is not dependent
marine or fire insurance. In the lat- on pecuniarv loss. Hess v. Segon-
ter the ])articular o))ject is to indem- feiter, t27 Ky. 348, 32 Ky. L. Rep.
nify against a pecuniary loss; and 225, 128 Am. St. Rep. 343, 14 L.R. A.
the event upon wliich the money is (N.S.) 117, 105 S. W. 476. Jt was,
made payable is the liappening of the liowever, held in England under the
loss, the contract being in terms to statute 14 George III., e. 48, that
pay whatever is lost, not exceeding a there must be a i)ecuniary interest in
specified sum. But a life insurance the life or event insured. Halford
is a contract to pay a specific sum v. Kymer, 10 Barn. & C. 724; 1 Pliil-
on the happening of a particular lips on Ins. (3d ed.) 201, sec. 356;
event which may or may not occa- (Statute 14 George III. c. 48, was
sion a pecuniary loss. Where that never in force in Wisconsin. Hurd
event is the death of the insured him- v. Doty, 86 Wis. 1, 21 L.R. A. 746, 56
.self, there is nothing like an indem- N. W. 371). ''But the better opin-
nity against loss to liim, for he can ion is tluit the decided cases wliich
never receive the money." Trenton i)roeeed upon tlie ground that the in-
Mutual Life Ins. Co. v. Jolmson, 24 sured must necessarily liave some pe-
N. J. L. 576, 585, per Elmer, J. See cuniary interest in the life of the
Warnock v. Davis, 104 U. S. 775, cestui qui vie are founded in an er-
779, 26 L. ed. 924, ]>er Field, J.; roneous view of tlie nature of the
Phoeni.x Mutual Life Ins. Co. v. contract." Phoeni.x ^Mutual Life Ins.
Bailev, 13 Wall. (80 U. S.) 616, Co. v. Bailey, 13 Wall. (80 U. S.)
618, 619, 20 L. ed. 501, per Clif- 616, 018, 619, 20 L. ed. 501.
ford, J.; Loomis v. Eagle Life & A wife, ho\v(ver, might in Eng-
Health Ins. Co. 6 Gray (72 Mass.) land insure th(> life of her husband
396) ; Mechanics Nat. Bk. v. Com- without other i)roof of interest than
ins, 72 N. H. 12, 101 Am. St. Rep. the relation between them. Reed v.
060; Corson's Exr. Appeal of, 113 Royal Exciiange Assur. Co. Peake
Pa. St. 438, 443, 444, 6 Atl. 213, Add. Cas. 70. I'cake N. C. 3d ed. pt.
per Clark, J.; Halford v. Kymer, 10 ii. See liunyon oti Life Ins. (ed.
Barn. & C. 724. As to pecuniary etc. 18()8) 6. On wife's right to insure
interest, see § 899 herein. See life of husband, see note in 54 L.R.A.
also note 128 Am. St. Rep. 225. See note in 54 L.R.A. 225, on
303. Held, in Mutual Life Ins. Co. insni-ai)le interest in life of relative
V. Allen, 138 I\[ass. 27, 5 Am. i)y Itlood.
Rep. 246, 247, tliat pecuniary inter-
Joyce Ins. Vol. I. — 0. 129
§ 26 JOYCE ON INSURANCE
can be no recovery,* while in life insurance the interest need only
exist at the time the insurance is effected,' unlaws such be the neces-
sary effects of the provisions of the insurance itself.* Again, in
life policies there is no distinction between total and partial losses,
but upon the loss occurring the insurer is bound to pay, according
to the terms of his agreement, the full sum insured.^
Still again, in a life policy the element of damages is not
dependent upon the payment or nonpayment of the debt, nor
the payment of the amount of pecuniary interest by third par-
ties. The insurable interest is inquired into beforehand by the
insurers to prevent speculative insurances which are against public
policy, and it is sufficient in all life policies that the contract is not
involved as a ivager policy, although, of course, it may he voided
for fraud, hut as ive have said, the question as to interest is limited
in case of loss to that of whether the policy is within that class de-
nominated wagers}^ The question of fraud should be eliminated
in determining whether life insurance is or not a contract of in-
6 Chrisman v. State Ins. Co. 16 Or. Health Ins. Co. 6 Gray (72 Mass.l
283, 18 Pac. 466; Saddlers' Co. v. 396, 399, per Shaw, C. J., quoting
Badeoek, 2 Atk. 554, when insurable from Park on Ins. (7th ed.) 645; St.
interest must exist under fire policies, John v. American Mut. L. Ins. Co. 2
see notes 52 L.R.A. 330, 332, 336, Duer (N. Y.) 419, 434. In the last
iMO, 341. case the court, notwithstanding- it ad-
' United States. — Connecticut Mut. mils that there is no distinction be-
Life Ins. Co. v. Schaefer, 94 U. S. tween total and partial losses in life
457, 24 L. ed. 251. insurance, nevertheless asserts that
Mi.<^souri. — McKee v. Phoenix Ins. life insurance is a contract of indem-
Co. 28 Mo. 383, 75 Am. Dec. 129. nity. This case, however, is not the
Pennsylvania. — Rawls v. American law of New York, since the rule
Mutual Life Ins. Co. 27 N. Y. 282, there seems to be that life insurance
36 Barb. (N. Y.) 357, 84 Am. Dec. is not a contract of indemnity. Fer-
280; Corson's Exr., Appeal of, 113 guson v. Massachusetts Mutual Life
Pa. St. 438, 447, 6 Atl. 213. Ins. Co. 32 Hun (N. Y.) 306, 310,
Rhode Island.— Mowry v. Home 311, et seq., affirmed 102 N. Y. 647;
Life Ins. Co. 9 R. I. 346. Rawls v. American Mutual Life Ins.
England.— -Da\hy v. India & Lon- Co. 36 Barb. (N. Y.) 357, 362. 84
don Life Assur. Co. 15 Com. B. 365, Am. Dec. 280, affirmed, 27 N. Y. 282,
13 Eng. Rul. Cas. 383. 289. See § 24a herein.
As to time when insurable interest i'' Mr. Ricliards says: "We are
must exist, see § 901 herein. easily led to approve the better doc-
* Connecticut Mut. Life Ins. Co. v. trine tliat the valid life insurance con-
Schaefer, 94 U. S. 457, 24 L. ed. 251 ; tract is in so far one of indemnity
Sides v. Knickerbocker Life Ins. Co. that the necessity of an insurable in-
16 Fed. 650 ; Scott v. Dickson, lOS terest, and an interest actually or pre-
Pa. St. 6, 56 Am. Rep. 192. sumptively of a valuable character,
8 Kennedy v. New York Life Ins. lies at its foundation." Richards on
Co. 10 La. Ann. 809, 811, citing An- Ins. (3d ed.) p. 40, sec. 34.
neslev, 207; Loomis v. Eagle Life &
130
I
NATURE OF THE CONTRACT § 26
deninity, for fraud viliates all coulracls. But in the case of a
valued marine policy the inquiry is not thus i-estricted, as where
the owner's interest in a valued policy is diminished to the extent
of a loan on bottonn-y to pay for repairs. ^^ So in a valued marine
i)olicy the insurer may show that either by mistake or design the
whole of the property insured was not shipj)ed. and thus entitle
himself to a proportionate deduction from the valuation of the
policy. ^2 To carry the argument still further, if life insurance is
a contract of indemnity in any case whatsoever, then since by in-
demnitv is meant a full indemnity, and no more, it mii.'^ be con-
ceded that the question may be opened to the extent of determining
whether tho party intended to be benetited has been indcmnilied oi-
not, as in tlie case of Godsall v. Boldero,^^ and that ruling n)ust
then be held to govern. This conclusion is irresistible, as was fully
realized by the six judges who in the exchequer chamber expressly
overruled that case in Dalby v. India & London Life Aasurance Com-
pany,^* and held unequivocally that life insurance w^as not a con-
tract of indemnity, and how an agreement to pay a fixed sum, and
one in which the premium is based upon the duration of human
life and an event which is bound to occur and which diflFers in so
many essentials, can be held to be a contract of indemnity is hardly
conceivable without also conceding that Godsall v. Boldero ^^ de-
termines the law, and if so, the rule stare decisis should obtain, not-
withstanding the injustice of that decision w^as so great that Mr.
Bunyon,^^ evidently speaking for the profes.«ion, attacked it on
that ground, among others, and predicted that it would be over-
ruled," a.s was thereafter done in Dalby v. India & London Life
^^ Read v. jMutual Safety Lis. Co. He slroiiolv disapproves the ruling
3 Sand. (N. Y.) 54. in Godsall v. Boldero, 9 Ea-st, 72,
^2 Atlantic Ins. Co. v. Lunar, 1 and says that there are the greatest
Sand. (N. Y.) 91. difHculties in considorinij the contract
^^9 East, 72. as tliat oi" an indemnity apart from
1* 15 Com. B. 365, 13 Eng. Rul. the statute 14 George 'llL, chapter
(as. 383. See Ferguson v. Massa- 48, and that the principle upon which
clnisetts Mut. Life his. Co. 32 Hun the decision is based is the assumed
(N.Y.) 312, per Hardin, J., (affirm.- <-ommon-law doctrine rather than th<'
ing Dalby v. Lidia & London Life words of the act, and he adds: "So
Assur. Co.) affirmed 102 N. Y. 647. great is the injustice involved in it
^5 9 East, 72. that in practice it is universally re-
^^ Bunyon on Life Assur. .sec. 7. .jected. . . . The officers them-
" This author, who wrote (1853) selves . . . have not found it to
before the decision in Dalby v. India be for their benefit to act upon the
& London Life Assur. Co.' 15 Com. rigid rule of law, but generally pay
R. ;!65, 13 Eng. Rul. Cas. 383 (1854), without inquiry." He further says:
gives much consideration to this ques- "So strong appears the feeling at the
tion, and determines that life insnr- present time in the profession against
ance is not a contract of indemnitv. this decision, that it is by no means
131
§ 2G
JOYCE OX insurancp:^
Assurance Company/^ wherein llie judges also declared that the in-
justice of the decision was so ,2;reat that hut a few othces had availed
themselves of it. We have >h<)\\ii in a i)ii(ir section ^^ that although
the amount may Ijc agreed upon beforehand, as in case of valued
marine policy, nevertheless that does not alter the fact that an in-
dennrity is intended in such policies, and although a life policy
may be a valued one, the similarity extends no further. We con-
clude, therefore, as we first asserted, that the weight of authority is
that life insurance is not a contract of indemnity.^" It is also de-
impiobaljle that it may be shortly
reviewed in a higlier court than that
in which it was decided." This au-
thor also a.sserts : "A whole life poli-
cy is not like a fire or marine assur-
ance made for a short period, and
renewable with the consent of both
jiarties, but is a contract to receive
a sum of money upon an event which,
although deferred, will certainly
Life ludemnitv Co. 166 Mo. App.
221, 148 S. W". 626, G.'^.O.
Neiv Jersey. — Campbell v. Su-
preme Conclave Improved Order of
lleptasoph-s, 66 N. J. L. 274, 280,
54 L.R.A. 576, 49 Atl. 550; Trenton
Mut. Life & Fire Ins. Co. v. Johnson,
24 N. J. L. 585.
Neiv York. — Enil)ler v. Hartford
Steam Boiler Inspection & Ins. Co.
happen, and. although renewed from 40 X. Y. Supp. 450, 452, 8 App. Div.
year to year by the payment of an 186, case aff'd 158 N. Y. 431, 44
annual premium the premium is so L.R.A. 512, 53 X. E. 212; Rawls v.
American Mutual Life Ins. Co. 36
Barb. (N. Y.) 357, 27 X. Y. 282,
289, 84 Am. Dec. 284; Algase v.
Horse Owners Mut. Indemnity As-
soc. 77 Hun, 472, 29 X. Y. Supp. 101,
302; Ferguson v. ^lutual Life Ins.
Co. 32 Hun, 311, 312, affM 102 X. Y^
647.
OJiio. — Kecklev v. Co.sliocton Glass
Co. 86 Ohio St.' 213, 99 X. E. 299,
Am. & Eng. Ann. Cas. 1913D. 607.
Veniifiiilvania. — Scott v. Dickson,
States.— Cenh-i\\ Bank of 108 Pa. St. 6, 56 Am. Rep. 192. See
Washington v. Hume, 128 U. S. 195, also Little's Appeal, 162 Pa. 586, 29
32 L. ed. 370, 9 Sup. Ct. 41. Atl. 660, 42 Am. St. Rep. 844.
Georgia. — Exchange Bank v. Loh. Hhode Island. — Mowrv v. Home
104 Ga. 446, 469, 470, 44 L.R.A. 372, Life Ins. Co. 9 R. I. .346, 354.
382, 31 S. E. 459. Wisconsin. — Gatzweiler v. Milwau-
Indian-a. — X^ye v. Grand Lodge, 9- kee .Elect. Rv. & Lisht Co. 336 Wis.
Ind. App. 131," 139, 36 X. E. 429, per 34, 37, 18 L.R.A.(X.S.) 211, 16 Amer.
Lotz, J. & Eng. Annot. Cas._633, 116 X. W.
3Iari/Jand. — Emerick v. Coaklev, 633. ;>7 Ins. L. J. 64 <.
.35 Mdi. 188, 193; Whiting use of Sun Encjland.—D&lhy v. India & Lon-
calculated that the right of renewal
rests with the assured, and is a
portion of the consideration for which
all past premiums liave been paid."
Bunyon on Life Assur. 79 Law
Library. *22, *24.
18 15 Com. B. 365, 13 Eng. Rul.
Cas. :i83.
19 § 25.
2^ 71ie folloicing authorities liold
thai it is not a contract of indemni-
United States. — Central Bank of
Mut. Ins. Co. v. Independent !Mutu
al Ins. Co. 15 :\Id. 297, .327.
Massachusetts. — Mutual Life Ins.
Co. V. Allen, 138 Mass. 24, 27, 52
Am. Rep. 246. 247.
Missouri. — Wavland v. Western
don Life Assur. Co. 15 Com. B. 365,
13 Eng. Rul. Cas. 383: Law v. Lon-
don Indis])utal)lc Lile Policy Co. 1
Kav & J. 22.!, 228, 229.
Bunyon on Life Ins. (79 Law Li-
brary) *7-24; 17 Earl of Halslmry's
132
NATUKE OF THE CONTRACT
§ 26
Laws of England "Insurance," p. not merely for an' indemnity, as in
.')44. See Id. p. 513, where it is said : marine and fire policies." Phoenix
"Life insurance is not a contract of Muiual Life Ins. Co. v. Bailey, 13
indemnity and the principle of sub- Wall. (80 U. S.) GKi, 618 et seq. 20
loj^ation does not apply to it." See L. ed. 501, per Clifford, C. J.
also Sweet's Diet. En"'. Law (ed. United Stales. — Manhattan Life
]882) "Insurance." Examine note Ins. Co. v. llennessy, 99 Fed. 64, 68,
]28 Am. St. Rep. 303, 304. 39 C. C. A. 629; Sides v. Knicker-
"Policies of life insurance are ijov- hocker Life Ins. Co. (C. C.) 16 Fed.
erned in some respects by different 6r)0, 652.
rules of construction from those ap- Georgia. — Exchange Bank v. Loh,
plied by the courts in case of poli- 104 Ga.^ 446, 470, 44 L.R.A. 372, 382,
cies against marine risks or policies 31 S. E. 459.
against loss by fire. Marine and fire Illinois. — Guardian Mutual Life
policies are contracts of indemnity Ins. Co. v. Hogan, 80 111. 45, 22 Am.
by which the claim of the insured is Rep. 180.
commensurate with the damages he Indiana. — Nye v. Grand Lodge A.
sustained by the loss of or injury to O. IT. W. 9 Ind. App. 131, 139, 36
the property insured. . . . Life N. E. 429.
insurances have sometimes been con- loiva. — Farmers & Traders Bank v.
strued in the same Avay, but the bet- .Johnson, 118 Iowa, 282, 284, 91 N.
ter opinion is that the decided ca.ses W. 1074 (cited to point of insurable
which proceed upon the ground that interest of daughter and assignment),
the insured must necessarily have Louisiana. — Rorabach v. Piedmont
some pecuniary interest in the life of & A. L. Ins. Co. 35 La. Ann. 233, 234,
the cestui qui vie are founded in an -^8 Am. Rep. 239 (cited to insur-
crroneous view of the nature of the able interest).
contract, that the contract of life in- New York. — Olmstead v. Koyes. 85
surance is not necessarily merely one N. Y. 593, 598; Waldheim v. .John
of indemnity for a pecuniary loss, a.s Hancock Mut. Life Ins. Co. 8 ■\!isc.
in marine and fire policies, that it is 509, 28 N. Y. Supp. 766; Grattan v.
sutficient to show that the policy is Natural Life Ins. Co. 15 Hun, 77
not invalid as a wager policy if it (cited to insurable interest),
appear that the relation, whether of Peinisi/lvaniu. — Corson's Appeal,
consanguinity or affinity, was such 113 Pa. 447, 57 Am. Rep. 479, 6 Atl.
between the pei'son whose life was 213 (cited to insurable interest) ;
insured and the beneficiary named in Corson v. Garnier, 17 Phila. 342. ■
the policy as warrants the conclusion South Carolina. — Crosswell v. Con-
that the beneficiary had an interest, necticut Indemnity Assoc. 51 S. Car.
whether pecuniary or arising from 103, 112, 28 S. E. 200.
dependence or natural affection, in Virfjinia. — Clemmitt v. New York
the life of the person insured. In- Life Ins. Co. 76 Va. 360 (cited to in-
surers, in such a policy, contract to surable interest).
pay a certain sum in tlie event there- A life insurance policy is not by
in s])ecified, in consideration of the the great weight of authority a con-
payment of the stipulated premium tract of indemnity, but is strictly a
or prcmiinns, and it is enough to en- \alued policy; "a stii)ulation to pay
title the assured to r(<cover if it a|)- a sum certain upon the happening of
pear that the stipulated event lias a specified contingency. Under such
happened, and that the party effect- a ])olicy the amount payable has no
ing the policy had an insurable inter- neces.sary relation to damages actu-
est such as is described in the life of ally suffered by the beneficiaiy. The
the person insured at the inception insured buys and pays for the riglit
of the contract, as the contract is to have from another a specified sum
133
§ 26
JOYCK ON INSURANCE
cidcd that as to a creditor l)aying premiums of a i)()licy upon his
dehtor's life, the contract is one of indemnity, but it is not so where
the premiums are paid by the insured.^
111-
the
upon the happeniiiii' of a spccitifd taken hetwocn marine and other
event. Payment for the insurance is surances and life insurance, on
in the iiatare of a)i inrestmeiii. The irround that while the lormer have
money value of the tlung covered by for their object to indemnify for loss,
tlie insurance does not enter into the the latter is an absolute engagement
transaction at all." (Italics are ours.) to pay a fixed sum on the happening
(ratzweiler v. IVJilwaukee Electric Ky. of a certain event, without reference
& Light Co. 136 Wis. 34, 37, 18 to any damage in fact suffered by
L.R.A.(N.S.) 211, 16 Amer. & Eng. the insured in consefiuence. But this
An not. Cas. 633, 116 S. W. 033, per distinction is superficial, and rests
Marsliall, J. rather upon the mode of determining
The following ai(thorities hold that the amount of indemnity than upon
it is not Htrictli) a contract of indem- any ditference in principle. There is
nity, or, in other words, it is in the the same difference, having reference
nature of an ituhnnnity, as in case to the question of indemnity, between
where a creditor insures his debtor's \alued and open policies, in l)oth lire
life. Bacon's Benefit Societies and and marine insurance, that there is
Life Ins. sec. 163; Miller v. Eagle between an open policy in either and
Life & Health Ins. Co. 2 E. D. Smi'tli, a policy of life insurance. In open
294 295. Ijolicies the question of the amount
The following authorities hold that of indemnity is left to 1)p deternnned
it is a contract of indemnitii: wlien the contingency upon which it
becomes due shall have happened,
while in valued policies and policies
on lives the value of the interest
which the insured seeks to nrotect is
"The contract of insurance is agreed upon by the parties, and in-
one of indemnity, but in life insur- serted in the policy, and so the
ance the amount of the indemnity, amount of indemnity whicii shall be-
we think, like a valued policy, is come due on the happening of tlu>
agreed upon beforehand;" St. John given contingency is predetermined,
v? American Mutual Ins. Co. 2 Duer The purpose in all cases is alike — in-
(N. Y.) 41fl, 434, not the law of New demnity for the lo.^s of a valuable
York as noted in the text; Codsall interest." May on Ins. (3d ed.
Bevin v. Connecticut Mutual Life
Ins. Co. 23 Conn. 244, 251; Kennedy
V. New York Life Ins. Co. 10 La.
Ann. 809, 810, where Merrick, C. J.,
says
as
V. Boldero, 9 East, 72, wliich was
overruled as noted in the text. See
note 2 Smith's Lead. Cas. (44 I^aw
Lib. 203, 207) 165, 170. Mr. IsI-av-'
sl\all speaks of life insurance as an.
expedient by which a pecuniary in-
demnity may be seeured to the l)ene-
liciaries. (Book 3. e. 1. p. 7()(). ed.
1810) ; and he notes (Id. p. 777) the
ease of Godsall v. Boldero, 9 East,
72, which at tliat time had not been
sec.
7. Sipe also id. sec. 117.
Mr. Philli])s (1 Phillips on Ins.
sec. 3), says that the cdn tract is now
considered "as extending n( t only to
indemnity against sea risks, fire, or
laud, and death, but," etc. This au-
thor, however, wrote before Godsall
y. Boldero. H East, 72, was overruled.
The code detinition of insurance in
California is thought \)\ Mr. Deering
to imply that life insurance is a con-
overruled, and says : "They hold lliat tract o! indemnitv in tiiat .state
this insurance, like every other to
which the law gives effect, is in its
nature a contract of indemnity as
distinguished from a wager.
"A distinction has sometimes been
(DeiM-ing's Aniiot. Civ. (\n\v Cal. sec.
2527, and note), although he does not
discuss the (|uestion.
^ Central Bank of Washington v.
Hume, 128 r. S. 105. 9 Sup. Ct. 41,
134
Ni\TUUK OF THE CONTRACT § 27
§ 27. Accident insurance is not a contract of indemnity in all
cases. — Accident iii.siirauce is not a contract of indemnity in all
cases. It only indemnifies against the effect of accidents resuUin.o;
in bodily injuries. In case of death occasioned thereby it can in
no sense be said to indeumify, because in such case there is a close
analogy between accident and life insurance.^ A policy of accident
insurance ordinarily has much the same features as one of life in-
surance, though, it more nearly than one of life insurance has the
indenmity feature. The amount stipulated to be paid is a fixed
sum as to each particular injury specified, or is computable without
any such definite data as in case of the loss of property. And it is de-
cided that an accident insurance policy is to be regarded as an
investment contract in which the only parties concerned are the
insurer and the insured or the beneficiary. It is not a contract of
indemnity giving right to subrogation in the absence of a provision
expressly making it such ^ nor is an accident insurance contract a
contract of indemnity, even though the stipulated sum to be paid is
called an "indenmity." Calling such payment an indemnity is a
matter only of nomenclature, which does not affect the substance
of the contract, nor change its legal effect, nor render the policy
an indemnity contract.* It is said, however, that accident insur-
ance indenmifies in a certain sense against the pain and loss con-
nected with the immediate accident, except in case of death.^ It
is also decided that a policy of accidental insurance is issued and
accepted for the purpose of furnishing indenmity against accidents
and death caused by accidental means, and the language of the
32 L. od. 370 (cited in West Norfolk L. J. 647, quoted from in Suttles v.
Lumber Co., In re, 112 Fed. 764; Ex- Railway Mail Assoc. 141 N. Y. Supp.
cliano-e Bank v. Loli, 104 Ga. 446, 1024, ir)6 App. Div. 435.
449,^44 L.K.A. 374, 31 S. E. 459; * Suttles v. Railway Mail Assoc.
Crosswell v. Connecticut Indemnity 141 N. Y. Supp. 1024, 156 Ai)p. Div.
Assoc. 51 S. Car. 103, 112, 28 S. E. 4.35.
200). ^ Tlieobald v. Kailway Passenger's
2 See Bradhurn v. Great Western Assur. Co. 26 Eng. L. & Eq. 432, 437,
Ry. Co. 23 Week. Rep. 48, 8 Eng. 440. But in Ilealey v. Mutual Acci-
Rul. Cas. 439. Examine Gatzweiler dent Assn. 133 111. 556, 560, 25 N.
V. Milwaukee Elect. Ry. & Light Co. E. 52, 31 Cent. L. J. 419, 23 Am. St.
136 Wis. 34, 37, 16 Anier. & Eng. Rep. 637, 9 L.R.A. 371, where it is
Annot. Cas. 633, 18 L.R.A. (N.S.) said that the purpose of accident in-
211, 116 S. W. 633, 37 Ins. L. J. surance is to furnish indemnity
647: Accident insurance not a con- against accidents and deatli caused
tract of indemnity, 17 Earl of Hals- by accidental means. This, however,
bnry's Laws of England, \^. 566. appears to l)e a mere general state-
^Gatzweiler v. Milwaukee Electric ment of the court, made incidentally
Ry. & Light Co. 136 Wis. 34, 16 Am. in connection with the question of
&' Eng. Ann. Cas. 633, 18 L.R.A. construction.
(N.S.) 211, 116 N. W. 633, 37 Ins.
135
§§ 27a, 27b JOYCE ON INSURANCE
policy must be construed with reference to the subject to which
it is applied.^
§ 27a. That employers' liability insurance is contract of indem-
nity. — A policy issued by a casualty company against employers'
liability is a contract of indenmity to the amount agreed upon, but
it does not necessarily relieve the assured from all responsibility
whatever for damage,^ resulting from injuries to its employees.' A
casualty insurance policy providing that no action shall lie again.st
the company as respects any loss under the policy, unless it shall
be brought by the assured himself to reimburse him for loss actually
sustained and paid by him in satisfaction of a judgment, witliiii
sixtv days from date of such judgment and after trial of the issues,
constitutes a contract of indemnity and not one of insurance.'
And under a like provision the contract is held to be one of indem-
nity for the benetit of assured.^ Again, all cases of indemnity
against future contingencies, and this applies to an employer's lia-
bility policy against Hal)ility for personal injuries to employees,
are included in a statutory provision whereby one who indemnilies
another against an act to be done by the latter is lialjle jointly with
the person indemnified, and separately to every person injured by
such act.^°
§ 27b. Same subject: whether contract one of indemnity or lia-
bility or both. — Whether an employers liability policy is a con-
tract of indenmity merely, or of liability, or both, depends neces-
i^arily upon the terms and conditions of the instrument. A dis-
tinction is made between contracts for indemnity against liability
and, those of indemnity against loss. In the former, case the in-
surer's obligation becomes fixed when liability attaches to the in-
sured. In the latter case the insurer's liability does not attach until
loss has been suffered, that is, Avhen the insured has paid the dam-
ages. And where the agreement is to indemnify against loss from
common law or statutory liability, and there is also a provision in
the contract that no action shall lie against the insurer as respects
6 Healey v. Mutual Are. As.sn. 133 oka Liinil)cr Co. v. Fidelity & Casu-
111. 5.56, 23 Am. St. Rep. 037, 9 alty Co. (iii Minn. 2S(), 30 L.R.A. (589,
L.R.A. 371, 23 N. K. :)2. 65 N. W. 353.
'Rnmfoi-d Falls Paper Co. v. Fi- » Carter v. .F^tna Life Ins. Co. 76
delitv & Casualtv Co. 192 Me. .')74, Kan. 2^.5, 11 L.R.A. (N.S.) 1155, 91
43 Atl. 503; 17 'Earl of Halsbiuy's Pac. 178.
Laws of Enslaiid. p. 571. ^° ^loore v. Los Angele.s Iron &
8 Kennedy^ V. Fidelity & Casualty Steel Co. (U. S. C. C.) 89 F_ed. 73,
Co. 100 Minn. 1, 117 Am. St. Rep. under Cal. Civ. Code, sec. 27^7, dis-
cing, 9 L.R.A. (N.S.) 478n, 10 Am. & tinguished in Northern v. Casualty
Eng. Ann. Cas. 673, 110 N. W. 97, Co. of America (U. S. C. C.) 177
36 Ins. L. J. 224, distinguishing An- Fed. 981.
136
NATURE OF THE CONTRACT § llh
•
loss under llic policy, unless it is brought by the assured himself
to reimburse him for loss actually sustained and paid by him within
a certain time in satisfaction of a judgment after trial of the issue,
it is determined that a fair conclusion is that the i)olicy is one of
indemnity against loss, and that the insurer's liability does not
become fixed until the assured has paid the judgment as provided
in the policy.^^ 80 it is declared in a Tennessee case, that "there is
a difference between the effect of a policy Avhich insures directly
against lialjility, and one that insures against loss or damage by
reason of lial)ility. Under contracts of the first description, the
amount of the policy, up to the extent of the liability incurred by an
emi)loyer on account of an accident to an employee, becomes, im-
niediately upon the happening of the event on which the liability
depends, and the giving of such notice as the policy provides for,
an asset of the assured, which, in the absence of any provisions to
the contrary in the policy, may be assigned by him, or taken for his
debt, subject, of course, to the making of such ])roofs to perfect
the demand as the policy may provide for. Under the policies of the
second kind, to which the one before us belongs, the amount of the
insurance does not become available until the assured has paid the
loss, and is not even then available unless proper notice has been
given as provided in the policy." ^^ In a Wisconsin case the insurer
agreed to pay the employer all sums for which he "shall become
liable to his employees" on account of personal injuries, etc.; and
it was held to be a contract of indenmity against liability, so that
" Conqueror Zine & Lead Co. v. land Ca.snalty Co. 197 Ma.ss. 167, 8:5
-TStna Life Ins. Co. 152 ]\Io. App. N. E. 407; Connolly v. Bolster, 187
832, 133 S. W. lot), 40 Ins. L. J. Mas.s. 266, 72 N. E. HSl.
721; Cavard v. Rol)ertson & Hobbs, .l//c/f?(7««-— Stephens v. Peimsyl-
123 Tcnii. 882, :iO L.K.A.(N.S.) 1224 vania Ca.snalty Co. 135 Mich. 180, 07
and note, 131 S. \V. 8(i4, 40 ins. L. J. X. W. 685, 33 Ins. L. J. 180.
144. The above ca.se in 152 Mo. Xew J<;r.se//.— Travelers Ins. Co. v.
App. 721, cites the following- de- Mose.s, 63 N. J. Eq. 260, 92 Am. St.
cisions: Re]). 663, 49 Atl. 720.
United States.— Marvldwd Ca.snal- New YorA-.^Mnnroe v. Maryland
ty Co. V. Omaha EleVtric Lio-ht & Casualtv Co. 96 X. Y. Supp. 705, 48
Power Co. 157 Fed. 514, 85 C. C. A. Misc. 183.
106: Allen v. .l^tna Life Ins. Co. (U. Tennessee.— ^V\u\vy v. United
S. C. C.) 137 Fed. 136. Stales Casualty Co. 113 Tcnii. 592,
ioM-«,— Cusliniaii v. Carboiidale Sii S. W. 2, 34 Tns. L. J. 179.
Fuel Co. 122 Iowa, 656, 98 N. W. ]Vashin(jton.—P\\i-et Sound Imp.
509. Co. v. Frankfort i\rarine Accident &
Maine.— Vryv v. P.alh (!as & Elec- Plate Class Co. 52 Wa.sh. 124, 100
trie Co. 97 Me. 241. 94 Am. St. Rep. Pac 190.
.500, 59 L.R.A. 444, 54 Atl. 395, 32 12 ],^iniev y. Tiiited States Casu-
Ins. L. J. 656. alty Co. 113 Tenn. 592, 83 S. W.
Massachusetts. — Davison v. Marv- 2, 34 Ins. L. J. 179.
137
§ 27b JOYCE ON INSURANCE
payment by the employer, of a claim for personal injury, was not
a condition precedent to his right to recover against the insurer.^^
Under an Oliio decision it is determined than an employer's liability
}>olicy is not a contract to pay a liability, but one of indenmity
against loss, under a provision that no action should lie against the
company to recover for any loss under the policy, unless brought
by assured for loss actually sustained and paid in money by him,
in satisfaction of a judgment, after trial of the issue, "nor, unless
such action is brought within ninety days after final judgment
against him has been satisfied." ^* 80 in equity an employers' lia-
bility insurance is not an insurance against liability, but of indem-
nity against loss by reason of liability, the contracting parties' in-
tention being, where the contract so provides, to reimburse or make
whole the insured against loss sustained by it on account of its lia-
bility to its emi)loyees for negligence; and. independently of such
a condition as to reimbursement of the insured, in an action brought
by him tlie contract would be construed as one of indemnity only.^*
If a clause in a policy undertakes to indenmify assured against loss
by reason of liability on account of injuries to employees, and the
insurer agrees to defend proceedings against assured, or settle the
same, unless it elects to pay the provided indemnity to assured, it
docs not make the contract one guaranteeing jniyment of an obh-
gation of insured, rather than one of indemnitv. where another
clause provides that no action shall be brought against the insurer
^^ Hoven v. Employer.s Liability where there has been no loss. The
Assur. Corp. 93 Wis. '201, 32 L.R.A. contract of insurance contains noth-
388, 67 N. W. 46, compare Fenton ing to show that it was the object or
V. Fidelity & Casualty Co. 36 Or. intention of the contracting parties
283, 48 L.R.A. 770, .'jG' I^ac. 101)6. that the insurer sliould guaranty the
^* Gari'ett v. Traveler's Ins. Co. 20 ga.s company's liability for negli-
Ohio Dec. 181, 55 Oliio Law Bull, gence to its employees. Tt was not
181. a contract of in.surance against lia-
^^ Frve v. Bath Gas & Electric Co. bility, but of indemnitv asrainst
07 Me. '241, 94 Am. St. Rep. 500, 59 loss 'by reason of liability. .^ . .
L.K'.A. 444, 54 Atl. 395. The court. In this case as we have seen, tiic con-
l>er Wiswell, C. J., .said : "The con- tract was one of indemnity only. Tt
tract was with the gas company to wa.s not obtained by the gas company
indenmify that company 'against for the benefit of its employees, but
• loss' from liability for damages on for its own benefit exclusively, to re-
account of bodily injuries accidental- indjurso it for any sum that the com-
ly suffered by an employee and pany might be obliged to pay, and
caused l)y the negligence of the as- had jiaid on account of injuries sus-
sured. The use of the word 'in- taiued by an employee through its
demnify' shows the object and nature negligence. Independently of the
of the contract. It was to reimburse, condition in the contract of insur-
"or make whole, the a.ssured against ance above quoted, we should be com-
loss on account of such liability, pellod to construe this contract as one
There can be no reimbursement of indemnity only."
138
NATURE OF THE CONTRACT
271)
unless by tlie insuied himself to reimburse him for loss aetually
sustained and paid, the former clause being merely an additional
l)rivilege for insured's protection.^® Where the insurer exi)re?sly
binds himself to pay all damages with which insured may be legal-
ly charged or required to pay, or for which he may become legally
liable, it is not only a contract of indemnity, but also a contract to
pay liabilities, and a recovery may be had thereon as soon as the
liability attaches to insured • and before it is discharged. The
measure of damages is the amount of the accrued liability. ^^ Again,
it is held that an employee's liability policy is not one of indeirmity
merely, on which suit could not be brought until a.ssured had paid
a judgment against it for personal injuries t > an employee, but in
equity the insurer becomes the principal debtor to an injured em-
ployee, and the assured the surety so that a bill would lie by the
^® Allen V. ^Etna Life In.s. Co. 145 be $5,000, except as it miglit be in-
Fed. 881, 76 C. C. A. 265, 7 Ij.I^.A. creased tjy failure on its part to pay
(N.S.) 958, cited in Maryland the cost of making tlie defense. Case
Casualty Co. v. Omaha Klectric followed in Vindicator Con.sol. Gohl
LJglit & Power Co. 157 Fed. 514, 85 -Mining Co. v. Frankfort iMariiic,
C. C. A. 106. In this ease the parties? Accident & Plate Glass Ins. Co.;
agreed that the assured shall not Frankfort Marine, Accident & Plate
settle any claim "except at its own Ghiss Ins. Co. v. Vindicator Consol.
co.st." An action was brought Gold Mining Co., 158 Fed. 1023, 86
against a-ssured resulting in a judg- C. C. A. 674.
nieiit against it for .$5,000, which ^"^ American Employers' Liability
was, after being alfirmed on appeal. Ins. Co. v. Fordvee, 62 Ark. 562, 54
paid by assured. The court, per Am. St. Rep. 305, 36 S. \V. 1051.
Adams, Cir. J., said: "A.s modified In this case it is said: "Tlie diffcr-
bv the eondilion just rei'ened to, tlie ence between a contract of indemnity
contract is one of indenuiity against and to pay legal liabilities is that,
loss to the extent of .$5,000, together upon the former, an action cannot be
with any further sum which the in- broughl and a recovery had until the
surer defending the same in the name liabililv is discliaj'ged, whereas, upon
ol' the assured might I'orce the as- t lie latter, the cause of action is com-
sured to pay as outlays or expendi- [vlete when the liability attaches," —
tures incident to making the defense, (pioted in Frye v. Bath Gas & Klec-
It clearly indemnilied against the trie Co. 97 Me. 241, 94 Am. St. Hep.
court costs in (|ur'stion. ' The con- 500, 59 L.R.A. 444, 54 Atl. 395, 32
tract remains one of iudeuuiily loss Ins. L. .1. ()5(i. See Anoka Lumber
only and to the liniileil ext(>nt Co. v. I^'idelity & Casualty Co. (i.']
ju.st specihed. The liiiiilation is as Minn. 286, 3() L.R.A. 68t>, '65 N. W.
much a pari of the contract a.s the 353. Held, that from the \'ery terms
covenant ol' in(h'iiuiity, and the de- of the instrument itsell' the conlia<-f
fendant is as much entitled to the was not merely an agreement to in-
full protection of the agreed limit as demnif'y the plaintiff against any act
the plaintilT is to the protection of of the employee, but that in case of
the agreement to indc iinil'\." In an accident of such a character as
this case the parties agreed that the to injure him, whereljy a cause of
defendant's limit of liability should action should arise against assured,
139
t
$§ 27c, 27d
JOYCE ON INSURANCE
lutler to establisli tlie principal's lialjility and compel it to perform
the contract of indemnity.^®
§ 27c. Injury to property or to employees and others: to what
extent contract is one of indemnity. — Insurance against loss or dam-
age to property, wliether owned by assured or others, caused by ex-
])losion of steam boilers, and for which assured may be lialjle, and
also against loss of life or injury to person, whether to assured, to
employees, or to any other person, caused by such explosion or
rupture, and payable to assured for the benefit of the injured person
or persons, or their legal rej)resentatives in case of death, and not
contingent upon tlie legal liability of assured, is a contract of in-
demnity in so far as it covers injury to the property, but in view
of the provision as to nonlegal liability of the assured for injury
to the person, it is not a contract of indemnity, especially so where
the sum ])aid is to be for the beuetit of the injured person, and it
is to be deemed as having been intended, at most, as a pecuniary
indemnity to the legal representatives of an employee for the loss
sustained by them in consequence of death. ^^
§ 27d. English workmen's compensation act grants complete in-
demnity. — A policy taken out insuring against accidents to em-
ployees under the English AVorkmen's Compensation Act of 1006
grants a com])lete indemnity mider that act. the fatal accidents
act of 1846, and the common law, and applies to all employees in
the assured's immediate service.^"
tlie insurer or company would as- ])]osion and accident and resulting
sume the liability. Distinguis<hed in loss to pro2)erty, and against acci-
Kennedy v. Fidelity & Casualty Co. dental personal injury and loss of
100 Minn. 1, 117 Am. St. Kep. 658, human life, for which insured miglit
9 L.R.A. (N.S.) 478n, 10 Am. & Eng. be liable to his employees or to any
Annot. Cas. 673, 110 N. W. 07, 30 other person. The court ^aid: "On
Ins. L. J. 224. its face it is for indemnity against
^8 Beacon Lamp Co. v. Travelers explosion and' accident, and los.s or
Ins. Co. 61 N. J. Eq. 59, 47 Atl. damage resulting therefrom to the
570. property, real and personal, of the
" Embler v. Hartford Steam Boil- assured, and to all property of others
or 1 lisped ion & Ins. Co. 40 N. Y. for which the assured may be liable,
Snpp. 4r)0. S App. ^iv. 186, alfd. and against accidental persona! in-
158 N. Y. 431, 44 L.R.A. 512, 53 N. jury and loss of life for which the
E. 212. Policy was issued iirior to assured may be liable to its em-
N. Y". Ins. Law 1892, c. 600. See ployees or to any other pei-son,
Chicago Sugar Refining Co. v. caused by the boilers, or any ma-
American Steam-Boiler Co. (U. S. chinery connected with and operated
C. C.) 48 Fed. 108, case rev'd by them." Id. p. 200.
American Steam-Boiler Co. v. Chi- 20 Bj..,<i](.y & Kj^^sex & Suffolk Acci-
ca"(i Su"ar Rcliuing Co. 57 Fed. 294, dent Indemnity Soe., In re, 81 L. J.
6 C. C. A. 336, 9 it. S. App. 186, 21 K. B. 523, 526. [1912] 1 K. B. 415,
L.R.A. 572. Policy was upon steam 105 L. T. 919, 28 T. L. R. 17.5, [1912J
boilers and proviiled against ex- W. C. Rep. 6, per Fletcher Moulton,
140
NATUIMO OF THE CONTKACT
§ ■J7e-271i
§ 27e. Insurance of carriers against losses from injuries to pas-
sengers is contract of indemnity. — A contract to indeniiiify a coin-
juon carrier of ])a.<^eii tiers aiiaiiisl losses occurring from injuries to
])assengers is not against public policy, and is treated, without dis-
cussion by the court, as a contract of indenniity.^
§ 27f. Insurance against burglary and loss or damage to prop-
erty are contracts of indemnity. — And ''are subject to the same
principles as fire insurance, which is only a particular instance of
insurance against accident to pro])orty." ^
§ 27g. Insurance against accidents, death, and theft of animals
is contract of indemnity. — The fact that a corporation's piu'pose
is to indemnify its members for loss or damage by accidents, death,
and theft of animals belonging" to its members, and that its mem-
Ijcrs pay a membership fee and annual dues, and are assessed for
losses, makes it a contract of indemnity and a co-operative insur-
ance company. It comes within the delinition of insurance, and
this is so even though the promisor is a corporation and its promise
is only to those who become members, and it has no accumulated
funds out of which to pay losses, but relies exclusively upon as.'^ess-
ments therefor.^
§ 27h. Fidelity guaranty insurance is contract of indemnity. —
An employers' fidelity bond insuring against loss caused by
"fraudulent or dishonest acts . . . amounting to embezzle-
ment or larceny" is essentially a contract of indenmity against loss;
and the general rules governing the construction of life and fire in-
surance are applicable to it.*
L. J., a case of constructiou of a pol- is eonstruetion] ; Guarantee Co. of
icy and tlie proposal. Seo 17 Earl of North America v. Mechanics' Sav-
Halsburv's Laws of England, p. 571.
^ Trenton P;issenger Ry. Co. v.
Guarantors Liability Indeninitv Co.
CO N. J. L. 246, 44 L.R.A. 2i3, 37
Atl. 009. See also American Casu-
ings Bk
& Trust Co. 80 Fed. 7Gt),
772, 26 C. C. A. 146 [points of con-
struction, and that contract is one
of full indemnity] ; Cluuuiiion v.
American Bonding & Trust Co. 11.")
alty Ins. Co.'s case (Boston & A. K. Ky. 863, 872, 103 Am. St. Rep. 356,
Co. V. Mercantile Trust & Deposit 75 S. W. 107 [point here is con.>^truc-
Co.) 82 Md. 535, 38 L.R.A. n7n, 34 tion] ; American Surety Co. v. Pauly,
Atl. 778.
2 17 Earl of Halsbury's Laws ol'
England, "Insurance," p. 512n.
3 State V. Vigilant Ins. Co. 3(1
Kan. 585, 2 Pac. 840.
^JFAna Indemnity Co. v. J. R.
Crowe Coal & Mining Co. 154 Fed.
170 U. S. 133, 42 L. ed. 977, 18
Sup. Ct. 552 [not directly so held.
lUit the court in determining the
construction of the bond said: ''The
object of the bond in suit was to
indemnify or insure the bank against
loss arising from any fraud or
545, 83 C. C. A. 431 (citincf .Jackson dishonesty on the part of O'Brien
V. Fidelity & Casualty Co. 75 Fed. in connection with his duties as
359, 365, '21 C. C. A. 394 [point here ca.shier, or with the duties to which in
141
§ 27i JOYCE ON INSURANCE
§ 27i. Title guaranty insurance is contract of indemnity. — .V
contract of guaranty insurance of title is a contract of indemnity
similar to that of insurance and is governed by the .«ame rule as to
right of action not accruing until time of loss.* So a title policy is
a contract of indemnity where the i)lainly expressed intent is to
indemnify against loss from defects or unmarketability of title, and
that if any loss should be sustained by assured by reason of the
noncompletion of certain buildings, such loss should come under
the indemnification covenant^ of the policy; as, where the policy
indemnified the assured in a certain amount against loss on a mort-
gage given as collateral security upon ground rents, and the policy
also '''guaranteed" the completion of certain buildings within a
specified time with municipal improvements, free of municipal
liens; and in such case the guarantee does not change the nature
of the contract as one of indemnity, and make it a guarantee.^ Tn
another case the bond guaranteed the completion of certain build-
ings under a contract. Advances had been made for building o])-
erations, the consideration 1)eing the conveyance of ground rent.<
on land to be improved and the furnishing of said bond. The
principle of indenmity was applied, limiting the damages to the
actual loss in the value of the ground rents, not exceeding the
amount of insurance; the loss being the difference in the mai-ket
his employers service he rai2;ht be deranify the plaintiff was coextensive
subsequently appointed. Tlrat ob- with that of the latter to reimburse
jeet should not be defeated by any the employer] ) ; Remington v. Fi-
narrow interpretation of its pro- delity & Casualty Co. 2< Wash. 429,
visions, nor by adopting a construe- 435, 72 Pac. 432.
tion favorable to the company if * Purcell v. Land Title Guarantee
there be another construction equal- Co. 94 i\Io. App. 5, 67 S. W. 726.
ly admissible under the terms of the ^ Wheeler v. Equitable Trust Co.
instrument executed for the pro- 221 Pa. 276, 70 Atl. 750, 37 Ins. L.
tection of the bank;' Id. p. 144, per J. 1037, s. e. 206 Pa. 428, 55 Atl.
Mr. Justice Harlan]; Fidelitv &1065. The syllabus m this case (221
Casualty Co. v. Eickhoff, 63 Minn. Pa. 276) reads as follows: AVhere a
170, 56 Am. St. Rep. 464, 30 L.R.A. policy of title insurance of a mort-
586, 65 N. W. 351 [in this case the gage is by its terms a general con-
aetion was brought to recover money tract of indemnity against loss from
allea:ed to have been paid to defend- defects or unmarketability "of the
ant's employer upon a bond, execut- title of the insured to the estate,
ed at defendant's request and in the mortgage or interest" in the real
form requested ]jy him, by which the estate included in the mortgage, and
I)laintiff. a suarantee insurance com- ihe policy contains in a note to a
panv, obligated itself to make good, schedule a guaranty to complete
andreimbnrse to the employer such certain buildings according to plans
pecuniarv loss as it might sustain l)y and specifications mentioned, the
reason of the infidelity^ of defendant court will construe the whole con-
as employee and it "was held that tract lo be one of indemnity; and
the obligation of defendant to in- where it also appears that the in-
142
NATURE OF THE CONTRACT . §§ 27J-271
value of the ground rents if the buildings had been completed and
their value with the buildings in their incompleted .state.'
§ 27j. Rent or rent guaranty insurance is contract of indem-
nity. — A fire policy insuring against loss of rents is within a Code
provision defining insurance, and providing that the sole ohject of
insurance is indemnity, and it is a contract of indemnity. Such
a policy may validly stipulate for a method of ascertaining and
computing the loss without violating in anyway the principle tliAt
insurance shall furnish only indemnity against loss.'
§ 27k. Insurance on "use and occupancy" of an elevator: when
not a contract of indemnity. — A policy insuring the use and occu-
pancy of an elevator, issued to a grain elevating company, under
which the liability is fixed at a specified sum per day, and wherein
the insurer agrees to pay absolutely and unconditionally the amount
or sum fixed in it.< contract for the loss to the insured by reason of
its suspension of business by fire, partakes of the nature of a valued
policy and it is not unqualifiedly a contract of indemnity. The
stipulated sum agreed to be paid is the measure of liability.^
§ 271. Credit guaranty insurance is contract of indemnity. —
Credit guaranty insurance, or contract to indenmify against lo.ss
of claims or against loss by insolvency of debtors, is one of indem-
nity against loss of property. It is a contract of insurance.^"
sured, who held the mortgage as col- Assurance Co. 155 Cal. 521, 2;^.
lateral for a loan, had bought it in L.R.A.(N.S.) 123, 18 Am. & Eng.
at his own sale, permitted by the Ann. Cas. 512, 101 Pac. 911, under
terms of the loan, at a price equal Cal. Civ. Code, sees. 2527, 2551,
to the loan, and therafter had fore- 2558. See Young v. American Bond-
dosed the mortgage and bought in ingCo. 228 Pa. 373, 77 Atl. fi23,
the real estate, the insured will not be where the business of surety com-
permitted in an action on tlie policy panies is held to be essentially that
to show a defect in title, or that the of insurance, — a case of contract to
houses had not been completed in indemnify vendors against loss of
accordance with the plans and lentals, etc. See notes in 16 L.R.A.
specifications. In such case it is im- (N.S.) 1055, 23 L.R.A.(N.S.) 123,
material that the insured, and not a on construction of policy or contract
stranger, bid the mortgage up and insuring against loss of rents,
bought it in at an amount equal to ^ Butfalo Elevating Co. v. Prussian
the loan, and it is also immaterial National Ins. Co.' 71 N. Y. Supp.
that the only other bidder was the 918, 64 App. Div. 182, affd in
insolvent borrower. The insured, Michael v. Prussian National Ins.
having bought the mortgage at a Co. 171 N. Y. 25, 63 N. E. 810.
price equalto ihe loan, sullered no i° State v. Phelan, 66 Mo. App.
loss, and is therefore entitled to no 548; Shakman v. United States
indemnitv. Credit Svstem, 92 Wis. 366, 32
'German American Title & Trust L.R.A. 383, 53 Am. St. Rep. 920, 91
Co. v. Citizens Trust & Surety Co. N. W. 304. See Rice v. National
190 Pa. 247, 42 Atl. 682. Credit Co. 164 Mass. 285, 41 N. E.
8 Whitney Estate Co. v. Northern 276 (policy insuring against loss by
143
§ 27m JOYCE ON INSURANCE
§ 27in. Whether contract to defend physician against suits for
malpractice is one of insurance and indemnity. — A coiupany int-or-
porated loi' tlio ])ur))0,se of aiding and protecting the medical ]»ro-
fes.sion in the practice qf medicine and surgery bv the defense of
physicians and surgeons against civil prosecution for malpractice,
which issues a contract, for an agreed and stipulated annual pay-
ment, and agrees to defend said civil suits, for alleged malpractice,
during a stated time, at its own expense, not exceeding a certain
amount, l)ut limiting its liability by not assuming or agreeing to
piiy any judgment for damages rendered in any such suit for mal-
practice against the holder of the contract, is held an insurance com-
])aii\- within the meaning of the Code of California defining insur-
ance and specifying what events ma}' be insured against.^^ as such
contract })rovides indenmity against a contingent liability, and the
corporation is amenable to regulation under the state insurance
laws.^^ The court, per A^an Fleet. District Judge, says: ^^ "Com-
plainant relies, in support of the contention advanced by it, ujiou
Vredenburgh v. Physicians Defen.'se Co.^* and State (ex rel. Physi-
cians Defense Co.) v. Laylin.^^ both involving a construction of the
same contract, and wherein conclusions were reached in harmony
with complainants claim that the contract is merely one for per-
sonal services. I am unable to acquiesce in the views expre.sse<l in
these cases. The reasoning ])roceeds from a consideration of the
formal terms of the contract in suit as affected by certain general
definitions of the essentials of a contract of insurance as stated in
the text books: and both ca.<^es ignore the consideration that the lia-
bility to I0S.S, incurred in the contingency as to which the contract
relates, involves a liability beyond the naked amount of the judg-
ment that may be rcco\crod. On the other hand, the views herein
expressed will be found fully sustained in the later case of Physi-
cians Defense Co. v. O'Brien Ins. Commr,^® where the sujjreme
court of Minnesota, interpreting the same contract in the light of a
statutory definition very similar to. and no broader than our own.
held it to be clearly a contract of insurance." In the Illinois case,
insolvency of debtors considered as er (U. S. C. C.) 188 Fed. 832, 40 In.^.
contract "of indemnity, bnt no dis- L. J. 20(12. Application for injnnc-
cnssion on tliis point), cited in tion (Iciiiod ; demurrer sustained and
American Credit Indemnity Co. v. Ijill dismissed. Case aif'd 109 Fed.
Champion Coated Paper ' Co. 103 576, 118 C. C. A. 50, 47 L.R.A.(N.S.)
Fed. (iOO, 614, 43 C. C. A. 340, no 200 and note.
discussion, but bonds of this cliar- ^^ Id. 83().
acter declared to be essentially in- 1* 126 111. App. ."00.
surance contracts. ^^ 7.] Oliio St. 00. 76 N. E. .')67.
" Cal. Civ. Code, sees. 2527, 2531. ^^ loO Minn. 490, 111 N. W. 396.
12 Physicians Defense Co. v. Coo])-
144
NATURE or THE COJ^TRACT § 27m
above-mentioned.^'' the contract was decided not to be one of
indemnity, as it did not possess that element, and tliat tlie coqoora-
tion did not conduct an insurance business: "apj)Hcant does not in-
sure the holder against suits for malpractice. It merely makes a
business of defending; n^ainst them when they are brougbt. provides
legal services for its j)alr()ns.'' In the Ohio case, above noted, ^^ tiie
court declared that the contract was "neither in form nor legal 'ef-
fect, anything more than a contract for services. And said con-
tract im])o.«es upon the company no duty or obligation other than
that of defending the physician or surgeon who may hold such
contract against any action that may be brought against him for
allciicd ]iial[)ractice . . . 'said company does not obligate
itself to pay, or to a.«sume, or to secure the payment of any judg-
ment against the holder thereof in anv suit defended bv it.' The
undertaking of the company is not that it will compensate the phy-
sician or surgeon for lo.ss or injury he may actually sustain, but
only that it will, after suit brought against him, undertake and
conduct for him his defense, and thereby, if may be, protect him
against liability for loss, by preventing judgment being obtained
against liim. If the company successfully performed its contract
no loss or injury resull.s to the defendant. But if not, and judg-
ment be obtained against him, there is no obligation or lialjility on
the part of the company to pay or satisfy said juclgment or any
part of it. Obviously, we think, such contract is not one of indem-
nity, for under it the liability of the company ceases, at the precise
point and time that the right to indemnity attaches or begins. We
are of opinion therefore, that the plaintitt' company is not an insur-
ance company, nor the contract it issues an insurance contract." ^^
This case further turned upon the point that the business was a
professional one expressly prohibited to corporations under the
Ohio statutes,^" and such corporation was not entitled to receive a
certificate of authority to transact business in the state. In the Min-
nesota case ^ it was held that the contract was one oi' insurance, and
that the corporation making such a contract was engaged in the in-
surance business; also that the essential ])uri)ose of such a contract
is not to render personal sendees, but to indenmify against loss or
damage resulting from the defense of an action for malpractice, and
^"^ Vredonburoh v. PlivsiciaiLS De- ^^ Id. 9fl. per Crc\v,,.I.
fense Co. 12(5 111. App. 50?). ^^Wex. Stat. Oliio, 100.3, see. 3235.
^* State (ex rel. [Mivsir-iniis Dp- ^ Plivsiciaiis Dcfoiiso Co. v.
fonse Co.) v. Laylin, 73 Ohio St. 90, O'Biicn, 100 iMiiui 490, 111 N. W.
76 N. E. 567. The action was to com- .'■90.
pel the Secretary of State to admit
the company to do business in the
slate.
Joyce Ins. Vol. I. — 10. 14-5
§§ 27n-29 JOYCE OX INSURANCE
tliat the company a.cTeed within the statutory definition of insnranoe
to "do some act of vahie to tlie insured in case of such loss or dam-
age," and that it was otlioi'wise within tlie statutory definition.^
§ 27n. Employees' benefit and relief association: contract not
one of indemnity. — It is held in Pennsylvania that the great under-
lying purpose of a beneficial association or organization is not to in-
demnify or secure against loss, but that its design is to accumulate
a fund from the contribution of its members for beneficial and pro-
tective-purposes to he used in their own aid or relief in the
misfortunes of sickness, injury or death. The benefits although se-
cured by contract, and for that reason to a limited extent assimilat-
ed to the proceeds of insurance are not so considered. This applies
to a beneficial association for the protection of employees or firms
and corporations against sickness accident or death. ^
§ 28. Reinsurance is a contract of indemnity. — Reinsurance is
a contract of indemnity and binds the reinsurer to pay the reinsured
the whole loss sustained in respect of the subject insured to the ex-
tent for which he is reinsured.'* The object of reinsurance is said
to be indemnity to the insurer against his own act. since he may
have the sum he has insured reassured to him by some other in-
surer.^
§ 29. Other Incidents of the doctrine of indemnity. — Since tlic
doctrine of indenniity contemplates that the insured .shall be in-
demnified, but shall never be more than fully indemnified, for a
2 Lewis, J., dissented. Rep. 413. Examine Bartlett v. Fiie-
^ Beneficial Associations, 32 Pa. man's Ins. Co. 77 Iowa, 15.3, 158, 41
County Ct. Rep. 457, followino- Com- N. W. 601 (wliere it was said an
inonwealth v. Equitalile Beneficial agreement to reinsure is an under-
Assoc. 137 Pa. St. 412, 18 Atl. 1112. taking entered into with the insurer
See §§ 344-34(j lierein. "to indemnif.y the owner of tlie in-
* Allemannia Fire Ins, Co. v. Fire- .>-ui'ed property in case a loss oc-
raen's Ins. Co. 209 U. S. 326, 52 L. curs") : Hunt* v. New Hampshire
ed. 815, 28 Sup. Ct. 544, 37 Ins. L. Fire Underwriters Assoc. 68 N. H.
J. 316, 14 Am. & Eno-. Annol. Cas. 305, 308, 73 Am. St. Rep. 602. 38
048; Providence-Washinoton Fire KR.A. 514, 38 Atl. 145. See §§
Ins. Co. v. Atlanta-Birmingliam Fire !1(, 113, 131 et seq. herein.
Ins. Co. (U. S. C. C.) 166 Fed. 548, Reinsurance is an indemnity to
38 Ins. L. J. 461. See also Eagle the insurer for the loss up to the
Ins. Co. V. Lafayette Ins. Co, 9 Ind. amount, whether for the whole or
443; Illinois M,utual Fire Ins. Co. v, ])art of the risk stipulated, and for
Andes Ins. Co. 67 III. 362. 16 Am. which the premium is paid. Chalar-
Rep. 620: Mutual S. Ins. Co. v. on v. Insurance Co. of North
Hone, 2 N. Y. 235, 240; Hone v. America, 48 La. Ann. 1582, 1590, 36
Mutual Safety Ins. Co. 1 Sand. (N. L.R.A. 742, 21 So. 267.
Y.) 137. Commercial Mutual Ins. ^ Insurance Co. of North America
Co. V. Detroit Fire & ^Marine Ins. v. Hibornia Ins. Co. 140 IT. S. 5()5,
Co. 38 Ohio St. 11, 15, 16, 43 Am. 573, 35 L. od. 517, 11 Sup. Ct. 909.
146
NATURE OF THE CONTRACT § 29
loss, there have, nece.'^sarily arisen many incidents or corollaries
thereto, such as the doctrines of constructive total loss, of abandon-
ment, of subrogation, coinsurance, contribution, and apportion-
ment of loss, etc., which will be noticed hereafter under their ap-
propi'ialc heads. ^
^Brelt, J., in Castellain v. Prpston, writer by tlie party insured, hut only
L. R. 11 Q. B D. 380; Cineinnati Ins. to the extent of tlie indemnity eon-
Co. V. Dutlield, (i Ohio St. 200, 67 teniphited by the policy: See ehap-
Aui. Dec. .{30, where it is lieki that ters herein on Abandonment and
the lei^al ett'eet of an abamlonment in Total Loss. As to repairs, particular
the sense in w hicli it is used in average adjustment, and one third
policies of marine insurance and in new for old, as qualifying the princi-
the law regulating that subject, is to pie of indemnity, see § 3078 herein,
operate as a transfer to the under-
147
CHAPTER III,
PAROL CONTRACTS.
§ 31. Contract need not be in writiutj: parol contract and rule in England.
§ 31a. Parol contracts : life insurance : industrial life insurance.
§ 31b. Parol contracts : accident insurance.
§ 31c. Parol contracts: "workman's collective policy:" custom.
§ 31d. Pai'oJ contract : where policy partly written at time of loss : contract
binding.
§ 32. Parol contracts : the common-law rule.
§ 33. Parol contracts : statutory regulations : English stamp acts.
^ 33a. Parol contracts: standard policy.
§ 33b. Statutor}^ regulations: contract partly in writing and partly by
parol.
§ 34. Parol contracts : mutual benefit societies.
§ 35. Parol contracts: corporations: statutory or charter provisions.
§ 30. Parol contracts: corporations: statutory or charter provisions: con-
tinued.
§ 37. Parol contract for insurance subject to usual provisions of policy.
§ 38. Parol agreement for insurance may be specifically enforced, or court
may award damages.
§ 38a. Same subject: standard policy: rule in New York.
§ 38b. Same subject : life insurance : iiulustrial life insurance.
§ 38c. Evidence: oral contract must be clearly established.
^ .'>n. Parol contracts: statute of frauds.
§ 40. How far parol contract merged in written agreement.
§ 41. Parol contract : renewal.
§ 41a. Same subject: standard policy: agent's authoi-ity.
§ 41b. Parol contract: renewal: contract luust be complete: recovery: evi-
dence to establish.
§ 41c. Parol contract: renewal: standard policy: equitable estoppel.
^' 41d. Parol contract : reinsurance : validity.
§ 41e. Parol agreement for reinsurance may be specifically enforced.
§ 31. Contract need not be in writing: parol contract and rule
in England. — Tlie contract of insurance need not be a specialty nor
even in writing, for it is well-settled law that a parol contract of
insurance is valid in tlie absence of a statutory requirement or other
148
PAROL CONTRACTS
§ 31
positive regulation to the contrary, and this rule covers not only
agreements to insure, but the completed contract.' There is a well-
' United States. — Eames v. Home
Ins. Co. 94 U. S. 621, 24 L. ed 298
(valid contract for a policy created) ;
Relief Fire Ins. Co. v. Shaw, 94 U.
S. 574, 24 L. ed. 291; Franklin Fire
Ins. Co. V. Colt, 20 Wall. (87 U. S.)
560, 22 L. ed. 423 (preliminary con-
tract for insurance) ; Merchants' Mut-
ual Ins. Co. V. Lvman, 15 Wall. (82
U. S.) 664, 21 L. ed. 246; Commercial
Mutual Marine Ins. Co. v. Union
Mutual Ins. Co. 19 How. (60 U. S.)
.318, 15 L. ed. 636 (agreement to issue
policy binding) ; Union Mutual Ins.
Co. V. Commercial Mutual I'iis. Co.
2 Curt. (U. S. C. C.) 524, Fed. Cas.
No. 14,372 (parol acceptance of
written proposal is binding contract
in absence of any statute contra) ;
Humphrey y. Hartford Fire Ins. Co.
15 Blatch'f. (U. S. C. C.) 35. 37, 511,
Fed. Cas. Nos. 6874, 6875 (contract
to insure and to issue policy bind-
ing).
Alabama. — Insurance Co. of North
America y. Thornton, 130 Ala. 222,
55 L.R.A. 547, 89 Am. St. Re].. DO.
30 So. 614, 31 Ins. L. J. 305 (liable
for loss before issue of policy) ; Com-
mercial Fire Ins. Co. y. Morris, 105
Ala. 498, 18 So. 34 (contract to in-
.sure : renewal) ; Home Ins. Co. y.
Adler, 77 Ala. 242, 71 Ala. 521 (valid
contract of insurance may be made in
parol; verbal agreement to i-ssue
policv) ; Mobile ^Marine Dock &
Mutual Ins. Co. v. McMillan, 31 Ala.
711 (agreement to insure valid; need
not be reduced to writing).
California. — American Can Co. v.
Agricultural Ins. Co. 12 Cal. App.
l.iS, 106 Pac. 720, 39 Ins. L. J. 518
(parol contract of insurance valid;
but facts did not establish one) ;
Crawford v. Transatlantic Fire Ins.
Co. 125 Cal. 609, 58 Pac. 177; 28 Ins.
L. J. 935 (liability; may attach on
oral agreement to issue policy; ques-
tion of evidence) ; Harron v. City of
London Fire Ins. Co. 88 Cal. 16, 25
Pac. 982 (i)arol contract for* insur-
ance by special agent) ; Gold v. Sun
Ins. Co. 73 Cal. 216, 14 Pac. 786
(parol agreement to issue policy^ val-
id.)
Illinois. — Insurance Co. of North
America v. Bird, 175 111. 42, 51 N. E.
686; Firemens' Ins. Co. v. Kucssncr,
164 111. 275, 45 N. E. 540; Hartford
Fire Ins. Co. v. Farrish, 73 111. 166
(parol contract of, valid) ; Hartford
Fire Ins. Co. v. Wilcox, 57 111. 180
(parol contracts of, valid) ; Fire Ins.
Co. of Phila. County v. Sinsabaugh,
101 111. App. 55 ; Concordia Fire Ins.
Co. v. Heffron, 84 lU. App. 610 (oral
contract of insurance) ; Stoelke v.
Hahn, 55 111. App. 497 (verbal con-
tract of, valid in absence of statute
to contrary).
Indiana. — Commercial Union As-
surance Co. v. State, 113 Ind. 331, 15
N. E. 518 (agents may make parol
as well as written contracts) ; Posey
County Fire Assoc, v. Hogan, 37 Ind.
App. .573, 77 N. E. 670 ("it has long
been settled that an oral contract for
insurance is valid") ; Western Assur.
Co. V. McAlpin, 23 Ind. App. 220. 77
Am. St. Rep. 423, 55 N. E. 119
(valid contract to insure).
loica. — Revere Fire Ins. Co. v.
Chamberlain, 56 Iowa, 508, 8 N. W.
338 ("tliat insurance may be effected
1)V parol is well settled,'' per Adams,
Cih. J.) ; Hubbard v. Hartford Fire
Ins. Co. 33 Iowa, 325, 11 Am. Rep.
125 (case of agreement to issue a
policy on a certain date; issued but
not delivered).
Kansas. — Wilson v. German-Ameri-
can Ins. Co. 90 Kan. 355, 133 Pac.
715 (binding contract of insurance
may be made witliout issuance of
policy) ; Preferred Accident Ins. Co.
v. Stone, 01 Kan. 48, 59 Pac. 586
(execution and delivery of policy not
essential) ; Phoenix Ins. Co. v. Ire-
land, 9 Kan. App. 644, 58 Pac. 1024
(parol contract to insure, valid in
absence
tra).
of statutory provision, con-
149
/
§ 31 JOYCE OX INSURANCE
dcfinefl distinction between a parol contract to insure or to issue an
Kentucky. — Hartford Fire Ins. Co. no statutory requireiucMit, contract
V. Trimble, 117 Kv. 583, 25 Ky. L. need not be in wrilinn).
Rep. 1497, 78 S. W. 4(i2, 33 Ins. L. Michigan.— y[ivhhj:cm Pipe Co. v.
J. 348 (-well .settled law in tliis state Michigan Fire & Mar. Ins. _Co. 92
that a parol contract of insurance is Mich. 482, 491, 20 L.R.A. 27/, .32 N.
valid and enforceable") ; Connuercial W. 10/0 (''it is well settled that
Union Assur. Co. v. Urbansky, 113 where a contract of insurance ha-s
Ky. 624, 24 Ky. L. Rep. 462, 68 S. been agTeed upon, no policy need be
W. eoS, 31 Ins. L. J. 728 (oral con- made out. Its delivery is not es-
tracts of insurance are valid) citing sential to the validity of the con-
National Fire Ins. Co. v. Rowe, 20 tract") ; Roger Williams Ins. Co. v.
Ky. L. Rep. 1473. 49 S. W. 422; Can-ington, 43 Mich. 252, 5 N. W.
Fidelity & Casualty Co. v. Ballard & 303^ 9 Ins. L. J. 577.
Ballard Co. 105 Ky. 253, 20 Ky. L. Missouri.— King v. Phoenix Ins.
Rep. 1169, 48 S. W. 1074, 28 In.s. L. q^ 193 t^j^. 290, 113 Am. St. Rep.
J. 227; Howard Ins. Co. v. Ow-en s gyg^ e.Amer. & Eng. Ann. Ca-s. 618,
Admr. 94 Ivy. 191, 14 Ky. L. Kep. gg g ^j ggg (oj-al contract of insur-
881 21 S. W. 103/. ^^^^ ^.^j.^) . g^^g y g^ J j^ ^,^ij,g
Mame.-^alkev v Metropolitan ^^^^..^^ ^^^ ^^ ^3 ^^^ ggg
Ins. Co 06 Me. 3/1 (nothing in ,^„,idered at length in above
nature of contract ot nre insurance ^ x ^t j . tj^ 1 „i t •+■„ t„c
which requires it to be in writing) . Sf^^^l.^J^^^"^ o-fi ?h <^ W °7
3far^tod.-Mallette v. British- Co. 142 Mo. App. 2..6, 126 S W 22/
American Assur. Co. 91 Md. 471, 46 (contract of insurance need not be
Atl 1005, 29 Ins. L. J. 966 (contract evidenced by a written policy);
to insure valid; pleading oral con- Sheppard v. Boone County Home
tract and demurrer). Mutual Fire Ins. Co. 138 Mo. App.
Massachusetts.— Goodhue v. Hart- 20, 119 S. W. 984 (but facts here
ford Fire Ins. Co. 175 Mass. 187, 55 showed no oral contract was made).
N. E. 1039. 29 Ins. L. J. 207 (oral AebmsAo.— Carter v. Bankers Life
contract valid; temporary here to Jns. Co. 83 Xeb. 810, 120 S. W. 455
oover removal) ; Sanford v. Orient (written application and counter
Ins. Co. 174 Mass. 416, 75 Am. St. proposal; no policy issued; contract
Rep. 358, 54 N. E. 883 (may make valid). ^ 1 11 xr
',. . ' , , 0' ■ ^f^ +„ New Hampshire. — Goodall v. New
preliminary contract, bee note to i ^r f 1 t.-i- t n o- m
ii • in n *. T T \(iT\. -Rv-.^^r, England Mutual lire Ins. Co. 2o N.
this case 49 Lent. 1j. •). 4b/ ) ; rJrown ^^ ir.,^ , ,• j i. v ^ n
xp ,,• ^i , , V T n^ Mi\ H. 169 (policy need not be actually
V. Franklin Mutual lire Ins. Co. loo • i\
Mass. 565, 52 Am. St. Rep. 534. 43 ''"^^/r J^rse».— Smith & Wallace Co.
N. E. 512 (evidence of custom ot ^. p^.'^^.^i^j, ^^t. Ins. Co. 68 N. J. L.
agent to bind company by oral con- g-_^_ 33 ^^tl. 458 (complete temporary
tract of insurance admissible; stock (.Q^tract existed).
company may undoubtedly make oral Xg^^. York. — International Ferry
contract of insurance) ; Emery v. Co. v. American Fidelity Co. 207 N.
Boston :Marine Ins. Co. 138 Mass. y. 350, 101 N. E. 160 (a parol agree-
398 (secretary held to have authority ment by an insurance company to
to make binding oral agreement to effect a stipulated insurance by issue
indorse a risk upon an open policy) ; of a valid policy is binding in absence
Dodd V. Gloucester Ins. Co. 120 Mass. of constitutional or legislative re-
468 (marine; valid contract of insur- quirement contra. A case of marine
ance held to have existed) ; Sanborn vessel liability insurance) ; Ruggles v.
V. Firemen's Ins. Co. 16 Grav (82 Ameiy-an Cent. Ins. Co. 114 N. Y.
Ma.ss.) 448, 77 Am. Dec. 419 (where 415. 11 Am. St. Rep. 674, 21 X. E.
150
PAROL CONTRACTS § 31
insurance policy, and a parol contract of insurance; and in Oliiu u
1000 (fonipletp and valid contract
from date of conversation with
asent) ; Van Loan v. Farmers Mutual
Fire Ins. Assoc. 90 N. Y. 280 (valid
ao-reement for insurance) ; Angell v.
Hartford Fire Ins. Co. 59 N. Y. 171,
17 Am. Rep. 322 (agent may make
preliminarv contract to issue policy) ;
Flli.s v. Aibanv City Ins. Co. 50' N.
Y. 402, 10 Am. Rep. 495 (valid pre-
liminarv contract with agent to issue
policy)"; Fish v. Cottenett, 44 N. Y.
538, 4 Am. Rep. 715 (parol contract
for insurance valid) ; Trustees of
First Baptist Cluirch v. Brooklyn
Fire Ins. Co. 19 X. Y. 305 ; Reynolds
v. Westchester F'ire Ins. Co. 40 X. Y.
Supp. 33(i, 8 App. Div. 193. But
compare §S 33a, 38a herein.
North Carolina. — Floars v. ^■Etna
Ins. Co. 144 N. C. 232, 11 L.R.A.
(N.S.) 867n, 5(1 S. E. 916 (oral con-
tract of insurance or to insure will,
in absence of some statutory pro-
visions, be upheld if otherwise bind-
ing).
North Dakota. — Boos v. ^Etna Ins.
Co. 22 X. Dak. 11, 132 N. W. 222, 40
Ins. L. J. 1787 (breach of parol con-
tract to insure; recovery may be
had) ; following MeCabe Bros. v.
.Etna Ins. Co. 9 N. Dak. 19, 47
L.R.A. 641. 81 N. W. 426.
Ohio. — Newark Machine Co. v.
Kenton Ins. Co. 50 Ohio St. 549, 22
L.R.A. 768 and note, 35 X. E. 1060
(parol contract of insurance valid).
Oregon. — Sprout v. Western As-
surance Co. 33 Oreg. 98, 54 Pac. 180,
28 Ins. L. J. 118 (oral prelitninary
contract to insure) ; Nortli British »fc
jNIercantile Ins. Co. v. Lambeit, 26
Or. 199, 37 Pac. 909 (oral con-
tract for insurance by agent bind-
ing).
Pennsylra)ii/i.~ Renner v. Fire
Assoc, of Phila. 229 Pa. 75, 140 Am.
St. Rep. 706. 78 Atl. 44, 40 Ins. L. J.
84 (law permits oral contracts of in-
surance; oral executory contract
valid); Patt^M-son v. Benjamin
Franklin Ins. Co. 81i Pa. St. 454
1
(there may be a parol contract be-
fore issuing policy, but evidence here
insufficient) ; Smith v. Odlin, 4
Yeates (Pa.) 468; Ripka v. MutuaJ
Fire Ins. Co. 36 Pa. Super. Ct. 51*
(agent may bind company by con-
tracts by parol before issuing policy,
unless specitic charter requirements
preclude).
South Carolina. — Strickley v. Mo-
bile Ins. Co. 37 S. Car. 56, 16 S. E.
280 (company bound where local
agent received insured's money on
promise to issue policy).
'Texas. — Cohen v. Continental Fire
Ins. Co. 67 Tex. 325, 60 Am. Rep. 24,
3 S. W. 296 (agent may contract by
jiarol renewal) ; Austin Fire Ins. Co.
V. Brown (Tex. Civ. App.) 160 S.
W. 973 (preliminary oral contract
binding) ; State Mutual Fire Ins. Co.
v. Taylor, — Tex. Civ. App. — , 157
S. W. 950 (contract of insurance by
parol valid in absence of charter or
statutory provisions).
Utah. — Idaho Forwarding Co. v.
Firemen's Fund Ins. Co. 8 Utah 41,
17 L.R.A. 586, 29 Pac-. 826 (agree-
ujent to execute policy in future;
question of pleading and evidence,
held that plaintiff could not recover).
Virginia. — Interstate Fire Ins. Co.
v. McFall, 114 Va. 207, 76 S. E. 293
(completed contract undelivered
policy) ; Haskin v. Agricultural Fire
Ins. Co. 78 Va. 700; Woody v. Old
Dominion Ins. Co. 31 Gratt. 362, 31
Am. Rep. 732.
Wa^hiufjlon. — Thompson v. Ger-
mania Fire Ins. Co. 45 Wash. 482, 88
Pac. 941, ;}6 Ins. L. J. 400 (complete
oral contract made).
West Virginia. — Croft v. Hanover
Fire Ins. Co. 40 W. Va. 508. 52 Am.
St. Rep. 902. 21 S. K. 854 (oral
executory contract valid).
^\'is<■nnsin. — Whitman v. Mil-
waukee Fire Ins. Co. 128 Wis. 124,
116 Am. St. Rep. 25, 5 L.R.A. (X. S.)
680n, 107 X. W. 2!)1 (oral contract
against lire, valid); John R. Davis
Lumber Co. v. Scottish Union &
51
§ 31
JOYCE ON INSUKANCE
parol contract of insurance, as distinguished from a parol agree-
ment to issue a policy, must not be executory, but must take effect
in prscsenti}
National Ins. Co. 94 Wis. 472, 69 N. on Ins. (ed. 1845) 60, § 5. See IMor-
W. 156 (binding verbal contract of gan v. Mather, 2 Ves. Jr. 15 and n.
insurance mav be made) ; Stchlick v. Contra, Bell v. Western ]\Iarine &
iMihvaukee Mechanics" Ins. Co. 87 Fire Ins. Co. 5 Rob. (La.) 423, .39
Wis. 322, 58 N. \V. 35 (parol con- Am. Dee. 542; Cockerill v. Cincinnati
tract to insure valid) ; Mathers v. ]\[utual Ins. Co. 16 Ohio, 148. In
Union IMutual Accident Assn. 78 this case the court says: "It is uni-
AVis. 588, 11 L.K.A. 83, 47 N. W. versal commercial usage that the poli-
1130 (oral agreement for present cy shall be in writing, and there is
insurance, valid) ; Northwestern ]ns. no exception to it in positive decision
Co. V. ^^tna Ins. Co. 23 Wis. 160, 99 or municipal regulation. Such a
Am. Dec. 145. See Strohn v. Hart- thing as a verbal policy is unknoAvn
ford Ins. Co. 33 Wis. 648. to tlie law of insurance, and the books
Wi/oming. — Summers v. Mutual upon the subject and decisions unite
Life Ins. Co. 12 Wvo. 369, 109 Am. in declaring that a policy must be in
St. Rep. 952, 66 L.R.A. 812, 75 Pac. writing." It here appeared that the
937 (parties bound though terms not act incorporating tlie company re-
reduced to writing), quired their contract to be in writ-
Evfjland. — See Coulter v. Equity ing, but the court also said that ''with-
Fire Ins. Co. 24 Canadian L. T. 88. out the act we should hold that a ]ioli-
As to English decisions, see note 22 oy of insurance upon the principle of
L.R.A. 772. When contract deemed general usage must be in writing, as
to he eoncliided, see marine ins. act supported and declared by universal
1906, 6 Edw. VII. c. 41, sec. 21; authority." But see Dayton Ins. Co.
Butterworth's 20th Cent. Stat. (1900- v. Kelly, 24 Ohio St. 345, 15 Am.
1909) p. 404. Rep. 612.
See further as to validity of oral It should he rememhered that a
contracts of insurance, notes 22 policy is the contract reduced to urit-
L.R.A. 768-773; 6 Am. & Eng. Ann. ing. See Hicks v. British American
Cas. 624, 69 Am. St. Rep. 143, 77 Assur. Co. 162 N. Y. 284, 48 L.R.A.
Am. Dee. 402. 424, 56 N. E. 743. Avhere the court
"Although tliere is a difference of says: "It is usual for the company
opinion in the various jurisdictions to issue a policy of insurance evi-
and among the text-writers as to dencing the contract between the
whether or not an executory contract parties, but the ])olicy accomplishes
can be made to insure in the future, nothing more than that," per Parker,
yet the clear preponderance of au- C. J. So the issuing of a policy fur-
thority seems to be that such con- nishes a convenient mode of proving
tracts are valid." Benner v. Fire contract but it is not essential to its
Assoc, of Phila. 229 Pa. 75, 140 Am. validity. Walker y. Metropolitan
St. Rep. 700, 78 Atl. 44; 40 Ins. L. J. Ins. Co. 56 Me. 371, 376.
84, per Moschzisker J., citing numer- Prepaipnent of pretnium not pre-
ous cases. requisite oral contract. See fifth
Policy need not he issued, and if note under § 41 herein. See § 72
no date is mentioned takes effect im- herein.
mediately. Potter y. PhaMiix Ins. * Hartford Fire Ins. Co. v. Whit-
Co. 63 Fed. 382. See note 10 Am. man, 75 Ohio St. 312, 9 Amer. & Eng.
Rep. 502. Ann. Cas. 218, 79 N. E. 450; Hart-
As to mai'ine insurances, see 1 Duer ford Fire Ins. Co. v. Trimble, 117
152
PAHOL CONTRACTS
§ 31
A parol contract by a diih^ authorized agent of an in.-nrance com-
pany is binding on the conipsn}^ before issuing the poHcy.^ In a
Massachusetts case the plaintifi' made an appUcation for fire insur-
ance to defendant's local agent, who orally agreed to place a. certain
amount at a certain rate upon the risk at once, and to bind it, and
immediately made a memorandum to that effect in the '^binding
book." The risk was specially hazardous, and in view thereof a
special agent was to inspect and approve the risk. The agent had
written authority to receive proposals for insurance, and was accus-
tomed to fill and deliver policies signed in blank by the company's
oflicers and left with him for that purpose. The same class of risks
had been frequently taken by the agent, and he had issued policies
thereon without consulting the company, and agents were accus-
tomed to bind their principals by preliminary oral agreements until
policies could be conveniently issued. Upon action brought it was
decided that the agent had made an oral agreement for insurance
within the apparent scope of his authority.^" So an oral agreement
Ky. 583, 25 Kv. L. Rep. 1497, 78 S.
W. 4(i2, 33 Ins. L. J. 348 (where the
court said: "We recognize the dis-
tinction between jiarol contracts of
insurance in prsesenti, and in futuro,
but consider it unnecessary to con-
sider this question").
A distinction exists between a eon-
tract of insurance which comprehends
the issued policy, and a contract to
insure. The one is executory in its
nature, and the other executed.
Sproul V. Western Assur. Co. 33
Orcg. 98, 54 Pac. 180.
"It is contended by counsel for ap-
pellee tliaf the autliorities distin-
guish between verbal agveenionts for
insurance in futuro, and verbal con-
tracts for insurance in pra^senti, and
liave rejected the former, but sus-
tained tiie latter, character of eon-
tracts. We concede there is a con-
flict of authority upon this question."
The court then considers whether a
contract for renewal can validly rest
in parol, holds that it can, and ackls:
"The conclusion we have reached is
supported by King v. Cox, 63 Ark.
204, 37 S. W. 877, and Home Ins. Co.
V. Adler, 71 Ala. 516 (521, 77 Ala.
242). In those cases it apjieared that
the contract was made v.ithin a few
days of the expiration of the policies
which were to be renewed. Counsel
for appellee argue that the contracts
in those cases were made so near the
(late of the expiration of the old poli-
cies the court regarded them as con-
tracts of insurance in pra^scnti. The
coui't in those cases did not hold that
the contracts were enforcible because
the contracts for renewal were made
but a short time before the expiration
of the old policies, and, therefore,
were contracts in pra^senti.- They
simply adjudged that parol contracts
for the renewal of policies, which
were made before the expiration of
the old policies" were binding. Bald-
win V. Phoenix Ins. Co. 107 Ky. 356,
21 Ky. L. Rep. 1090, 54 S. W.'l3, 29
Ins. L. J. 78, ])er Paynter, J. Seo
Taylor v. Phoenix Ins. Co. 47 Wis.
365, 2 N. AV. 559, as to contract to re-
new in prjcsenti (quoted from in
American Can Co. v. Agi-icultural
Ins. Co. 12 Cal. App. 133, 106 Pac.
720, 39 Ins. L. J. 518) ; Western As-
surance Co. v. McAlpin, 23 Ind. App.
220, 55 N. E. 119.
9 Ripka V. Mutual Fire Ins. Co. 36
Pa. Super. Ct. 517.
^° Putnam v. Home Ins.
Mass. :124, 25 Am. Rep. 93.
Co. 123
But see
153
§ 31 JOYCE ON INSURANCE
may be binding on Ibe company wlien by agTcement with the as-
ynrod the agent is to fix the amount 0/ indemnity as he sees proper
and does fix it, as shown by memorandum made by him.^^ And an
agent who is intrusted with blank policies, signed by the president
and secretary of the insurance corporation, with autliority to fill
up and negotiate the same, may bind it by an oral contract of in-
surance.^^ It is held in Connecticut that an insurance company
cannot ordinarily insure by parol, but that the parties may, how-
ever, agree by parol as to the terms upon which a policy may be
issued.^' In another case an application was made to an agent of
several insurance companies for insurance, and the amount was
specified, the rate fixed, tlie premium paid, and a receipt given
lliorefor by the agent, who promised to draw the policy the second
following day, and stated that if it burned before then 'Sve will call
it" the property ''insured," and these negotiations were reduced to
writing, and a policy was issued by the insurer and accepted by the
insured, and afterwards the property burned, in an action brought
upon the oral contract to insure, it was held that there was no sucli
oral contract with the company; that at the most it was an oral
contract on the part of the agent to insure.^* Guarantee insurance,
however, is declared to be excepted from the rule first above stated.^*
In England, however, the act 35 George III,, chapter 63, section
2, expressly provided for an engrossed, printed or written contract in
case of every agreement for any marine insurance, and that the
same shall specify the premium or consideration, the character of
the risk, the sums insured, and the names of the insurers.^® And
by act 18G7, 30 Victoria, chapter 23, section 7, every contract or
agreement for sea insurance ^"^ must be expressed in a policy, other-
Daniels V. Citizens' Tiis. Co. 5 Fed. ^^ Bisliop v. ('lav l^'iro & Marine
425, 430; Tavlor v. Gerinania Ins. Co. Ins. Co. 49 Conn. i()7.
2 Dill. (U. S. C. C.) 282, Fe(]. Cas. " Kleis v. Niai^aia Fire Ins. Co.
13,793; Home Ins. Co. v. Adler, 71 117 Mich. 469, 5 Det. L. N. 337, 70
Ala. 516; AVarner v. Milford .Mntnal N. W. 155, 27 Ins. L. J. 912.
Fire Ins. Co. 153 Mass. 335, 11 See as to merger of parol contract
1..K.A. 598, 26 N. E. 877; Friuikliii in written aoreement. § 40 herein.
Fire Ins. Co. v. Tavlor, 52 Miss. 441 ; i^ Floars v. Aetna Life Ins. Co. 144
Kntiules V. American Cent. Ins. Co. N. Car. 232, 11 L.R.A.(N.S.) 867n,
114 \. Y. 415, 21 N. E. 1000, 11 Am. 56 S. E. 916.
St. Kep. 074. and note, 678, and note, ^^ See also 25 Geo. III. e. 44; 28
21 Am. St. Rep. 88.3. Geo. III. e. 56 (whole act repealed so
As to agent's power to make oral far as relate.s to marine insnrance by
contract, see § 525 herein. marine ins. act,- 1906, 6 Edw. VII.
^^ Croft V. Hanover Fire Ins. Co. c. 41) wliich implv a written con-
40 W. Va. 508, 21 S. E. 854. tract; Abbott on Slii})ping, Story's
12 King V. Plioenix Ins. Co. 195 Mo. cd. 2, n. 1. As to Engli.sli Statntes,
290, 113 Am. St. Rep. 678, 6 Amer. see § IV. herein.
& Kim-. Ann. Cas. ()18, 92 S. W. 892. ^'^ Other than that referred to in
154
PAROL CONTRACTS § .'Jla
wise it is null and void, and in addition, under .scelion of said act,
no policy shall be pleaded or given in evidence, or adinitted in any
court to be good and available in law or in equity, unless duly
stamped.^' Under the same act policies effected abroad and charge-
able with duty by virtue of the 28 and 29 A^ictoria, chapter 9G, sec-
tion 15, may be stani})ed within the time specified in that act.
Again, under an English decision, it is held that although there is
no positive law in New South Wales necessitating that marine con-
tracts of insurance be in writing, yet an agent authorized to make
contracts in the ordinary way must make them in writing,^^ and
although the slip be initialed, and would otherwise be a contract of
marine insurance, it is nut an enforceable policy in England under
the provisions of the act al)ove noted. ^°
§ 31a. Parol contracts: life insurance: industrial life insur-
ance. — The rule as to parol contracts stated under the preceding
section applies to life insurance.^ And even though a policy is
never issued, a contract for life insurance will come into existence
immediately where a proposition is accepted and the premium
paid.^ But a contract for present insiu-ance is not made by an ap-
])licant who gives his note for the lirst premium in consideration
that a policy shall be issued, where his examination is to be made in
the future, and he expressly stipulates that the note shall not be
negotiated until the policy has been delivered and accepted.^
Again, in a Wisconsin case where an action was brought on an al-
raercliant shipping am'd. act 18G2, 25 suranee: English decisions, see note
& 26 Vict. c. G;J, .sec. 35. As to Eng- 22 L.R.A. 772.
lish Statutes, see § IV. herein. See As to ship)}ie}i's clubs or associa-
also as to stamp acts: 1 Arnoiild on tions, see 30 & 31 Vict. c. 26, sec. J);
Marine Ins. (9th ed. Hart & Simey) 25 & 26 Vict. c. 89, sees. 3, 6, 180,
sees. 28 et seq. pp. 41 et seq. (wliere 193, 194, 196, 206. For English Stat-
it is said: "Tlie rigour of the law has utes, see § IV. iierein.
been considerably modified," etc. and ^ Knights of Maccabees of the
cases are noted in whicli assured re- World v. Gordon, 83 Ark. 17, 102
covered without a i)olicy); 17 Earl S. W. 711. 36 In.s. L. J. 628; Mcln-
of Halsburv's Laws of England, pp. tvre v. Federal Life Ins. Co. 142 I\Io.
338 & notes, 505 et seq. 515, 517 and App. 236, 126 S. W. 227: Pacific Mu-
§ 33 herein. lual Ins. Co. v. Shaffer, 30 Tex. Civ.
"But see Teignmouth General App. 313, 70 S. W. 566.
Mutual Ship. Assoc, In re (Martin's ^ Caiter v. Bankers Life Ins. Co.
Claim) L. R. 14 Eq. 148. 83 Neb. 810, 120 N. W. 455 (a ten-
^^ Davies v. National Fire & Ma- ])aymcnt policy). See also Knights
riije Ins. Co. of New Zealand App. of Maccabees of the World v. Gordon,
Cas. L. R. (H. L. P. C. Eng. 1891) 83 Ark. 17, 102 S. W. 711, 36 Ins. L.
485. J. 628.
2° Fisher v. Liverpool Marine Ins. ' Summers v. Mutual Life Ins. Co.
Co. L. R. 8 Q. B. 469; L. R. 9 Q. B. 12 Wvo. 369, 66 L.R.A. 812, 109 Am.
418. Validity of oral contract of in- St,. Rep. 952, 75 Pac. 937.
155
§ 31b JOYCE OX IXSURAXCE
Icgcd oral contract of prudonlial life insurance, the validity of such
a contract was evidently conceded, at least there appears no dis-
cussion as to that point, the only question being whether there
was such an oral contract upon the evidence and it was determined
that there was not.*
§ 31b. Parol contracts: accident insurance. — "Within the rule
above stated.'*^ an oral a.ureement for present or immediate in-
surance covering an accident risk is valid and binding.* And
the general rule applies that when a contraet of insurance has
been agreed on, the execution of a policy is not essential to its
validity, unless it is part of the contract that execution and de-
livery are prerequisites to its taking effect.^ So in an action of
assumpsit upon an accident insurance policy, it is held that a con-
tract of insurance is to be treated by the principles applicable to the
making of contracts in general.''' In a. Georgia case it was claimed
that an oral contract was made with defendant's agent for im-
mediate insurance, and that the written policy had been fraudu-
lently dated so as to post date the accident. It was held that it was
unnecessary to decide whether or not a valid contract of accident
insurance could be made in that state, as it was apparent from
the evidence that no parol contract was consummated; that the
plaintiff had expressly agreed, in writing, that the basis of the con-
tract between him and the company should be the application and
the premium paid by him ; that no statements made by him to the
agents should bind the company unless WTitten upon the applica-
tion : that the application itself should not be binding upon the
company until accepted by its secretary, and that the policy itself
should not be in force until actually issued from the company's
ofiice. It further appeared that the insured had knowledge of the
limitations upon the agent's authority and that he was not em-
powered to write any binding contract and that no statements made
by him to the applicant were to bind the company. It w^as also
held that a mere verbal assurance by the agent of the insurer to
the applicant that he was insured from the date of the application
and the giving by the former to the latter of a receipt purporting
* Chamljt'ilain v. Prudential Ins. United States Casualtv Co. 106 Me.
Co. of America, 109 Wis. 4, 83 Am. 411, 76 Atl. 002.
St. Rep. 851, 85 N. W. 128, 30 Ins. ^ pj-^^fe^.^.e^i Accident Ins. Co. v.
L. J. 427. Stone, 61 Kan. 48, 53, 58 Pac. 586.
*** See § 31 herein. "^ Washburn v. United States Casu-
5 Mathers v. Union Mutual Acei- altv Co. 106 Me. 411, 76 Atl. 902, 108
dent Assoc. 78 Wis. 588, 11 L.R.A. Me. 429, 81 Atl. 575.
83, 47 N. W. 1130. See Wasliburn v.
156
PAROL CONTKACTS §.^ 31e, 31d
to be for the first f|u;irterly premium did not constitute a contract
of insurance on wliicli an action could be maintained.*
§ 31c. Parol contracts: -'v/orkman's collective policy;" custom. —
Tlie rule tliat a contract of in.-urance may be by parol, and need
not be in writin,<i.^ has Ijeen ai)i)lied where a "workman's collective
policy," for which ai)plication was made, was one by which the
insurer agreed to j^ay one year's full wages to the party injured in
case of death, and one half wages in fifty-two weeks for certain in-
juries. This policy was to be issued to an employer for the bene-
fit of its operatives, and the insurer agreed through its agent, in con-
sideration of the employer's application and promise to pay the
premium, that the insurance should be in force until the applica-
tion was rejected and notice thereof given, that is, the policy was
not to be issued unless the application was approved, and until it
was disapproved and the employer received notice to that cft'ect the
insurance was to l^e in force. It did not appear that the application
was signed. The agent was authorized to and did make such con-
tracts, although it was his custom to give a writing to that effect.
An employee lost his life between the time the application wa.<
made and notification of its rejection. It was also held that inas-
much as there existed no right to have a policy issued the remedy
was not in equity, but by an action at law to recover on the parol
contract.^"
§ 3 Id, Parol contract: where policy partly written at time of
loss: contract binding. — In a late case the owner of property con-
tracted with an agent re]»resenting several insurance com])anies to
insure jjroperty for a certain amount, but did not designate the
particular company in which the insurance should be taken, and at
the same time he p'aid the premium and arranged with the agent
to hold the policy, and thereafter to keep the property insured. A
|)olicy was issued in a comiiany, which policy shortly afterwards
was canceled, and the agent then placed the insurance in another
8 Fowler V. Preferred Accident Ins. 897, 28 Ins. L. J. 88G, as to writing
Co. 100 Ga. 330, 28 S. E. 398, 27 Ins. being nece.ssary to alter insurance
L. J. 1G8. See also Fireman's Fund contiact.
Ins. Co. V. Rogers, 108 Ga. 191, '.]'■> As to cif/eiit's jtoirer to make oral
S. E. 954. 28 Ins. L. J. 102.'). Eaini- contract, see § Si'i liei'cin.
iue S 31: herein. ^ See § 31 lierein.
Contract of fire insurance to he ^° Fidelity & Casualty Co. v. Bal-
hinding must be in writinrj under lard & Ballard Co. IC) Ky. 253, 20
Georgia Statute. Delnware 'ins. Co. Ky. L. Rep. 11G9, 48 S. W. 1074, 28
V. Pennsylvania Fire Ins. Co. 126 Ga. Ins. L. J. 227.
380, 7 Amer. & Eng. Annot. Cas. Agent's agreement : Liahilitij not to
1134, 55 S. E. 330: Ga. Civ. Code attach till approval, see § 59 liere-
secs. 2022, 2089. See Lippman v. in.
iEtna Ins. Co. 108 Ga. 391, 33 S. E.
157
^ 32 JOYCE ON INSURANCE
company represented by him, and that poUcy, too, was canceled.
He then placed the insurance in the defendant company, and be-
gan to write out a policy, but an interruption prevented its comple-
tion at the time, and before it was finished the property was de-
stroyed by fire. It was held that the steps taken by the authorized
agent of the company constituted a binding contract of insurance,
and also that the agent's agreement with the property owner to hold
the policy and keep his property insured was not repugnant to the
duty of the agent to defendant, nor did it affect the validity of the
contract of insurance. ^^
§ 32. Parol contracts: the common-law rule. — Formerly, con-
tracts of insurance were not required to be in writing, and this was
the common law in England.^^ The earliest English statute, 43
Elizabeth, chapter 12, enacted in 1601, mentions policies of insur-
ance, as does also the statute 6 George 1., chapter 18, which was the
act securing to the two great comi)auies of assurance in 1719 the
monopoly of making these contracts, subject to certain exceptions.
In this latter act the preamble declares that this contract ''or course
of dealing is commonly called a policy of assurance." But there
is nothing in the.se statutory regulations which can be construed as
making the acts requiring a written policy in England declarators'
of the common law, and in fact the earlier statutes in that country
sought only to remedy or restrain certain abuses in insurance
rather ,than to declare old principles. It was no doubt a well-es-
tablished usage to have policies of assurance in England from the
day Of the Lombards, and Maylnes ^^ a.sserts that it was customary
to regi.ster verbatim policies of assurance in the office of assurances
in order to preserve evidence of the contract in case the policy
should become lost. But the.se and other like facts go no farther
than to establish a usage to have policies as an evidence of the con-
tract. An examination of Lord Mansfield's decisions and of the
cases subsequent thereto fails to di.'^cover that a policy or writing
was necessary to the validity of a contract of insurance at the com-
mon law, and it is admitted that formerly the contract was not
required to be in writing.^* Emerigon declares that "^"aHn and
Pothier agree in saying that in insurance the writing is onlv re-
quired for ])roof of the contract; that tlie wi'iting is extrinsic to
^^ Wilson V. Cioriiian-Amfricaii Ins. tees of First F>aptist Clmix-h v.
Co. 90 Kan. 355, 133 Pac. 713 ; War- Brooklyn Fire Ins. Co. 19 N. Y. 303 ;
ren v. Franklin Fire Ins. Co. (Iowa, 1 Smith's Mercantile Law (M. & H.
1913) 143 N. W. 334. ' ISDO), 494.
^2 Northwestern Iron Co. v. 2&na ^^ Lex Mercatoria, 115.
Ins. Co. 23 Wis. 160; Sanborn v. i* See 1 Wood on Fire Ins. (2(1
Firenians Ins. Co. Ki Grav (82 ed.) sec. 1; 1 Phillips on Ins. (3d
Mass.) 448, 77 Am. Dec 419;' Trns- ed.) sees. 8, 9.
15S
PAKOL CONTRACTS
32
the substance of the agreeinenl*. They are rcducod to writing for
the purpose of more easily preserving their proof. . . . 15ut
this conmion-law rule ceases its operation in all cases where writing
is expressly required by law. . . . The ( niidon ^* informs us
that formerly insurances were made without writing; they were
termed 'in confidence,' because the person stipulating for insur-
ance did not make his bargain in writing, but trusted to the good
faith and honesty of his insurer. But this practice, because of the
abuses and disputes it engendered, was subsequently prohiV>ited in
all commercial places." ^^ And the court in Sandford v. Trust
Fire Insurance Comjjany ^^ declared in 1845 that it had not been
able to find anything in the common law of England rendering
il neces,<ary that contracts of insurance should be in writing."
So it was held in a case in the United States Supreme Court ^^ that
" Chapter 1, art. 2, p. 223.
^6 Emerigoii on Jus. (Mereditli's etl.
1805) c. ii. sec 1, pp. 25, 26. See 1
Wood on Fire Ins. (2d ed.) p. 2, sec.
1.
"11 Paige (N. Y.) 547.
13 See also Sanborn v. Fireman's
Ins. Co. 16 Gray (82 Mas.s.) 448, 77
Am. Dec. 419.
19 Commercial Mutual jNIarine Ins.
Co. V. Union Mutual Ins. Co. 19 How.
(60 U. S.) 318, 321, 322, 15 L. ed.
636.
Cited in United Stales. — McElroy
V. British America Assur. Co. 36 C.
land, 9 Kan. App. 649, 58 Pac. 1024;
Western ]\Ias.sachnsetts Ins. Co. v.
Dufl'ey, 2 Kan. 355.
Kentucki/. — I'idelitv & Casualty
Co. V. Ballard, lO.l Jvy. 256, 48 S. W.
1074; Security F. Jns. Co. v. Ken-
tucky Marine & Fire Ins. Co. 7 Bush,
86, 3 Am. Rep. 301.
Louisiana. — Trager
Equitable L. Ins. Co.
239.
Man/land. — Phoenix
V.
31
Louisiana
La. Ann.
Ins. Co. V,
Rvland, 69 Md. 447, 1 L.R.A. 550, 16
Atl. 109.
Massachusetts. — Brown v. Fi-ank-
C A. 622, 94 Fed. 997; London & lin Mut. F. Ins. Co. 165 Mass. 568,
- ^ ^ '- 52 Am. St. Rep. 535, 43 N. E. 512;
Emery v. Boston M. Ins. Co. 138
Mass. 412: Sanborn y. FinMuan's Ins.
Co. 16 Gray (82 Mass.) 453.
Missouri. — Griswold y. American
Cent. Ins. Co. 1 Mo. App. 102.
New JIampsliire. — Moi-rison v.
North America Ins. Co. 64 N. H.
140, 7 Atl. 378.
New York. — Van Loan v. Farmers'
Mut. F. Ins. Asso. 90 N. Y. 285;
Trust ee.s of First Baptist Church v.
15rooklyn F. Ins. Co. 19 N. Y. 308;
Rhodes y. Railway Pass. Ins. Co. 5
Lans. 74; Ann Loan y. Farmers'
Mut. F.
Hotclikiss
Lancashire Fire Ins. Co, y. Storrs, 17
C. C. A. 650, 36 U. S.' App. 327, 71
Fed. 125; Fireman's Fund Ins. Co. y.
Norwood, 16 C. C. A. 140, 32 U. S.
App. 490, 69 Fed. 75 ; Scrantou Steel
Co. V. Ward's Detroit & L. S. Line,
40 Fed. 870; Humphrcv y. Hartford
F. Ins. Co. 15 Blatchf." 37 Fed. Cas.
No. 6,874; Gary v. Nagel, 2 Biss. 246,
Fed. Cas. ^fo. 2,403.
Illinois. — Continental Ins. Co. y.
Roller, 101 111. App. 80; Fiienien's
Ins. Co. y. Knossner, 164 ill. 280, 45
N. E. 540 ; Hartford Fire Ins. Co. v.
Wileox, 57 111. 182.
Indiana.— Feoria Maiine & Fire
Ins. Co. V. Walser, 22 Ind. 83.
loica. — Viele v. Gernuuiia Ins. Co.
26 Iowa, 9, 96 Am. Dec. 83.
Kansas. — Phoenix Ins. Co. y. Ire-
Ins. Asso. 24 Hun, 134;
y. Germania F. Ins. Co.
5 Hun, 98; Post y. .Etna Ins. Co. 43
Barb. 362; see Hicks y. British Amer-
159
§ 33 JOYCE OX IX6UKAXCE
under the common law a promise for a valuable consideration to
make a policy of insurance is no more required to be in writing
than a promise to execute and deliver a bond or a bill of exchange
or a negotial)le note.^^ In the case of Cockerill v. Cincinnati ^lu-
tual Insurance Company ^ the court, relying upon usage and upon
the fact that the charter of the company required a writing, holds
that such a thing as a verbal policy was unknown to the law of
insurance, and that a policy must be in writing "as supported and
declared by universal adjudication." But the policy is the writ-
ing. ThLs case was substantially overruled by a later Ohio case;
that is. in so far as relates to the contract being in writing.^ The
opinions of Mr. Duer and Mr. Millar ^ are to the same purport as
the Ohio ease. The court of appeals in Xew York * has held that
a contract of insurance is not required to be in writing by the gen-
eral principles of law. Under a Wisconsin decision neither the
conunon law nor any statutory provision in force, in that state re-
quires that an agreement to insure against loss by fire should be re-
duced to writing.* Referring again to the .statutory regulations in
England. Mr. May ^ doubts whether the stamp laws require a writ-
ingand whether a parol agreement to insure would be void. The
statements in this section as to the common-law rule relate also to
cases of contracts by other than corporations. The rule as to them
will be considered hereafter.''^
§ 33. Parol contracts: statutory regulations: English stamp
acts. — Where a statute requires the stipulaiions to be m writing, it
is held in Georgia that it is indispensable that they should be." So
ica Assur. Co. 13 App. Div. 445. 43 Ins. Co. 56 Me. 371 ; Baile v. St. Jo-
X Y Supp. 623, rev'd 162 X. Y". 2S4. sepli Fire & Maiine Ins. Co. 73 Mo.
48 L.R.A. 424. 50 X. E. 743. 383.
Xorth DaAo/a.— McCabe Bros. v. ^ 16 Ohio, 148. See. also, Bell v.
^tna In«: Co. H N. D. 2-5, 47 L.K.A. Western Fire Ins. Co. 5 Rob. (La.)
645, 81 K TV. 426. 423. 39 Am. Dee. 542.
0/,jo.—Elstner V. Cincinnati Eqiii- 2 Dayton Insurance Co. v. Kelly,
table Ins. Co. 1 Disney (Ohio) 411, 24 Ohio St. 345, 15 Am. Rep. 612.
420. See § 31 herein.
Tennessee. — American Cent. Ins. ^1 Duer on Ins. (ed. 1845) 60;
Co. v. McCrea, 8 Lea, 524, 41 Am. Millar on Ins. 30.
Rep. 647. * Tru.-tees of First Baptist Church
j^rfl.s.— Splawn v. Chew. 60 Tex. v. Brooklyn Fire Ins. Co. 19 N. Y',
522, 537. 305.
irj.scoH.N^JH.— Campbell v. American ^ Mobile :Marine Dock & Mut. Ins.
F. Ins. Co. 73 WLs. 108, 40 X. TV. Co. v. McMillan & Son, 23 Wis. 160,
661. 99 Am. Dee. 145.
TT'vow/«.7.— Summers v. Tlutual L. ^1 May on Ins. (3d ed.) sec. 25.
Ins. Co. 12 Wvo. 390. 66 L.R.A. 818. ' See §§ 36. 37 herein.
107 Am. St. Rep. 952, 75 Pac. 937. " ciark v. Brand, 62 Ga. 23 (un-
20 See also Walker v. :Nretropolitan dcr Ga. Code. sec. 2794. See Ga. Civ.
160
PAROL CONTRACTS § 33
it ]i;i.-; been decided in that state,^ where the Code requires a writ-
in.u;. thai an insurance company was not estopped from insisting
that the contract was not in writing in a case where the insured,
while removing liis insured stock of goods to another house, re-
. quested the insui'ance agent to transfer his policy if necessary, and
the ag3nt consented to the removal and promised to make the neces-
sary entry on the books, and that equity would not relieve the
parly acting on a parol contract unless his act was in pursuance of
the contract, on the faith of it, and induced by it.^° But a Massa-
chusetts statute which required the conditions of insnrance against
loss by fire to be stated in the body of the policy was lield to apply
only to written contracts of insnrance, and not to parol iusurance.^^
Jt is said by the court in a Kansas case that subsequent to the
passage of the revenue laws requiring a stamp it might be neces-
sary that a contract of insurance should be in writing.^^ And in
Fish V. Cottenet ^^ it is held that a stamp does not affect the validity
of a parol contract for insurance. In that case the court says:
"Contracts of this character when put in writing certainly require
a stamp. If the defendant had performed its agreement and is-
sued a policy the government would have received the aid to its
revenue which is so much required. It is not the making of the
agreement that defrauds the revenue, but its breach by the defend-
ant. Agreements, when in writing, must be stamped. A stamp
upon an oral agreement is an impossibility." iVnd iMr. May ^* as-
serts that the stamp laws do not go to the validity of the contract.
He also says that the doctrine of the Kansas case above referred to
'"seems not to l)e well founded," and "that the state courts do not
recognize the constitutional right of the general government lo
determine the rules of evidence b}' which the former shall be gov-
erned, and liold pretty uniformly" that the laws of Congress in re-
gard to using or admitting in evidence only stamped instruments
applies (mly to United States court,s,^^ and that author doubts the
Code sees. 2022, 2089 ; Delaware Ins. ^^ West j\rassaeliusetts Ins. Co. v.
Co. V, Pennsylvania Fire Ins. Co. 12() DufTey, 2 Kan. :>4/.
Ga. 380, 7 Aniei'. & I'^n^-. Annot. Cas. ^^ 44 N. Y. :)38, r)43.
1134, 5.5 S. E. 230. See also § 31b "1 May on Ins. (3d ed.) sec. 25.
herein, and note 8. ^^ Citing llic lollowing' cases:
9 Simonton v. Liverpool & London ^''"''''/,'^'':"'::;~ ^''yi!!'''!;^^ ''\^""'"
& Globe Ins. Co. 51 Ga. 76. 1"?""'^'^\^^'A' .1 ^^ ''*"• ^'^ ^- ^"^ ^-^'
^° See Southern Life Lis. Co. v.
19 L. ed. 223.
T- , -,. --, .v.M o i-'v 01 Coitnerlirut. — Gi'ifTin v. Raiinev, 35
Kemplon, ,)() Ga. 339. See J^s 31 p.,,,,, 039
et seq. liei-ein. ////»r~/«.— United States Express
"Relief Fire Ins. Co. v. Shaw, 94 c^. v. Haines. 48 III. 21S; Bunker v.
U. S. 574, 24 L. ed. 291; Mass. Stat. (;,een, 4S 111. 2^3; Craig v. Dimock,
1804, c. 196. 47 111. 308.
Joyce Ins. Vol. I. — 11. IGl
§ 33
JOYCE OX INSURANCE
power of Con.aTess to declai-e unstamped instrumcntp wholly void,
and cites cases from Illinois and Kentucky holding that it has not
such power.^^ And he adds : "But it is doubtful if this will become
the settled view of the law upon mature consideration.^' It is also
very genei-ally held that under United States Statutes 1864, chap-
ter 173, section 163, and 1865, chapter 78, only those unstamped
instruments can be said to be void where the stamp has been omit-
ted with intent to defraud the revenue, and such is the law under
the statute of 1866, chapter 184, section 9." ^^ In South Dakota
the want of a revenue stamp on a policy cannot be questioned in a
state court.^^ So in Iowa the validity of a deed is not, in the alj-
3Iaine.— Dudley v. Wells, 45 Me. Kentucky.— B.imter v. Cobb, 1
145. Bush (Ky.) 239.
Massachusetts. — Green v. Holway, Louisiana. — Blake v. Hall, 19 T.n.
301 Mass. 243, 3 Am. Rep. 339; Car- Ann. 49; McLean v. Skelton, 18 La.
penter v. Snelling, 97 Mass. 452. Ann. 514.
Pennsylvania. — ]\IcGovern v. Hoes- 3Iassachusetts. — Carpenter v. Snel-
back, 53 Pa. St. 176, 177. ling, 97 Mass. 452.
Vermont. — Hitchcock v. Sawyer,
39 Vt. 412.
Contra; see Chartiers & Rob
Nevada. — JMaynard v. Johnson, 2
Nev. 16.
Wisconsin. — Sayles v. Davis, 22
Turnp. Co. v. McNamara, 72 Pa. St. Wis. 225.
228, 13 Am. Rep. 673. See cases, in If one fails to affix the stamp, the
7 Alb. L. J. 49; Edeck v. Rainer, 2 presumption arises that such act is
Johns. (N. Y.) 423; Plessinger v. wilful. Howe v. Carpenter, 53 Barb.
Depuy, 25 Ind. 419. ''Where un- (N. Y.) 382. Contra, New Haven &
stamped instruments were excluded Northampton Co. v. Quintard, 6 Abb.
the question of constitutional compe- Pr. N. S. (N.Y.) 128; Weltner v.
tency was not raised." Riffgs, 3 W. Va. 445; act June 30,
The failure to affix a revenue 1864, which only declared those iii-
stamp to the transcript of a foreign struments invalid where there was an
judgment of a justice of the peace intent to evade the provisions of the
does not preclude its admissibility in act; Hallock v. Jaudin, 34 Cal. 167,
evidence. Tomlin v. Woods, 125 declares internal revenue stamps no
Iowa, 367, 101 N. W. 135. _ part of a note.
16 Citing Latham v. Smith, 45 111. Instrument not stamped when
29; Hunter v. Cobb, 1 Bush (Ky.) j^^de may be stamped subseciuently,
239. ^ so as to be admissible in evidence, as
" Citing License Tax cases, 5 Wall, ^^.j^^^^ .^tamped in presence of the
(72 U. S.) 462, 18 L. ed. 497; Pe- ^.^^^^ Patersen v. Eames, 54 Me.
year v. Commonwealth, o ^^ all. (/2 203; Cooke v. Ensland, 27 Md. 14;
U. S.) 475, 18 L. ed. 608
18 Citing numerous cases. Exam-
ine the following cases :
Alabama. — Blunt v. Bates, 40 Ala.
470.
Georgia. — Green v. Lowrv, 38 Ga.
548.
Illinois.— :iacqa\n v. Warren. 40 N. W. 80O.
111. 459; Israel v. Redding, 40 111.
362.
162
Don-is V. Grace, 24 Ark. 326. See
further as to stamps, Hitchcock v.
Sawver, 39 Vt. 412; Corbin v. Tracy,
34 Conn. 325.
1^ Wheaton v. Liverpool & London
& Globe Ins. Co. 20 S. Dak. 62, 104
PAROL CONTRACTS § 33
pence of fraud affected Ijy the failure to affix a revenue stanip.^"
And a deed is valid and effectual in Illinois even though a revenue
stamp is not affixed and canceled as required by the Federal stat-
ute.^ And where an objection is made to admitting in evidence
an unstamped instrument, the burden is upon the person object-
ing, to show that the stamp was omitted with intent to evade the
act of Congress.^ Justice Cooley says: "It has been repeatedly de-
cided that the act of Congress which provided that certain papers
not stamped should not be received in evidence must be limited in
its operation to the Federal courts.' Several of these cases have .
gone still further, and declared that Congress cannot preclude par-
ties from entering into contracts permitted by the state laws, and
that to declare them void was not the proper penalty for the en-
forcement of tax laws." * And in a case which arose in Massa-
chusetts the court said: ''We entertain grave doubts whether it is
within the constitutional authority of Congress to enact rules regu-
lating the competency of evidence on the trial of cases in the courtvS
of the several states which shall be obligatory upon them. We are
not aware that the existence of such a power has been judicially
sanctioned. There are numerous weighty reasons against its ex-
istence." * In Missouri it is decided that the Federal stamp act
requiring all insurance contracts to have an internal revenue stamp
thereon does not make invalid parol contracts of insurance.^ But
where the "'war revenue act" '' required a stamp upon instruments,
documents, or papers of any kind or description whatsoever, and
also provided that it should not be received in evidence without
such stamp in any court, and it is the duty of the party issuing
and of the party receiving the instrument to cancel the affixed
stamp, it is held that if a policy of insurance is delivered for ex-
amination and in case of acceptance revenue stamps are required
20 Dorr Cattle Co. v. Des Moines Ins. Co. 20 S. Dak. 62, 104 N. W.
National Bank, 127 Iowa, 153, 4 Am. 850; Southoin Ins. Co. v. Estes, 106
& Eng. Annot. Cas. 519, 98 N. AV. Tenn. 472, 52 L.R.A. 915, 62 S. W.
918, 103 N. W. 836. 149, and note, 84 Am. St. Rep. 185-
1 Thompson v. Calhoun, 216 111. 189.
]61, 74 N. E. 775. ^ Cooley's Con.stitutional Limita-
2 Ohio River Junction Rd. Co. v. lions (6th. ed.) 592, n. 2, citing sev-
Pennsvlvania Co. 222 Pa. 573. 72 oral eases.
Atl. 271; act of Conj^ress June 13, screen v. Hohvay, 101 Mass. 243,
1898, c. 448, 30 Stat. 448 (IT. S. 3 Am. Rep. 339.
Comp. Stat. 1901, p. 2286). ^ King v. Plioenix Ins. Co. 195 Mo.
3 Citing numerous cases. See al- 290, 113 Am. St. Rep. 678, 92 S. W.
so Knox V. Rossi, 25 Nev. 96, 48 892, 6 Am. & Eng. Annot. Cas. 618.
L.R.A. 305 and note, 57 Pac. 179; "'Section 7 of internal revenue act
Ratliff V. Ratlifie, 131 N. Car. 425, June 13, 1898, c. 448, 30 Stat. 452
(i3 L.R.A. 963, 42 S. E. 887; Wheat- (U. S. Comp. Stat. 1901, p. 2292).
on V. Liverpool & London & Globe
163
§ 33 JOYCE OX INSURANCE
to be attaolied and canceled by the ai^ent or if returned, stamps
enclosed for the purpose of being attached must accompany the
policy, such requirements luust be complied with, and after death
of the insured the internal revenue collector has no authority to
athx the required stamps to the policy, cancel them and thereby
give it life.*
In England, however, the statute, 35 George III., chapter 63,
which repealed all former stamp duties on marine insurances, and
wliich did not extend to tire or life insurances, provided that every
contract for marine insurance should be "printed or written," and
that an insurance contract or agreement therefore should be void
unless stam|)ed. and prescril)ed a penalty for noncom])liance.^ As
we have stated under a prior section ^ the English act of 18(j7, 30
Victoria, chapter 23, page 9, requires that every policy of sea insur-
ance be duly stamped to be admissible in evidence, and also pro-
vides that policies made* abroad may be stamped. Other sections
of this act make provisions in relation to the stamping of policies,
covering time and voyage policies, mixed policies, and insurances
by carriers, and making certain exceptions in case of nuitual in-
surances, and providing penalties for noncompliance.^ Again : "a
contract for sea insurance other than such insurance as is referred
to in the merchant shipping act ^ is not valid unless the same is ex-
pressed in a policy, which cannot be given in evidence unless it is
stamped, and this must, except in certain specified cases, be done
before it is executed; but a policy, although not duly stamped
may for the purposes of production in evidence, be stamped after
execution on payment of a penalty of ,£100." * Under a decision
8 Amos-Ricliia v. Norlliwestern see Id. p. 515. As to statutory pro-
Mutual Life Ins. Co. 14;! JMicli. G84, visions as to slampiiig of mutual in-
107 N. W. 707, s. c. (U. S. C. C.) sunmce policies, etc., see Id. p. 505 et
152 Fed. 982, 36 Ins. L. J. 549. seq. Stamp acts fire insurance, see
^ See Kensington v. Inglis, 8 East, Id. p. 517. When contract deemed
273; Morgan v. ISIatlier, 2 Ves. Jr. concluded see marine ins. act, 1906;
15, 18; Rogers v. McCartliv, 3 Esp. 6 Edw. VII. c. 41, sec. 21; Butter-
106; 3 Phillips on Evidence (5th ed.) worth's 20th Cent. Stat. (1900-1909)
232. "Insurance," p. 404.
^ See § 31 herein. Settlement of life ]iolicies: when
2 See also 33 & 34 Viet. c. 97, sec. indenture chargeable with stamp du-
117; 44 & 45 Viet. c. 12, see. 44; 47 ties under stamp act 1891, sec. 104,
& 48 Vict. c. 62, sec. 8. See also list of sub-sec. 2 (A) of sec. 104. See Duke
acts in force in England. See § IV. of Nortliumberland v. Commissioners
herein, 39 & 40 Vict. c. G, sec. 2, pro- of Inland Revenue, [1911] 2 K. B.
vides for stamping after execution. (Law Rep.) 343.
^ 1894, sec. 506. Practice as to admission in evi-
* 17 Earl of Halsburv's Laws of dence of unstamped documents traced
England, p. 338 and notes. As to ;ind e.\|ilained. Coolgai'die Gold
stamps on other than marine policies, Fields, In re; Fleming, Ex 2)arte, 69
164
PAROL CONTRACTS § 33a
rendered in 1801 the words "ship or vessel," in the customs and in-
land icvenue act of 1870 (which imposes a stauij) duty ujjon poli-
cies of sea insurance made on any ship or vessel), will be construed
"shi])s or vessels." Under the interpretation of statutes act of
1880, providino- that in statutes enacted after 1850 words in the
singular shall include the ]>lural. so Ihat where one lumdred and
nineteen vessels were insured under a time i)olicy, it was licld that
the stamp duty must be calculated upon the agftregate amount in-
sured, even though a specific sum was appropriated to each vessel.^
And it was decided in 1911 that no ol)ligation to pay a loss relative
to sea insurance existed, although the verbal agreement constituted
such a contract, where it was not ex|)ressed in a duly stamped poli-
cy of sea insurance and was tlierefore invalid.^ But a ''contract
note" which does not contain the essentials of a marine policy, or
policy of sea insurance, as required by statute, is not a contract of
sea insurance, even if stamped.'
§ 33a. Parol contracts: standard policy. — Altliough in many of
the states a standard form of lire policy is provided for l>y statute,
and some of the states have statutory provisions concerning the
form or substance of life- and accident policies, still it is held . in
Massachusetts that it is settled that a statute requiring such standard
form does not preclude a temporary oral contract for insurance.*
L. J. Ch. 215, [IflOO] 1 Cli. 475, 82 patent." 17 Earl of Ilalbury's Loans
L. T. '23, 48 W. K. 461, Cozens-Har- ol' England, pp. ;5;?9, ;{40 and notes.
dy J. See also as to admissibilit.y of Registration of ijisurance companies,
imstanii>ed in.slrnments, Mason v. see 5 Id. p. CI/. As to insnrance
iMotor Traftion Co. 74 L. .1. Ch. 273, clubs being- registered see § 178
[1905] 1 Cb. 419, 92 L. T. 234, 12 herein notes 19, 20; § V. lierein note
Manson, 31, 21 T. L. R. 238. K). p. 32.
lllerial Insurance Companies— Ne- ^ Great Britain Steamship Prem-
cessity of being registered— compa- inm Assn. v. White (Scot. Ch. Sess.
nies acts— England. Soon after 1891) 29 Scot. \j. R. 104.
1824 "a great number of insurance « Genfoisd<iiMgs Aktieselskabet
companies were formed, eitlicr bv (8kandniavia Ix'einsurance Co. of
charter from the Crown or by Special V'T'nnifi'N^ k £'\V""\^ Ti-.v'
Statutes or under the provisions of a ^^- 1 1" " 1 ^ •^V^viV'^'" '^'^'ol ^^l'
, 1 • 1 1 o i^ if under stamp act 1891, sees. 93, 9/.
partnership deetl. cut a part irom ., ^ n , i l o .-, ■
, , . ' . ^ h or a Tuller statement of this ca.se,
banking companies, no company, as- ^^^, ^ ^-j^^ herein
sociation, or partnership consisting ' 7 Mackay v. Scottish Boat Ins. Co.
of more than twenty ])ersons, lormed y |,| (<i,(,^)\ f' ^ 'M Div 1903) 40
on or after the '2d November, 18(i2. Scottish Law." Rep? 675; 'stamp act
for tlie acquisition of gain l)y the 5gf)i sees. 92 93.
company, association, or iiartiu'rsliip 8 Goodhue v. Hartford Fire Ins.
or its members, is legal, and tlierefore Co. 175 Ma.^s. 187, 55 N. E. 1029, 29
no marine insurance company is le- Ins. L. J. 207. under Stat. 1894, c,
gal unless registered undci- the com- 522, sec. 59; Pub. Stat. c. 119, sec.
panics acts 1862-1(108, or formed in ]38. Citing Sanford v. Orient Ins.
pursuance of some other act ov letters Co. 174 Mass. 416, 75 Am. St. Rep.
165
§ 33a
JOYCE ON INSURANCE
In another case in that state il is declared tliat a vahd contract
of insurance niii>,ht rest only in parol. In this case there was a
claimed aoreenient with an agent to issue certain policies in the
standard form, but upon the facts it was held that there was not a
(•(insummated or final agreement constituting such parol contract,
as certain essential elements of the contract of insurance were not
fixed in advance or subsequently agreed to, but that the relations
between the parties rested in negotiations.^ And in New York a
verbal contract of present insurance, since 18SG, constitutes a con-
tract of insurance which embraces, however, the provisions of the
standard fire policy.^" In Tennessee the terms of the standard
policy are construed in connection with a local agent's commission
in determining the extent of his authority to make oral contracts
of insurance or renewals thereof, and no recovery is permitted,
either on an executed contract of insurance or an executory con-
tract to renew when not made within the terms of the agent's
authority thus limited.^^ In North Carolina the enactment which
establishes a standard form for a policy, the statute being only
afiirmative in its terms, will not invalidate an oral contract.^^ Un-
der an Illinois decision the insurer was held liable upon a "binder."
even though no policy w^as issued ; and the contract was held sub-
ject to the terms of a standard policy to which it was attached as
a part thereof.^^ And under a CJeorgia decision the ])roperty de-
scribed in the memoraudum or binder was held insured during the
term specified therein upon the terms and conditions of the regular
standard policy of the company.^* It is important also to consider
liere as a governing principle the efi'ect of a decision in Maine,
where it is determined that a policy of fire insurance, in the standard
^58, 54 N. E. 883. See Bn.wn v.
Franlvlin Mutual Eire 3ns. Co. 105
Mass. 56,'), r)2 Am. St. Hop. 5:J4, 43
N. E. 512.
^ Cunnine:liain v. Councetieut Fire
Ins. Co. 200 Mass. 333. 86 N. E. 78 <.
38 In.'^. L. J. 315, the court, per Rug"-,
J., said: "nor can it l)e argued ttiat
lliere may not be a valid contract of
insurance resting only in i)arol."
This was a ease of action of contract,
upon appeal on agreed facts, with
no stipulation tliat trial or ap]>eliiil(>
coTirt might draw inferences of fact.
^^ Hicks V. British-America Assur.
Co. 162 N. Y. 284, 48 L.l^.A. 424, 5()
N. E. 743, 30 Tns. L. J. 14. But see
as to vMritie vessel liahilitii poJicii,
International Ferry Co. v. American
Fidelity Co. 207 N. Y. 350, 101 K
E. 160, noted under S 31 herein.
" Caldwell v. Virginia Fire & ^Vla-
rine Ins. Co. 124 fenn. 593, 139 S.
W. 698, 40 Ins. L. J. 1899. See §§
41a, 41c herein.
12 Floars v. .Etna Fife Tns. Co. 144
K Car. 232, 11 L.R.A.(N.S.) 867n,
56 S. E. 916, qnoied in Gazzam v.
German Union Fire Ins. Co. 155 N.
Car. 3:?0, 339, Ann. Cas. 1913E, 282,
286. 71 S. E. 434.
13 Jacobs v. Atlas Ins. Co. 1 tS 111.
A pp. 325. See also St. Paul Fire &
I\rarine Tns. Co. v. Balfour. 16S Fed.
212. 9:! C. C. A. 4ns.
1^ Queen ins. Co. v. llarUvel! Tee
& Laundrv Co. 7 Ga. App. <8/, 68 S.
E. 310, :!9 Ins. L. J. 1125.
166
PAROL CONTRACTS §§ 33b, 34
form is to be treated as a voluntary contract which, like any other,
dei'ives its force and etHcacy from the consent of the parties.^*
§ 33b. Statutory regulations: contract partly in writing and
partly by parol. — Where a statute positively requires that a con-
tract of fire insurance sliall be in writing, it precludes a contract
made partly in writing and resting partly in parol.^^
§ 34. Parol contracts: mutual benefit societies. — Some doubt has
been expressed whether or not the rule that a contract of insurance
need not be in writing except when required by statute applies to
mutual benefit societies. ^''^ The cases for the most part are those of
marine and fire insurances, with some authorities in accident and
life insurance on other than the mutual plan." But we see no
reason why the rule should not obtain in cases of an agreement for
insurance on the mutual plan as in other contracts, and it has been
held in New York that a mutual fire insurance company could
bind itself by parol to issue a valid policy of insurance. The court
said, referring to the plaintiff, that "it must be assumed that she
knew the character of defendant and the purpose for which it was
organized, and her application for insurance was an application to
become a member of the defendant upon the terms and conditions
prescribed in its charter, and its constitution and by-laws. She
must have expected a policy in the usual form issued by the de-
fendant, and nuist be deemed to have agreed to accept such a policy.
She must also be deemed to have agreed in advance to pay the
consideration in the mode prescribed by the defendant's charter,
constitution, and by-laws. The agreement for this insurance was
binding, therefore, not only on defendant, but also upon the plain-
tiff. Defendant could have issued and tendered its policy to the
plaintiff." ^^ So an oral promise by the president of an insurance
i^Dunton v. Westchester Fire Ins. Ins. Co. 33 Wl^. G49, 37 Wis. 62.5, 19
Co. 104 Me. 172, 20 L.R.A.(N.S.) Am. Rep. 777; 21/arme; Northwestern
1058, 71 Atl. 1037. Ins. Co. v. ^l^]tna Ins. Co. 23 Wis.
"Athens Mutuaf Ins. Co. v. Evans, 100, 99 Am. Dee. 145; Same to ship
132 Ga. 703, 64 S. E. 903, Civ. Code fJ^od.-^ «« (^cck iitslcad of hold: North-
Ga. sees. 2022, 2089. western Iron Ins. Co. v. .Etna Ins.
A * ^^ ,■ 1 7 fi Co. 26 Wis. 78.
As to alteration, bii parol, see 8 ^ . , , ■ /-.
070 V, «■ ^ ^ J. As to mulual rnmjxtnies: Com-
^(^ iierein. • i -vi . i ai ■ r /~i
,_ , -r. . o • - mcrcial AJutiuil .Maiiue ins. Co. v.
"Bacons Benefit Societies and Union Mutual Ins. Co. 19 How. (60
Bile Ins. (ed. 1888) sec. 172; Id. u. S.) 318, 15 L. ed. 636; Belleville
(ed. 1894) sec. l72. Mutual Ins. Co. v. Van Wnikle, 12
"L?/e; Sheldon v. Conn. IVlutu- N. J. Eq. 333; SchafTer v. Lehij^h
al Life Ins. Co. 25 Conn. 219, 65 I\tutual Fire Ins. Co. 89 I^a. St. 296.
Am. Dec. 565; Trustees of First Bap- ^^ Van Loan v. Farmers' Mutual
tist Church v. Brooklyn Ins. Co. 19 Fire Ins. Assn. 90 N. Y'. 280. Com-
N. Y. 305; Accident: Rhodes v. Rail- pet re § .3Sa herein as to standard
way Pass. Ins. Co. 5 Bans. (N. Y.) policy: rule in New York. See also
71; Fire: Strohn v. Hai-tford Fire § 3.')a JKMein.
167
§ 34
JOYCE ON INSURANCE
company to make a policy of insurance is a contract binding on the
company, and a court of equity ^Yill compel its specific perform-
ance
20
It is true that mutual benefit societies differ in some resjiects from
other mutual insurance corporations, and the powers of such organi-
zations are restricted either by statute or by charter,^ and lliese
restrictions relate not only to membership, but to the designation
of beneficiaries. The laws, however, of these societies have been
construed liberally in many cases,^ although some courts are in-
clined to limit such corporations strictly to their statutory or charter
powers;^ and where a certiiicate is not delivered to the insured
nor signed by him or certain otiicers as required under the by-laws
as conditions precedent to liability for loss, there is held to be no
operative contract of insurance.* So in case of a fraternal benefit
society even a certificate has been held of no force prior to initia-
tion, where initiation is under the l)y-laws, a condition precedent to
membership.^ But it is also decided that the absence of a con-
iiip
2*> Commercial Mutual Marine Ins.
Co. V. Union Mutual Ins. Co. 19
How. (60 U. S.) 318, 15 L. ed. 63G.
See also Union Mutual Ins. Co. v.
Commercial Mutual Ins. Co. 2 Curt. ^
(U. S. C. C.) 524; New England Fire Mass. 410, 75 Am. St. Rep. 350, 54
& Marine Ins. Co. v. Robinson, 25 N. E. 883; Brown v. Franklin ]\lutu
Ind. 536; Trustees of First Baptist al Fire Ins. Co. 165 Mass. 565, 5:
Massachusetts. — Daniels v. Pratt,
14.3 Wa-sh. 516, 10 N. K. 166; Elsey
V. Odd Fellows' Mutual Relief Assoc.
142 Mass. 224, 7 N. E. 844. Com-
pare San ford v. Orient Ins. Co. 174
Cluu-ch V. Brooklyn Ins. Co. 18 Barb.
(N. Y.) 69; Kelly v. Commonwealtb
Ins. Co. 10 Bo-sw. (N. Y.) 82.
■1 Elsev V. Odd Fellows' Mutual Re-
lief Assn. 142 Ma.ss. 224, 7 N. E. 844;
Kentucky Masonic ]\Iutual Life Ins.
Co. y. IVliller, 13 Bush (Ky.) 489.
2 Bloominoton ]\iutual Ben. A.ssn.
V. Blue, 120 111. 121, 11 N. E. 331,
60 Am. Rep. 558; Coyenant Mutual
Ben. Assn. y. Sears, 114 111. 108, 29
N. E. 430; Supreme Lodge Kniglit~s
of Pythias y. Schmidt, 98 Tud. .374,
381 ; Mancely y. Kniohts of Birming-
ham, 115 Pa. St. 305, 9 Atl. 41.
3 United *S'/rtff.s.^Worley y. North-
west Masonic Aid A.ssoc. 10 Fed. 227.
Illinois. — Fraternal Tribunes y.
Steele, 114 111. App. 194; Steele v
Am. St. Rep. 534, 43 N. E. .512;
Emorv v. Boston Marine Ins. Co. 138
:\lass." :!n8.
JlicJiinan. — Supreme Lodge
Knishts of Honor y. Nairn, 60 Mich.
44, 26 N. W. 826.
Oliio. — National Mutual Aid Assoc.
V. Gonser, 43 Ohio St. 1, 1 N. E. 11, 1
West Rep. 4; State y. Momv, 38 Oliio
St. 7.
* Sterling v. Head Camp Pacific
Jurisdiction Woodmen of the World,
28 Utah, 505, 80 Pae. 375, 1110. See
Pfeifer v. Supreme Lodge Bohemian
Beiieyolent Slayonian Soc. •■)7 Misc.
71, 74 N. Y. Supp. 720, atl'd (Mem.)
77 N. Y. Supp. 1125, 74 App. Div.
6.30, revd. 173 N. Y. 418, 66 N. E.
108 s. c. atif'd (mem.) 91 App. Div.
Fraternal Tribune, 215 111. 190, 74 013, 86 N. Y. Supp. 1144, s. c. aff'd
N. E. 121.
Kentucky.- — Van Bibber y. \an
Bibber, 82 Ky. 347; Kentucky Ma-
sonic Mutual Life Ins. Co. v. Miller,
13 Bush (Kv.) 489.
(mem.) 179 N. Y. 588, 72 N. E. 1149.
^ Lord V. Modern Woodmen of
America, 113 Mo. App. 19, 87 S. W.
530. See also Supreme Lodge
Kniiilits & Ladies of Ilonor y. John-
168
PAROL CONTRACTS
§ 34
tiollinc; ])r()vi,-^ion of its by-laws, or an agreement of the parties to
tlie coiiti'aiy a binding contract of insurance, may be consummated
with a mutual lire insurance company without the issuance of a
policy (if insurance.®
Public policy is the basis of the prohibition by law of acts w'hich
are miauthorized by the charter of a com])any,' and there are
numerous cases which uphold contracts, even when made in viola-
tion of a provision contained in the charter, and which involve an
unauthorized exercise of c^orporate powers. Especially is this true
where it appears that the provision so contravened was not intended
by the legislature to operate as an imperative prohibition of the
contract violating such charter provision; or where the charter pro-
vision was intended for the benctit of the corporation rather than
the protection of the public; or where the provision is merely direc-
tory ; * or where the contract is made in violation of the charter,
and third persons acting in good faith and without notice would be
injured thereby.^ And even the provisions of the statute under
which a mutual benefit society is incorporated may be waived so far
as to preclude the defense of ultra vires.^° Such cases also involve
questions as to the nature and extent of the powers of agents, and
also whether the party dealing wdth the agent' had notice of factsS
which if knoAvn to him would make the contract not only ultra
vires, but void. The point under consideration also comprehends
the question of estoppel, as where the party has relied upon the
apparent authority of an agent, or the company has received I he
son, 81 Ark. 512, 99 S. W. 834;
Shartle v. Modern Brotherhood of
Amerif-a, 139 Mo. App. 433, 122 S.
W. 1139. Compare Bruner v. Brotli-
erhood of American Yeoman,
Iowa, 612, 111 N. W. 977.
^Alliance Co-operative Ins. Co. v.
Corbett, G9 Kan. 5(U, 77 Pae. 108.
'Morawetz on l^rivatc Corp. (ed.
1882) sec. 100.
8 Uniied States. — National Bank v.
Matlhew.s, 98 U. S. 621, 627, 25 L.
ed. 188, 189; Gold Mining' Co. v. Na-
tional Bank, 96 U. S. 640, 24 L. ed.
648; Zabriskie v. Cinoinnati R. R.
Co. 23 How. (64 U. S.) 381, 16 L.
ed. 488.
Alabama. — Bates & 1 lines v. Bank
of Alabama, 2 Ala. l.ll, 4()2.
Connecticut. — Bnlklev v. Derby
Fish Co. 2 Conn. 252, 7 Am. Dec.
Massachusetts. — Dodd v. Glouces-
ter Ins. Co. 120 :\Iass. 408. See
Brown v. Franklin jMutual liis. Co.
165 Mass. 565, 52 Am. St. Rep. 534,
136 43 N. E. 512; Emery v. Boston Ma-
rine Ins. Co. 138 Mass. 398.
3>((5 York. — Palmer v. Cvi)ress
Hill Cemetery, 122 N. Y. 429, '25 N.
E. 983; Leslie v. Lorillard, 110 N. Y.
51!), 18 N. E. 36:!, 1 L.R.A. 456, row-
pare % 38a herein. See ^ 33a herein.
Enfihiii(L — Ayres v. South Austra-
lian i3anking- Co. L. R. 3 P. C. 548.
See notes 22 Am. St. Rep. 768;
article "Ultra Vires Conti-acts of Coi-
poration.';," 32 Am. Law. l\eg-. 4:!.
9 Morawetz on Private Corp. (ed.
1882) sec. 50; Id. rule VI. sec. 62 et
seq. See next section herein.
lOCoulson v. Flvnn, 86 N. Y.
Supp. 833, 90 App. Div. 613, afC'd
■1.
181 N.
169
Y. 62, 79 N. E. 507.
§ 34 JOYCE ON INSUKANCE
benefits ari.-ing from unauthorized acts. While there are certain
leading principles which aid in a solution of the question of what is
and is not a valid contract within the charter or articles of asso-
ciation, yet each case must rest in a large measure upon its par-
ticular facts. j\Iany of the decisions are arbitrary and seemingly
.rendered without regard to principle or authority."
Again, as a general rule, the doctrine of waiver is applicable
equally to mutual benefit societies as to other insurance companies
where the charter or constitution of a society does not render it in-
applicable,^^ for, in general, by-laws may be waived which are in-
tended as a protection to the company.^^ So waiver of a by-law
may arise from a course of dealing.^^ It is also held that the
doctrine of estoppel applies to mutual benefit associations in regard
to their insurance contracts, substantially the same as against or-
dinary insurance companies and other corporations.^* So the fact
^^ See notes .^1 Am. Dee. 341-45; Brotherhood of America, 113 Minn.
13 Am. Dee. 108, 109; Morawetz on 411, 131 N. W. 471; Schoenau v.
Corp. (ed. 1882) sees. 28-148, 165, Grand Lodge, A. 0. U. W. 85 Minn.
209; Angell & Ames on Corp. (9th 349, 88 N. W. 999.
ed.) sees. 256-65. See next section Missouri. — Francis v. Supreme
herein. . Lodge A. 0. U. W. 150 Mo. App. 347,
12 ]\Iillard V. Supreme Council 130 S. W. 500, 39 Ins. L. J. 1391.
American Legion of Honor, 81 Cal. Massachusetts. — Compare Mass.
340, 22 Pac. 864. In this ease the cases cited under § 36 herein,
society had continued to levy and re- Texas. — Supreme Lodge United
ceive assessments from the memher Benevolent Assoc, v. Lawson (1911)
after the date when it claimed the — Tex. Civ. App. — , 133 S. W. 907 ;
member ceased to be in good stand- Grand Fraternitv v. Mulkev (1910)
ing. 62 Tex. Civ. App. 147, 130 S. W.
See also the following cases : 242.
Vniteil States. — Modern Woodmen ^^ Union Mutual Fire Ins. Co. v.
of America v. Tevis, 111 Fed. 113, 49 Kevser, 32 N. H. 313, 64 Am. Dee.
C. C. A. 256, 117 Fed. 370. 375. Here, by the charter and by-
Arlansa.s. — ^losaic Templars of laws, the directors were required to
America v. Jones, 99 Ark. 204, 137 S. divide the risks into four dashes, and
W. 812. to determine the rates of insurance
Tlliiiois. — .Johnson v. Modern and the issuing of all policies; wifli
Woodmen of America, 160 111. App. full knowledge of all facts the direct -
37, 42 Nat. Corp. Rep. 122. ors insured property which should
Indiana. — Brotherhood of Painters, have been insured as belonging to an-
Decorator.-;, &: Pai)erhangers of Amer- other class. See also Cline v. Sover-
ica V. Barton, 46 Ind. App. 160, 92 eign Camp Woodmen of the World,
N. E. 64. Ill IMo. App. 601, 86 S. W. 501.
Kentuckii. — Modern Brotherhood ^^ Downs v. Kniahts of Columbus,
of America v. Phelps, 142 Kv. 544, 76 N. H. 165, 80 Atl. 227.
134 S. W. 892, 40 Ins. L. J. 710. i* Wuerfler v. Trustees Grand
Michigan. — Lord v. Natural Pro- Grove Wis. Order of Druids, 116 Wis.
tective Soe. 129 Mich. 335, 88 N. W. 19, 96 Am. St. Rep. 940, 92 N. W.
876, 32 Ins. L. J. 1038. 433. See also, as to same principle,
Minnesota. — Johnson v. Modern Kidder v. Supreme Assemblv of
170
PAROL CONTRACTS § 34
that tlie relief department of a railroad corporation, organized for
the benefit and protection of railroad employees, is a nuitual insur-
ance company, does not relieve it from the operation of the rules of
equitable estoppel. ^^
Where a mutual benefit society is.sues a policy which is in its
terms in conflict with the by-laws of tlie society, the presumption is
that the society has waived its by-laws in favor of assured. ^'^ So
it is held that a regulation or by-law of a fire insurance company
cannot make void a policy issued by the directors in contravention
thereof if the policy is Jiot voidable upon other grounds," and a
mutual company may bind itself by a contract of insurance with-
out issuing a written policy, although the by-laws require that all
applications for insurance shall be examined and approved by the
directors or a committee before a policy is issued and that the
secretary shall, after approval of the applications, issue and deliver
all policies and keep a list thereof.^^ So the omission to sign or
countersign a policy has been held not to render a policy invalid,
notwithstanding such requirement of the corporation.^" And a
by-law restricting membership in a certain class to persons under a
certain age may be waived.^ And where an agent has acted within
the apparent scope of his authority, the principal is estopped to
allege specific instructions not known to the party ,2 or to deny the
agent's power or its own power to contract where the contract has
American Stars of Equity, 154 111. 462;JJuion Ins. Co. v. Smart, (iO N.
A pp. 489; Modern Brotlierliood of H. 458.
Amei'iea v. Plielps, 142 Kv. 544, 134 ^ Morrison v. Wisconsin Odd Fel-
S. W. 892, 40 Ins. L. J. "710; Tim- lows Mutual L. Ins. Co. 59 Wis. 162,
berlake v. Supreme Commandery 18 N. W. 13. See also Supreme
I'liited Oivter of tlic Golden Cross of Lodge Kniglits of Honor v. Davis, 26
llie World, 208 Mass. 411, 94 N. K. Colo. 252, 58 Pn<-. 505; Wood v. Su-
685; Johnson v. Modern Brother- preme Ruling of Fraternal Mystic
lK)od of America, 113 ^linn. 411, 131 Circle, 212 111. 532, 72 N. E. 783,
N. W. 471. rev'g Supreme Ruling of Fraternal
^6 Burlington Voluntary Relief De- Mystic Circle v. Wood, 114 111. App.
l)arlment v. White, 41 Neb. 547, 43 431. See § 1992 lierein. Compare
Am. St. Rep. 701, 59 N. W. 717. Fraternal Tribunes v. Steele, 114 ill.
17 Davidson v. Old People's Mutu- App. ' 194, aft'd Steele v. Fraternal
al Ben. Soc. 39 Minn. 303, 39 N. W. Tribunes, 215 111. 190, 74 N. E. 121.
803, 1 L.R.A. 482. Pirrung v. Sui)reme Council of Cath-
18 Campbell V. Merchants' & Fann-- olie Mutual Ben. A.ssoc. 93 N. Y.
ers' Mutual Fire Ins. Co. 37 N. H. Supp. 575, 104 App. Div. 571; El-
35, 72 Am. Dec. 324; Merchants' & liott v. Knights of the iNlodern Mac-
Manufacturers Ins. Co. v. Curran, 45 cabees, 46 Wash. 320, 13 L.R.A.
Mo. 142, 100 Am. Dec. 361. (X.S.) 856, 89 Pac. 929.
i^Zell V. Herman Farmers' Mutu- 2 p^^ery v. Boston Marine Ins. Co.
al Ins. Co. 75 Wis. 521, 44 N. W. 828. 138 Mass. 398, 412. In this ease un-
20 Myers' V. Keystone INlutual Life der the by-laws the president Avas re-
Ins Co 27 Pa. St. 268, 67 Am. Dec. quired to sign all policies. In case,
171
§ 34
JOYCE ON INSURANCE
been executed by the otlier party.^ And an nnre.ctricted authority
to an agent of a lire insurance company to negotiate a contract
of insurance by issuing a poHcj- inckides authority to make a
vahd prehminary contract for such issue; and a parol agreement
to that effect ujDon his part and the receipt of the premium therefor
binds the company.* It may also be stated in this connection that
an applicant for insurance in a mutual compan}' is a stranger to
the by-laws, and is not chargeable with knowledge thereof vmtil he
becomes a member.*
In view, therefore, of these principles why cannot a corporation
of this character bind itself by a completed agreement of insurance
not in writing? Certainly in those cases where the society is one
which does not issue certificates,^ it could not be urged that the
contract must be in writing. And a^^sume the case where an agent,
within the apparent scope of his authority, makes an oral agree-
ment of insurance in a coiporation which does issue certilicates,
and such party is received into the corporation, and the right to
certain benefits matures before any certificate is issued, can the
corporation impeach its own want of power to make such contract
where not contrary to public policy? To hold that it could would
hcirdlv seem to be founded in the rea.son and justice of the law.'
Iiowever, of his absence, inability, or
death, i^ohcies were to be signed by
two directors. The secretary of the
company contracted orally with the
jdaintiti' to insure him. The company
claimed a want of authority, but it
was held that the evidence showed a
sufTicient binding autiiority: New
Kniiland Fire & Marine Ins. Co. v.
Schettler, 38 111. 166; Union Mutual
Ins. Co. V. Wilkinson, 13 Wall. (80 U.
S.) 222, 20 L. ed. 617. Here the court
said: "The powers of the agent are
])rima facie coextensive with tlie busi-
ness intrusted to his care, and will
not be narrowed by limitations not
communicated to the person with
whom he deals."
^ Bloomington Mutual Ben. As.soc.
V. Blue, 120 ill. 127, 11 N. E. 3.31, 58
Am. Kep. 8.')2, m Am. Rep. 358 ; Ful-
ler V. Boston Ins. Co. 4 ]\Iet. (45
Mass.) 206; Ijjimont v. Grand Lodge
Iowa, Legion of Honor, 31 Fed. 177.
* Ellis V. Albany Ins. Co. 50 N. Y.
402. The agent was authorized to re-
ceive proposals for insurance, and to
17
make and countersign policies and to
renew the same.
* See § 3!t3 herein. See Court
of Honor v. Hering (1914) 178
Mich. 377, 144 N. W. 843, noted un-
der § 53 herein.
^ Grand Lodge Order of Hermann-
Soehne v. Eisner, 26 ^lo. App. 108.
''' See Bloominston Mutual Ben.
Assoc. V. Blue, 120 111. 127, 11 N. E.
331, 58 Am. Rep. 852, 60 Am. Rep.
558; Chicago Building Soc. v. Crow-
ell, 65 111. 454. In this case Crow-
ell boi'rowed money of the society,
and the latter procured insurance up-
on the property, and shortly before
the expiration of the policy Crowell
told (lie secretary tliat he wi.shod to
insure his own ))roperty; but the
.secretary re])lied that the society pre-
leri'ed to procure tlie insurance and
would do so, but before the insurance
was ejected the property was de-
stroyed. It was held that though the
procuring of insurance was Tiot an
express right conferred by charter,
yet as the societj'^ had exercised tliese
6
PAKOL CONTRACTS § 34
It will be seen, therefore, that the decided caPCs offer lierein no
certain and unvarying rule for the determination of the propo.sition
before us. It is held that when an accepted ap])li('ant for nioinber-
ship pays his membership fee and promises in his written applica-
tion to pay the further sum of one dollar and ten cents whenever
any other member dies, or to forfeit his own claim to a benefit, and
the by-laws provide that the association within thirty days after
satisfactory proof of his death, will pay to his ''widow" as many
dollars not exceedin.2; one thousand as there are surviving members
at the time of the death, a contract of life insurance is completed.'
So where the intestate has complied witli all other provisions of the
society, the fact that lie had not taken out a certificate nor desig-
nated to whom his benefit should be payable does not preclude a
recovery against the society, but in the absence of such certificate
the family of the deceased will be entitled to the benefit,^ and where
the supreme lodge of the Knights of Honor sends a benefit cer-
tificate, properly signed and sealed, to a subordinate lodge for a
pei-son who has applied for membership, been balloted for. elected,
and had a degree conferred upon him, and has paid his fees an'd
passed a medical examination which has been approved, the con-
tract relations between him and the supreme lodge are complete,
although the subordinate lodge has not delivered to him the cer-
tificate; ^° and in Zell v. Hernian Farmers' Mutual Insurance Com-
pany " it was held that under its by-laws the company could bind
itself by a contract of insurance without issuing a written policy/"
12
powers they would be estoi)p(Ml from App. 20, 119 S. W. 984, 38 In.s. L.
claiming it as ultra vires. J- 904.
See the following cases: New YoWr.— Connecticut Mutual
United St at es.-^houihern Life Ins. Life Ins. Co. v. Cleveland Co. 41
Co. V. McCain, 96 U. S. 84, 24 L. ed. Barb. (N. Y.) 9.
653; Lament v. Hotelmen's Mutual TF/scoxsm.— Germantown Farmers'
Ben. Assoc. 30 Fed. 817; Bennett v. Mutual Ins. Co. v. Dliein, 43 \Vi.s.
Maryla^id Fire Ins. Co. 14 Blatclif. 420, 28 Am. Rep. 549.
(U. S. C. C.) 422, Fed. Cas. No. 1321. En(jla)id.-^Cjovdou v. Sea Fire &
Connecticut.— Bu\k]e\ v. ' Derl)y LiiV Assur. Co. 1 Hurl. & N. 599;
Fish Co 2 Conn. 252, 254, 7 Am. Port of London Assur. Co. In re, 5
Dec.'271.' I)f^ Gex, M. & G. 465, 481; County
F/o~r/rfa.— Southern Life Ins. Co. v. Life Assur. Co., In re, L. R. 5 Ch.
Lanier, 5 Fla. 110, 58 Am. Dec. 448. 288.
777- • XT u i„ 1 T,-';..,, f. Af.T 'Bolton v. Bolton, 73 Mo. 299.
Illinois. — New Lno-land riic tv Ma- qti-i n i t i p 1^
T n o„i,.^tn«,. -iQ Ml ici; ^Bishop v. (rrand Lodsje or bm-
rine Ins. Co. v. hchettler, .58 111. U)(). . 1 e w >- \.-a no xr \r
„ ,. ., 1 pire Order of iMut. Aid, 112 N. Y.
loua. — Matt v. Roman ( atliolic ^^7 oq ]sJ p^ .-,(J'J
Mut. Prot. Soe. 70 Iowa, 455, 30 N. "10 T'orschor' v.' Supreme Lodge
W. 799. Kni2hts of Honor, 72 Mich. 316, 2
Ma^ifachmetts. — Emery v. Boston ]^.R^A. 206, 40 N. W. 545.
Marine Ins. Co. 138 Mass. 410. "11 jr^ Wis. 521, 44 N. W. 828.
M/s.so?tri. — Shepard v. Boone ^^ ^^or a full consideration of the
County Mutual Fire Ins. Co. 1:18 ]\Io. princLi)les discussed in this section,
173
§ 35 JOYCE ON INSURANCE
Again, parol contracts of insurance by mutual benefit societies are
held to be valid, wherever the agreement has been entered into and
completed except as to the issuance of a certificate or policy, and
it is also declared that there is no reason why such contracts should
not be valid." So where the by-laws of a mutual insurance com-
pany do not specifically require that all of its insurance contracts
shall be in writing, and there exists no statutory or charter pro-
vision limiting the method in which the company may bind itself
to written contracts, it is held that the great weight of authority
is now to the efl'ect that the right to make contracts of insurance,
like any other right of contracting, exists as at common law, and
that an oral or parol contract of insurance, or executory agreement
to insure, which leaves nothing to be done but to issue and deliver
the policy, are valid aiid enforceable, and that this rule applies to
such mutual companies.^*
§ 35. Parol contracts: corporations: statutory or charter pro-
visions. — Some distinction was formerly made between corporations
and individuals or partnei-ships, as to the validity of parol con-
tracts, since under the common law corporations could only contract
under their corporate seal. But this doctrine does not now obtain.^*
see 4 Thompson on Corp. (ed. 1894) Iowa. — Muscatine Water Co. y.
sec. 5015 et seq. 5825 et seq.; vol. 5 Muscatine Lumber Co. 85 Iowa, 112,
Id. sees. 5849, 6042. ' 39 Am. St. Rep. 284, 52 N. W. 108.
iSRuights of Maccabees of tlie Massachnsetts. — Thayer v. Middle-
Wovkl V. Gordon, 83 Ark. 17, 102 S. sex Ins. Co. 10 Pick. {2i Mass.) 326,
W. 711, 36 Ins. L. J. 628. See 329.
Brown v. Franklin Mutual Fire Ins. Michigan. — Sarmiento v. Davis
Co 165 Mass. 565, 52 Am. St. Rep. Boat & Oar Co. 105 Mich. 300, 55
534, 43 N. E. 512. Am. St. Rep. 446, 63 N. W. 205.
14 State Mutual Fire Ins. Co. v. -^>''^- ^«:^---Perkins y. Washing-
Tavlor (1913) - Tex. Civ. App. - ^^on Ins. Co. 4 Cow 64.j; Mott v.
157 S W 950 Hicks, 1 Cow. ol3, 13 Am. Dec. ooO.
^, ' . ' ' ' -ni 1 PeJ^«s^/^l•a«^«.— Hamilton v. Lv-
''Untied States. - Fleckner v. ^ ^^^^^^^^j j^^ ^^ - p^ ^^ 339
^T^-^l^^-fi"' ?-?' ^ T rkic^r' nrgini^.-^ee Banks v. Poitiaux,
S.) 338, 35^ 3.38, o L ed. 631 636, 3 ^J^^ ^^^ ^^ ^^_ j^^^ .^g
per Story, J.; Bank of Columbia v. ^^,-,^.^„,,„._st. Clair v. Ratled-e,
Patterson 7 Cranch (11 U. S.) 299, ^^^ ^.^ ^33^ g- j^^_ g^ j^^^ gg^^
3 L. ed. 351. go N. W. 234 ; Ford v. Hill, 92 Wis.
Ue^aHrtjr.— Deringer v. Deringer 5 ^gg 53 Am. St. Rep. 902, 66 N. W.
Houst. (Del.) 416, 1 Am. St. Rep. 150. n^
Illi>ioi.^.—B. S. Green Co. v. Blod- gee also Anffell & Ames on Corp.
gett, 159 111. 169, 50 Am. St. Rep. (g^jj ed.) sec." 228 et seq; 1 Mav
146, 42 N. E. 176 ; New England Fire on Ins. (Parson's ed.) sec. 16;
&^Marine Ins. Co. v. Schettler, 38 111. Morawetz on Private Corp. (ed.
171. 1882) sees. 167 et seq.; Tliom]ison on
7«rZwwo.— Ross v. City of Madison, Corp. (2d. ed.) sees 1915, 1920, 1!)23,
1 Ind. 281, 48 Am. Dec. 361. 1940, and see Id. sees. 1921 et seq. as
174
PAROL CONTRACTS § 35
There are case?, however, which go so far as to hold that where
the act of incorporation or charter of the insurer requires the con-
tract to be in writing, such corporate provision should govern, and
necessitates a writing. Such decisions would seem to rest upon the
principle that a corporation can only act in the manner and mode
prescribed by the law creating it. Thus, in 1804, Mr. Chief Jus-
tice Marshall, although not holding that a parol contract of in-
surance was invalid, determines that where the act incorporating
an insurance company provides that its policies shall be in writ-
ing, a contract to cancel is as solemn an act as the contract for
insurance, and must likewise be in writing and not rest in parol. ^^
So in Spitzer v. St. Mark's Insurance Company ^' it is held that
since under the company's act of incorporation it was empowered
only to make policies in writing, a contract to renew a policy was
the same as to make one, and it could only be done by a w^ritten
instrument, and where the company's charter provided that policies
issued by the company should be under seal, it was decided that an
unsealed policy could not be given in evidence. ^^ And under a
Pennsylvania decision, where the company's charter, after granting
the right to make contracts of insurance, provides that ''every
such contract, bargain, agreement, and policy to be made by the
said corporation shall be in writing or in print," any attempted
oral contract of insurance by an agent is, in the absence of an
cstojjpel, not binding on the company.^^ Again, it has been declared
1 use of cori>orate seal. As to neees- ^^ Head v. Providence Ins. Co. 2
.sitv for sealing see Briee's Ultra Cranch (6 U. S.) 127, 150, 2 L. ed.
^'ii-es (ed. 189:3) pp. 538 et seq. 229, 237.
Sealed and unsealed instruments; ^'^ 6 Duer (N. Y.) 6 (1856).
statutes aholisliins- distinctions, see ^8 Li^j(|.^„pj. y. Delaware Mutual S.
notes 71 Am. St.' Rep. 205, 206, 50 Ins. Co. 13 Ark. 401. See Montreal
id. 151 et seq., as to affixing .seal to Assur. Co. v. McGillivray, 9 L. C.
policy, see § 180 herein. 488; National Banking & Ins. Co. v.
See as to parol contracts by cor- Knaup, 55 Mo. 154; Cockerill v. Cin-
porationfi. 4 Thompson on Corp. cinnati Ins. Co. 16 Ohio, 148. But
(ed. 1894) sees. 5015 et seq., 5174- ggg the last section herein.
5177, 5825 et seq.; Id. (2d ed.) sees. 19 B(>„„ei. v. Fire Association of
1920, 2138. pj^-jg 229 Pa. 75, 78 Atl. 44, 140
lo bind a corporation by a con- ^^_ g^^ ^ ^^g ^^ j^^^ ^ ^ 84.
ract made by one who has authority ^^^ Moschzisker, J., said:
to act for it, it IS not necessary that ,.„ , ' V , i i. ^i •
his authority should be recited "in the But no matter what the view may
contract, or the corporate name be ^^ elsewhere, in Pennsylvania we
signed to it, or his official designa- I^ave an authority which settles the
tion be added to his signature. Jones question here. See also Ripka v.
V. Williams, 139 Mo. 1, 37 L.R.A. Mutual Fire Ins. Co. 36 Pa. Super.
682, 61 Am. St. Rep. 436, 39 S. W. Ct. 517.
486, 40 S. W. 353.
175
§ 35 JOYCE ON INSURANCE
m Illinois that the rights of the parties were governed by the law
of thai state where the apjilication was made to a local agent in
the state, and the policy issued in New York did not become opera-
tive until countersigned by the local agent there.^° But corpora-
tions in that state are not precluded from making oral contracts
to effect insurance, where their charters authorize them to make
such contracts by issuing written policies.^ There is a distinction,
however, between mere agreements to issue a policy and com-
l)leled parol contract of insurance. There are numerous case,«
which h'old that preliminary parol contracts to issue a policy are
valid, even though a loss occur before the issuance, and even though
the charter or act of incorporation provide that the contract be
executed only in a certain manner.^ But where the question is
whether a parol exwuted contract of insurance can be enforced in
view of such charter provisions as the above, many serious con-
siderations are involved, such as the right of a corporation to incur
a liability which is not necessarily an enlargement of its powers.
So again, it cannot be assumed that every per.son is familiar
with the charters of all corporations,^ or with by-laws limiting the
powers of agents to make the customary contracts appertaining
to the business he is authorized to transact.* And wliile those
dealing with a private corporation are charged with some degree
of care to ascertain the corporation's powers with reference to a
transaction, yet if the transaction has some fair relation to hiatters
within the corporate authority, the defense of ultra vires will not
in general be available to afford injustice or inij^osition.^ And
under an Ohio decision a parol contract of insurance is valid when
not forbidden by statute or a provision of the company's charter
which has been brought to the knowledge of the other contrai-tiug
party.® And where a person without such knowledge has acted
in the highest good faith in pursuance of a parol contract and
induced by it, it is undoubtedly true that the corporation could not
20po„jpj.oy v. Manhattan Life Ins. ^ ij,,^,] y 'Woi^t Branch Bank, 15
Co. 40 111. :m. Pa. St. 172.
* Firemen's Ins. Co. v. Kuessncr. * Barber v. Stroniherg-riirlson Tel.
164 111. -275, 45 N. E. 540. .Mty. Co. 81 Neb. 517, 129 Am. St.
Corporation authorized l)y charter Rep. / 03, 18 L.R.A.(N.S. ) ()80, and
to make insurance and issue policy note, 110 N. AV. 15/.
may enter into i>arol contract of in- ^ McQuaig- v. Gulf Naval Stores
suranco. Continental Ins. Co. v. Stores Co. 56 Fla. 505, l.'il Am. St.
Roller, 101 111. App. 77. Rep. 160, 47 So. 2.
2 See Constant v. Alle£ilianv Ins. ^ Xewark .Machine Co. v. Kenton
Co. 3 Wall. Jr. (U. S. C. C.) 313, Ins. Co. 50 Ohio St. 549, 22 L.R.A.
Fed. Cas. No. 3136; CoUett v. Morris- 708, 35 N. E. 1060.
on, 9 Hare, 162; Perry v. Mercantile
Ins. Co. 8 U. C. 363.
176
PAROL CONTRACTS
§ 35
plead ultra vires to avoid the obligation^ So where a contract has
been fully performed b}' the party contracting Avith a corporation,
and the corporation has received the benefits from such contract,
it cannot afterward invoke the doctrine of ultra vires to defeat an
action brought again.st it on such contract. And where an in-
surance company issues a policy to one upon his own life, payable
at his death to a third person, and the insured pays the premiums
which are accepted by the company, it is held that it cannot, after
the death of the assured, resist payment of the policy to the bene-
ficiary, upon the ground that he is neither a relative, heir, nor
devisee of the insured, and that its charter authorizes it to pay to
such persons only,^ So where a Ih'e insurance company liius insured
' See the following oases :
T'nited States. — National Bank v.
Whitney, 103 U. S. 99, 2() L. ed. 443;
Union National Bank v. Mattliews, 98
U. S. 621, 23 L. ed. 188.
Couneclicut. — Pahncr v. Hartford
Fire Ins. Co. 54 Conn. 488, 9 Atl.
248; Credit Co. v. llowc ^ladiine Co.
54 Cunn. 387, 8 Atl. 472.
Indiana. — Louisville N. A. & C.
Rv. Co. V. Flanagan, 113 Ind. 488,
14 N. E. 370.
New Hampshire-. — Norton v. Bank,
61 N. H. 593.
New York. — Pavi.sh v. Wheeler, 22
N. Y. 494; Samuels v. Fidelity &
Casualty Co. 1 N. Y. Supp. 850, aft'"d
121 N. Y. 060.
Ohio. — ^Newark Machine Co. y.
Kenton Ins. Co. 50 Ohio St. 549, 22
L.R.A. 768, 35 N. E. 1060.
Pennsi/lvania. — Lloyd v. West
Branch Bank, 15 Pa. St. 172.
Tennessee. — Mallory v. Ilanauer
Oil Works, 86 Tenn. 598, 8 S. W. 396.
See also 2 Morawetz on Corp. (2d
ed.) c. VIII. sees. 577-725; 5 Thomp-
son on Corp. (ed. 1894) sec. 6021,
"The other party estopped when he
has received the benefit;" sec. 6022,
"Or where the corporation has acted
to its disadvantage;" sec. 6023, ''RuIp
where the contract is fully executed
on both sides," sec. 6024, "Rule where
the contract has been fully executed
on eitlior side;" sec. 6025, "Rule
where, the coiitra.ct has been executed
by the party contracting with the
Jovce Ins. Vol. 1. — 12. 17
corporation;" sec. 6026, "Rule where
the contract has been executed by the
corporation ;" sec. 6028, "Doctrine
tliat violation of charter or want of
power cannot be set up collaterally;"
see. 6029, "Cases where this doctrine
has been applied;" sec. 6030, "Who
may not set up such violations or
want of power;" sec. 6031, "Illus-
trations of the foregoing."
As to charter: corporate poiver:
ultra vires, see § 334 hei"ein.
* Bloomington jMutual Ben. Assoc.
V. Blue, 120 111. 121, 11 N. E. 331;
60 Am. Rep. 558. See last section
herein.
If a corporation has entered into a
contract in violation, of a directory
provision of its charter, and has en-
joyed the full benefit of such con-
tract, it caiinot plead ultra vires in
defense, in the absence of proof that
fraud was intended or has been
lonsummated. Sherman Center Town
Co. y. Morri.s, 43 Kan. 282, 19 Am.
St. Rep. L34, 23 Pac. 569.
See also the following cases:
Illinois. — Kadish v. Garden City
Equitable Loan & Building Assoc.
151 ill. 531, 42 Am. St. Rep^. 256, 38
N. E. 236.
loua. — -Twiss y. Guaranty Life
Assoc. 87 Iowa, 733, 43 Am. St. Rep.
418, 55 N. W. 8.
New J/awps// /re— Manchester &
L. R. Co. V. Concord R. Co. m N. H.
too, 9 L.R.A. 689, 20 Atl. 38.!.
New York. — Vought v. Eastern
§ 35 JOYCE ON INSURANCE
against hail, without authority so to do, and the insured performs
his part of the contract and the insurer accepts the benefit, it is
estopped to set up its want of power to issue such a policy.^ So if a
company by its charter is prohibited from insuring more than two-
thirds of the value of any property, yet voluntarily and without
fraud or misrepresentation insures more, the policy is not thereby
made void.^° Again, when the act of incorporation provides that
all powers relating to contracts of insurance are vested in directors,
and they are to divide the property insured into four classes and to
direct the making and issuing of all policies of insurance, if after
making a by-law establishing a rule for the division of risks, and
with a knowledge of the facts, they insure property in one class
properly falling in another, thereby violating the by-law, still the
policy issued will be valid and the company bound. ^^ But it has
also been held that an insurance company is not estopped from
setting up the fact that a contract of insurance made through its
agent is ultra vires, though its agent had led the other contracting
party to believe that the company had power to make it, and though
no pretense was set up by the company or its agent that the con-
tract was ultra vires until a loss thereunder was known by all parties
to have occurred. ^^ Therefore, charter provisions relating to execut-
ing a policy ought not, in the absence of words of rastriction or a
plain denial of such power, to be construed to limit the powers of
the corporation or to prevent them from making parol contracts
within the ordinary scope of their chartered powers. ^^
Bldg & Loan Assoc. 172 N. Y. 508, ance Co. v. Colt, 20 Wall. (87 U. S.)
02 Am. St. Rep. 761, 65 N. E. 496. 560, 22 L. ed. 423.
Wisconsin. — Wuerfler v. Trustees Illinois. — Hartford Ins. Co. v. Wil-
Grand Grove, Wis. Order Druids, cox, 57 111. 180.
316 Wis. 19, 96 Am. St. Rep. 940, 92 Maine.— Walker v. Metropolitan
N. W. 433. Ins. Co. 56 Me. 371.
But compare Chewaeia Lime Massachusetts. — Putman v. Home
Works V. Dismukes, 87 Ala. 344, 5 Ins. Co. 123 Mass. 324, 328, 25 Am.
L.R.A. lOOn, 6 So. 122; Miller v. Rep. 93.
American Mutual Accident Ins. Co. New York. — Post v. JEtna, Ins.
02 Tcnu. 167, 20 L.R.A. 765, 21 S. Co. 43 Barb. (N. Y.) 351.
W. 39. " New England Fire & Marine Ins.
^Denver Fire Ins. Co. v. Mc- Co. v. Robinson, 25 Ind. 536; San-
Clellan, 9 Colo. 11, 59 Am. Rep. 134, born v. Firemen's Ins. Co. 16 Grav
Pae. 771. (82 IVlass.) 448, 77 Am. Dec. 410";
1® Williams v. New England Mut. Baile v. St. Joseph Fire Ins. Co. 73
F. Ins. Co. 31 Me. 210. Mo. 371. See Posey County Fire
^^ Union Mutual Fire Ins. Co. v. Assoc, v. Hogau, 37 Ind. App. 573,
Keyser, 32 N. H. 313, 64 Am. Dee. 77 N. E. 670; Brown v. Franklin
375. Mutual Fire Ins. Co. 165 Ma.ss. 565,
12 Webster v. Buffalo Ins. Co. 7 52 Am. St. Rep. 534, 43 N. E. 512;
Fed. 399. See United States Insur- Sanford v. Orient Ins. Co. 174Mass.
178
PAROL CONTRACTS § 36
§ 36. Parol contracts: corporations: statutory or charter pro-
visions: continued. — Jt is even declared in a MassachusclLs case ^*
that the phraseology of statutes chartering insurance companies
respecting the execution of policies should be regarded as consisting
simply of enabling words not restraining the power which they
confer to make contracts of which the policies are the evidence,
and it was directly determined that the company had power to
make an oral contract, although the charter gave authority to
make contracts of insurance "in their name and by the signature of
their president for the time being, or by tlie signature of such
other person and in such form and with such ceremonies of au-
thentication as they may by their rules and by-laws direct." In a
later case in that state it is held that an insurance company having
power generally to "make insurance against loss by fire" may make
a preliminary contract to insure property, to be consummated by a
subsequent execution and delivery of a policy; and the language
in its charter describing the manner in which a policy should be
executed does not restrain this general power. ^^ It is also decided
in the same state that the power of an insurance corporation to
make an oral contract of insurance is not impaired by a provision
in its by-laws that its "directors may authorize the president and
secretary to make insurance, and will issue policies at such rates of
insurance and under such limitations and restrictions as they shall
prescribe." These are enabling,, not restraining, words.^^ It is
also determined that while under a statute in Massachusetts insur-
416, 75 Am. St. Rep. 358, 54 N. E. ]\Iass. 413, 416, 104 Am. St. Rep.
883 (note more fully under § 36 here- 594, 71 N. E. 801 (a ease of non-
in). waiver as to time limitation for
Validity of oral contract of in- suing. Cited in llatcli v. United
suranee ; contract to insure ; charter States Casualty (Jo. 197 Mass. 101 , 14
or statutory provisions, see note 22 L.R.A.(N.S.) "o07, 83 N. E. 398);
L.R.A. 770. Lewis v. Metropolitan Life Ins. Co.
"Sanborn v. Firemen's Ins. Co. 380 Mass. 317, 318, 62 N. E. 369
16 Gray (82 Mass. 448) 77 Am. Dec. (defense of estoppel not sustained.
419; see also Franklin Fire Ins. Co. Cited in Thomson v. American Fi-
V. Colt, 20 Wall. (87 U. S.) 560, 22 delity Co. 215 Mass. 460, 461, 102 N.
L. ed. 423. E. 699, agent held to have no author-
^* Sanford v. Orient Ins. Co. 174 ity to waive time limitation for suing;
Mass. 416, 75 Am. St. Rep. 358, 54 Cavvvood v. Supreme Lodge Kniahts
N. E. 883. & ■ Ladies of Honor, 171 Ind.
16 Brown v. Franklin Mut. Fire 410, 23 L.R.A.(N.S.) 304, 308, 86
Ins. Co. 165 Mass. 565, 52 Am. St. N. E. 482). Distinguished in Carl-
Rep. 534, 43 N. E. 512. Compare son v. Metropolitan Life Ins. Co. 172
Jennings v. Metropolitan Life Ins. Mass. 142, 145, 51 N. E. 525 (no
Co. 148 Mass. 61, 18 N. E. 601. waiver: time limitation for suing.
Waiver of proofs of death. Cited in Cited also in Thomson case above
Paul v. Fidelity & Casualty Co. 186 noted).
179
§ 36
JOYCE ON INSURANCE
ance companies can make valid policies only when attested by the
signatures of the })re^idcnt and secretary, still this provision has no
application to oral agreements to make insurance." So it is de-
clared in a New York case ^^ that "whatever doubts ina\- formerly
have existed as to the validity of parol contracts of insurance made
by insurance companies authorized by their charters to make insur-
ance by issuing policies, it is now settled that they are valid. It is
equally well settled that parol contracts of such companies to effect
an insurance by issuing policies are valid," " and it was also held
in an Indiana case ^° that the company, unless expressly restrained
by charter, might make a valid insurance by parol. ^ xVnd the facts
that an insurance company is bound by its charter to print on the
face of its policies all conditions, and that certain othcers shall
sign all the policies or contracts made, etc., do not prohibit the com-
pany from making oral contracts of insurance,^ although under a
similar state of facts a case was decided contra in the Missouri state
court.^ But a different rule is applied in a later ca.>^e in that state
and it is held that where the charter of a corporation is that fur-
nished by the general laws of the state, which require that the con-
ditions of all policies issued by companies so organized shall l)e
written or printed on the face thereof, and that all policies and
contracts of insurance and instruments of guaranty made by such
companies shall be subscribed by the president, or president pro
tempore, and attested by the secretary, nevertheless a verbal agree-
ment to insure is binding.* This rule is again asserted there imder
a decision in 1906, and it is further decided that a statute declaring
that parol contracts may be binding on aggregate corporations if
made bv an agent dulv authorized bv the coritorate vote or under
"Commercial ]\Iu(iuil ins. Co. v. ^ See also State .Miilual Fire Ins.
Union Mutual Ins. Co. 1!) How. (60 Co. v. Taylor, — Tex. Civ. App. — ,
U. S.) .318, 15 L. eci. (iSli. 157 S. W." 9M).
1^ Ellis v. Albany City I'^ire In.s. ^ Jie,^jii,i„. y ruitcd States In.s.
Co. 50 N. Y. 402, 10 Am. Rep. 495. Co. 2 Dill. (U. S. C. C.) 2(j, Fed.
See also Commercial ^Mutual Ins. Co. Cas. (i.Stid.
v. Union Mut. Ins. Co. 19 llow. (00 ^llenning y. United States Ins.
U. S.) 319, 1.-) L. ed. e.iO; AValkev y. Co. 47 Mo. 425, 4 Am. Rep. 332.
Metropolitan Ins. Co. 56 Me. 371; * Baile v. St. Joseph Fire & Marine
Trustees First Baptist Church y. Ins. Co. 73 Mo. 3S;>, disl'ntguisliinij
Brooklyn Fire Ins. Co. 19 N. Y. 305. Henning v. United States Ins. Co. 47
See ?5S"33a, 38a herein. Mo. 425, 4 Am. Rep. 332. An earlier
^^See also Loomis x. Jefferson statute also provided that parol
County Patrons' Fire Relief Assoc, contracts could be made by duly
87 N. Y. Supp. 5, 92 App. Div. 601. autiiorized agents of aggregate
As to standard policy rule in New corporations and that such contracts
Yolk, see ^*^ 33a, .38a herein. could be implied from corporate acts
2° New England Fire & ^farine Ins. or tiiose of an agent with general
Co. v. Robinson, 25 ind. 536. powers.
180
PAROL CONTRACTS § 36
the ,o;cneial reniilatioiis of the corporation, and that contracts may
be implied on the part of such corporation from their acts or
those of an agent whose powers are of a general character, must
be construed as authorizing insurance coiporations to make parol
contracts of insurance.^ It is held in Constant v. Allegheny In-
surance Company ® that although by its act of incorporation an
insurance company can make a valid insurance only by a policy
attested by the president, secretary, and the seal of the corporation,
yet before such instruments are attested in due form the president
or secretary, or whoever else may act as a general agent of the
company, may make agreements and even parol promises as to the
terms on which a policy shall be issued, so that a court of equity
will compel the company to execute the contract specifically."^ And
under the charter of an insurance company which provides that
every contract, bargain, agreement, and policy for insurance shall
be in writing or in print, and be under the seal of the coiporation,
a contract to issue a policy as an executory agreement to insure is
binding without a written memorial of it.^ It is also decided that
the rule that corporate contracts are unenforceable when not signed
by certain persons is so harsh and inconvenient that it has been
widely dejiarted from and practically abandoned,^ and it is gen-
erally held in like cases that a parol agreement for insurance is
valid.^^ But a mere collateral promise or representation which does
not involve the execution of a policy of insurance is not within the
scope of the general authority of an officer or agent of such a cor-
^Kinij V. Phoenix Ins. Co. 195 Mo. Ins. Co. 174 Mass. 420, 75 Am. St.
290, 113 Am. St. Rep. 678, 6 Araer. Rep. 358, 54 N. E. 883.
& En<;-. Annot. Ca.s. 618, 92 S. W. .U/c/;?V/om.— Westchester Fire Ins.
S92. ^ Co. V. Earle, 33 Mich. 150.
6 3 Wall. Jr. (U. S. C. C.) 313, North DflAoia.— McCabe v. .^tna
Fed. Cas. 3136. Tns. Co. 9 N. D. 25, 47 L.R.A. 645,
■^ See also Seenritv Eire Ins. Co. v. 81 N. W. 426.
Kentucky Marine & Eire Ins. Co. 7 ^^'<^^f T irgmm.—CYoii v. Hanover
Bus!, (ky.) 81, 3 Am. Rep. 301. F Ins. Cc 40 W. Va^ 512, 52 Am.
8 Insurance Co. (Franklin Ins. St Rep 902, 21 S. E. 8o4.
Co.) V. Colt, 20 Wall. (87 U. S.) . ' ^f ^"\,7- p '^^JTv 'h^n - i oS
c-nJ oc) T j AC)o Telephone Mfg. Co. 81 Aeb. 51 <, 129
;f-r"; '"^ -7 ; c> . J? Am. St. Rep.^703, 18 L.R.A.fN.S.)
Cited m: Lmted btates. — Earaes v. ,.„„ , /^ ^^ „ '^ ,,,. - __ ■ '
,, , /-, r.^ TT o ^.-.T- o^ T 1 680, anci note, 116 JSI. W. Jo/.
Home Ins. Co. 94 TL «• 027 24 L. ed. ,„ j,,, ,, p,,,,i, j^^. Co. 2 Bi..s.
300; Laclede Firc-Brick Mfg. Co. v. ^u. S. C. C.) 333, Fed. Cas. 7001;
Hartford Steam-Boiler Inspection & ^^^.^n ^, Hartford Fire Ins. Co. 59
Ins. Co. 9 C. C. A. 8, 19 U. S. App. j^ y. 171, 17 Am. Rep. 322; Fish v.
510, 60 Fed. 35L Cottenett, 44 N. Y. 538: Post v.
ManjJand.—Ph(Bmx Ins. Co. v. .^tna Ins. Co. 43 Barb. (N. Y.) 351;
Ryland, 09 Md. 447, 1 L.R.A. 550, Cooke v. 2FAx^a, Ins. Co. 7 Daly (N.
16 Atl. 109. Y.) 555; Jones v. Provincial Ins.
il/fl.s,sflc//H.se/^s.— Sanford v. Orient Co. 16 U. C. Q. B. 477.
181
§ 37 JOYCi-l UX INSURANCE
poration. and cannot })e en forced. ^^ Tlie following ca?e< further
illustrate the rule a.s to agreements for insurance : Thus, an agree-
ment for insurance was made with an insurance company through
its agent, and on the next day the policy, dated as of the preceding
day, was executed, delivered, and received in perfect accordance
with that agreement, and it was held that the company was liahle
for a loss occurring after the agreement was entered into and be-
fore the policy was executed, although the charter of the company
provided that all policies of insurance should be subscribed by the
president and signed and sealed by the secretary.^^ Again, where
the charter confers upon an insurance company power "generally to
do and perform all things relative to the object of the association."
and 23rovides in a subsequent section that ''all policies or contracts
of insurance" shall be subscribed by the president or some other
ofhcer designated by the board of directors for that purpose, the
latter provision does not disable the companj^ from binding itself by
contracts for policies and immediate insurance executed in other
modes and by other agents, but merely prescribes the manner in
which the final contract or policy shall be executed. ^^ So a pro-
vision in a company's charter requiring that ''all policies and con-
tracts of insurance . . . shall be subscribed by the president"
relates only to executed insurances, and does not abridge the com-
mon-law right to make an oral executory contract for insurance.^*
§ 37. Parol contract for insurance subject to usual provisions
of policy. — A parol contract for insurance is in effect the contract
of the company as expressed in the policies commonly issued by
them, unless otherwise agreed upon,^^ and is to be regarded as
made upon the terms and subject to the conditions in the ordinary
forms of policies used by the company at the time.^^ In other
words, if nothing is stipulated in the preliminary agreement con-
cerning the nature or kind of the policy to be issued, the law
presumes that it was contemplated by the parties that the ordinary
*^ Con.stant v. Alleghany Insurance 35 N. E. 1000; Smith v. State Ins.
Co. 3 Wall. Jr. (U. S. C. C.) 313, Co. 64 Iowa, 716, 21 X. W. 145.
Fed. Cas. 3136. le Salisbury v. Hekla Fire Ins. Co.
^^Davenport v. Peoria Marine & 32 Minn. 458, 21 N. W. 552; Vining
Fire Ins. Co. 17 Iowa, 276. v. Franklin Fire Ins. Co. 89 Mo.
^^ Davton Ins. Co. v. Kelly, 24 App. 311 ; De Grove v. ^Metropolitan
Ohio St. 345, 15 Am. Rep. 612. Ins. Co'. 61 X. Y. 594, 19 Am. Rep.
^* Security Fire Ins. Co. v. Ken- 305 ; Cleveland Oil & Paint Mfg. Co.
tuckv Marine Sc Fire Ins. Co. 7 Bush v. Norwich Union Fire Ins. Co. 34
(Ky") 81, 3 Am. Rop. 301. Oreg. 228. 55 Pac. 435; Eureka Ins.
" Hubbard v. Hartford Fire Ins. Co. v. Robinson, Rhea & Co. 56 Pa.
Co. 3:5 Iowa, 325, 11 Am. Rep. 125; St. 256. 94 Am. Dec. 65; State Fire
Newark ^fachino Co. v. Kenton Ins. Ins. Co. v. Porter, 3 Grant Cas.
Co. 50 Ohio St. 549, 22 L.R.A. 768, (Pa.) 123.
182
PAROL CONTRACTS § 37
and usual policy used by the insurer to cover property of like nature
and kind as that designated in the agreement should be issued.
The usual intendment of such agreement is that a policy shall
issue which shall contain the specific limitations and conditions up-
on which the loss insured against shall be payable. The issuance
of the policy is the ultimate act contemplated by the executory,
and completes the executed contract.^'' And where nothing is said
in the negotiations about special rates of insurance, or the special
conditions of the policy, it will be presumed that those which were
usual and customary were intended.^* The preceding rule has
seemingly been qualified to this extent, that a presumption that the
parties to an oral preliminary contract of insurance contemplated
such a form of policy as has been usual between them, or is usual in
such cases may be applied in some instances.^' So where plaintiff
applied to defendant's agent for a policy of marine insurance on
certain goods and paid the premium, but the agent said it was not
his custom to give a policy, and that it was unnecessary, and gave
him a receipt specifying the risk insured, but containing no condi-
tions, it was held that the contract was governed by the limitations
and conditions contained in the policies ordinarily used by the com-
pany.^" If the insurer, however, enters into an oral contract of
insurance, and at the same times agrees to issue a policy which it
subsequently refuses to do, it cannot claim that the insured's right
of recovery is defeated by the violation of any provisions which the
policy, if issued, would have contained.^ But if a policy is issued
in pursuance of a verbal agreement, and assured receives it, but
" Sproul V. Western Assurance United States. — Eames v. Home
Co. 33 Oreg-. 98, 54 Pac. 180, 28 Ins. Tns. Co. 94 U. S. 621, 24 L. ed. 298;
L_ J, 118. Relief Fire Ins. Co. v. Shaw, 94 U.
18 Newark Machine Co. v. Kenton S. 574, 24 L. ed. 291.
]ns. Co. 50 Ohio St. 549, 22 L.R.A. Iowa.— Barve v. Council Bluffs
708 and note, 35 N. E. 10G3; Cleve- Ins. Co. 76 Iowa, 609, 41 N. W. 373;
land Oil & Paint Mfg. Co. v. Nor- ^mitli v. Sta^te Ini;. Co. 64 Iowa, 716,
wich Union Fire Ins. Co. 34 Oreg. 21 N. T\ . 145.
ooQ e:- p 4Q" Minnesota.- — Sau.sburv v. Hekla
""Benner V Fire Association of t";<- I-- C»- ^^ ^'i""- ^58. 21 N. W.
?nli'''-f'.!,''- .«• in"/"'-T^S''S' ■"v^!.™,,;.».-MoCann v. iEtna Ins.
706, 78 Atl. 44, 40 Ins. L. J. 84. ^^ ^ ^^^ -jpg
"We can conceive of instances where New^York.—Upman v. Niagara
this rule might well be applied, but y^^^ j^^ ^^ 12i n. Y. 454, 8 L.R.A.
this is not one of them." Per Mosch- -2n^ 24 N. E. 690.
zisker, J. I'llardwick v. State Ins. Co. 23
^^De Grove v. Metropolitan Ins. Qr. 290, 31 Pac. 656, 22 Ins. L. J.
Co. 61 N. Y. 594, 19 Am. Rep. 305, 262. Compare Sproul v. Western
and note, 309. See also the follow- As.'^uranco Co. 33 Oreg. 98, 54 Pac.
180, 28 Ins. L. J. 118.
183
§ 38
JOYCE ON INSUKANCE
it is void because of noncompliance with a statutory form, the
presumption is that the terms of the oral contract conform with
those of the written policy.^
§ 38. Parol agreement for insurance may be specifically enforced,
or court may award damages. — An oral contract to issue a policy
of insurance is binding and may be specifically enforced, or the
court may award damages the same as in an action on an executed
policy.^ In a New Hampshire case * an agreement was made with
2 Green v. Liverpool & London & son, 28 Ind. 17: Peoria Marine &
Globe Ins. Co. 91 Io\va, 615, 60 N. Fire Ins. Co. v. Walser, 22 Ind. 73;
W. 189. See Howard Ins. Co. v. Kentucky Mutual Ins. Co. v. Jenks, 5
Owens, 94 Ky. 197, 21 S. W. 1037, lud. 96;' Western Assurance Co. v.
14 Ky. L. Rep. 881. McAlpin, 23 Ind. App. 220, 55 N. E.
3 Vvited States.— Taxloe v. Mer- 119.
chants Fire Ins. Co. 9 How. (50 U. Kansas. — Preferred Accident Ins.
S.) 390, 13 L. ed. 187; Fitton v. Fire Co. v. Stone, 61 Kan. 48, 58 Pac.
Ins. Assoc. 20 Fed. (U. S. C. C.) 766 986.
(agreement to insure may be con- Kentucky. — Security Fire Ins. Co.
sidered in equity as insurance, at, law v, Kentucky Marine & Fire Ins. Co.
there could only be an action for 7 Bush (Ky.) 81, 3 Am. Rep. 301;
breach of contract to effect tlie in- see Hartford Fire Ins. Co. v. Trim-
.surance) ; Humphrey v. Hartford ble, 117 Ky. 583, 25 Ky. L. Rep.
Fire Ins. Co. 15 Blatchf. (U. S. C. 1497, 78 S. W. 462.
C.) 35, Fed. Cas. No. 6874. Manjland.—Vha^nix Ins. Co. v.
Alahama.^Coxnxmvnal Fire Ins. Rvland. 69 Md. 437, 1 L.R.A. 548,
Co. V. Morris, 105 Ala. 498, 18 So. 16 Atl. 109.
34; Home Ins. Co. v. Adler, 77 Ala. Massachusetts. — See Cunningham
242, 71 Ala. 524.
California. — Gold v. Sun Ins. Co.
73 Cal. 216, 14 Pac. 786.
v. Connecticut Fire Ins. Co. 200
Ma.ss. 333, 86 N. E. 787, 38 Ins. L.
J. 315 (a case of action of contract,
Connecticut. — See Bishop v. Clay on parol agreement to issue standard
Fire & Marine Ins. Co. 49 Conn. 167
Georgia. — Simonton, Jone-s &
Hatcher v. Liverpool & London &
policies; no discussion as to right of
action).
Michigan. — Michigan Pipe Co. v.
Globe Ins Co. 51 Ga. 76 (action lies; ^^-^^^^^^^^^^ Y\ve & Marine Ins. Co. 92
equity wdl gTant relief even though ^ji,i,;'482, 20 L.R.A. 277, 52 N. W
contract required to.be in writing).
Illinois.— Fir evaen's Ins. Co. v.
Kuessner, 164 111. 275, 45 N. E. 540 ;
Dinning v. Phcenix Ins. Co. 68 III.
414 (but held that there were only
preliminaries to contract, and that no
contract was actually made, so bill
was dismissed) ; Fii-e Ins. Co., Phila.
County V. Sinsabaugh, 101 111. App.
55; see Concordia Fire Ins. Co. v.
Heffron. 84 111. App. 610, as to
pleading on oral contract to insure.
1070.
Minnesota. — Everett v. O'Lcary,
90 Minn. 154, 95 N. W. 901.
Mississippi. — Franklin Fire Ins.
Co. V. Taylor, 52 Miss. 441.
Misso7iri. — Baile v. St. Joseph
Fire & Marine Ins. Co. 73 Mo. 371.
Nebraska. — Carter v. Bankers Life
Ins. Co. 83 Neb. 810, 120 N. W. 455.
Nevada. — Cooper v. Pacific Mutual
Life Ins. Co. 7 Nev. 116, 8 Am. Rep,
Indiana. — Standley v. Northwest- 705.
ern Mutual Life Ins. Co. 95 Tnd. 254; New Hampshire. — Gerrish v. Ger-
Amcrican Horse Ins. Co. v. Patter- man Ins. Co. 55 N. H. 355.
184
PAROL CONTRACTS
§38
the agent of the company for insurance aaainst fire for one year,
commencing the risk at noon, September 30, 1873. The premium
was paid to the agent and he agreed to procure and deUver the
pohcy. Before this was done, and on October 1, 1873, a loss
occurred. The requisite proofs of loss were made and a policy
demanded and payment of the amount insured, which demands
were refused. Upon a bill in equity therefor it was decided that
(he court had jurisdiction to compel a delivery of the policy and
specific performance, and that it would, to avoid circuity of action,
decree payment of the loss. So specific performance of an execu-
tory parol contract to insure a marine risk may be compelled in
equity after the loss has occurred, when it appears that the voyage
was undertaken on the understanding that the risk had been ac-
cepted, and that the writing to effect the insurance would be duly
made, and that the premium would be paid when required accord-
New Jersejf. — Hallock v. Com- a. court of equity, and having been
mercial Ins. Co. 26 N. J. L. 268. c-nforced by the procurement of the
New York. — Ellis v. Albany City policy, an action can be maintained
Ins. Co. 50 N, Y. 402, 10 Am. Rep. upon the instrument; or the court, in
495; Rhodes v. Railway Passenger enforcing the execution of the con-
Ins. Co. 5 Lans. 71; Kelly v. tract, may enter a decree for the
Commonwealth Ins. Co. 10 Bosw. 82. amount of the insurance. Franklin
But compare § 38a herein. Fire Ins. Co. v. Colt, 20 AVall. (87
North Dakota.— Boos v. .^tna Ins. U. S.) 560, 22 L. ed. 423. Cited in:
Co. 22 N. Dak. 11, 132 N. W. 222, 40 United States.— Tennant v. Travel-
Ins. L. J. 1787. lers' Ins. Co. 31 Fed. 324; Frankle v.
Oregon. — Sproul v. Western Assur. Pennsylvania F, Ins. Co, 12 Ins. L. J.
Co. 33 Oreg. 98, 54 Pac. 180, 28 Ins. 619, Fed. Cas. No. 5,052a ; Magic
L. J. 118. Ruffle Co. V. Elm City Co. 13 Blatchf.
Utah.— Jaaho Forwarding Co. v. 151, 2 Bann. & Ard. 159, Fed. Cas.
Firemen's Fund Ins. Co. 8 Utah, 41, No. 8,949; Weeks v. Lycoming F. Ins.
17 L.R.A. 586, 29 Pac. 826. Co. 7 Ins. L. J. 553, Fed. Cas. No.
Virginia. — Interstate Fire Ins. Co. 17,353.
V. IMcFall, 114 Va. 207, 76 S. E. Alabama.— Home Ins. Co. v. Ad-
293; Iladen v. Farmers & Mechanics ler, 71 Ala. 524.
Fire Assoc. 80 Va. 683; Haskin v, California. — Crawford v, Trans-
Agricultural Fire Ins. Co. 78 Va. atlantie F. Ins. Co. 125 Cal. 611, 58
700; Wooddy v. Old Dominion Ins. Pac. 177.
Co. 31 Gratt^ 362, 31 Am. Rep. 732. Indinna.—FYi\(\entia\ Ins. Co. v,
Wisconsin. — Northwestern Iron Co. Sullivan, 27 Ind. App. 37, 59 N. E.
V. ^tna Ins. Co. 23 Wis. 160, 99 Am. 873.
Dec. 145. Kansas. — Preferred Aeci. Ins. Co.
Wyoming. — Summers v. INIutual v. Stone, 61 Kan. 53, 58 Pac. 986.
Life Ins. Co. 12 Wvo. 369, 66 Massachusetts. — Emery v, Boston
L.R.A. 812, 109 Am. St." Rep. 992, 75 Marine Ins. Co. 138 Mass. 412.
Pac. 937. Michigan. — Michigan Pipe Co. v.
Canada. — Jones v. Provinciallns. Michigan F, & M. Ins. Co. 92 Mich.
Co. 16 U. C. Q. B. 477. 491, 20 L.R.A. 289, 52 N. W. 1070.
An executory contract for insur- New York. — Hicks v. British
anee, being valid, can be enforced in American Assur. Co. 162 N, Y, 299,
185
§ 38 JOYCE OX INSUKANCE
ing to usage; ' and an oral promise by the president of an insurance
company to make a policy of insurance is a contract binding on the
company, and a court of equity will compel its specific perform-
ance.^ Again, if tlie agents of the A, B, C, D, and E insurance
companies agree with a party to insure her premises in the A, B, C,
and D companies, she has against these four, after destruction there-
of by fire, a claim for the loss, even though the policies have not
been delivered to her, but none against the E, although the E had
also written out a policy for her. Equity will only consider that
to be done which was agreed to be done.' So equity may compel
the issuance and delivery of an insurance policy after the loss, and
enforce the payment of it, as if made in advance, where there has
been a valid agreement for one before the loss, even where the
contract was by parol and the charter of the company requires all
policies to be in writing.' And full relief will be administered in a
suit for specific performance of a contract to insure, by compelling
the payment of the loss when the evidence of its extent is satis-
factory.^ But equity will not compel the issuance of a policy in
accordance with the provisions of a contract to insure, where the
property intended to be covered has been destroyed and its owner
has received from other insurers more than its value. Nor will
specific performance of a contract to issue a policy be granted where
it was eft'ccted by agents of the property owner, and was not bind-
ing on him without ratification, and he did not ratify it until after
loss, when it was to his interest to do so.^°
In a Kentucky case, in an action upon a "workman's collective
policy" agreed to be issued to an employer for the benefit of his
operatives, in case of injury, or resulting death to an employee.
48 L.R.A. 4:i0, 56 N. E. 743: rev'^ 13 See Union Mutual Ins. Co. v. Com-
App. Div. 445, 43 N. Y. Supp. 623; raercial Mutual IMarine Ins. Co. 2
Van Tassel v. Greenwich Ins. Co. 72 Curt. (U. S. C. C.) 524, Fed. Cas.
Hun, 145, 25 N. Y. Supp. 301; 14,372; New England Fire & Marine
Clarkson v. Western Assur. Co. 92 Ins. Co. v. Robinson, 25 Ind. 536;
Hun, 535, 37 N. Y. Supp. 53. Trustees of First Baptist Church v.
Oregon. — Sproul v. Western A.ssur. Brooklyn Ins. Co. 18 Barb. (N. Y.)
Co. 33 Or. 101, 54 Pac. 155. 69; Kelly v. Commonwealth Ins. Co.
Pennsiflvanki. — Smith v. Susar 10 Bosw. (N. Y.) 82.
Vallev Mut. F. Ins. Co. 5 Pa. Dist. R. ' Fitton v. Fire Ins. Assoc. 20 Fed.
.340. " 766.
* Gerrish v. German Ins. Co. 55 N. * Franklin Fire Ins. Co. v. Taylor,
H. 355. 52 Miss. 441. See Ellis v. Albany
5 PhoMiix Ins. Co. V. Rvland, 69 Ins. Co. 50 N. Y. 495, and note.
Md. 437, 16 Atl. 109, 1 L.R.A. ^ Phenix Ins. Co. v. Rvland, 69 Md.
.-,48. 437. 1 L.R.A. 548, 16 Atl. 109.
6 Commercial Mutual Marine Ins. i° Insurance Co. of North America
Co. V. Union :\rutnal Ins. Co. 19 v. Schall. 96 Md. 225, 61 L.R.A. 300,
How. (60 U. S.) 318, 15 L. ed. 636, .53 Atl. 925.
186
PAROL CONTRACTS § 38a
and wliie-li insurance was to be in force until an unsigned applica-
tion was disapproved and notice thereof given to the employer, and
between the date of said application and notification of its rejection
an employee lost his life, it was held that cw tJiere existed no right
to have a policy issued the remedy was not in equity but by an'
action at law to recover on the parol contract}^
§ 38a. Same subject: standard policy: rule in New York. — It
is held in New York that, since 1886, when the legislature enacted
the standard fire insurance policy law,^^ an oral contract to insure
has been treated as a contract of insurance, and not, as formerly, a
contract to issue a policy, and that assured's assignee had a cause
of action on a contract for present insurance since it included with-
in it the standard form of policy, and the contract was a completed
one, but that the failure to deliver the policy to the assignor gave
said assignee no cause of action therefor, as he had sustained no
damage by reason thereof. We may, however, state the conclusion
arrived at in this decision in another form, as follows: The value
of property destroyed by fire after an oral contract to insure it, but
before the issuance of a policy thereon, cannot be recovered as
damages for breach of agreement to issue the policy, where the
failure to deliver the policy did not cause any damage to the in-
sured, since the oral agreement constituted a binding contract of
insurance which could be enforced against the insurer except for
the failure of the insured to comply with the conditions contained
in the standard policy of insurance, which were by law made a
])art of the contract. ^^
1^ Fidelity & Casualty Co. v. Bal- to recover the loss which he sus-
hu-d & Ballard Co. W'i Ky. 253, 20 tained by the company's violation of
Ky. L. J\ep. 116!), 48 S. \V. 1074, 28 the contract as evidenced by the
In.s. L. J. 227. The court, per policy, or the court, in equity, could
Payntor, J., said: "If parties have render judgment for the amount of
agreed to tiie terms of insurance, the loss. In the case at bar the plain-
hut tlie policy has not been issued, tiff does not .seek to have the court
the insured could proceed in a court compel the company to issue a policy,
of equity, and compel the company to It is confessed that the company had
issue the policy. When a loss iiiter- the right to disapprove the appli-
venes between the time the terms of cation and refuse to issue it. There-
insurance are agreed upon and the fore the plaintiff had no right to
delivery of the policy, which is l)ut an maintain an action in equity to corn-
evidence of contract', then the insured pel the comi)any to issue it. This
can, by an action at law, recover the action is at law to recover on the
amount authorized by the terms of contract of insurance which was made
the contract. In the event of loss be- to be in force until the company ap-
fore delivery of the policy, if the in- proved the application or rejected it,
sured desired by circuitous route to and notified the appellee of such
bring an action, and have adjudged action."
to him the policy, he might do so, ^^ La^ys 188G, c 488.
and then maintain an action at law " Hicks v. British- American As-
187
§ 38b
JOYCE ON INSURANCE
§ 38b. Same subject: life insurance: industrial life insurance, —
Parol agrecniciU.s for life insurance may be speciiically enforced by
requiring tlie issuance of tlie policy as agreed, either before or after
the loss.i*
But an action which is in fonn one to establish and enforce
an oral contract of industrial life insm*ance cannot be sustained
where it is, in fact, an attempt to alter the terms of a written con-
tract which consisted of an application and a receipt for one week's
premium paid on account thereof, and subject to acceptance or
rejection by the company, but no policy was issued, and the evi-
dence did not tend to show any consideration for a separate oral
contract, even though, the agent represented that the insurance
began at once.^^
surance Co. 162 N. Y. 284, 48 L.R.A. enactment of the standard fire insur-
424, 50 N. E. 743, 30 Ins. L. J. 14, ance policy law and .says that ''there-
rev'g 32 N. Y. Supp. 623, 13 App. after the contract to insure was, by
Div. 444. The court cites Van Loan common consent of tlie profession
V. Farmers Mut. Fire Ins. Assoc. 90 and the courts, scientitically treated
N. Y. 280; Angell v. Hartford Fire as a contract of insurance, and not,
Ins. Co. 59 N. Y. 171, 17 Am. Rep. as formerly, a contract to issue a
322; Ellis v. Albany City Ins. Co. policy, as an examination of the au-
50 N. Y. 402, 10 Am. Rep. 495— and tliorities in this court from'' Ruggles
declares that "the situation which v. American Central Ins. Co. 114 N.
those cases were designed to meet no Y. 415, 11 Am. St. Rep. 674, 21 N.
longer exists. During the period of E. 1000, "will show." Per Parker,
time in which they and others were Ch. J.; Landon, J., Werner, J., and
decided, and down to tlie year 1886, Haight, J., dissented. See Queen
each insurance company was at liber- Ins. Co. v. Plartwell Ice & Laundry
ty to insert such provisions in the Co. 7 Ga. App. 787, 68 S. E. 310,
policy of insurance issued by it as it 39 Ins. L. J. 1125.
deemed best. The result was that Marine vessel liability insurance;
there was no uniformity in policies parol agreement to issue a valid
of insurance, and wJien loss by fire policy binding, and suit lies thereon.
occurred prior to a delivery of the International Ferry Co. v. American
policy, it became necessaiy for the as- Fidelity Co. 207 N. Y. 350, 101 N.
sured to secure possession of the E. 160.
policy, either by its voluntary de- Parol contract of insurance — e.x-
livery to him by the officers of the eciitory contract to renew: specific
company, or in pursuance of a decree performance. See §§ 33a, 41a, 41c
in a suit in equity for specific per- herein.
formance. Thereon he could found ^* Summers v. Mutual Life Ins. Co.
a judgment for the damages sus- 12 Wyo. 369, 66 L.R.A. 812, 75 Pac.
tained by the fire, or he was al- f)37. See also Carter v. Bankers
lowed to recover the damages sus- Life Ins. Co. 83 Neb. 810, 120 N. W.
tained for a breach of the contract, 455 (ten-payment policy),
which wa.s treated as a contract for ^^ Chamberlain v. Prudential Ins.
the delivery of a policy. The last Co. of America, 109 Wis. 4, 83 Am.
one of the cases cited was decided in St. Rep. 851, 85 N. W. 128, 30 Ins.
1882."' The court then notes the L. J. 427.
188
PAROL CONTRACTS
38c
§ 38c. Evidence: oral contract must be clearly established. —
Such parol contracts must be clearly established, or the court will
refuse relief either at law or in equity. ^^ And in order to sustain
an action on a contract of insurance, where no policy has been
issued, the elenient>s nuist have been a.^reed upon, and nothing been
left open and undetermined, and all conditions precedent complied
with.^'^ And where a complaint alleges the subject of insurance,
the limit of the risk, tlie peril insured against, the amount, and the
premium, it is sufHciently specific to support an action ba.sed on a
parol contract of insurance.^*
Again, since a contract of insurance may rest in parol if all the
elements essential to a valid contract are agreed upon, a contract of
insurance is established where an agent, with authority to receive
^^ California. — American Can Co.
V. Aerir'ultural Tns. Co. 12 Cal. App.
13;5,'lO(; Pac. 720, ;]1) Jns. L. J. ol8.
See Crawford v. Traus-Atlantie Fire
Ins. Co. 1-25 Cal. 009. 38 Pac. 177,
28 Ins. L. J. 938 (covering- also
points of what declarations are and
are not part of the res oesta?).
Connecticut. — Sec Bisliop v. Clay
Fire & Marine Ins. Co. 49 Conn. 167.
Illinois. — Dinnins: v. Phoenix Ins.
Co. 08 111. 414.
Tndimia. — New Enjrland Fire &
Marine Ins. Co. v. Robinson, 25 Ind.
536.
Kent mill. — Hartford Fire Ins.
Co. V. Tiinil)le, 117 Kv. .")S:5, 25 Kv.
L. K'ep. 1497, 78 S. W. 402.
Man/land.— See Mallette v. Brit-
isli-Anierican Assur. Co. 91 Md. 471,
40 Atl. 1005.
Michigan. — Kleis v. Niatjara Fire
Ins. Co. 117 Mich. 409, '5 Del. L.
News, 337, 70 N. W. 155, 27 Ins. L.
J. 912.
Minnesota. — See Ames-Broohs Co.
V. ^Etna Ins. Co. 83 Minn. 346, 86 N.
W. 344, 30 Ins. L. J. 802.
Nebrafika. — McCann v. il'^^tna Ins.
Co. 3 Neb. 198.
Ohio. — Hartford Fire Ins. Co. v.
Wliitman, 75 Ohio St. 312. 79 N. F.
450; Snydain v. Columbus In.s. Co.
18 Ohio "St. 459. •
Peniisylrania. — Benner v. Fire
Assoc, of Phila. 229 Pa. 75, 78 Atl.
44, 40 Tns. L. J. 84, 140 Am. St. Rep.
1
706; Patterson v. Benjamin Frank-
lin Ins. Co. 81* Pa. St. 4.54; Ripka v.
Mutual Fii-e Ins. Co. 30 Pa. Super.
Ct. .517.
Virginia. — Haden v. Farmers &
Mechanics' Fire Assoc. 80 Va. 683;
Haskin v. Agricultural Fire Ins. Co.
78 Ya. 700.
W isconsin . — Strohn v. Hartford
Ins. Co. 37 Wis. 625.
. Oral contracts of insurance must
be clearly established in every par-
ticular. The testimony must make
clear the subject-matter, the amount,
jiid elements of the risk, including
its duration in point of time and ex-
tent of hazard a.'^sumed, the rate of
]iremium, and, generally, all the
circumstances peculiar to the con-
tract of insurance. Benner v. Fire
Assoc, of Phila. 229 Penn. 75, 140
Am. St. Rep. 706, 78 Atl. 44, 40 Ins.
L. J. 84. See also Moonev v.
Merriam, 77 Kan. 305, 94 Pac. '263;
Hartford Fire Ins. Co. v. Trimble,
]17 Kv. ,583. 25 Kv. L. Rep. 1497,
78 S. W. 402, 33 Ins. L. 3. 348;
Keystone iMattress & Spring Bed
Co. V. Pittsburg* Underwriters, 21
Pa. Super. Ct. 38. Examine §§
38-38C, 40-49, 72 herein.
17 Croft V. Hanover Fire Ins. Co.
40 W. Va. 508, 52 Am. St. Rep. 902,
21 S. E. 854. Comimre § 45a herein.
18 Ohio Farmers Tns. Co. v. Bell
(1912) 51 Ind. App. 377, 99 N. E.
812.
S9
§ 38e JOYCE OX INSURANCE
iipi^lieations for insurance and accept risks, agrees to insure certain
property, and the time when the risk should begin, the amount of
the risk, its duration, the premium, and the kind of policy to be
issued were all fixed, and nothing remained to be determined after-
ward, though the premium was not paid, the agent being indebted
to the insured, and having on previous occasions issued policies to
the insured, crediting the premium on account.^^ But, as in other
cases of parol contracts, the assent of the parties to the terms of the
agreement may be shown by their acts and the attendant circum-
stances, as well as by the words they have employed,^" although
evidence of usage to make written applications is immaterial.^
Again, acceptance of a policy does not constitute conclusive evidence
of a contract or parol agreement to effect a stipulated insurance
by the issue of a valid policy, where there is no negligence on in-
sured's part.^ It may, however, be a question for the jury whether
or not there exists a parol contract to insure.'
^^ Western Assur. Co. v. MeAlpin, contract, but to snpport the position
23 Ind, App. 220, 77 Am. St. Rep. tliat no contract whatever had been
423, 55 N. E. 119. See also Posey made. If a contract had in point of
County Fire Assoc, v. Hogan, 37 fact been made as alleged, it was of
Ind. App. 573, 77 N. E. 670. Ex- no consequence whether it was ac-
amine §§ 72 et seq. herein, cording to general usage or not.
20 Newark Machine Co. v. Kenton ... It is no legitimate conflrma-
Ins. Co. 50 Ohio St. 549, 22 L.R.A. tion of the defendant's position un-
768, 35 N, E. 1060. See § 3760 der such circumstances to show that
herein. otlier insurance companies usually
^ Emery v. Boston Marine Ins. Co. require applications for marine in-
138 Mass. 398. In this case* the suiance to be in writing as a eon-
court, per Allen, J., said : '*But it dition of making the contract. . , .
is also well settled, and it is now too An oral contract was lawful, and the
late to question the doctrine, that an evidence was properly confined to the
oral contract of insurance may be question whether this particular oral
valid: Sanborn v. Fireman's Ins. contract had been made, as testified
Co, 16 Gray (82 Mass.) 448. As was by the plaintiff, without going into
said in that case: 'It is not easy to 1he general inquiry whether other
see the force of the reasoning which i)arties were accustomed to make
would infer that because parties such contracts.' " Compare JEtna
usually make their contract in one Ins. Co. v. Northwestern Iron Co. 21
way it would be void when they Wis. 464, 471.
choose to make it in another, equally ^ International FeiTV Co. v. Ameri-
good at common law and not pro- can Fidelity Co. 207 N. Y. .350, 101
liibited bv anv statute.' See also N. E. 160, revg. 129 N. Y. Supp.
Relief Fire Ins. Co. v. Shaw, 94 U. 1120, 145 App. Div. 906.
S. 574, 24 L. ed. 291. A usage that ^ IJVnwis.^lwi^nr-Awe Co. of North
an oral contract if made is considered America v. Bird, 175 111. 42, 51 N. E.
invalid would be plainly repugnant f)86, affg. 74 111. App. 396.
to law and void. In the present case Kentucl-ji. — Natural Fire Ins. Co.
the evidence of nsage was offered, v. Rowe, 20 Ky. L. Rep. 1473, •:I9 S.
not in aid of the construction of a W. 422.
190
PAROL CONTRACTS § 39
§ 39. Parol contracts: statute of frauds. — In the United States
Supreme Court it is held that the statute of frauds does not require
that a promise to make a policy of insurance should be in writing,'*
nor does the statute make a writing necessary in Alabama,* nor in
Kentucky.^ So an oral contract of insurance for one year, includ-
ing its date, is a contract to be performed within a year, and is
not witliin the statute of frauds,'' and an agreement to insure for
even three or more years, where the contingency may happen with-
in a year, is not within the statute.®
A verbal agreement of renewal which is not by its terms to
endure for a longer period than one year, though it may continue
for an indefinite period, is not within the statute.^ But a contract
to issue a policy and to renew the same yearly thereafter until the
insured shall otherwise direct, inasmuch as it is not to be performed
within one year, is within the statute, and is not taken out of it by
part ^performance by issuing a policy each of two preceding years."
10
Minnesota. — Ames-Brooks Co. v. ^ ^nieriean Central Ins. Co. v.
Min& Ins. Co. 83 Minn. 346, 86 N. Leake, 31 Ky. L. Rep. lOKi, 37 Ins.
\\. 344, 30 Ins. L. J. 802. L. J. 147, 104 S. W. 373; Howarc
Pennsijlvania.—Gixoiiiih&um Kera- Ins. Co. v. Owens, 94 Ky. 197, 14
raie Art' Syndicate v. German Ins. Ky. L. Rep. 881, 21 S. W. 1037;
Co. 213 Pa. 500, 62 Atl. 1107. 33 Phopuix Ins. Co. v. Spiers, 87 Ky.
Ins. L. J. 214. 286, 10 Ky. L. Rep. 254, 8 S. W. 453.
South Dakota. — Minneapolis See also Wicbeler \. Milwaukee, Me-
Threshino-^Macliine Co. v. Darnall, chauies ]\Iutual Ins. Co. 30 Minn.
13 S. Dak. 279, 83 N. W. 266, 29 Ins. 464, 16 N. W. 363.
L. J. 687. Eeinsurance : statute of frauds,
* Commercial Mutual Marine Ins. see § 116 herein.
Co. V. Union Mutual Ins. Co. 19 ' San ford v. Orient Ins. Co. 1(4
How. (60 U. S.) 318, 15 L. ed. 636; Ma^^s. 416, 75 Am. St. Rep. 358, 54
Union Mutual Ins. Co. v. Commercial N. E. 883; Sanborn v. Fireman's Ins.
Mutual Marine Ins. Co. 2 Curt. (U. Co. 16 Gray (82 Mass.) 448, 77 Am.
S. C. C.) 524. Fed. Cas. 14,372. Dec. 419; Howard Ins. Co. v. Owen,
5 Alabama.— Commovcml Fire Ins. 94 Ky. 197, 14 Ky. L. Rep. 881, 21
Co. V. Morris, 105 Ala. 498, 18 So. S. W. 1037. See also Walker v.
34; Gold Life Ins. Co. v. Mayes, 61 ^Metropolitan Ins. Co. 56 Me. 371;
Ala 163. See also: Croft v. Hanover Fire Ins. Co. 40
Arkansas.—Kln'j; v. Cox, 63 Ark. W. Va. 508, 52 Am, St. Rep. 902, 21
204, 37 S. W. 877. S. E. 854.
Kansas.— Fhwnix Ins. Co. v. Ire- ® Morse v. Minnesota & St. Louis
land, 9 Kan. App. (544, 58 Pac. 1024. Ry. Co. 30 Minn. 464, l(i X. W. 358.
MwsoMr/.— Melntvre v. Federal See Van Loan v. Farmers' Mutual
Life Ins. Co. 142 ^lo. App. 256, 126 Fire Ins. Assoc. 24 Hun (N. Y.) 132.
S. W. 227. ^ Trustees of First Baptist Church
New Tor/c.— International Fen-y v. Brooklyn Fire Ins. Co. 19 N. Y.
Co. V. American Fidelity Co. 207 N. 305; s. e. 18 Barb. (N. Y.) 69. See
Y. 350, 101 N. E. 100. § 1468 herein.
West Virginia.— Crott v. Hanover i° Klein v. Li\eipool & London &
Firo Inr,. Co. 40 W. Ya. 508, 52 Am. Globe Ins. Co. 22 Ky. L. Rep. 301,
St. Rep. 902. 21 S. E. 854. 57 S. W. 250.
191
§ 40 JOYCE ON INSUKAXCE
A contract may however, be divisible and partly within the statute,
and void as to that part and valid as to the other part, as in case
of a pai'ol agreement to answer for loss by fire, and for the default
and miscarriage of another.^^
§ 40. How far parol contract merged in written agreement. — A
I>arol contract to issue a policy is not merged in a written policy
which does not cover all the branches and elements of the parol
contract, and which the company does not admit as binding upon
it. ^2 So the issuing in consequence of a parol agreement of a policy
containing material errors resulting from a mistake of the agent of
the insurers in communicating the facts to them, and the agent's
error in requiring the insured to pay a premium which is less
than the rate agreed upon and less than the agent was authorized to
insure at, does not impair the liability of the insurers upon the
original agreement." and where the insurers on receiving a pre-
mium agreed to deliver a policy covering specific property, and
afterward sent a policy varying from the terms of the contract and
a loss occurred, it was decided that a recovery might be had in
accordance with the terms of the insurance contracted for. it ap-
pearing that the policy was received by a clerk and its provisions
not known to the insured till after the fire.^* So where the terms
of an order to insure have been materially departed from in the
policy by fraud or mistake, the order will be considered as con-
taining the contract between the pai-ties. But the order can be
resorted to only in so far as it varies from the policy ; in all otlier
respects the policy should be considered as the contract.!^ And if
an insurance company receives the premium paid to its agent who
made the contract and forwcirded the policy, it is bound by the con-
tract made by him, although by mistake it is not correctly stated
in the policy.^^
It may be stated that, as a general rule, the written contract will
be presumed to embody therein all previous verbal agreements of
the parties and will in the absence of fraud or mistake be conclu-
sive upon them." And in ^'ew York an insurance pohcy presump-
"]^robile Marine Dock & Mutual ^^ ^i,j.aham v. Nortli German Tns.
Ins. Co. V. Mc^Iillan, 31 Ala. 711. Co. (U. S. C. C.) 40 Fed. 717.
i2Xebra.<ka & Iowa Ins. Co. v. ^^ .AIeLaug:!ilin v. Equitable Life
Seiveis, 27 Xeb. 541, 43 X. W. 351. Assur. Co. 38 Xeb. 725, 57 X. W.
i^Buulen v. Orient Mutual Ins. 557. Examine §§ 185, 3806-3800
Co. 8 Bosw. (X. Y.) 448. lierein.
1^ Franklin Ins. Co. v. Hewitt, 3 B. See also the following cases :
I^Ion. (Ky.) 231. United States. — Northern Assur-
es Delaware Ins. Co. V. Hosran, 2 ance Co. v. Grand Yiew Buihlinir
Wash. (U. S. C. C.) 4, Fed. Cas. Assoc. 183 U. S. 308. 46 L. c.l. 213,
3765 22 Sup. Ctj. 133, 31 Ins. L. J. 97 (''It
192
PAROL CONTRACTS
§ 40
tively merges all previous stipulations and expro5A«es the final un-
derslanding of the parties. If, however, by inadvertence or mutual
is a fundamental rule, in courts both concealed its terms, and prevented
of law and equity, that parol con- com])lainant from leading- it. See
temporaneous evidence is inadmissi- McM aster v. New York Lite Lis. Co.
ble to contradict or vary the terms [U. S. C. C] 90 Fed. 40, 28 ln.s. L.
of a valid written instrument. ... J. 960. Botli the above cases are re-
This rule has always been followed versed in Mc.Master v. New York Life
and applied by the English courts in Ins. Co. 183 U. S. 25, 46 L. ed. 64, 22
the case of policies ot insurance in Sup. Ct. 10, 'M Tns. L. J. .15.5. The
writing'. . . . Coming to the de-
cisions in our state courts, we find
that, while there is some contrariety
ot decisions, the decided weiglit of
court per Sanborn, C. J., in the C. C.
A. case quotes from Union Mutual
Life Lis. Co. v. ]\Iowrv, 96 U. S. 544,
54/, 24 L. ed. 674, as follows: "All
authority is to the effect that a policy previous verbal arrangements were
of insurance in writing cannot be merged in the written agreement. The
chang-ed or altered by parol evidence understanding of tiie parties as to the
amount of the insurance, the condi-
of what was said prior or at the
time the insurance was ett'ccted.
. . . As to the fundamental rule
that Avritten contracts cannot be
modified or changed by parol evi-
dence, unless in cases where the eon-
tions upon wliich it sliould be paya-
l)le, and the premiums to be paid
were there expressed for the very
purpose of avoiding any controversy
or question concerning' them.
tracts are vitiated by fraud or mutual For compliance with arrangements
mistake, we deem it sufficient to say respecting future transactions, par-
that it has been treated by this ties must provide by stipulations in
court as invarial)le and salutary, their agreements when reduced to
. . . Policies of fire insurance in writing. The doctrine, carried to the
writing have always been held by extent for which tiie assured contends
this court to be within the protection in this case, would subvert the salu-
of this rule." Id. ])er Mr. Justice tary rule tliat the wi'itten contract
Shiras) ; Kentucky Vermillion Min- must prevail over previous verbal ar-
ing & Concentrating Co. v. Norwich rangements and open tlie door to all
Union Fire Ins. Soc. 14GFed. 695, 77 the evils wliich that rule was intend-
C. C. A. 121; Leder v. New York ed to prevent").
Life In.s. Co. 143 Fed. 814, 74 C. C. Georgia.— Vn\\\ev v. Preferred Ac-
A. 488 (parol evidence of prior ne- cident Ins. Co. 100 Ga. .■i30, 28 S. E.
398, 27 Tns. L. J. 368 Call tlie oral
gotiations inadmissible to contradict
certain and unambiguous terms of
written contract, even to raise an es-
toppel in pais) ; New York Life Ins.
Co. V. McM aster. 87 Fed. 63, 57 U.
8. App. 6.38, 30 C. C. A. 532, 28 Ins,
L. J. 698 (holding that no represen-
tation, promise,, or agreement made,
conversations and negotiations be-
tween the i)laintitf and the defend-
ant's agent in r(>firence to accident
insurance which tlie plaintiff desired
to procure in the defendant company
resulted in the ]daintitf tilling out
and signing an application for a pol-
or opinion expressed, i'.i the previous icy for such insurance in the defend-
parol negotiations as to the terms or ant company, and the agents of the
legal effect of the resulting written defeinhint gi\-iiig the plaint ilT a re-
agreement, can be permitted to pre- ceipt for a certain sum on the first
vail eitlier at law or in equity, over quarterly i)remiiim of the policy to
the plain provision*; and just inter- be issued by the defendant and weiv
pretation of the contract, in the al)- therefore merged in the said written
sence of some artifice or fraud which instruments bv virtue of the plain
Joyce Ins. Vol. L — 13. 193
§ 40 JOYCE ON INSURANCE
inistake, or fraud of one party and mistake of the other an accepted
policy fails to conform to a prior oral agreement to insure a court
will correct it.^^ Again, it is decided in an Oklahoma case, where
the court reviews at length numerous authorities, that: (1) It is
a fundamental rule of law that parol contemporaneous evidence is
inadmissible to contradict or vary the terms of a valid written in-
strument. (2) When parties have deliberately entered into a writ-
ten contract in such terms as import a legal obligation, without any
uncertainty as to the object or intent of such transaction, it is con-
clusively presumed that the whole transaction of the parties and the
extent and manner of their undertaking was reduced to writing;
and all oral testimony of previous negotiations or statements be-
tween the parties, or contemporaneous therewith, are merged in
the written instrument, in the absence of fraud or mutual mistake
of the parties. (3) A contract in writing, if its terms are free from
doubt or ambiguity, must be i^ermitted to speak for itself, and
and familiar rule that all oral nego- If the action is brought on the oral
tiations, conversations, and agree- contract underlying it, a complete
raents between parties to a written answer is that the negotiations were
contract which either precedes or ac- reduced to writing, and executed and
companies the execution of the instru- accepted by the parties." Id. per
ment are to be regarded as merged Hooker, J.).
in or extinguished by it, and the Washington. — Ferguson v. Lum-
writing is to be treated as the ex- bermen's Ins. Co. 45 Wash. 209, 88
elusive agi'eement by which the eon- Pac. 128, 36 Ins. L. J. 318 (oral evi-
tracting parties are bound." Id. per dence inadmissible which tends di-
Fish, J.). 7-ectly to contradict terms of policy
Kentucky. — Provident Savings and application by showing that more
Life Assurance Soc. of N. Y. v. With- property was covered than the writ-
ers, 132 Ky. 541, 21 L.R.A.(N.S.) ten contract specified).
30 note, 116 S. W. 350 (renewable West Virginia. — Providence-Wash-
term policy; special preliminary con- ington Ins. Co. v. Board of Educa-
tract became merged in policy when tion, 49 W. Va. 360, 38 S. E. 679, 30
issued, and .said policy constituted Ins. L. J. 577 (where parties have
the sole measure of the company's made a written agreement, the writ-
liability), ing is regarded as the exclusive evi-
Massachusetts. — Bowditch v. Nor- dence of the contract, and all oral
wieh Union Fire Ins. Soc. 193 Mass. negotiations preceding or accompanv-
565, 79 N. E. 788, 36 Ins. L. .J. 276. ing the execution of the written
Michigan. — Kleis v. Niagara Fire agreement are merged in it and are
Ins. Co. 117 Mich. 469, 5 IDet. L. N. not admissible in evidence).
.337, 76 N. W. 155 ("this was the Wisconsin. — Rief v. Continental
completion of a contract evidence of Casualty Co. 131 Wis. 368, 111 N. W.
Avhich was contained in the two writ- 502 (where no fraud or mistake evi-
ings, viz., the application and policy, dence to contradict or vary policy in-
which merged all negotiations and admissible).
agreements in the writing; and under ^^ International Ferry Co. v. Amer-
innumerable authorities it is not sub- ican Fidelity Co. 207 N. Y. 350, 101
ject to contradiction or variation bj' N. E. 160 (marine vessel liability in-
parol in an action brought upon it. surance), see § 3Sa herein.
194
PAROL CONTRACTS § 41
cannot by the courts, at the instance of one of the parties be
ahered or contradicted by parol evidence, unless in case of fraud
or mutual mistake of facts, and this principle is applicable to con-
tracts of insurance. ^^ The rule, however, that parol agreements are
merged in a written contract has no application where, in an action
to recover premiums with interest, paid on a life insurance policy,
it is alleged that the written contract was by fraud or mistake
executed differently from the terms of the agreement.^"
§ 41. Parol contract: renewal. — The term "renewal" means that
the old policy shall be repeated in substance. It is the same in
this connection as ''extended." ^ And where there is an agreement
for the renewal of a policy, the insured is justified in assuming
that the premium, and all the terms and conditions of the renewal
will be the same as those of the original unless he has notice of some
proposed change. In other words unless otherwise expressed, a
renewal of an existing insurance policy is on the same terms and
conditions as were originally contained in tlie pre-existing policy.
This is especially so where the terms of the original policy expressly
so provide and the verbal agreement to insure is made shortly before
the expiration of said policy and a part of the renewal premium is
paid with a promise to pay the remainder in a few days, said pay-
ment and promise being accepted by the agent of insurer.^ A
parol contract to renew an existing policy or contract of insurance
is valid. It may be based upon the payment of the consideration
or |)remium at the time the contract is made, or upon an express
agreement postponing said payment, or upon a course of dealing
l)etwcen the parties sliowing that they contemplated that credit
should be given for the premium, and that it need not be paid
^^ Liverpool &"^ London & Globe and altliouuli the insurer declined to
Ins. Co. V. T. ^I. Richardson Lumber renew hut tailed to notify insured or
Co. 11 Okla. 585, 69 Par-. 938, 31 Ins. return the premium paid. The loss
L. J. 997. See also Gish v. Ins. Co. occurred after the expiration of the
of Xortli America, 16 Okla. 59, 13 time specified in the receipt.
L.R.A.(N.S.) 826, 87 Pac. 869, 36 As to renewal poUc!/ bei)i(j on same
In.s. L. J. 227. terms and conditions as original, see
2*' Gwahnoy v. Provident Savinu' Si? 1460, 1463 herein. Examine §
Life Assurance Soe. 132 N. Car. 925, 37 liereiu.
44 S. E. 659, 33 Ins; L. J. 72. See Reinsurance sometimes means "re-
Mutual Life Ins. Co. v. Ilarsus, — newal." See § 112 lieivin.
Tex. Civ. App. — , 99 S. W. 580. ^ ]\iallctte v. Briti.^h American As-
1 Phoenix Ins. Co. v. Hale, 67 Ark. surance Co. 91 Md. 471, 46 Atl. 1005,
433, 55 S. W. 486, 29 Ins. L. J. 550, 29 Ins. L. J. 966. Compare O'KeiUy
554, per Iluuhes, J.: "P>indin<i- re- v. Corporation of London Assurance
ceipt" construed in this connection, Co. 101 N. Y. 575, 5 N. E, 568, dis-
and contract to renew lield \alid tinguislied in McCabe v. Aetna Ins.
even though said receipt was to be Co. 9 N. Dak. 19, 47 L.R.A. 641, 81
invalid on the issue of the renewal, N. W. 426, 29 Ins. L. J. 138.
195
41
JOYCE OX I^sSURANCE
wlien the renewal policy is issued but upon demand by the agent.^
And where insurance agents authorized to countersign, issue and
renew policies of insurance agree orally to continue an existing
contract of insurance and issue a renewal or policy therefor, the
insurer is obligated, although credit is given for the premium.*
And where an insurance agent had charge of all the insured's
insurance business for several years, under directions not to let
a policy expire unless told to do so, and under an arrangement
whereby the insured jiaid the premiums only on presentation
of bills therefor, and the agent had a pigeonhole in his safe
devoted to the exclusive custody of insured's papers, it was decided
that there was a valid renewal of an accident policy by the agent
attaching a renewal receipt to the original policy, charging the
renewal premium to insured and crediting the insurance company
with the amf)unt.* And a company through its authorized agent,
under §
' Baldwin v. Phoenix Ins. "Co. 107
Kv. 3o(i, 21 Kv. L. Rep. 1090, 54 S.
W. 13, 29 Ins.'L. J. 78. In this case
insurer's agent liad been issuing poli-
cies for years to insured without pre-
niiunis being paid when policies were
issued or renewals made, but said
premiums had been charged to in-
sured, and when the account Avas
presented it was paid. See quotation
from this case in note tp S 31
herein. Compare Klein v. Liverpool
& London & Globe Ins. Co. 22 Kv.
L. Rep. 301, 57 S. W. 250, noted
39 herein.
That parol contract to renew valid,
see:
Arkansas. — Kine v. Cox, Go Ark.
204, 37 S. W. 877.
• California. — American Can Co. v.
Aaricultnral Ins. Co. 12 Cal. App.
133, 106 Pac. 720, 39 Ins. L. J. 518
(but the evidence here did not estab-
lisli a parol contract).
Illinois. — Insurance Co. of North
America v. Bird, 175 Til. 42, 51 X. E.
686.
Indiana, — Western Assurance Co.
V. IMcAlpin, 23 Ind. App. 220, 55 X.
E. 119.
Kenfncky. — Hartford Fire Ins. Co.
V. Trimble', 117 Kv. 583, 25 Kv. L.
Rep. 1497, 78 S. W. 462, 33 Ins. L.
J. 348 (but evidence showed no en-
forcible contract)
Missouri. — Shepard v. Boone
Countv Mutual Fire Ins, Co. 138
Mo. App. 20, 119 S. W. 984, 38 Ins.
L. J. 904 (oral contract for renewal
valid, but facts here showed no oral
contract was made).
North Dakota. — Boos v. Aetna Ins.
Co. 22 N. Dak. 11, 332 N. W. 222,
40 Ins. L. J. 1787 (foUoicinfj Mc-
Cabe V. Aetna Ins. Co. 9 N. Dak. 19,
47 L.R.A. 641, 81 X. W. 426, 29 Ins.
L. J. 138).
* Squier v. Hanover Fire Ins. Co.
162 N. Y. 552, 76 Am. St. Rep. 349,
3{ N. E. 93. Compare Brown v.
Dutchess Countv Mutual Ins. Co. 71
N. Y. Supp. 670, 64 App. Div. 9.
As to agent's power to renew, see
§ 538 herein.
^ Washburn v. United States Cas-
ualtv Co. 106 :\Ie. 411, 76 Atl. 902,
108 "Me. 429, 81 Atl. 575.
As to prepai/ment of premium as
prerequisite: credit iov premium,
and custom as to same, see §§ 72,
78, 84, 1122, 1141 herein. See also:
United States. — Ins. Co. (Franklin
Fire Ins. Co.) v. Colt. 20 Wall. (87
V. S.) 560, 22 L. 0.1. 423: P.rooklvn
Life Ins. Co. v. :\IilkT (Miller v. Life
Ins. Co.) 12 Wall. (79 U. S.) 285,
20 L. ed. 398.
Arkansas. — King v. Cox, 63 Ark.
204, 37 S. W. 877'.
Indiana. — Western Assurance Co.
196
PAROL CONTRACTS
§ 41
may contract by parol for the renewal of a policy, although it be
stipulated on the face of the existing policy that it shall not be
renewed in that manner.^ Again, although the written appoint-
ment of an agent of a fire insurance company does not authorize
him to make oral contracts, still he may Ijind the insurer by a
parol contract to insure where such contract is a renewal of an
existing policy about to expire, if he has authority to negotiate,
lill up and issue blank jjolicies with which he is entrusted and
which are signed by the president and secretary of the company.
So where a contract of insurance is about to expire and insured
apjjUes for ten days further insurance and agrees therefor with
the agent, this may constitute a mere renewal of the pre-existing
insurance contract, and as written the agent's authority, when
his power to renew a policy by oral agreement is not limited.'^
And a parol agreement by an agent of a foreign insurance company
for renewal of a policy which had l^een originally issued by him will
be deemed to have been made by him in his representative capacity,
V. MeAlpin, 23 Ind. App. 220, 55 N.
E. 119.
Mon/Jand. — Union Fire Ins. Co. v.
Baltimore Asbestos Co. (Md.) 89
Atl. 408; Mallette v. British Ameri-
ean Assurance Co. 91 Md. 471, 46
Atl. lOn.3, 29 Ins. L. J. 96().
Michigan. — Dailey v. Preferred
Masonif IMntual Accident Assoc. 102
:\lich. 289, 26 L.R.A. 171, 57 N. W.
184.
North Dalota. — McCabe v. Aetna
Ins. Co. 9 N. Dak. 19, 47 L.R.A. 641,
81 N. W. 426, 29 Ins. L. J. 138 ("it
is also lU'ged tbat pre])aynient of the
premium for tiic renewal term was
neee.ssary to effect a valid renewal
but we are of opinion tliat lliis was
not e.s.sential. liy the terms of the
policy prejniyment of the ])remium
is not required. By the lanijiiae'e of
the policy, it may be renewed 'in
consideration of premium for I lie' re-
newal term.' This lan<z.ua<ie cannot
be con.strued .so as to retjuii'c prepay-
ment of such ])remium. Moreover,
this laniiuape in the ])olicv has ref-
erence only to Ihe completed contract
of renewal, and not to a preliminary
contract
J.).
Ohio. — Newark
to renew." Td. per Fisk,
Machine Co. v.
Kenton Ins. Co. 50 Ohio St. 549, 22
L.R.A. 768, 35 N. E. 1060.
Fennsiilrania. — Benner v. Fire As-
sociation of Pliila. 229 Pa. 75, 140
Am. St. Rep. 706, 40 Ins. L. J. 84,
78 Atl. 44. •
Te.ras. — Supreme Lodge Fnite<l
Benevolent Assoc, v. Lawson, — Tex.
Civ. App. — , 133 S. W. 907.
Wijoming. — Summers v. Mutual
Life "ins. Co. 12 Wvo. 369, 109 Am.
St. Rep. 952, 66 L.R.A. 812, 75 Pac
937.
Prior parol agi-eement a.s to pay-
ment of premiums — waiver and es-
tojipel, .see § 1354 liereiu.
^ Cohen v. Continental Fire Ins.
Co. 67 Tex. 325, 3 S. W. 296, 60 Am.
Rep. 24. See Gidding-s v. Pluenix
Ins. Co. 90 Mo. 272, 277, 2 S. W.
139; Roval Ins. Co. v. Beattv, 119
Pa. St. (), 12 Atl. 607.
Examine as to specialties, Fire-
men's Ins. Co. v. Floss, 67 Md. 403,
10 All. 139.
■^ King v. Phoenix Ins. Co. 195 Mo.
290. 113 Am. St. Rei>. 678, 6 Amer.
& Kng. Annot. Cas. 618, 92 S. W.
892. Compare Brown v. Dutchess
("•ounty IMulnal Ins. Co. 71 N. Y.
Supp. 670, 64 App. Div. 9.
197
§ 41 JOYCE ON INSURANCE
when he is aulhorized to i;;sue renewals.' But it is hehl in Penn-
sylvania, that an ai^ent appointed to the territory in question
with full power to receive proposals for insurance; with authority
to issue and countersign policies and renewal receipts "furnished
by said associations;" to assent to assignments and transfers, to
collect premiums, and to transact "such other business as may be
entrusted to his care'' is not thereby empowered to obligate and
SMfCabe v. Aetna Ins. Co. 9 N. Dill. (C. C.) 282, Fed. Cas. No. 1.1,-
Dak. 19, 47 L.R.A. 641, 81 N. W. 793; Baubile v. .ICtua Ins. Co. 'l Dill.
426, 29 Ins. L. J. 138 (iu tliis ease (C. C.) 356, Fed. Cas. No. 1,111;
there was nothing in the commission Scrauton Steol Co. v. Ward's Detroit
or in the policy authorizing tlie agent & Lake Superior Line (C. C.) 4t)
to make a preliminary oral agreement Fed. 866.
to issue or renew policies, neither Arkansas. — King v. Cox, 63 Ark.
Avas there anything restricting the 204, 37 S. W. 877.
agent's authority in this regard, "and California. — Stewart v. Helvetia
if such authority was conferred upon Swiss I^ire Ins. Co. 102 Cal. 218, 36
him, it must have been .so conferred Pac. 410.
1)V opei'at ion of law, from the express loica. — City of Davenport v.
authority given him." The agent Peoria ^larine & Fire Ins. Co. 17
liad express authority to receive pro- Iowa, 276.
posals for insurance; to act as sur- Kentucki/. — Security Fire Ins. Co.
veyor, and to appoint surveyors, for v. Kentucky iVfarine & Vive Ins. Co.
buildings to be insured, to make in- 7 Bush, 81, 3 Am. Rep. 30L
surance thereon by policies signed by Mari/land. — Phoenix Insurance Co.
the president and attested by the sec- v. Rylaiid, 69 Md. 437, 1 L.R.A. .')48,
retary, countersigned by said agent 16 Atl. 109.
as agent, and by the terms of the ])ol- Massachusetts. — Emery v. Boston
icy said agent might renew the same Marine Ins. Co. 138 Mass. 398, 412;
in the manner therein ])rovided. It Sanborn v. Firemen's Ins. Co. 16
was declared that such an agent was Gray (82 ]\rass.) 448, 77 Am. Dec.
a general agent. The court, per Fisk, 419.
J., cites and considers: Oti the point Missmiri. — Baile v. St. Joseph Fire
of general af/enci/. King v. Cox, 63 &. Marine Ins. Co. 73 Mo. 371.
Ark. 204, :57 S. W. 877; Post v. Aet- Xew YorA:.— Manchester v. Guard-
na Ins. Co. 43 Btiri). (N. Y.) 361; iau Assurance Co. ir)l N. Y. 88, 56
Lisihtliodv v. North American Ins. Am. St. Rep. 600, 47) N. E. 381;
Co. 23 Wend. {N. Y.) 22; IMcEwen IMore v. Xew York IJoweiw Firejlns.
v. Montgomery County ]\lutual Ins. Co. 130 X. Y. .")37, 29 N. K. 7.'')7;
Co. 5 Hill (N.' Y^.) 10.'). And on the O'Reilly v. Corporation of London
point thai a fjeneral a</enl with sim- Assiu'ance Co. 101 N. Y. 375, 5 N. E.
ilnr autlioriti) mail enter into a l>ind- 568; Van Loan v. Farmers i\Iutual
1)1(1 eiecutori/ contract Itii /xirol to Fire Ins. Assoc. 90 N. Y. 280; An-
issne or renew a poJicii in llic future gell v. Hartford Fire Ins. Co. 59 N.
the followino- cases: Y. 171, 17 Am. Rep. 322; Ellis v.
United ,S7rt«e.s\ — Insuraiu-e Co. Albanv Citv Ins. Co. .50 N. Y. 402,
(Franklin Fire Ins. Co.) v. Colt, 20 10 Am. Rep. 495; Truslees of First
AYall. (87 U. S.) 560, 22 L. ed. 423; Baptist Church v. Brooklyn Fire Ins.
Connnercial Mutual IMarine Ins. Go. Co. 19 N. Y. 305; Post v. Aetna Ins.
v. Union :\rutual Ins. Co. 19 IIow. Co. 4.3 Barl). 351; Shank v. Glens
(60 U. S.) 318, 321, 15 L. ed. 636; Falls Ins. Co. 40 N. Y. Supp. 14, 4
Tavlor v, Germania Insurance Co. 2 Ai)p. Div. 516.
198
PAROL CONTRACTS § 41a
bind the company by an oral agreement to renew in the future
an existing contract. There was, however, a law under which
the insurance company was organized which required every con-
tract or policy made by it to be in writing or print, and under
such charter provision it was determined that in the absence of
elements of estoppel the company was precluded from making a
binding parol contract to renew a policy in the future.^ In Ben-
jamin V. Saratoga Mutual Fire Insurance Company ^° a policy
of insurance was issued to plaintiff as agent of the owners. Plain-
tiff had an interest in the property as mortgagee, of which he
informed the insurers. .Vfterward he obtained title by foreclosure,
lie notified tlie insurers of this and of the fact that he had agreed
to convey to a third person. They consented that the policy should
remain valid till the vendee's title was perfected and it was held
that this agreement was equivalent to issuing a new policy to the
j)laintift'. A preliminary contract to insui-e or renew insurance
is not within the provisions of the policies of the insurer respecting
renewals, waiver, etc.^^
§ 41a. Same subject: standard policy: agent's authority. —
Where a local agent's commission empowered him to issue and
countersign policies on risks accepted by him ; to renew or cancel
such policies; and to assent to assignments thereof ])efore loss;
but such authority was subject to the terms and conditions of the
company's printed policy, and the agent's acts were not to be in
contravention thereof, or to operate as a waiver of them, the agent's
authority depended upon two writings, the agent's commission
and the printed policy, which was the standard policy, and it
provided for renewal under the original stipulations in considera-
tion of a premium for the renewed term; it also stipulated that
whatever was done by the agent must be done by writing indorsed
upon the policy; it was also held, in the absence of proof that the
agent's powers had been broadened, or that the insurer had ratified
Ohio.— Bayton Ins. Co. v. Keilv, Fire Ins. Co. 73 Wis. 100, 40 N. W.
24 Ohio St. ;J45, .3fi5. GOl ; Kino- y. Hekla Fire Ins. Co. 58
Oregon.— I'luvfhvk-k v. State Ins. Wis. 508, 17 N. W. 297; Tavlor v.
Co. 20 Oreg. 547, 2() Pac. 840. Phoenix Ins. Co. 47 Wis. 365.
South Carol itia. — Stickley v. Mo- As to agent's power to reneiv poli-
bile Ins. Co. 37 S. Car. 56^ IG S. E. cy, see § 538 herein.
280. ^ Benner v. Fire Association of
Te.m.s.— Cohen v. Continental Kiro Phihu 220 Pa. 75, 140 Am. St. Rep.
Ins. Co. 67 Tex. 325, GO Am. Rep. 70(1. 78 Atl. 44, 40 Tns. L. .1. 84.
24, 3 S. W. 29G. lo 17 N. Y. 415.
r//a^.— Idaho Forwardinj? Co. v. ^^ McCahe v. .Etna Ins. Co. 9 N.
Firemens Fnnd Ins. Co. 8 Utah, 41, Dak. 19, 47 L.R.A. G41, 81 N. W.
17 L.R.A. 58G, 29 Pae. 826. 426, 29 Ins. L. J. 138.
Wisconsin. — Campbell v. American
199
§ 41b . JOYCE UN IXSrifAN'CE
liis acts, or lliat lie hud ever been beUl out a.< having power to
l)iiid the company by an oral contract, to in?;ure or to renew
exi.sting insurance, tliat said agent had no authority to make an
oral contract of insurance or to renew an existing policy except in
accordance with the authority vested in him by his commission
and the '"printed ])olicy." ^^
§ 41b. Parol contract: renewal: contract must be complete: re-
covery: evidence to establish. — The contract to renew nuist be com-
plete as in cases of original insurance. ^^ And n\\ agreement to
continue an insurance being valid, a recovery may be had before
the issuance of the policy or the payment of the premium.^* But
mere loose general conversation relating to the renewal of a policy,
had between the assured and an agent authorized to renew policies,
cannot be deemed equivalent to a renewal. ^^ So evidence of a con-
versation between the owner of property and the agent of defendant
company about renewing another insurance, during which tlie
former said to the latter: "Don't forget the barn; Renew the barn
as quick as that comes due," and received the re})ly, "I will attend
to it; you don't need to worry," — is too vague and uncertain to
show clearly an oral contract to insure in the future. The conver-
sation consisted of a few words on the street, no money passed,
no memorandum wa.'^ made, and there was no definite promise,
and thereafter the owner instructed the agent to watch the insur-
ance.^^ And where the insured testified that he called the local
agent up to his ottice and told him that certain policies were about
to expire and asked him to renew them in the same companies
for the same amounts for another year, and there was some
conversation about higher rates and the agent agreed to renew
the policies and said he would not lose any time on the same, and
12 Caldwell V. Virsinia Fire & v. Aetna Ins. Co. 22 N. Dak. 11, 132
.Mariuf Ins. Co. 124 Teiui. 593, 139 N. W. 222, 40 Ins. L. J. 1787 (a re-
S. W. 698, 40 Ins. L. J. 1899. eovery can be liad for breaeli of parol
1^ American Can Co. v. Ao'ricnl- contract to insnre made Avith defend-
lural Ills. Co. 12 Cal. Ai>p. 133, 10(5 ant's authorized asient prior to ex-
Pac. 720, 39 Ins. L. J. 518; Johnson piration of the policy).
V. Connecticut Fire Ins. Co. 84 Ky. ^^ O'Heilly v. Corporation of Lon-
470, 2 S. W. 151, 8 Kv. L. Kep. 460; don Assur. Co. 101 N. Y. 575, 5 N. E.
King V. Hekla Fire Ins. Co. 58 Wis. 568. See also Croghan v. New Y^ork
508, 17 N. W. 297; Dinnino- V. Plice- Underwriters' Agency, 53 Ga. 109,
nix Ins. Co. 68 111. 414, 418. See 111: American Can Co. v. Ao-ricul-
iJ§ 43-49, 181 hcicin. tural Ins. Co. 12 Cal. App. 133, 106
14 Sprinti-er v. Aiislo-Nevada As- Pac. 720, 29 Ins. L. J. 518.
snr. Corp. 33 N. Y^ 543, 11 N. Y. ^^ B(,„„pi. v. Fire A.«.sociation of
Supp. 533. See Wainer v. :Milford Phila. 229 Pa. 75, 140 Am. St. Rep.
Mutual Fire Ins. Co. 153 Mass. 335, 706, 78 All. 44, 40 Ins. L. J. 84.
11 L.R.A. 598, 26 N. E. 877; Boos
200
PAROL CONTRACTS § 41b
they were to be renewed at their expiration, and the insured never
had any eonnnunicalion with the company rehitive to said oral
contract, and on cross-examination testified that he did not depend
upon the agent to renew hut upon the company, but on redirect
examination stated that lie depended upon the agent for said
renewals, such evidence does not establish an executed contract
of insiy-ance. It amounts to nothing more in law than an execu-
tory agreement to renew an existing ])olicy of insurance upon
its expiration at a future date.^'^ Again, Avhere it is sought to
establish renewal of an insurance policy in an action thereon, and
the plaintiff merely proves an application to the defendant's agent
to"bind"' or renew the policy, and, receiving no answer, supposed
that the policy was continued, no contractual obligation on the part
of the defendant is thereby established. In such case it is incum-
bent upon the party to repeat his question and take further action if
lie wishes to obtain assent of the company.^* And no present
contract of insurance which will sujiport an action to recover for a
loss is shown by evidence that, shortly before the expiration of the
former policy, plaintiff instructed his cashier, who was also the in-
surer's agent, to renew the policy when it expired, which the agent
promised but neglected to do.^^ But it is not necessary that
insured establish a parol contract to renew ''by clear and satisfactory
evidence," and an instruction to the jury that plaintiff must
establish his case "by a fair pre]5onderance of evidence" is not
error,2° AltlK)Ugh the pleading, in an action on a verbal agree-
ment to renew an existing policy, is defective in that it fails to set
forth with sufficient fullness and clearness the terms, agreements,
covenants, and stipulations contained in the original policy and
which were to be inserted in the renewal policy, still, the insured
will be entitled to recover upon evidence showing a previous insur-
ance, and a verbal agreement to renew. ^ So evidence of one suing
on a |)reliminary contract to renew a policy that he relied upon it
and would have procui'ed other insurance had he not believed that
the ])olicy was renewed, is admissible.^ But an offer to prove that
insurance agents arc accustomed to agree to renewals in advance
"Caldwell v. Viriiinia Fire & Ma- 20 j^ipC^bp y^ Aetna Tiis. Co. 9 N.
rine Ins. Co. 124 Tenn. f)!).!, ]3fl S. Dak. 19, 47 L.R.A. (i41. 81 N. W. 42G,
W. G08, 40 Ins. L. J. 18i)i). See § 29 Jns. L. J. 138. See § 3/60 lieiv-
41a herein. m.
"Royal Tn.s. Co. v. Beat! v, 119 Pa. ^ ]\lallette v. British America As-
St. 6, 4 Am. St. Rep. (J22, 12 All. snrance Co. 91 Md. 471, 40 Atl. 1005,
G07. 5 Pa. (L. ed.) 306. 29 Ins. L. J. 9G(l See § 38<- hei'ein.
i^Idalio Forwardim;- Co. v. Fire- 2 j^iv-Cabe v. Aetna Tns. Co. 9 N.
mens Fnnd Tns. Co. 8 TTtah, 41, 17 Dak. 19. 47 L.R.A. 041, 81 N. W.
L.R.A. 586, 29 Pac 82(i. 42(i, 29 Ins. L. J. 138.
201
§§ 41e, 41d JOYCE ON INSURANCE
of the e.\j)iratiuii of current policies and f;;ive credit for premiums
is properly refused when offered to establish the authority of the
agent to niake an oral contract for future insurance or the renewal
of insurance.^
§ 41c. Parol contract: renewal: standard policy: equitable es-
toppel. — In Teuuessee, as above stated, the standard policy terms
and conditions are construed and held to govern the extent of a
local agent's authority under his commission to make oral contracts
of insurance or renewals of existing policies, and, thus construed
and upon the evidence, the agent's want of authority to make such
oral contract has been held to preclude a recovery and where at
the date of the claimed oral contract sued on the insured held an
unexpired policy, issued by the defendant company, containing
a stipulation precluding the insured from claiming any privilege
or permission affecting the insurance under said policy, unless the
same should be written on the policy or attached in writing thereto,
an equitable estoppel arises against assured to set up an oral
contract to renew said policy as the oral contract would be in fraud
of the insurer's rights and said estoppel set up as a matter of
defense in the answer is good against the complainant. And
even though it might be claimed that the oral contract contemplated
the execution of a new printed or written evidence of the contract
of insurance beginning at the instant of the expiration of the old
policy, and that each of these evidences constitute in and of them-
selves different contracts, nevertheless the estoppel exists whei'e
the parties, the subject matter or property, the amount of indemnity,
and the cause of loss contemplated by the oral contract are the
same as in the printed policy. And a party cannot in a court of
equity expect a decree for damages for the breach of a contract of
which that court would refuse to decree specific performance. And
where complainant avers his legal right to an executed oral contract
but fails to prove it, and avers in the alternative an executory oral
contract, and invokes the equitable doctrine of specific performance
he must abide by the equitable rules governing that branch of llie
jurisdiction of the court. And the variance is fatal where tlie
existence of an oral executed contract is averred and the proof
shows merely an executory contract to renew a policy.*
§ 41d. Parol contract: reinsurance: validity. — The contract of
reinsurance involves no legal princii)les essentially different from
those applicable to contracts generally, and although the contract
'P>enner v. Five Association of * Caldwell v. Yirainia Fire & Afn -
Phila. 22!) Pa. 75, 140 Am. St. Pvep. rine Ins. Co. 124 Tenn. 593, 139 S.
706, 78 Atl. 44, 40 Ins. L. J. 84. AV. G98, 40 Ins. L. J. 1899.
202
PAROL CONTRACTS § 41e
differs in many respects from a contract of insurance,^ still it
is held to be a contract of insurance and not required to be in
writing, a parol agreement therefor being valid. It may, however,
be a question for the jury whether such a contract of reinsurance
exists.^ But under an English decision, in 1911, there was a verbal
agreement for reinsurance, or to sign a policy on certain conditions
whicli were complied with, but the defendant, an underwriter at
Lloyds, refused to sign, and an action was brought to recover dam-
ages for breach of the verbal agreement. It was determined that
the action could not be maintained, because the verbal agreement
was a contract of sea insurance, and was invalid under the stamp
act, 1891,' as not being exnressed in a policy of sea insurance,
and the defendant would, if he paid the loss, be paying money upon
a loss relative to sea insurance, which insurance was not expressed
in a policy of sea insurance duly stamped, and he would, therefore,
be liable to a jienally under the slamj) act 1891.8
§ 41e. Parol agreement for reinsurance may be specifically en-
forced. — A suit in equity may be su^tained to compel specitic per-
formance of an oral contract to reinsure.^
^ See §§ 113, 126, 128, 130 herein, means of an "open cover," tlie risks
Esamine Ivigle Ins. Co. v. Lat'a.x- they had insured as to cargo to he
ette Ins. Co. 9 Ind. 44G; Consoli(Uit- carried in certain steamers for a jie-
ed Real Estate Co. v. Cashow, 41 Md. riod of twelve months. The plain-
59; Manufacturers Fire & Marine tiffs became liable for a loss, but de-
Ins. Co. v. Western Assur. Co. 145 I'endant refused to sign the policy
Mass. 419, 14 N. \\. ()32: Jackson v. put forward by plaintiffs in respect
St. Paul Fire & ^larine Iwii. Co. 99 thereto, under the claim tliat the f'or-
N. Y. 124, 1 X. E. .")39. mer had not made all the declara-
^Mclntyre v. Federal T^ife Ins. Co. tions they should have made under
142 Mo. App. 256, 12() S. W. 227. the ''open cover." By verbal agree-
See Commercial Mutual >hirine In^. ment an independent person was ap-
Co. V. Union Mutual Ins. Co. 19 How. pointed who examined plaintiff's
(60 U. S.) 318, 15 L. ed. 636, ^vlli(•]l hooks and certified that all the dec-
was an agreement to reinsure. larations had been made, but al-
' Sec. 93. though defendant had agreed to sign
'Sec. 97. Genfursikriiigs Aktie- the l)olicy upon such certilication, it
selskabet (Skandinavia lieinsurance refused to sign or to pay the loss.
Co. of Copenhagen) v. Da Costa ^Commercial AFutual Marine Ins.
(Eng. C. A.) : [1911] 1 K. B. (Law. Co. v. Union Mutual Ins. Co. 19
Rep.) 137. Plaintiffs reinsured bv Ifow. (60 U. S.) 318, 15 L. ed. 636.
203
CHAPTER IV.
REQUISITES OF VALID CONTRACT— COMPLETION OF CON-
TRACT.
SuBDiv. I. Requisites op Valid Coktractt.
II. Completion of Coxthact — Proposal and Acceptance.
III. Completion op Contract — Prepayment of Premium.
IV. Completion of Contract — Delivery of Policy— Knowl-
edge OF Loss.
SuBDiv. I. Requisites of Valid Contract.
§ 43. Requisites of a valid contract of insurance.
§ 44. Requisites of a valid parol contract of insurance.
i^ 44a. Same subject : identity of parties : designation of insurer.
§ 44b. Same subject : designation of insured.
§ 44c. Oral contract for reinsurance or for renewal must be complete.
§ 45. Minds of the parties must meet on all essentials of contract.
>; 45a. Same subject : where impossil)le to obtain dctinite particulars or im-
portant facts.
^ 46. Essentials need not be expressly agreed upon: prior course of deal-
ing, custom, etc.
§ 47. The usual rate of premium will be presumed to have been intended.
^ 48. Both the rate of premium and the duration of the risk may be under-
stood.
§ 49. The rate of premium and amount may be understood.
§ 50. Whether contract exists may be governed by custom or usage of the
parties or of the insurance business at a place.
§ 43. Requisites of a valid contract of insurance. — To coll^^tit^te
a valid contract of in>«urance it is necessary that there .should be
(1) parties thereto, (2) a ])revniinn. (3) a subject-matter, (4) an
insurable interest. ( o) certain risks or perils, (6) duration of the
risk, (7) the amoiiut insured.^" It is also essential to a valid con-
10 J. C. Smith tS: Wallace Co. v. App. 789, 59 S. E. 94; Shawnee
Pru-ssian National Ins. Co. 68 N. J. Mutual Fire Ins. Co. v. McClure, 39
L. 674, 54 Atl. 458, .32 Ins. L. .1. 559, Okla. 535. 49 L.R.A.(N.S.) 1054, 135
per Garretson, J. See also Todd v. Pac. 1150: Cleveland Oil & Paint
German-American Ins. Co. 2 Ga. Manufacturing Co. v. Norwich Union
204
KEgUISITES OF VALID CONTRACT § 4;j
tract of insurance that the time of the comniencenient of the risk
be agreed upon.^^ And there can be no conii)l('(e contract of in-
surance, unless all these essentials exist, either exjjressiy or by
imi)lication. But "neither the times and amoiqits of ])ayments by
the assured, nor the modes of estimating or securing the payment
of the sum to be paid by the insurers, alfect the question whetlier
the agreement between them is a contract of insurance. All that
is requisite to constitute such a contract is the payment of the con-
sideration by the one and the promise of the other to, ])ay the
amount of the insurance upon the happening of injury to the sub-
ject by a contingency contemplated in the contract." ^^ And the
omission of a statement in the ])olicy of the amount of the prem-
iums which is i>aid does not invalidate insurance. ^^ It is also neces-
sary that the parties be those capable of contracting,^* and that the
Fire Ins. Soc. 34 Oreg. 228, 55 Pac. called the subject-matter" (marine
435. insurance). 17 Earl of Halsbury's
The essentials of a contract of in- Laws of England, p. 33(3. See also
suranee are a subject-matter, the risk as to essentials 17 Id. pp. 339 et seq.
insured against, tlu; amount, duration & notes. Contract or "policy of sea
of the risk, and the premium : Tyler insurance" which does not specify
V. New Amsterdam Ins. Co. 4 Kob. the sum or sums insured is invalid
(N. Y.) 151; Trustees of First Bap- and cannot be stamped or sued on as
tist Church v. Brooklyn Ins. Co. 28 such policy. Home Marine Ins. Co.
N. Y. 153. Essentials' are, the prem- Ltd. v. Smith [1898] 2 Q. B. D. L.
ises, the risk, the amount, the time K. 351. L1898] 1 Q. B. 829, 67 L. J.
the risk should continue, and the pre- Q. B. N. S. 777, 554, 78 L. T. Kep.
mium: Strohn v. Hartford Fire Ins. 734, 465. Completed contract: what
Co. 37 Wis. 625; 19 Am. Kep. 277. constitutes: intent of parties, see
Kate of premium should be agreed note 138 Am. St. Kep. 38, 43. Keciui-
upon. Roberta ]\Ianufacturing Co. v. sites of valid policy, see § LSI herein.
Koval Exciiange Assur. Co. 161 N. ^^ Whitman v. Milwaukee Fire Ins.
Car. 88, 76 S. E. 865. See Hartford Co. 128 Wis. 124, 116 Am. St. Rep.
Fire Ins. Co. v. Whitnum, 75 Ohio 25, 5 L.R.A.(N.S.) 4U7n, 107 N. W.
St. 312, 79 N. E. 450, 36 Ins. L. J. 291. See S^ 46, .-)0 herein.
19. But compare S§ 46-49 herein. ^^ Commonwealth v. Weatherbee,
The substantial elements of a con- 105 Mass. 149, 160, per (h-ay, J.;
tract of insurance are the payiuent State v. Farmers' & [Mechanics' ^VIu-
of a consideration by one party and tual Benevolent Assoc. 18 Neb. 276,
the promise of the other to pay an 25 N. W. 81.
agreed amount upon the happening donsideraHon is any benefit con-
of the specified contingency, it being f erred upon the promisor to which
understood that the former party had he is not lawfully entitled. Schadt
an insurable interest in the sul)jcct \. Mutual Life Ins. Co. 2 Cal. App.
matter: Bolton v. Bolton, 73 Me. 715, 84 Pac. 249, Cal. Civ. Code,
299, 303. To render the contract sec. 1605.
complete, there should be a matter " Whcaton v. Liverpool & London
to form its subject, and this matter & Globe Ins. Co. 20 S. Dak. 62, 104
should be exposed to the hazards of N. W. 850. Eramive §§ 45-50 herein.
the sea: Emerigon on Ins. (Mere- ^* See §§ 34, 305 et se(|. hen'in.
dith's ed.) c. i., sees. 1, 2, pp. 5, 11, As to consent of person wliose life
"The thing or property insured is is insured, see note 56 L.K.A. 585.
205
J? 44
JOYCE OX 1X.SIKAXCK
risk be a legal one, not repugnant to public policy nor po.sitive pro-
hibition, nor occa:5ione(l by the insurer's own fraud or miscon-
duct, nor an infringement of the rights of persons not parties to
the contract. ^^
§ 44, Requisites of a valid parol contract of insurance. — A parol
contract for insurance must contain all the essentials of a valid
agreement so that nothing remains to be done but to lill up and
deliver the policy on the one hand, and to pay the premium on the
other.^^ The contract must also be fairlv entered into for a aood
consideration between parties competent to contract,^''' and the
minds of the insured and insurer must come together in mutual
agreement on every material point constituting a contract in order
^* Bell V. Western Marine & Fire uncertain in its terms. Evidence
Ins. Co. 5 Rob. (La.) 423, 39 Am. tended to establish a valid contract
Dec. 542; 1 Phillips on Ins. (3d ed.), to insure).
492, sec. 906. See § 34 herein. Mississippi. — Franklin Fire Ins.
On validity of contract of insur- Co. v. Taylor, 52 iMi.<s. 441.
ance in violation of statute, see note ^ew Jerseif. — Consumei's' Match
in 12 L.R.A.^N.S.) 612; on validity Co. v. Germaii Ins. Co. 70 N. J. L.
of insurance on intoxicating liquors 226, 57 Atl. 440, 33 Ins. L. J. 525,
as affected bv liquor laws, see note in 32 Ins. L. J. 180.
31 L.R.A.(N.S.) 874. ^eiv YorA-.— Sandford v. Trust
16 People's Ins. Co. v. Paddon, 8 Fire Ins. Co. 11 Paige (N. Y.) 547;
Bradw. (111.) 447. Tyler v. New Amsterdam Fire Ins.
See also, the following cases: Co. 4 Rob. (N. Y.) 15l.
Uniled States.~Kqm{ab\e Life Ins. O///0.— Hartford Fire Ins. Co. v.
Co. V. McElroy, 83 Fed. 631, 49 U. Whitman, 75 Ohio St. 312, 79 N. E.
S. App. 648, 28 C. C. A. 365, 27 Ins. 450, 36 Ins. L. J. 19 (when oral
L. J. 361. contract incomplete.)
Alabama.— Stephenson v. Allison, P en >i s i/Iv a ni a. —Bennev v. Fire
165 Ala. 238, 51 So. 622; Home Ins. -'^^soc. of Phila. 229 Penn. 75, 75
Am. St. Rep. 706, 78 Atl. 44, 40 Ins.
-. .. ^, .^ . „^„. ^
Illinois. — Insurance Co. of North ',;. . ^, , , • ,-.
\\isco)ism. — Chamberlain v. Pru-
dential Ins. Co. of America, 109 Wis.
4, 83 Am. St. Rep. 850, 85 N. W.
128 ; .John R. Davis Lumber Co. v.
Scottish Union & National Ins. Co.
94 Wis. 472, 69 N. W. 156; Stehlick
v. Milwaukee Mechanics Ins. Co. 87
Co. V. Adler, 71 Ala. 516.
America v. Bird, 175 111. 42, 51 N
E. 686, affg. 74 111. App. 306; Bar-
low v. Farmers' Mutual Fire Ins. Co.
1'28 111. App. 580; Hartford Ins. Co.
v. Wilcox, 57 111. 180.
Indiana. — Kentuckv Mutual Ins.
Co. V. Jenks, 5 Ind. 96; Posey Coun- ^^.^^^ ^^ ^g ^^ ^ 35^^
^7 ^^^.t,^^!«^: I Hogan, 3. Ind. On requisites of a pree
App. 573, 77 N. E. 670.
Mussach usetts. — Cunningham v.
Connecticut Fire Ins. Co. 200 Mass.
333, 86 N. E. 787, 38 Ins. L. J. 315
(held, no binding parol contract
here) ; Real Estate Mutual Fire Ins. rish. 73 111. 166.
present oral eon-
tract of insurance, see note in 5
L.R.A.(N.S.) 407; on validity of oral
contract of insurance generallv, note
in 22 L.R.A. 768.
1' Hartford Fire Ins. Co. v. Far-
Co. v. Roessle, 1 Gray (67 Mass.) 336.
Minnesota. — Ames-Brooks Co. v.
Rate of premium not fixed, see
Hartford Fire Ins. Co. v. Whitman,
.Etna Ins. Co. 83 Minn. 346, 30 Ins. 75 Ohio St. 312, 79 N. E. 450, 36
L. J. 802 (contract not void because Ins. L. .T. 19.
206
REQUISITES OF VALID CONTRACT § 44a
to constitute a complete oral contract for insurance. ^^ A parol con-
tract must otherwise conform to the rules given in the last section
in regard to legality of the contract. It is declared in the case of
1-ife insurance companies whose custom is to contract by written
policies, that until such policy is delivered and the premium paid
the presumption is that there were negotiations, but no contract,
and no intention to contract, before delivery of the policy.^® But
a valid contract of life insurance may exist even though no policy
is issued.^" But an oral contract is incomplete and unenforceal)lc
for want of certainty as to the pai'ties. the risk insured against, and
the duration of the insurance.-' And instructions by a general to
a local agent, who signifies his desire to write a policy on his own
property, to write it in the usual way, do not constitute a binding
contract of insurance, even though it is a custom for agents to in-
sure their own property, and such instructions are supplemented by
the writing of the policy-, where at the time of the conversation
between said agents the subject matter of insurance was not in
existence, no statement made of the value of the property to be
insured, no amount stated, no rate of premium fixed, and the in-
surance company never accepted or delivered the policy, and no
premium was ever paid.^
§ 44a. Same subject: identity of parties: designation of in-
surer. — Where an insurance agent represents several companies,
and there is no designation of the company to take the risk, there
is no contract, because of failure of parties.^ Sq an oral agree-
18 Bell v. Peabodv Ins. Co. 49 W. ^ Ogle Lake Shingle Co. v. Na-
Va. 437, .38 S. E. 541, .30 Ins. L. J. tional Lumber Ins. Co. 68 Wash. 1«5,
627; Ogle Lake Shingle Co. v. Na- 122 Pae. 990.
tional Lunil)er Ins. Co. 68 Wash. 185, ^ Zimmerman v. Dwelling House
122 Pae. 900. See Ames-Brooks Co. Ins. Co. 110 Mich. 399, 33 L.K.A.
V. .^:tna Ins. Co. 83 Minn. 346, 86 698, 68 N. W. 215, 26 Ins. L. J. 77.
N. W. 344, 30 Ins. L. J. 802. See ^ Qgle Lake Shingle Co. v. Na-
§ 45 herein. tional Lumber Ins. Co. 68 Wash.
" EquitJibh- Life Assurance Soc. v. 185, 122 Pac. 990, citing New Or-
McElrov, 83 Fed. 631, 49 U. S. App. leans Ins. Assoc, v. Boniel, 20 Fla.
648, 28 C. C. A. 365, 27 Ins. L. J. 815; Hartford Fire Ins. Co. v. Trim-
361. Caldwell, C. J., dissented. ble, 117 Ky. 583, 25 Ky. L. Rep.
Meaning of "negotiation," see note 1497, 78 S. W. 462, 33 Ins. L. J.
to § 55 herein. 348; Kleis v. Niagara Fire Ins. Co.
As to delivery of policy, see Inter- 117 Mich. 469, 76 N. W. 155; Michi-
national Forrv Co. v. American Fi- gan Pipe Co. v. Michigan Fire &
delity Co. 207 N. Y. 350, 353, 101 Marine Ins. Co. 92 Mich. 482, 20
N. E. 160. See also §§ 90 et seq. L.R.A. 277, 52 N. W. 1070; John R.
herein. Davis Lumber Co. v. Scottish Union
20 Carter v. Bankers Life Ins. Co. & National Ins. Co. 94 Wis. 472, 69
83 Neb. 810, 120 N. W. 455. See N. W. 156; Sheldon v. Hekla Fire
also §§ 31 et seq. herein. Ins. Co. 65 Wis. 436, 27 N. W. 315.
207
§ 44a JOYCE UX IXSL'li'ANCE
nient will fail where under the rules of conslniction Ihere is a want
of identity of the |)artie.s to the contract. This ajiplies where an
asicnt of several companies is applied to for insurance, and there is
no proof or claim that at the date of application for insurance there
wa< any ati'reement on the part of insurer's agent that it was to be
placed with the defendant company.'* In such cases it is held that
there should he a designation of the company or companies to carry
the risk as well as the amount to be assumed by each and this agree-
ment should be mutual.^ But even though if an agent for several
insurance companies is directed to place a given amount of insur-
ance, without any expectation on the ))art of the ap|)licaiit that it
will all he written in any one of the companies, which are not men-
tioned by name, no contract exists as to any one or all of them, and
no liability attaches until further action is taken to determine and
deline the risk, in doing which the agent acts as agent of insured,
still the agents agreement t(» ])lace a certain amount of insurance,
to select t]ie companies, distribute the risk and give the insurance
constitutes a valid contract of insurance with each company as soon
as its policy is signed, although the policies are not deli\ered until
after the property is destroyed by fire.^ And where persons contract
for insurance with the agents of several companies without specify-
ing in which the insurance is desired, and subsequently the agents
designate a particular corporation a.s the insurer, they pos.«essing
tiie power to make such designation, this completes the contract,
and makes the insurer so designated liable for a subsequent loss.'
So where the agent represents several companies and wilji full ])()w-
er in tlie premises designates a company in which to place the i-isk
and carry the insurance, and the time the policv is to run, the in-
sured's name, the rate, the amount, and the gt)ods to he insured are
all agreed upon, approved and placed on (lie by such agent, there
is a com])lete oral conti'act of insurance.* Again, it is held to be
* Hartford Fire Ins. Co. v. Triyi- tollo v. Grntit Couiitv Mutual Fire &
ble, 117 Kv. 583, 25 Kv. L. Kep. Lif-Iitinu"- Ins. Co. 133 Wis. 3(il, 11:5
497. 78 S. W. 4ti2, 33 Ins. L. J. 348; N. W. (i3!). Compare Axues-Hrooks
Insurance Co. of Nortli America v. Co. v. ^F]tna Ins. Co. 83 Minn. 34(5,
lUrd, 175 111. 42, 51 N. E. 686, affg. 86 N. W. 344, 30 Ins. L. J. 802.
74 111. App. 306; John R. Davis As to description of parties, see
Lunil)er Co. v. Scottish Union & Na- §§ 310, 1689 herein,
tional Ins. Co. 94 Wis. 472, 69 N. W. ^ j\ii^.i,i„.,„ pj^g q^^ ^ IVfichigan
156. Fire & Marine Ins. Co. 92 Midi. 482,
^ John R. Davis Lumber Co. v. 20 L.R.A. 277 (annotated on when
Scottish Union & National Ins. Co. insurance af^ent is agent ot insured)
94 Wis. 472, 09 N. W. 156. See In- 52 N. W. 1070.
surance Co. of North America v. ' Croft v. Hanover Fire Ins. Co.
Bird, 175 111. 42, 51 N. E. 086. affg 40 W. Va. 508, 52 Am. St. Rep. 902,
74 111. App. 306; Mooney v. Mer- 21 S. E. 854.
riara. 77 Kan. 305, 94 Pac. 263; Cos- * Thompson v. Germania Fire Ins.
208
REQUISITES OF VALID CONTRACT §§ 44b-45
error to non-suit the plaintiff in an action upon a fire insurance pol-
icy, on the ground that no completed contract of insurance is shown,
where it appears that the plaintiff directed an insurance agency,
in which the defendant company, as well as other companies, was
represented, to carry for him, on the property subsequently burned,
a certain amount of insurance, that policies to the amount specified
were written in different companies, chosen by the agency, and
that, upon one of these companies becoming bankrupt, the agency
replaced the portion of insurance which was carried by that com-
pany by writing a policy of similar amount in the defendant com-
})any, notwithstanding it further appears that the plaintiff did not
know of the substitution of policies until after the fire occurred,
and although the new policy was never actually delivered to him.*
§ 44b. Same subject: designation of insured. — The fact that the
agent's memorandum of insurance designated one person, when the
insurance was applied for and intended to be paid to another, does
not invalidate an oral contract of insurance.^"
§ 44c. Oral contract for reinsurance or for renewal must be
complete.^^ — And no i>resent contract of insurance which will sup-
port an action to recoxer for a loss is shown by evidence that, short-
ly before the expiration of a former policy, plaintiff instructed his
cashier, who was also the insurer's agent, to renew the policy when
it expired, which the agent promised but neglected to do.^^
§ 45. Minds of the parties must meet on all essentials of con-
tract. — There must be a meeting of minds upon all the essentials
of a valid contract of insurance. If any of the material details re-
main to be determined, the contract is not complete." Concur-
Co. 45 Wash. 482, 88 Pae. 941, 3U man's Fund Ins. Co. 8 Utah, 41, 17
Ins. L. J. 400. L.R.A. 586, 29 Pac. 820.
* Todd V. German-Anicrif-an Ins. On validily of oral agi'eeniont to re-
Co. 2 Ga. App. 789, 59 S. E. 94. new or extend policy, .see note in 22
^•^ Croft V. Hanover Fire Ins. Co. L.R.A. 772: on teiius and conditions
40 W. Va. 508, 52 Am. St. Rep. 902, of nsual written i)o!icy as affecting a
21 S. E. 854. Examine Phillips v. claim nnder or damages lor breacli of
Union Central Life Ins. Co. (U. S. an oral contract to renew policy, see
C. C.) 101 Fed. 33, rev'd Union Cen- notes in 48 L.R.A. (N.S.) 321, 324.
tral Life Ins. Co. v. Phillips, 102 " fj^Ycr/ ,s7a/.e.s\—Mntnal Life Ins.
Fed. 19, 41 C. C. A. 263. Co. v. Young, 23 Wall. (90 U. S.)
^^ Manchester Fire Ins. Co. v. In- SiS, 23 L. ed. 152; Kennedy v. Mu-
surance Co. of Illinois, 91 111. App. tual Benelil Life Ins. Co. (U. S. I).
609 (held that essentials not agreed C.) 205 Fed. 677; Travis v. Neder-
on here) : Doherty \. Millers c^' Man- land Life Ins. Co. Ltd. 104 Fed. 486,
ufacturers Ins. Co. 4 Ont. Law Rep. 43 C. C. A. ()b'.\\ Kimball v. Lion
303 (case of renewal policy held not Ins. Co. 17 Fed. 625, 626.
complete; renewal not accepted; AUihanui. — Home Ins. Co. v. Ad-
higher rate charged). lei-, 71 Ala. 516.
^^ Idaho Forwarding Co. v. Fii'c- Georgia. — Todd v. German-Ameri-
Joycp Ins. Vol. I. — 14. 209
§ 45 JOYCE ON INSUKANCE
rence of minds is esvsenlial. The impressions of one alone of the
parties is insufficient.^* In brief nothing should be left open for
future determination. The assent must be nmtual, since this meet-
ing of minds is vital to the life of the contract. This obligation is
correlative, and depends upon the acts of the parties themselves,
and if one party is not bound it necessarily follows that there is no
obUgation on the other party. ^^ But the terms being specified, the
minds of the parties meet when the insurer signifies his acceptance
of the application to the applicant.^® AVhere, however, one made
application for life insurance, gave his note for the premium, and
took a receipt from the company's agent, giving the company the
right to accept or reject the application, and the company did not
agree to the terms, but issued a policy Mith different terms, and sent
the same to the agent, but before delivery the applicant died, his
note being unpaid, it was held that there was no mutual assent of
parties, and no contract of insurance."
can Ins. Co. 2 Ga. App. 789, 59 S. 639; Wliitman v. Milwaukee Fire
E. 94. Ins. Co. 128 Wis. 124, 116 Am. St.
Illinois.— Covenant Mutual Benefit Rep. 25, 5 L.R.A.(N.S.) 680n, 107
Assn. V. Conway, 10 Brad. (10 111. N. W. 291; John R. Davis Lumber
App.) 348. " Co. V. Scottish Union & National
Massachusetts.— QuiW v. Boston Ins. Co. 94 Wis. 472, 69 N. W. 156.
Ins. Co. 197 Mass. 216, 83 N. E. i* Roberta Manufacturing Co. v.
401; Cunningham v. Connecticut Roval Exchange Assur. Co. 161 N,
Fire Ins. Co. 200 Mass. 333, 86 N. Car. 88, 76 S. E. 865.
]■:. 787, 38 Ins. L. J. 315; Goddard "Mutual Life Ins. Co. v. Young,
V. Monitor Mutual Fire Ins. Co. 108 23 Wall. (90 U. S.) 85, 23 L. ed.
Mass. 56, 11 Am. Rep. 307. 152; Elia.son v. Henshaw, 4 Wheat.
Micliinfin. — Serane v. Portland, 9 (17 U. S.) 225, 228, 4 L. ed. 556, 557;
Mich. 493. Hallock v. Commercial Ins. Co. 27 N.
New YorA-.— Bradley v. Standard J. L. 645, 72 Am. Dec. 379; Strohn
Life & Accident Ins. Co. 98 N. Y. v. Hartford Ins. Co. 37 Wis. 625, 19
Supp. 797, 112 App. Div. 536 (con- Am. Rep. 777.
sidered under § 62a herein) ; Trus- ^^ Schwartz v. Germania Ins. Co.
tees of First Baptist Church v. 18 Minn. 448, 455.
Brooklyn Fire Ins. Co. 28 N. Y. 153. " JMutual Life Ins. Co. v. Y^oung,
North Carolwa.—Boss v. New 23 Wall. (90 U. S.) 85, 23 L. ed. 152.
York Life Ins. Co. 124 N. Car. 395, Cited in :
32 S. E. 733. United States.— Giddings v. North-
Oldahoma. — Shawnee ^Mutual Fire western Mut. L. Ins. Co. 102 U. S.
Ins. Co. V. McClure, 39 Okla. 535, 112, 26 L. ed. 93; La Compania Bil-
49 L.R.A.(N.S.) 1054, 35 Pac. 1150. baind v. Spanish American Light &
South Dakota.— l^oYdue^s v. Mutu- Power Co. 146 U. S. 483, 497, 36 L.
al Cash Guaranty Fire Ins. Co. 22 ed. 1054, 13 Sup. Ct. Rep. 142; Pen-
S. Dak. 1, 114 N." W. 1092. dleton v. Knickerbocker L. Ins. Co. 7
West Virginia.— MeCullfs Adm'r Fed. 178; Hamblet v. Citv ]ns. Co. 36
V. Phoenix Mutual Life Ins. Co. 18 Fed. 122; Paine v. Pacific Mut. L.
AY. Va. 782. Ins. Co. 2 C. C. A. 461, 10 U. S.
Wisconsin.— Cof^teWo v. Grant App. 256, 51 Fed. 691; Starr & Co.
County Mutual Fire & Liglitning v. Galgate Ship Co. 15 C. C. A. 373,
Ins. Co. 133 Wis. 361, 113 N. W. 29 U. S. App. 599, ()8 Fed. 241;
210
REQUISITES OF VALID CONTRACT
§ 45
In case the correspondence between the parties shows that their
minds never met with respect to the terms, there is no contract, nor
is the company bound in sucli case by mailing to the apphcant a
policy which he is not bound to accept.^^ So, where an application
for insurance was made in the regular form, and everything was
satisfactory except the rate of premium, and correspondence was
had on this subject, whereby the owner of the property, being un-
able to make better terms elsewhere, finally notified the company
that he agreed to the rate required, it was lield that a valid contract
of insurance had been made, upon which the company ^^as liable,
where the property was burned before the premium was paid or the
policy written.^' Again, Avhere there was an agreement to accept
Bowen v. Hart, 41 C. C. A. 396, 101 i^ Eames v. Home Ins. Co. 94 U.
Fed. 381; Travis v. Ncderland L. S. 621, 24 L. ed. 298. Cited in:
Ins. Co. 43 C. C. A. 656, 104 Fed. United States.— Ladede Fire-Brick
488; Miller v. Northwestern Mut. L. Mfg. Co. v. Hartford Steam-Boiler
Ins. Co. 49 C. C. A. 334, 111 Fed. Inspection & Ins. Co. 9 C. C. A. 8,
469 ; Mohrstadt v. Mutual L. Ins. Co. 19 U. S. App. 510, 60 Fed. 359;
52 C. C. A. 678, 115Fed. 84; Rickard Schultz v. Phenix Ins. Co. 77 Fed.
v. Taylor, 122 Fed. 937 ; Shattuck v. 389.
Mutual L. Ins. Co. 4 Cliff. 611, Fed. Alabama.— Harttord F. Ins. Co. v.
Cas. No. 12,715. King, 106 Ala. 522, 17 So. 707.
Alabama.— Al-Ahama Gold L. Ins. ////»o/s.— Continental Ins. Co. v.
Co. v. Maves, 61 Ala. 167. Roller, 101 111. App. 77, 79.
Califonna..-Yove v. Bankers' & .r^A?' •'""'■^^Y'^'^a" ^ooJ' ^-""-a '''
Merchants' Mut. L. Asso. 88 Cal. J^«4,'P^"' ^^ Ind. App. 225, < i Am.
612, 26 Pac. 514. ^\^''^'- f-^'^'' \ E. 119.
n -. I T Massachusetts. — Emerv v. Boston
Zo«ja.—Stephe^nsv Capital Ins. ^ j^g. Co. 138 Mass. 412; Davis v.
Co. 87 Iowa, 28 ^ 54 N. W. 139. jp^^^^ ^j^,^ p j^^g Co. 67 N. H. 219,
Maine. — Clark v. Insurance Co. of 34 Atl. 464.
N. A. 89 Me. 36, 35 L.R.A. 279, 35 Ohio.— 'Newark Maeh. Co. v. Ken-
AtL 1008. ton Ins. Co. 50 Ohio St. 556, 22
Oklahoma. — Home Forum Benefit L.R.A.- 773, 35 N. E. 1060.
Order v. Jones, 5 Okla. 614, 50 Pac. Oregon. — Sproul v. Western Assui.
165. Co. 33 Or. 105, 54 Pac. 180.
Wyoming. — Summers v. Mutual L. Pennsi/lvaiiiii. — Smith v. Sugar
Ins. Co. 12 Wyo. 394, 66 L.R.A. 820, Vallev Mut. F. Ins. Co. 5 Pa. Dist.
107 Am. St. Rep. 952, 75 Pac. 937. R. 339.
See Costello \-. Grant County Mu- Wisconsin. — Van Slyke v. Trem-
tual Fire & Lightning Ins. Co. 133 pealeau Countv Farmers Mutual Fire
Wis. 361, 113 N. W. 63!) (the Ins. Co. 48 Wis. 683, 687, 5 N. W.
policy issued here was hased upon a 236.
(•hanged application of which appli- See Doherty v. Millers & Manufac-
cant had no knowicdge) ; Doherty v. turers Ins. Co. 4 Ont. Law Rep. 303,
Millers & Manufacturers Ins. Co. 4 Avhere higher rate of premium cliarged
Ont. L. Rep. 303, where renewal con- and contract held not complete,
tract had not complete. See § 104 Loomis v. Jefferson County Patrons
herein. Fire Relief Assoc. 87 N. Y. Supp. 5,
18 Hamhlet v. City Ins. Co. 36 Fed. 92 App. Div. 601. See § 104 Iierein.
118. Sec Sheldon v. Hckla Fire Ins. Completion of contract: negotia-
Co. 6.") Wis. 436. See Si^ ',7, 62, 63 lions through mail, see §§ 57, 62
herein. herein.
211
§ 45 JOYCE ON INSURANCE
the risk as soon as the rate of premium should be fixcfl, whicli was
not done, and a loss occurred, it was held that no insurance was ef-
fected, although the company entered the insurance in its order-
book, and the number and date of the proposed policy in its ledger,
and the secretary told the applicant to consider himself insured.^"
So where it appeared that a "risk Wcjs taken for t'.vo thousand five
hundred dollai"s at two per cent," and that the applicant's insur-
ance broker threw a policy down on the secretary's desk and said,
according to one witness, 'There is a policy, if you take it,"' or ac-
cording to another witness, "You are to make out a like policy."
but tendered no premium till the premises to be insured were burned,
it was held that the contract was too vague and indefinite to be
binding.^ But the agreement will be complete, although a bond to
pay assessments be not executed, it being customary to do that up-
on delivery of the policy.^
The minds of the parties must also meet as to the subject mat-
ter,^ and, if the insurer acted on his application describing one
house, and issued a policy thereon, the insured cannot recover un-
der such policy for the loss of another house, wliich was one he in-
tended to have taken insurance upon, on the ground that he ap-
plied for an insurance on the latter, but the agent of the company,
by mistake, described the former in the application.* In another
case the broker, without the owner's knowledge or authority, stated
in the application that the risk was a machine shop, when in fact it
was an organ factory, which was a more hazardous risk, and the
owner accepted the policy expressed to be on a machine shoi), and
paid the premium. It was held in an action after loss that the ])ol-
icy v»-as void, as the minds of the parties never met on the subject
matter of the contract: ^ and in a case where the api)lication was for
insurance on one house and the policy covered another whicli the
agent thought was the one meant, there was no insurance, as the
As to necessity of fixing rate of ^ Van Loan v. Fanners' ]\I. Fire
preniium, see Hartford Fire Ins. Co. Ins. Co. 24 Hnn (N. Y.) 132.
V. Wliitnian, 75 Ohio St. 3l2, 79 N. ^ j^j^ie Fire Ins. Co. v. Wallace,
E. 450, 9 Ani. & Eng. Ann. Cas. 218, 153 Ky. 677, 156 S. W. 140; Sanders
36 Ins. L. J. 19. See lloberta ^Nfanu- (Landers) v. Cooper, 115 N. Y. 2<!),
faeturing Co. v. Koval Exchange 12 Am. St. Rep. 801, 5 L.R.A. 638
Assur. Co. 161 N. Car. 88, 76 S. E. and note, 22 N. E. 212.
865; Wheal on V. Liverpool & London ^Sanders (Landers) v. Cooper,
& Globe Ins. Co. 20 S. Dak. 62, 104 115 N. Y. 279, 12 Am. St. Rep. 801,
S. ^V. 850. Compare next following 5 L.R.A. 638n, 22 N. E. 212.
sections herein. ^ Goddard v. Monitor ]\Iutual Fire
20 Christy v. North Brit. Ins. Co. Ins. Co. 108 Mass. 56, 11 Am. Rep.
3 Ct. Sess. (1st series, 1825) p. 360. 307.
^ Tjder v. New Amsterdam Fire
Ins, Co. 4 Rob. (N. Y.) 151, 156.
212
REQUISITES OF VALID CONTIUCT § 45
minds of the parties never met.^ So again where two vessels with
the same name were lying in port, and the in^^urance was on goods
laden or to be laden on board a vessel of a certain name, and there
was a doubt as to which vessel was intended, it was held, in the ab-
sence of proof that the goods Avere laden on board the vessel con-
templated by the pai-ties, that the policy did not attach.' The rule
is otherwise, liowever, if both parties intend the same subject, but
make a mistake in the name.^ Again, an oral agreement by an in-
surance agent to take $5,000 upon mill property is not a completed
contract of insurance if there was to be an apportionment between
real and personal estate, and none had been made when the prop-
erty was destroyed by lire.^ 80 where an undated note with a blank
application was given to an agent of an insurance company, with
an agreement b}^ the latter that such acts constituted an agreement
of insurance, and that when the owner gave the company a descrip-
tion of tlie property the policy should issue, and the note and ap-
plication be filled out, this does not constitute a contract of insur-
ance.^"
Again, where the agent upon application gave a receipt for the
premium, which contained only a brief statement of the risk in-
sured, specifying the rate of the premium, amount of insurance,
the property, the time insured, but did not specify the peril or risk
insured against, it was held not a contract, but merely evidence that
the insured was entitled to a contract in the usual form, and that
the usual policy must be looked to to ascertain the limitations and
conditions of the contract and the company's liability.^^ In an-
other case the defendant's agent agreed to insure one C, by an ''open
policy" upon tobacco belonging to C. and others, stored in C.'s ware-
house at a certain rate per annum, the amount insured being varia-
ble from time to time as the amount of tobacco in the store should
vary. The time for which the insurance should continue was not
fixed, and no premium was received by the agent, on the ground
that he could not determine what amount of premium would be-
come due under the policy. After this agTcement plaintiff's tobacco
stored in the warehouse was destroyed by fire, and it was lield that
in the absence of any definite agreement as to the duration of the
« Mead v. Westchester Fire Ins. Y. 279, 5 L.R.A. 638, 22 N. E. 212.
Co. 3 Hun (N. Y.) 608. See § 44b herein.
' Sea Ins. Co. v. Fowler, 21 Wend. ^ Kimball v. Lion Ins. Co. 17 Fed.
(N. Y.) 600. See Hughes v. Mer- 625.
cantile Mutual Ins. Co. 55 N. Y. 265, ^° Mattoon Manufacturing Co. v.
14 Am. Rep. 254. Oshkosh Mutual Fire Ins. Co. 69
* Hughes V. Mercantile Mutual Ins. Wis. 564, 35 N. W. 12.
Co. 55 N. Y. 265, 14 Am. Rep. 254; ^^ De Grove v. Metropolitan Ins.
Sanders (Landers) v. Cooper, 115 N. Co. 61 N. Y. 594, 19 Am. Rep. 305.
213
§§ 45a, 46 JOYCE ON INSURANCE
risk there was no coinplolc contract of insurance. ^^ So a dcdnite
statement of the period of in.'^urance is indispensable where the Code
requires a writing." But an insurer who has left the value of the
property blank, to be determined after loss, is estopped to insist
that an oral statement as to its value was material to the validity
of the contract.^*
But a contract of fire insurance is complete when it appears that
the terms of the contract have been settled by the concurrent assent
of the parties, and nothing remains to be done but to deliver the
policy.^^ And, if oral contracts of life insurance be completed by
a meeting of the minds of the parties, the insurer will be liable for
a loss occurring before the issuance and delivery of the policy. ^^
§ 45a. Same subject: where impossible to obtain definite partic-
ulars or important facts. — Although all the essential elements of
the contract must ordinarily be agreed upon in order to bind the
parties, still if it is at the time impossible to obtain important facts
affecting the subject of their dealing, they can make a general agree-
ment to accomplish their purpose as Avell as they can, and where a
contract is made in the absence of definite particulars, it is the duty
of a.ssured to furnish them within a reasonable time, and a breach
of this duty annuls the contract."
§ 46. Essentials need not be expressly agreed upon: prior course
of dealing, custom, etc.— All the essentials need not, liowever, be
expressly negotiated upon, since they may be understood, as where
the terms of the usual policy are presumed to have been intended."
or where the usual rate of premium is presumed to have been
meant ; ^^ or in case the duration of the risk is understood to be the
" Strohn V. Hartford Fire Ins. Co. 674, 54 Atl. 458, 32 Ins. L. J. 559,
37 Wis. 625, 19 Am. Kep. 777. See per Garretson, J.; Ruggles v. Amen-
§§ 46 50 herein. <'an Central Ins. Co. 114 N. Y. 415,
""Clark V. Brand, 62 Ga. 23, 25; 21 N. E. 1000; DeGrove v. Metro-
Ga. Code, sec. 2794. See § 1440 politau Ins. Co. 61 N. Y. 602, 19
jierein Am. Rep. 305; Boice v. Thames Ins.
i^Bardwell v. Conway Mutual Fire Co. 38 Hun (N. Y.) 246. See also
Ins. Co. 122 Mass. 90. House v. Security Fire Ins. Co. 145
15 Stephenson v. Aliison, 165 Ala. Iowa 462, 121 N. W. 509, 38 Ins. L.
238, 138 Am. St. Rep. 26, 51 So. J. 875; Queen Ins. Co. v. Hartwell
622; Todd v. German-American Ins. Ice & Laundry Co. 7 Ga. App. 787,
Co. 2 Ga. App. 789, 59 S. E. 94. 68 S. E. 310, 39 Ins. L. J. 1125;
16 Summers v. Mutual Life Ins. Todd v. German-American Ins. Co.
Co. 12 Wvo. 369, 66 L.R.A. 812, 109 2 Ga. App. 789, 59 S. E. 94; State
Am. St. Rep. 992, 75 Pac. 937. Mutual Fire Ins. Co. v. Taylor
"Scammell v. China Mutual Ins. (1913) — Tex. Civ. App. — , 157
Co. 164 Mass. 341, 49 Am. St. Rep. S. W. 950.
462, 41 N. E. 649. " Audubon v. Excelsior Ins. Co.
18,7 C." Smith «& Wallace Co. v. 27 N. Y. 216; Perkins v. Washington
Prussian Nat. Ins. Co. 68 N. J. L. Ins. Co. 4 Cow. (N. Y.) 645; Wmne
214
REQUISITES OF VALID CONTRACT § 47
samq as in a former policy ; ^° or where by custom or usage a cer-
tain course of dealing has been established.^ It is said in an Illinois
case that: ''It has been held that such an oral contract will sustain
an action although no express agreement was made as to the amount
of premium to be paid or the duration of the policy, if the inten-
tion of the parties to the contract in these particulars can be gath-
ered from the circumstances of the case." ^ So where, during nego-
tiations, nothing is said about special conditions of the policy, it
will be presumed that those which are usual and customary were
intended.^ And although the rale is an element of the contract
which nuist be agreed upon, yet if the proximate amount of pre-
mium is known and the exact amount is a mere matter of calcula-
tion, and the applicant agrees to pay whatever amount the calcu-
lation shows it to be the contract can be enforced.'*
§ 47. The usual rate of premium will be presumed to have been
intended, and the minds of the parties will be as::umed to have met
and iixed the rate where a prior course of dealing would reasonably
warrant such intendment.^ So, where nothing is said, during the
negotiations about special rates, it will be presumed that those which
are usual and customary w^ere intended.^ The fact that the amount
V. Niagara Fire Ins. Co. 91 N. Y. herein.) Michigan Pipe Co. v. Mich-
385; Home Ins. Co. v. Adier, 71 Ala. igan Fire & Marine Ins. Co. 92 Mic-h.
r,16. See next following sections 482, 20 L.R.A. 277, 52 N. W. 1070;
lun-ein. See also Queen Ins. Co. v. J. C. Smith & Wallace Co. v. Prus-
Hartwell Ice & Laundry Co. 7 Ga. sian National Ins. Co. 68 N. J. L.
A pp. 787, 68 S. E. 310, 39 Ins. L. 674, 54 Atl. 458, 32 Ins. L. J. 559,
J. 1125, 1131; Todd v. German- per Garretson, J.
American Ins. Co. 2 Ga. App. 789, ^ Concordia Fire Ins. Co. v. Hef-
59 S. E. 94; Jacobs v. Atlas Ins. Co. fron, 84 111. App. 610, per Sears,
148 111. App. 325; Michigan Pipe P.J.
Co. V. Michigan Fire & Marine Ins. ^ Newark Machine Co. v. Kenton
Co. 92 Mich. 482, 20 L.R.A. 277, 52 Ins. Co. 50 Ohio St. 549, 22 L.R.A.
N. W. 1070; Ames-Brooks Co. v. 768, 35 N. E. 1060.
.Etna Ins. Co. 83 Minn. 346, 86 N. * Stale ]\lutuai Fire Ins. Co. v.
W. 344, 30 Ins. L. J. 802; J. C. Taylor (1913) — Tex. Civ. App.
Smith & Wallace Co. v. Prussian Na- — , 157 S. W. 950.
tional Ins. Co. 68 N. J. L. 674, 32 ^ See Jacol)s v. Atlas Ins. Co. 148
Ins. L. J. 561, 54 Atl. 458. 111. App. 325; Concordia Fire In.s.
2» Winne v. Niagara Fire Ins. Co. Co. v. Heftron, 84 111. App. 610 ;
91 N. Y. 185. See also Concordia Michigan Pipe Co. v. ]\licliigan Fire
Fire Ins. Co. v. Hetlron, 84 111. App. & Marine Ins. Co. 92 Mich. 482, 20
610. L.R.A. 277, 52 N. W. 1070; Araes-
^ Hartshorne v. Union ]\rutual Ins. Brooks Co. v. .T^tna Ins. Co. 83
Co. 36 N. Y. 172. See also Todd v. Minn. 346, 86 N. W. 344, 30 Ins.
German-American Ins. Co. 2 Ga. L. J 802. See § 46 herein.
App. 789, 59 S. E. 94; Western As- ^ Newark Machine Co. v. Kenton
surance Co. v. McAlpin,*23 Ind. App. Ins. Co. 50 Ohio St. 549, 22 L.R.A.
220, 77 Am. St. Rep. 423, 55 N. E. 768, 35 N. E. 1060.
119. (See this case under § 44
215
§ 48
JOYCE ON INSURANCE
of premium is not fixed does not necessarily prove that the contract
of insurance had not become operative. Therefore, a memorandum
stating in general terms tlie amount of insurance desired on chart-
ered freiglit of a designated vessel, ''Premium, open for particu-
lars," marked "binding" before the signature of the parties, and
"Send policy to Walker & Hughes, 63 Wall street, New York," is
an obligatory policy of insurance. It is equivalent to an agreement
that the insurance shall be upon a reasonable rate of premium until
the assured shall liave an opportunity to furnish furtlier particu-
lars, and that he Avill furnish them within a reasonable time. His
failure to do so avoids the contract.' In Audubon- v. Excelsior In-
surance Company'* an application was made for insurance
against fire of certain engravings similar in all respects to
others on which the assurer had recently issued a policy to the same
applicant. The parties agreed verbally upon all the terms of such
insurance, except the rate of premium. The previous insurance was
mentioned in the conversation, 'and the assurer promised to make
out a policy and send it to the assured at a near date, and it was
held that there was a contract to insure at the former rate of pre-
mium, and that recovery might be had for loss thereon though the
policy was not made out when the loss happened. But if anything
remains so that it appears that tlie rate of premJum is not fixed, or
that the usual rates do not apply, then the contract is incomplete.*
and where there is a verbal agreement for a continuous insurance,
and the rate of premium is changed, this terminates such agree-
ment, and it requires a new bargain to effect a continuing contract.^
So where an agent had authority to receive applications and for-
ward the same with the premium for approval, and the policy is-
sued was to be of effect as of the time of the agreement, and the
usual rate was paid, but a loss occurred before the agent forwarded
the risk and premium, the contract was held binding, although it
was claimed by the company that it had not assented to the rate of
premium.^"
§ 48. Both the rate of premium and the duration of the risk may
be understood, and a valid contract exist, as where an agent had
insured certain property for several years, and upon expiration of
the insurance an application was made to him for another policy
'Scammel v. China Mutual In.s. 23 How. (64 U. S.) 401, 16 L. ed.
Co. 164 Mass. 341, 49 Am. St. Rep. 524.
462, 41 N. E. 649. See Queen Ins. ^ Trustees of First Baptist Church
Co. V. Hartwell Ice & Laundry Co. v. Brooklyn Fire Ins. Co. 28 N. Y.
7 Ga. App. 787, 68 S. E. 310, 39 153.
Ins. L. J. 1125. ^° Perkins v. Washington Ins. Co.
'a 27 N. Y. 216. 4 Cow. (N. Y.) 645.
^ Orient Mutual Ins. Co. v. Wright,
216
REQUISITES OF VALID CONTRACT §§ 49, 50
thereon, which was written hy him, and thereupon he directed it
to be reported to the defendant, and entered upon the register of
completed contracts. The rate of premium and duratiou of the risk
were not specified when the agreement was made, but the agent had
been accustomed to give credit for premiums and to keep the pol-
. icies until called for. Before delivery the property was burned, and
it was held that the same term and rate of premium as the expired
policy must have been intended, notwithstanding the amount of
in.surance was reduced in the last policy."
§ 49. The rate of premium and amount may be understood. — An
agreement to insure a cargo to be laden, provided the vessel sail
within a given time, which agreement, though contingent as to the
amount to be covered and the rate of premium, provides means for
a.scertaining them with certainty as soon as the lading is completed
and the day of sailing fixed, is valid, and the insurers are bound to
give a policy on the vessel's sailing within the given time, and the
insured is bound to pay the premium accordingly. ^^
§ 50. Whether contract exists may be governed by custom or
usage of the parties or of the insurance business at a place. — It
is well settled that insurers are bound to know the customs of a
place where they transact business, and are assumed to have made
their contracts in reference to such customs. So in a New York
case, a custom had existed for many years, and had become an es-
tablished usage and course of business by which the insurance busi-
ness was transacted at a certain place in the following manner: Per-
sons engaged in receiving consignments of cotton at that place ob-
tained from the insurer a certificate of insurance expressed to cover
shipments of cotton from various points on the river to the holder
of such certificate to said place. The holder kept a book in wliich
he entered as received all shipments of the description specified in
the certificate, with the values and requisite particulars, and after
the end of each month he exhibited such pass-!)Ook to the insurer,
and had the premium fixed. The fact of shipment was rarely
known to the consignee or insurer before the termination of the
risk. The defendants, a New York company, delivered to their
agents an open policy of marine insurance for two hundred and
fifty thousand dollars; a certificate of renewal of this policy, and an
additional policy was thereaflor issued for two hundred and fiftv
thousand dollars, and delivered to said agents at the same time a
^^ Winne v. Niagara Fire Ins. Co. ^^ Biinten v. Orient Mutual Ins.
91 N. Y. 185. See also Concordia Co. 8 Bosw. 448. See Concordia Fire
Fire Ins. Co. v. Heifion, 84 111. App. Ins. Co. v. Heft'ron, 84 111. App. 610.
610 ; Walker v. Metropolitan Ins. Co. See §§ 46, 47 herein.
56 Me. 371.
217
§ 50 JOYCE OX INSURAXX'E
large number of certificates to be used in their insurance agency,
one of which was issued to the plaintiff and pasted into his pass
book. The agents at the time made an entry in their pass book,
"I'o cover all cotton shipped by or for ac't of the following parties,
valuation per bale annexed to each name." Then followed the
names and value per bale. Thereafter the agents wrote on the ,
original certificate to the plaintiff a renewal of the policy, and
signed the same, and at the same time gave a renewal of the certi-
ficate for the same term. By instructions to the agents the certi-
ficates were covered by the policies, and considered as representing
the policies, subject to the same terms and payable in like manner.
Thereafter and before the termination of the renewal period a boat
having cotton on board, consigned to the plaintiff on account of
the persons named in the certificate, was destroyed with the cargo
by fire. An action was brought demanding the issue of a formal
Ijolicy and the amount due, and it was held that the defendants
were liable, the certificate being declared to be in effect an open,
continuous policy. ^^ In another case, in the same state, a contract
binding upon the company was permitted to be established by evi-
dence that a custom existed between the plaintiffs and several in-
surance companies, including the defendant, by which applications
were made for "not to exceed" a certain sum where the value of
property upon which insurance was desired was not known at the
time of the application, and that the company, not knowing tlie
actual value of the property, had made insurances in like manner
with certain of the other companies upon the property in various
sums; ^* and a custom to consider that an open policy covered all
cotton consigned to a party unless the bill of lading showed the
contrary, binds the insurer in the absence of such reservation in
the bill of lading.^^
Si:bdiv. II, Completion- of Contract — Proposal and Accept-
ance.
§ 53. Completion of contract : mutual benefit societies or associations.
§ 53a. Same subject: acceptance: approval.
^3 Hartsliorne v. Union Mut. Ins. ^^ Bramstein v. Crescent Mutual
Co. 36 N. Y. 172. See Todd v. Ger- Ins. Co. 24 La. Ann. 589. See Dela-
man-American Ins. Co. 2 Ga. App. ware Ins. Co. v. S. S. White Dental
789, 59 S. E. 94, 37 Ins. L. J. 191; Manufacturing Co. 109 Fed. 334. 48
Concordia Fire Ins. Co. v. Heffron, C. C. A. 382, 65 L.R.A. 387, writ of
84 III. App. 610. certiorari denied (mem.) 18.1 I'. S.
iM<'abbri V. Mercantile Ins. Co. 700, 46 L. ed. 396, 22 Snp. Ct. 93 *.
Lans. (N. Y.) 446, Id. 64 Barb. (N.
Y.) 85.
218
COMPLPrnON OF CONTRACT
>; 531). Same subject: sig-ning'.
>; 53c. Same subject: initiation: medical examination: signing.
§ 54. Completion of contract : proposal or application.
§ 54a. Effect of absence of signed proposal : Insurer may be estopped to set
up want of proposal.
§ 54b. When contract of fidelity insurance complete, and not a mere pro-
posal.
^ 55. Completion of contract : acceptance generally.
§ 55a. Mere intention to accept, insufficient.
§ 55b. To what extent acceptance must accord with terms of application.
§ 55c. Proposal and acceptance : counter propositions.
§ 55d. Whether acceptance of offer should be communicated to proposer.
i'^ 55e. Protection by insurer pending approval: date when policy in force
^ 56. Qualified acceptance: condition precedent.
S 57. Acceptance : delay in acting on application.
§ 58. (Transferred to §§ 66b-66j herein.)
§ 59. Agent's agreement : liability not to attach till approval.
§ 59a. Usage or custom that agents can bind insurer until notice of refusal.
§ 60. Approval may be implied from the circumstances.
§ 61. Oral agreement of agent may be controlled by application.
§ 61a. Agent's statement that application accepted: when insurer estopped.
§ 61b. Agent's statement that certificate or application binding : mutual ben-
efit insurance.
§ 62. Completion of contract: negotiations through mail.
j^ 62a. Employers' Hability insurance : when contract incomplete : negotia-
tions with insurance agent through mail.
i> 62h. Contracts of insurance : telegraphic agency.
§ 63. No contract where acceptance mailed differs in terms from proposal.
^ 64. Agent's receipt pending approval or issuance of policy: "binding
slip : "' ''binding receipt.''
§ 65. Same subject : effect of memorandum : binding slip, indorsement,
etc.
§ 66. Completion of contract, marine and fire: binding slip.
§ 66a. Binding slips, etc., continued: new terms: rate of premium: parol
evidence.
§ 66b. Delivery to and acceptance by applicant: generally.
§ 66c. Right of applicant to reject policy: generally.
§ 66d. Stipulation or agreement for return of policy by applicant: option
to accept or reject.
§ 66e. Where applicant receives policy for examination: acceptance.
§ 66f. Applicant not bound to accept policy when it does not conform to
proposal or agreement.
§ 66g. Where policy does not conform to proposal : neglect of applicant or
assured to read policy : duty to notify company or rescind.
219
§ 53 JOYCI-: ox INSURANCE
§ 06h. When applicant may reject policy not conforming to agent's repre-
sentations.
§ 66i. Klt'ect of retention of policy by applicant : unreasonable delay.
§ 66 j. Acceptance bj- insured father for infant beneficiaries.
§ 53. Completion of contract: mutual benefit societies or asso-
ciations. — hi mutual benefit societies the bj-laws and charter of
the company are of great weight in determining what constitutes
the completion of tlie contract, as where the by-laws provide that the
l)cneliciarv nhall be named in the certificate, involving therebv the
question whether the company has power to complete a con-
tract otherwise than in the precise manner provided, and whether
or not a compliance with the bj'-laws is not a condition precedent.
In New York it has been held that it is not.^® Issuing a policy
of insurance, however, within the power of a mutual benefit society
under its charter, but conflicting with its by-laws, will be deemed
a waiver of such by-laws in favor of the assured, and will be con-
trolling.^' And it has been determined that a valid contract of in-
surance existed between the owner of a schooner and an insurance
company at the time of her loss, although on the application book
of the company certain blanks left for the value of the ve.'^scl and
the amount insured were not filled as provided in the by-laws.^*
We have, however, already ^^ given some attention to the question
of the power of such corporations to make a parol contract of in-
surance, and have seen tliat while in some states the courts have
been inclined to limit such corporations strictly to their statutory
or charter powers, j^et in other states a more liberal construction
has been given.^° But, as we have stated, the by-laws, however, are
made to govern the officers and members of the company, rather
than persons who are about to become members ; ^ and such persons
^^ Bishop v. Grand Lodge of jmu- Home Forum Beneficial Order v.
pire Order of iMulual Aid, 112 N. Jones, 5 Okla. 598, 50 Pac. 165, 27
Y. 627, 20 N. E. 562, revg. 43 Hun ins. L. J. 8, 18, where the court, per
(N. Y.) 472. Dale, C. J., says: "If Ave apply to
^'Davidson v. Old People's Mu- this case the rules which seem gen-
tual Ben. Assoc. 39 Minn. 303, 1 erally to prevail we must hold that
L.K.A. 482, 39 N. W. 803. the parties to the contract were gov-
^8 Dodd v. Gloucester Mutual Fire erned by the constitution and laws
Ins. Co. 120 Mass. 468. of the order. . . . We must fur-
^^ § 34 ante. Ihor hold that Jones was presumed
2° See also Bacon's Benefit Soc. & to have known, and joined the order
Life Ins. sec. 147. under a knowledge of such laws"
^ The court in Somers v. Kansas a case, however, relating to agency
Protective Union, 42 Kan. 619, 622, of subordinate lodges. See § 407
22 Pac. 702; Titsworth v. Titsworth, herein.
40 Kan. 571, 20 Pac. 213. Compare Application may provide that it is
220
COMPLETiON OF CONTRACT
53
are not member?;, but rather stranoers to the company in prior
negotiations witli it relative to granting insurance, for member.ship
does not date before consummation of the contract.^
The follou'inr/ general rules, however, govern in such companies
in relation to the consummation of the contract. The contract is
complete upon proposal and accej^tance of the terms,' provided that
the terms are so definitely agreed upon as to all the essentials that
all that remains is to comply therewith ; * and the company may
waive provisions in its by-laws where they are for its benefit,^ and
acts done by an agent within the scope of his authority, although
in disregard of the express provisions of the by-laws, may be bind-
ing on the company.^ And in a mutual befiefit order case it was
contended that the agent who obtained the application and for-
warded it to the company had no power to waive any of the provi-
sions of the application or policy, but it was held that the agent was
a soliciting agent, and that his knowledge of facts before the ap-
plication was sent to the order was the knowledge of the order; and
the doctrine of estoppel was applied to prevent a forfeiture of the
policy. It was also decided that a person ajjpointed as agent by the
company to solicit insurance, forward apj)lications, and deliver pol-
icies, is in effect the general agent of the company, and his knowl-
edge of any fact that might increase the risk is the knowledge of
the company.''' In a case which arose in Nebraska in an action
brought against a railroad relief association, it appeared that the by-
laws of the association provided that those who desired to become
subject to by-laws and cliaiter of
company as in Winchell v. Iowa
State Ins. Co. 103 Iowa, 189, 72 N.
W. 503.
2 Eilcnberger v. Protective Mutual
Fire Ins. Co. 89 Pa. St. 464; Strat-
ton V. Allen, Id N. J. Eq. 229;
Franklin Fire Ins. Co. v. Martin, 40
X. J. L. 579, 29 Am. Rep. 271; Co-
lumbia Ins. Co. V. Cooper, 50 Pa. St.
331; Cumberland Valley Mutual Pro-
tective Co. V. Schell, 29 Pa. St. .31.
Compare quotation in last ])receding
note. See §§ 317, 393 herein.
Tlio application may be such that
tlie applicant will be presumed to be
acquainted with the rules of the as-
sociation. Court of Honor v. Hering,
178 iMich. 377, 144 N. W. 843.
' Oliver V. American Legion of
Honor (Cal 1882) 17 Am. L. Rev.
301.
* Connecticut Mutual Life Ins. Co.
V. Rudolph, 45 Tex. 454; Todd v.
Piedmont & Arlington Life Ins. Co.
34 La. Ann. G3.
* Manning v. Ancient Order Unit-
ed \Vc)rk. 8G Ky. 13(5; 5 S. AV. 385;
Cumbei'land \'alk'\- Mutual Protect.
Co. V. Schell, 29 Pa. St. 31; Splawn
V. Chew, ()0 Tex. 532.
•^ fJnion Mutual Life Ins. Co. v.
Wilkinson, 13 Wall. (80 U. S.) 222.
20 L. ed. 617; Somers v. Kansas
Pruloctive Union, 42 Kan. 619, 22
Pac. 702; Emeiv v. Boston Marine
Ins. Co. 138 Mas.s. 398. See i^§
3i)3, 395 herein.
''' Thomas v. Modern Brotherhood
of America, 25 S. Dak. 632, 127 N.
W. 572, 39 Ins. L. J. 1539, and note.
See §§ 393, 395, 424 et seq. herein.
221
§ 53a JOYCE OX IXSUKAXCE
members should make application in a certain manner, and also
submit to a physical examination. "\V., on July 21st, stated his de-
sire to become a member to a soliciting agent of the department, who
gave written notice of W.'s application to the officers of the associa-
tion, specifying July 21st as the day for the application to take
effect. On July 22d, however, W. w^as taken sick. The prescribed
manner of making the ap])lication w^as not complied with, nor was
any physical examination made, and no request was made of W. for
compliance with either requirement. His name was placed on the
roll of members and an assessment deducted from his wages. On
August 7th, the association, through its officers, was notified of W.'s
disability, and subsequently tendered back his assessment in tlie
form of a ''time check," which he refused a few hours before his
death. It was held that the company was estopped from denying
the completion of the contract.*
§ 53a. Same subject: acceptance: approval. — Membership in a
nmtual company may be obtained by acceptance of a policv
issued by the company; and liability as a 'member upon dissolu-
tion proceedings will thereby be created.^ No proposal for absolute
indemnity is contained in an application for insurance which does
not allude to the method of raising the fund, so as to render neces-
sary' an acceptance of the policy, where it provides for the levying
of an assessment to meet the obligation.^" And a deduction by a
raih'oad company of dues to an employees' relief association, from
the wages of an employee, does not amount to an acceptance of the
employee's application to become a member of the association, where
the constitution and by-laws of the association authorized the com-
])any to deduct dues from members, but it does not appear that the
company had l)een officially notified by the association that the em-
ployee had been admitted to membership. ^^ If an agent has no
authority to accept a person to membership but the application
must be forwarded to the association for acceptance, the certificate
does not relate back to the date of the application, wliere there is
nothing in the latter to that effect, and the association is not liable
in such case, where an accident occurs to the applicant before ac-
' Bin-linji^ton Voluntary Relief De- ^° Tuttle v. Iowa State Traveliug
partment \. White, 41 Neb. 547, 59 Men's Assoc. 132 Iowa 652, 7 L.R.A.
X. W. 747, 751. See ^§ 34, 510 here- (X.S.) 223, 104 X. W. 1131.
in. "Receipt and acceptance" of ap-
^ Swing V. Kaufman, 115 K Y. plication and fee, see § 1437 here-
Supp. 143. See (mem.) 117 N. Y. in.
Supp. 1148, 132 A pp. Div. 932. " Baltimore & Ohio Employee's
090
COMPLETION OF CONTRACT § 53b
ce])(nn('e.^^ But where a benefit certificate contained conditions
which were not in a prior one, in lieu of wliich it was isj^ucd. and
therefore an acceptance of the later certificate was necessary, al-
though it did not appear that a written acceptance was required, a
finding in an action thereon tliat the member had accepted said
later certificate is warranted where it is shown that it was found
among his private papers.^^ Again, the enumeration in the appli-
cation for insurance in a mutual benefit association of certain ex-
ceptions from liability does not, by exclusion, prevent the opera-
tion of an exception of suicide contained in the insurer's by-law^s,
so as to render acceptance necessary to make binding a policy con-
taining such exception, where the application makes the by-laws a
basis of membership in the association.^* The issuance of a policy
to a member of a mutual fire insurance company may be found
from admissions in the pleading or answer.^* If a policy is issued
by the secretary of a mutual fire insurance company Avith the knowl-
edge of the directors, their nonaction constitutes an approval or
ratification which is binding where approval of applications by the
board is provided for by the constitution, even though tliey sup-
posed the policy was issued upon an application which liad 1)cmi ap-
proved by the promoters of the company, who in fact, had never
passed upon the amended application.^*
§ 53b. Same subject: signing. — The acceptance by a member of
a mutual benefit association, of a certificate issued for him and in
accordance with his directions, will be presumed, although he never
signed the blank form of acceptance printed upon its face, where
it does not appear that such signature was made in the slightest
degree a requisite for showing acceptance." In a INIichigan case
the constitution and regulations of the lodge provided that tlie con-
tract shovdd be complete on examination of the applicant and ap-
proval of the application by the supreme lodge, and upon the sign-
ing the certificate and forwarding it to the subordinate lodge, which
was done, but the subordinate lodge retained it on the gTound of
Relief Assoc, v. Post, 122 Pa. St. Men's Assoc. 132 Iowa 652. 7 L.R.A.
579, 9 Am. St. Rep. 147, 2 L.R.A. (N.S.) 223, 104 N. W. 1131.
44, 15 All. 885. ^^ Spencer v. Fanners Mutual Ins.
12 Rogers v. Equitable Mutual Life Co. 79_Mo. App. 213, 2 Mo. App.
& EndoAvnieut Assoc. 103 Iowa 337, Rep. 3*7.
72 N. W. 538. Compare New York ^^ Fanners Co-operative Ins. Assoc.
Life Ins. Co. v. Moats, 207 Fed. 481, v. Taliaferro, 107 Ga. 326, 33 S. E.
125 C. C. A. 143. 26.
13 Wood V. Brotherhood of Ameri- i'^ Luhrs v. Luhrs, 123 N. Y. 367,
can Yeomen, 140 Iowa, 98, 117 N. W. 9 L.R.A. 534, 25 N. E. 388.
1123. Countersigning policy — death be-
1* Tuttle V. Iowa State Traveling fore, see § 1438 herein.
223
§ 53c JOYCE ON INSURANCE
fraud in the application, and the court determined that the benefi-
ciary might recover without producing the certificate, no fraud in
the apphcation being shown." And if a policy against loss by fire
is issued by a nuitual protective association to one who has not
signed its constitution, he may be estopped when sued for an assess-
ment, and the association when sued upon a liability arising under
the policy, from asserting that he is not a member of the association
because of such failure to sign.^^ But where the constitution of a
fraternal association provides, as a condition precedent to a benefi-
ciary certificate becoming in force, that it shall be executed bv the
supreme president and supreme secretary and countersigTied by cer-
tain officers of the local council, and the conditions accepted in .
writing on the certificate by the member to whom it is issued, such
conditions must be complied with before the assessment, paid when
the application was made, can be applied.^" It has also been held
that a person enrolled as a member of a mutual benefit association,
without having signed the application required, cannot claim any
insurance, even though he did not know that his application had
never been received.^ Where under the laws of a society no cer-
tificate was to be issued until full meml:»ership should be conferred,
and a person made and signed an api)lication for membership, at-
tended one meeting, and was notified to attend the next, wdien full
membership would be conferred, and at the time of the next meet-
ing he was too ill to attend and died shortly after, it was held that
the contract was not completed.^
§ 53c. Same subject: initiation: medical examination : signing. —
A benefit certificate cannot become effective until an applicant has
been initiated into the order, where such initiation is, by the laws
of the order, made a condition precedent to the execution of a con-
tract of insurance.^ And where one of the rules of a fraternal ben-
efit society provides that no certificate of benefit membership shall
^^ Ijorscher v. Supreme Lotlt^e ^ Tavlor v. Grand Lodfje Ancient
Knifrhts of Honor, Tl Mich. 316, 40 Order 'U. W. 75 Iliin (N. Y.) 612,
N. W. 545. 29 N. Y. Supp. 773, 61 N. Y. St.
19 Ricluirds V. Louis Lipp Co. 69 Rop. 510.
Ohio St. 359, 100 Am. St. Rop. 679, Countersi;::niiig: policy: death be-
69 X. E. 616. fore. S 1438 herein.
^''Triple Tie Benefit Assoc, v. ^ Sovereign Camp Woodmen of (he
Wood, 73 Kan. 124, 84 Pac. 5()5. World v. Hall, 104 Ark. 538, 41
1 Supreme Lodge of Protection L.R.A.(N.S.) 517, 148 S. W. 526;
Knights & Ladies of Honor v. Grace, Kolosinski v. ]\Iodern Brotherhood of
(iO Tex. 569. But see Somers v. America, 175 Mich. 582, 141 N. W.
Kansas Protective Union, 42 Kan. 589; Lord v. Modern Woodmen of
619. 22 Pac. 702. America, 113 Mo. App. 19, 87 S. W.
On failure to sign application as 530. See McWilliaras v. Modern
avoiding accident, life, or mutual ben- Woodmen of America (1912) —
efit poliW, see note in 4 B. R. C. 468. Tex. Civ. App. — , 142 S. W. 641.
224
COMPLETION OF CONTRACT § 53e
be in force until the applicant shall have been initiated or obligated
at a meeting of the district court or under a dispensation granted,
and until he shall have signed and accepted the certificate and made
full payment of the assessment and dues as provided in the consti-
tution, and before the recorder shall deliver a benefit certificate, the
initiate must, in person, while in good health, sign the certificate
in his presence, it cannot be held that the risk was assumed until
the law was complied with or the compliance waived; and where
tlie applicant reached the point where he paid an assessment and
certain dues and was initiated, but broke down with paresis before
the certificate was received and it was not delivered to him or to
any person for him nor demanded by him. and he died from said
ailment it was held that there was no binding contract.'* If the
l)rocedure is that applications for membership in a fraternal ben-
efit society are forwarded by the secretary of the local colony
to the home ofiice, and if in proper form, and the ap-
plicant duly found initiated and the fee for the benefit certificate
paid, a benefit certificate, reciting that it is issued upon condition
that the insured complies with the laws, rules, and regulations of
the society and indorses thereon his acceptance in writing of the
certificate upon the conditions named, is then forwarded by the
home office to the secretary of the local colony for the acceptance
of the member, the contract of the benefit certificate becomes effec-
tive when formally accepted by insured. Such accef)lance is the
final act consummating the contract, although delivery may be
conditioned upon any act such as payment of premium to a local
agent.^ AVhere the application of respondent's (the beneficiary)
wife was approved by the home office and returned to the local dep-
uty, who delivered it to the applicant with the declaration that it
was in force, and the lodge was organized a week later, and she was
voted in as a member, but was prevented by sickness from attend-
ing, and so was not initiated and did not receive the obligation, and
after the lodge was organized, the certificate was attested by re-
spondent as secretary and by the president, and redelivered to her,
it was held that she did not become a member of the society, the
contract was not completed, and the certificate was void.^ And even
* Court of Honor v. Hering, 178 The <iiiestioii of sickness, etc.,
Mich. 377, 144 N. W. 843. ' pending acceptance may dei)end, so
^ Supreme Colony United Order, far as the (•onii)h'lion or validity of
Pilgrim Fathers v. Towne, 87 Conn, the contract is concerned upon the
644, 89 Atl. 264. question of concealment or fraud.
, ^Loudon V. Modern Brotherhood Equitable Life As.sur. See. v. Mc-
of America, 107 Minn. 12, 119 N. EIroy, 83 Fed. G31. 49 U. S. App.
W. 425. 548, 28 C. C. A. 365, 27 Ins. L. J.
Joyce Ins. Vol. I. — 15. 225
§ 53c JOYCE ON INSURANCE
though an apphcant has taken all requisite steps and has been in-
itiated, and the supreme medical examiner has approved the ap-
plication and medical examination as required by the by-lawy, still
where such requirement is a condition precedent to benelicial mem-
l^ership, the beneliciary has no claim for benefits where the member
was accidentally killed before said approval, although on the same
day.''' Where, under the constitution and laws of a beneficiary
order, it is provided that the local lodge may receive applications
for benefit certificates, and that such application shall, if acceptable
to the local lodge, and the medical examiner thereof, be at once
forwarded to the grand secretary of the order, who shall submit the
same to the grand medical examiner, who has, under the constitu-
tion and laws of such order, authority to reduce the sum named
in the application for a beneficiary certificate, or to reject the same
altogether; and where it is further provided that no beneficiary
certificate shall be binding upon the order until the same has been
approved by the grand medical examiner, and signed by the presi-
dent and secretary of the order; the approval and action of such
ofiicers are essential to create an obligation upon the beneficiary
certificate, and in such case delay on the part of the local lodge in
forwarding the application to the grand lodge will not create a con-
tract in the face of the provisions of the constitution and laws of the
order, even though the applicant had been initiated into the order
and paid the required dues and assessments.^ If a medical exami-
nation is made a condition precedent to one's admission to the mutual
Ijenefit class of a fraternal order his heirs cannot recover, even
though he pays the first assessment, where it is to be applied part-
ly in payment of his fee in the nonbeneficial or social class, and
part is to be refunded in case of his rejection in the other class.^
The initiation as a member of a local camp of an applicant for mem-
bership in a fraternal or beneficial order before the receipt by such
camp of a certificate from the sovereign camp, if unauthorized by
the constitution and by-laws, is not a waiver of conditions precedent
to his becoming a beneficial member of the order, but can, at the
561, as to concealment in other than * Home Forum Beneficial Order v.
mai-ine risks, see §§ 1844 et seq. Jones, 5 Okla. 598, 50 Pac. 165, 27
herein. Ins. L. J. 165. See § 407 herein.
'Patterson v. Supreme Command- See also Patterson v. Supreme Com-
ery United Order of Golden Cross of mandery United Order of Golden
the AVorld, 104 Me. 355, 71 Atl. 1016. Cross of the World, 104 Me. 355,
See also Rogei-s v. Equitable Mutual 71 Atl. 1016.
Life & Endowment Assoc. 103 Iowa ^ Asselto v. Supreme Tent Knights
337, 72 N. W. 538. of Maccabees, 192 Pa. 5, 43 Atl. 400.
226
COMPLETION OF CONTRACT § 53a
most, make liim only a fraternal member.^" An application for life
insurance and medical examination are preliminaries solely for the
benefit and protci-lioii of the insurer in issuing the policy. He may
entirely dispense with or waive them, and is^slle a policy which is
A^alid and binding.^^ So the issuance of a relief certificate is evi-
dence that conditions precedent to receiving benefits thereunder,
such as a medical examination, payment of the assessment and fee
and initiation, have been complied with or waived. ^^ In a suit up-
on a mutual benefit certificate, in order to sustain a defense that the
medical examination of the insured was reconsidered and rejected
within six months by the secretary of the medical board of the de-
fendant, in accordance w4th a provision therefor in the certificate,
the defendant must show that the reconsideration and rejection
w^ere for a sufficient cause wdiich existed at the time of the original
examination. And the fact that one parent of an insured died of
phthisis before the medical examination is not of itself enough to
prove that sufficient cause existed for rejection of the insured. ^^
Again, the initiation, as a member of a local camp, of an applicant
for membership in a fraternal and beneficial order before the re-
ceipt by such camp of a certificate from the sovereign camp, if un-
authorized by the constitution and by-laws, is not a waiver of con-
ditions precedent to his becoming a beneficial member of the order,
but can, at the most, make him only a fraternal member.^* Where
respondent, the beneficiary, reported as secretary of the local lodge
to the head office that the applicant had become a member, and
])aid several assessments, which were received and applied in pay-
iiiciit thereof by the head office, in ignorance of the facts as to non-
(•oiii|)lianee by the applicant with the by-laws as to the necessary
stc[)s to be taken to become a member, it was held that the accept-
ance of the money did not constitute a waiver by the association
of the right to repudiate the transaction and the certificate upon
discovery of the facts. On the undisputed evidence the company
was entitled to judgment, notwithstanding the verdict.^* . A med-
io McLendon V. Sov(Mvi<-u Camp J. L. 584, 14 L.R.A.(N.S.) 632, 07
Woodmen of tlie World, 10(5 Tenn. All. 1037.
095, 52 L.R.A. 444, C4 S. W. 30. ^^ McLeudon v. Sovereign Camp of
11 Malheit v. Metropolitan Life Woodmen of the World, 100 Tenn.
Ins. Co. 87 Me. 374, 47 Am. St. Rep. 095, 52 L.R.A. 444, 64 S. W. 36.
330, 32 Atl. 989. See Hoefner v. Canadian Order of
12 Wagner v. Supreme Lodge Chosen Friends (Ont. H. C. J.) 18
Knights & Ladies of Honor, 128 Canadian L. T. 86.
Mich. 660, 8 Det. Leg. N. 815, 87 N. i^ Loudon v. Modern Brotherhood
W. 903. of America, 107 Minn. 12, 119 N. W.
1^ Gilroy v. Supreme Court Inde- 425.
pendent Order of Foresters, 75 N.
227
§ 5i JOYCE OX INSUl^ANCE
ical examination by an authorized physician may become a pre-
requisite to the issuance of a certificate under a statute making a
contract of an as.^ocialion with its members one of life insurance.^®
§ 54. Completion of contract: proposal or application. — The pro-
posal for insurance may be uiade by written application or orally,
and it is generally upon reliance of the facts stated therein that the
insurer accepts the risk. A written application is now generally
dispensed with by fire insurance companies. The application is not
the contract, but a mere proposal for insurance,^''
If, however, an application for accident insurance provides tliat
the contract shall be complete when received at the insurer's ofiice
and accepted by its secretary, the application accompanied by the
premium and their acceptance by the insurer forms the contract of
insurance until the policy is issued and received."
No obligation rests upon the company to accept, ^^ and a life
insurance company has an absolute right to insist that it shall ac-
cept an application and issue a 'policy before it shall be bound as
an insurer,^" and it may reject the proposal even though there may
have been a payment of part or even all of the premium.^ So,
where there is the payment by an applicant of the admission fee
and an acceptance by him of a receipt stating that the policy is not
to go into effect until the application has been approved and ac-
cepted, and there is a statement in the application that the annual
dues must be paid and the policy actually delivered to the appli-
cant^ and the application is not accepted nor are the dues paid,
Instate V. Willett, 171 lud. 29G, plication was held to constitute the
23 L.R.A.(N.S.) 197, 86 N. E. 68; contract. In Home Life Ins. Co. v.
Burns' Ann. Stat. Ind. sec. 4713. Myers, 112 Fed. 816, 50 C. C. A.
On whether u beneht association is 514, it was held that the application
an insurance company, see note in 38 and certain questions and answers
L.R.A. 33. On what constitutes in- therein amounted at best to only a
iiurance, note in 48 L.ii.A.{X.S.) contract for insurance, provided the
1051. application should be approved.
^' Travis v. Nederland Life Ins. When insurance contract is corn-
Co. Ltd. 104 Fed. 486, 43 C. C. A. plete, see note 69 Am. St. Hep. 143-
653; Covenant Mutual Benefit Assoc. 153.
V. Conway, 10 Brad. (10 111. App.) "Robinson v. United States Be-
348; Schwurtz v. Gerniania Ins. Co. iievolent Soc. 132 Mich. 695, 102
18 Minn. 448 ; Heiman v. Phoenix Am. St. Rep. 436, 94 N. W. 211.
Mutual Life Ins. Co. 17 Minn. 157, "^Mutual Life Ins. Co. v. Youn?,
10 Am, Rep. 154; McCully v. Phce- 23 Wall. (90 U. S.) 85, 23 L. ed. 152;
nix Mutual Life Ins. Co. 18 AV. Va. Harp v. Grangers' Mutual Fire Ins.
782. See Hogben v. :\rctropolitaii Co. 49 :\rd. 309.
Life Ins. Co. 69 Conn. 503, 38 Atl. 20 Summers v. :\lLitual Life Ins. Co.
214, 26 Ins. L. J. 998. But compare 12 Wvo. 369, 109 Am. St. Rep. 992,
Commercial Mutual Accdt. Co. v. 66 L.R.A. 812, 75 Pac. 937.
Bates, 176 111. 194, 52 N. E. 49, 74 1 Otterbein v. Iowa State Ins. Co.
111. App. 335, where the written ap- 57 Iowa, 274, 10 N. W. 667; Arm-
228
COMPLETION OF CONTRACT § 54a
tliere i? no valid contract created. The payment of the admission
fee under such circumstances creates no contract of insurance of
itself. 2
There may be an acceptance far a limited period of time with
tlie right reserved to reject: as in a case where a fire insurance
company, havino; received an application for a policy, contracted
to accept the risk for the term of thirty days from date, "unless the
applicant is sooner notified of its rejection. If he receives no no-
tice that the risk is rejected, the insurance will cease at the end of
the thirty days, unless a regular policy has been issued. '^ After
expiration of the thirty days a loss occurred, no policy having been
issued nor notice of rejection given; it was held that the company
was not liable.^
So the acceptance may be conditional.*
If the application is not made in writing and there are no state-
ments contained in any written application as to the risk or subject-
matter, then oral proof of such facts is admissible.^ Though oral
statements are not admissible, as a rule, to alter the application, if
in writing,^ for such application is itself the best evidence of its
contents.'
Where the custom of the compmiy has been to issue a new pol-
icy covering a former risk without a new written application there-
for, the secretary of the company has authority to issue a new policy
without a new written application, notwithstanding a by-law pro-
vides that all applications shall be examined and approved before
a policy is issued.^
§ 54a. Effect of absence of signed proposal: insurer may be
estopped to set up want of proposal. — in an English case a jiolicy
was effected by a wife ujK.n her husband's life, who was the as-
sured under said policy which Avas issued under the seal of insurer
and stated that it was granted in consideration that the proposer had
signed and delivered a proposal to the company which constituted
the agreed basis of the contract. It was also stipulated that any
untrue statement therein as to assured's health should render the
policy void and all moneys paid thereunder on account of the
strong v. State Ins. Co. 61 Iowa, 212, ^ Ashworth v. Builders' Mutual
le N. W. 94. Fire Ins. Co. 112 Mass. 422; 17 Am.
2 Weinftld v. Mutual Reserve Fund Rep. 117; Jenkins v. Quincy Mutual
Life Assoc. 53 Fed. 208. Fire Ins. Co. 7 Gray (73 Mass.) 370;
3 Barr v. North American Ins. Co. Tibbets v. Hamilton Mutual Ins. Co.
61 Ind. 488. •> Allen (85 ^Mass.) 569. See Com-
' Hamilton v. Lvcoming Ins. Co. 5 mercial Mutual Accident Co. v. Bates,
Pa. St. 339. See § 56 herein. 176 111. 194, 52 N. E. 49.
^The court in Iloose v. Prescott ' Lewis v. Hudmon, 56 Ala. 186.
Ins. Co. 84 Mich. 309, 11 L.R.A. 340, ^ ^ell v. Herman Farmers :\lutual
47 N. W. 587, 32 Cent. L. J. 226 Ins. Co. 75 Wis. 521, 44 N. W. 828.
229
§§ :Ah, 55 JOYCE ON INSURANCE
insurance should be forfeited. Said wife, who had duly paid the
])remiums, claimed tlie policy amount upon assured's death. The
insurer resisted the claim on the ground that the proposal
on which the policy had been issued contained misrepresen-
tations as to the assured's health. At the hearing before justices
of a complaint for nonpayment of the sum insured, the wife satis-
lied the justices that a proposal produced by the comj^any and pur-
])orting to be signed by her was not signed by her or with her au-
thority, and she further stated that no proposal at all had l)een
.signed by her or with her authority. It was held that the company,
having issued the policy and received the premiums, was estopped
from contending that in consequence of the want of a proposal there
was no contract; that the mere fact that the wife, instead of con-
fining her evidence to the disproof of the proposal put forward by
tlie company, made the admission, irrelevant to her own case, that
there had been no proposal at all, did not prevent her from taking
the benetit of that estoppel; and that the company was liable on
the policy.^
§ 54b. When contract of fidelity insurance complete, and not
a mere proposal. — A temporary contract executed and delivered to
an employer, upon his application, which expressly states that the
company "hereby guaranties the fidelity" of an employee and that
all liability shall cease upon issuance of the regular bond or in a
certain number of days if no bond is issued, is binding and is not
converted into a mere proposal for a contract by Avriting across the
face of the contract the Avords: ''subject to result of investigation."
Such words should be so construed as merely to give to defendant
the right to cancel the contract on further investigation, so as to
prevent future liability.^"
§ 55. Completion of contract: acceptance generally.— A propo-
sition only becomes a binding contract when the party to whom it
is made signifies his acceptance to the proposal. ^^ so that in the ab-
sence of some provision to the contrary there nuist be an actual ac-
ceptance of the proposal for insurance, some act to bind the com-
3 Pearl Life Assur. Co. v. .Johnson, construction. Allis CIialmer.«? Co. v.
Same v. Greenhalgh, [1909] 2 K. B. Fidelity & Depo.'^it Co. 29 T. L. R.
L. R. 288 (above text is partly the .'SOfi. Pbillimore, J.
syllabus in this ease). ^^ Bentley v. Columbia Ins. Co. 17
" On when contract is dceraed to N. Y. 421, 423 ; Hartford Fire Ins.
have been made, see noles in 63 Co. v. Davenport. 37 IMich. 600. See
L.R.A. 833. and 23 L.R.A.(N.S.) 968. §^ fi6b-66j herein.
10 Hall v. United Slates Fidelity & Acceptance and issuing policy corn-
Guarantee Co. 177 :Minn. 24, 79 N. plete contract. Deviue v. Federal
W. 590, 28 Ins. L. J. 661. Life Ins. Co. 250 111. 20.3, 95 N. E.
Fidelily insurance : emploj/ee in- 174, 40 Ins. L. J. 1513.
sured from "issuance" of policii :
230
COMPLETION OF CONTKACT
§ 55
pany, or some act must be done which is equivalent thereto, and
from which the company cannot recede without liability. ^'^
If the act done by the insurer be such that a liability would exist
against him were he to withdraw, or, in other words, if he has so
acted that he cainiot recede without liability, there is an acceptance,
and the contract is complete.^^ So a contract of life insurance is
consummated upon the unconditional written acceptance of the ap-
plication for insurance by the company to which such application
is made." And where a written proposal for fire insurance is ac-
cepted by the company there is a meeting of the minds of the par-
ties, and a valid contract of insurance which will be enforced.^*
And acceptance of a proposal to insure for a premium offered com-
pletes the negotiations; and where upon the same day that an ap-
plication for insurance was filed the company made out and signed
the policy, it thereby ratified the application, and its consent was
complete. ^^
So a fire insurance company admits its liability and is estopped
to claim that a policy was not accepted or in force, where it issued
and delivered the policy antedating its liability and accepted proofs
of a loss occurring between the two dates, and participated in an
12 United .S'/«fe.s.— Shattuck v. Mu-
tual Life Ins. Co. 4 Cliff (C. C.)
598, Fed. Cas. No. 12,715.
Alabama. — Al; bama Gold Life Ins.
Co. V. Mayes, 61 Ala. 103.
Georgia. — W. P. Harper & Co. v.
Ginners Mutual Ins. Co. 6 Ga. App.
139, 04 S. E. 567.
Indiana. — New England Ins. Co.
V. Robinson, 25 Ind. 530.
Maine. — Carlelon v. Patrons An-
droseosr^in IMutual Fire Ins. Co. 109
I\re. 79; 39 L.R.A.(N.S.) 951, 954,
82 Atl. 649.
Masmchusetts. — IMarkey v. Mutual
Benefit Ins. Co. 103 Mass. 92.
Minnesota. — Schwartz v. Germaniu
Ins. Co. 18 Minn. 448; Heiman v.
Plio?nix Mutual Life Ins. Co. 17
Minn. 153, 10 Am. Kep. 154.
ilf?s.soi«r/.— Keim v. Home Mutual
Fire Ins. Co. 42 Mo. 38, 97 Am. Deo.
291.
New Jemeri. — Halloek v. Commer-
cial Insurance Co. 20 N. J. L. 278.
Oklahoma. — Shawnee ^lutual Fire
Ins. Co. V. IMcClure. 39 Okla. 535, 49
L.R.A.(N.S.) 10r)4, 35 Pac. 1150.
231
Texas. — Connecticut IMutual Life
Ins. Co. V. Rudolph, 45 Tex. 454.
Virginia. — Haden v. Farmers' &
Mechanics' Fire Assoc. 80 Va. 683;
Ilaskin v. A2:rieultural Fire Ins. Co.
78 Va. 707. ^
"Negotiation" means the entire
transaction of applying for and final-
ly issuing- the completed contract of
insurance. Everson v. General Fire
& Life Assur. Corp. Ltd. 202 INIass.
169, 88 N, E. 658, 38 Ins. L. J. 923
and note 931.
13 Mead v. Davison, 3 Ad. & E.
.303; Dunlop v. Higgins, 1 H. L. Cas.
;]81; Kentucky 'Mutual Ins. Co. v.
.Tenks, 5 Ind. 96; Viii^sar v. Camp, 14
Barb. (N. Y.) 341.
14 New York Life Ins. Co. v. Bab-
cock, 104 Ga. 07, 69 Am. St Rep.
134, 42 L.R.A. 88, 30 S. E. 273, 27
Ins. L. J. 049.
1^ Herring v. American Ins. Co.
123 Iowa 533, 99 N. W. 130, 33 Ins.
L. J. 558.
16 Keim v. Home ^Ntutnal Fire Ins.
Co. 42 :\ro. 38, 97 Am. Dec. 291.
§ 55a JOYCE ON INSURANCE
adjustment based on tlie validity of four policies that relieved it
of one fourth of it< liability, and issued its check therefor," And
when an open policy is issued ''on property on board vessel," etc.,
"with such other risks as may be agreed on, as per indorsement
hereon, accepted by the company," and the risk is agreed upon,
the premium paid, and the indorsement made by the agent, the in-
surance is effected; but a different rule obtains where the risk is
''to be accepted.*'^* But a present contract of insurance is not effect-
ed by signing an application, followed by the statement of the agent
that he would "see to it, take care of it so it would be all right,"
would "get a policy." ^^ If an application for accident insurance
provides that the contract shall be complete when received at the
insurer's office and accepted* by its secretary, the application accom-
panied by the premium and their acceptartce by the insurer forms
the contract of insurtmce until the policy is issued and received.^"
In an action on a policy of insurance which had been filled up
and signed, but not delivered, and on which no premiums had been
paid, it is for the jury to determine what constitutes a reasonable
time within which the insured should pay the premium and accept
the policy.^ It is also a question for the jury whetlier an applica-
tion to an insurance com]:>any b}^ a party desiring to be insured has
been declined or not.^ and the question whether a policy was issued
• on a written application may be one for the jury,* but the effect of
an acceptance is a question for the court.*
If the policy ever attached, the insurer has a claim for premium ;
if otherwise, he has not.^
§ 55a. Mere intention to accept, insufficient. — A mere intention
by the insurer to accept the proposal is of itself alone insufficient,
" Finlev v. "Western Empire Ins. 199 N. Y. 590. See Robinson v.
Co. 69 Wa.sh. 673, 125 Pae. 1012. ' Union Central Life Ins. Co. (U. S.
iMVass v. Maine .Mutual .Marine C. C.) 144 Fed. 1005, rev'd 148 Fed.
Ins. Co. CI IMe. 5.37. 358, 78 C. C. A. 208.
^^ Whitman v. ^lilwaukee Fire Ins. ^ Cronin v. Fire Assoc, of Pliila.
Co. 128 Wis. 'l24, 5 L.R.A.(N.S.) 123 Mich. 277, 6 Det. L. N. 1048, 82
407, 116 Am. St. Rep. !?5, 107 N. W. N. W. 45, 29 Ins. L. J. 564.
291. * ^lanson v. Metropolitan Surelv
20 Robinson v. United States Be- Co. 112 N. Y. Supp. 886, 128 App.
nevolent Soc. 132 :\Iicli. 695, 102 Am. T)W. 577 affd (mem.) 199 N. Y. 590.
St. Rep. 4.36, 94 N. W, 211. The ap- ^ Cleveland v. Fittyplar-e, 3 ]\rass.
plication here was marked •■approved 392, 395; ^Merchants' Ins. Co. v.
and accepted" by tlie .secretary. Clapp, 11 Pick. (28 Mass.) 56, 61;
^ P>axter v. Mas.-asoit Ins. Co. 13 Homer v. Dorr, 10 ]\Iass. 26; Tavlor
Allen (95 Mass.) 320. v. Lowell. 3 Ma.ss. 331, 3 Am. Dec.
2 Mutual Benefit Life Ins. Co. v. 141: Elliers v. United Ins. Co. 16
Wi=:e, 34 :\Id. 582; Manson v. Metro- -Tohns. (N. Y.) 128; Hendricks v.
politan Snretv Co. 112 N. Y. Supp. Commercial Ins. Co. 8 Johns. (N. Y.)
886, 128 App. Div. 577 (mem.) affd 1.
232
I
COMPLETION OF CONTRACT § 55b
as such intention may be changed even thougli certain preliminary
acts liave been done by the insurer in view of a sub.-^equent consum-
mation of the contract.^ And in ca.se of a mere offer or bare pro-
posal, a mental determination to accept, or even acts done in
pursuance thereof are not sufhcient, when not completed by a
reciprocal promise.'
§ 55b. To what extent acceptance must accord with terms of
application. — It may be stated as a general rule that the apphcant
has a right to assume -that his policy will be in accordance with his
ap])lication, and it is the duty of the insurer to so write it. If other
and different clauses not in accord therewith are inserted by the
insurer he should call insured's attention to them.^ It is also neces-
sary, in order to establish an insurance contract, where the parties
are at the same place, that there "should be, according to the prin-
ciples of the common law an offer and an acceptance thereof in ac-
cordance with its terms.^ In a Maryland case it is held that where
the binding slip given by a fire insurance company for temporary
insurance is in the form of an executed contract, and not in the
form of a contract executory only, the conditions of a policy issued
and tendered, after the applicant has sustained a loss, cannot be
read into the contract; and where such binding slip is silent as to
the question of other insurance it is not competent to inject into
the contract any restrictions of that character. It is also too late, in
such a case, to reject the application after a loss has occurred.^" If
a signed application expressly provides the basis on which the in-
surance is to be effected the insurer cannot, whether by inadvert-
^ Allen V. Massaelmsetts, ]\Iutual J. 761 (a distinction is made in llii-^
Accident Assoc. 167 ^lass. 18, 44 N. case between bilateral and unilateial
E. ]0:)3, 26 Ins. L. J, 316. contracts). See ^ 63 herein.
' New V. Gerniania Fire Ins. Co. "Acceptance innst correspond to
171 1 11(1. 35, 131 Am. St. Rep. 24'), offer in every re.spect leaving' nothino;
8.") X. E. 703. cpeii to fntnre negotiations." 1 Paji'e
8 (iernian-.\merican Ins. Co. v. on Contracts (ed. 100.')) see. 45.
Darrin, 80 Kan. 578, 103 Pac. 87. 38 "It becomes a contract only when
Ins. L. J. 1008, citing' and quoting (he iiropositioii is met by an accept-
from Gristock v. !\oyal Ins. Co. 87 ance wliicli coi-re.>^iH)nds with it en-
Micli. 428, 49 N. W. 634; ]\fcEJroy v. tii'ely and adequately, an assent, how-
British American Assur. Co. 94 Fed. ever, may bind the party, altliougli
990, 36 C. C. A. 61.'). See also Mohr- not ex-jn-ess or in writing, if it can l)e
staclt V. ^Intual Life Ins. Co. 11') fairlv inferred from bis profiting bv
Fed. 81, 32 C. C. A. 675. See § 6:5 llie .•Stipulations of the contract." 1
herein. Parsons on Contracts (ed. 1904) bot-
As to neglect of applicant to read tom p. 513 (Book II. ^p. 476).
application or policy, see §§ C)()<i, i° ^lutnal Fire Ins. Co. ^font.
1974. 3514 note, liere'in. County v. Goldstein, 119 Md. 83, 86
9 Busher v. New York Life Ins. Co. Atl. 35.
72 N. H. 551, 58 Atl. 41, 33 Ins. L.
233
§ 55b JOYCE ON INSURANCE
ence, mistake or design, change such basis of contract and substitute
another in its stead and thereby bind the applicant without his
knowledge or consent and the latter ha.s the right to assume that
the policy if issued will be upon the stated Ijasis as offered, and it
is the duty of the assurer to so write it or reject it. If such an ap-
plication is received and retained by the company, and a policy be
written and delivered, and the premium paid by the applicant and
retained by the company, a binding contract of insurance is effected
on the basis of the application." If an agent has authority to
negotiate, write, and transmit applications, he has for such pur-
poses all the power the company itself possesses, and agreements
made with him as to what the terms of the application should be,
are made with the company. It is the agent's duty to frame the
application in accordance with his agreement with the applicant
and his neglect to do so is the company's neglect. His knowledge
is his principal's knowledge and where the company in such case
accepts and approves the application, receives and retains the first
year's premium and issues the policy a binding contract of insur-
ance is effected according to the agreement. ^^
It may be stated, however, that conditions not mentioned in the
application may be inserted in the policy by the insurer, but with
this qualification that if the policy issued contains any clause, to
which assured does not agree, he is at lil)erty to reject it, and either
demand a rescission and return of the premium paid, or insist up-
on a policy without the condition to which he does not assent, and
if such a policy is received and accepted without objection and re-
newed, the objectionable clause cannot be eliminated on the ground
that it is not expressly referred to in the application.^^ In a Massa-
chusetts case the court says: "The application not only did not con-
tain the terms and conditions which the defendant says they did
not, but, so far as appears, they did not contain many other terms
and conditions which are in the policies. Ordinarily it is not ex-
pected that an application for insurance will contain all the terms
and conditions which are included in the policy when it is issued.
Certain particulars are named ; othei-s are not. The application is
for such insurance on such terms and conditions as, in view of the
particulars submitted, the companj' sells. It is to be presumed that,
^1 German American Ins. Co. v. Lee v. Union Central Life Ins. Co.
Darvin, 80 Kan. 578, 103 Pae. 871, 38 22 Kv. L. Rop. 1712, 56 S. ^V. 724,
In.s. L. J. 1008. 29 Ins. L. J. 510.
i2pfiester v. jMissouri State Life " Bi„„t v. Fidelitv & Casualty Co.
Ins. Co. 85 Kan. 97, 116 Pae. 245, 40 145 Cal. 268. 67 L.R.A. 793, 104 Am.
Ins. L. J. 1651. St. Rep. 34, 78 Pae. 729, 34 Ins. L.
' Presumption that terms of policy J. 166.
in conformity Avith application, see
234
i
COMPLETION OF CONTRACT §§ 55e, 53d
as in, other cases, the purchaser has made himself acquainted with
what he is purcliasing. On the delivery of the policy, therefore,
the contract becomes complete without any further assent on the
part of the insured. Possibly, if the policy contains any extraord-
inary provisions such as are generally or often found in policies,
the insured on receiving it might have a right to rescind. But that
was not the case here. Morever, the plaintiff is a mutual company.
. . . The provision contained in one of the policies in regard
to coinsurance or average is not shown to liave been an unusual oi-
extraordinary provision, and it appears that the brokers who were
acting for the defendant knew that it was frequently inserted in
policies, and knew when the applications were sent what the uni-
form provisions of the policies issued by the plaintiff were." ^*
§ 55c. Proposal and acceptance: counter propositions. — If the
applicant rejects the contract offered and makes a counter proposi-
tion and refuses to pay the premium until it is accepted, there is
no contract unless such proposition is accepted and notice of ac-'
ceptance given to the proposer.^^ If the company rejects the appli-
cation and makes a counter proposition which is accepted and the
required premium is paid it is a valid insurance contract even
though no policy of insurance is issued. ^^ But if the insurer replies
to tlie application by proposing different terms, or by sending a
l)olicy differing in essential matters no contract is made until the
counter proposition or policy has been accepted by the applicant.^'
§ 55d. Whether acceptance of offer should be communicated to
proposer. — A contract may be completed by notice of acceptance,
as where tliere was some correspondence as to the rate of .premiuin
and the applicant finally notified the company that he agreed to
the rale required, it was held that a valid contract of insurance had
been made.^*
^* Commonwcnltli ^rntuol Firp Tns. ropolitnn Surety Co. 112 N. Y. Supi).
Co. V. Will. Knal)e & Co. 171 Mas?. 880, 128 App. Div. 577, ati'M (mem.)
205, 50 N. E. 516, 29 Ins. L. J. 34, 199 N. Y. 590. But see § 55d liereiii.
l)er Morton, J., cited in Paquette v. ^^ Carter v. Bankers Life Ins. Co.
Pi'udenlial Ins. Co. 193 ^Mass. 215, 83 Neb. 810, 120 N. W. 455. See
220, 79 N. E. 250, to point tliat a $^ OOc lierein.
liolicy of life insurance may coiitain ^"^ See Micliisjaii Pipe Co. v. IMiclii-
conditions not found in tlie applica- L;an Kire & Marine Ins. VjO. 92 Mieli.
tion, but outside oE any independput 482, 491, 20 L.R.xV. 277, 289, 52 N.
agreement the application an<i i)ol- W. 1070, 1073. See §§ OOe (iOli
icy together usually form the con- liei-ein.
tract. 18 p]a,nes v. Home Ins. Co. 91 I^.
i^Eriuitable Life Assurance Soc. S. G21, 24 L. ed. 298. Seetliisea.se
v. iMcKlroy, 8:5 Fed. 631, 49 U. S. under § 45 herein.
App. 548, 28 C. C. A. 365, 27 Ins. As to ne^'otiations tlirouuli mail
L. J. 561. Eianiiiie INlanson v. Met- or teleurams, see {^>? 02, ()2a, 63 herein.
235
§ ood JOYCE OX INSURANCE
So Avhere the company's officers merely place an initial letter
on the application, upon notice to the applicant that the policy
is prepared and ready for him there is an acceptance by the
company.^^ But the question has been raised as to the necessity
of such a communication and in a Federal case it is directly held
that the acceptance of an offer not communicated to the proposer
does not make a contract, but this was a case of a counter proposi-
tion.'^" In a New Hampshire case it is also decided that the accept-
ance to be complete must be actually communicated to the offerer,
except that in cases of offers by mail or telegraph constructive
notice of acceptance may be sufiicient.^ In a West A'^irginia case
it is held that a contract cannot bind the party proposing it, luitil
the acceptance of the other party is in some way actually or con-
structively communicated to him.'^ In an Indiana case it is deter-
Delivery: notice to assured of exe- notice of acceptance is necessar3\
cution of policy, see § 100 herein. "A mere mental intention to accept.
Binding- slip, etc., see §§ 65 et seq. not followed by sucli act or notice as
herein. is sufficient in law to charg-e the par-
^^ Armstrong v. Provident Saving ty making the offer with notice of
Life Assur. Soc. (D. C. Ont.) 2 Ont. the acceptance, dots not have any Ic-
L. Rep. 771. gal effect '\i\ converting the offer into
20 Equitable Life Ins. Co. v. Mc- a contract." Id.
Elrov, 83 Fed. 631, 49 U. S. App. ^ Rusher v. New York Life Ins. Co.
548, 28 C. C. A. 365, 27 Ins. L. J. 561. 72 N. H. 551, 58 Atl. 41, 33 Ins. L.
The court, per Sanborn, C. J., cites J. 761. See Kilcullen v. Metropoli-
Kendall's Admr. v. Pacitie Mutual tan Life Ins. Co. 108 Mo. Ap]j. 61,
Life Ins. Co. gl Fed. 689, 2 C. C. A. 82 S. W. 966, holding that there was
459, 10 U. S. App. 256; Jenness v. no completed contract, and no corn-
Iron Co. 53 Me. 20. 23; Thayer v. municated acceptance of the applica-
Middlesex ^Mutual Fire Ins. Co. 10 tion.
Pick. (27 Mass.) 325, 331; MeCul- 2 ]^jeCnlly's Admr. v. Plia-nix Mu-
lough V. Eagle Ins. Co. 1 Pick. (18 tual Life Ins. Co. 18 W. Va. 782,
Mass.) 278; Beckwith v. Cheever, 21 (following the lans'uage of 1 Par-
NT. H._41, 44; White v. Corlies, 46 N. sons' Con. 483). In this case tlie
Y. 467; Borland v. Guffey, 1 Grant's ajiplication provided that the "con-
Cas. (Pa.) 394; Duncan v. Heller. 13 tract shall be completed onlv bv the
S. C. 94, 96. delivering of the policy," 'but the
"An acceptance which does not go above was also decided as a general
beyond an uncommunicated mental principle. The court said: ''In the
determination, cannot create a bind- case of Barr v. Insurance Co. of
ing agreement .simply because the in- North America, 6^ Ind. 488, it was
tention to accept did in fact exist, held that a company may be bound,
. . . But in the rule that accept- tliongh no policy was issued; but
anee of an offer must be communi- there must be a valid contract .'^ub-
cated, the word 'communicated' does sisting between the ^larties. A mere
not mean actual notice." Lawson on acceptance of tlie proposition by the
Contracts (ed. 1905) ?<ec. 26. See 1 company would not create a valid
Page on Contracts (ed. 1905) sec. contract witlunit a notification to tlie
43, where (he cases considered are to insured. ... In Hobb's Case,
the effect that a connnunication or Law Rep. 4 Eq. 9, it was held, that a
236
COMPLETION OF CONTRACT § Twd
mined that in case of a mere offer or bare proposal, mental deter-
mination to accept or even acts done in inirsuance thereof are not
sufHcient to bind .the party who makes the offer, a reciprocal prom-
ise is required, and therefore in addition to consent the party to
whom the offer is made must connnunicate his acceptance directly
or constructively to the other party, that is he must, in the latter
case, use such agency as amounts to constructive notice.' In jNlassa-
chusetts it is held that wliere the application provides that it must
be received and accepted by the company before it is liable and
that it is not responsible for money paid to any other than its
treasurer, or those authorized by him in writing, the signing of an
application and the payment of money to an agent by the applicant
constitutes no acceptance even though the company had received
the application and had been intending to accept it. and had
made some minutes on it at the home office but had changed its
intention when it heard of an accident to the applicant, no accept-
ance having been communicated to him prior thereto.*
But under a jNIichigan decision actual acceptance at the home
office may be sufficient Avithout notice of acceptance especially so
wdiere the application provides that the conti-act shall be complete
upon such approval.^ And where upon the same day that an
application was filed and the premium offered, the company made
out and signed the policy, it thereby ratified the application and
its consent was comidete.^ In Oklahoma proof of approval of an
application, independently of the issuance and delivery of a policy,
may be made by direct evidence of the act of approval itself, or
in an implied way by the acceptance and application of the pre-
mium, and it is declared that the correct rule seems to be that the
obligation- of the insurer or insurance company depends on the
fact of the acceptance or approval of the application for insurance
and not on notice of such acceptance to the insured.'^ And the
sole question should be, as we have stated elsewhere.* whether the
insurer has signified his acceptance by some binding act from
proposed contract is not bindins- on * Allen v. Massachusetts Mutual
the party who proposes it until its Accident Assoc. 167 Maas. 18, 41 N.
acceptance by the other party has E. 105'), 26 Ins. L. J. 316.
been communicated to him or his ^ Robinson v. United States Benev-
ao-ent. Vide also Dimh)p v. Hiu<jins, olont Soc. 132 Mich. 695. 102 Am. St.
I'^H. L. Cases, 381; Tayloe v. Mer- Rep. 436, 94 N. W. 211.
chants Fire Ins. Co. 9 How. (50 V. ^ Koim v. Home ]Vhitnal Fire Ins.
S.) 390, 402, 13 L. ed. 187; Trevor Co. 42 Mo. 38, 97 Am. Dec. 291.
V. Wood, 36 N. Y. :507." ' Van Arschile-Osbornc Brokerage
3 New v. Germania Fire Ins. Co. Co. v. Cooper, 28 Okla. 598, 115 Pac.
171 Ind. 33, 131 Am. St. Rep. 245, 779, 40 In.s. L. J. 1625.
85 N. E. 703. Question of accept- * See § 55 herein,
ance by mail, although general prin-
ciple held to be as above stated.
237
§§ 53e-57 JOYCE OX INSIJJAXCE
which he cannot recede. The test is not intention alone but
whether tiiat intention has been effected.
§ 55e. Protection by insurer pending approval; date when policy
in force. — A notilicution from an insurance company that it would
protect until the application is acted upon does not place the insur-
ance in force from that date for the purpose of determining the
truthfulness of statements in the application at the mception of the
contract.^
§ 56. Qualified acceptance: conditions precedent. — An acceptance
may be quaUlied or made depeiident upon the performance of
some condition precedent, in Avhich case notice of compliance
therewith will bind the insurer. This is illustrated by a case
where a person haAdng an interest in an academy building applied
to the agent of a mutual ofKce for insurance, paid what cash was
required, and gave the necessary premium note. The insurance
company agreed to issue a policy on the application on certain
alterations being made in the building, and on authority from
the trustees of the academy to effect the insurance. These condi-
tions were complied with, and the agent Avas notified to examine the
building, which he did not do. It was held that the risk com-
menced from the time of the notice that the conditions were
performed.^" In case of a conditional acceptance of the risk, if
the conditions specified are not complied Avith no valid contract is
effected," and if the time or place of acceptance is specified, the
acceptance must conform thereto.^^ In case the policy does not
conform to that contemplated by the application, there must be an
acceptance of such policy, or there is no binding contract, and
where there is such a change of terms acceptance by the company
is a qualified acceptance which the api^licant is not bound to accept
and if he does not accept the company is not bound.^^ Again,
the acceptance may be qualified by the terms of the binding receipt
as where the insurance is to be effective from the date of the
i-eceipt subject however to the company's approval or rejection of
the risk.^*
§ 57. Acceptance: delay in acting on application. — There is, as
we have seen, no obligation resting upon the insurer to accept
' Carleton v. Patrons Androscoggin Quill v. Boston Ins. Co. 197 Mass.
Mutual Fire Ins. Co. 109 Me. 79, 39 -16; 83 N. E. 401.
L.li.A.(X.S.) 951, 82 Atl. 649. See , ''J^I^J^^",.,^': Pr'^'^^^ ^^^'^*-
^§ o9, P4-66 herein. 13 :\rutual Life Ins. Co. v. Young,
" Hamilton v. Lycoming Ins. Co. 5 23 Wall. (90 U. S.) 85, 23 L. ed. 152.
Pa. St. 3;!9. 14 :\ro}irstadt v. Mutual Life Ins.
" Gauntlett v. Sea Ins. Co. 127 Co. 115 Fed. 81, 52 C. C. A. 675.
Mich. 504, 86 N. W. 1047. See also See S§ 64, 96 herein.
238
COMPLETION OF COKTKACT §57
a proposal or application for insurance/^ and therefore delay in act-
ing thereon will not in itself warrant a presumption of acceptance. ^^
Thus, in an Alabama case, a receipt was given by an agent recitinp;
that the applicant was to be considered insured from date, "if said
application shall be approved and accepted by said company." Af-
ter several weeks the application was rejected, and it was held that
no acceptance could be implied from such delay, even though the
note for the premium was not surrendered, it not appearing that
the agent claimed the power to contract," So the company will
not be bound by a mere delay of five months without reply to the
proposal ; ^® nor by a delay of two months and the retention of a
note for the first premium ; ^^ nor will unreasonaljle delay bind
the company,^" and it was held a question for the jury whether a
delay of twenty seven daj's was unreasonable ; ^ and where the
application provided ''the policy to bear date and take effect at
noon of the day this application is approved," this was held to
mean approval by the home or principal office, and that a delay
of eighteen days before rejecting the application would not warrant
a presumption of acceptance.^ In another case an application for
fire insurance was made to a mutual company August 7th, the
application being subject to the ai^proval of the directors, and was
delivered to one of the directors August 9th. On the 19th of
Aug-ust the directors had a meeting for the transaction of special
business, and no action was at that time taken on the application.
August 30th the house was burned. September 25th, at the first
regular meeting of the executive committee, the application was
rejected, and the connnittee's action was approved by the directors.
It was held that there was no such negligence on the part of the
company as would entitle the plaintiff* to recover.'
Again, an insurance company does not, by delay in passing
^^ § 53 herein. " Alabama Gokl Life Ins. Co. v.
" Equitable A.ssuraiiee Soe. v. Mc- Mayes, 61 Ala. 163.
Elroy, 83 Fed. 631, 49 U. S. App. "New York Mutual Ins. Co. v.
548, "28 C. C. A. 365, 27 Ins. L. J. Jolinson, 23 Pa. St. 72.
561; Herman v. Phamix Mutual Life ^^ Ross v. New York Life Ins. Co.
Ins. Co. 17 Minn. 153; Hallock v. 124 N. Car. 395, 32 S. E. 733.
Commercial Ins. Co. 26 N. J. L. 268, ^o Misselhorn v. Mutual Reserve
27 Id. 645, 72 Am. Dec. 379; Has- Fund Life Assn. 30 Fed. 545, per
kin V. Agricultural Fire Ins. Co. 78 Brewer, J.
Va. 707. ^ Duffy v. Bankers Life Assoc. 160
That mere delay in acting upon Iowa, 19, 46 L.R.A.(N.S.) 25, 139 N.
an application cannot be construed W. 1087.
into an acceptance is supported by ^ Winnesheik Ins. Co. v. Holzgrafe,
an overwhelming weight of aulhori- 53 111. 516, 5 Am. Rep. 64.
ty. See notes 36 L.R.A.(N.S.) 1211, 3 pxarp v. Grangers' Mutual Fire
and 51 L.R.A.(N.S.) 873. Ins. Co. 49 Md. 307.
239
§ 58 JOYCE OX INSURANCE
upon an application presented by an uninsurable risk, assume
the obligation of an insurer upon the theory that its conduct pre-
vents the securing of insurance elsewhere and creates a legal pre-
sumption of acceptance.* And mere delay in rejecting a receipt
for renewal of an accident policy does not amount to an acceptance
which will continue the policy in force.^ So where the agent, who
knew of the rejection of the application, failed for eighteen days
thereafter to notify the insured, and a fire occuri-ed, the company is
not liable.^
But retention of tlie premium and failure to reject within a rea-
sonable time, may imply an acceptance ; ' and if through negli-
gence of the agent the application is not received or acted upon,
until a loss occurs, the company is liable.*
In case of a proposal by mail an offer to insure should be accepted
within a reasonable time, or the party might assume that it was
rejected.^ But if the company agrees to notify the applicant of
rejection of his proposal, and receives the application and premiuiri
note, but fails to send such notification for seven months, and tlie
property is burned in the meantime, this is such a delay as to
render the company liable.^"
The applicant has also the right to assume that his application
was rejected after a delay of forty days where the receipt for the
premium so provided and no explanation of the delay was offered. ^^
§ 58. Transferred to §§ 66b-66j herein.
* Northwestern Mut. Life Ins. Co. time to adjust a matter o£ concern
V. Neafus, 145 K3'. 563, 36 L.K.A. onfy to itseff were tantamount to an
(N.S.) 1211, 140 S. W. 1026. acceptance of the application of an
* Richmond v. Travelers' Ins. Co. ag-reemeut to issue the policy.'' In
123 Tenn. 307, 30 L.K.A. (N.S.) 954, this case insured met with an accident
130 S. W. 790. heforc the policy ^vas delivered. The
^ More V. New York Bowery Fire court in the principal case also con-
Ins. Co. 130 N. Y. 537, 29 N. E. 757, siderti Campbell v. American Fire
rev'g 10 N. Y. Supp. 44, 55 Hun Ins. Co. 73 Wis. 100, 40 N. W. 661 ;
540. New York Life Ins. Co. v. Babcock.
' Robinson v. United States Benev- 104 Ga. 67, 69 Am. St. Rep. 134, 42
olent Soc. 132 Mich. 695, 102 Am. L.R.A. 88, 30 S. K. 273,, and cites
St. Rep. 436, 94 N. W. 211 (in this Continental Ins. Co. v. Haynes, 10
case application was made June 29, Ky. L. Rep. 276; Uartford Fire Ins.
accepted June 30; policy was re- Co. v. Iving, 106 Ala. 519, 17 So. 507.
ceived by agent July 2, and insured * Fish v. Cottenet, 44 N. Y. 538.
was killed July 2). The court, per ^ Thayer v. ^liddlesex ^Mutual Fire
Grant, J., considers Preferred Acci- Ins. Co."^ 10 Pick. (27 Mass.) 326.
dent Ins. Co. v. Stone, 61 Kan. 48, ^^ Somerset County ^futnal Fire
58, 986, and quotes therefrom as fol- Jns. Co. v. May, 2 We^'k. Not. Cas.
lows: "The retention of the premi- (Pa.) 43.
nm and its failure to reject the appli- ^^ Stillwell v. Covenant Mutual
cation, its holdins' of it while it took Life Ins. Co. 83 ^lo. App. 215.
240
COMPLETJOX OF CONTRACT § 59
§ 59. Agent's agreement: liability not to attach till approval. —
If the application provides llial no liability sliall attach until
approval by the principal, such ai)proval is necessary to coini)lctc
the contract, and if a loss occurs before such approval, the insur-
ance company is not lialjle, though the premium has been delivered
to the local agent. ^^ If a ])erson applies for life i/isurance and pays
an amount equal to the first premium, but the application and tlie
receipt for the money paid stipulate that the insurance is to become
effective only when the application is approved and the policy
issued, the transaction does not amount to an agreement for pre-
liminary or temporary insurauce.^^ And where if an agent has au-
thority merely to receive ai)plications and forward the same for ap-
proval and to deliver policies and receive premiums, and the appli-
cant knows the extent of the agent's authority, but that the policy
vvas to l)e issued by the general agent on his approval of the risk, and
the risk is rejected after the property is burned, but without knowl-
edge of the fact, there is no valid contract of insurance.^* In another
ca.«e an insurance solicitor received a written ai)))lication for insur-
ance, witli the understanding that no liability should attach until
approval by the company. The solicitor also accej^ted the premium
and gave a receipt therefor providing that it should be returned in
case of nona])proval of the ri.sk. I'he solicitor mailed the apjilica-
tion and ])remium to the company, but the comijany never received
or heard of them, no policy was i.ssued. and the j)remium was not
returned to the applicant. It was decided that the company was
not liable. ^^ In a New York case a general agent appointed a
subagent, with authority to make contracts^ for insurance which
.should be binding u[)on the company from the date of application
until, upon reference to the general agent, they t^hould be rejected.
The plaintiff claimed to have been appointed a subagent, and sent
a Ic'Hm- proposing insurance. The letter was delivered to the
general agent. There was conflicting evidence as to whether the
latter read plaintiff's letter until after he had knowledge of the
fire; but after he knew of the fire he executed and deli\crcd a policy
to the plaintiff, and it was held that the policy was invalid, and
that the agent had no authority to issue a jtolicy to himself. ^^
An application to an insurauic (•()iii])aiiy for a pdlicy of fire
^^ Pickett v. German Fire Tn.s. Co. ^^ Fleiiiiii<i' v. Il.u-t fdfd' Fii'e Ins.
.".9 Kan. ()97, 18 Pae. <)();]; .Jacoh.^ v. Co. 42 Wis. (il(i.
New York Lit'e Ins. Co. 71 Miss. ()5S, ^^ Atkinson v. ilawkeve In.s. Co. 71
129 Atl. ()()(). See §§ ()4-(;(i. !)(i Iicre- Iowa, 340, 32 X. W. 371. This was
in. ,'1 lire risk: tlie aueiU was a soliciting;
^' Cookscv v. Mutnal Life Ins. Co. a<ienl onlv.
73 Ark. llY. 108 Am. St. IJep. 2fi, iMV-nliev v. Cohimhia Ins. Co. 17
83 S. W. 317. X. Y. 121.
,r()y(o Ins. Vol. J.— Hi. 241
§§ o9a, 60 JOYCE ON INSURANCE
insurance, and a pi'oinisc by it? agent to attend in due time to the
matter of taking sucli further ."-teps as were nece&sary to efJ'ect the
insurance, subject to the action of the insurer, do not constitute a
valid contract for insurance in pra^senti." If the application taken
by a local agent is conditioned that it shall attach only upon the
general agent's approval, and he approves it, but with a modifica-
tion which the applicant accepts, a subsequent approval by the
general agent is unnecessary.^^
§ 59a. Usage or custom that agents can bind insurer until notice
of refusal. — A general usage or custom to the etfect that persons
authorized to solicit insurance can bind their principal until
notice of the refusal of the risk is received by the agent and com-
municated to the person desiring insurance is valid, and is binding
both upon stock and mutual insurance corporations insuring against
loss by fire.^'
§ 60. Approval may be implied from the circumstances. — Receipt
of a premium from a local agent, by the general agent, followed by
an instruction from the latter to the former to cancel the policy,
will be such a recognition of the existence of the policy as to
constitute the requisite "approvar" of the general agent for its
validity ; ^° and if after the execution and delivery of a policy
by an agent of the insurers duly authorized to make insurance upon
vessels and who had in fact previously insured the same vessel for
the same applicant, a memorandum is signed by the insured that
the insurance is to take effect ''when api3roved by the general
agent at Buft'alo," and a loss occurs, the insurers ai'e liable although
the insurance was disapproved by the general agent, who directed
the agent to return the premium note and cancel the policy; no
notice of the disapproval having been given to the insured till
after the loss.^ Again, the insurance wa^ to inure from the
time of the payment of the premium to the agent, provided the
company approved the risk, and the agent having had negotiations
with a pai'ty accepted a premium for insurance for a certain sum
to conuuence then, and gave a receipt therefor as agent. Before
^"^ Whitman v. Milwaukee Fire Tns. Cited in Cnneordia Fire Ins. Co. v.
Co. 128 Wis. 124, llti Am. St. Rep. Hefifroii, 84 III. App. 612 ; Underivood
25, o L.R.A.(N.S.) 407 (annotated \, Greenwich Ins. Co. 161 N. Y. 413,
on the requisite.s of an oral contract 55 N. E. 936, 29 Ins. L. J. 149 (as to
of in.surance) 107 X. W. 291. this last case see note 12 under § 66a
^^ Born V. Home Ins. Co. 120 Iowa, herein). Examine §§ 46, 50, 65 here-
299, 94 X. W. 849. in.
" Brown v. Franklin Alut. Fire Ins. 20 ^tna Ins. Co. v. ^ilaguire, 51 111.
Co. 165 Mass. 565, 52 Am. St. Rep. 342. See § 73 herein.
.534, 43 N. E. 512. See also Insaranc(> ^ TFAna Ins. Co. v. Webster, 6
Co. of Vallev of Ya. v. Mordecai, 22 Wall. (73 U. S.) 129, 18 L. ed. 888.
How. (63 U. S.) Ill, 16 L. ed. 329.
COMPLETION OF CONTRACT §§ 61, Gla
llie preniiuin was received by tlie company or the policy made
out the i>reiiiises wore burned. Had the premium boon jmmc-
chalely remitted by llie af2,ent to the home ofiicc, it would have been
received there befoi-e tlie los;^. In the lower court it waR held that
there could be no binding contract until the receipt of the premium
and approval of the lisk at the home ofhce. The court of errors,
however, decided ibat a recovery could be had.^
§ 61. Oral agreement of agent may be controlled by applica-
tion. — If the ai)])Ucation particularly si)ecilie.s when the contract
Avill take effect, this, it is held, will control a contemporaneous oral
agreement differing in terms therefrom, and made with the agent
of the insurer, in a case where the j^laintifF, at the solicitation of
an agent signed an a[)plication for a policy, wherein it was provided
that the ]3olicy should lake effect from the day the application was
approved and gave his note for the premium. The agent gave a
receipt for the note, at the same time promising plaintiff that
the policy would take effect from the date of the application. The
application was sent to the pnncipal office and was rejected ; but,
before the agent had informed plaintiff of the failure of the nego-
tiations the property proposed to be insured Ava.s destroyed by lire.
It was held that there was no valid contract of insurance.^ And
even though if the agent who solicited the insurance assured the ap-
])licant that it would go into effect at once, and he signs the aj^plica-
tion which stipulates that the insurer incurs no liability until the
policy is issued and delivered, and the receipt for the llrst premium
contains a like stipulation, the insurer incurs no liability until the
policy is issued and delivered, nor can there be any recovery in the
absence of such issuance and delivery, as such written contract
governs and cannot be varied by jxu'ol evidence, and the applicant
is negligent in not reading the agreement.'* And where from the
terms of the application the only reasonable and natural inference
to be drawn is, that the insurance, if granted, Avould take effect
from the date and delivery of the policy, a mere oral statement from
an agent that the insurance if granted would be operative from the
date of the apjdication. is not l)inding, said agent's authority,
known to the apjdicant, being limited to forwarding the application
to the company for approval or rejection.*
§ 61a. Agent's statement that application accepted: when insurer
estopped. — An insurance company may be estopped to repudiate
2 Perkins v. Wasliin^lon Ins. Co. 4 Co. 109 Wis. 4, 83 Am. St. Rep. S-J,
Cow. (N. Y.) 04.-), .Tolins. Cli. (N. '85 N. W. 128.
Y.) 48"). * Firomon's Fund Ins. Co. v. Ros;-
MViiino.'^luMk Ins. Co. v. Holz- ers, 108 Cti. 101, 33 S. E. 954, 28
grafo, 53 111. 510, 5 ;\in. Rep. 64. Ins. L. J. 1025.
* Chamberlain v. Prndcntinl Ins.
243
§§ Gib, 62 JOYCE ON INSURANCE
the announcement of il.^ agent that an application ha? been ac-
cepted if the applicant wliile relying thereon dies, or, by reason of
intervening sickness, has become incapal^le of securing other insur-
ance.®
§ 61b. Agent's statement that certificate or application binding:
mutual benefit insurance. — A benelit certificate to which by its
terms only a member of a particular association is entitled, is not
void, because at the time the apphcation is made the a])plicant
is not a member of the association, if the agent soliciting the appli-
cation agreed that the certificate should become binding when
applicant was admitted into the association, tmd he wa.s in fact
admitted before a liability arose under the certiticate.'' So a mutual
life insurance company whose by-laws reserve to its board of direct-
ors the power to accept the applications for insurance, but authorize
the secretary- to receive the applications and the advance premium
thereon and conduct all correspondence with applicants in makino;
insurance contracts, will be bound by the written, though erroneous,
statement of that otiicer to an applicant that his application
had been accepted, and that a policy would be issued, if, before
making it, the secretary had received and was retaining the advance
premium, and if the applicant died before either he or his benefi-
ciary became aware of the real facts.®
§ 62. Completion of contract: negotiations through mail, — Xego-
tiations are frequently carried on by mail, and some question has
arisen as to what constitutes an acceplance in such cases. If the
application and premium be mailed, and they are never received
nor heard of by the company, no coulract exists even i1iou,l!.1i a re-
ceipt is given by the coiiipnn\".^ hi llie well-known case of Mc-
Culloch V. The I'^agle Insurance Comiiany^" a letter was written
inquiring on what terms the company w(nild lake a risk for a stated
amount on a certain brig and cargo between s[)ecilied termini. The
company replied slating the terms, and on the .«ame day the answer
was received the party wrote requesting a policy on the terms speci-
fied. The day liefore this letter of acce])taiu'e was mailed the com-
])aiiy had written refusing the risk, which, however, was not re-
^Kiiiibro V. New Yoi'lv Life Ins., ^ ^i,,,,]!,,,, v^f.,^^),,!,. ;\[,itual Beiie-
Co. i:!4 Iowa, 84, 12 I..I^A.( X.S. ) tit Sof. 04 Ivmi. •")(), 07 Pac. r>33.
421, 108 N. ^Y. 102."). See Christy v. Exainiiie Gillespie Heme Tp. iMutual
North Brit. Ins. Co. 3 Ct. Sess. (1st 1-^ire Jns. Co. v. Prather, lO-j 111. App.
.series, 1823) i). .300, noted under >5 123, agent's authority an important
4o herein. Examine §^ ()4 el se(i. t actor.
herein. ' ® Atkinson v. Ilawkeye Ins. Co. 71
7 Delanevv. Modern Accident Club. Iowa. 340, 32 N. W.' 371. See §
121 Iowa, "528, 63 L.R.A. 6t)3, 97 N. 3300 herein.
W ni ^°1 Pick. (18 Mass.) 277.
244
COMI'LETION OF CONTKACT
§ 62
ceivcd at tlie time of mailing the letter of acce[)tance. All the let-
ters were duly received in regular course of mail by both parties.
Upon a loss and action brought for recovery tliereof the court held
that there was no completed contract. In a later case, however, in
the same state." il was declared bv the court in argument tlial a
"notice actually put into the mail, especially if forwarded and be-
yond the control or revocation of the party sending it, may be a
good notice." ^^ Jn view of the McCuUoch v. Eagle Insurance
Company case, we will state that a locus poenitcnliae exi.^ts so long
as either party may withdraw. But the rule clearly is that the
mailing a letter of acceptance in like ca.<es coiupletes the contract,
as the locus poenitentiae is ended when the acceptance has passed
beyond the control of the party, notw^itlistanding before that the
company may have mailed another letter rejecting the risk, unless
such notice has reached the insured before his acceptance had been
mailed.^^ And if the acceptance is made by the deposit of a policy
^^ Thaver v. Middlesex Mutual Fire
Ins. Co. 10 Pick. (27 Mass.) 326, 331.
^^ See also 1 Duer on Ins. (ed.
1845) 121. Mr. Phillips (1 Phillips
on Ins. (3(1 ed.) ]>. 18, sec. It) says:
"The doctrine decidedly predominat-
ing in the cases, accordingly, is that a
written offer by insurers of tenns on
vvhich thev will insure where the sub-
Indian<t. — Swing v. National Pulp
Co. 47 Ind. App. li)9, «J3 N. E. 10U4,
40 Ins. L: J. 807.
Minnesota. — Kilborn v. Prudential
Ins. Co. 99 Minn. 176, 108 N. W.
8t)l, 35 Ins. L. J. 840.
Missouri. — Welsh v. Chicago Guar-
anty Fund Lite Soc. 81 ]\lo. App. 30.
New Hampshire. — B usher v. New
ject risks and terms. are adequately York Life Ins. Co. 72 N. H. 551, 58
specitied, becomes binding on dis- Atl. 41, 33 Ins. L. J. 761, considered
patch of an acceptance, provided the under § 62a herein,
acceptance reaches them before being
countermanded, and in reasonable
time, or within the time prescribed."
^3 United States. — Taylor v. Mer-
chants Fire Ins. Co. 9 How. (50 U.
S.) 390, 13 L. ed. 187 (see citations
of this case beloAV, in this note).
Alabama. — Triple Link IMutual In-
demnity Assoc. V. Williams, 121 Ala.
138, 77 Am. St. Rep. 34, 26 So. 19.
J r/,Yn?.srt.s.— Travelers Fire Ins. Co.
V. Globe Soap Co. 85 Ark. I(i9, 122
New York. — Hammond v. Interna-
tional Rv. Co. 116 N. Y. Supp. 854,
(i.-J .Misc.' 437, aff'd (mem.) 119 N. Y.
Supp. 1127.
North Carolina. — Kendrick v.
Mutual Benelit Life Ins. ('o. 124 N.
Car. 315, 70 Am. St. Rep. 592, 32
So. 728.
Texas.— Fidelity Mutual Life As-
soc. V. Harris, 94 Tex. 25, 86 Am.
St. Rep. 813, 57 S. W. ()35.
Vermont. — Hartford Steam Boiler
Am. St. Rep. 22, 107 S. AV. 38(5; Inspection & Ins. Co. v. I^nsher
Stocking Co. 60 Vt. 439, 44 Am. St.-
Rep. 859, 29 Atl. 629.
West Virginia. — Galloway v. Stand-
ard Fire Ins. Co. 45 W. Va. 237, 31
S. E. 969, 28 Ins. L. J. 125.
England. — Adams y. Lindsell, 1
Barn. & Aid. 681, 6 Eng. Rul. Cas.
80.
Mutual Reserve Fund Life Assoc, v.
Farmer, 05 Ark. 581, 47 S. W. 850.
Colorado. — Mutual Life Ins. Co. v.
Reid, 21 Colo. App. 143, 121 Pac.
132.
Illinois. — National Mutual Church
Ins. Co. v. Trustees Meth.-Epis.
Church, 105 111. App. 143.
245
§ 02
JOYCE UX IXSUKAXCE
in the mail, (lie contract is consunnnated, for the company thereby
does an overt act which signifies that tlie policy shonld have present
See also 1 Wood's I'lrc Iiisunince,
2d ed. 40, sec. If) et seq. and notes.
The case of Tayloe v. Merchants'
Fire Ins. Co. cited above in this
note, is cited on the above point in:
United Stale.^. — ^[cDonald v.
Chemical National Bk. 174 U. S. 610,
620, 43 L. ed. 1110, 19 Sup. Ct. 787 ;
Patrick v. Bowman, 149 U. S. 411,
424, 37 L. ed. 795, 13 Sup. Ct. 811;
Utley V. Donaldson, 94 U. S. 29, 45,
24 L. ed. 55; Peinisylvania Lumber-
man's ]\Iutual Fire Ins. Co. v. Meyer,
126 Fed. 352, 354, 61 C. C. A. 254,
256; Sea Ins. Co. v. Johnston, 105
Fed. 286, 291, 44 C. C. A. 477, 482;
Andrews v. Schreiber, 93 Fed. 369;
Phenix Ins. Co. v. Sdiultz, 80 Fed.
337, 343, 42 U. S. App. 483, 25 C. C.
A. 453, 459; Schultz v. Phenix Ins.
Co. 77 Fed. 375, 394; Gairettson v.
North Atchison Bank, 47 Fed. 869;
Northwestern Mutual Life Ins. Co. v.
Elliott, 7 Sawy. 21, r, Fed. 225, 229:
Winterport Granite & Brick Co. v.
The Jasper, Holmes, 102, Fed. Cas.
No. 17,898; Humphrev v. Hartford
Fire Ins. Co. 15 Blatehf. 511, Fed.
Cas. No. 6,875; Dodoe, In re, 9 Ben.
482, 17 Nat. Bankr.^ Keg. 506, Fed.
Cas No. 3,948; Gartielde v. United
States, 11 Ct. CI. 601.
Alabama. — ^lol^ile ^Farino Dock &
Mutual Jns. Co. v. McMillan, 31 Ala.
711, 720.
Arkansas. — State ^Futual Fire As-
soc. V. Brinklev Stave & Heading Co.
61 Ark. 1, 5, 25 L.R.A. 713, 54 Am.
St. Rep. 191. 31 S. W. 869.
Georgia. — Holliugsworth v. Ger-
mania, Niagara, Hanover & Republic
Fire Ins. Cos. 45 Ga. 294, 297, 12
Am. Rep. 579.
Illinois. — Firemen's Ins. Co. v.
Kuessner, 164 111. 275, 280, 45 N. E.
540; Haas v. Mvcrs, 111 111. 421,
426, 53 Am. Rep. 634; Hartford Fire
Ins. Co. v. Farrish, 73 III. 1(36, 168;
Continental Ins. Co. v. Roller, 101 111.
App. 80.
Indiana. — Barr v. Ins. Co. of
Xorlh America, 61 Ind. 488, 495;
New England Fire & Marine Ins.
Co. v. Robinson, 25 Ind. 536, 539;
Kentucky Mutual Ins. Co. v. Jenks,
5 Ind. 96, 100 ; Western Assur. Co. v.
McAlpin, 23 Ind. App. 220, 223, 77
Am. St. Rep. 423, 55 N. E. 119;
Union Central Life Ins. Co. v. Pau-
ley, 8 Ind. App. 85, 94, 35 N. E. 190.
Iowa. — Ferrier v. Storer, 63 Iowa,
484, 487, 50 Am. Rep. 752, 19 N. W.
288.
Kansas. — ^Preferred Accident Ins.
Co. V. Stone, 61 Kan. 48, 53, 58 Pac.
986.
Kentucky. — Security Fire Ins. Co.
V. Kentucky Marine & Fire Ins. Co.
7 Bu.sh (Kv.) 81. 86, 3 Am. Rep.
301.
Man/ land. — Latrobe v. AVinans, 89
Md. 636. 647, 43 Atl. 829; Hand v.
Evans Marble Co. 88 Md. 226, 231,
40 Atl. 899; Phoenix Ins. Co. v. Rv-
land. 69 Md. 437, 447, 1 L.R.A. 548,
550, 16 Atl. 109 ; Wheat v. Cross, 31
Md. 99, 103, 1 Am. Rep. 28.
Massachusetts. — Brauer v. Shaw,
168 Mass. 198, 201, 60 Am. St. Rep.
387, 46 N. E. 617; Sanborn v. Fire-
men's Ins. Co. 16 Gray (82 Mass.)
448, 454, 77 Am. Dee. 419.
Michi(jan. — -Michigan Pipe Co. v.
Alichigan Fire & Marine Ins. Co. 92
Mich. 482, 491, 20 L.R.A. 277, 289,
52 N. W. 1070.
Minnesota. — Horn v. Western Land
Assoc. 22 ^linn. 236; Heiman v.
Phoenix Mutual Life Ins. Co. 17
Minn. 153, 157, Gil. 127, 10 Am. Rep.
154; Lanz v. McLaughlin, 14 Minn.
72, 75, Gil. 55.
Mississippi. — Alabama Gold Life
Ins. Co. v. Herron, 56 Miss. 643, 646 ;
Robertson y. Cloud, 47 Miss. 210.
Missouri. — Day y. iMechanics & T.
Ins. Co. 88 Mo. 325, 337, 57 Am. Rep.
416; Lunostra.'^s y. German Ins. Co.
48 Alo. 201, 204, 8 Am. Rep. 100;
Keim v. Home Alutual Fire & Marine
Ins. Co. 42 Mo. 38, 41, 97 Am. Dec.
246
COMPLETION OF CONTRACT § 62
vilalily.^* And wlicre a properly addres;«ed contract is deposited
in the post ofiice it constitutes a delivery tliere.^* And the deposit
of a jiolicy in the mail properly addressed to the insured, with post-
age prepaid is a delivery to him even though death, sickness or loss
occurs thereafter but before the policy is received, and a recovery
may be had for such loss or death. ^^ If, however, the postage is not
291; Wallingford v. Home Mutual Wisconsin. — Fuller v. Madison
Fire & Marine Ins. Co. 30 Mo. 46, Mutual Ins. Co. 36 Wis. 599, 603.
55; Misselhorn v. ^tutual Reserve As to the fj^eneral rule in other con-
Fund Life Assoc. 30 Mo. App. 589, tracts that the acceptance takes effect
600; Estey v. Truxel, 25 Mo. App. from the mailing of the letter of ac-
238, 245. eeptance and a retraction from the
Xew Hampshire. — Davis v. Home receipt of the letter. See the follow-
Manufacturers Ins. Co. 67 N. H. 218, ing cases:
219, 34 Atl. 464. Georgia.— Bryan v. Booze, 55 Ga.
New Jersey. — McClave v. Mutiyil 438.
Reserve Fund Life Assoc. 55 N. J. L. Iowa. — Ferrier v. Storer, 63 Iowa.
187. 191, 26 Atl. 78; Northampton 484, 50 Am. Rep. 752, 19 N. W. 288.
Mutual Live Stock Ins. Co. v. Tuttle, Kentucky.— lintcheaon v. Blake-
40 N. J. L. 479; Hallock v. Conuuer- man, 3 Met. (Kv.) 80.
cial Ins. Co. 26 N. J. L. 268, 283, 27 Marifland.—i^tockham v. Stock-
N. J. L. 645. ham, 32 Md. 196 ; Wheat v. Cross, 31
New Tor/.-.— Bentlev v. Columbia Md. 99, 1 Am. Rep. 28.
Ins. Co. 17 N. Y. 421, 423; IMcCluskey New II ami^shi re. —Ahhott v. Shep-
v. National Life Assoc. 77 Hun, 55li, herd, 48 N. H. 14, 17,
558, 28 N. Y. Supp. 931; Post v. New Jersey.— Fotts v. Whitehead.
Aetna Ins. Co. 43 Barb. (N. Y.) 351, 20 N. J. 55.
7.T ,7 ^, ,• \\r ^■ r> • Pennsylvania. — Greer v. Chartiers
North Carolina. — V\ ylie v. Brice, ^ .^ ^'^ „ c<, „„, .., . „ _ ,„
rrn XT n lo' R- Co. 96 Pa. St. 391, 42 Am. R. n48.
70 N. Car. 42o. ,,.. T,r , , i^i ^ u
Wisconsin. — \\ ashburn v. Fletcher,
Ohio. — Palm v. Medina County 42 Wis. 152.
:\Iut. Fire Ins. Co. 20 Ohio, 529, 539. EnrjlanLl. —Bnncan v. Topham, 8
Oregon.— llac-heny v. Learv, 12 Comm. B. (O. S.) 225.
Oreg. 40, 43, 7 Pac". 329. " See also 2 Rents Comm. (13tli
Pennsylvania.— Uamihon v. Ly- ""^-^ 4'' '"?'^ ''.''^^1 .^^ ^'^^ paragraph
coming ins. Co. 5 Pa. St. 339; McKee l^st^ preceding in this note
V. Harris, 16 Phila. 150. See Stand- ^,, '' ^e^^"^ ;'.n^ "'.'f '.Ian ^'^T "^■
ard Wheel Co. v. Phoenix Ins. Co. 29 ,«.: ^?!'^^'- ^^'^ ^T • ^v' ■^^^\ ^^.^- «*l:
It n fi. t> oi,-- 18/ ; Oliver v. American Legion of
I'a. Co. Ct. Rep. Sbi. l, ,,, , u,uo\ i- \ ? n
,„ Vw^- Ti or. rlonor (Cal. 1882) 1/ Am. L. Rev.
lennessee. — Otis v. Pavne, 8b .,^-, ,, ■ , t ^, n n i
m pf-> rro o o ^T- oio' '^^^ - Commercial Ins. to. v. llallock,
renn. 66.>, 666 8 S. ^^ . 848. .^^ ^ j j^ ^^^g. jj^^^^j^, ^, ^ommer-
y.,.,.s.-Matkin v^ Supreme Lodge ^.^^, ^^^ p^, .,^. ^. ^j ^ ._,,.^_ -._, ^^^
Knights of Honor, 82 Tex. 301, 303, ^,^^ 3-,. ^a.ssar v. Camp, 11 N. Y.
2, Am. St. Kep. 88,, 18 S. ^^ . 306; ^^^. j^j^^^i^^ v. Frith, 6 Wend. (N.
«lake V. Hamlnirg Hremen Fire Ins. y.) 103, 21 Am. I^cc 262, 2 Kent's
Co. 67 Tex. 160, 163, 60 Am. Rep. Commenlaiies, 13tli "ed.""477. See
15, 2 S. W. 368. Fames v. Home Ins. Co. 94 U. S. 621,
West Virginia. — McCully v. Plio'- '24 L. ed. 298.
iiix :\rutual Life Ins. Co. 18 W. Va. 15 (Jallowav v. Standard Fire Ins.
782, 785; Woody v. Old Dominion Co. 45 W. Va. 237, 31 S. F. 969, 28
Ins. Co. 31 Gratt. (Va.) 362, 364. Ins. L. J. 125. See § 231 lierein.
31 Am. Rep. 732. i« Triple Link Afulual Indenmitv
247
§ 62 JOYCE ON INSURANCE
prepaid there is no presumption that it was received by addressee,
and depositing a letter witliont postage is not prima facie evidence
of its receipt." as a proj^osal by mail requesting an answer may be
withdrawn before it is accepted but not thereafter. ^^ The underly-
ing principle is this, that a person makes the mail, or similar agency
his agent to receive the acceptance, by making his offer through
that medium and the acceptance when mailed or properly delivered,
as in case of a telcgriun. is then constructively communicated to the
proi)oser, except of course, where the proposal has been withdrawn
prior to said mailing or delivery. ^^ So where the status of the
parties becomes fixed by a completed contract of insurance it can-
not be affected and the contract ignored or repudiated by subse-
quent letters. 2° A policy is also delivered when mailed from the
home oHice to the agent for delivery to assured.^ If an application
is accepted and the contract is put in force by issuing and mailing
a policy, the fact that it is then sent to an insurance agent for un-
conditional delivery does not alter the effect of the transaction.^ If
an applicant for insurance delivers his application to the special
agent of a foreign insurance company, who transmits it to tho
office of the comj)any, and the policy is issued and mailed to the
applicant, the contract takes effect when the policy is mailed. It
being a foreign contract the question as to whether the insurance
company, or its agent, had a license to transact business in the
state where the application was made is immaterial in an action
by the company to recover a premium.'
Assoc. V. Williams, 121 Ala. 138, 77 Co. 72 N. H. 551, 58 Atl. 41, 33 Ins.
Am. St. Rep. 34, 26 So. 19, 28 Ins. L. J. 7fil, considered under § 62b.
L. J. 621; Travelers Fire Ins. Co. v. 20 ^^elsh v. Chicago Guaranty
Globe Soap Co. 85 Ark. 169, 122 Fund Life Soc. 81 Mo. App. 30.
Am. St. Rep. 22, 107 S. W. 386; ^ Mutual Life Ins. Co. v. Reid, 21
Mutual Reserve Fund Life Assoc, v. Colo. App. 143, 121 Pac. 132.
Farmer, 65 Ark. 581, 47 S, W. 850; On where insurance contract is
Kimbro v. New York Life Ins. Co. deemed to hav& been made when pol-
134 Iowa, 84, 12 L.R.A.(N.S.) 421, icy is mailed to local asent of in-
108 N. W. 1025, 35 Ins. L. J. 57. surer see notes m 6.-. L.R.A. 840; 23
See §§ 103-108 herein. L.R.A.{N.S.) 969; 52 L.R.A.(N.S.)
On presumption as to receipt of 276; or to insured or his agent, see
communication sent through mail, see note in 52 L.R.A. (N.S.) 275.
note in 49 L.R.A. (N.S.j 458. On 2 j^idelity :\rutual Life Assoc, v.
effect of death of party after the Harris, 94 Tex. 25, 36 Am. St. Rep.
mailing but before the receipt of his 813, 57 S. W. 635.
letter accepting an offer, see note in ' Hartford Steam Boiler Inspection
12 L.R.A.(N.S^) 439. & Ins. Co. v. Lasher Stocking Co. 66
" Welsh V. Chicago Guaranty Vt. 439. 44 Am. St. Rep. 859, 29 Atl.
Fund Life Soc. 81 Mo. App. 30. 629. See Harrigan v. Home Life
18 Jones V. New York Life Ins. Co. Ins. Co. 128 Cal. 531, 58 Pac. ISO,
15 Utah, 522, 50 Pac. 620. 61 Pac. 99.
1^ Busher v. New York Life Ins.
248
1
COMPLETION OF CONTIfACT § 62a
In a case in the United States circuit court a life insurance, Upon
due application, was issued under a contract with the local agent,
whereby it was sul:>s(antially agreed tliat the agent should pay the
lirst quarter's premium and take the applicant's note for the same,
and the policy was mailed from the home ofiice July 28, 1885,
and received by tlie local agent August 5, 1885, but was never act-
ually delivered into the possession of the applicant, who was taken
ill August 6th, and died September 9, 1885, and it was held that
as between the applicant and the company the policy became eflfec-
tive and binding when placed in the mail July 28, 1885, and if not
then, certainly when it reached the hands of the agent, August 5,
1885.'* So, also, where an accident policy was sent by mail but
did not reach its destination until after the death of assured, it was
held that the coutract was complete when the policy was deposited
in the mail and credit given for the premium.^ And where a poli-
cy insuring against loss by boiler explosion was deposited in the
mail, together with the report of the company's boiler inspector and
suggestions as to changes in the setting of the boiler, it was held
that the contract was complete and that compliance with the sug-
gestions was not a condition precedent to the completion of. the con-
tract.^ Again, if at the direction of the insurer's agent a check for
the premium is sent by mail to the company, the time of payment
is that of tlie mailing, where the check is honored.' And where a
new poHcy, substituted for the old one, in accordance with an agree-
ment, is delivered by mail, the old one being surrendered, the con-
tract is completed even though the premium is not prepaid as re-
quired and a delivery in person is also required.* A proposal by
an insiu'ance company by letter to renew a policy must be accepted
or there is no binding contract.^
§ 62a. Employers' liability insurance: when contract incom-
plete: negotiations with insurance agent through mail. — The rule
that the minds of the parties must meet on all the essential elements
of the contract^" applies to employers' liability insurance; and
when a contractor holds such an insurance covering or connected
^Yoinit? V. Equitable Life Ins. Co. Ins. Co. 124 N. Car. 315, 70 Am. St.
30 Fed. 'iW2. Kep. 592, 32 S. E. 728; Tayloe v.
5 Dailev v. Preferred Masonic Mut- Alereliants Fire Ins. Co. 9 How. (50
ual Aec-ident Assn. 102 Mich. 289, U. S.) 390, L3 L. ed. 187.
26 L.R.A. 171, 57 N. W. 184. Re- « Lamb v. Mutual Resen-e Fund
versed upon other points on rehear- Life Assoc. (U. S. C. C.) 106 Fed.
ir-^, 102 Mich. 299, 60 N. W. 694. 637, aff'd 108 Fed. 961, 48 C. C. A.
6 Hartford Steam-Boiler Inspection 164, s. c. 109 Fed. 81.
& Ins. Co. V. Lasher Stockinp; Co. ^ W. P. Harper & Co. v. Ginnens
66 Vt. 439, 44 Am. St. Rep. 859, 29 Mutual Ins. Co. 6 Ga. App. 139, 64
Atl. 629. S. E. 567.
' Kendricks v. Mutual Benefit Life ^° See §§ 45 et seq. herein.
249
§ GJb JOYCE ON INSURANCE
\vilh certain work, on beginning another piece of work writes to the
insurer s general agent that he understands that the policy covers
the new work but is advised by the agent, by letter, that it is not
covered but that he will bind the risk until the contractor decides
just what he wants to do, and requests the latter to call him up on
the telephone the following day, or that he will come to see the con-
tractor on that day if the latter so desires, and no reply is made
to the agents communication, the two letters do not constitute u
contract of insurance on which the insurer is liable for an injury to
an employee occurring ten days after the negotiations.^^
§ 62b. Contracts of insurance : telegraphic agency. — Contracts
may be made through the medium of a telegraph, as well as through
the mail and such contracts are as binding and obligatory as if
made in the ordinary way. The entire transaction may be by tele-
graphic comnumication entirely or partly by letters and partly by
telegram, or the telegraphic communication may be one of several
factors necessary to constitute a complete contract. .Vn acceptance
by telegram must be one that binds both the proposer and acceptor.
^\llere the telegraph is adopted as the medium of communication
l)etween parties contemplating a contract, an acceptance of a pro-
posal completes the contract, if sent within the time agreed upon,
or if no time is .specified or indicated, then if .'^ent witliin a reason-
ably prompt time, having in view all the circumstances. The time
of telegraphing is the time from which the contract becomes closed
and binding; or to be more exact, the time Avhen the proper tele-
gram is deposited in the telegraph office, or delivered to the tele-
graph company or its authorized agent for transmission, is the time
from Avhich the completion of the contract dates. This is by
analogy to the accejitance of a prcjposal through the mail. This nile
assumes, of course, that the offer has not been withdrawn [it the
time of such acceptance. Where the proper telegram accepting a
proposal is sent as above, a subsequent revocation of the proi>osition
will not be effectual as against the contract or the accepting ])arty.
even though such revocation be telegraphed by the proposer before
the message of acceptance is received by him. And this rule as to
acceptance applies, it is held, even though the telegram so accept-
ing does not reach the proposer.^^ The above rules may be quali-
fied l)y the rule stated in the preceding section as to negotiations by
mail, and locus poenitentiae." In case a proposal for insurance is
made by telegram the contract is completed by delv<ery at the tele-
iiBradlev v. Standard Life & Ac- 12 jo^^.p ^n Electric Law (2d ed.)
cident Ins. Co. !)8 N. Y. Supp. 797, sees. 878-910a.
112 App. Div. ^3(). ^^ See § 62 herein.
250
COMPLETION OF CONTKACT . § 63
graph office and placing beyond the acceptor's control a properly
addressed telegTani accepting the proposal.^*
If negotiations are carried on by telegrams and tliere is a
conditional acceptance of the risk, and the imposed conditions are
not complied with, no contract is effected. ^^ A contract of insur
arice is not made by telegram and a letter where the rate of prem-
ium is not settled and the letter also encloses a form but not of the
character indicated by previous letters and negotiations.^^
In case the negotiations are partly by telegram and partly by
mail the acceptance and j)olicy become effective on the date when
it is mailed from tlie j)lace where the insurance company is lo-
cated."
§ 63. No contract where acceptance mailed differs in terms from
proposal. — \^ tlie }>olicy sent by mail is not an acceptance of the
terms proposed, but is in different terms, there is no contract, as
the minds of the parties never met, although the insTU-ers answer
that they accept the terms proposed.^* iSo if the correspondence
shows that the minds of the parties never met upon the terms, mail-
ing a policy which the applicant is not l)oiiiid to accept does not
bind the company. ^^ The acceptance must be an absolute and
^* Buslier v. New York Life Ins. surli cases, still the law requires that
Co. 72 N. H. 551, 58 Atl. 41, 33 Ins. the message of acceptance .shall pass
L. J. 761. In this case the court, per beyond the control of the acceptor."
Bingham, J., said that where the ^* Gauiitlott v. Sea Ins. Co. 127
offer is sent bv mail oi' by telegraph Mich. 504, 86 N. W. 1047.
"it is eommoniy held, andsuch is the ^^Pht'nix Ins. Co. v. Schultz, 80
law in this State— that the reply ac- \^^- ^3'. 2o C. _C. A. 453, 42 U. S.
cepting the offer may l)e sent through ^^PP- "^^•'- ''^^'S" " J""'^- ^'■\-
the same medium, and the contract ^ a'^'T .o- ^^^"^^^^''1 ^^'•
will be complete when the acceptance l^-_^ ^^ ^''"'■- ^^'^ ^^^ ^- ^- ^"PP"
is mailed, or delivered to the tele- /-i j. i i- ■ - •
, «. - , , , , , ^1 On telegram as prelimniarv step in
graph office properly a.hlresse. to the ,,,„,,, i^,tio„ ^f contract, see" note in
party making the offer, and beynnd 4 L.R.A.(N.S.) 177. On time an<l
the acceptors control: Abbott v. pi.,ee of consummati(m of contract
Shepard, 48 N. H. 14; Davis v. Home \vi,ere offer bv letter is accepted bv
Manufacturers' Ins. Co. 67 N. H. telegram or vice versa, see note in 6
218. The theory advanced in support L.H.A. (N.S.) 1016.
of such a holding is that when one ^^ Op^^a^ j,-,g Q^^^ ^ Carrington, 3
makes an offer through the mail, or (\iini. :i37; Duncan v. Topham, 8
hke agency, he authorizes the accept- Com. B. (0. S.) 225; Costello v.
ance to be made through the same Grant County :\rutual Fire & Light-
medium, and constitutes that medium ning Ins. Co. l.i.'J Wis. 361, 113 N. "w.
his agent to receive the acceptance, 639. See §§ 45 et seq. 55b, 66f here-
and that the acceptance when mailed in; Nordness v. Mutual Cash Guai-
or delivered at the telegraph office, is anty Fire Ins. Co. 22 S. Dak. 1, 114
then constructively communicated to X. \v. 10!)2.
Ihe offerer; 2 Lang. Cont. 095, sec. ^^ Piedinont c*c Arlington Life Ins.
15, par. 2. While constructive notice Co. v. Fwing, 92 U. S. 377, 23 L. ed.
of acceptance is permitted to take the 610; Hamblet v. City Ins. Co. 36
place of actual communication in Fed. 118.
251
§ (i3 JOYCE ON INSURANCE
unconditional one.'^" And this applies to the renewal of a policy
where there is an increase in the rate of premium, and the corres-
pondence shows that there was no aoreement fixin,2; the rate, and,
therefore, there is no acceptance.^ But where, in the correspond-
ence respoctinp; an agreement to insure, the letter of the applicant
•states that the rate per cent "is pretty heavy, but I gu&«s we will
have to stand it."' There is an acceptance of the proposal to in-
sure.2 And where an agent sent a policy by mail to an applicant,
with a statement that the ju'emium charged wa.*; higher than usual,
and requesting a return of the policy by mail should he decline it,
or if retained, to send the premium, it was held that retaining the
policy was an acceptance, or, at all events, the que.-^tion was one for
the jury.^ In a Connecticut case, one C. signed an application for
life insurance, and submitted to a medical examination under an
agTeement that the policy, when issued, should be forwarded by
mail to C.'s address in New A'ork, who, if it was found to be as
agreed, was to send the premium, or if not, to return the policy;
the policy to take effect when the premium was paid. Afterward,
the agent mailed it to C. at New York, the envelop being marked
''return in ten days if not called for." It was returned uncalled for.
The agent then sent the ])olicy to another place where he sujiposed
C. mieht be. but C. had died two davs Ijefore it was sent. It was held
to be an inchoate and not a complete contract of insurance, and
that no liability attached under it.*
Again, a subsequent acceptance of a proposition which has been
signed and mailed is not binding as a contract where before acce|>t-
ance a new condition or term has been added by the proposer and
rejected, since in such ca.«e there has been ilo such meeting of
minds as is essential to complete the contract, even though the ap-
plicant sent with the original application his personal notes for
the first year's premium.^ If upon receipt of the application, fur-
ther information is requested and it is sent by the applicant with a
stalement that if it is not satisfactory it should consider the appli-
cation withdrawn and return his check, which had been given for
the first premium, and the application is rejected b}'- letter sent
to the local agent with a return of the premium on the .same day
that the applicant died no contract of insurance is made.^ In ca.se
2° Hartford Steam Boiler Inspee- ' Sheldon v. Atlantic Fire & Ma-
tion & Ins. Co. v. Lasher Stocking rine Ins. Co, 2G N. Y. 460, 84 Am.
Co. 66 Vt. 439, 44 Am. St. Rep. 859, Dec. '21.3.
29 Atl. 629. * Rogei-s v. Charter Oak Life Ins.
^Dolicitv v. Millers & Manufac- Co. 41 Conn. 97.
lurers Ins." Co. 4 Ont. Law Rep. 303. * Travis v. Nederland Life Ins. Co.
2 Eames v. Home Ins. Co. 94 U. S. Ltd. 104 Fed. 486, 43 C. C. A. 653.
6'21, 24 L. ed. 298. 6 .Miller v. Northwestern Mutual
252
COMI'LKTION OF CONTRACT § 64
of such negotiations by mail if conditions precedent to writino the
policy are imposed by the insurer, and are not complied with by
the applicant, there is no c<)iii])leted contract of insurance.' An
insurance company may. lio\ve\er, be esto[)i)C(l to deny the issuance
of a policy where the applicant receives and relies upon a letter
from the insurer's agent stating that the company had reconsidered
the application and would issue a policy covering the full amount
from the start on the plan ajjplicd for and that the agent would
send the policy as soon as' it arrived.^ A proposal by letter, the
forwarding of policies for examination and the acceptance thereof
ett'ect a contract, and if the one who makes the proposal, has no
original authority as the C(>m})any's agent, but is made its agent
by the company's act, evidenced by correspondence, his deli\ery
of the i)olicy Ijetore loss eft'ects the contract.^
§ 64. Agent's receipt pending approval or issuance of policy:
"binding slip:" "binding receipt." — To what extent a company is
bound by a receipt given by an agent pending an approval by the
c()m|)any or until the policy is issued depends greatly upon the
agent's authority and the particular circumstances of each case, and
for these reasons the decisions are not perfectly in accord. The
following general rules will, however, be found to be in conformity
with the law as laid down by the adjudicated cases: 1. If the act
of acceptance of the risk by the agent and the giving by him of a
receipt is within the scope of the agent's authorit}", and nothing
remains but to issue a policy, then the receipt will bind the com-
pany.^" 2. Where an agreement is made between the appHeant
and the agent whether l)y signing an application containing such
condition, or otherwise, that no liability shall attach until the
principal aj^proves the risk and a receipt is given l)y the agent, such
accei)tance is nierels' condilional. and i.~ sul»(»i-(lin;Ue(l to the act of
the company in approving or rejecting; ^^ so in life insurance a
LilV Ins. Co. Ill Fed. 4(j5. 4!) C. C. § 57 herein, and cases. See also
A. .'i.'JO. Lee V. I'nioii Ceiili'al Lil'e Ins. Co. 19
' (^lill v. Boston Ins. Co. 197 Ma.-<s. Kv. L. Hep. U()8, 41 S. W. :!19: .Mu-
210, 83 N. F. 401. lual Lite Ins. Co. v. Herron, 7!) Miss.
8 New York Life Ins. Co. v. Mc- :;81,. 30 So. 091 (here receipt was
Intosh, — Miss. — , 41 So. 381, 35 signed by a solicitor a ppciinted by tlie
Ins. L. J. 857, s. o. 80 Miss. 230, 38 ficneral manager).
So. 775, 34 Ins. L. J. 1054. See also ^^ See S 57 herein, and cases.
Kiinbro v. New York Life Ins. Co. See also IMohrsladt v. ^lutnal Life
134 Iowa 84, 12 L.K.A.(N.S.) 421, Ins. Co 115 Fed. 81, 52 C. C. A.
108 N. W. 1025, 35 Ins. L. J. 57. (;75; Pace v. Provident Savings Life
8 National Mutual Church Ins. Co. Assur. Soc. 113 Fed. 13, 51 C. C. A.
V. Trustees IMethodisl Episcopal 32; Union Central Life Lis. Co. v.
Church, 105 111. Apj). 143. I'iiillips, 102 Fed. 19. 41 C. C. A.
i°Fish V. Cottenet, 44 N. Y. 538; 203, rev'g 101 Fc.l. 33; Steinle v.
253
§ (34 JOYCE ON INSURANCE
"binding slip" or "binding receipt," does not insure of itself. When
l^roperly executed it protects the a'i»pli('ant for insurance against
the contingency of sickness intervening its date and the delivery of
the policy, if the application for insurance is accepted. If the
latter is not accepted, or refused, in the valid exercise by the com-
]>;niy of its rights, the "binding" slip ceases eo instanti to liave any
eH'ect.^^ 3. Where the acceptance by the agent is witliin the scope
of his authority, a receipt containing a contract for insurance for
a specified time which is not absolute but conditional, upon accept-
ance or rejection by the principal, covers the specified period, unless
the risk is declined within that time," and it has been held in these
cases that the company may not arbitrarily reject after a loss.^*
In connection with the above rulers the following decisions are
important: Where an agent gave a binding receipt pending the
comi)any"s approval and told the applicant that the risk had been
accepted, and the evidence of the agent showed that it had in fact
been accepted, the contract was held good after loss, and the com-
pany estopped to deny acceptance,^* and it is also held where the
agent gave a receipt for certain money intended as part payment
of premium and duty, under an agreement of insurance for one
month, or unless rejected by the company before the expiration of
the month, and the property was burned before a policy was issued,
that giving the receipt completed the contract, unless rejected by
the principal, ^^ and the company will be bound Avhere a local in-
surance agent authorized to deliver "binding receipts," signed by
the general agent, agrees in good faith and for value to assume the
payment to the company of the first cash instalment, and delivers
to the insured a "binding receipt" properly signed.^''' But it is
Now York Life Ins. Co. 81 Fed. 480, Life Ins. Co. 41 Wash. 228, 83 Pae.
2b C. C. A. 401, 52 U. S. App. 2.35, IKJ, 35 Ins. L. J. 137.
27 Ins. L. .1. 174 {Distinguished in ^^ Fish v. Cottenet, 44 N. Y. 538;
Starr v. Mutual Life Ins. Co. 41 I^alm v. Medina Ins. Co. 20 Ohio 52!).
Wasli 228, 83 Pac. IKi, 35 Ins. L. J. See also Union Central Life Ins. Co.
]:{?). v. Phillips, 102 Fed. 19, 41 C. C. A.
12 Gardner v. North State ^Mutual 263, revV 101 Fed. 33. Bnt comjmre
Life Ins. Co. 163 N. Car. 3(i7, 48 Shawnee Mutual Fire Ins. Co. v. Me-
L.R.A.(N.S.) 714, 7J) S. E. 806. See Clure (1913) 39 Okla. 535, 49 L.R.A.
also Grier v. IMutual Life Ins. Co. 132 (N.S.) 1054, 135 Pac. 1150.
N. Car. 542, 44 S. E. 28. Examine " Penlev v. Beacon Ins. Co. 7
New York Life Ins. Co. v. Moates, Grant U. C. 130.
207 Fed. 481, — C. C. A. — . ^^ Mackie v. European Ins. Co. 21
"Goodlellow v. Times & Beacon L. T. N. S. 102. See BaiT v. North
Assur. Co. 17 U. C. Q. B. 411. See American Ins. Co. 61 Ind. 488.
also Robinson v. Union Central Life " Mississippi Vallev Life Ins. Co.
Ins. Co. (IT. S. C. C.) 144 Fed. 1005, v. Neyland. 9 Bush (Ky.) 430. But
rev'd 8 L.R.A. (N.S.) 883, 148 Fed. see Todd v. Piedmont & Arlington
358, 78 C. C. A. 268; Starr v. Mutual Life Ins. Co. 34 La. Ann. 63.
254
COMPLETION OF CONTKACT § 64
held that it is competent for the agent to explain AAhat was under-
stood between the parties by the words, "this receipt being bind-
ing/' etc., whci'c the I'eceipt was signed by the agent and read as
follows: "Received of S. three hundred and seventy-live dollars in
payment of insurance in the C. S. Insurance Company, this re-
ceipt being binding, on said company until policy is received.*' ^^
In another case A. applied to an agent for insurance on certain
propert}', and the terms were agreed upon and the premium paid,
but the agent having no blanks for i)olicies agreed to send a policy
to A., and gave him a receipt sijecifying the property to be insured
and providing that a policy should be sent as soon as the blanks
were received, and it was held that the effect of the i-eceipt was to
bind the company the same as if a policy with the ordinary condi-
tions had been issued. The policy, however, was declared void for
breach of certain conditions relating to "other insurance" con-
tained therein. ^^ But where a receipt was given by the general
agent of an insurance company, Avho agreed if the application
should be approved by the company to furnish a policy within
thirty days, "or, if the application is declined, to return the above
amount to him, or his order, on demand and return of this re-
ceipt," and the application was approved by the company and a
policy was sent to the agent within thirty days; but before delivery
the applicant died and the agent returned the policy to the com-
pany, the court decided that the receipt did not operate as a present
insurance for thirty days or until a policy should be furnished.^"
In another case the applicant signed an application ])roviding that
only the home office had authority "to determine whether or not
a policy shall issue on application." The agent gave a receipt,
specifying the amoimt received and expressed to be in jjayment of
insurance in the company. It was also set forth that the receipt
should be binding upon the company, until the policy was received.
An action being brought, the court decided that the receipt wa.s not
binding after the application was rejected, and also that the com-
pany was not bound to issue a ])olicy. No decision was given, how-
ever, as to the ])oint whether the receipt was binding on the com-
pany until action had by it on the application, as the question was
not considered as raised by the facts in the case.^
Where a receipt by an insurance agent to an applicant for pay-
" Scurry v. Cotton States Life Ins. ^Cotton States Life Ins. Co. v.
Co. 51 Ga. 024. Scurry, 50 Ga. 48. Ejcamine New
1^ Hubbard v. Hartford Fire Ins. York Mutual Ins. Co. v. Johnson, 2.3
Co. 33 Iowa, 325, 11 Am. Kep. 125. Pa. St. 72.
2° Marks v. Hope Mutual Life Ins.
Co. 117 Mass. 528.
255
§ 05 JOYCE ON INSURANCE
ment of premiimi, states tliat if the ap|)li('ation is approved the
insurance will he in force from the date of the medical examina-
tion, it refers to the examination the result of which is forwarded
to the company and not to one which is withheld by the examiner
because not satisfactory. Such a receipt does not put the insur-
ance in force pending a decision upon the application.^ Again,
where the agent acknowledged receipt of the application in a speci-
lied company ''subject to approval by" a named manager "all for
the term of one year and one note payable on" a certain date also
a stated amount "in cash, all to be restored if policy is not issued"
and "if policy is not received within thirty days from date of this
receipt. rei)ort that fact to" said manager at a designated place, and
the application and premium were returned to the agent and the
risk rejected, it was held that there was no contract of insurance
even though the applicant never received back said application or
premium, where he gave no notice of the nonreceipt of the policy
as requested.'
§ 65. Same subject: effect of memorandum: binding slip: in-
dorsement, etc. — The memorandum of insurance and the receipt
for the premium, both signed by the agent of the underwriter, form
a contract of insurance between the parties,* and where no policy
is made out or delivered, an action can be maintained on the mem-
orandum, .since the contract will be presumed to be that evidenced
by the usual policies issued in like cases by -the company,^ and an
ordinary binding slip is an agreement to issue a policy in the form
the insurer is accustomed to issue, and furnishes indemnity to the
assured pending action upon his application by the insurer, sub-
ject to the terms and conditions contained in such policy.^ Again,
a binding slip containing a memorandum to identify the parties
to a contract of insurance, the subject-matter, and the principal
terms, "to be binding until policy is delivered," is a contract for
temporary insurance subject to the conditions contained in the
ordinary policy in use by the company,'^ and if the terms of a
2 Northwestern Mutual Life Ins. Pa. St. 256, 94 Am. Dec. G5; State
Co. V. Neafus, 145 Kv. 50:?. 36 L.R.A. Fire & Marine Ins. Co. v. Porter, 3
(N.S.) 1211, 140 S.'W. 102(i. Cxrant Cas. (Pa.) 123.
3 Easlev v. New Zealand Ins. Co. ^ ^Mutual Fire Ins. Co. jMoutooniery
5 Idaho 593, 51 Pac 41 S, 27 Ins. L. County v. Goldstein, 119 Md. 83, 86
J. 289. Compare Stihvell v. {'ove- Atl. 34. Binding- slip defined. See also
pant Mutual Life Ins. Co. 83 Mo. Gardner v. North State Mutual Life
A pp. 215. Ins. Co. 163 N. Car. 367, 48 L.R.A.
estate Fire & Marine Ins. Co. v. (N.S.) 714, 79 S. E. 807.
Porter, 3 Grant Cas. (Pa.) 123 (a ' Lipman v. Niagara Fire Ins. Co.
marine risk). See Pattison v. Mills, 121 N. Y. 454, 8 L.R.A. 719, 24 N. E.
2 Bli,-,di, N. S. 519 (marine risk). 699.
^ Eureka Ins. Co. v. Robinson, 56
256
COMPLETION OF CONTRACT § 65
Standard policy are attached to the binder as a part thereof the in-
surance company may be liable in accordance therewith.' So a
memorandum, made by a company's aftent, that a vessel's frei.<2,ht
is insured in a specified sum, eft'ects such insurance by a policy
in blank, issued according- to the custom of the company, at that
place. ^ fSo when goods are insured on ''memorandum" or open
policy, entries of shipments made on the blank-book to which the
policy is attached are as valid as if made on the sheet on which
the policy was written ; ^° and the company may be bound by a
memorandum that the subject ''stand insured'' until a certain date,
and although loss occurs before that time." And a recognized
custom among insurance companies that upon the agent's taking
the memorandum of an application the insurer became immediate-
ly bound, may constitute an important factor as to the existence
of a contract. ^2 But where the plaintiff, wishing to obtain insur-
ance on his interest in the barque P., his agents, L. C. & Co., em-
ployed F., an insurance broker, who obtained from W.. agent of the
company, this j)aper. dated .June 20, 1878: "No. 1002. $1,200,
D. S. F. & M. Ins. Co., Wilmington, Del. This certifies that we
have this day entered in the name of Iv. C. & Co., for whom it may
concern, on our open policy No. 1002, with (said Co.) a risk of
$1,200 on barque P. at and from June 20, 1878, to June 20, 1879,
loss, if any, payable in current funds to Messrs. L. C. & Co., or
order, according to the terms and conditions of the policy."
(Signed) "J. S. W., agent." The paper was delivered by the
broker to L. C. & Co., and by them assigned in writing to plaintiff.
No policy was ever prepared or issued by the company. In a suit
on said paper for a loss on said vessel, it was held that the same
did not constitute a valid and binding contract of insurance, nor
could an action be maintained on it as such." An agent may bind
the company by an entry or memorandum of the contract in what
is known as a "binding book." So where an entry of insurance
was made by a local agent, with authority "to receive proposal of
insurance," in the "binding book," to continue in force until the
premises, the risk being specially hazardous, should be inspected by
a special agent, a-nd the property was burned before the policy is-
8 Abel V. Atlas Ins. Co. 148 111. facfurcrs' :\rntual Ins. Co. 17 Oliio,
App. 325. • 192.
^ Insnranoe Co. of Vallev of Va. v. ^^ Soutliern Ins. Co. v. Hannah
Morderai, 22 How. (63 U. S.) Ill, 16 (l!)04) — Miss. — , 37 So. 506.
L. ed. 329. Cited in Concordia Fire " Delaware State Fire & ^Marine
Ins. Co. V. Heffron, 84 111. App. 612. Ins. Co. v. Shaw, 54 Md. 546. But
^"Edwards v. M issi.'jsi ppi Yallev see Mobile ^lariiie Dock & Mutual
Ins. Co. 1 Mo. App. 192. ' Ins. Co. v. MacMillan, 31 Ala. 711.
^^ Neville v. Merchants' & Manu-
Joyce Ins. Vol. I. — 17. 257
§ G6 JOYCE ON INSURANCE
sued, the company was bound thereby/* and where the agent
entered the amount upon his register the terms being agreed upon
and the premium received by the agent, the contract was held
valid. ^^ So an indorsement on an application for reinsurance that
the risk is taken will be binding.^® So the company may be bound
by a certificate given by the secretary of an insurance company to
an applicant consenting that a policy already issued to him might
cover property not included therein, ^"^ In Thompson v. Adams ^*
tlie plaintifi:'s in New Zealand instructed their representatives to
obtain insurance for them upon certain goods in New Zealand.
Their representatives communicated with a firm of brokers who un-
dertook to efl'ect insurance for twenty thousand pounds. Insur-
ance had been effected in the same way before. The insurance
brokers communicated with another broker, B., entitled to effect
insurances at Lloyds. B., as was customary, prepared a slip show-
ing the particulars as in case of a marine risk; this risk was shown
to the defendant, who initialed the slip. Ordinarily, this slip was
followed with a policy. This slip was initialed October, 1886, but
no policy was tendered for signature until February following, and
on the 28th of that month news came that the premises and goods
were destroyed by fire, but no policy had been issued nor premium
tendered. Premiums were afterward tendered but defendant re-
fused to accept them or to sign the policy. It was held that the
slip was a binding contract to insure and enforceable. A ''binder"
is not invalid for failure to state the premium, and it is so executed
as to become an obligation of the company where the chief clerk
of insurer's agent signed it and the agent ratified the act.^^
§ 66. Completion of contract: marine and fire: binding slip. —
In marine insurance in England the usual course of business is for
the broker to prepare a slip or brief memorandum, containing the
particulars of the proposed insurance, and showing the risk. This
slip is presented, if at Lloyds, to the miderwriters, and, if the risk
is accepted, is initialed successively by them for the sum agreed to
be taken by each underwriter. Within about the last twenty-seven
years fire risks have been underwritten at Lloyds, the same course
being pursued as in marine risks, and when the slip has been com-
pletely initialed the policy is prepai-ed by the broker and submitted
1* Putnam v. Home Ins. Co. 123 "L. R. 23 Q. B. D. 361. See next
Mass. 324, 25 Am. Rep. 93. section.
15 Ellis V. Albany Fire Ins. Co. 50 ^^ Jacobs v. Atlas Ins. Co. 148 111.
N. Y. 402, 10 Am. Rep. 495. App. 325, 38 Nat. Corp. Rep. 483.
1^ Woodruff v. Columbus Ins. Co. 5 In this case the amount of the insur-
La. Ann. 697. ance or risk was held to be five hnn-
1' Goodall V. New England Fire dred dollars where expressed as 500,
Ins. Co. 25 N. H. 169. hut with a line after the figure 5.
258
COMPLETION OF CONTKACT § 66
to the successive undeiwiiters, and when they have signed the
pohcy the contract is complete in all formal particulars, and an
interval must elapse between initialing the slip and the date of the
policy, which frequently runs into weeks and months. There is,
however, in the English cases one essential and marked difference
between the legal effect of the initialed slip in marine and fire poli-
cies, and this distinction is brought about clearly by force of the
act of 1867, 30 Victoria, chapter 23, sections 7, 9. In marine risks
the slip is, in practice and in accordance with a long-existing course
of business, and the understanding of those engaged in marine in-
surance, the complete and final contract between the parties fixing
the terms of the insurance and the premium, and is obligatory upon
both parties. At least this is its effect as an honorary engagement,
but under the legislative enactment above referred to requiring
contracts and agreements for sea insurance to be expressed in a poli-
cy, and precluding the pleading or the admission in evidence. of a
policy not duly stamped, such slip is not a valid obligation, binding
either in law or equity upon the insurers, in case they should seek
to evade the honorary contract evidenced by the initialed slip, for
the policy is the only legal evidence of the contract. On the con-
trary, in case a slip is initialed for a fire risk, there is no statutory
difficulty in the way. A slip filled out and presented for fire insur-
ance at Lloyds and initialed, is a binding legal contract to effect
a subsequent insurance, and not merely an honorary undertaking.
If the policy is put forward within a reasonable time the under-
writer is obligated to subscribe, and during the interval between
llic slip and the policy he is legally bound, and the insured is liable
for the premium. We deduce the distinction here made between
the effect of the slip in marine and fire risks from the words of tht;
statute and the cases cited below, and such is evidently the law of
the present day in England.^" But it is said that in case of an un-
staniped agreement to insure, the. premium having been paid, a
court of equity would compel the issuance of a policy,^ although
2° Fisher v. Liverpool Marine Ins. Hart & Simey, 1909) §§ 34 et sccj.
Co. (1873) L. R. 8 Q. B. 469, L. R. pp. 48 et seq. See also Id. {? .58,
9 Q. B. 418, 43 L. J. Q. B. 114; p. ofj, upon tLe point, "Does the sli])
London Mutual Ins. Co. In re contain the requisites of a valid
(Smith's case), 4 L. R. Ch. 611; policy?" Also Id. § 39, p. 56,
Tlionipson v. Adams, L. R. 23 Q. B. '^agreements to issue policies" eover-
D. 361 ; noted as last case nnder pro- iii^- notes.
ceding section; lonidcs v. Pacific F. ^ Mead v. Davison, 3 Ad. & E. 303,
& M. Tns. Co. L. R. 6 Q. B. 674, 13 308. As to English stamp acts, see
Eng. Rul. Cas. 471; 17 Earl of Hals- § 33 herein. As to stamp act 1891
bury's Laws of England, pp. 348 et see 17 Earl of Halsbury's Laws of
seq.; Arnold on ]\Iarine-Ins. (Perkins' England, p. 349.
ed. 1850) 13, *13, 14, Id. (8th ed.
259
§ 66a JOYCE ON INSURANCE
the statute above referred to would seem to exclude even this propo-
sition.^ It is stated, however, that for the purpose of showing
when the proposal was accepted reference may be made to the slip
or covering note or other customary memorandum of the contract,
although it be unstamped.^ In this country, however, when a slip,
application, or order for insurance is actually accepted, the terms
being agreed upon and the contract otherwise complete except the
issuance of the policy, whether the entry be made in the books of
the company j)roperly subscribed by an authorized agent, or the
acceptance be otherwise evidenced, there would seem to be no valid
reason why in the absence of a statutory or })erhaps some charter
prohibition there is not a valid enforceable contract of insurance,
even though the policy is not issued, and such is evidently the law.*
We may state here that in this country the general j)rinciples un-
derlying and governing the completion and validity of contracts
of insurance are equally applicable to cases of marine and fire con-
tracts as in other cases, and those principles are set forth fully
under this chapter. But upon the question whether the slip on
application for a policy of insurance is admissible in evidence to
show the intention of tlie parties to the policy a different question
is presented; and although it is held not admissible in a court of
law upon the general grounds that all prior negotiations are merged
in the written contract, yet if the policy does not conform to the
agreement contained in the slip, it might be admissible to show a
mistake in a court of equity or in a court exercising equitable juris-
diction over the case, or even in a law court under certain circum-
stances.* An application for a policy may be validly drawn up in
lead pencil.®
§ 66a. Binding slips, etc., continued: new terms: rate of pre-
mium: parol evidence. — A present contract of insurance upon new
terms may arise and become of force from date by a binding slip
containing a memorandum of the "accepted" terms.'^
2 Fisher v. Liverpool Marine Ins. Ins. Co. 50 N. Y. 402; Neville v.
Co. L. R. 8 Q. B. 469, L. R. 9 Q. B. Merchants & Manufacturers Mutual
418, 43 L. J. Q. B. 114. Ins. Co. 17 Ohio 192. See also
^ 17 Earl of Halsbury's Laws of cases cited S§ 64, 6.") herein.
England, p. 348, citing marine ins. * Plinenix Fire Ins. Co. v. Gurnee,
act, 1906 (8 Edw. 7, c. 41) § 21. 1 Paige (N. Y.) 278; Motteux v.
*Marx V. National Marine & Fire London Assurance Co. 1 Atk. 545, 13
Ins. Co. 25 La. Ann. 39; Woodruff v. Eng. Rul. Cas. 407; Dow v. Whetten,
Columbus Ins. Co. 5 La. Ann. 697; 8 Wend. (N. Y.) 160, 168; Delaware
Wass V. Maine Mutual ^Marine ]ns. Ins. Co. v. Hogan, 2 Wash. (U. S. C.
Co. 61 Me. 537; Loring v. Proctor, C.) 4 Fed. Cas. No. 3765.
26 Me. 18; Blancbard v. Waite, 28 ^ cj^y Ins. Co. v. Bricker, 91 Pa.
Me. 51; Warren v. Ocean Ins. Co. 16 St. 488.
Me. 4.39 ; Ellis v. Albany Citv Fire ' Belt v. American Central Ins. Co.
260
COMPLETION OF CONTRACT § 6,6a
"Wliere a memorandum states in general terms the amount of in-
sm aiice desired on cliartered freight on a designated vessel "pre-
mium, open for particulars," marked ''binding" before the ])arties'
signatures, "send policy" to a specified place, there is an obligatory
tem])orary contract.*
In a Georgia case A. made a verbal application to a local agent
of an insurance company for a policy of insurance on certain de-
scribed property, then offering to pay the premium to the agent.
The agent stated that he could not at that time issue the regular
standard policy of the company, nor accept the tender of the pre-
mium because he did not know the rate on tliat class of property.
The agent agreed, however, to enter upon the books of the com-
pany a Avritten memorandum in the nature of a "binder," which
he stated would be effective as a contract of insurance until the
regular policy was issued by the company, and that, on receipt of
this regular policy, A. could pay the premium. This was satis-
factory to A., and the agent, in compliance with his agreement, did
write, sign, and place in the book of policies issued by the company
at his agency a statement or "binder," containing all the essential
elements of a contract of insurance between A. and the company,
and made a written report to the company of this memorandum or
"binder," and of his action relating to the same, all of which was
aflirmed and ratified by the company. It was held: (a) A com-
plete temporary contract of insurance existed between A. and the
company during the period set out in the memorandum or binder,
(b) For a loss which occurred during the existence of the tempo-
rary contract, and before the rate of premium had been fixed on the
property covered thereby, A. could recover the amount stipulated-
as indemnity in the binder, less the rate of premium fixed by the
company subsequently to the loss. It was also held that the prop-
erty described in the memorandum or binder was insured during
the term specified therein upon the terms and conditions of the
regular standard policy of the company.^
In another case an insurance company, by its agent, issued and
delivered to tiic insured a binder, or binding slip, Avhereby it as-
sumed and bound $2,000 of insuraiice u})on certain property of the
insured ; the binding .slip to be void on delivery of the policy. Wlien
the binder was delixcred it was assumed by the insured that the
insurer proposed to charge a rate higher than it had charged for
163 N. Y. 5:).'), 57 N. E. 11U4, airi;' r)3 ^ Queen Insurance Co. v. Hartwell
N. -Y. Supp. 316, 20 App. Div. 546. Ice & Laundry Co. 7 Ga. App. 7«7,
8 Scamniel v. Cliina INlulual Ins. 68 S. E. 310, 39 Ins. L. J. 1125.
Co. 161 Mas.s. 341, 4L) Am. St. Rep.
462, 41 N. E. 649.
261
§ GOa. JOYCE ON INSURANCE
the same insurance for the previous year, although no rate was'
mentioned in the binder, whereupon he requested the agent of the
insurer to ascertain if he could not obtain from liis ]jrincipal some
concession in the rate. This the agent consented to attempt, but
l)efore any attempt was made by the agent the building burned.
It was held (1) That a complete temporary contract of insurance
existed between the insurer and the insured from the time of the
delivery of the binder. (2) That the insured having accepted the
binder, the promise to pay the premium to be mentioned in the
policy was a sufhcient consideration for the contract. (3) That
the agent of the insurer having failed to tix the rate before the
policy was delivered and before the loss occurred, the insured was
bound to pay a reasonable rate for the protection which he had
received by the temporary contract.^"
There may be such a latent ambiguity in a memorandum, with
a "rider" attached, with reference to a policy designated by number
as to permit parol evidence to explain the same.^^ And where a
further claimed renewal of a policy was in the form of a binder or
Ijinding slip which stated no consideration, but provided: ''memo,
to be void on delivery of the policy," it was held that the slip,
standing alone was not a complete and perfect contract, but was
open to explanation by parol proof as to intention of the parties
and the established custom of the business as to the issuance of such
slips to brokers for temporary insurance pending approval of the
risk, and also as to the brokers knowledge of such custom and that
the contract was made in accordance therewith, and a recovery was
precluded for a loss after notice of rejection of the risk.^^
A receipt delivered by an agent to the assured for the first pre-
mium may be explained and avoided by ])arol evidence showing
that no actual payment took place, and that the agent, without the
authority of his principal, took the promissory note of the assured,
which was never paid, the receipt containing a condition that the
failure to pay the note at maturity ended the policy. ^^ But if a
receipt for a premium is given by a person who is the agent both
'* J. C. Smith & Wallace Co. v. senting. Same ease, 151 N. Y. 130,
Prussian Nat. Jns. Co. G8 N. J. L. 45 N. E. 365, rev'g 83 Hun, 611i) .')4
(j^i, 54 Atl. 458, 32 Jns. L. J. 559. App. Div. 38G, 06 App. Div. 531, 103
^*St". Paul Fire & Marine Ins. Co. App. Div. 610 (memo.) 184 N. Y.
V. BallOTir, 1G8 Fed. 212, 93 C. C. A. GOT (memo.)
498. 13 p,jj|i:^t,n y Fidelity Mutual Life
12 Underwood v. Greenwich Ins. Ins. Co. 155 Ala. 265, 130 Am. St.
Co. 161 N. Y. 413, 55 N. E. 936, 29 Rep. 21, 46 So. 578. But compare
Ins. L. J. 149 (rev'g Van Tassel v. Chamberlain v. Prudential Ins. Co.
Greemvieh Ins. Co. ol N. Y. Supp. 109 Wis. 4, 83 Am. St. Rep. 850, 85
79, 28 App. Div. 163, 3 Justices dis- N. W. 128.
262
COMPLETION OF CONTRACT § 60b
of the insurer and the assure'd, who in giving tlie receipt was not
acting as the agent of tlie insurer, but gave it for premiums paid or
advanced for a building and loan association on policies in which
it was interested, such receipt is not admissible against the insurer.^*
§ 66b. Delivery to and acceptance by applicant: generally. — xVn
applicant for insurance has a right to require delivery to and ac-
ceptance by him of the policy before he will be bound.^^ And
where delivery and acceptance of the policy is necessary to put the
insurance into effect, there can be no risk until the things precedent
agreed upon shall happen.^® But an acceptance of the policy by
the insured will conclude the contract with the insurer." Where
the applicant, however, signs a paper reciting that he had '"re-
ceived and accepted from" the insurer's agent a policy there is no
acceptance which is binding where the policy was not delivered to
him until three days thereafter.^^
Ordinarily and without special circumstances where the appli-
cant accepts a policy based on his application he accepts all its
stipulations as they are contained therein including conditions
made a part thereof.^^ And an insured who accepts a policy in-
corporating the provisions of another policy as part of the contract
is bound by such provisions, although the policy referred to is in
possession of the insurer, and is never seen by the insured, who
knows nothing of its terms. ^^
If different kinds of policies of life and endowment insurance
are issued by an insurance company and the form of application
for a policy calls upon the applicant to indicate which kind he de-
sires, he becomes charged with knowledge of the provisions of the
policy and it must be conclusively presumed that he received the
kind of poHcy he desired and that he understood and assented to
its terms and conditions.^
1* Foreman v. German Alliance Summers v. ]Vratual Life Ins. Co. 12
Ins. Assoc. 104 Va. 694, 113 Am. St. Wyo. 369; 109 Am. St. Rep. 992, 66
Rep. 1071, 52 S. E. 337, 3 L.R.A. LK-A. 812, 75 Pac. 9:37.
( N S ~) 444n alhnglord v. Home Mutual
15 Summers v. Mutual Life Ins. Co. JL^^e & Marme Ins Co. 30 Mo. 46;
12 Wyo. 369, 109 Am. St. Rep. 369. ^/^^j^^j;^ ^^ ^"'- ^*'- ""• ^^''^''P^^'
66 L.R A. 812, 75 Pac. 937. ,, ^^^^^^^ ;; p^^^,^, ^^q ^ ^. ^
Contract ot insurance is not com- ^g^^ jg ^j-_,^, y^-
plete until policy is delivered and 'm- 19 Brown v. United Slates Casualty
cepted. Millard v. Brayton, 1/7 Co. (U. S. C. C.) 88 Fed. 38, 27 Ins.
Mass. 533, 52 L.R.A. 117, 59 N. F j^ j 951, Dismissed 88 Fed. 829.
43(5. 20 Conner v. ]\I audi ester A«sur. Co.
i« Banco De Sonora v. Bankers' 130 Fed. 743, 65 C. C. A. 127, 70
Mutual Life Co. 124 Iowa 576, 104 L.R.A. 106. See 8 66^- herein.
Am. St. Rci). 367, 100 N. ^Y. 532; 1 Banner v. Equitable Life Assur.
263
§ 66c JOYCE OX INSURANCE
§ 66c. Right of applicant to reject policy: generally. — The
applicant may refuse to accept a policy, even if he stipuhites in his
application to accej^t it if issued. Such an agreement is merely one
not to withdraw his offer, is without consideration and not binding.^
If the delivery of a policy of life insurance and the payment of the
premium are conditioned upon this acceptance of the application at
the home office and the issue of the policy and also upon accept-
ance by the applicant of the policy, there is no binding contract
upon either party until the actual delivery of the policy and pay-
ment of the first premium as prior thereto the appHcation may V)e
rejected or the applicant may reject the policy.' In a Connecticut
case it is held that the signing of an application for life insurance
with the execution and tender of a policy does not effect a contract,
where the applicant changes her mind and refuses to accept the pol-
icy when tendered, never receives it and does not pay the first pre-
mium, although the premiums are paid by another party without
authority or interest.* And the refusal to accept a policy except up-
on a lower rate of premium precludes a delivery which would make
a binding contract.* So where one is induced by the company's
agent to surrender a policy and take out a new one upon the con-
sideration that he will be allowed the surrender value of the first
policy upon the first premium and insured did not accept the policy
as delivered and never indicated that lie was satisfied with it or up(ni
the subject of the surrender value and the fir.-^t premium, but mere-
ly took the policy for examination and never signified his approval,
there is no unqualified delivery.^ If after dissolution of a firm
and the death of one partner, a new policy u])on real estate, which
had become the property of the estate of the deceased partner, is by
the direction of the surviving partner issued in the deceased part-'
ner's name and it is antedated and is sent to the attorney for the
heirs who refuses to accept the policy in the form issued but prom-
ises to see the agent about it but does not, no contract is completed.'
See. 141 N. Y. Supp. 442, 156 App. of forfeiture and estoppel, depend-
Div. 562, 565. ing upon the date of the policy as
On effect of general notification by affectinjr the time of payment of the
agent of arrival of policy, where iiremiuni.
the company has substituted another * Hoeben v. Metropolitan Life Ins.
form of poiicv for tliat applied for, Co. 69 Conn. 503, 38 Atl. 214, 26 Tn.'s.
see note in 12 L.R.A.(N.S.) 421. L. J. 998.
2 Citizens National Life Ins. Co. V. * Roberta Manufacturins^ Co. v.
Murphv, 154 Ky. 88, 156 S. W. 1069. Roval Exclianse Assur. Co. 161 N. C.
3 McNlaster v. New York Life Ins. 88, 76 S. E. 865.
Co. 99 Fed. 856, 40 C. C. A. 119, « Westerfield v. New York Life Ins.
case wa.s rev'd in 183 U. S. 25, 46 L. Co. 129 Cal. 68, 61 Pac. 667, 29 Ins.
ed. 64, 22 Sup. Ct. 10. but on point.s L. J. 813, aft'g 58 Pac. 92.
264
COMPLETION OF CONTRACT §§ 66d, 666
§ 66d. Stipulation or agreement for return of policy by applicant:
option to accept or reject. — The parties may, without making the
contract invalid, stipulate that a life policy may be returned if
not satisfactory to the applicant and that the note for the premium
will be surrendered to him.* And evidence is admissible in an ac-
tion on the policy of an agreement between insurer's agent and
the applicant giving the latter an option to acce|)t or reject tlie
policy, to explain his acts in rejecting a policy and demanding its
cancelation, and the act of the agent in collecting a payment on tlie
note for the premium and returning the amount upon the repudia-
tion of the transaction by the applicant.^ In a New York ca.se ^°
it appeared that the agent of a company gave to A. a life insurance
policy and received his note and a check therefor. A written agree-
ment was entered into, providing that the policy should be re-
turned unless the agent should obtain the surrender value or paid-
up policies for certain policies delivered by A. to the agent. The
agent failed to accomplish this result. The court held that no
valid contract Avas created until the condition was complied with
and that it was immaterial whether the agent of the company had
power to make such conditional delivery or not, since if he had not,
the result would still be that no contract was made.
§ 66e. Where applicant receives policy for examination: accept-
ance. — If a ])()licy is merely submitted to the applicant for ex-
auiination, to be linally delivered if he approves of it and pays the
tirst ])remium, and he never signifies his approval, and does not
pay the premium, there is no acceptance or delivery,^^ since the
jnerc receiving of a policy by a person proposed to be insured, for
the purpose of determining whether he will accept it, is not suf-
ficient to conclude the contract.^^ And an acceptance of a policy
b}' an applicant for insurance in order to ''read it and look it over"'
does not constitute an acceptance binding as a contract.^^ .Vgain,
an applicant may reserve the right to inspect his policy before ac-
ceptance but 'he maj^ waive such right.^-
' Baldwin v. Ponnsvlvaiiia Fire Ins. ^^ Westoifield v. New York Life
Co. 20 Pa. Super. Ci. 1^88. , Ins. Co. 129 Cal. 68, 61 Pae. 667, 29
8 Parker v. Bond, 121 Ala. 529, 25 Ins. L. J. 813, -MTi^ 58 Pae. 92.
So. 898. ^^New v. Gennania Fire Ins. Co.
A.S to retention of policy see § 66i 171 Ind. 33, 131 Am. St. Rep, 245,
lierein. 85 \. E. 703.
» Atkins V. New York Life Ins. Co. " p,.iddv v. l^aum, 140 N. Y. Snpp.
(1901) — Tex. Civ. App. — , 62 S. 481, 79 Misc. 607.
W. 503. 1* Going v. jMulual Benefit Life
1° Harnickell v. New York Life Ins. Co. 58 S. Car. 201, 36 S. E. 556,
Ins. Co. Ill N. Y. 390, 18 N. E. 632, 29 Ins. L. J. 801.
affV 40 Hun (N. Y.) 558.
265
§ mi JOYCE ON INSURANCE
§ 66f. Applicant not bound to accept policy when it does not con-
form to proposal or agreement. — Where the policy does not conform
in terms to the proposal, there is no obligation resting upon the
applicant to accept it.^^ Thus, in a New York case an agent, who
had authority to solicit and make contracts for insurances, agreed
to insure the plaintiff by a policy containing special provisions for
refunding the money paid for premiums and received the plain-
tiff's note in part payment. The company tendered a policy with-
out the provision, which policy the plaintiff refused. It was de-
cided that the transaction did not constitute a binding contract.^®
Under a Kentucky -decision the agent executed a writing showing
that the applicant "was entitled to an ordinary life policy in ac-
cordance with the application, provided it was accepted by the
company," and, if not accepted a note given the agent for the first
premium "was to be returned." Nothing appeared in the applica-
tion as to a limited risk, but the policy contained an exemption of
liability in case of death from certain causes. It w^as held that as
the policy was different from that for which the applicant had con-
tracted he was not bound to accept it, and that the company was
liable for the amount of the note." And where an application for
accident insurance is received and accepted by the insurer, the ap-
plicant is not bound by a policy containing conditions inconsistent
with such application, which is issued and sent to a local insurance
agent for delivery, until such applicant has had an opportunity to
ratify or waive such inconsistent provisions. ^^ So the issue of a
policy of life insurance for one-half the amount proposed in the
application is a rejection of the proposition of the applicant and
is not binding upon the insurer until assented to by the apj^licant."
If the insurer proposes a form of insurance not in conformity with
the application it will be liable pending the applicant's action on
such change, where it is stipulated in the receipt for the iiremium
that the insurance should be in force from the dale thereof, and
it was agreed with the agent that the insurance should ))cgin at
once, and the receipt also stipulated that the amount paid should
be refunded if no' policy should be issued.^" The acceptance of a
policy, without negligence on the part of the insured does not
" Mutual Life lus. Co. v. Youn^-, Soc. 132 Mich. 695, 102 Am. St. Rep.
23 Wall. (90 U. S.) 85, 23 L. ed. 152, 430, 94 N. W. 211.
S«>e S>? -ISl), *63 lieroin. ^^ New York Life Ins. Co. v. Lew,
16 Tiftt V. Plux?uLx Mutual Life Ins. 122 Ky. 457, 29 Kv. L. Rep. 21, 5
Co. 6 Lans. (N. Y.) 198. L.R.A. 739 and note, 92 S. W. 325, 35
I'^futual Life Ins. Co. v. Gorman, In.s. L. J. 455.
19 Ky. L. Rep. 295, 40 S. W. 571, 2(3 ^o Halle v. New York Life In.<^. Co.
Ins. L. J. 1014. 22 Ky. L. Rep. 740, 58 S. W. 722.
1^ Robinson v. United States Ben.
2G6
COMPLETION OF CONTRACT §§ G6s, GUh
OJ
make it tlie true and conclusive evidence of a prior parol agree-
ment to insure, and a court will correct such policy when, x.>y in-
advertence or mutual mistake, or the fraud of one party and the
mistake of tlie other it does not conform to the actual agre^^ment.^
§ 66g. Where policy does not conform to proposal: neglect of
applicant or assured to read policy: duty to notify company or
rescind. — If the policy does not accord with the application the
failure of insured to read it does not relieve the insurer from the
duty of so writing it, and where the application is expressly made
the basis on which insurance is to be effected it is of no consequence
that the insured does not read the policy when delivered or prompt-
ly object to its terms.^ But it is also held that if a person receives
a policy of insurance ostensibly in response to an application there-
for, which he signed and parted with in the belief, induced by the
fraud of the agent taking the same, that it called for a policy dif-
ferent from that which it called for in fact, he is bound, as a matter
of law, to examine the policj' within a reasonable time after it comes
to his hand, and to discover obvious departures therein from the one
which he supposed he was to get, and promptly, upon discovering
the same, to rescind the transaction, give the company due notice
thereof, and do all on his part which justice requires to restore the
former situation, or he will be held to have accepted the policy as
satisfying his application, so as to be precluded from rescinding the
same.^ And the assured is charged with notice of the contents of
a written application executed l)y him, and which, by the terms of
the policy, is made a part thereof.*
§ 66h. When applicant may reject policy not conforming to
agent's representations. — If an application for insurance does not
set forth all the provisions which the policy is to contain, and the
insurer's agent represents that the ))olicv will contain certain lawful,
stipulations, the policy luust contain them, or the insured will not
be bound to accept it. In such case, however, it is incum-
bent upon the applicant immediately after receipt of the policy
^International Ferrv Co. v. Amcri- ^ Rostwick v. Mutual Fire Tns. Co.
can Fidelitv Co. 207 N. Y. 350, 101 110 Wis. 392, 67 L.K.A. 705, 89 N.
"N. E. 100 (marine vessel lialnlity in- W. 538, 92 N. W. 240, 31 In.<. L. J.
suranee). 412. Sec also Cluunhcrlain v. I'ru-
On reformation of in.surance itolicy <ieiitial Ins. Co. 109 Wis. 4, 83 Am.
for mistake of solicitin.a' a^ent, see St. Kep. 850, 85 N. W. 128.
note in 11 L.K.A. (N.S.) 357. Tliat neglect to read or have appli-
2 German-American Tns. Co. v. cation read no excuse, warranties.
Darrin, 80 Kan. 578, ;i8 Ins. L. J. See §§ 1974, 3514 and note herein.
1008, 103 Pac. 87. quoting- from On effect of delay in seeking relief
McElroy v. Bi'itisli American Assur. from mistake in insurance contract,
Co. 94" Fed. 990, 3(3 C. C. A. 615. see note in 28 L.K.A. (N.S.) 8!)0.
See §§ 55b, 63, 6Ub herein. •* Russell v. Prudential Life Tns.
267
§ C6i JOYCE OX INSURANCE
to notif}' the company of his refusal to accept the policy.* So
one who signs an apph cation for life insurance without read-
ing it, upon the assurance of the soliciting agent that it con-
forms to representations orally made, and that such signing
is customary but not necessary, may refuse to accept a poli-
cy tendered him, on the ground that it does not meet such
representations, notwithstanding the application contains a provi-
sion that no statement made by the solicitor would affect the right.s
of the company unless embodied in a written application.^ And
where the defendant's agent induced the applicant to take out a
policy by a promise that the principal would make her a loan on
her property taking the policy as part security therefor and the
agreement was also that the applicant was to accept the policy only
on condition that the loan be made she may refuse to accept the
policy where the company declines to make the loan, and she may
surrender the policy and recover back the premium paid.' But a
false statement by an insurance agent, that the policies of a rival
company did not contain a certain clause, will not justify the in-
sured in refusing to receive his policy, where he has sub.?equently
niade an application therefor, after having been furnished with a
blank policy which he retained about ten days^ and having been
requested by the agent to compare it with that used by the other
company.*
§ 661. Effect of retention of policy by applicant: unreasonable
delay. — If fire policies are sent by mail to the applicant condition-
ally, that is with the privilege of returning them to the company
within a specified time in case the terms on which they were sent
Co. 176 N. Y. 178, 98 Am. St. Rep. tions, VI. Misrepresentations made
ti56, 68 N. E. 2.52. wlien policy is exchanged. VII.
5\vmerican Ins. Co. v. Weiberger, :\Iisrepresentations made by agent
74 :Mo. 167; Ribble v. Roberts,"— at time of delivering policy.
Tex. Civ. App. — , 180 S. W. 630, 47 VIII. Eiifect of agent's agreement
Ins. L. J. 156, 159. that applicant might reject policy.
«> Evans V. Central Life Ins. Co. 87 IX. INIisrepresenta tions made to
Kan. 641, 41 L.R.A.(N.S.) 1130n, illiterate persons. X. Where appli-
12.J Pac. 86. See §§ 489 et seci. cation is not intelligible to one in-
herein. duced to insure. XI. Where agent
Right to reject or re^icind policy makes good his misrepresentation.
not conforming to representations of XII. Admissibility of parol evidence
insurer's agent is headline to note 41 conflicting with written application.
L.R.A.(N.S.) 1130, as follows: I. XIII. Questions for the jury. XIV.
Scope. II. Riglits to reject or re- .Miscellaneous.
scind, in general. III. Necessity that ' Key v. National Life Ins. Co. 107
applicant rely upon agent's mi.^repre- Iowa 446, 78 N. W. 68, 28 Ins. L. J.
seutations. IV. Policy varying from 2-39.
agent's agreement treated as counter- * American Steam Boiler Ins. Co.
proposal. V. Cases treating agent's v. Wilder, 39 ]Minn. 350, 1 L.R.A.
statements as promissory repre.scnta- 671, 4U X. W. 252.
268
COMPLETION OF CONTRACT § 6Gi
were not satisfactory and the aiij'tlieant receives the policies and-
retains them .beyond the time allowed for their return, the failure
to take advantage of such option is in effect an act of acceptance,
and the last act necessary to complete the contract and whetlier the
time was allowed to pass either intentionally or unintentionally
will make no difference.^ And the insured is not justified in re-
fusing to receive a policy notwithstanding the agent falsely states
that the policies of a rival company did not contain a certain clause
where the insured subsequently makes an application therefor,
after having been furnished with a blank policy which he retained
about ten days and having been requested by the agent to compare
it with that used by the other company.^" In Adams v. Eidan "
it was held that a finding that an applicant receives and retains
without objection policies made out and sent to him is equivalent
to a finding that he had accepted them. And in such cases it
would seem to be incumbent upon the applicant, immediately on
receipt of the policy, to notify the company of his refusal to ac-
cept the policy. Under a Federal Supreme Court decision the re-
tention of a policy containing a copy of the application, by as-
sured, is an approval of such application.^'^ Under a Wisconsin
decision the reasonable time for discovering that a policy of insur-
ance received ostensibly in response to an application therefor,
signed in the belief, induced by the fraud of the agent that it called
for a policy different from that actually called for, differs from
the one supposed to have been applied for, commences to
run immediately upon the receipt of the paper, nothing oc-
curring then reasonably to excuse the applicant from omitting to
examine his contract. And retaining the policy, in ignorance of
the fraud because of failure to examine it, four and one' half months
' Swing V. Marion Pulp Co. 47 Arkansas. — King v. Cox, 63 Ark.
Ind. App. 199, 93 N. E. 1004, 40 Ins. 211, 37 S. W. 877; Providence Life
L. J. 807. Assurance Soc. v. Rentlinger, 58
i» American Steam Boiler Ins. Co. Ark. 544; 25 S. W. 835.
V. Wilder, 39 Minn. 350, 1 L.R.A. Illinois. — National Union v. Arn-
671, 40n, 252. liorst, 74 111. App. 482, 489.
"47 Minn. 53, 43 N. W. 690. Man/land.— CAohe Reserve Mntnal
12 New York Life In.s. Co. v. Life Ins. Co. v. Duffv, 76 Md. 301,
Fletcher, 117 U. S. 519, 29 L. ed. 934, 25 Atl. 227.
6 Sup. Ct. 827. New York.— Hook v. Michigan
Cited in: :\rutual Life In.<;. Co. 90 N. Y. Supp.
United States. — John Hancocic 5(). 44 Misc. 478, 483.
Mutual Life Ins. Co. v. Houpt, 113 Xorth Dakota. — Johnson v. Dakota
Fed. 576; Caruthers v. Kansas Fire & Marine Ins. Co. 1 N. Dak.
Mutual Life Ins. Co. 108 Fed. 494; 181, 45 N. W. 799.
United States Life Ins. Co. v. Smith, Distinguished in State Ins. Co. v.
92 Fed. 507, 34 C. C. A. 510. Crav, 44 Kan. 735, 25 Pac. 197.
269
§ 66i JOYCE ON INSURANCE
in such a case is, as a matter of law, unreasonable, and defeats the
right of the insured to rescind the contract, where t^ere was noth-
ing to prevent his examining his policy as soon as it was delivered
to liim, and the substitution is plainly apparent on its face.^^ Again,
silence on the part of a buyer of goods which the seller has offered
to insure at their joint expense before delivery, coupled with the ac-
ceptance and retention of the policies by the former operates as
an acceptance of the offer even though he has a secret intention
not to accept and he becomes liable for premiums. ^^
But mere failure to reply to a letter containing a slip to be pasted
to a policy of insurance, and which deals wdth a matter already
embraced in the contract, Avill not make the slip binding on the
insured, in the absence of anything to show that the insurer was
injured by the silence.^^ But in a Massachusetts case ^^ an insur-
ance company issued a policy in the name of B., and sent it to
B.'s agent, by whom it was returned with a requast to make it pay-
able to K., B.'s mortgagee. The first policy was canceled and a
new policy was made out to K., but without B.'s knowledge of such
return and substitution. The court determined that although the
new policy was kept seven months by K., this did not constitute an
acceptance thereof on the part of B., notwithstanding B. admitted
that K.'s possession was not fraudulent. In Meyers v. Keystone
Mutual Life Insurance Company,^''' it was determined that there
was no sufficient acceptance of the policy to make it binding. There
the agent of the company agreed gn certain terms for a policy which
were not ratilicd l)y the company, but a new policy was sent with a
request to return it if the terms were not satisfactory, and both
policies were kept without complying Avith the terms of the letter.
The receipt and retention by assured of a renewal policy creates a
binding contract even though the assured's name in the policy is
that of the original corporation from which it had been changed.^®
An acceptance by assured of a policy of fire insurance, issued to
take the place of another, is shown, notwithstanding assured re-
tained the other policy, where assured at the time of the fire had no
knowledge of the attempted substitution which was arranged by an
agent acting as factor for both parties : and on being consulted after
13 Bostwiek V. Mutual Life Ins. Co. System Co. 92 Wis. 366, 53 Am. St.
116 Wis. 392, 67 L.R.A. 705 (anno- Rep. 920, 32 L.R.A. 383, 66 N. W.
tated on retention of policy of insur- .328.
ance as waiver of mistake or fraud ^^ Bennett v. City Ins. Co. 115
of the insurer or its agent), 89 N. W. ]Mass. 241.
538. 92 N. W. 246, 31 Ins. L. J. 412. i' 27 Pa. St. 268, 67 Am. Dec. 462.
i^Bolin Manufacturing Co. v. ^^ ppgypi. Mercantile Co. v. State
Sawver, 169 Mass. 477, 48 N. E. Mut. Fire Assoc. 23 S. Dak. 1, 119
620." N. W. 1008.
15 Sliakman v. United States Credit
270
COMPLETION OF CONTRACT § 66j, 70
the fire, informed the compan}^ that he proposed to hang on to all
the policies."
§ 66j, Acceptance by insured father for infant beneficiaries. —
Where a father insures his life for the benefit of his infant children,
it is not essential to the interests of the beneficiaries that they have
the nominal possession of the policy, the taking delivery of the
policy by the insured constitutes an act of acceptance for such bene-
ficiaries, and in subsequently holding the same he made himself a
naked depositary without any int^rst for those entitled thereto.^"
SuBDiv. III. Completion of Coxtkact — Pkepayment of
Premium.
§ 70. Prepayment of premium condition precedent.
§ 71. Actual prepayment of premium not in all cases essential to validity
of contract.
§ 72. Prepayment of premium: oral agreement.
§ 73. Preijayment of premium to agent or broker.
§ 74. Effect of part payment.
§ 74a. Same subject : rebate : agent's commission released or property taken
on credit therefor.
§ 74b. Part payment: good health.
§ 75. Payment by third person.
§ 76. Prepayment of premium may be waived.
§ 77. Waiver of prepayment by agent.
§ 78. Renewal : waiver of prepayment of premium.
§ 79. Prepayment of premium: effect of delivery of policy,
§ 80. Prepayment: credit may be given.
§ 80a. Same subject: promissory notes, checks, and drafts.
§ 81. Prepayment: mutual credits: application on agent's debt.
§ 82. Where there are mutual credits.
§ 83. Crediting premium on agent's indebtedness to applicant.
§ 84. Prepayment : course of dealings : allowing credit.
§ 85. Prepayment of premium: evidence of waiver.
§ 86. Effect of receipt in policy for premium.
§ 70. Prepayment of premium condition precedent. — Where it is
expressly provided that the policy shall not take effect until the
premium is paid, there is no binding contract until such payment
is made, unless such provision is waived,^ and if the application
" Finley v. Western Empire Ins. of policy of ordinarv life insurance
Co. 69 Wash. 673, 125 Pac. 1012. without consent of beneficiary), 79
20 Ferguson v. Phcenix Mutual Atl. 997, 40 Ins. L. J. 1521.
Life Ins. Co. 84 Vt. 350, 35 L.R.A. ^United Stales. — GidtVmgs v.
(N.S.) 844 (annotated on suiTender Northwestern Mutual Life Ins. Co.
271
§ 70
JOYCE OX INSURANCE
provides that the policy shall not be in force until the first premium
is paid, the legal result is that the insured covenants with the cor-
poration directly, and not through its agents, that the policy shall
102 U. S. 108, 26 L. ed. 92; Miller v.
Northwestern ^Mutual Life Ins. Co.
Ill Fed. 405, 469, 49 C. C. A. 330,
334; ]\lutual Reserve Fund Life
Assoc. V. Simmons, 107 Fed. 418, 46
C. C. A. 393; Lamb v. Mutual Re-
serve Fund Life Assoc. 106 Fed. 637,
aff'd 108 Fed. 961, 48 C. C. A. 164,
S. C. 109 Fed. 81; Travis v. Neder-
land Life Ins. Co. 104 Fed. 486, 488,
43 C. C. A. 653, 656; Weinfeld v.
Mutual Reserve Fund Life Assoc. 53
Fed. 209. See Mc:\Iaster v. New
York Life Ins. Co. 99 Fed. 850, 40
C. C. A. 119 (alf'd 90 Fed. 40) rev'd
183 U. S. 25, 46 L. .ed. 64, 22 Sup.
Ct. 10.
Arkansas. — Home Fire Ins. Co. v.
Stancell, 94 Ark. 578, 127 S. W. 966.
California. — Westertield v. New
York Life Ins. Co. 129 Cal. 68, 77,
01 Pac. 667; Bergesen v. Builder's
Ins. Co. 38 Ca. 541.
Colorado. — Newcomb v. Provident
Fund Soc. 5 Colo. App. 140, 143, 38
Pac. 61.
Illinois. — Milwaukee Mechanics
Ins. Co. V. Graham, 181 Hi. 158. 54
N. E. 914, 29 Ins. L. J. 175; Home
Ins. Co. V. Field, 42 Til. App. 392.
Indiana. — New v. Germania Fire
Ins. Co. 171 Ind. 33, 131 Am. St.
Rep. 245, 85 N. E. 703.
Kentuchi/. — Blue Grass Ins. Co. v.
Cobb, 24 ivv. L. Rep. 2132, 72 S.
W. 1099.
Massachusetts. — Wainer v. ]\Iilford
^Mutual Fire Ins. Co. 153 Mass. 335,
11 L.R.A. 598, 26 N. E. 877; Baxter
V. Massasoit Ins. Co. 13 Allen (95
Mass.) 320; Mulrev v. Shawmut Uut.
Firo Ins. Co. 4 Allen (86 Mass.) 116,
81 Am. Dec. 089.
Michigan. — Bowen v. Prudential
Ins. Co. of America, 178 Mich. 03,
51 L.R.A. (N.S.) 587, 144 N. W. .543.
Minnesota. — Schwartz v. Ger-
mania Ins. Co. 18 Minn. 448.
, Missouri. — Wilcox v. Sovereign
Camp Woodmen of the World, 76
Mo. App. 573, 1 ]\ro. App. Reps. 525.
Baker, 56
Div. .558;
11 Paige
Xorih
Xebraska. — Modern Woodmen Ac-
cident Assoc. V. Kline, 50 Neb. 345,
09 N. W. 943, 26 Ins. L. J. 724.
New York. — Russell v. Prudential
Ins. Co. 176 N. Y. 178, 98 Am. St.
Rep. 656, 68 N. E. 252; Babeock v.
N. Y. Supp. 239, 37 App.
Sandford v. Trust Ins. Co.
(N. Y.) 547.
Carolina. — Perrj' v. Se-
curity Life & Annuity Co. 150 N.
Car."l43, 03 S. E. 079, 38 Ins. L. J.
432; Ray v. Security Trust & Life
Ins. Co." 126 N. Car. 166, 35 S. E.
246, 29 Lis. L. J. 369.
Ohio. — State Life Ins. Co. v. Har-
vey, 72 Ohio St. 174, 73 N. E. 1056 ;
Flint V. Ohio Ins. Co. 8 Ohio 502;
Union Central Life Ins. Co. v. Mor-
row, 7 Ohio Dec. 118.
Pennsylvania. — Brady y. North-
western ^lasoiiic Aid Assoc. 190 Pa.
595, 42 Atl. 962.
-Oliver v.
Va. 134, 1
S. E. 536,
Virginia.-
Ins. Co. 97
Rep. 29, 33
Mutual Life
Va. Sup. Ct.
28 Ins. L. J.
/lO. See :\Iutual Life Ins. Co. v.
Oliver, 95 Va. 445, 28 S. E. 594, 27
Ins. L. J. 444.
If insured does not comply with a
condition precedent in a policy no
contract is effected. Banco de
Sonora v. Bankers Mutual Casualty
Co. 124 Iowa 576, 104 Am. St. Rep.
367, 100 N. W. 532; Summers v.
:\rutual Life Ins. Co. 12 Wyo. 369,
109 Am. St. Rep. 992, 75 Pac. 937,
06 L.R.A. 812.
A condition is valid in a fire policy
issued in Iowa, providing "that no
insurance, whether original or con-
tinued, shall be considered as binding
until the actual payment of the
premiums, nor shall this company be
liable for any loss under this policy
occurring when any note, or any
part thereof, given for a part or
whole of the premium, shall be due
and nnpaid." Harle v. Council
Bluffs Ins. Co. 71 Iowa, 401, 32 N.
COMPLETION OF CONTRACT § 70
not be binding until such payment is made.^ So where there is a
special understanding between an insurance ofRce and the agent of
the insured that no insurance shall be considered as effected in be-
half of himself or others until the premium is paid, and a rule of
the company is kept i)osted up in the office not to consider an in-
surance effected until the premium is paid, the policy delivered, or
a written acceptance entered on the books, no agreement for insur-
ance can be perfected in equity when these conditions are not com-
plied with.^ So, also, where a policy is issued subject to the con-
ditions on the back thereof, and one of the conditions is that the
contract is not valid unless the premium is actually ''paid in cash,''
and there is no waiver of this provision by the company, and the
agent issuing the policy has no authority to alter these provisions,
it is held that the acceptance of a promissory note of the insured
by the agent as payment of the premium does not render the con-
tract complete, and that there is no consideration for the note.'*
And where the application for a life policy provides that there shall
be no contract until the policy is issued and delivered and the first
premium paid during the life of the applicant while in the same
condition of health as described in the application, and the appli-
cant dies before the policy is issued, the contract is not complete.'
So a policy of insurance issued on the express condition that the
assured shall execute his negotiable promissory note to the com-
pany with a solvent indorser is of no binding force until the con-
dition has been performed.^ Where by the charter of the com-
pany the deposit of a iDremium note for a sum to be determined
by the directors is made a condition precedent to receiving the
policy, this condition must be complied with.''' In New Jersey a by-
law of the company required the execution of a premium note by
the assignee before delivery to him of the approved policy, and the
purchaser of insured property took an assignment of the policy and
sent it to the secretary of the company for approval. This was
given by indorsement on the policy, and entry on the company's
W. 396. See also Mutual Reserve quirement that initial payment must
Fund Life Assoc, v. Simmons, 107 have been actuallv paid, see note in 5
Fed. 418, 46 C. C. A. 393. Perry v. B. R. C. 372.
Security Life & Annuitv Ins. Co. ■* Dunham v. Morse, 158 Mass. 132,
150 N. Car. 143, 63 S.'E. 679, 38 35 Am. St. Rep. 47.3, 32 N. E. 1116.
Ins. L. J. 432. See §§ 80, 80a, 1202 herein.
2 Russell V. Prudential Tns. Co. 170 ^ Paine v. Pacific Mutual Life Ins.
N. Y. 178, 98 Am. St. Rep. 656, 68 Co. 51 Fed. 689. 691. See § 104.
N. E. 252. 6Bid\vell v. Si. Louis Floating
3 Flint V. Ohio Ins. Co. 8 Ohio, 502. Dock & In.'^. Co. 40 Mo. 42.
On promissory note as iiayment of ''Belleville .Mutual Ins. Co. v. Van
insurance ])reraium .'^alisfving re- Winkle, 12 N. J. Kq. 333, § 34.
Joyce Ins. Vol. I.— fs. 273
§ 70 JOYCE UN INSURANCE
S
books. The policy, however, was retained until the required prem-
ium note should be executed, which was agi*eed to be done. This
was neglected, a loss occurred, and defendant was a.ssessed as a
policy holder. He refused to pay. A bill was filed against him
by the company. The court dismissed the l)ill on the ground tliar
the property was not insured.^ In Giddings v. Northwestern Mu-
tual Life Insurance Company ^ an application was made bj' B. to
the agent of a mutual life insurance company for a policy ui)on his
life for six thousand dollars; the application was upon a form fur-
nished by the agent. The charter of the company provided that
before a person could become a member, he should ''the first time
he effects insurance, and before he receives his policy, pay the rates
that shall be fixed upon and determined by the trustees.'"' A pol-
icy was issued and forwarded to the agent, which provided that it
should not be binding on the company until "the premium be
actually paid, during the lifetime of the person whose' life is as-
sured, to the company, or some person authorized to receive it. who
shall countersign the policy on receipt of the premium." The pol-
icy was not called for, but was returned and canceled. B. died
l)rior to the return of the policy, and the administrator tendered the
Jirst premium to the agent, who refused to act in the matter. There-
upon, the administrator forwarded proofs of loss to the company,
action was subsequently brought, and the court decided that the
payment of the premium in the lifetime of B. was a condition pre-
cedent to A.'s liability, and the suit could not be maintained. In
another case the policy expressly provided that the company should
not be liable until the premium in full was actually paid, and that
if the premium was not paid within fifteen days from the date of
the policy, it should be null and void. Before the premium was
paid, and before the expiration of the "fifteen days," the property
was burned. Thereupon the insured within the '"fifteen days"
tendered the premium and claimed indemnity for the loss. The
court, however, determined that actual payment of the premium,
not only within the "fifteen days" but before loss, was necessary
to render the company liable under the policy, and that the holder
could not recover.^" And where a party seeking insurance on his
life has made some effort to pay the premium necessary to perfect
Ihe contract, but has not done all that he could, the company is not
liable; ^^ and such stipulation as to prepayment of premium is not
complied with or waived by a payment of the premium to an in-
^ CranbeiTv ^Mutual Fire Ins. Co. ^° Bradlev v. Potomac Fire Ins.
V. Hawk (N. J. Ch. 1888) 14 Atl. Co. 32 Md. 108, 3 Am. Kep. 121. See
74.5. Home Ins. Co. v. Field, 42 111. App.
» 102 U. S. 108, 26 L. ed. 92. :!02.
274
COMPLETION OF CONTRACT § 70
surance a^ent, through whom the application was made and the
policy delivered, if the policy contains an express stipulation that
every insurance agent, broker, or other person forwarding applica-
tions or receiving premiums is the agent of the applicant and not
of the company, although the c()mi)any were in the habit of settling
a monthly account with him, and he, after the loss, tendered the
])remium to them.^^ It is also held in a North Carolina case that
if the prepayment of dues is stipulated for in the application,, it
constitutes an essential part of the contract of insurance, with which
tlie agent has no power to dispense even if an intent to do so can
l)e inferred from his forwarding the policy with a receipt for the
dues signed by the president, but not countersigned by him.^^ So
the parties to a contract of insurance may stipulate that it shall not
become operative as an indemnity until payment in full by the
insured of all charges and assessments required by the constitution,
rules, and regulations of the insurer.^* An '"advance premium"'
is in the nature of a membership fee, where the payment thereof
is' made a condition precedent to liability of the company under the
express terms of the policy.^^ In Hubbell v. Pacific jNlutual Insur-
ance Company ^® the defendant agTced to insure plaintiff's cargo.
The custom in such cases was to issue a policy in from ten to twenty
days on payment of the premium or delivery of the note of the in-
sured therefor. AVithin twenty days plaintiff became insolvent,
and made an assignment. Defendant gave notice that the jn-e-
mium must be paid in cash or secured. Nothing more was done.
Several years afterward, in a suit brought on the agreement, it was
held that the agreement came to an end by the failure of plaintiff
to comply with defendant's notice or to take some action at the
time. In Buflum v. Fayette Mutual Fire Insurance Company,^"^ it
was determined that if tlie by-laws of a mutual insurance company
provide that "each person, before the policy sliall be binding on
the company, shall pay to the treasurer or agent such premium
and make such deposit as the directors sliall determine,'" the com-
pany is not rendered liable on a policy which is executed, but not
delivered, and for which no i)rciiiiiun has been paid, by an oral
promise of iheir trea,surer to the ai)plicant for insurance that if any-
"Cronkliite v. Aofidont Ins. Co. l* Modern Woodman Acc-ident
of North America. 'A'y Fed. 26. As.soc. v. Kfine, 00 Neb. 345, 69 N.
I2:yiulrev v. Shawmut jMuliial \V. 943, 26 Ins. L. J. 724.
Fire Ins. Co. 4 Allen (86 INfass.) is c^j^ifi, y. Covenant Mutual Bene-
316. 81 Am. bee. 689. See Walling- tit Assoc. 16 Tex. Civ. App. 593, 43
lord V. Home Mutual Fire & Marine S. W. 819.
Ins. Co. 30 Mo. 46. '' 100 N. Y. 41. 2 N. F. 470.
i^Onnond v. Fidelity Lite Assn. i' 3 Allen (85 Mass.) 360.
96 N. C. 158, 1 S. E. 796.
§ 71 JOYCE ON INSURANCE
thing should happen, he would see the premium paid, or that he
would take it upon himself to keep the policies good. In another
case an application for life insurance was made to an insurance
company' which it found satisfactory ; and it wrote a policy based on
the application and sent tlje policy to its agent, who offered the pol-
icy to the person making 'the application for inspection. The
premium called for by the terms of the policy was not paid, and the
policy was not delivered, and it was decided that an action could
not be maintained against the company under any form of dec-
laration." And if a policy of insurance is sent to the assured, and
he refuses to accept it and pay the premium according to its terms
and his agreement, but holds it to look into the standing of the
company while it is under advisement, without delivery, accept-
ance, and payment of the premium, tlie property is at risk of the
assured, and he cannot recover in case of loss by fire. It is too
late to accept the policy and tender the premium after the prop-
erty is destroyed, where the policy requires prepayment and there
has been no waiver. ^^ Where a policy on mortgaged premises
which the mortgagor has refused to accept is delivered to the mort-
gagee, who does not pay or agree to pay the premium, tiie policy
does not become effective by reason of a clause therein that the
mortgagee should pay the premium on demand if the mortgagor
fails to do so.^" And a worthless check does not constitute the
payment of the first premium required as a condition precedent to
the completion of the contract.^ A premium is not overdue be-
cause not paid on the day of the date of the policy, even though
the insurance is not to take effect unless the first premium is paid.^
§ 71. Actual prepayment of premium not in all cases essential to
validity of contract. — This head-line statement is a general qualifi-
cation of or exception to the rule first stated under the last preced-
ing section and will, therefore, be only briefly instanced in this
place as it emln-aces to a great extent what appears under other sec-
tions next following herein. The payment of the premium is not
made a condition precedent to the taking effect of a contract of in-
surance by a writing following the proposals, but not made a part of
the policy, either by recital or reference, stating tliat the applicant
agrees "that the assurance hereby proposed shall not be binding on
said company imtil the amount of premium as stated therein shall
iSMarkev v. Mutual Beneflt Ins. 171 Ind. 33, 131 Am. St. Rep. 245,
Co. 126 JMass. 158. See also Home 85 N. E. 703.
Ins. Co. V. Field, 42 111. App. 392. ^ Bradv v. Xorthwestern Masonic
19 Milh ille :Mutual Marine & Five Aid A.ssop. 100 Pa. 595, 42 Atl. 962.
J*vs. Co. v. Collerd, .38 N. J. L. 480. » Kcinedy v. .Metroiiolitan Life
. '° New V. Germania Fire Ins. Co. Ins. Co. 116 La. G6, 40 So. 533.
276
COMPLETION OF CONTIJACT § 72
be rocoixed V)y said company or an accredited agent."' And in
Stanley v. Northwestern Life Association* a member agreed in
liis application to pay ''one assessment within thirty days after the
date of such assessment" whenever made in accordance with the
constitution and by-laws, which provided that every member fail-
ing to pay his assessment within thirty days from the date thereof
should stand suspended, and the court decided that under the stip-
ulations of the contract if one assessment was not paid within the
time provided, the certificate would become null and void, but the
payment of at least one assessment was not a condition precedent to
recovery.*
§ 72. Prepayment of premium: oral agreement. — In the case of
an oral contract of insurance or to insure, the prepayment of the
premium is not necessary ^ until the policy issues, unless there is a
special agreement to the contrary, but when the policy is tendered,
the insured must pay the premium, unless credit is given or
there is an express or implied waiver or some agreement obviating
the necessity of prepayment.' If an oral agreement for insunmce
is made, and prepayment is not made a condition precedent, there
is no obligation to pay the premium until the policy is ready for
delivery.^ And a promise to pay may be sufficient.^ So also is a
3Slieldon V. Comieotiout Mutual Me. 51, 48 Am. Dec. 474; Loriug v.
Life Ins. Co. 25 Conn. 207, 65 Am. Proctor, 26 Me. 18.
Dec 565 ^eru Torfc.— Ruggles v. American
* 36 Fed. 75. Central Ins. Co. 114 N. Y. 415, 11
5 See note to 21 Am. St. Rep. 883. Am. St. Rep. 674, 21 N. E. 1000;
See sections next following. Audubon v. Excelsior Ins. Co. 27 N.
6 Western Assurance Co. v. Mc- Y. 21G, 223, Denio, J.; Kelly v.
Alpin, 23 Ind. App. 220, 77 Am. St. Commonwealth Ins. Co. 10 Bo.sw.
Rep. 423, 55 N. E. 119. (N. Y.) 82. See § 38a herein.
Oral agreement — case where tho Aorf/i Carolina. — Perry v. Security
agent received .and remitted the Life & Annuity Ins. Co. 150 N. Cai*.
premium: Ellis v. Albany City Ins. 143^ 63 S. E. 679, 38 Ins. L. J. 432.
Co. 4 Lans. (N. Y.) 433, 50 N. Y. Wisconsin.— 3o\\n R. Davis Lum-
402, 10 Am. Rep. 495. 1^^^. q^ y Scottish Union & National
On requisites of a present oral con- j^^ q^ 94 ^yis. 472, 69 N. W. 156;
tract of insurance, see note in 5 j^^f^jjiipk v Milwaukee Mechanics'
L.R.A.(N.S.) 407. j^^ Co. 87 Wis. 379, 58 N. Y. 350.
"^ United States. — Kohne v. Insur- , +„„*.. ^„„^„,„i . r^^o
ance Co. of North America, 1 Wash. As to oral contract: renewal, pre-
(U. S. C. C.) 93, Fed. Cas. No. P^.^'^^ ^^ premium, see fifth note,
7920. § 41 herein.
7/;>,;o,-,5._Continontal In.s. Co. v. 8 pij-enien's Ins. Co. v. Kuessner,
Roller, 101 111. App. 77. 164 111. 275, 45 N. E. 540; Perry v.
Indiana.— ^Gw England Fire & Security Life & Annuity Ins. Co.
M. Ins. Co. V. Robinson, 25 Tnd. 53(). 150 N. Car. 143, 63 S. E. 6/9, 38
Zoua.— Davenport v. Peoria Ma- Ins. L. J. 432; Croft v. Hanover
rine & Fire Ins. Co. 17 Iowa, 276. Fire Ins. Co. 40 W. Va. 0O8, o2 Am.
3/ame.— Blanchard v. Waite, 28 St. Rep. 902, 21 S. E. 854.
277
^ 7;j
JOYCE OX INSURANCE
promise to give a premium note.^° But it is not essential to the ex-
istence of a ))inding contract to make insurance that the premium
note should have been actually signed and delivered. ^^
§ 73. Prepayment of premium to agent or broker. — The payment
of the premium to a company's authorized agent binds the company
thougli tlie agent "convert the money and a policy is never actually
issued. ^^ And where the insurer's agent retains the premium paid,
beyond the time limited for payment or remittance to the company
there is a sufficient payment. ^^ So an insurance company will not
be permitted to refuse a risk on the ground of a loss prior to the
receipt of the premium if the premium was paid to an agent of the
company prior to the loss and would have been received but for the
delay of the agent.^* And it is no defense, that the company never
received the money from the agent who delivered the policy, he hav-
ing authority to deliver it.^^ In a Pennsylvania case the policy
provided for actual cash payment into the ofhce before the policy
should attach and payment was made to an insurance broker to
whom the application was made, but the money was not paid into
the office of the company. The court held that he was agent of the
applicant, and that the company was not liable.^® Again, if the
premium is paid to the company's general agent, who transmits the
application but not the premium paid, and the company delays
formal acceptance until the agent remits the premium there is a
completed contract." Payment to an agent of a duly authorized
^ Milwaukee Meclianic's Ins. Co. v.
Graham, 181 111. 158, 5-1 N. E. 914,
aTg SO 111. App. r)4i).
1° Commercial Mutual Ins. Co. v.
Union INIutual Ins. Co. 19 How. (GO
U. S.) 318, 15 L. ed. G3li.
^^ Commercial Mutual Jns. Co. v.
Union iAlutual Ins. Co. 19 How. (60
U. S.) 318, 15 L. ed. 63(J, cited in
Miller v. Brooklyn Life Ins. Co. 12
Wall. (79 U. S.j 285, 304, 20 L. ed.
398, 402; Belleville Mutual Ins. Co.
V. Van Winkle, 12 N. J. Eq. 333, 340.
i2lde V. Phoenix Ins. Co. 2 Biss.
^* Perkins v. Washington Ins. Co.
4 Cow. (N. Y.) 045.
^* Lebanon Mutual Ins. Co. v. Erb,
112 Pa. St, 149, 4 Atl. 8. See Shoe-
maker V. Commei'cial Union Assur.
Co. 80 Neb. G37, 114 N. W. 1105.
16 Pottsville Mutual Ins. Co. v.
Minnequa Springs Improvemeiit Co.
100 Pa. St. 137." See also Arthur-
holt v. Susquehanna Mutual Fire
Ins. Co. 159 Pa. St. 1, 39 Am. St.
l^ep. 659, 28 Atl. 197.
On insurance broker as agent for
insured as to payment, see note in 38
(U. S. C. C.) 333, Fed. Cas. No. L.R.A.(N.S.) 616, on insurance agent
7001 . See Ferebee v. North Carolina as agent of assured as to payment,
I\[utual Home Ins. Co. 68 N. C. 11
See New Y'ork Life Ins. Co. v.
Greenlee, 42 Ind. App. 82, 84 N. E.
noi.
1^ Gaysville Manufacturing Co. v.
Phoenix Mutual Fire Ins. Co. 67 N.
H. 457, 36 Atl. 367. See also Pulasld
Mutual Fire ins. Co. v. Dawson, Hi
111. App. 514.
278
see note in 20 L.R.A. 286.
As to agent's powei's, restrictions
on authority, etc., compare S§ 424
el seq., 472 et seq., 512 et seq., 550
et sec|. herein.
i"" Preferred Accident Ins. Co. v.
Stone, 61 Kan. 48, 58 Pac. 986.
COMPLETION OF CONTRACT § 73
aoent or t(j one without authority where it is received by the coni-
ixmy or its authorized agent is sufficient.^* It is held in Illinois
that payiiient of the premium to the local agent and a return there-
of to the genci-al agent, by whom the amount is credited to the local
agent on the books of the company, and an instruction afterward
to the local agent to cancel the policy, is an admission that there
wa.s a policy capable of being canceled, and it is not for the com-
pany afterward to deny it.^^ But an agent authorized to deliver the
policy and receive and transmit premiums, but not to issue policies,
may not extend the time for payment.^" If the assured pays the
premium to an insurance broker and receives the policy, he does
not lose the benefit thereof by reason of a course of dealing between
the broker and the general agent of the company.^ A policy was
executed and attested as required by the act incorporating the com-
pany. It contained no stipulation making an actual payment of
the premium a condition precedent, or that default in its payment
should constitute a forfeiture. The policy was delivered without
jn-epayment to an agent for the purpose of being delivered to the
plaintiff. The plaintiff paid the premium to the agent and the
stock insured was destroyed by fire. It was held that the company
was liable.^ When the policy provides that the insurance broker
should be deemed the agent of the insured, the payment of the pre-
mium to him does not constitute a payment to the company.^ So
where a policy is delivered to an agent with authority to deliver it
to tlie insured and receive the premium, and the agent delivers the
j)()licy and accepts a note for the premium, and discounts it on his
own account, but does not pay the amount to the princi])cil, the
company is liable, although the policy provides that sucli agent
shall be deemed the agent of the insured, and that the insurer shall
not be liable until he actually receives the premium.* The deci-
sions, however, are not unanimous upon the (question whether the
" Weisman v. Commercial Fire Ins. Co. 122 N. Y. 439, 25 N. E. 92(5,
Ins. Co. 3 Pennewill (Del.) 22-1, 50 15 N. Y. 802; K()lirl)ach v. Germania
Atl. 93. Tns. Co. G2 N. Y. 47. 20 Am. Kep.
^^ ^l^^tiia In.s. Co. V. Maguirc, 31 451. (See N. Y. statute as to so-
]11. 342. lioitor bcinji' insurer's agent) ; Potls-
^^ Critf'hett v. American Tns. Co. 53 \ille iMutiial Ins. Co. v. ^linnequa
Iowa, 405. See statutes of this stale Sprinsis improvement Co. 100 Pa.
as to .solicitor being insurer's agent. St. 137.
See § 512 herein. ■* Carson v. Jersey Citv Five Tns.
1 Pittsburgh Boat Yard Co. v. Co. 43 N. J. L. 300,39 Am. Rep. 584.
Western Assnr. Co. 5 Pa. 119. 47 See Alexander v. Germania Fire Tns.
Am. Dec. 401. ' Co. 06 N. Y. 464, 23 Am. Rep. 76.
^ Pennsylvania Ins. Co. v. Carter, See statutes of New Jersey and New
— Pa. — , 11 Atl. 102. York as to solicitor being agent of
' Wilber v. Williamsburg City Fire insurer.
279
§ 74 JOYCE ON INSURANCE
agent or broker is agent of the insurer or insured in certain cases,
although the statutes of a majority of the states make the solicit-
ing agent the insurer's agent. This point, however, will be con-
sidered hereafter.*
§ 74, Effect of part payment. — AVhere prepayment is a co idition
precedent to the validity of the policy, a part payment of the pre-
mium, unless the balance is credited, is not sufficient to bind the
company,® unless the company assents thereto and receives the part
payment.' If payment is not required until the policy is delivered
a partial payment to the agent, to whom the policy is sent for de-
livery to assured, is a waiver of complete payment.^ So there may
be a prepayment partly in cash and the balance by note.^ Again,
a presumption exists, if a policy is delivered upon a part payment
of the premium that a credit was extended for the balance.^" If
an agent has full authority, to deliver policies, collect premiums and
make rates and the policy is delivered, receipts the payment, and
shows on its face that the premium was considered fully paid the
insurer cannot call in question the acts of the agent in extending
credit to insured for part of the premium, especially where the pol-
icy contains no condition that it shall not be effective unless the
premium be paid in money.^^ '
An agent may have the right to bind the insurer by ac-
cepting less than the amount of the initial fee, and if he
does so and the policy is issued it is unimportant that assured
knew that the sum paid was less than the regular fee.^^ And
5 It is held in a ca-se in Indiana ® Barnes v. Piedmont & Arlington
that the broker is the agent of the Life Ins. Co. 74 N. C. 22.
one from whom he receives com- , ' Brown v. Massachusetts Mutual
pensation, irrespective of who em- Life Ins. Co. 59 N. H. 298, 307, 47
ploys him : Indiana Ins. Co. v. Hart- Am. Rep. 205. See also Nebraska &
well, 123 Ind. 177, 24 N. E. 100; see Iowa Insurance Co. v. Christiensen.
MuUin V. Vermont Mutual Fire Ins. 29 Neb. 572, 26 Am. St. Rep. 407.
Co. 58 Vt. 113, 4 Atl. 417. « n^^, York Life Ins. Co. v. Green-
In another case it is held that he is lee, 42 Ind. App. 82, 84 N. E. 1101.
agent for both parties: Crousillat v. ^ Life Ins. Co. of Virginia v.
Ball, 3 Yeates (Pa.) 375; 4 Dall. Hairston, 108 Va. 832, 128 Am. St.
(4 U. S.) 294, 2 Am. Dec. 375. Rep. 989, 62 S. E. 1057. See §§ 80,
In another case it is decided that 81, 1202 herein.
he is agent of the person employing ^° Northwestern Life Assur. Co. v.
him: Hamblett v. City Ins. Co. 36 Schulz, 94 111. App. 156.
Fed. 118. ^^ Home-stead Fire Ins. Co. v. Ison,
In another ease it is decided that 110 Va. 18, 3 Va. App. 485, 65 S. E.
he may be shown to be the company's 463. 38 Ins. L. J. 1143.
agent: Newark Fire Ins. Co. v. ^^ipj-jpie Link Mutual Indemnity
Samons, 110 111. 166. See chapters Assoc, v. Williams, 121 Ala. 138, 77
on agents §§ 424 et seq., 472 et seq.. Am. St. Rep. 34, 26 So. 19, 28 Ins.
512 et seq., 550 et seq. herein. L. J, 621.
280
COMPLETION OF CONTRACT § 74a
where there is an application, or payment of a portion of the
premium, and acceptance of the risk by tlie company, and nothing-
is required but the delivery of the policy and the payment of the
balance of the premium, which latter is not required under the
rules of the company until the contract is completed, a valid con-
tract for a policy exists.^^ Again, an agreement between the gen-
eral agent of a foreign insurance company and a person who takes
a policy, by which the latter is given credit for a part of the first
premium in ignorance of any stipulation contained in the policy
thereafter issued, which denies the right of the agent to make such
contract, estops the insurance company to deny the acts of the agent
or to assert the invalidity of the agreement. And a provision of an
insurance policy to the efi'ect that ''none of its terms can be modi-
fied nor any forfeiture under it waived save by an agTeement in
writing signed by the president or secretary of the company" never
became binding or efiective on the assured, who made his contract
v»ith the general agent and manager of the insurance company
within the state before the policy was written, when he did not as-
sent to this provision, had no knowledge of it, and was not informed
that the policy to be issued would contain any such provision,^* It
is held, however, that part payment of the premium cannot be
waived by a mutual insurance company's agent with authority to
issue policies.-'*
§ 74a. Same subject: rebate: agent's commission released or
property taken on credit therefor. — An insurance company, is not
charged with notice that payment of the first premium on a policv
was effected in part by a release of the agent's commission to the ap-
plicant.^^ So the payment of the first premium required by an
application for insurance, to be made before the policy will become
binding, is not effected by the release to the applicant of the agent's
commission and payment by the applicant of the balance, where the
commission is not due until the premium has been paid in cash
and the policy issued, and all moneys received by the agent are to
be held in trust for the company, while the binding slip requires a
return of the money acknowledged to have been received, upon re-
jection of the policy.^' But it is also held that a person who, under
"Cooper V. Paciac Mutual Life 268, 8 L.R.A.(N.S.) 883, rev'^ 144
Ins. Co. 7 Nev. 116, 8 Am. Rep. 705. Fed. 1005. As to rebate see §§ 447,
1* Cole V. Union Central Life Ins. 715, 1091, 1092, 1408 herein.
Co. 22 Wash. 26, 47 L.R.A. 201, 60 " Union Central Life Ins. Co. v.
Pae. 68. Robinson, 148 Fed. 358, 78 CCA.
15 Graham v. Mercantile Town 268, 8 L.R.A.(N.S.) 883 (annotated
Mutual Ins. Co. 110 Mo. App. 95, 84 on allowance to applicant of agent's
S. W. 93. Commission as payment of premi-
16 Union Central Life In.s. Co. v. urn), 144 Fed. 1005.
Robinson, 148 Fed. 358, 78 C C. A.
281
§§ 74b, 73 JOYCE OX INSURANCE
a state statute is agent of the insurer, may accept part payment of
the first premium in cash, and for that portion which amounts to
liis commission may lake his pay in mercliandise. or trust assure<l
for such baUmce, even tliough the premium is required to be paid
in cash.^^ But it is decided that an agent of a life insurance com-
pany has no implied authority to waive payment of premiums on
an insurance policy in money and agi-ee to take something in lieu
thereof which is neitlier money nor an agreement to pay money,
nor equivalent to money to the corporation when taken. ^^ It is,
liowever, also held that if an insurer gives its agent full power to
collect a premium, and treats the premium as paid, such an agent
may agree to take part payment in trade with insured.^" ,
§ 74b. Part payment: good health. — If. owing to a mistake a.s to
the amount, only part of the premium is paid to and received by
the agent, and the actual delivery of the policy, which is also re-
quired as a condition precedent to complete the contract, is delayed,
and the delivery by the agent is recalled before sickness of the ap-
plicant, no insurance is effected.^ If part payment in cash is de-
ferred until the applicant is sufiering from his last sickness and
shortly before his death no contract exists even though the solicitor
orally agrees to a partial payment in cash.^
§ 75. Payment by third person. — Where a policy of life insur-
ance provitles that it shall not take effect until the payment of the
advance premium has been made during the lifetime of the insured,
a payment with the applicant's money made by a third party but
without his knowledge, although during his lifetime, cannot be
ratified by his administrator after his death, and is inoperative.^
is.lolin ITaiu-oek Mutual Life Ins. ^o jjome^fpad Fire Ins. Co. v. Ison,
Co. v. Sfhliiik. 175 111. 284, -31 N. 110 Va. 18, 3 Va. App. 483, G5 S. K.
E. 795, 28 Ins. L. J. 132, aTg 74 111. 4G3. 38 Ins. L. J. 1143. See § 83.
Ap|). 181. See AYinchell v. Iowa ^ Rav v. Securitv Trnst & Life
State Ins. Co. 103 Iowa. 189, 72 N. Ins. Co. 126 N. Car. 16fi, 33 S. E.
W. 303. - 246, 29 Ins. L. J. 369.
Brokers actins,' a.s insnred'.s aaents, ^ Han-iman v. New York Life Ins.
not; within statute N. Y. 1892, e. 641, Co. 43 Wasji. 398, 86 Pa^^. 636, 35
sec. 1, which forbids agents, etc. of Ins. L. J. 852.
lire insurance company including as ^ ^yijij-jj^'p. y^ Massachusetts Mutual
consideration for insurance any lee, Life Ins. Co. 129 Mass. 240, 37 Am.
compensation, etc. Tanenbaum v. Rep. 317. See State Life Ins. Co.
Rosenthal. (iO N. Y. Supp. 494, 44 v. Harvey, 72 Oliio St. 174, 73 N. E.
App. Div. 4.)t. 1036. Compare Mississi]>pi Valley
19 Tomsecek v. Travelers' Ins. Co. Life Ins. Co. v. Neyland, 9 Kush
113 Wis. 114. 90 Am. St. Rep. 846, (72 Ky.) 430.
57 L.R.A. 455, 88 N. W. 1013. See as to payment of premiums in
On payment of insurance premium marine insurance: Hurlliurl v. Pa-
by cancelation of aiieut's indebted- cific Ins. Co. 2 Sum. (U. S. C. C.)
ness, see note in L.R;A.1915A, 686. 471, Fed. Cas. No. 6919; Patapsco
282
COMPLETJOX OF CONTHACT § 76
Where an applicant lor life insnranee had an interview with an
agent of the company, who ottered a policy to him and a.<ked him
to pay the premium, and he told the agent that if. he would go to
a third party that the latter would pay him, as an arrangement had
been made with him to that eft'ect, and the agent agreed to go, but
never went, and retained the ])olicy in his own hands: it was held
that instructions were erroneous which permitted the jury to find
that these facts were equivalent to a delivery of the policy and pay-
ment of the premium.^ But a third person may by agreement be-
tween the assured and him made in the agent's presence agree to
pay the premium and bind the company by a part payment.^ And
a person may obtain money from another to j)ay the premium on
a policy which is taken out for the benefit of insured's estate, and
the insurer issuing the policy cannot inquire into the terms of tlie
contract under which the money was obtained, as it is immaterial
to him.^ But if an applicant for life insurance, after making his
application, changes his mind and refuses to accept the policy when
tendered, and neither he nor the beneficiary named therein pays
any of the premiums nor authorizes their payment, there is no
complete contract of insurance, though another person into whose
possession the policy comes pays such premiums.' And a friend
of the applicant cannot pay the premium, about the payment of
which there was an unsettled dispute, an hour or two before the
death of the applicant, to an agent ignorant of his hopeless iUness.
and thus secure a valid policy, not delivered until after his death.*
§ 76. Prepayment of premium may be waived. — It is well-settled
law that the clause in a policy exempting the company from liabil-
ity until actual payment of the prenuum may be waived by the
Ins. Co. v. Smith, 6 Har. & J. (Mel.) 19, 29, 49 C. C. A. 216, 225; Equit-
166, 14 Am. Dee. 268; Insurance Co. able Life A.«isur. Sec. v. MeElroy, 8.3
of Pourisvlvania v. Smith, i! Whaii. Fed. 631, 637, 28 C. C. A. 365,"^ 371
(Pa.) 520. 49 U. S. App. 548; Paine v. Pacili.-
* Hoyt V, Mutual Beiiolit Life Ins. Mutual Life Ins. Co. 51 Fed 689
Co. 98 Mass. 539. 693, 2 C. C. A. 459, 463. 10 U. S.
* New York Life In.s. Co. v. Gm-n- App. 256 (Kendalls Adm'r v.
lee, 42 Ind. App. 82, 84 N. E. 1101. Same) ; Whiting v. Massachusetts
«I\lerchants Life Assoc, of U. S. v. Mutual Lif'e Ins. Co. 129 Mass. 240,
Oakum, 98 Fed. 251, 39 C. C. A. 56. 241, 37 Am. Kep. 317: Societe Des
' Hogljen v. Metropolitan Life Ins. Mines D'Argent et Fonderie.s De
Co. 69 Conn. 503, 61 Am. St. Rep. Bingliam v. Mackintosh. 5 Ctah 568.
53, 38 Atl. 214. 577, ]8 Pac. 363. Distinguished in
* Piedmont & Arlington Life Ins. Dove v. Koval Ins. Co. 98 Mich. 122,
Co. v. Ewing, 92 U. S. 377, 23 L. ed. 125. 57 N."W. 30. See also Harri-
610, cited in Oiddings v. Northwest - man v. New York Life Ins. Co. 43
ern Mutual Life Ins. Co. 102 U. S. Wash. 398, 86 Pae. 656, 35 Ins. L. J.
108, 112, 26 L. ed. 92, 93; Cable 'v. 852.
United States Life Ins. Co. Ill Fed.
283
§ 70 JOYCE ON INSURANCE
company or its authorized agent, and the contract become binding
without prepayment of the premium, such provisions being for the
benelit of the company,^ and prepayment of the premium may be
waived though the poUcy provides that the premium must be prepaid
either at the company's ofiice or to an agent duly authorized in writ-
ing to receive it.^° So a clause in a policy providing that it shall be
void unless the premium is paid to the secretary, or an agent of the
insurer duly appointed in writing, is waived by the insurer Avhen-
ever, by his voluntary act, the policy leaves his office to be delivered
to insured on payment of the premium, without regard to the fact
that someone, having nominal connection with the insurer as agent,
hands over the policy, receives the premium, and fails to pay it to
the insurer.^^ And where the by-laws and conditions of a mutual
insurance company provide that all general and local agents shall
be appointed by the, secretary and furnished with a certificate of
appointment under seal setting forth their powers, and no insur-
ance, whether original or continued, shall be considered binding
unless the premium shall have been actually paid to some duly au-
thorized and commissioned agent, such by-laws and conditions are
solely for the benefit of the insurer and may be waived, and are
waived, when an agent is authorized to deliver a policy and receive
the premium though such agent has not been duly authorized and
commissioned as provided in the by-laws. Such a course of dealing
adopted between the insurer and his agent, though wholly incon-
sistent with the provisions of the policy cannot be set up to defeat
a recovery.^2
^ Train v. Holland Purchase Ins. tual Fire Ins. Co. v. Elkins, 124 Pa.
Co. 62 N. Y. 598, 602; Bodine v. Ex- St. 484, 10 Am. St. Rep. 608, 17 Atl.
change Fire Ins. Co. 51 N. Y. 117; 24.
10 Am. Rep. 566; Wood v. Pough- Utah. — Thum v. Wolstenholme, 21
keepsie Ins. Co. 32 N. Y. 619 ; Trus- Utah 446, 61 Pac. 537, 29 Ins. L. J.
tees First Baptist Church v. Brook- 699.
lyn Fire Ins. Co. 19 N. Y. 305. As to premiums etc., excuses,
See also the following eases : waiver and estoppel, see also §§ 1345
California. — Griffith v. New York et seq. herein.
Life Ins. Co. 101 Cal. 627, 40 Am. ^° Susquehanna Mutual Fire Ins.
St. Rep. 96, 36 Pac. 113. Co. v. Elkins, 124 Pa. St. 484, 10
7Hrf/a«a.— New York Life Ins. Co. Am. St. Rep. 609, 17 Atl. 24; Uni-
V. Greenlee, 42 Ind. App. 82, 84 N. versa! Fire Ins. Co. v. Block, 109 Pa.
E. 1101. St. 535.
Nebraska. — Nebraska & Iowa Ins. ^^ Arthurholt v: Susquehanna Mu-
Co. v. Christiensen, 29 Neb. 572, 26 tual Fire Ins. Co. 159 Pa. St. 1, 39
Am. St. Rep. 407. Am. St. Rep. 059. 28 Atl. 197.
North Carolina. — Pender v. North ^^ Susquehanna Mut. Fire Ins. Co.
State Mutual Life Ins. Co. 163 N. v. Elkins, 124 Pa. St. 484, 10 Am.
Car. 98, 79 S. E. 293. St. Rep. 608, 17 Atl. 24.
Pennsi/lvania. — Susquehanna ^lu-
284
COMPLETION OF CONTRACT § 76
Again, a condition in a policy that it shall not be in force until
the premium is paid is waived by neglect of the company to insist
on such condition after the agent reports that a policy has been is-
sued and that the premium thereon is unpaid.^^ It is held in Louis-
iana, that where an application for insurance is accepted, the policy
made out in duplicate, and the name of the assured as such is en-
tered on the company's books, the contract is complete, and unless
the company has required payment of the premium at that time,
or notified the applicant of a stipulation in the policy requiring pay-
ment of the premium as a condition precedent, the company will
be deemed to have waived such condition.^* Although a policy in
a mutual insurance company stipulates that it shall be void if any
assessment on the premium note shall not be paid within thirty
days, yet it may lawfully impose a second assessment where the first
one is not paid within the time limited.^* But the acceptance of a
note for the premium constitiTtes a waiver of a condition requiring
prepayment, although the policy may be canceled after the matur-
ity and nonpayment of the note if reasonable notice is given, and
this may be done without either tendering or crediting that part
of the premium which is unearned, as the credit may be adjusted,
no matter into whose hands the note may fall.^®
Such waiver may be established by evidence of a parol agTeement
to that effect,^'' or it may be inferred from circumstances showing
that prepayment was not intended to be insisted upon,^^ and proof
of such a waiver is no violation of the rule prohibiting parol evidence
to vary or contradict a written contract. ^^ So a statement that the
payment of the money makes ''no difference" is a waiver.^" The
mere fact, however, that the applicant goes to an insurance office to
make payment of the first premium by note but is told that it can-
" German Ins. Co. v. Shader, 08 Cloit v. National Protection Ins. Co.
Neb. I. m L.K.A. 918. 8:i Am. St. '^r, I'.arb. (N. Y.) 189.
Kep. 503, 93 N. W. 972. ^^ Thompson v. St. Louis Mutual
i^Pino'v. Merchants' Mutual Ins. Life Ins. Co. 52 Mo. 469; Bodine v.
Co. 19 La. Ann. 214, 92 Am. Dee. Kxeli.inge Fire Ins. Co. 51 N. Y. 117,
529. 10 Am. Rep. 566; Goit v. National
~15 Columbia Itis. Co. v. Bueklev, Proteetion Ins. Co. 25 Barb. (N. Y.)
83 Pa. St. 293, 24 Am. Rep. 172. 189; Whitwell v. Putnam Fire Ins.
16 Little V. Charter Oak Life In.s. Co. 6 Lans. (N. Y.) 166, 168; Heaton
Co. 38 Ohio St. 110. See Thum v. v. Manhattan Fire Ins. Co. 7 R. I.
Wolstenholme, 21 Utah, 446, 61 Pac. 502; Equitable Ins. Co. v. McCrea,
537, 29 Ins. L. J. 699. 76 Tenn. 541.
As to notes for premiums, and ^^ Pino v. Merchants' IMutual Ins.
premium etc. notes, see §§ 1202 et Co. 19 La. Ann. 214, 92 Am. Dee.
" B()(hne v. Exchange Fire Ins. ^o Bragdon v. Applelon Mutual
Co. 51 N. Y. 117, 10 Am. Rep. 566; Ins. Co. 42 Me. 259.
529.
77
JOYCE OX INSURANCE
not be paid until tlie agent with whom negotiations were pending
consented and that he was not in, does not constitute a waiver.^
Where the premium was not paid at the time of application, but
after the loss and on delivery of the polic}^, the insured not mention-
ing the loss, it was held that the question of, waiver of immediate
payment was one of fact for the jury.^ >
§ 77. Waiver of prepayment by agent. — A general agent of an
insurance conjpany who has authority to deliver policies and receive
payment of the premium has power to waive prepayment of the
premium although the policy contains a condition to the contrary.^
80 a general insurance agent, with authority to make terms for in-
surance countersign and deliver policies, and collect ])remiums, has
power to waive a condition in the policy requiring payment, of the
premium in money.* Where the agent of the insurers was told
that the money was ready for him in the bank, and the agent told
assured to let it lie, and when he wanted it he would draw for it,
^ Deunis v. Fidelity Mutual Life
Ins. Co. 159 Mich. 594, l(i Det. L. N.
1065, 124 N. W. 575.
2 Baldwin v. Chouteau Ins. Co. 56
Mo. 151, 17 Am. Rep. 671.
^ United States. — Miller v. Brook-
lyn Life Ins. Co. 12 Wall. (79 U. S.)
285, 20 L. ed. 308; O'Brien v. Union
Mutual Life Ins. Co. 22 Fed. 586.
E.imniue Robinson v. Union Central
Life Ins. Co. 144 Fed. 1005, rev'd
148 Fed. 358, 78 C. C. A. 268, 8
L.R.A.(N.S.) 883. See Ball & Sage
Wagon Co. v. Aurora Fire & Marine
Ins. Co. 20 Fed. 232.
California. — Berliner v,
Ins. Co. 121 Cal. 451, 53
Illinois. — Mulligan v.
tan Life Ins. (^o.l49 111
Indiana. — Home Ins.
man, 112 Ind. 7, 13 N,
^ V,
Travelers
Pac. 922.
Metropoli-
App. 516.
, Co. V. Gil-
E. 118; New
York Life Ins. Co. v. Greenlee, 42
Ind. App. 82, 84 N. E. 1101; West-
ern Assur. Co. V. McAlpin, 23 Ind.
App. 220, 77 Am. St. Rep. 423, 55
N. E. 119.
Iowa. — Critehett v. American Ins.
Co. 53 Iowa 404, 407, 5 N. W. 543;
Young V. Hartford Fire Ins. Co. 45
Iowa 377, 24 Am. Rep. 784.
Louisiana. — Pino v. Merchants'
Mutual Ins. Co. 19 La. Ann. 214, 92
Am. Dec. 529.
Michigan. — Improved Match Co.
286
Michigan Mutual Fire Ins. Co. 122
Mich. 256. 6 Det. L. N. 748, 80 N.
AY. 1088, 35 Ins. L. J. 53.
Minnesota. — Kilborn v. Prudential
Ins. Co. 99 .Minn. 176, 108 N. W. 861,
35 Ins. L. J. 840, Rev. Laws 1905, sec.
1716, Genl. L. 1895, c. 175, sec. 88,
p. 437.
New York. — Bowman v. Agiicul-
tural Ins. Co. 59 N. Y. 521; Boehen
V. Williamsburg City Ins. Co. 35 N.
Y. 131, 90 Am. Dec. 787; Sheldon v.
Atlantic Fire & Marine Ins. Co. 26
N. Y. 460, 84 Am. Dec. 213; Hotch-
kiss V. Germania Fire Ins. Co. 5 Hun
(N. Y.) 91. But compare Russell v.
Piudential Ins. Co. 176 N. Y. 178,
98 Am. St. Rep. 656, 68 N. E. 252.
Ohio. — Newark Machine Co. v.
Kenton Ins. Co. 50 Ohio St. 549, 35
N. E. 1060, 31 Week. L. Bull. 51, 22
L.R.A. 768n.
Tennessee. — Southern Life Ins.
Co. V. Booker, 9 Heisk. (Tenn.) 606,
24 Am. Rep. 344.
Virrfinia.- — See Wytheville Ins. &
Banking Co. v. Teiger, 90 Va. 277,
18 S. E. 195.
On effect of nonwaiver agreement
on conditions existing at inception of
insurance policv, .see note in 13
L.R.A.(N.S.) 826.
* American Employers' Liability
Ins. Co. V. Fordvce, 62 Ark. 562, 54
Am. St. Rep. 305, 36 S. W. 1051.
COMPLETION OF CONTKACT § 77
and he dre\v for it after the fire, this was held to constitute a sufl"i-
cient waiver.^ and a general agent may waive prepayment of the
premium although the policy provides not only that the insurer
shall ''not he liahle until actual payment of the premium," hut also
that no'ofiicor or agent shall "he held to have waived any of the
terms and conditions of the policy unless such waiver be indorsed
thereon in writing." ^ And an agent may waive prepayment al-
though a receipt delivered to assured with the policy provides that
"agents may not deliver policies until the premiums are received,
as no policy is in force until paid for," and the policy also provides
that the agent cannot change or waive its conditions.' It is held,
however, in a Pennsylvania case, that an agent may not Avaive pre-
payment of premium if the application states that he has no power
to do so.^ And under a Missouri decision there can be no waiver
by an agent of a mutual company.^ It is also declared in a Con-
necticut case that the agent has no power to waive such prepayment
if the policy states that it shall not be valid till the premium is
paid.^° And if an agent exceeds his actual authority, and the ap-
plicant has notice of the fact, the company is not bound as in a case
where a local agent assumed to waive a provision that ''no insurance
would be binding until actual payment of the premium," and the
policy contained a provision that none of its terms could be Avaived
by any one except the secretary of the company.^^ Nor can a mere
local agent waive a condition in the policy that the premium shall
be paid in money. ^^ If, however, a local agent has power to receive
proposals, countersign and deliver policies within. his territory he
is presumed to have power within such territory to waive immediate
payment of })remiums.^^ But it is not a waiver of prepayment
where the agent tells the applicant that he may pay the dues on
application or when the policy should be delivered.^* It is said by
the court in an Iowa case that "the authorities all agree that a mere
5 New York Centra! Ins. Co. v. iMVilkins v. State Ins. Co. 43
Xatioual Protection Ins. Co. 20 Barb. Minn. 177, 45 N. W. 1.
(N. Y.) 468. ^^^YiUputs v. Northwestern Mutual
6 Younf,' V. TTartford Fire Ins. Co. Life Ins. Co. 81 Ind. 300, 309. But
45 Iowa 377, 24 Am. Kep. 784. see Provident Savings Life x\ssur.
"^ Miller v. Brooklyn Life Ins. Co. Soc. v. Oliver, 22 Tex, Civ. App. 8,
12 Wall. (79 U. S.') 285, 20 L. ed. 53 S. W. 594.
398. ^^ Farnuni v. Plioonix Ins. Co. 83
" Greene v. L.ycoming Fire Ins. Co. Cal. 246, 17 Am. St. Rep. 233, 23
91 Pa. St. 387. Pac. 869.
^ Graham v. Mercaulile Town Mu- ^* Ormond v. Fidelity Life Assn.
tual Ins. Co. 110 Mo. App. 95, 84 96 N. C. 158; 1 S. E. 796.
S. \V. 93.
^° Bouton V. American Mutual Life
Ins. Co. 25 Conn. 542.
287
§ 78 JOYCE ON INSURANCE
agreement to waive prepayment will not put a policy in force where
it is not delivered. It is, therefore, the delivery which constitutes
the ground of waiver." ^^
§ 78. Renewal: waiver of prepayment of premium. — It is equal-
ly well settled that it is competent for the company to disregard the
condition relative to prepayment of the premium, and upon any
renewal to waive by parol tbe payment in cash of any premium,
and this waiver can be shown by proof that credit was given or can
be inferred from circumstances, and the waiver can be made by
the company or any of its duly authorized agents.^® So where the
company accepted an application, issued the renewal, and forward-
ed it to the agent, stating to him that they would hold him respon-
sible for the premium, it was decided that this amounted to a con-
tract between the company and the applicant to insure his property
according to the terms and stipulations of the renewal.^' A provi-
sion in a policy already executed that no insurance, whether orig-
inal or continued, should be binding until the actual payment of
the premium, and the written acknowledgment thereof does not in-
validate a subsequent contract by parol to renew such insurance
for a premium not paid at the time the risk attaches but postponed
to a future day.^^ and where an insurance company agreed that a
policy for one year should be a permanent risk, and that its officers
should call for the premiums as they became due, and leave the
certiticates of payment and renewal, and the assured relied upon
this arrangement, but before any of the officers called for the re-
newal premiunij the property was destroyed by fire, it was decided
that the company was liable for the loss.^^ But an agent who has
no power to make a contract of insurance cannot bind the company
by a contract to indefinitely postpone the payment of a renewal
premium and keep the policy in force in contravention of its pro-
visions.^" If an insurance company mails to an insured a renewal
fire policy, which he returns, refusing to accept it, and the company
then leaves the policy with a mortgage clause attached with the
mortgagee's agents, who place it with the mortgage papers, where
it remains, and subsequently the company presents a bill for the
^5 Critchelt v. American Ins. Co. " Planters' Ins. Co. v. Rav, 52
53 Iowa, 404, 407, 5 N. W. 543. IVIiss. 325.
^^ Bodine v. Exchange Fire Ins. ^* Trustees First Baptist Clmrcli v.
Co. 51 N. Y. 117, 10 Am. Rep. 5C6; Biooklyn Fire Ins. Co. 19 N. Y. 305.
Fireman's Fund Ins. Co. v. Pekor, ^^ Trustees First Baptist Church v.
10(j Ga. 1, 31 S. E. 779; Continental Brooklyn Fire Ins. 18 Barb. (N. Y.)
Casualtv Co. v. Bridges, — Tex. Civ. 69.
App. — , 114 S. W. 170. See Do- ^o Critchett v. American Ins. Co. 53
hertv v. Millers & I\Ianufacturers Ins. Iowa, 404, 5 N. W. 543.
Co. 4 Ont. L. Rep. 303.
288
COMPLETION OF CONTKACT § 79
premiiiiDs to these agents, who, requesting time to comnuinicate
with the owner, then write to him stating that if he does not pay the
preniiuni they will, and charge the amount to him, and the owner
does not answer the letter, but writes Ir's agent directing him to pay
the })remium at once, but tender of payment is delayed until after
the destruction of the property by fire, when it is refused, the policy
does not become effective so as to bind the company.^
Again, prepayment of the premium for the renewal term is not
necessary to make a \alid iDreliminary contract with an insurance
agent for renewal.^
Where insured had an agreement by which his insurance was to
be kept up to a specified amount by new policies or renewals, and
it was the agent's custom to charge premiums as policies were re-
newed or issued, and to have settlements periodically with insured,
when premiums would be paid, it may be implied that credit for
the premium so charged was gi-anted to the next period of settle-
ment.^
§ 79. Prepayment of premium: effect of delivery of policy. —
Where the contract is otherwise complete, an unconditional delivery
of the policy operates as a waiver of the prepayment of the pre-
mium, notwithstanding an express provision therein that the com-
pany shall not be liable until the premium is actually paid,* and
^ New V. Germania Fire Ins. Co. Massachusetts. — Jones v. New
171 Ind. 33, 131 Am. St. Rep. 245, 85 York Life Ins. Co. 168 Mass. 245,
N. E. 703. 248, 47 N. E. 92, 26 Ins. L. J. 1009.
^McCabe v. .l^tna Ins. Co. 9 N. Minnesota. — Kollitz v. Equitable
Dak. 19, 47 L.R.A. 641, 81 N. W. Mutual Fire Ins. Co. 92 Minn. 234,
426, 29 Ins. L. .T. 138. 99 N. W. 892.
'Newark Machine Co. v. Kenton Nebraska. — German Ins. Co. v.
Ins. Co. 50 Ohio St. 549, 22 L.R.A. Shatter, 68 Neb. 1, 60 L.R.A. 918,
768 and note, :].') N. E. 10(i3. 93 N. W. 972.
* United Slates. — Miller v. Life New York. — Boehen v. Williams-
Ins. Co. 12 Wall. (79 U. S.) 285. 20 burg Ins. Co. 35 N. Y. 131, 90 Am.
L. ed. 398. Dec. 787; Washoe Tool Mfg. Co. v.
Arkansas. — American Employers Hibernia Fire Ins. Co. 7 Hun (N.
Liability Ins. Co. v. Fordvce," 62 Y.) 74, 66 N. Y. 613.
i\rk. 562, 5/0, 54 Am. St. Rep. 305, North Caroliyia.— Uaxhuni v. Penn-
36 S. W. 1051. svlvania Ca.sualtv Co." 138 N. Car.
California.— Grimth v. New York 379, 50 S. E. 262.
Life Ins. Co. 101 Cal. 627, 40 Am. South Caroliufi.—Canihen v. Hart-
St. Rep. 96, 3(i Pac. 113; Farnum v. ford Life Ins. Co. 80 S. Car. 264, 61
Piiopnix Jns. Co. 83 Cal. 246, 17 Am. S. E. 428.
St. Hep. 23i5, 23 Pac. 869. Tennessee.— ^oulhcrn Life Ins. Co.
Illinois. — People v. Commercial v. Hooker, 9 Heisk. (Tenn.) ()06, 24
Life Ins. Co. 247 111. 92, 93 N. E. Am. Rep. 344; Equitable Ins. Cc v.
yO- McCrea, 8 Lea (Term.) 541.
Louisiana. — Latoix v. Germania Yirrfinia. — Wytheville Insurance &
Ins. Co. 27 La. Ann. 113.
Joyce Ins. Vol. L — 19. 289
§ 79 JOYCE OX INSURANCE
the company cannot, under such circumstances, cancel the policy
for nonpayment without first putting the insured in default by
some act, such as a new demand.^ But the mere nonpayment of
the premium on demand, does not of itself destroy the policy where
the company fails to give notice of its election to rescind the con-
tract.^ Again a local insurance agent who has power to extend cred-
it upon the premium, and who represents the full power of the
company to make binding contracts of insurance by countersign-
ing and delivering policies, and who countersigns and delivers a
policy unconditionally as a completed contract under a specific
agreement for the payment of the premium at a future date there-
by waives, to the full extent to which the company could then have
waived, the actual payment of the premium as a condition prece-
dent to its liability on the policy.''' A certificate of life insurance is
also presumed to have been delivered on the day of its date, althpugh
this presumption may be overcome, and even though the applica-
tion provides for prepayment of the first premium such provision
can be waived and this is so even if the certificate so provides and
the delivery of the certificate without prepayment may constitute
a waiver, or raise the presumption of a waiver or that credit was
given.* Again, a provision in a policy of insurance stipulating that
the policy shall be void unless payment of the premium shall be
made to the secretary, or an agent of the insurer duly appointed as
such in writing, is intended to protect the insurer against default
on the part of mere solicitors for insurance from the insured, but
not to make the latter answerable for the default of the insurer's
agents; and if the insurer, either expressly or by acts warranting
the injiplication, in fact appoints an agent to deliver a policy and
collect the premium, the receipt of the money by such agent is the
receipt by the insurer, and, operates as a waiver of such condition
in the policy, although the insurer does not in fact receive the pre-
mium.^ It is held that the delivery of a policy does not operate as
a waiver of prepayment where the policy provides that it shall not
Banking Co. v. Teiger, 90 Va. 277, ^ Washoe Tool Manufacturing Co.
18 S. E. 195. V. Hibernia Fire Ins. Co. 7 Hun (N.
West Virginia. — Eagan v. ^tna Y.) 74.
Fire & Marine Ins. Co. 10 W. Va. ' Famum v. Phoenix Ins. Co. 83
583. Cal. 246, 17 Am. St. Rep. 233, 23
As to effect of delivery of policy Pac. 869. See Slobodisky v. Phenix
before payment of first premium con- Ins. Co. 53 Neb. 816, 74 N. W. 270.
trary to conditions, see note 20 L. ed * Hoover v. Bankei's Life Assoc.
398. See also note 107 Am. St. Rep. 155 Iowa, 322, 136 N. W. 117.
136, 137. ^ Arthurholt v. Susquehanna Mu-
5 Latoix V. Germania Ins. Co. 27 tual Fire Ins. Co. 159 Pa. St. 1, 39
La. Ann. 113. Am. St. Rep. 659, 28 Atl. 197.
290
COMPLETION OF CONTRACT § 80
be binding until the premium is paid, and that waiver must be in
writing. In such case the agent cannot waive such condition preced-
ent,^" and although a condition as to prepayment of premium may
be waived by the general agent, by delivering the policy without
exacting payment, there is no such waiver when the agent merely
leaves the policy for examination and requires the party, if he con-
cludes to accept it, to prepay the premium, in accordance with the
condition. ^^ It is also held that when an application for life insur-
ance, signed by the applicant, provides that the policy shall not take
effect until the first premium is paid in full, and the policy, as is-
sued, declares that no agent has power to extend the time for paying
the premium or to waive any forfeitures, and that these powers can
be exercised only by the pre^^ident or secretary or one of the vice-
presidents and will not be delegated, and that no provision in the
policy can be waived or modified except by such officers by indorse-
ment on the policy, a general agent whose appointment specifies
that he has no authority to make, alter, or destroy any contract, to
waive any forfeiture or to receive any moneys except on policies or
renewals signed by the president, secretary, or manager of the or-
dinary branch, has no power to waive the payment of the first pre-
mium, and the delivery of a policy by him without such payment
is ineffective. ^2
§ 80. Prepayment: credit may be given. — An insurance may be
binding without actual prepayment of the premium by an agree-
ment by the company to give credit therefor ; ^^ and it is held that
if the charter of an insurance company be wholly silent as to the
power of the corporation to give credit for premiums and to take
notes in payment, such a power necessarily results from its power
to make insurances and to enable it to advantageously conduct its
bilsiness.^* If a poUcy is delivered on an agreement for future pay-
ment of the premium it becomes effective immediately, although
the premium is not paid.^* And credit will be presumed to have
been given if the policy is delivered without prepayment,!^ since
an unconditional delivery in such case raises a presumption that
loPottsville Mutual Fire Ins. Co. 423; Mississippi Valley Ins. Co. v.
V. Minnequa Springs Improvement Dunklee, 16 Kan. 158.
Co. 100 Pa. St. 137. ^^ Mclntyre v. Preston, 5 Gilm.
"Wood V. Poughkeepsie Mutual (111.) 48.
Ins. Co. 32 N. Y. 619. ^^ Dailey v. Preferred ^Masonie Mu-
12 Russell V. Prudential Ins. Co. lual Accident Assoc. 102 Mich. 289,
176 N. Y. 178, 98 Am. St. Rep. 656, 26 L.R.A. 171, 57 N. W. 184, 60 N.
68 N. E. 252. W. 694.
13 Franklin Fire Ins. Co. v. Colt, ^^ Kollitz v. Equitable Mutual Fire
20 Wall. (87 U. S.) 560, 22 L. ed. Ins. Co. 92 Minn. 234, 99 N. W. 892.
291
§ 80
JOYCE ON INSURANCE
credit was given. ^'^ So tliei-e may be a presumption that credit was
given for the difference between the ca^li payment and the full
amount of the pieniium.^^
An agent authorized to insure may give credit, ^^ where it is not
a, condition precedent that tlie iirst premium should be paid at the
time tlie policy is delivered.^o although a general agent, even though
in violation of the rules and regulations of his principal, may give
credit for premiums.^ And an agent autliorized to make fire insur-
ance contracts and issue policies, has authority to waive cash pay-
ment of premiums and give credit, or time, for their payment, un-
less the insured has notice of restrictions upon his authority, and
such waiver may be express or implied.^ So an agent may give
credit where the policy provides that the insurance shall not be
binding until the actual payment of the premium.^ And insured
is not bound to take notice of conditions in the policy, that the
premium must be actually paid, nor that the waiver of condition
must be indorsed in writing on the policy, when it is executed and
delivered to him as a valid and completed contract by an agent hav-
ing authority to countersign it, and who, before or at the time of
delivery of it, has given the insured a credit upon the premium up-
on parol. If a loss occurs, in such case, before the credit expires,
^' Washburn v. United States Casu- North Carolina. — Pender v. North
aity Co. 108 Me. 429, 81 Atl. 575. State Mutual Life Ins. Co. 163 N.
• "Northwestern Life Assur. Co. v. Car. 98, 79 S. E. 293.
Scluilz, 94 111. App. 156. South Carolina. — Cauthen v. Hart-
^^ United States. — Franklin Fire ford Life Ins. Co. 80 S. Car. 264,
Ins. Co. V. Colt, 20 Wall. (87 U. S.) 61 S. E. 428.
560, 22 L. ed. 423. (Agent with au- Tennessee. — Gordon v. United
thority to take and approve risks and States Casualty Co. — Tenn. Ch.
to insure) : Ball & Sage Wagon Co. App. — , 34 S. 'W. 98.
V. Aurora Fire & Marine Ins. Co. 20 ^° Marysville Mercantile Co. Ltd. v.
Fed. 232. (Agent had "full power to Home Fire Ins. Co. 21 Idaho, 377,
receive proposals for insurance, to 121 Pac. 376. See §§ 70, 71, 76
receive moneys, and to countersign, et seq. herein.
issue, and renew policies of insur- ^ State Mutual Fire Ins. Co. v.
anee of the company, subject to such Taylor (1913) — Tex. Civ. App. — ,
rules, and regulations as are or may 157 S. W. !)50.
be adopted by the company, and such ^ Newark Machine Co. v. Kentou
instructions as may from time to time Ins. Co. 50 Ohio St. 549, 22 L.R.A.
bo given by the manager of the com- 768n, 35 N. E. 1060.
pany at Cincinnati.") ^O'Brien v. Union Mutual Ins. Co.
Idaho. — Marvsville Mercantile Co. 22 Fed. 566 (general agent) ; Day-
Ltd. V. Home Fire Ins. Co. 21 Idaho, ton Ins. Co. v. Kellv, 24 Ohio St. 345,
377, 121 Pac. 376. 15 Am. Kep. 612. See Hewitt v.
Minnesota. — Kilborn v. Prudential American Union Life Ins. Co. 34
Ins. Co. 99 Minn. 176, 108 N. W. Misc. 738, 70 N. Y. Supp. 1012, rev'd
861. 73 N. Y. Supp. 105, 66 App. Div. 80.
Nebraska. — Union Life Ins. Co. v.
Raman, 54 Neb. 599, 74 N. W. 1090.
292
COMPLETION OF CON TK ACT § 80a
the comjiany i.* bound, nolwilhslaiifling tlie asTeciiient for credit
was iiol iiulor.-ed upon the pohcy. The limitation upon the power
of tlie auent to waive such condition apphes only after the ])olicy
has been delivered as an executed contract.* Again, provisions in
a policy of insurance that the risk shall not attach unless the pre-
nhuni has been actually paid are waived where the policy is deliv-
ered on an agreement to extend credit, and the insurer does not
take advantage of such provisions, but treats the ])olicy as in force.^
The agent may agree to be himself responsible for the premium.^
In a. Louisiana case the agent was requested to send the bill for the
premium to the treasurer of the insured society for payment and he
replied, "That's all right,". and called several times, but did not lind
the party, and the contract was held to be complete.'' If an agent
with no authority to give credit delivers a policy before the pre-
mium is paid, but accounts therefor to the company, it is bound.'
And an agreement to pay the premium is suflicient although the
property is destroyed before the delivery of the policy.^
Credit may be given for a portion of the premium,^" and the giv-
ing of any credit on the payment of premium by an authorized
agent of tJie company is a waiver of actual payment as a condition
precedent to its liability ; and the only remedy of the company after
the term of credit has expired, is to rescind or cancel the policy for
nonpayment within the term, upon personal notice to the in-
sured.^^ Again, insurer's agent may accept payment of the pre-
mium in instalments.^^
§ 80a. Same subject: promissory notes, checks, and drafts. —
Insurer's agent may accept the promissory notes of the applicant. ^^
And, although one of the conditions of an insurance policy is that
it "shall not be valid or l>inding until the first premium is paid,"
*rarnum v. Phoenix Ins. Co. 83 " Farnum v. Plurnix Ins. Co, 83
Cab 246, 17 Am. St. Rep. 2:53. Cal. 246, 17 Am. St. Rep. 233.
* German Ins. Co. v. Sluuler, 68 ^^ Mulligan v. Metropolitan life
Neb. 1, 60 L.R.A. 918, 93 N. W. 972. Ins. Co. 149 111. App. 516.
^ Mississippi Valley Life Ins. Co. ^^ Mississipjii Vallev Life Ins. Co.
V. Neyland, 9 Bush (Ky.) 430. See v. Neyland, 9 Bush (Ky.) 430. Gen-
Sheldon v. Connecticut Mntual Life oral agent with power to solicit ap-
Ins. Co. 25 Conn. 207, 65 Am. Dee. plications and receive Hrst premiums:
565 (noted under § 80a herein). Kelly v. St. Louis Mutual Life Ins.
■^La Societe v. Morris, 24 La. Ann. Co. 3 Mo. App. 554. See §§ 1202
347. et seq. herein.
* Agricultural Ins. Co. v. Mon- See also the following cases:
tague, 38 Mich. 548, 31 Am. Rep. United States. — Commercial ]\Iu-
326 tual Marine Ins. Co. v. Union Mut.
^Fitton V. Fire Ins. Assn. 20 Fed. Ins. Co. 19 How. (60 U. S.) 318. 15
76(). L. ed. 636; Hodgson v. Marine Ins.
10 Trustees First Baptist Church v. Co. 5 Cranch (9 U. S.) 100, 3 L. ed.
Rrooklvn Ins. Co. 28 N. Y. 153. See 48; Robinson .v. Cnion Cent. Life Ins.
§ 74 herein. Co. 144 Fed. KMK'), rev'd 8 L.H.A.
293
§ 80a JOYCE ON INSURANCE
if it is silent as to the mode of payment, promissory notes received
by the company, even in the absence of any express agreement,
must be deemed to have been accepted as payment of the premium.
The poh'cy is binding and is a vahd consideration for the notes. ^*
So the agent may agree to liold liimself accountable to the company
for the cash payment, and that a note should be given by the ap-
plicant for the balance of the premium at some future time, and
that the insurance should take effect when the proposals were ac-
cepted.^* And payment may be made partly in cash and partly in
notes, as where a life insurance policy was issued to plaintiff's de-
cedent expressed to be made in consideration of a premium already
(
(N.S.) 883, 148 Fed. 358, 78 C. C. A. Neio Torfc.— Buckley v. Citizens
268. Compare Pennsylvania Casual- Ins. Co. 188 N. Y. 399, 13 L.l^A.
ty Co. y. Bacon, 133 Fed. 907, 67 (N.S.) 889, 81 N. E. 165; Stewart.
C. C. A. 497; Miller v. Northwestern v. Union Mutual Life Ins. Co. 155
Mutrual Life Ins. Co. Ill Fed. 465, N. Y. 257, 42 L.R.A. 147, 49 N. E.
49 C. C. A. 330; Mutual Life Ins. 876; McGee y. Felter, 135 N. Y.
Co. y. Loe:an, 87 Fed. 637, 57 U. S. Supp. 267, 75 Misc. 349; looker v.
App. 18, 31 C. (-. A. 172. Security Trust Co. 49 N. Y. Supp.
Alabama. — Lehman v. Gunn, 124 814, 26 App. Di\ . 372.
Ala. 213, 82 Am. St. Rep. 59, 51 Oklahoma. — Arkansas Ins. Co. v.
L.R.A. 112, 27 So. 475. Compare Cox, 21 Okla. 873, 20 L.R.A. (N.S.)
Batson v. Fidelity Mutual Life Ins. 421, 129 Am. St. Rep. 808, 98 Pac.
Co. 155 Ala. 265, 130 Am. St. Rep. 552.
21, 46 So. 578. South Dakota.— ^ohle v. Kansas
Caiifornia.—GrUnth v. New York City Life Ins. Co. 33 S. Dak. 458,
Life Ins. Co. 101 Cal. 627; 40 Am. 146 S. W. 606.
St. Rep. 96, 36 Pac. 113. Texas. — Provident Savings Life
Colorado. — Rosenberg v. Johnson, Assur. Soc. y. Oliver, 22 Tex. Civ.
45 Colo. 53, 99 Pac. 315. App. 8, 53 S. W. 594. See Hudson
Georrji a. —Bi\)\) v. Fidelitv Mu- v. Compere, 94 Tex. 449, 61 S. W.
ti;al Life Ins. Co. 128 Ga. 491, 12 389.
L.R.A. (N.S.) 319, 57 S. E. 892. Utah.— Thnm v. Wolsteuholme, 21
7//mo/.s.— Devine v. Federal Life Utah, 446, 61 Pac. 537, 29 Ins. L. J.
Ins. Co. 250 111. 203, 95 N. E. 174, 669.
40 Ins. L. J. 1513: INIutual Life Ins. Vermont. — Porter y. Mutual Life
Co. v. Allen, 113 111. App. 80, atf'd Ins. Co. 70 Vt. 504, 41 Atl. 970.
212 111. 134. 72 N. E. 200. On promissory note as payment of
loua. — Kinibro y. New York Life insurance premium, see note in 5 B.
Ins. Co. 134 Iowa, 84, 12 L.R.A. R. C. 365. On commercial paper as
(N.S.) 421. 108 N. ^Y. 1025. such payment, .see note in 35 L.R.A.
A'e«i?/rfev.— National Life Ins. Co. (N.S.) 84.
V. Tweddeil, 22 Ky. L. R. 881, 58 S. i* Union Central Life Ins. Co. y.
W. 699. . Taggart, 55 Minn. 95, 43 Am. St.
Minnesota. — Kilborn v. Prudential Rep. 474, 56 N. \V. 579. But com-
Ins. Co. 99 Minn. 176, 108 N. W. 861. pare Dunham v. Morse. 158 Mass.
Missouri.— J acohii v. Omaha Life 132, 35 Am. St. Rep. 473, 32 N. E.
As.soc. 146 Mo. 523, 48 S. W. 462, 1116.
142 Mo. 49, 43 S. W. 375. See ^^ <mipij,^,^ ^ Connecticut Mutual
Moonev v. Home Ins. Co. 80 Mo. Life Ins. Co. 25 Conn. 207, 65 Am.
App. i92, 2 Mo. App. Rep. 524. Dec. 565.
294
1
COMPLETION OF CONTRACT § 80a
paid, and of a like sum to be aniuially paid during the continuance
of the. policy, and providing that the policy should not take effect
until the premium was paid, and that the policy should be forfeited
''in case any premium due upon this policy shall not be paid at the
day when payable." The first premium Avas paid partly in cash
and partly in promissory notes, but the notes were not paid and the
insured died. It was held that the policy had taken effect and that
the nonpayment of notes did not bar plaintiff's recovery, because
the "forfeiture" clause referred to premiums after the first.^^ So
payment in cash may be waived and a promissory note or other evi-
dence of indebtedness may be accepted in lieu thereof and a prom-
issory note, payable to his own order, given by an applicant to-
gether with cash for the first premium to an agent of the company
is sufficient, even though non-negotiable under the statute, such
instruments being enforceable in the hands of a purchaser or as-
signee." Again, where the agents of an insurance company, act-
ing for themselves, advance the money for the premium to the com-
pany, and take the note of the insured for the amount as their own
and negotiate it, the company cannot dispute its liability on the
ground that the premium has not been actually paid.^^ And credit
for the first premium may be given by the soliciting agent by tak-
ing a note therefor, according to the usual method of transacting
business, and indorsing it over to the general state agent instructing
him to charge the net sum due the company from such premiums
to such soliciting agent's account, the latter being thereby still liable
to the company for the net premium. ^^
A check may also be given and accepted as payment, as where in-
surer's agent instructs the applicant to send him "his .check for the
premium and the business is concluded" and it is sent.^° If credit
i« McAllister v. New England Mu- 689, 691, 2 C. C. A. 459, 4(31 ; Ken-
tual Ins. Co. 101 Mass. 558, 3 Am. dalls Admr. v. Pacific Mutual Life
Rep. 404. Ins. Co. 51 Fed. 689, 691, 2 C. C. A.
" Unterhamscheidt v. Missouri 459, 461, 10 U. S. App. 256.
State Life Ins. Co. 160 Iowa, 223, 45 Alaha ma. —Home Protection v.
L.R.A.(N.S.) 743, 138 N. W. 459. Avery, 85 Ala. 348, 351, 7 Am. St.
18 Home Ins. Co. v. Curtis, 32 Rep. 54, 5 So. 143.
Mich. 402. Indiana. — Home Ins. Co. v. Gil-
On giving of note as a transaction man, 112 Ind. 7, 13, 13 N. E. 118.
witli tlie agent personally, see note in Louisiana. — Trager v. Louisiana
5 B. R. C. 436. Equital)le L. Ins. Co. 31 La. Ann. 239.
19 Mutual Life Ins. Co. v. Reid, 21 il/ar/y/a/id.— Mallctte v. British
Colo. A]))). 143, 121 Pac. 132. American Assur. Co. 91 Md. 471,
20 Tavloe v. Merchants' Fire Ins. 483, 46 Atl. 1005.
Co. 9 ilow. (50 U. S.) 390, 13 L. ]l/«s.sac/iM«e//.s.— White v. Connee-
ed. 187. ticut Fire Ins. ('o. 120 Mass. 333.
Cited in United States.— V-Aine v. H^orth CaroUnu. — HoUowell v. Life
Pacific Mutual Life Ins. Co. 51 Fed. Ins. Co. 126 N. Car. 398, 404, 35 S.
295
§§ 81, 82 JOYCE OX INSURANCE
is given and a draft is drawn by the insurer and accepted by in-
sured, but. at tlie time tlie property was destroyed by fire, it was un-
paid, such non-payment constitutes no defense even though the ap-
pHcation stipuL^ited that "if the premium is not i)aid as herein
agreed the insurance shall be void until such settlement is made." ^
It may be a question for the jury whether the general agent has
waived the cash payment of the j^'einium ; ^ al.«o whether or not
credit has been given and accepted,^ or whether an agent had au-
thority to give credit and waive a cash payment.* And whether
credit ha.s been given may be shown by direct proof or inferred from
surrounding circumstances, as by the production of the policy at
the trial : ^ and the agent's authority may be evidenced by issuing
a policy upon an application which recites that the agent has been
paid the premium.®
§ 81. Prepayment: mutual credits: application on agent's
debt. — Where there are mutual credits between the parties, and an
authorized agent of the company is indebted to the applicant, the
parties may agree that the amount of the premium may be charged
or credited, as the case may be, subject to settlement of accounts,
and this will constitute a valid prepayment of the premium and be
binding upon the company.'''
§ 82. Where there are mutual credits. — AVhere the insurer and
insured had mutual credits and struck a balance monthly, this is
in efl'ect a payment,* and where an application had been sent by
plaintiff's agent to defendant's agent, who agreed to take two thirds
the ri.-^k, and the amount, duration, and premium were agreed up-
on, and the two agents had running accounts with each other and
E. 616. See Miller v. Northwestern v. Surety Trust & Life Ins. Co. 60
Mutual Life Ins. Co. Ill Fed. 465, N. Y. Siipp. 189, .58 App. Div. 602.
49 C. C. A. .330, where cheek was * S]ol)odisky v. Phenix Ins. Co. 53
given but held that no contract was Neb. 816, 74 N. W. "270.
made under the cirouuistances. * Pender v. North State Mutual
On check or draft as pa,>-ment of Life Ins. Co. 163 N. Car. 98, 79 S. E,
insurance premium, see note in 293.
L.R.A.1916A, 674. ^ poj.ter v. Mutual Life Ins. Co.
1 Bell V. Hudson Bay Ins. Co. 44 70 Vt. 504, 41 Atl. 970.
Can. Sup. Ct. 419, 21 Am. & Eng. "^ Marsh v. Northwestern National
Ann. Cas. 788. Compare London & Ins. Co. 3 Biss. (U. S. C. C.) 351,
Lancashire Life Assur. Co. v. Flem- Fed. Cas. No. 9118. See cases in
ing, App. Cas. [1897] Law Rep. 499. following sections.
2 Cauthen v. Hartford Life Ins. Charging premium to agent person-
Co. 80 S. Car. 264, (il S. E. 428. ally by company, and agent credits
^ Untcrharnscheidt v. Missouri insured as payment : Wvtheville In-
State Life Ins. Co. 160 Iowa, 223, .surance & Banking Co. v. Teiger, 90
45 L.R.A.(N.S.) 743, 138 N. W. 459; Va. 277, 18 S. E. 1!)5.
Slol)odiskv V. Phenix Ins. Co. 53 * ^Mai'sh v. Northwestern National
Neb. 816," 74 N. W. 270; Manson v. Ins. Co. 3 Biss. (U. S. C. C.j 351,
Metropolitan Surety Co. 112 N. Y. Fed. Cas. No. 9118.
Supp. 886, 128 App. Div. 577; Cross
296
COMPLETION OF CONTRACT § 83
r^ettled nioiitlily. the court lield that there was evidence for ihe jury
of a contract of insurance, which hegan immediately:^ and where
the parties had mutual accounts and their course of dealing was to
give credit for premiums due to each, and to give receipts as for
cash and to balance accounts from time to time, and the plaintiff
was given a receipt for his premium, such ]M-emiuni is paid when
the recei})ts are given. ^°
§ 83. Crediting premium on agent's indebtedness to applicant. —
When an insurance agent, who has authority to issue policies of
insurance, i.ssues and delivers a policy upon a building therein de-
scribed, and agrees with the assured to deduct the premium out of
money then in his possession belonging to the assured, and apply
it on the payment of the premium, such an agreement is a receipt
of the premium, and the company issuing the policy will be bound
thereby; " but if the agent has money of the assured in his posses-
sion and has agreed to pay the premium out of the same, and the
company has no knowledge thereof, it may upon nonpayment of
the ])remium. and upon due notice, cancel the policy. ^^ Whore an
insurance agent enters into a contract to insure property, crediting
the premium on an account whicii the agent owed the insured, the
contract is binding on the company ;^^ and where money is ad-
vanced by a subagent to the general agent to be debited against pre-
miums collected by the former, and he applies for insurance, the
advancement to the general agent will be considered a payment of
the premium.^* And if the agent pays the insurer eacii luonth set-
tling with it for the amount due on premiums collected, it is im-
material that insured settled with the agent by crediting him \\i11i
the amomit of tlie premium on an accounr due assured from such
agent." ]n Wooddy v. Old Dominion Insurance Conipany ^^ an
8 Sanborn v. Firemen's Ins. Co. 1(5 Co. 155 N. Car. 330, Ann. Cas. 1912C
Gray (82 Mass.) 448, 77 Am. Dec. 362, 71 S. E. 434, 40 Ins. L. J. 158(i.
419. On whether existence of indebted-
1° Prince of Wales Life Assur. Co. ness froin insurer to insured in an
V. Harding, El. B. & E. 183, 4 Jur. amount suflHcient to pay ]jremuim or
(NS ) 851 '?7 L J O B. 297. a.ssessmenl will prevent forteiture of
.1 ' ~ ^ ' a ■ policy for nonijavment of premium.
On payment or insurance pre- ^ ■ oo { l> * , v y \ Sn i
,^ •' , ,. p ,. ^- .see note in 23 lj.n.A.( N.r>.) .5U4.
niuim by cancelation of agents m- u Thompson v. American Tontine
debtedness, sec note m L.R.A.1915A, ^.^^ ^ ^^^, ^^^^ ^^ ^g j^, Y. 647,
686. ^.^^
" PhoPnix Ins^ Co. Meier, 28 Neb. 15 Herring v. American Ins. Co.
124, 44 N. W. 9/. 123 Iowa 533. 99 N. W. 139. 33 Ins.
12 Merchants & Manufactnrers Mil- L. J. 558. The court said: "While
tual Ins. Co. v. Baker, 4 Neb. 384, it is true as a general proposition,
94 N. W. 627. Ihat an agent may not accept prop-
13 Western Assur. Co. v. ]\rcAlpin, erty in beu of cash for the premium,
23 Ind. App. 220, 77 Am. St. Hep. without express authority to do so, it
423, 55 K. E. 119. But compare is equally as true that, when he ac-
Gazzam v. German Union Fire Ins. tuallv pays the premium in cash to
297
§ 84 ■ JOYCE UX l.XSUKAX'CE
agent aulliorized to fill up and deliver policies entered into mi agree-
ment for insurance with an applicant who tendered the premium
to the agent; but the latter, who resided in the house insured, and
who owed the former for rent, said he would apply tlie i)remium
toward the rent, and this was held a valid payment of the premium.
But in the absence of an actual or apparent right of an agent to
contract for livery service in lieu of cash for the premium the in-
surer is not estopped to claim its nonapproval of the application,
by reason of the nonpayment by the agent for such livery hire."
Again, a policy delivered by an agent without exacting payment
of the premium under an agTcement between him and the assured
that the agent would accept as payment his own indebtedness for
meat, and take meat for the balance, is void, where the policy con-
tains a condition requiring all premiums to be paid at the home
office, but provides that payments will be accepted if paid to the
agent in exchange for a receipt signed by the president or secretary
and countersigned by the agent and that the policy shall not take
effect unless the first premium is paid while the assured is in good
health. 18
§ 84. Prepayment: course of dealings: allowing credit. — Stipu-
lations making a prepayment of the premium a condition prece-
dent to the attachment of the risk are in some cases governed by
the usual course of dealing between the parties to the contract, or
between the principal and agent or insurance broker. So an agent
authorized to take risks and insure may be also authorized by gen-
eral usage to give credit.^^ And evidence that an insurance com-
pany sued has often extended time to others and to the insured for
the insurer, it ends the matter so far ter Fire Jns. Co. v. Plato, 22 Ohio
as the insurer is concerned." Cir. Ct. Rep. 35.
16 31 Gratt. (Va.) 362, 31Am.Rep. Te.ras.— Provident Savings Life
'32. Assur. Soe. v. Oliver, 22 Tex. Civ.
I'^Winehell v. Iowa State Ins. Co. ^pi) 8 53 S W 594
103 Iowa 189, 72 N. W 503. VermonL-^orXer i Mutual Life
^, ' \r'rf^ a^ ^A ci'f p^"'-c5r- Ins. Co. 70 Vt. 504, 41 Atl. 570.
113 Wis. 114, 90 Am. St. Rep. 84b, ^. . . ^.n -J ^ r, ^r
57 L.R.A. 455, 88 N. W. 1013. „"'^'"'"';ToH^.^ ^^al\^^-:.a V' ^- J '
" United States.— ¥vvin\^\\n Fire gairston J08 Va. 832,_128 Am. St.
Ins. Co. v. Colt, 20 Wall. (87 U. S.) ^^^P- -^^'-^^ ^'- &• ^- ^^^'■
560, 22 L. ed. 423. Franklin Fire Ins. Co. v. Colt
New York. — Boiee v. Thames, & {above cited) is cited in:
jMersey Marine Ins. Co. 38 Hun (N. United States.— 1^ or d-Beutscher
Y ) 246 Llovd v. Ins. Co. of North America,
'North Dakota.— MaCahe v. ^tna llO^Fed. 420, 429, 49 C. C. A. 1, 10;
Ins. Co. 9 N. Dak. 19, 47 L.R.A. 641, Jones v. JEtna Ins. Co. 7 Rep._645.
bl N. W. 426. 29 Ins. L. J. 138. 8 Ins. L. J. 416. Fed. Cas. No. /453,
Ofoio.— Newark Machine Co. v. 19 Alb. L. J. 522.
Kenton Ins. Co. 50 Ohio St. 549, 22 Arkansas.— American Employers'
L.R.A. 768, 35 N. E. 1060 ; Manches- Liability Ins. Co. v. Fordyce, 62 Ark.
298
I
COMPLETION OF CONTRACT § 84
the payiiiciit of premiums on other policies, that the policy in suit
was delivered without payment of premium or subsequent demand
therefor, and that the company accepted part of the premium due
when tendered, is sufficient to prove a waiver of a condition in the
policy exempting the company from liability miless the premium
is actually paid; and it cannot, after loss, urge as a defense that the
premium was not all paid.^" So the fact that the rate of premium
has not been paid or fixed will not prevent the commencement of
a valid contract of insurance where there is a generally understood
rate on that class of risks and the usual course of business between
the parties has been for the agent to collect the premiums at his
convenience after the issuance of the policies.^ In a Pennsylvania
case 2 the company issued and forwarded a policy to its agents after
notification given the plaintiff that a policy which was about to
terminate would be renewed unless he gave notice to the contrary.
It was a custom between the agent and the insured to give the latter
a credit for thirty days, and the premium in this instance was
charged to him by such agents, and a credit of thirty days given.
Before the expiration of that period, but after a fire, the insured
gave his check for the premium, which was retained for two weeks
without objection. In an action on the policy it was held to be a
question for the jury whether a contract existed. In Lungstrass v.
(lerman Insurance Company)^ the agent was accustomed to forward
his remittances to the company at the end of each month. He ap-
plied for insurance on his goods, and upon receipt of the policy he
made an entry of the amount chargeable against him for the pre-
mium in a book in which his accounts with the company were reg-
uUu-ly kept, and it was decided that he was not obliged to forward
the premium before the accustomed time, and that the company
56'^ 570 54 Am. St. Ren. 305, 36 Co. v. Richardson, 40 Neb, 1, 8, 58
S.W. 1051. N. W.597.
, ,. TT ^ T., . Pr. 1- nil New l.ork. — Merserau v. Plui'iiix
Induma. — ILonie Jus. to. ^ . Uil- i t --p t n «r xr v o--i
,,., I 1 - 11 iQ XT TT lie. Mutual Lite Ins. Co. bo N. Y. 2/4,
man, 112 Jud. (, 14, i.6 JN. h,. llo, m • ^r *. i t -^
Prudc-ntial Ins. Co. v. Sullivan, 27 2'8; Shear v. Phannx Mutual Life
Tnd. App. 30, 36, 59 N. E. 873; I^^- ^o- 4Hun (N. 1.) 801.
Western Assur. Co. v. Mc-Alpin, 23 " ^f ^ r "'''Tw vf ^^^ ^^V^'rJ
Ind. App. 220, 227, 77 Am. St. Rep. ^^^e Ins. Co. 40 W\ a. 508 51/, 52
423, 55 N. E. 110. '^''^, ^,\ ^^^P- ^\'' -^l S. E. 8o4^
' • T /-< ^i 2° Nebraska & Iowa Ins. Co. v.
Kansas.— Vhvomx Ins. Co. y. Mun- ei,i.igti,,„sen, 2!) Neb. 572, 26 Am. St.
ger, 49 Kan. 1/8, 196, 33 Am. St. j^ ^^-^ ^5 j^ y^^ g.,^^
Rep. 360, 30 Pac. 120; German Ins. 1 T^|i,.,,|gan Pipe Co. v. Miehi-an
Co. v. Amsbauo^h, 8 Kan. App. 19/, pj^.^ ^ Marine Ins. Co. 92 :\ri(-h. 482,
201, 55 Pac. 481. 20 L.R.A. 277, 52 N. W. 1070,
Mariiland. — Mailette v. British 2 f^^j^g y North British & Mercan-
Ameiican Ins, Co. 91 ]\Id, 471, 483, ^Wo Ins, Co. 137 Pa. St. 335, 21 Am,
46 Atl. 1005, St. Rep. 879, 20 Atl. 1014.
iVebrasfca.— Western Home Ins. 3 43 Mo. 201, 8 Am. Hep. 100.
299
§ 84 JOYCE ON INSURANCE
was liable. So in another case it was cieterinined tliat the com})any
might waive a condition providing that the premium should be
actually paid before the policy should attach, and if the course of
business between the company and one of its agents tended to show
tliat the company was accustomed to substitute the personal liabil-
ity of the agent fdr premiums received in the place of the security
whicli tlie suspension clause in the policy afforded, a nonsuit should
not be ordered, but the case should be submitted to the jury,'* and
the contract may be complete without pre])ayment where it is the
custom of the company to give the broker credit until the end of the
month.* So the first premium on a policy of insurance will, as be-
tween insurer and insured, be deemed to have been paid at the time
the general agents of the insurer extended credit therefor to the in-
sured, where such premium was charged to the agents in their ac-
count with the insurer pursuant to the general course of dealings
between them, which disregarded any arrangements the agents
might make with insured as to credit, notwithstanding that a note
covering the premium in question, given by the insured to the
agents did not mature until after an attempt had been made to can-
cel the policy, nor until after the destruction of the property, and
that, upon maturity, it was taken up by the agents from the bank
by which it had been discounted, and was still held by them at l!ic
time of the action on the policy, they having been credited in the
meantime in their account with the conjpany with the amount of
premium unearned at the time of the attempted cancelation.^ Tn
J.ebanon JMutual Insurance Company v. Hoover' it appeared thai
by the usual and established course of business between an agent
and tlie company the former was charged for the premiums received
by liim on all policies and renewal certificates obtained throu.gh
him. whether the insured paid the agent or not, and tliat he was
expected to render regular monthly statements and settle with the
company, and the assured was not expected to pay the agent in ad-
vance, but only on demand about a month after etfecting insurance.
It was held that a failure to pay the premium would not prevent a
recovery on the policy for a loss. And wlicre insur;nice brokers, on
delivery to them of a policy, are wilh their knowledge charged in
a general account with the ]jremium due on the policy, and they
make no objection, the comi)any i,< lia])le for the insurance money,
* Elkins V. Sus(|U(li;imia AJiitual ^ Biu-klov v. Citizens Ins. Co. 188
Fire Ins. Co. 113 Ph. St. :i86, (J Atl. N. Y. .39!), 13 L.R.A.(N.S.) 88!), 81
222. N. E. 165.
5 Rugfrles V. American Central Ins. '^ 113 Pa. St. 591; 8 Atl. 163.
Co. Ill N. Y. 418, 11 Am. St. Rep.
674.
300
COMPLETION OF CONTRACT § 84
notwithslandiiig the policy provides in terms that the insurance
company shall not \>p liable until the premium sliall be actually
paid, and that no .<!uch provision shall be construed as waived ex-
cejjt by some distinct act, such as a clear express asreeuient in-
dor.^^ed on the policy.* And although agents are forbidden by a
life insurance comi)any to take notes for first premiums, the taking
of a note will constitute a payment of the premium, where the cus-
tom is for the agent to take the note in his own name and charge
it to himself in his account with the company, being responsible
for its collection.^ But it is lield in New UamiJshire that the cus-
tom of the company to charge the advance premium to tlie agent
on is.«uing a policy is not a payment unless so understood between
the agent ancl the insured.^" So it may be show^n that by usage in
case of a parol agreement to insure, the premium is not due till de-
livery of the policy. ^^ But it is held, however, in a New ^'ork case
that evidence that the agent of an insurance company frequently
waived the condition of prepayment is not admissible to raise an
inference of waiver in the absence of other proof tendiug to estab-
lish it.^^ This decision does not, perhaps, conflict with the general
rule that, notwithstanding there may be a condition that the policy
shall not attach tillthe premium is actually paid, nevertheless the
insurer cannot successfully set up nonpayment, where the author-
ized agent of the company, by his accustomed and usual course of
.dealing with the a.ssured. induce.< him to rely upon the belief that
the condition of prepayment is waived." In Dinning v. Phoenix
Insurance Company " an alleged general custom among agents
and brokers to give credit for premiums was set up, but the court
8 Bang v. Farmville Ins. & Bank- shall on Ins. (ed. 1810) *292 et
ing Co. 1 Hughes (U. S. C. C.) 290, seq., where it is said that the rule that
Fed. Cas. No. 838. the underwriters give credit to the
9 Kimbro v. New York Life Ins. broker depends upon usage.
Co. 13-1 Iowa, 84, 12 L.R.A.(N.S.) "Baxter v. Massasoit Ins. Co, 13
421, 108 N. W. 102.!). Allen (f)5 Mass.) 320.
10 Brown v. Massachusetts Mutual ^^ ^y^od v. Poughkeepsie Mutual
Life Ins. Co. 59 N. H. 298, 47 Aju. Ins. Co. 32 N. Y. 619.
Ken. 205. " S^'e Tenant v. Travelers' Ins. Co.
In England, the negotiations are 31 Fed. 322; Yonge v. lM|uitablo
generally carried on through a broker, Life Ins. Co. 30 Fed. 902; Fraukle
and the "premium is due from assured v. Pennsylvania Fire Ins. Co. 9 Fed.
to the broker and from him to the 70(i. 12 Ins. L. J. _614; Home Life
company: 1 Phillips on Ins. (3d ed.) Ins. Co. v. Pierce, /5 111. 42(5; New-
274, .sec. 507, clfitnf Fouke v. Pen- ark Machine Co. v. Kenton Ins. Co.
sack, 2 Lev. 153, and other cases; 50 Ohio St. 549, 22 L.R.A. /(i8ii, 35
Grove v. Dubois, 1 Term Rep. 112; N. E. 1063 (considered under ?i 78
Edgar v. Fowler, 3 East, 222; De herein); Helme v. Philadelphia Life
Gaminde v. Pigou, 4 Taunt. 240; Ins. Co. 01 Pa. St. 10/, 100 Am.
Parker v. Smith, 16 East, :i82, and Dec. 621.
several other cases. See also 1 Mar- ^^ 68 111. 414, 3 Ins. L. J. 677.
301
§ 85
JOYCE OX INSURANCE
iound that there was nothing in the coin-.<c of dealings hctween the
parties to sustain such a claim or warrant any implied waiver of
prepayment, and this is on a line with the decision in the New York
case above noted. ^* And in connection with these cases we do not
believe that a mere custom to give credit to others will be sufficient
to hold the company in the absence of other proof, such as a cus-
tom to give the applicant credit.^®
§ 85. Prepayment of premium: evidence of waiver. — Delivery of
the policy without prepayment of the premium is prima facie evi-
dence of waiver," and such waiver may be shown by parol.^^ So
parol evidence is admissible to show that the agent verbally agreed
that a policy of insurance should take effect immediately upon the
approval of the application, and that the premium note might be
made and the cash premium paid at some future time, at the con-
venience of the parties; provided that such agreement was made
known to and acquiesced in by the defendants. ^^ Although evidence
is admissible to prove whether the delivery was conditional or ab-
.solute, yet when a husband, acting as agent for his wife, procures
a policy of insurance on his own life in the name and for the ben-
efit of the wife, his subsequent declarations that the policy was de-
livered conditionally are not admissible as against the wife.^**
^^ Wood V. Poughkeepsie Mutual
Ins. Co. 32 N. Y. 619.
^^ See 1 Wood on Fire Ins. (2d
ed.) 68, who says: "But so far as
evidence of the practice of the agent
to give credit to others is concerned,
it is hardly believed that evidence
thereof can establish a waiver, and
that it is inadmissible to establish a
waiver unless connected with other
^■rnof to establish it." Citing the
following cases:
United States. — Marsh v. North-
western National Ins. Co. 3 Biss. (U.
S. C. C.) S51, Fed. Cas. No. 9118.
Illinois. — Teutonia Ins. Co. v. An-
derson, 77 111. 382; Teutonia Ins. Co.
V. Mueller, 77 111. 22 ; Provident Life
In5;. Co. V. Fennell, 49 111. 180; Illi-
nois Cent. Ins. Co. v. Wolf, 37 111.
354, 87 Am. Dec. 251.
Louisiana. — Michael v. Mutual Ins.
Co. 10 La. Ann. 737.
MassacJi nsetts. — Hemmingway v.
Bradford, 14 Mass. 121.
New York. — Baker v. Union Mu-
tual Life Ins. Co. 43 N. Y. 283:
Sheldon v. Atlantic Fu-e Ins. Co. 26
N. Y. 460, 84 Am. Dec. 231; New
30
Y^ork Cent. Ins. Co. v. National
Prot. Ins. Co. 20 Barb. (N. Y.) 468;
Bamum v. Childs, 1 Sand. (N. Y.)
52; Goit v. National Protection Ins.
Co. 25 Barb. (N. Y.) 189.
'Ohio. — Madison Ins. Co. v. Fcl-
lowes, 1 Disn. (Ohio) 217.
Wisconsin. — Troy Fire Ins. Co. v.
Carpenter, 4 Wis. 20.
^"^ Wood v. Poughkeepsie Ins. Co.
52 N. Y. 619. See Washoe Tool
Manufacturing Co. v. Hibernia Fire
Ins. Co. 66 N. Y. 613; Church v.
Lafayette Fire Ins. Co. 66 N. Y.
222. Examine § 75 herein,
^^ Pino v. Merchants' Ins. Co. 19
La. Ann. 214, 92 Am. Dec. 529.
On the parol evidence rule as to
varying or contradicting written con-
tracts as affected by the doctrine of
waiver or estoppel as applied to pol-
icies of insurance, see note in 16
L.R.A.(N.S.) 1165.
^^ Sheldon v. Connecticut Mutual
Life Ins. Co. 25 Conn. 207, 65 Am.
Dec. 565.
2" Southern Life Ins. Co. v.
Booker, 9 Heisk. (Tenn.) 606, 24
Am. Kep. 344, Emerigon (Emerigon
o
COMPLETION OF CONTRACT § 86
§ 86. Effect of receipt in policy for premium. — In this country
the effect of an acknowledgment of the receipt of the premiinn in
a policy of insurance which has been delivered to the assured has
been the subject of much discussion. It is held in an Indiana case
that if an agent delivers a policy which acknowledges that the pre-
mium has been paid, this concludes the company, in the absence
of fraud or mistake, from subsequently assailing the policy on ac-
count of failure to pay the premium.^ In a New York case the fact
that the assured had possession of the policy which provided for
payment of a specified sum in advance as a part of the consid'era-
tion, was held no evidence of payment of the first premium.^ Un-
der another decision in that state, if a policy acknowledges receipt
of the fh'st premium which had not been paid, said first payment be-
ing the consideration, and the circumstances disclose no promise to
pay, no obligation or liability on the part of the insurer or insured
exists.^ Under an Iowa decision when a fire insurance policy ac-
knowledges the receipt of the payment of a premium which in fact
has not been paid, the fact that the policy is made out and sent to
the insured on his express promise to remit the premium does not
estop the insurer from denying its validity for nonpayment of the
premium, as against a mortgagee of the assured to whom the loss
is made payable, although he received the policy from the assured
without notice of the nonpayment of such premium.* But under a
later decision in that slate, where there was a recital of the payment
on Ins. [Meredith's ed.] 1850, c. the premium, and the premium be-
jii., see. 6, p. 69), says: "If the pol- comes due from the latter to the for-
icy imports that the premium has mer. The broker generally credits
been received, there is novation, the assured with the premium; there-
1 hough the payment has not been ef- fore, the acknowledgment of its re-
feetive, and the sum was passed into ceipt in the policy in England stands
account current. It becomes, then, on a different basis than in the Unit-
an ordinary and purely chirographic ed States, where the liability, as a
debt." "Novation" defined in note iiile, is from tlie assured to the un-
f, id. p. 68. He then notes an old derwriter. In England, the assured
custom whereby the ciause, "received is estopped by the receipt : See chap-
the premium," was witlulrawn from ter on Agencj'.
the pohcy; the brokers held them- ^ Home Ins. Co. v. Gilman, 112
selves as debtors to the insurer and Ind. 7, 13 N. E. 118.
creditors of the assured for the ^ Quinby v. New York Life Ins.
amount of the premium. This spe- Co. 71 Hun (N. Y.) 104, 24 N. Y. S.
cies of transfer worked a novation. 593, 54 N. Y. St. Rep. 82.
The premium ceased to be due as ^ Priddy v. Baum, 140 N. Y. Supp.
premium. It was due as money ad- 481, 79 Misc. 607.
vanced or to be advanced by the bio- * Union Building Assn. v. Rock-
ker. In England, in case of marine ford Ins. Co. 83 Iowa 647, 32 Am.
policies negotiated through a broker, St. Rep. 323, 14 L.R.A. 248, 49 N.
the cases evidence a custom for the W. 1032.
undeiTvriter to credit the broker with
303
§ 86 JOYCE ON INSURANCE
of an afliiii.«.«ion fee in the certificate or policy, evidence of the so-
liciting agent tending to show that said fee had never been paid
was offered as was also evidence by others of statenionls contra by
the agent after insured's death, but the evidence of such statements
was rejected and it was held that the rights of the designated ben-
eficiaries became fixed by insured's death.* In California, it is hekl
that if an insurance policy contains a formal receipt of the pre-
mium, its nnconditional delivery is conclusive evidence of payment
so as to estop the company from denying the validity of the policy,
notwithstanding the declaration in it that it .<halL not be binding
until the premium is actually paid: that the same result follows
where the policy is delivered as a valid and completed contract up-
on a consideration expressed therein, the receipt of which is im-
pliedly acknowledged.^ And under the civil code of that state an
acknowledgment in a policy of the receipt of the premium is con-
clusive evidence of its payment, so far as to make the policy bind-
ing, notwithstanding any stipulation therein tliat it shall not be
binding until the premium is actually paid, and this applies to a
recital in the policy of the consideration paid where there is also
a provision against liability while any note for the premium is due
and unpaid and the note for- said consideration remains due and
unpaid.'^ In an Illinois case* the court declares that an insurance
coiupany will be estopped on the grounds of public policy to dis-
pute its receipt for the purpose of avoiding the policy.^ The same
ruling obtains in Tennessee.^" but it is held in the same case that
the company may show nonpayment in an action to collect the pre-
mium, or in deducting it from the amount sought to l)e recovered.
So in Maryland ^^ it is declared that an insurance coiupany will not
be permitted to allege a want of consideration for its promise by
disputing its acknowledgment of the receipt of the premium when
sued on the policy after a loss has happened. In South Dakota,
where the statute provides that an acknowledgment in a policy of
the receipt of premium is conclusive evidence of its payment, so far
as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until the premium is actually
* Sclioep V. Bankers Alliaiu-e Ins. son, 77 III. 384; Teutonia Life Ins.
Co. 104 loAva 354, 73 N. W. 825. Co. v. Mueller, 77 111. 22.
^ Farnum v. Pha'nix Ins. Co. 83 ^ Same in Union Life Ins. Co. v.
Cal. 246, 17 Am. St. Rep. 233. Winn. 87 111. App. 257.
"^ Palmer v. Continental Ins. Co. ^° Southern Life Ins. Co. v. Book-
1.32 Cal. 68, 64 Pac. 97, 61 Pac. 784; er, H Heisk. (Tenn.) 606, 24 Am.
Civ. .Code, sec. 2598. Compare 'Moo- Rep. 344.
nev v. Home Ins. Co. 80 ^lo, App. ^^ Consolidated Real Estate & Fire
192, 2 Mo. App. Rep. 524. Ins. Co. v. Cashow, 41 Md. 59.
* Teutonia Life Ins. Co. v. Ander-
304
COMPLETION OF CONTRACT § 86
paid, and the policy does not contain in express terms the words
'"receipt of which is hereby acknowledged"' prescribed for the stand-
ard forms, but recites ''in further consideration of the annual pre-
mium" and that ''this policy will be continued upon the further
payment of a like amount . . . each year," the word ''contin-
ued" implies the existence of a policy, and the words "further pay-
ment" clearly imply if they do not expressly acknowledge a pre-
ceding payment, so a receipt for the first premium is clearly
acknowledged so far as the binding effect of the policy is con-
cerned.^^
In a New Jersey ease" the policy w^as executed by the president and
secretary of the company, and contained a formal acknowledgment
of the payment of the premium, and it was decided that this pre-
vented the company from averring or showing nonpayment for the
purpose of proving that tlie contract had no legal existence, and
that it conclusively achnitted payment of the premium so far as
was necessary to give validity to the contract, and it was said by
Beasley. J., that the usual legal rule that a receipt was only prima
facie evidence of payment, and might be exjjlained, did not apply
"where the question involved is not only as to the fact of payment,
but as to the existence of rights springing out of the contract," and
that "with a view of defeating such rights the party giving the re-
ceipt cannot contradict it," and he adds "an acknowledgment of an
act done contained in a written contract, and which act is requisite
to put it in force, is as conclusive against the party making it as any
oilier part of the contract, and cannot be contradicted or varied b}'
parol." Mr. Wood ^^ cites this case somewhat at length as an au-
thority ; another writer, however,^^ dissents therefrom. Mr. May ^*
states that such recital in the policy is only prima facie evidence
of payment. Mr. Marshall ^'' asserts that the payment or nonpay-
ment of the premium can have no effect on the validity of the con-
tract, as an action will lie to recover the premium "notwithstand-
ing the formal acknowledgment of it in the policy, which is not
inserted there as conclusive evidence of the actual payment of the
premium, but to preclude the necessity of proving it in case of
^^ Noble V. Kansas Cilv Life Ins. ^^ Ostrander on Fire Ins. see. 95,
Co. 33 S. Dak. 458, 14G N. W. 60(j; p- 220.
S. Dak. Civ. Code, sec. 1849; Laws ^^ 1 May on Ins. (3d ed.) sec. 359,
1909, c. 58. See also Power Mer- citing United States, Indiana, Loui-
cantile Co. v. State Mutual Fn-e siana, Massachusetts, New Ilamp-
Assoe. 23 S. Dak. 1, 119 N. W. 1008. shire, New York and Texas cases.
" P>as{'h v. Humboldt iMutual I'lre See also Troy Fire Ins. Co. v. Car-
& Marine Ins. Co. 35 N. J. L. 429, pouter, 4 Wis. .■!2, and cases cited.
5 Bennett's Fire Ins. Cases, 421. ^^ 1 Marshall on Ins. 335.
"1 Wood on Fire Ins. (2d ed.) 09. i
Joyce Ins. Vol. I. — 20. 305
§ 86 JOYCE ON INSURANCE
loss," and Mr. Pliillips ^* states that the acknowledgment is, accord-
ing to general practice, "substantially true," but is nevertheless only
prima facie evidence which may be rebutted. It is also held in
North Carolina that parol evidence is admissible to explain a receipt
given by the agent of a fire insurance company for the premium
on the policy,^^ and in Ormond v. Fidelity Mutual Life Associa-
tion ^° the insured agreed to pay the dues to the agent upon de-
livery of the policy. Attached to the policy w^as a receipt for the
dues, providing that when payment was made to an agent such
agent must countersign it at the date of payment. The policy was
sent to the insured without the receipt being countersigned by the
agent. It was decided that this amounted to a declaration that the
required payment had not been made, and must be made before the
policy could become binding. Under a later decision in that state
the acknowledgment in a policy of insurance of the receipt of a
ju'cmium estops the insurer to test the validity of the policy on the
ground of nonpayment of the premium.^ But in so far as a recital
in an insurance policy of the payment of premium is a part of the
contract of insurance, it cannot be contradicted by parol to invali-
date the contract, in the absence of fraud in procuring the delivery
of the policy. In so far, however, as a recital in an insurance pol-
icy of the j)ayment of premium is a mere receipt for money, it is
only prima facie like other receipts, and will not prevent an action
to recover the money if not in truth paid.^ In Nebraska the deliv-
ery of a life policy to insured and its possession by the ])eneliciary
after its death are prima facie evidence of the payment of the cash
consideration recited therein.^ So in fSouth Carolina, such a receipt
in the policy is only prima facie evidence, although it is also held
that the deliver}^ of such a policy without exacting payment creates
a presumption that credit was given.* Under a Massachusetts deci-
sion if the insurer delivers to a broker for the assured a policy con-
taining an acknowledgment of the receipt of the premium, they
cannot insist, as a condition precedent, on their actual receipt of
1^1 Pliillips oil Ins. (3d ed.) sees. ^ Union Life Ins. Co. v. Parker,
275-78, 512-15. ' OC Neb. 395, 103 Am. St. Rep. 714,
i^Ferebee v. North Carolina Mu- 62 L.R.A. 3i)U, 92 N. W. 604. See
lual Home Ins. Co. 68 N. C. 11. also Cauthen v. Hartford Life Ins.
20 96 N. C. 158, 1 S. E. 796. Co. 80 S. Car. 264, 61 S. E. 428.
^ Grier v. Mutual Life Ins. Co. 132 Examine Hewitt v. American Union
N. Car. 542, 44 S. E. 25 ; Kendriek Life Ins. Co. 34 Misc. 738, 70 N. Y.
v. Mutual Benefit Life Ins. Co. 124 Supp. 1012, revd. 73 N. Y. Supp.
N. Car. 315, 70 Am. St. Rep. 592, 105, 66 App. Div. 80.
32 S. E. 728. * Cauthen v. Hartford Life Ins.
2Keudrick v. Mutual Benefit Life Co. 80 S. Car. 264, 61 S. E. 428.
Ins. Co. 124 N. C. 315, 70 Am. St.
Eep. 592, 32 S. E. 728.
306
COMPLETION OF CONTRACT
86
the premium note which was delivered by the assured to tlie brok-
er at llie time of receiving the poUcy, and afterward dehvered to
the underwriters,* and a suit hes at the instance of a pohcy holder
to recover a portion of the unearned premium notwithstanding that
a promissory note which has been given for the premium has not
been i)a)d.^ Other cases hold that the delivery of the receipt for
])ayiiient of premium is not conclusive, and tliat where the policy
])rovides for payment in the lifetime of assured of an advance pre-
)i]imii it nnist be done.' And the bvu'den is upon the insurance
company to prove nonpayment of the premium note, in order to
avoid a policy of insurance made and accepted on condition that
it sliould cease and determine upon failure by the as,sured to pay
a premium note when due given by him to the insurers.*
The cases are numerous, however, which hold that wdiere a policy
duly executed and delivered acknowledges the payment of the pre-
mium, such receipt, in the absence of fraud, duress, or mistake
estops the company from denying the same, and is conclusive evi-
dence of payment ; ^ while other courts qualify, this rule by holding
tliat it is evidence of payment to the extent, at least, that such pay-
ment is necessary to give validity to the contract.^"
5 Mayo V. Pew, 101 Mass. 555.
^ Hemingway v. Bradford, 14
Mass. 121.
"^ Davis v. Massachusetts Life Ins.
Co. 13 Blatelif. (U. S. C. C.) 162,
Fed. Cas. No. 3642 ; Brown v. Massa-
chusetts ]\futual Life Ins. Co. 59 N.
H. 298, 47 Am. Rep. 205; Orniond
V. Fidelity Life Assoc. 96 N. C. 158,
1 S. E. 796. See Troy Fire Ins. Co.
V. Carpenter, 4 Wis. 20. See also 1
May oil Ins. (Parsons) sec. 359, and
cases cited.
* Hodsdon v. Guardian Life
Co. 97 Mass. 144, 93 Am. Dec.
Cauthen v. Hartford Life Ins.
80 S. Car. 264, 61 S. E. 428.
^Illinois. — Teutonia Life Ins.
V. Anderson, 77 111. .')84; Provident
Life Ins. Co. v. Fennel!, 49 111. 180;
tllinois Cent. Ins. Co. v. \yolf, 37
111. 354, 87 Am. Dec. 25L
Indiana. — Home Ins. Co. v. Gi
man. ]12 Ind. 7, 13 N. E. 118, 17
Jus. L. .]. 12; Kline v. National Ben.
Assn. Ill Ind. 462, 11 N. E. 620, 60
Am. Ren. 703.
Ins.
73;
Co.
Co.
Louisiana. — Michael v. Mutual Ins.
Co. to La. Ann. 7.37.
Manjland. — Consolidated Real
Estate & Fire Ins. Co. v. Cashow, 41
Md. 59.
Montana. — Savage v. Phoenix Ins.
Co. 12 Mont. 258. 33 Am. St. Rep.
591, 31 Pae. 66, 21 Ins. L. J. 967.
yew York. — Goit v. National Pro-
tection Ins. Co. 25 Barb. (N. Y.)
1 89.
C>/iio.— Madison Ins. Co. v. Fel-
lows, 1 Disn. (Ohio) 217, Id. 2 Disn.
(Oliio) 128.
Knijland- ]{o\k'v{s v. Secui'itv Co.
(C. A.) [1897] 1 Q. B. Ill, m L. J.
Q. B. (N. S.) 119, 75 Law T. IJep. 53
(even while the policy remains in tho
company's possession) ; Dalzell v.
Mair, 1 Camp. 532; Cumining v.
Forrester, 1 Maule & S. 498, 499;
1)(> Gaminde v. Pigou, 4 Taunt. 246;
1- Anderson v. Thornton, 8 Exch. 425.
^^ Insurance Co. of Pennsylvania,
Jn re, 22 Fed. 109. See oilier cases
and citations throughout this section.
307
§ 86 JOYCE ON INSURANCE
It is certainly true that the insurer can waive prepayment of the
premium, and if the policy be delivered without exacting such pre-
payment its validity is established, provided alway.s that the con-
tract of assurance is otherwise binding. It is also true that if the
contract be comj)leted and is valid and the risk has attached, that
the insurer has an action for the premium earned, and the insured
either a suit for specific performance, or an action for indemnity ^^
may be compelled in equity. Certain rights have attached and the
insured may, with the knowledge and acquiescence of the insurer,
have rested to his prejudice upon tliose rights. The contract has
been completed and the policy has become valid and binding.^^ j^^^
exactly what point, then, does the flaw exist w^hicli will enable the
insurer to aver or prove that the premium has not been paid for the
purpose of escaping liability on a contract which the assured, rest-
ing his belief upon the precedent established by the adjudicated
cases, has the right to consider completed and binding? In view,
therefore, of the weight of authority, such receipt is conclusive evi-
dence of payment, so tar as the validity of the policy rests thereon,
and the assured is estopped to deny such acknowledgment for the
purpose of escaping liability on the contract, unless fraud, duress,
or mistake be shown. But where payment of the premium is
sought to be enforced, the receipt should be only prima facie evi-
dence of payment. ^^
^^ Dinning- v. Phoenix Ins. Co. 68 ]iany may exist and be enforced at
III. 414; Phtrnix Ins. Co. v. Ryland, law to pay biniunthlv a specified
69 Ind. 437, 1 L.R.A. 548, 16 Atl. sum: Smith v. Bown, 58 N. Y. St.
109; New England Fire & Marine Rep. 60.'), 27 N. Y. Supp. 11, 75 Hun,
Ins. Co. v. Robinson, 25 Ind. 536; 231.
Gerrish v. German Ins. Co. 55 N. H. ^^ Even thouiih the premium be
355. never paid, decides the conrt in Mil-
It is held in Carpenter v. Mutual ler v. Life Ins. Co. 12 Wall. (79 U.
Safety Ins. Co. 4 Sand. Ch. (N. Y.) S.) 285, 20 L. ed. 398; Farnum v.
408, that an agreement to insure, Pha?nix Ins. Co. 83 Cal. 246, Iv Am.
evidenced by the receipt for the St. Rep. 233.
premium, may be specihcally en- ^^ Norton v. Phoenix Life Ins. Co.
forced, and if a lo.ss has happened, 36 Conn. 503, 4 Am. Rep. 98. See
payment may be compelled in equity. Pitt v. Berksliire Life Ins. ('o. 100
As to life policies, where the Mass. 500; Ryan v. Rand, 26 N. H.
premium is paid in advance, the con- 12; Southern Life Ins. Co. v. Book-
tract is held not to bind the insured er, 9 Heisk. (Tcnn.) 606, 24 Am.
to pay, the forfeiture of the policy Rep. 344; Life Ins. Co. v. Davidge,
being the result of nonpayment when 51 Tex. 244. See Mooney v. Ilomfe
due, although it is held a contract Ins. Co. 80 INIo. App. 192, 2 Mo.
obligation on the part of a member App. Rep. 521.
of a co-operative assessment com-
308
COMPLETION OF CONTRACT
subdiv. iv. completiox of contract delivery of policy
Knowledge of Loss.
§ 90. Delivery of policy not necessary to comjjlete contract.
§ 90a. Same subject : date.
§ 91. Actual or manual delivery of policy not necessary to complete
contract.
§ 92. Agreement to deliver policy : demand is unnecessary.
§ 93. There may be a constructive delivery.
§ 94. Delivery: possession of policy by assured.
i; 95. Neglect of assurer to deliver policy.
§ 96. Conditional delivery.
§ 97. Parol evidence admissible to show conditional delivery.
§ 97a. Condition precedent: delivery or prepayment of premium during
lifetime or good health, etc., of assured.
§ 97b. Same subject.
§ 97c. Change in health of assured : date of contract.
§ 98. When actual delivery of the policy necessary.
§ 99. Delivery : misrepresentation or fraud.
§ 100. Delivery: notice to assured of execution of policy.
§ 101. Delivery to agent of insured or to third person.
§ 102. Deliver}' by and to agent : policy held by agent.
§ 103. Delivery: agreement completed before loss: mortal illness oi
accident.
§ 104. Delivery: agreement incomplete at time of loss, mortal illness, or
accident.
§ 104a. Same subject.
§ 105. Loss before date of contract: policy retroactive,
§ 106. Where both parties know of loss when contract is made or exe-
cuted.
§ 107. Knowledge of loss by assured before and after risk attaches.
§ 108. Assured not obligated to notify company of loss before de-
livery of policy when risk has attached.
§ 108a. Mutual benefit societies or associations: issuance of certificate.
§ 108b. Mutual benefit societies or associations: actual delivery of cer-
tificate unnecessary, unless. *
§ 108c. JNIutual benefit societies or associations: initiation as prerequisite
to delivery.
§ 108d. Delivery of certificate to subordinate lodge, local camp, etc.
§ 108e. Mutual benefit societies or associations: delay in executing and
delivering- certificate: retention of certificate.
§ 108f. Where officer of society acts as custodian of certificate.
§ 108g. Mutual benefit societies or associations: delivery of certificate
or prepayment of dues during life or good health.
309
§ 90
JOYCE OX INSURANCE
§ 90. Delivery of policy not necessary to complete contract. —
A promise to insure is generally performed by issuing a policy or
procuring one to be issued.^* and if the insurer delivei-s the policy
and receives the premium, he is estopped from denying the fact
that a contract of insurance was made," and dehvery of a policy
is conclusive proof of the completion of the contract, in the absence
of fraud. ^^ But a contract to issue an insurance policy, the agree-
ment being otherwise complete, is equivalent to the actual issuance
of the policy so far as the binding force of the contract is con-
cerned ; ^"^ since if a sufficient contract has been made neither a
policy nor a certificate is necessary to make the company liable. ^^
So in mutual benefit societies, if the insured has complied with
all the other requirements of the society, the fact that he has not
taken out a certificate or that one ha.s not been delivered to him
does not prevent a recoveiy,^^ and such recovery may be had
without producing such certificate.^"
^* Scranton Steel Co. v. Ward's per Deemer, J., said: "The rule of
Detroit & Lake Superior Line, 40 this court is that, if no policy is in
Fed. 866; Fire Association of Piiila. fact issued, the case will be treated
V. Bynum, — Tex. Civ. App. — , 44 and considered as if a policy in the
S. W. 579. usual form issued by the company
When Folicji is "issued:" meaning liad in fact been issued") ; Herring-
of term, see Stringham v. Mutual v. American Ins. Co. 123 Iowa, 533,
Life Ins. Co. 44 Oreg-. 447, 75 Pac. 99 N. W. 130, 33 Ins. L. J. 588.
822, 33 In.s. L. J. 463; Homestead See Newark Machine Co. v. Ken-
Fire Ins. Co. v. Ison, 110 Va. 18, 3 ton Ins. Co. 50 Ohio St. 549, 22
Va. App. 485, 65 S. E. 483, 40 Ins. L.R.A. 768, 35 N. E. 1060, 31 Week.
L. J. 1143. L. Bull. 51.
^^ State of Pennsylvania Ins. Co. It is a general rule that when a
In re, 22 Fed. 109; Traveler's Ins. parol contract of insurance lias been
Co. v. Jones, 32 Tex. Civ. App. 140. entered into the delivery of the i)oli-
73 S. W. 978. See Keen v. Alutual cy is not essential to its validity or
Life Ins. Co. 131 Fed. 551>, 33 Ins. L. enforceability unless a stipulation of
J. 916, rev'd 135 Fed. 677, 68 C. the contract be that it shall not there-
C. A. 315 (case of provisional and tofore take effect. International Fer-
permanent policv). . rv Co. v. American Fidelitv Co. 207
ifiRavburn v.' Pennsvlvania Cas- N. y. 350, 353, 101 N. E.' 160, per
ualty Co. 138 N. Car. 379, 50 S. E. Collin, J. (marine vessel liability in-
762. ' surance) ; Michigan Pipe Co. v. Mi-
^"^ Springer v. Anslo-Nevada Ins. chigan Fire & Marine Ins. Co. 92
Corp. 33 N. Y. St. Rep. 543, 11 N. Y. :\lich. 482, 491, 20 L.R.A. 277, 52 N.
Supp. 533. W. 1070; King v. Phoenix Ins. Co.
"Blake v. Hamburg-Bremen Fire 195 Mo. 290, 113 Am. St. Rep. 678, 6
Ins. Co. 67 Tex. 160. 60 Am. Rep. Amer. & Eng. Ann. Cas. 618. 92 S.
15; Western Assur. Co. v. McAlpin, W. 892.
23 Ind. App. 228, 77 Am. St. Rep. ^^ Bi.shop v. Grand Lodge of Em-
423, 55 N. E. 119; House v. Securitv pire Order of Mut. Aid, 112 N. Y.
Fire Ins. Co. 145 Iowa, 462, 121 N. 627, 20 N. E. 562: Lorseher v. Su-
W. 509, 38 Ins. L. .7. 875 (the court, ])reme Tjodge Knights of Honor, 72
310
COMPLETION OF CONTRACT §§ 90a, 91
§ 90a. Same subject: date. — Where an application was made to
an a.tieiit and tlie agent agreed to issue and send the apphcant a
pohcy on a certain day, and the policy was in fact issued on and
bore (late of that day, but was not deUvered nor the premium paid
for several days thereafter, it was held that the policy became
operative and binding from the day it was issued though not
delivered.^ But the date of delivery will be the date of the issuance
of the policy, which does not mean the date of the policy, when
the time of its delivery and acceptance is the first time the minds
of the parties meet upon all the essentials of the contract.^ A
policy does not take effect from the date of its delivery where it
expressly declares that it is to be effectual upon payment of the
initial ])remium for one year from its date which is much earlier
than the date of delivery.^ If the application asks for insurance
from ''the — day of " for one year "to the • —
({ry^yr ^f " \]^Q infereucc is that the insurance if granted will
take effect from the date and delivery of the policy, especially so
if the agent had no authority to make a contract until the applica-
tion was approvecl. and such want of authority was known to the
applicant.'* The exact date of delivery is immaterial if the jury
finds tliat it was actually delivered the question being whether there
was an actual delivery.*
§ 91. Actual or manual delivery of policy not necessary to com-
plete contract. — If the contract of insurance is otherwise complete,
and the parties intend that it shall be effectual without the policv
being actually delivered, an actual or manual delivery is unneces-
sary.^ This i-ule not only applies to a fire policy, since the insurer
Midi. 316, 2 L.R.A. 20G, 40 N. W. ^ ir^ited Stales.— FrankMa Fire
545. See ^S lOSa-lOSg herein. Ins. Co. v. Colt, 20 Wall. (87 U. S.)
2° Lorsc'her v. Supreme Lorlo-e 5G0, 22 L. ed. 423 (cited in Phoenix
Knights of Honor, 72 Mif-h. 316, 2 ins. Co. v. Meier, 28 Neb. 132, 44
L.R.^A. 206, 40 N. W. 54.j. N. w. 07) ; Fisher v. London & I^an-
1 Hubbard v. Hartford Fire Ins. ,.ashire Fire Ins. Co. 83 Fed. 807,
Co. 33 Iowa, 325, 11 Am. Rep. 12ry. 07 ins. L. J. 417. aff'd 92 Fed. .500,
See S 1441 herein. 34 (^ q a. .")03 (neitliei' actual de-
2 Homestead Fire Ins. Co. v. Ison, jj ^^^,j, manual possession of poli-
110 Va. 18, 3 Va. App. 485, 65 S. E. ^^^ „;,essavy).
463 38 Ins. L. J. 114,!. \4/«^fl.'»m.."— Stephenson v. Allison,
'^^r^'^'- ;'-^,^"'^ ' ;^'=j;'tie Life .. ^^j^ ^3g.^^^ g^ ^ 26
Ins^Co 111 Va. (.99, 69 S. E. 961, ^^^^^^ ^^^^^^ .^'^^ ^22; Phoenix Ins.
^^'^e!;;«n^ Fund Ins. Co. v. ("o. v^^ McArthnr, 116 Ala. 659, 22
Rogers, 108 Ga. 191, 33 S. E. 954, 28 ^o. 90... , ^ , x
Ins L J 10'^5 Georfjia. — v ireman's r' und 1 ns.
s'Pen'der v. North Slate Mutual Co. v. Pekor. 106 Ga. 1, 31 S. E. 779:
Life Ins. Co. 163 N. Car. 98, 79 S. New York Life Ins. Co. v. Babcock.
E '^QS 104 Ga. 67, 69 Am. St. Rep. 134, 42
311
§ 91 JOYCE ON INSURANCE
may be considered as holding it for insurer's benefit^ but also to life
insurance contracts unless actual deliver}^ is made essential to their
validity,^ and although delivery may be essential in order to com-
plete a contract of life insurance, such delivery may be waived ; ®
and although it is intended to issue the policy, yet if the terms
liave been agreed upon and acts have been done which would
entitle the applicant to a policy, or if by custom or by rules of
the company, or by agreement or otherwise, the policy is not
required to be immediately delivered, the contract may be complete
for the reception of the policy is not a prerequisite to a contract of
insurance.^" So the assured need not formally accept nor take
away a policy to complete the deliveiy,^^ and where a policy of
life insurance was delivered to the broker to whom the application
was made but the applicant died without having received the
policy, it was held that the contract was complete.^^
L.R,A. 88, 30 S. E. 273, 27 Ins. L. Unless made so by the terms of
J. 649. the application, actual delivery of a
Idaho. — Maiysville Mercantile Co. life policy to the insured is not es-
Ltd. V. Home Fire Ins. Co. 21 Idaho, sential to the validity of the contract.
377, 121 Pac. 1026. Deviue v. Federal Life Ins. Co. 250
Illinois.— Hose v. Mutual Life Ins. 111. 203, 95 N. E. 174, 40 Ins. L. J.
Co. 240 111. 45, 88 N. E. 204. 1513.
Maine. — ^Loring v. Proctor, 26 Me. ^ Rhodus v. Kansas City Life Ins.
18. Co. 156 Mo. App. 281, 137 S. W. 907.
North Carolina. — Roberta Manu- Where a policy provides that it
faetnring Co. v. Royal Excliange shall not be effective until delivery
Assur. Co. 161 N. Car. 88, 76 S. E. such provision may be waived.
865; Hardv v. Aetna Life Ins. Co. Pierce v. New York Life Ins. Co. 174
154 N. C. 430, 70 S. E. 828, 40 Ins. Mo. App. 383, 160 S. W. 40.
L. J. 1148; Powell v. North State ^° Yonae v. Equitable Life Assur.
Mutual Life Ins. Co. 153 N. Car. Soe. 30 Fed. 902. 1 Corp. L. J. 531;
124, 69 S. E. 12; Waters v. Security Sheldon v. Connecticut Mutual Life
Life & Annuitv Co. 144 N. Car. 663, Ins. Co. 25 Conn. 207, 65 Am. Dec.
54 S. E. 437, 36 Ins. L. J. 673, 13 565 ; Blanchardv. Waite, 28 Me. 51,
L.R.A.(N.S.) 805 (annotated on can- 48 Am. Dee. 474; Warren v. Ocean
celation of insurance contract by re- Ins.. Co. 16 Me. 439, 451, 33 Am.
turn of policy). Dee. 674; Alabama Gold Life Ins.
Ohio. — Hartford Fire Ins. Co. v. Co. v. Hen-on, 56 Miss. 643.
Whitman. 75 Ohio St. 312, 79 N. E. ^^ Xenos v. Wickham, 2 L. R. Eng.
450, 36 Ins. L. J. 19; Manchei-ter & Irish App. 296. 16 L. T. N. S.
Fire Ins. Co. v. Plato, 23 Ohio Cir. 800, 16 Week. Rep. 38, 36 L. J. Com.
Ct. Rep. 35. P. 31.3, 13 Eng. Rul. Cas. 422;
' Stephenson v. Allison, 165 Ala. Stringham v. ^Mutual Life Ins. Co.
238, 138 Am. St. Rep. 26 and note, 44 Oreo-. 447, 75 Pac. 822, 33 Ins.
51 So. 622. L. J. 463.
8 New York Life Ins. Co. v. Bab- 12 Mutual Life Ins. Co. v. Thom-
cock, 104 Ga. 67, 69 Am. St. Rep. son, 94 Ky. 253, 22 S. W. 87, 22 Ins.
134, 42 L.R.A. 88, 30 S. E. 273, 27 L. J. 481.
Ins. L. J. 649.
312
COMPLETION OF CONTRACT §§ 92-94
§ 92. Agreement to deliver policy: demand is unnecessary
where an insurance policy is agreed to be delivered within a cer-
tain time."
§ 93. There may be a constructive delivery. — That there may be
a constructive delivery of the policy is undoubted.^* In the follow-
ing cases, however, the circumstances were held not sufficient to
justify finding such constructive delivery. Thus, in Herman v.
Phoenix Mutual Life Insurance Company ^^ the company executed
and forwarded a policy to its agent to be delivered to the applicant
H, on receipt of the premium. The agent took the policy to H.'s
place of business, but he was temporarily absent from the state
and the policy was exhibited to the son, wdio was informed by the
agent that the first premium was payable in cash and a note. The
son did not pay the cash, but gave his father's note as required, and
the agent accepted the same and took it away Avith the policy,
stating that he would keep the policy good till the father's return.
The father died while so absent, and the court decided that there
was no actual or constructive delivery of the policy. ^^ So where
there was no payment of the premium due upon a life policy, and
payment of only one-half of the premium due had been waived,
it was held that a letter by the agent to the applicant stating that
"your policy" has arrived did not amount to a constructive de-
livery."
§ 94. Delivery: possession of policy by assured. — Possession of
the policy by the assured is only prima facie evidence of its delivery,
as where it appears that it was delivered subject to examination by
the assured." So mere possession by the assignee of the assured
13 Western Mass. Ins. Co. v. Duffey, fit Life Ins. Co. 103 Mass. 78, 118
2 Kan. 347. See Waters v. Security Mas.s. 178, 320 IMass. 158.
Life & Annuity Co. 144 N. Car. 663, ^'' Union Central Life Ins. Co. v.
13 L.R.A.(N.S.) 805 note, 54 S. E. Pauley, 8 Ind. App. 85, 35 N. E.
437, 36 Ins. L. J. 673. 190.
i^McLaehlan v. yEtna Ins. Co. 4 ^^ United Slates.— Davis v. Mas.sa-
Allen (N. B.) 173; Home Ins. Co. V. clmsetts Mutual Life Ins. Co. 13
Curtis, 32 Mich. 402, 5 Ins. L. J. 120. Blatehf. (U. S. C. C.) 462, Fed. Ca-s.
See New York Life Ins. Co. v. Bab- No. 3,642.
cock, 104 Ga. 67, 69 Am. St. Rep. 7Kmo/s.— Richardson v. North-
134, 42 L.R.A. 88, 30 S. E. 273, 27 western Mutual Life Ins. Co. 143 111.
Ins. L. J. 649; Waters v. Security App. 279.
Life & Annuity Co. 144 N. Car. 663, 3Ia-ssachnsetts.—M{irkey v. Mutu-
54 S. E. 437, 36 Ins. L. J. 673, 13 al Benefit Life Ins. Co. 103 Mass. 78,
L.R.A.(N.S.) 805 note; American 118 Mass. 178, 126 Mass. 158.
Home Life Ins. Co. v. Melton, — New York. — Prall v. Mutual Pro-
Tex. Civ. App. — , 144 S. W. 362. tection Life Assur. Soe. 5 Daly (N.
See § 102 herein. Y.) 298 aff'd 63 N. Y. 608.
15 17 Minn. 153, 10 Am. Rep. 154. North C«roZ?Vw.— Waters v. Seeu-
16 See also Markev v. Mutual Bene- rity Life & Annuity Co. 144 N. Car.
313
§§ <J.3, 96 JOYCE ON INSURANCE
of a life policy which recites on its face that it is to take effect only
when countersigned by the agent, and which is not so countersigned,
is no evidence that the policy was ever delivered to the assured.^'
])Ut delivery of a life policy to insured and its possession after his
death l)y the beneficiary are prima facie evidence that its recital
of a cash payment is correct.^"
§ 95. Neglect of assurer to deliver policy. — Nondelivery by rea-
son of negligence of the company or its agents does not relieve the
insurer of liability where the contract between the parties is com-
plete, as where the application has been accepted and the terms
concluded, and the premium has been tendered, or the applicant
has agreed to pay the first premium on delivery of the policy.^
since a coi^poration which is bound in good faith to execute and
deliver a policy in the usual form, and thereby consunnnate the
contract, cannot escape liability by negiec-ting so to do.^
§ 96. Conditional delivery. — A policy may be conditionally de-
livered, and in such case the contract is not complete until the
condition be complied with,' as where the delivery was conditioned
upon the agent obtaining the surrender value or paid-up policies*
in place of certain other policies of the a[)plicant left with hiui
for that purpose, and the agent did not succeed in so doing.* So.
a policy may be sent to assured for his acceptance or rejection and
upon payment of the premium the contract to be completed, in
which case the prerequisite conditions must be complied with.*
And a life insurance company may show that the manual delivery
of the policy was ccniditional, for this goes to the execution of the
contract.^ ^\^gain, where a policy of insurance is written at the
603, 54 S. E. 4.37, 36 Ins. L. J. 673, 2 Bradlov v. Nashville Ins. Co. 3
13 L.ri.A.(N.S.) 805 note. Examine La. Ann. 708, 48 A in. Dec. 465.
' Pennsburg Manufaotnring Co. v. ^ Le Hoy v. Park Ins. Co. 30 N.
Pennsylvania Fire In.s. Co. 16 Pa. Y. 5(); IJogeis v. Chai'tcv Oak Lite
Snper. Ct. 91. Ins. Co. 41 Conn. 97; Brnton v. ]\[ar-
19 Prall v. Mutnal Protection Life tin, 52 N. Y. 570. See also Moore v.
Assur. Soe. 5 Daly (N. Y.) 298 aiif'd Fanner's Alnlnal Ins. Assoc. 107 Ga.
63 N. Y. 608. 199, 52 N. E. 49; Commercial Mutual
2" Union Life Ins. Co. v. Parker, Accident Co. v. Bates, 176 III. 1!)4,
66 Neb. 395, 103 Am. St. Rep. 714, 52 N. E. 49; Blue Gra.ss Ins. Co. v.
62 L.R.A. 390, 92 N. W. 604; Thum Cobb, 24 Kv. L. Kcp. 2132, 72 S. W.
V. Wolstenholme, 21 Utah, 446, 61 1099.
Pac. 537, 29 Ins. L. J. 699. See * Harneckell v. New York Life
§§ 76, 86 herein. Ins. Co. 40 Hnn (N. Y.) 558, att"'d
lYoiiiie v. Equitable Life Assnr. Ill N. Y. .390, 2 L.R.A. 150, 18 N.
Soc. 30 Fed. 902, 1 Corp. L. J. 531 ; E. 632.
New York Life Ins. Co. v. Babcock, ^ Blue Grass Tn.5. Co. v. Cobb, 24
304 Ga. 67, 69 Am. St. Rep. 134, 42 Kv. L. Rep. 2132, 72 S. W. 1099.
L.R.A. 88, 30 S. E. 273, 27 Ins. L." ^ Gardner v. North State Mutual
J. 649, 656.
314
COMPLETION OF CONTRACT §§ 97, 97a
request of a broker, and delivered to liim by the agent of the
company on his promise not to regard it as binding until the
company shall have inspected and accepted the risk, the policy
being subject to immediate cancelation; and the company there-
after promptly inspects and rejects the risk; and the agent of the
company so notifies the broker, who thereupon agrees to return the
policy ; and no premium is charged or paid as between the broker
and agent, — there is no final and absolute delivery of the policy.
but the deli\ery is conditional only.'^
§ 97. Parol evidence admissible to show conditional delivery. —
Parol evidence is admissible to show a conditional delivery. So
in a case where the policy was expressed to have been executed
and delivered, parol evidence was held admissible that it was agreed
that a previous policy should be surrendered and a new policy issued
as a substitute therefore, which agreement was not performed, but
the prior policy enforced and the amount thereof paid.* Again,
after a written contract of life insurance is made its terms may
not be contradicted so a.s to affect its continued validity or to
avoid the insurance, but the company caii show that the manual
delivery of the policy was conditional, as this goes to the execution
of the contract, or it may prove fraud or other equitable matter in
the same way for the purpose of showang it never took effect as a
contract, so it may be shown that the delivery of the policy was
made upon false representations in the application as to the healtli
of insured, and as to his not having been exposed to certain conta-
gious disea.ses, and where a ''binding receipt" is given, and tlio
application is thereafter accepted and delivered the insurance relates
back to the date of the receipt.^
§ 97a. Condition precedent: delivery or prepayment of premium
during lifetime or good health, etc., of assured. — Whether or not the
applicant is in an insurable condition, is an insurable risk, at the
time of the delivery of a life or accident policy is an important
factor, and. therefore, where it is stipulated that the insurance shall
not be binding unless delivery is made and the first premium paid
during the lifetime of the applicant or while he is in sound or
good health, or some like provision is made a condition precedent.
Life Ins. Co. 163 N. Car. 367, 48 8 -paunre v. State Mutual Life As-
L.R.A.(N.S.) 714 note, 79 S. K. 80(i. sur. Co. 101 ]Mass. 279.
■'Hartford Fire Ins. Co. v. Wilson, 9 Gardner v. North State Mutual
187 U. S. 467, 23 Sup. Ct. 189, 47 Life Ins. Co. 16.1 N. Car. 367, 79 S.
L. ed. 261, r/^e^Z in CotTin V. New York F. 806, 48 L.R.A.(N.S.) 714 note.
Life Ins. Co. 127 Fed. 3r)6. 62 C. C.
A. 416. Distinrjuished in Bieber v.
V. Gans, 24 App. D. C. 517, 521. .
315
§ (J7a JOYCE OX INSURANCE
it must be complied with to render the company liable/" unless
^^ United States. — Amos-Ricliia v.
Northwestern Mutual Life Ins. Co.
(U. S. C. C.) 152 Fed. 192, 36 Ins.
549 (same case noted below
Micliigan) ; Cable v. United
Life ins. Co. Ill Fed. 19, 49
'•'d 191 U. S.
Sup. Ct. 74,
L. J.
under
States
C. C. A. 216, (case rev
288, 48 L. ed. 188, 24
points decided in Supreme Court
were : The power of States to con-
trol and regulate foreign corpora-
tions; jurisdiction in ccjuity, and re-
newal of causes ; case below of bill to
have policy delivered up for cancela-
tion on ground that it was procured
by fraud of deceased's agents; decree
that it be delivered up and canceled
affirmed in circuit court of appeals;
certiorari granted and decree re-
versed; ease remanded with order to
dismiss without prejudice) ; ^Manliat-
tan Life Ins. Co. v. Carder, 82 Fed.
986, 27 C. C. A. 344 (insured held to
have been in "good health" when pol-
icy delivered).
Alabama. — Powell v. Prudential
Ins. Co. 153 Ala. 611, 45 So. 208
(policy delivered to father after ap-
plicant's death of wdiich insurer was
ignorant and latter was mortally ill
at time of payment of premium).
Georgia. — Brown v. Mutual Bene-
fit Life Ins. Co. 131 Ga. 38, 61 S.
E. 1122 (policy required first pre-
mium to be paid during life time of
assured) ; Clark v. INIutual Life Ins.
Co. 129 Ga. 571, 59 S. E. 283 (pre-
mium acquired to be paid during
good health of applicant; non-suit
granted).
Indiana. — Michigan Mutual Life
Ins. Co. V. Thompson, 44 Ind. App.
180, 86 N. E. 502 (policy received by
company's agent w'lien applicant
mortally ill) ; Reserve Loan Life Ins.
Co. v. 'Hockett, 35 Ind. App. 89,
73 N. E. 842 (policy not delivered
until after applicant's deatli. al-
though premium paid).
Kentuckij. — Provident Savings
Life Assur. Soc. v. Elliott's Extr. 29
Ky. L. Rep. 552, 93 S. W. 659, 35
316
Ins. L. J. 713 (applicant died before
policy readied agent) ; Torpey v.
National Life Ins. Co. 29 Ky. L. Rep.
:]71, 92 S. W. 982 (applicant died
before policy issued and I)efore ap-
plication or medical examination re-
(^eived). Hill's Adrar. v. Penn
Mutual Life Ins. Co. 28 Ky. L. Rep.
790, 90 S. W. 544 (policy received
by agent of insured during appli-
cant'.s last sickness : note given for
premium).
Micliigan. — Bowen v. Prv;dential
Ins. Co. 178 Mich. 63, 51 L.R.A.
(N.S.) 587, 144 N. W. 543; Amos-
Richia v. Northwestern Mutual Life
Ins. Co. 143 Mich. 684, 107 N. W.
707, s. e. (U. S. C. C.) 152 Fed. 192,
36 Ins. L. J. 549 (requirement that
premium be actually ]iaid etc. while
insured in good liealth; policy w'as
found by beneficiary among insured's
papers after his death; held that
policy never delivered. There was
involved the point of cancelation of
stam{)s under the *'war revenue act"
of 1898).
Missotiri. — Rhodes v. Kansas City
Life ins. Co. 156 Mo. App. 281, 137
S. W. 907 (condition must be com-
plied with) ; Kilcullen v. Metropoli-
tan Life Ins. Co. 108 Mo. App. 61,
82 S. W. 966 (policy sent to agent;
insured died before it was delivered
or premium paid in full; no con-
tract ) .
Nebraska. — Anders v. Life Ins.
Clearing Co. 62 Neb. 585, 87 N. W.
331, 31 Ins. L. J. 224 (condition must
be complied with).
New York. — Poste v. American
Union Life Ins. Co. 52 N. Y. Supp.
910, 32 App. Div. 189, aff'd (mem.)
165 N. Y. 631, 59 N. E. 1129 (com-
pany not liable where no actual pre-
payment during lifetime even though
policy delivered and reported in re-
turn to insurance department), cited
in Hewitt v. American Union Life
Ins. Co. 70 N. Y. Supp. 1012, 1013,
34 Misc. 738, rev'd 73 N. Y. Supp.
105, 106, 108, 66 App. Div. 80.
COMPLETION OF CONTRACT
such condition is waived or there is an estoppel.^^
§ 97a
North Carolina. —llavdv v. Aetna
Life ln.s. Co. 154 N. Car." 430, 70 S.
E. 828, 40 Ins. L. J. 1148 (iirst pre-
mium to be paid "during good health
etc., evidence of delivery for jury);
Perry v. Securitv Life & Annuity
Ins. Co. 150 N. Car. 143, 63 S. E.
679, 38 Ins. L. J. 432 (policy de-
livered conditionally ; not accepted
for purpose of taking effect; upon
election to accept, notice should have
been given and premium paid or
tendered during good health).
Oregon. — Francis v. Mutual Life
Ins. Co. 55 Oreg. 280, 106 Pac. 523.
Pennsi/lvania. — Gordon v. Pruden-
tial Ins. Co. of America, 231 Pa. 404,
80 Atl. 882, 40 Tns. L. J. 1838 (pre-
mium paid while applicant sutfering
from sickness which proved fatal;
policy delivered for inspection only;
no recovery. But compare Barnes v.
Fidelitv Mutual Life Ins. Co. 101
Pa. 618. 45 L.R.A. 264, 43 Atl. 341).
Rhode Island. — Mohr v. Prudential
Ins. Co. of America, 32 R. I. 177, 78
Atl. 554 (a condition precedent to
liability).
Texas. — Aetna Life Ins. Co. v.
Hocker, 39 Tex. Civ. A pp. 330, 89
S. W. 26 (policy sent to agent for
conditional delivery; agent sent it to
bank for delivery witliout mention-
ing conditions ; insured was killed be-
fore actual delivery; licld no con-
tract although bank held note in es-
crow for premium).
Virginia. — Oliver v. Mutual Life
Ins. Co. 97 Va. 134, 1 Va. S. C. Rep.
29, 33 S. E. 536 (condition prece-
dent to liability).
Effect of stipulation in application
or policy of life insurance that it
shall not become hindinr/ unless de-
livered to assured while in pood
health.— ^ee notes 17 L.R.A.(N.S.)
1144, 43 L.R.A.(X.S.) 725, L.K.A.
1916F, 171, as follows:
1. Effect of assured's ill health at
time of application, a. Good liealtli.
2. Effect of incontestable clause. '.->.
Effect of cancellation. 4. EtTect of
delivery to agent as delivery to
31
assured. 5. Effect of refusal to
deliver because of illness or
death of assured. 6. Effect of as-
sured's knowledge of his condition.
7. Effect of statutes relieving policy-
holders from representatioiio and
warranties. 8. Waiver, a. Who may
waive, b. Effect of provision that
only certain officers may waive, c.
Effect of delivery while assured is
ill, d. Effect of delivery after death
of assured, e. Delivery for examina-
tion, f. Effect of acceptance of first
premium while assured is ill, g. Ef-
fect of acceptance of first premium
after assured's death, h. Effect of
acknowledgment of payment of pre-
mium, i. Acceptance of subsequent
premiums, j. Effect of approval of
application after breach, k. Effect of
giving option to accept policy, 1. Ef-
fect of giving time to pay premium,
m. Effect of retention of first pre-
mivnn, n. Effect of delay in issuing,
o. Effect of initiation, p. Agreemenl
by agent to deliver policy when is-
sued, q. Acceptance of note, or some-
thing other than money, in payment
of the first premium.
1^ Alcdjama. — Powell v. Prudential
Ins. Co. 153 Ala. 611, 45 So. 208 (no
waiver).
California. — Berliner v. Travelers
Ins. Co. 121 CaL 451, 53 Pac. 022,
27 Ins. L. J. 84/ (accident policy;
uisured killed while traveling; de-
livery valid, and payment premium
waived).
Georgia. — Brown v. Mutual Bene-
fit Life Ins. Co. 131 Ga. 38. 61 So.
1122 (policy precluded waiver by
agent; non-suit granted); Reese v.
Fidelity Mutn;il Life Assoc. Ill Ga.
482, :'.6 S. E. 637 (hold that no agent
could waive such condition prece-
dent ) .
Illinois. — John Hancock Mutual
Life Ins. Co. v. Schlink, 175 111.
284, 51 N. E. 795. aff'g 74 ill. Api^.
.181 (prepayment of prcmiuiii «l'n
ing lifetime etc. of assured
waived notwith.«taiidinti' polii'v
7
iicM
pro-
§ 97b
JOYCE OX INSURANCE
§ 97b. Same subject. — An actual or constructive delivery is es-
sential especially where the application exi)ressly provides that
the policy shall be actually delivered to or accepted by the applicant
while he is in good health. ^^ But where a policy of insurance is
ilelivcred, such delivery, in the absence of fraud, is conclusive that
the contract is completed, and is an acknowledgment that the
premium was paid during the good health of the insured." So
in the absence of fraud the deliver}^ of an accident insurance policv
is conclusive proof that the contract is completed and an acknowl-
edgment that the premium was properly paid during good health.^*
And if insured is in good health at the time the policy is mailed
to him, such a condition is complied with.^* So where insured is
in good health when a polic}^ is received by insurer's agent to be
unconditionally delivered there is a suflicient delivery even though
vision proliibiting waiver except by
certain officers).
KentucJcif. — Natural Life Ins. Co.
V. Twiddell, 22 Ivy. L. Rep. 881, 58
S. W. 699 (policy delivered after ap-
plicant had fatal disease; company
estopped) ; Connecticut Indemnity
Assoc. V. Groeans Admr. 21 Ivv. L.
Rep. 717, 52 S. W. 959, 28 Ins. L. J.
1031 (prepayment of premium when
insured in good health ; wai\ed by
agent),
584, 60 N. E. 1106 (waived by de-
livery and acceptance of premium
during insured's illness). Cited in
Genung v. Metropolitan Life Ins. Co.
69 N. Y. Supp. 1041, 1045, CO App.
Div. 424.
North Carolina. — Hardy v. Aetna
Life Ins. Co. 154 N. Car." 430, 70 S.
E. 828, 40 Ins. L. J. 1148 (condition
waived).
Oregon.- — Stringham v. Mutual
Life ins. Co. 44 Oreg. 447, 75 Pac.
Louisiana.- — Kennedy v. ]\Ietropoli- 822, 33 Ins. L. J. 463 (policy issued
Ian Life Ins. Co. 116 La. (iO, 40 So. but not delivered before illness and
533 (non-waiver). death; note given thereafter to agent
Michigan. — Dennis v. Fidelitv Mu- who had no knowledge thereof; no
lual Life Ins. Co. 159 Midi. 594. 16 waiver).
Det. Leg. N. 1065, 124 N. W. 575 Bhode Island.— Mohr v. Prudential
(l)o]i('v delivered and first premium Ins. Co. of America, 32 R. I. 177, 78
paid shortly after death ; insurer sent Atl. 554 (condition precedent unless
letter denying any liability; no waiv- waived).
er).
Minnesota. — Murphv v. Metropoli-
tan Life Ins. Co. 106 Minn. 112, 118
N. W. .355 ("no obligation is as-
sumed by the comjiany ]irior to the
date hereof, nor unless on said date
the a.ssured is alive and in sound
health." When policy issued assured
had cancer: defense of unsound
health not waived. ^liiin. Rev. Laws
1905, sec. 1695 construed).
New York. — Ames v. Manhattan
Life Ins. Co. 58 N. Y. Supp. 244, 40
App. Div. 465, 52 N. Y. Supp. 759.
31 App. Div. 180. aff'd 167 N. Y.
Tej-as. — Provident Savings Life
Assur. Soc. V. Oliver, 22 Tex. Civ.
App. 8, 53 S. W. 594 (condition
waived).
^2 American Home Life Ins. Co. v.
:\lellon (1912) — Tex. Civ. App. — ,
144 S. W. 362.
iSGrier v. Mutual Life Ins. Co.
132 N. Car. 542, 44 S. E. 25.
^* Ravburn v. Pennsvlvania Casu-
altv Co. 138 N. Car. 379, 107 Am.
St." Rep. 548, 50 S. E. 762.
15 Mutual Reserve Fund Life As-
soc. V. Farmei-, 65 Ark. 581, 47 S. W.
850.
318
•I
COMPLETION OF CONTRACT § 97b
tlie at^ent retains possession of the policy.^® And a pienuum is
paid during insured's lifetime where, without conceahnent or fraud,
it is paid on the same day that insured dies." If a policy contains
the condition that it ''does not take effect until the lirst premium
shall have been actually paid during the lifetime of the insured"'
another condition requiring payment of said premium while insured
is in good health cannot be incorporated in the contract, so that
if the policy is sent to the insurer's agent for deliveiy and said
agent is absent at the time it is received, but thereafter a tender
of the premium is made while the insured is fatally ill and such
tender is refused a motion for a nonsuit is properly denied. ^^
A condition precedent requiring delivery to the applicant while
in good health is waived by the company's collecting from its
agent, after the a])plicant's death and with knowledge thereof the
])remium paid by the latter to the agent.^^ And if a health certifi-
cate is also required the furnishing thereof may be waived.^"
Whether such a condition has been complied with may be a ques-
tion for the jury,^ or there may not, however, be such a vital conflict
of evidence upon the question of delivery of the policy as to warrant
submission of the case to the jury.^ So the insurer may insist that
the fact that the condition was complied Avith, be shown by a pre-
ponderance of evidence before it is rendered liable, unless there is
a waiver of the condition.^ When a life insurance policy states
that it is "based upon the payment of premiums in advance," and
there is evidence tending to show that by the rules and regiilations
of the company, a new examination, of assured is required if it is
not delivered within a specified time; that the premium must be
paid on its delivery, and that it cannot be delivered unless the
16 New York Life Tns. Co. v. Bab- Ross, 102 Fed. 722, 42 C. C. A. 601
cock, 104 Ga. 67, 42 L.R.A. 88, 30 (Petition for certiorari denied
S. E. 273, 27 Ins. L. J. 649. See [mem.l 179 U. S. 683, 45 L. ed. 38.'..
also New York Life Lis. Co. v. Pike, 21 Sup. Ct. 916) ; Lee v. Prudential
51 Colo. 238, 117 Pac. 899. 40 Tns. Life Ins. Co. 203 Ma.ss. 299, 89 N. E.
L. J. 2079. r)29, 17 Am. & Eng. Ann. Cas. 236;
!■' Ken d rick v. IMutual Benefit Life Cenung v. Metropolitan Life Ins. Co.
Ins. Co. 124 N. Car. 315, 32 S. E. 69 N. Y. Supp. 1041, 60 A pp. Div.
728. 70 Am. St. Rep. 592. •t'^t: Baldi v. :\retropoIitan Ins. Co.
18 Going- V. Mutual Beneiit Life 18 Pa. Super. Ct. 599; Going v. Mu-
Tns. Co. 58 S. Car. 201, 36 S. E. 556, tual Benefit Life Ins. Co. 58 S. Car.
29 Tns. L. J. 801. 201, 36 S. E. 556, 29 Tns. L. J. 801.
i^'RIiodus V. Jvansas Citv Life Ins. ^ Anios-Richia v. Northwestern Mu-
Co. 156 Mo. App. 281. 137"S. W. 907. tual Life Ins. Co. (U. S. C. C.) 152
20 Life Insurance Clearing Co. v. Fed. 192, 36 Tns. L. J. 549. s. c. 143
Altschuler, 55 Net). 341, 75 N. W. Mich. 684, 107 N. W. 707.
862, s. c. 53 Neb. 481, 73 N. W. 942, 3 ]\fohr v. Prudential Ins. Co. of
27 Tns. L. .T. 262. America, 32 R. I. 177, 78 Atl. 554.
iPnilcd States Life Ins. Co. v.
319
§ 97c JOYCE ON INSURANCE
applicant is in good health; that none of the«e requirements were
complied with and the policy was delivered when insured was
sick, only a few days before his death, it is sufficient upon the
issue whether there had been a valid deliveiy of the policy sued on.^
Again, the question of waiver of such a condition may be prop-
erly one for the jury,^ and such waiver must be specially pleaded
and proven,^ and while evidence tending to establish waiver is
slight yet it may be sufficient to require its submission to the jury ;
but if waiver is not pleaded there is no issue to submit and the
jury may be instructed to tind for the insurer.' The applicant's
condition of health at the time the policy is mailed from the home
office to a bank to be delivered cannot, in the absence of fraud, be
availed of where the statute provides that where an applicant sub-
mits to a medical examination by the company's physician and
is pronounced a fit subject of insurance, such company, in the
absence of fraud, shall be estopped from pleading that the insured
person 'Svas not in the condition of good health required by the
policy at the time of the issuance or delivery thereof." '
§ 97c. Change in health of assured: date of contract. — Where
a policy of life insurance is delivered it is based on the status of
the insured at the time of the application and the company assumes
the risk of subsequent ill health of the insured.^ So where an
application expressly provides that upon payment of the first pre-
mium and upon delivery to and receipt by the applicant of the
policy during his lifetime the policy should relate back to and take
effect as of the date of the application, and the policy also so
expressly provides, the terms of the contract and the intention of
the parties are both established and a change in the health of
insured, in the absence of any proviso in the policy, or in the
application, that such change would avoid the policy cannot vitiate
it nor divest the beneficiary' of his rights thereunder, the first
premium having l^een paid. And the doctrine of continuing
representations is eliminated by the above provisos.^" In case,
- * Powell V. North State Mutual ^ Unterharnscheidt v. ^Missouri
Life Ins. Co. 153 N. Car. 124, 69 S. State Life Ins. Co. 100 Iowa, 223,
E. 12. 45 L.R.A.(N.S.) 743, 138 N. W.
^ Life Insurance Clearing' Co. v. 459.
Allschuler 5?. Neb. 481, 73 N. W. 942, ^ Grier v. Mutual Life Ins. Co. 132
27 Ins. L. J. 262, s. c. 55 Neb. 341, N. Car. 542, 44 S. E. 28. E.ramiue
75 N. W. 862. Gardner v. North State Mutual -Life
6 Anders v. Life Ins. Clearing Co. Ins. Co. 163 N. Car. 367, 48 L.R.A.
62 Neb. 585, 87 N. W. 331, 3i Ins. (N.S.) 714, 79 S. E. 806.
L. J. 224. 1° New York Life Ins. Co. v. Moats,
' Anders v. Life Ins. Clearing Co. 207 Fed. 481, — C. C. A. — . The
62 Neb. 585, 87 N. W. 331, 31 Ins.
L. J. 224.
320
COMPLETION OF CONTRACT § 98
however, of a material change in the applicant's health prior to the
con.-^uninuition of the contract the insurer should be informed
thereof otherwise a fraud might be perpetrated upon insurer."
§ 98. When actual delivery of the policy necessary. — If there
be a provision or an agreement that the policy shall not be in force
until actual delivery to the insured, the contract is not consum-
mated nor the company bound in the absence of such delivery; ^^
and if an intent that there should be such actual or manual deliveiy
is evidenced by the terms of the application or contract, such re-
quirement must be complied with ; ^^ and this has been so held even
though the application makes the policy for the benefit of the
applicant's wife, and although there was a day's delay in passing
on said application, when otherwise it might have reached the
applicant before his death. ^* Again if the application for life
insurance stipulates that the insured incurs no liability until the
policy is issued and delivered, there can be no recovery in the
absence of such issuing and delivery, though the first premium is
paid, and the agent who solicited the insurance assured the appli-
cant that it would go into effect at once." And where the applica-
tion for a life insurance policy contains no agreement as to the
time of taking efi'ect together with an agreement that a note taken
in payment of the first premium shall not be negotiated until the
delivery of the policy, the insurance does not take effect until the
issuance and delivery of the policy. ^^ So the legal delivery of a
Court, per Morrow, Cir. J., distin- Bates, 176 111. 194, 52 N. E. 49;
giiLshes, as to continuing representa- Bowen v. Prudential Ins. Co. of
tions: Cable v. United Slates Life America, 178 Mich. (i3, 144 N. W.
3 ns. Co. Ill Fed. 19, 49 C. C. A. 543. Holding that if the applica-
216; Equitable Life Assur. Co. v. tion I'equires actual delivery tliere
McElroy, 83 Fed. 631, 28 C. C. A. mu.«t be actual delivers, and^ it was
365, and also considei-s Mutual Bene- declared by the court, per Steere, J.,
fit Life Ins. Co. v. Higginbotham, 95 that such an application is initiative
U. S. 380, 383, 24 L. ed. 499. Com- of the proposed contract, becomes a
pare cases considered near end of § part of it when consummated, is bind-
53b herein. ing on the applicant, and tixes the
^^ Gordon v. Prudential Ins. Co. of time when bis policy will become op-
America, 231 Pa. 404, 80 Atl. 882, eralivo and his insurance beoin.
40 Ins. L. J. 1838. " Powell v. North State Mutual
12 iMisselhorn v. Mutual Reserve Life Ins. Co. 153 N. Car. 124, 69 S.
Fund Life Assn. 30 Fed. 545; Koh- E. 12, 48 L.R.A.(N.S.) 714 note,
en V. Mutual Reserve Fund Life i* Kohen v. Mutual Reserve Fund
Assn. 28 Fed. 705. See also Moore Life Assoc. 28 Fed. 705.
v. Farmers Mutual Ins. Assoc. 107 ^^ Chamberlain v. Prudential Ins.
Ga. 199, 33 S. E. 65; New York Life Co. 109 Wis. 4, 83 Am. St. Rep. 851,
Ins. Co. V. Babcock, 104 Ga. 67, 42 85 N. W. 128.
L.R.A. 88, 69 Am. St. Rep. 134, 30 le Summers v. ^Mutual Life Ins. Co.
S. E. 273, 27 Ins. L. J. 649, 655; 12 Wvo. 369, 109 Am. St. Rep. 992,
Commercial Mutual Accident Co. v. 66 L.R.A. 812, 75 Pac. 937.
Joyce Ins. Vol. I. — 2.1. 321
§§ 99, 100 JOYCE ON INSUKAXCE
policy of fire insurance is essential to its existence as an enforceable
contract.^''^
Where a policy upon the life of A payable to B was conditioned
not to be binding until delivered to A in good health, it was held
that a delivery to B after the death of A was not binding upon the
insurer. ^^ The rule above stated is, however, subject to certain
qualifications, as will be noted elsewhere, as in cases of waiver or
delivery to an agent, etc.
§ 99. Delivery: misrepresentation or fraud. — If the delivery be
obtained by misrepresentation or fraud, it can have no effect as a
binding contract, as in case the assured has knowledge of the loss
at the time the application is made and conceals the fact.^^ So
fraud or other equitable matter may be proven to show that the
policy never took effect as a contract.*^"
§ 100. Delivery: notice to assured of execution of policy. — An
actual delivery of the policy is not essential to the completion of
the contract where an application has been made, accepted, and
the terms agreed upon, and the policy executed and notice thereof
given to the assured.'' And whether or not an insurance policy
has been delivered after its issuance does not depend upon its
manual possession by the assured, but upon the intention of the
parties as manifested by their acts or agreement, and where the
contract of insurance is completed and put in Avriting, and the in-
sured is notified by the insurance agent that this has been done,
and that the policy is in his possession for the insured, this must
be deemed a sufficient delivery of the policy to render it valid and
binding.^
" Morriss V. Home Ins. Co. 139 N. 806 {considered under § 97 here-
Y. Supp. 674, 78 Misc. 303, citing in) ; Whitley v. Piedmont & Arling-
Walrath v. Hanover Fire Ins. Co. ton Life Ins. Co. 71 N. C. 480 ; Fitz-
124 N. Y. Supp. 54, 139 App. Div. herbert v. Mather, 1 Term Rep. 12;
407. See also Ikeller v. "Hartford Edwards v. Footner, 1 Camp. 530.
Fire Ins. Co. 53 N. Y. Supp. 323, 24 Examine Commereial Mutual ins. Co.
Misc. 136. V. Bates, 176 111. 194, 52 N. E. 49.
Actual or constructive delivery is ^^ Gardner v. North State Mutual
essential to validity. American Life Ins. Co. 163 N. Car. 367, 48
Home Life Ins. Co. v. Melton, — Tex. L.R.A.(N.S.) 714 note, 79 S. E. 806.
Civ. App. — , 144 S. W. 362. i Bragdon v. Appleton Mutual Fire
i^McClave v. Mutual Reserve Ins. Co. 42 Me. 259; Sheldon v. Con-
Fund Life Assn. 55 N. J. L. 187, 26 necticut Mutual Life Ins. Co. 25
Atl. 78. Conn. 207, 65 Am. Dec. 565. See §
^^ Piedmont & Arlington Life Ins. 55c herein.
Co. v. Ewing, 92 U. S. 377, 23 L. ed. ^ phoenix Assur. Co. v. McAuthor,
610; Wales v. New York Bowery 116 Ala. 659, 67 Am. St. Rep. 154,
Fire Ins. Co. 37 Minn. 106, 33 N. 22 So. 903 ; Fischer v. London & Lan-
W. 322: Gardner v. North State Mu- cashire Fire Ins. Co. 83 Fed. 807, 27
tual Life Ins. Co. 163 N. Car. 367, Ins. L. J. 417, aff d 92 Fed. 500, 34
48 L.R..A.(N.S.) 714 note, 79 S. E. C. C. A. 503.
322
COMPLETION OF CONTRACT § 100
Again, notification to the applicant of the arrival of a life-
insurance policy, by the local agent who receives the application
and to whom the policy is forwarded for delivery, completes the
contract, which the insurer cannot deny after loss, although the
insurer in fact issues a different form of policy from that applied
for, and notifies the agent to secure an amendment to the applica-
tion requesting the policy issued, Avhich he fails to do.^ But it is
held that until delivery of a policy or payment of premium there
is no contract of insurance, in the absence of any oral agreement
for insurance prior to the policy, although the insured, who had
previously made an application, has been notified by the insurance
agent that a policy is ready for him.* In INIyers v. Liverpool &
London & Globe Insurance Company ^ application was made to an
agent for a fire policy ; thereafter the applicant was notified by the
agent that the policy was ready, and he was requested to call for it,
which he did several times, but did not find the agent in. The
policy was finally canceled by the agent and soon after the premises
were destroyed by fire, and it was held that no action could be
maintained on the contract.
§ lOL Delivery to agent of insured or to third person. — The
delivery need not be made personally to the insured but may be to
a third person for him, or to the order and control of a third person,
or to the agent of the insured, so the delivery is effectual to bincl
the contract where the company's agent under an agreement with
the assured holds the policy subject to the order and control of a
third person, whose mortgage interest is covered by it, though such
third person does not call for or receive it.^ So a delivery to
insurance brokers who are agents of the insured and the former's
admission that they handed the policy to insured constitutes a
good delivery by the insurer with an intent to be bound by its
terms and conditions and obligating insured,'^ but where the deliv-
ery is to a third party, until it can be learned whether the company
will accept the risk, and it is understood that if the company
refuses to insure, the applicant will try to obtain insurance in
another company, and a loss occurs before the agent learns whether
3 Kimbro v. New York Life Ins. ^ 121 Mass. 338.
Co. 134 Iowa, 84, 12 L.R.A.(N.S.) eilome Ins. Co. v. Curtis, 32 Mich.
421, 108 N. W. 1025. 402.
Annotated on effect of general no- ' Singer v. National Fire Ins. Co.
tificatiou by agent of arrival of policy ]39 N. Y. Siipp. 375, 154 App. Div.
where the company has substituted 783. Delivery to insured's authorized
another form of policy for that ap- agent is sufficient. American Fire
plied for. Ins. Co. v. Minsker Realty Co. 83
* Wainer v. Milford Mutual Fire Misc. 1, 144 N. Y. Supp. 305; Holmes
Ins. Co. 153 Mass. 335, 11 L.R.A. v. Thomason, 25 Tex. Civ. App. 389,
598, 26 N. E. 877. 61 S. W. 504.
323
§ 102 JOYCE ON INSURANCE
the risk has been accepted or not, no contract is consummated,
although the applicant has paid the premium.^ If the policy,
however, is handed to a messenger of the assured, his acts and
declarations are inadmissible to bind the assured in the absence of
proof of his authority.^
But the delivery is sufficient to complete the contract where it
is delivered to the company's agent under a stipulation in a proposal
for insurance that such agent shall act for both parties.^" In an
Iowa case it appeared that the insured had experienced some trouble
in keeping his property insured and made arrangements with
an insurance agent to reinsure upon the expiration of policies, and,
in the event of the cancelation of any policy, to insure in another
company. A policy having been canceled the agent arranged with
an agent of several companies to issue a policy on one of them, this
having been done and the policy handed to the first it was held
that there was a good and sufficient delivery, and that there was
nothing incompatible in the acts of the agent, in his employments
and the performance of his duties as to the cancelation and procur-
ing another policy. ^^ But it is held in a New York case that a
contention that a delivery of a policy to an agent of insured em-
ployed to procure insurance, is a valid delivery to insured is un-
tenable, where the latter never paid the premium and never had
the policy physically delivered to him, nor is such a contention
aided by the claim that the agent had a credit with the insurer,
irrespective of any agreements between the agent and assured. ^^
§ 102. Delivery by and to agent; policy held by agent. — A
delivery of a policy by an authorized agent is effectual to bind the
principals although it be delivered by him to another agent from
whom the application was received, and to whom the premium is
charged, it being delivered by the latter to the assured. ^^ But the
rule is otherwise where the policy is intended as a substitute for
an existing policy in another company, but is not delivered, and
the insured has no knowledge thereof until after the loss. So the
company will be bound by a delivery by its agent where the pre-
mium has been paid, notwithstanding the actual knowledge of the
' Brown v. American Central Ins. Ins. Co. 90 Kan. 355, 133 Pae. 715 ;
•Co. 70 Iowa, 390, 30 N. W. G47. See Aetna Ins. Co. v. Renno, 96 Miss.
Nutting V. Minnesota Fire Ins. Co. 172, 50 So. 563, 37 Ins. L. J. 795.
58 Wis. 26, 73 N. W. 432. Compare Hartford Fire Ins. Co. v.
'^ Williams v. Niagara Fire Ins. Co. McKenzie, 70 111. App. 615. See §
50 Iowa, 561. 661 herein.
10 Alabama Gold Life Ins. Co. v. ^^ :\iorriss v. Home Ins. Co. 139 N.
Herron, 56 Miss. 643. Y. Supp. 674, 78 Misc. 303.
11 Warren v. Franklin Fire Ins. Co. i^ Stebbins v. Lancashire Ins. Co.
161 Iowa, 440, 143 N. W. 554. See 60 N. H. 65.
also Wilson v. German-American
324
COMPLETION OF CONTRACT § 102
assured that the company intended to revoke the agent's authority,
where the delivery takes place hefore such revocation and the agent
has no knowledge of the company's purpose.^* If a local agent of a
fire insurance company has power to write, issue, and sign policies,
and is furnished with forms of policies to be written, issued and de-
livered by him after being signed by him, a policy becomes effective
upon the writing and delivery by such agent, unless the company
cancels the policies and where an agent has authority to issue and
deliver policies, his clerk acting under his instructions may do the
same.^^ And a person who makes a proposal for insurance may by
the company's acts be made its agent to deliver the policy and so
complete the contract." Where it is claimed that the insured was
the agent of the company at the time the policy was issued, and
that it was delivered to him as such agent, to be held for delivery
until he had paid the first premium and the evidence is conflicting,
a charge to the jury is correct, that, if the jury found that insured
received the policy from the company, not as agent or manager,
but as an ordinary applicant only, and that he was trusted by the
company to pay the first premium, instead of paying it in advance,
they should answer the issue for the plaintiff, or "yes; " but other-
wise if insured was to hold the policy as agent until he as an or-
dinary applicant, or individually should pay the premium."
Again where the authorized agent delivers the policy to another
to deliver to the assured, this is a delivery by the company.^* And
where an agent has authority to issue and deliver policies, and it is
issued and left, with a bank, of which the agent is cashier, for safe-
keeping, in accordance with an agreement with insured, the con-
tract of insurance becomes complete and effective, as there is a suf-
ficient delivery, the possession of the bank being equivalent to
possession by insured. ^^ If a policy is sent to a bank at insured's
residence to be delivered to him when the premium is paid, and in-
sured dies, it is a good delivery. And mailing of the policy from
the home office constitutes delivery and instructions to the bank
cannot affect a contract already made.^° And where the ])olicy
when issued was sent to insurer's agent, in conformity with the
terms of the application, and was by the agent sent to a mortgagee,
upon notice to assured and without objection by him, the policy
"Lightbodv v. North Ameriea Life Ins. Co. 163 N. Car. 98, 79
Ins. Co. 23 WeiuL (N. Y.) 18. S. E. 293. Sec § 660 herein.
^^ Marvsvillo Mercantile Co. Ltd. ^^ Ivellj' v. Commonwealth Ins. Co.
V. Home' Fire Ins. Co. 21 Idaho, 377, 30 Bosw. (N. Y.) 82, 95.
121 Pae. 1026. ^^ Marysville Mercantile Co. Ltd.
"National Mutual Church Ins. v. Home Fire 1^"=;. Co. 21 Idaho, 377,
Co. V. Trustees Methodist Episcopal 121 Pac. 1026.
Church. 105 111. App. 143. 20 ^t^^^. York Life In.«. Co. v. Pike,
"Pender v. North State Mutual 51 Colo. 238, 117 Pac. 899.
325
§ 102 JOYCE ON INSURANCE
was held eflfective, at least from the time the application was ac-
cepted, even though assured never saw the policy.^
Again, the delivery may bind the company where the policy is
retained by its agent,^ although only part of the premium has been
paid by the assured.^ So in determining whether there has been a
delivery of a policy the intention of the parties will be given eftect
and where the assured has unconditionally accepted the terms of an
executed policy, and it has subsequently been treated by the parties
as in force, its delivery will be regarded as complete, though it re-
mains in the hands of the insurer's agent.* And where it is ex-
pressly agreed that the policy shall be held by the agent in his safe
for the assured, this is a sufficient delivery, and the assured's right
is perfected.^ So where an agent of the defendant company was
also agent of another company, and he had charge of B's insur-
ance, selecting the companies and receiving his policies, and a ])ol-
icy having been canceled he insured the property in the defendant
company, notifying both parties thereof, charging the premium to
the assured in their private account, and the policy was placed by
him in his safe, it was held that this completed the contract and
bound defendant.®
As a rule, an unconditional delivery of the policy to the agent
for delivery to the insured binds the company, and the agent may
not refuse to deliver upon tender of the premium, although the in-
sured may be seriously sick.''^
^ House V. Security Fire Ins. Co. Minnesota Fire Ins. Co. 98 Wis. 26,
145 Iowa, 462, 121 "N. W. 509, 38 73 N. W. 432.
Ins. L. J. 875. ^Wheeler v. Watertown Fire Ins.
2 United States.— See Fischer . v. Co. 131 Mass. 1.
London & Lancashire Fire Ins. Co. * Newark Machine Co. v. Kenton
83 Fed. 807, 27 Ins. L. J. 417, aff'd Ins. Co. 50 Ohio St. 549, 22 L.R:A.
92 Fed. 500, 34 C. C. A. 503. 768 and note, 35 N. E. 1063.
Alabama. — Stei)lionson v. Allison, ^Franklin Fire Insurance Co. v.
165 AUi. 238, 138 Am. St. Rep. 26, Colt, 20 Wall. (87 U. S.) 560, 22
51 So. 622 ; Phoenix Ins. Co. v. Mc- L. ed. 423. Cited in Phwnix Ins. Co.
Author, 110 Ala. 650, 22 So. 903. v. Meier, 28 Neb. 132. 44 N. W. 97.
Indiana. — New York Life Ins. Co. ^ Dibble v. Northern Assur. Co. of
V. Greenlee, 42 Ind. App. 82, 84 N. London, 70 IVIieh. 1, 14 Am. St. Rep.
E. 1101. 470, 37 N. W. 704.
.Massachusetts. — Wheeler v. Wa- ' Schwartz v. Germania Life Ins.
tertown Fire Ins. Co. 131 Mass. 1. Co. 21 Minn. 215; Yonge v. Equitable
Missouri.— CassviWe Roller Mill Life Assur. Soc. 30 Fed. 902. See
Co. V. JEtna Ins. Co. 105 Mo. App. §§ 103, 104 herein.
146, 79 S. W. 720. On effect of delivery to agent as
Soulh Dal-ola. — Wheaton v. Liver- delivery to assured of policy contain-
pool & London & Globe Ins. Co. 20 iug stijndation that it shall not be-
S. Dak. 62, 140 N. W. 850. come binding unless delivered to as-
Vermonl. — Porter v. Mutual Life snred, see notes in 17 L.R.A.(N.S.)
Ins. Co. 70 Vt. 504, 41 Atl. 970. 1145, 43 L.R.A.(N.S.) 725, L.R.A.
Wisconsin. — Compare Nutting v. 1916F, 171.
326
COMPLETION OF CONTRACT
§ 103
It constitutes a sufficient deliver)/ of a fidelity bond, where the
company's agent delivers it to the employee whose fidelity is guar-
anteed, at the place where he is employed, the purpose and intent of
the company's agent being to deliver it to assured and to pass it into
his custody.^
§ 103. Delivery: agreement completed before loss: mortalillness
or accident. — "V^^here the contract is completed and the risk com-
menced, but the loss or death, or a dangerous sickness or accident
occurs thereafter and before delivery of the policy or certificate, the
company is liable, even though the premium has not been paid,
provided there be no fraud or concealment by the insured.^ So
See also the following cases sup- Co. v. Mcintosh (1906) — Miss.
porting the rule as to unconditional — , 41 So. 381, 35 Ins. L. J. 857.
delivery to agent. See 86 Miss. 236, 38 So. 775.
United States. — Union Central Ne^v Hampshire. — Busher v. New
Life Ins. Co. v. Phillips, 102 Fed. York Life Ins. Co. 72 N. H. 551,
19, 41 C. C. A. 263 ; Fischer v. Lon- 58 Atl. 41, 33 Ins. L. J. 761.
don & Lancashire Fire Ins. Co. 83 New York.— Singer v. National
Fed. 807, 27 Ins. L. J. 417, aff'd 92 Fire Ins. Co. 139 N. Y. Supp. 375,
Fed. 500, 34 C. C. A. 503. 154 App. Div. 783 ; Gallagher . v.
Alabama. — Stephenson v. Allison, Metropolitan Life Ins. Co. 67 Misc.
165 Ala. 238, 138 Am. St. Rep. 26, 115, 121 N. Y. Supp. 638, 39 Ins.
51 So. 622. L. J. 570.
Georgia. — New York Life Ins. Co. Oregon. — Francis v. Mutual Life
V. Babcock, 104 Ga. 67, 42 L.K,.A. Ins. Co. 55 Or. 280, 106 Pac. 523.
88, 30 S. E. 273, 27 Ins. L. J. 649. Virginia.— Eqwituhle Life Assur.
(So even though delivery to insured Soe. of U. S. v. Kitts Admr. 109 Va.
is made essential to validity.) 105, 63 S. W. 455.
Illinois.— Bev'me v. Federal Life Vermont.— Porter v. Mutual Life
Ins. Co. 250 111. 203, 95 N. E. 174, Ins. Co. 70 Vt. 504, 41 Atl. 970.
40 Ins. L. J. 1513; Mulligan v. Met- (Even though insured does not know
ropolitan Life Ins. Co. 149 111. App. of its receipt by the agent.)
516. 8 Prosser Power Co. v. United
Indiana.— New York Life Ins. Co. States Fidelity & Guaranty Co. 73
V. Greenlee, 42 Ind. App. 82, 84 N. Wash. 304, 132 Pac. 48.
E. 1101. (Even though delivery to ^ United States.— JJnion Central
applicant made essential.) Life Ins. Co. v. Phillips, 102 Fed.
/ou«.— Unterharnscheidt v. Mis- 10, 41 C. C. A. 263, rev'g 101 Fed.
souri State Life Ins. Co. 160 Iowa, 33 ; Kohne v. Insurance Co. of North
223, 45 L.R.A.(N.S.) 743, 138 N. W. America, 1 Wash. (U. S. C. C.) 93,
459 (even though agent absent when Fed. Cas. No. 7920.
policv sent) ; Kimbro v. New York Alabama.— Trii)\e Link Ins. Co. v.
Life Ins. Co. 134 Iowa, 84, 12 L.R.A. Williams, 121 Ala. 138, 77 Am. St.
(N.S.) 421, 108 N. W. 1025, 35 Ins. Rep. 34, 26 So. 19.
L. J. 57; Mederis v. Anchor Mutual Arkansas.— Travelers Fire Ins. Co.
Fire Ins. Co. 104 Iowa, 88, 65 Am.
St. Rep. 428, 73 N. W. 495.
Minnesota. — Kilborn v. Prudential
Ins. Co. 99 Minn. 176, 108 N. W.
861, 35 Ins. L. J. 840.
Mississippi. — New York Life Iiis. 50 Ga. 339
.327
V. Globe Soap Co. 85 Ark. 169, 122
Am. St. Rep. 22, 107 S. W. 326.
Georgia. — Fireman's Fund Ins. Co.
V. Pekor. 106 Ga. 1, 31 S. E. 779;
Southern Life Ins. Co. v. Kempton,
§ 103
JOYCE ON INSUKANCE
where an application was made for life insurance and the sum of
fifty dollars was paid to be applied on tlie lirst year's premium, and
the policy was forwarded to the agent for delivery, and the insured
died and the agent refused to deliver it, although the balance of
the premium was offered, the policy was held to have attached. ■^°
So where the premium is to be paid on delivery of the policy, and
a loss by fire occurs before delivery, the company is liable.^^ In
Fried v. Royal Insurance Company ^'^ the plaintiff made a proposal
for insurance on the life of her husband, and advanced the usual
premium for one year, and received therefor a receipt, providing
substantially that the policy was to be forwarded to the head office
at Liverpool, and if accepted a policy was to be issued; if rejected,
the premium was to be returned; if the husband died before deci-
sion should be received the sum insured w^is to Ije paid. The pro-
posal Was accepted and the policy returned to be executed by the
agent and delivered. The agent executed but refused to deliver it,
on account of an alleged unfavorable change in the husband's
health. The husband died soon after and the defendant refused
Illinois. — National Mutual Church
Ins. Co. V. Trustees M. E. Church,
105 III. App. 143.
Iowa.- — Unterharnscheidt v. Mis-
souri State Life Ins. Co. 160 Iowa,
223, 45 L.R.A.(N.S.) 743, 138 N. W.
459; Kimbro v. New York Life Ins.
Co. 134 Iowa, 84, 12 L.R.A.(N.S.)
421, 108 N. AV. 1025, 35 Ins. L. J.
57; City of Davenport v. Peoria Ma-
rine Fire Ins. Co. 17 Iowa, 276.
Kentucky. — Lee v. Union Central
Life Ins. Co. 19 Ky. L. Rep. 608,
41 S. W. 319.
Maine.- — Walker v. ]\Ietropolitan
Ins. Co. 56 Me. 371. (In this case
the policy was not issued nor the
premium paid.)
Michigan. — Dailey v. Preferred
Masonic Mutual Accdt. Assoc. 102
Mich. 289, 26 L.R.A. 171, 57 N. W.
184, 60 N. W. 694. See Shields v.
Equitable Life Assur. Soc. 121 Mich.
690; 80 N. W. 793, 29 Ins. L. J. 122.
Minnesota. — Ganser v. Firemen's
Fund Ins. Co. 38 Minn. 74, 35 N.
W. 584.
Mississippi. — New York Life Ins.
Co. V. Mcintosh, — Miss. — , 41 So.
.381, 35 Ins. L. J. 857, 86 Miss. 236,
38 So. 775, 34 Ins. L. J. 1054.
New Jersey. — Commercial Ins. Co.
V. Hallock, 27 N. J. L. 645, 72 Am.
Dec. 379.
New York. — Gallagher v. Metro-
politan Life Ins. Co. 67 Misc. 115,
121 N. Y. Supp. 638, 39 Ins. L. J.
570; Ellis v. Albany City Ins. Co.
50 N. Y. 402, 10 Am. Rep. 495. See
Loomis V. Jeft'erson Count}' Patrons'
Fire Relief Assoc. 87 N. Y. Supp.
5, 92 App. Div. 601.
Penns>/lva)iia. — Standard Wheel
Co. V. Phoenix Ins. Co. 29 Pa. Co.
Ct. Rep. 367.
Tennessee. — Gordon v. United
States Casualtv Co. (1899) — Tenn.
Ch. App. — , 54 S. W. 98 ; Whitman
V. American Central Ins. Co. 14 Lea
(Tenn.) 327 (case of substituted
policy),
Tej as.— -Home Forum Benefit Or-
der V. Jones, 20 Tex. Civ. App. 68,
48 S. W. 219.
Virginia. — Ecjuitable Life Assur.
Soc. of U. S. V. Kitts' Admr. 109
Va. 105, 63 S. E. 455.
^° Cooper V. Pacific Mutual Ins.
Co. 7 Nev. 116, 8 Am. Rep. 705.
1^ Ansrell v. Hartford Fire Ins. Co.
59 N. Y. 171, 17 Am. Dec. 322.
12 50 N. Y. 243.
328
COMPLETION OF CONTRACT § 104
payment, claiming that the contract was never consummated, and
that the acceptance must be qualified by the company's standing
instructions to the agent not to deliver a policy if a change had
taken place in the health of the assured. The court, however, de-
cided that the acceptance was absolute and unqualified, and could
. not be limited by private instructions to the agent of which the
plaintiff had no notice, and if the contract was in violation of the
instructions or inconsistent therewith, the defendant ratified the
same; that it was competent for the defendant to contract in entire
disregard of instructions to its agent; that they were chargeable
with knowledge that the contract was inconsistent with the agent's
alleged instructions, and with that Icnowledge had assented to it,
and that a recovery could be had by the plaintiff. And where the
agreement is completed before los^, the assured has the right to re-
ceive a policy although he knows that the company intended to re-
voke the agent's authority, but had not actually done so when the
agent tendered the polic5^^^ Again an application to an insur-
ance agent representing several companies for a certain amount of
insurance on specified property, the agent to select the companies
and distribute the risk, and his agreement so to do and give the
insurance, constitute a valid contract of insurance with each com-
pany as soon as its policy is signed, although the policies are not
delivered until after the property is destroyed by fire, since in dis-
tributing the risk the agent acts for the assured.^*
§ 104. Delivery: agreement incomplete at time of loss: mortal
illness, or accident. — If the contract is not completed, and a loss
occurs or the insured dies, or is dangerously ill or is accidentally
injured, the company may refuse to deliver the policy or receive
the premium, or otherwise consummate the contract,^^ as where the
" Lightbody V. North America Ins. Civ. Code not applicable); W. P.
Co. 23 Wend^ (N. Y.) 18. Harper & Co. v. Ginners Mutual Ins.
" Michigan Pipe Co. v. Michigan Co. 6 Ga. App. 139, 64 S. E. 567.
Fire & Marine Ins. Co. 92 Mich. 482, Indiana. — New v. Germania Fire
20 L.R.A. 277, 52 N. W. 1070. Ins. Co. 171 Ind. 33, 131 Am. St.
^^ United States.— Mohrstadt v. Hep. 245, 85 N. E. 703; Reserve
Mutual Life Ins. Co. 115 Fed. 81, 52 Loan Life Ins. Co. v. Hockett, 35
C. C. A. 075; Steinle v. New York Ind. App. 842, 73 N. E. 843.
Life Ins. Co. 81 Fed. 489, 52 U. S. Kentucky.— Claypool v. Continen-
App. 235, 26 C. C. A. 481, 27 Ins. tal Casualty Co. 129 Ky. 682, 112
L. J. 174. Examine Keen v. Mutual S. W. 835; New York Life Ins. Co.
Life Ins. Co. 131 Fed. 559, 33 Ins. v. Levy's Adm'r 122 Ky. 457, 21 Kv.
L. J. 916, rev'd 135 Fed. 677, 68 C. L. Rep. 21, 5 L.R.A. (N.S.) 739n, 92
C. A. 315. S. W. 325, 35 Ins. L. J. 455; Blue
Georgia.— Firemen's Fund Ins. Co. Grass Ins. Co. v. Cobb, 24 Ky. L.
V. Rogers, 108 Ga. 191, 33 S. E. 954, Rep. 2132, 72 S. W. 1099 (Ky. St.
28 Ins. L. J. 1025 (sec. 2095 Ga. sec. 702); Dickenson v. Provident
329
§ 104 JOYCE OX INSURANCE
policy was withheld until payment of the premium, which had not
been made when assured died.^® In a Pennsylvania case the ap-
plication was made to a mutual company and the agTeement was
that the premium should be paid on delivery of the policy. The
policy was drawn without the applicant's signature, but he was en-
rolled on the company's books as a member. A fire occurred and
delivery of the policy was refused, although the premium was
tendered, and it was held that the applicant's liability to con-
tribute to losses was not fixed, that the contract was not com-
pleted, and therefore no action could be maintained for a policy."
So where a policy provides that under no circumstances shall it be
enforced until the premium is paid, if the assured dies l>efore such
payment and before delivery of the policy, the policy is inoperative,
notwithstanding the company's agent has told the assured that he
could pay when the policy was delivered.^* And where a policy
was assigned and left with the company to be approved, and such
approval was delayed until assured should give a premium note,
and a loss occurred before the note was given, it was held that the
company could not collect his assessment for the loss, as no contract
of insurance existed.^^ And where in an action upon a fire policy
Sav. Life Assur. Soc. 21 Kv. L. Rep. uisite, and couuter-sig-ned in ignor-
Gll, 52 S. W. 825. ' ance of death).
Massachuseils. — Cunningham v. Virginia. — Oliver v. Mutual Life
Connecticut Fire Ins. Co. 200 Mass. Ins. Co. 97 Va. 134, 1 Va. S. C. Rep.
333, 86 N. E. 787, 38 Ins. L. J. 315 29, 33 S. E. 536, 28 Ins. L. J. 710.
(cause of action on contract. Case See Mutual Life Ins. Co. v. Oliver,
up on appeal on agreed facts with 95 Va. 445, 28 S. E. 594, 28 Ins. L.
stipulation that court might draw J. 710.
inferences of fact). Washington. — Harriman v. New
.A^e^ras Ay/.— Lowe v. St. Paul Fire York Life Ins. Co. 43 Wash. 398, 86
& Marine Ins. Co. 80 Neb. 499, 114 Pac. 656, 35 Ins. L. J. 852 ; Starr v.
S. W. 536. Mutual Life Ins. Co. 41 AVash. 228,
Neiv Hampshire. — Busher v. New 83 Pac. 116, 35 Ins. L. J. 137.
York Life Ins. Co. 72 N. H. 551, 58 Wisconsin. — Costcllo v. Grant
i^tl. 41, 33 Ins. L. J. 761. Countv Mutual Fire & Lig'htning Ins.
Neiv Jersey.— Consumers Match Co. 133 Wis. 361, 113 N. W. 639.
Co. v. German Ins. Co. 70 N. J. L. See Nutting v. Minnesota Fire Ins.
226, 57 Atl. 440, 33 Ins. L. J. 525. Co. 98 Wis. 26, 73 N. W. 432.
Oregon. — Lathrop v. Modern ^^ Collins v. Insurance Co. 7 Phila.
Woodmen of America, 56 Oreg. 440, (Pa.) 201. See Merchants & Manu-
106 Pac. 328, 109 Pac. 81. facturers Mutual Ins. Co. v. Baker,
Pennsylvania.— CoWins v. Insur- 4 Neb. (Unof.) 384, 94 N. W. 627.
ance Co. 7 Phila. (Pa.) 201. " Schaffei- v. Lehigh Mut. Fire
Texas.— Dickey v. Continental Ins. Co. 89 Pa. St. 296.
Casualtv Co. 40 Tex. Civ. App. 199, " Oi-mond v. Fidelity Life Assn.
89 S. W. 436 (case where counter- 96 N. C. 158, 1 S. E. 796.
signal ure of policy-writer a prereq- ^^ Cranberrv' Mutual Fire Ins. Co.
330
*l
COMPLETION OF CONTRACT § 104a
it appeared that the agent of the insurer, after writing the policy,
forwarded it to one S., with instructions to tender it to the plain-
tiff in renewal of an expired policy, but before it was so tendered,
the property was destroyed and H. received instructions by wire not
to deliver the policy, and he told the plaintiff of the receipt of the
policy by him and his instructions not to deliver it, and upon the
following day the plaintiff wired S, to hold the policy, which had,
however, been returned to the agent of whom a demand therefor
was made and the premium tendered, it was held that the contract
was not complete.^" So where an agent represented several com-
panies and an application was made to him for insurance, and part
of the premium paid, and after a loss the balance was paid and a
policy demanded, it w^as held that no action could be maintained
to compel delivery of a policy in the absence of evidence that a
contract of insurance had been completed with some particular com-
inmy.^ So the company may refuse to deliver a life policy al-
though it is made out and mailed to the agent to be countersigned
and delivered, it being provided that it shall take effect only when
countersigned by the agent, and the party dies before the policy
reaches the agent; ^ and where a life policy was not to be in force
until "signed by the officers of the association and delivered to the
applicant," and was not made out until after the death of the ap-
plicant and in ignorance of it, and was then delivered at the proper
place, it was declared void.' Nor is the company liable in a case
where an applicant for life insurance dies before the application
is forwarded to the company, although the applicant has given his
note for the amount of the first premium.*
§ 104a. Same subject. — Where the property is burned while the
risk is being considered and the ap])lication then rejected there is no
binding contract, although the agent gives a receipt for the first
premium where said receipt provides that the premium should be
returned if no policy was issued.* And the indorsement by the
clerk of an insurance company of a slip of paper notifying the com-
pany of a shipment to be covered by an open marine policy in the
usual way with the amount of the premium and the check mark
indicating its readiness for entry in the books, will not show an ac-
V. Hawk (1888) — N. J. Eq. — , 14 2 j^T^j.^g y_ Pha-nix Mutual Life
Atl. 745. Ins. Co. 1 Mo. App. 584.
On liability of insurance company ^ ^lisselhorn v. Mutual Reserve
for neglioent delay in passing upon Fund Assoc. 30 Fed. 545.
or issuing- policy until after loss, see * Covenant Mutual Benefit Assn. v
note in 40 L.K.A.(X.S.) 152. Conway, 10 111. App. 348.
2" New York Lumber & "Wood- * Shawnee Mut. Fire Ins. Co. v.
Working Co. v. People's Fire Ins. McClure, 39 Okla. 535, 49 L.R.A.
Co. 96 Mich. 20, 55 N. W. 434. (N.S.) 1054, 135 Pae. 1150.
^ New Orleans Ins. Assn. v. Boniel,
20 Fla. 815.
331
§ 105 JOYCE ON INSUKAXCE
ceptance of the risk in the face of its positive rejection by the officers
of the company as soon as they learned that it was on property al-
ready lost, of which the assured is notified without delay .^ A per-
son cannot refuse to accept a policy, repudiate the contract and then,
after loss, accept the policy, pay the premium, give notice of loss,
and sustain a claim that the contract was completed, even though
the company returns the policy AA'ith a letter requesting acceptance,
and after the contract is again repudiated again returns the policy
with a request by letter that it be accepted and the premium paid,
said letter being received after the loss, it appearing that the com-
pany at the time of the receipt of the premium was ignorant of the
loss.' Again, a binding contract by an insurance company, insur-
ing its agent's property, is not made by his writing the policy, en-
tering it on his register, and making out a report of it to the com-
pany, if the property is destroyed before the company receives the
report, which it refuses to approve.*
An accident insurance company may reject an application when
it learns of an accident to the applicant, even though it had in-
tended to accept the application, and had made some minutes upon
it, but had never communicated such intention to the applicant.^
And an accident insurance policy is not in force where a renewal
receipt is mailed by the agent, held by the insured a couple of
weeks, and returned with a notice to discontinue, although the
agents do not accept the discontinuance, but write assured that they
will hold the receipt for him and give him credit for the premium,
where he dies before the letter reaches him; and it is immaterial that
both parties think that the policy is in force until the discontinu-
ance is accepted. ^°
§ 105. Loss before date of contract: policy retroactive. — An
insurance policy may be retroactive, and so provide for indemnity
for a loss which happened anterior to the date of the policy. In
marine insurance a policy can be lawfully effected upon property
"lost or not lost; " but this phrase so used has reference to ca.ses
where the property has started upon its voyage and the parties to
the insurance have no knowledge whether it has been lost or nol
In such cases the insurance is against an unknown event, and the
6 Delaware Ins. Co. v. S. S. While Ins. Co. 110 Mich. 399, 33 L.R.A.
Dental Mfg. Co. 48 C. C. A. 382, 098, 68 N. W. 215.
109 Fed. 334, 65 L.R.A. 387, writ of ^ Allen v. Massachusetts Mutual
certiorari denied (mem.) 183 U. S. Accident Assoc. 16/ Mass. 18, 44 N.
700, 46 L. ed. 396. 22 Sup. Ct. 937. E. 1053, 26 Ins. L. J. 316.
' Nordness v. Mutual Cash Guar- ^° Richmond v. Travelers Ins. Co.
antv Fire Ins. Co. 22 S. Dak. 1, 114 123 Tenn. 307, 30 L.R.A. (N.S.) 954,
S. W. 1092. 130 S. W. 790.
^ Zimmerman v. Dwelling Houso.
332
i
COMPLETION OF CONTRACT § 105
underwriter takes the risk of the arrival of the property at its desti-
nation, and thus there is something to insure. ^^ ^;o a policy may
contain the words ''lost or not lost," and cover a cargo on board a
ship then on a whaling voyage, beginning the adventure on said
cargo as aforesaid,^^ and the property may be covered, although it
was lost eight hours before the policy was effected. ^^ So an insur-
ance will be valid where there is no fraud in the case, although
made after a loss and before notice thereof, and notwithstanding the
vessel was cast away and lost about ninety miles from the port of
destination, where some of the partners who procured the insur-
ance resided.^* And a policy will be upheld although the owners
went to the company's ofhce late in the evening and obtained in-
surance on a vessel which was past due and lost, and news of such
loss had reached the city, although it was not proven to have reached
the owners ; ^* and a policy may be retroactive where, in the ab-
sence of fraud, concealment, or misrepresentation, it is signed after
a loss has occurred for a risk taken to commence before its date,
though there be no clause equivalent to "lost or not lost; '"' ^^ for the
policy need not contain the words "lost or not lost" to cover losses
prior to its date. It is sufficient that it appear that the insurance
was intended to cover prior losses.^'' And a retrospective fire insur-
ance contract made when the thing insured is distant and its status
unknown to either party will bind the insurer for a loss occurring
before the date of the agTeement, if such appear either from the
policy or from circumstances to have been the intention of par-
ties;" and extrinsic evidence is admissible to prove that a policy,
dated on the same day on which an embargo was laid, was made
"People v. Dimick, 107 N. Y. 13, 26 N. J. L. 268; Commercial Ins.
29, per Earle, J.; Gauntlett v. Sea Co. v. Hallock, 27 N. J. L. 645, 72
Ins. Co. 127 Mich. 504, 86 N. W. Am. Dec. 379; Mercantile Mutual
1047, 30 Ins. L. J. 986, 991. Ins. Co. v. Folsom, 18 Wall. (85 U.
12 Paddock V. Franklin Ins. Co. 11 S.) 237, 21 L. ed. 827.
Pick. (28 Mass.) 227. ^'^ Mercantile Mutual Ins. Co. v.
i^Blacklmrst v. Cockell, 3 Term. Folsom, 18 Wall. (85 U. S.) 237, 21
Ren. 360. See also Clement v. Phop- L. ed. 827, affirmmg 8 Blatchf. (U.
nix Ins. Co. 6 Blatchf. (U. S. C. C.) S. C. C.) 170, Fed. Cas. No. 4902, 9
481, Fed. Cas. 2881; Merchants' Ins. Blatchf. (U. S. C. C.) 201, Fed. Cas.
Co. V. Paige, 60 111. 448 ; Schroeder No. 4903 ; Hammond v. Allen, 2 Sum.
V. Stock and Mutual Ins. Co. 46 Mo. (U. S. C. C.) 396; Hooper v. Robni-
174: Sutherland v. Pratt, 11 Mees. son, 98 U. S. 528, 53/, 2o L. ed. 219,
& -^Y 296 --'^; 1 Phillips on Ins. (3d ed.) 501,
1* Andrews v. Marine Ins. Co. 9 sec. 925; 3 Kent's Comm. 259, note
Johns. (N. Y.) 32. c- See also § 104 herein.
"Horler x. Merchants' Mutual ^^ Security Fire Ins. Co. v. Ken-
Ins. Co. 28 La. Ann. 730. tucky Marine & Fire Ins. Co. 7 Bush
i« Hallock V. Commercial Ins. Co. (Ky.) 81, 3 Am. Rep. 301.
333
§§ 106, 107 JOYCE OX INSURANCE
without knowledge of the embargo. ^^ And whore the contract is
made when both parties are ignorant of the los.<, the policy may
be valid and binding, although it is not deliveredj^" and so although
the policy is post-dated.^
§ 106. Where both parties know of loss when contract is made or
executed. — Although in marine risks the policy may be upon prop-
erty "lost or not lost," yet if the property has been totally lost and
this is known by the parties, there is nothing to insure, no event to
be indemnified against, no unknown event upon which to base the
contract, and hence there can be in such case no lawful or valid
insurance.^ But if at the time the policy is executed a loss has
occurred, and it is known to both parties, the contract will be bind-
ing if the risk has actually attached prior thereto.^ And it is held
that a binding contract may be made where the insurers know of
the loss at the time the contract is entered into, and it appears that
they intend to make themselves liable.* For if the amount of the
loss is uncertain, there is no reason why the insurance should not
attach.^ Such intention where the loss is unknown is generally ex-
pressed by the words ''lost or not lost." ^
§ 107. Knowledge of loss by assured before and after risk at-
taches. — Where a loss occurring before the risk attaches is known
only to the applicant and he obtains a policy without disclosing
the fact of loss, the policy is void,' even though the contract be
^^ Lorent & Steinmetz v. South 28 Ins. L. J. 1025, considering Ga.
Carolina Ins. Co. 1 Nott & McC. (S. Civ. Code, see. 2095, as not appliea-
C.) 505, 506. ble as said code relates exclusively
^^ Kohne v. Insurance Co. of North to completed contracts of insurance
America, 1 Wash. (U. S. C. C.) 93, made between parties who were both
Fed. Cas. No. 7920; Union Ins. Co. ignorant that the loss against which
V. American Fire Ins. Co. 107 Cal. it was intended to insure had already
327, 48 Am. St. Rep. 140, 28 L.R.A. occurred.
692, 40 Pac. 431. * Arkansas Ins. Co. v. Bostick, 27
^ IMead v. Davison, 3 Ad. & E. Ark. 539. . But see People v. Dimick,
303; Giffard v. Queen's Ins. Co. 1 107 N. Y. 14.
Hann. (N. B.) 432; Merchants' Ins. ^2 Phillips on Ins. (3d ed.) 502,
Co. V. Paige, 60 111. 448; Horter v. sec. 926.
Merchants' Mutual Ins. Co. 28 La. « Mead v. Davison, 3 Ad. & El.
Ann. v30. 303; Arkansas Ins. Co. v. Bostick,
2 So hold in People v. Dimick, 107 27 Ark. 539. See §§ 104 and 105
N. Y. 13, 29, per Earle, J. herein.
' 3 Mead v. Davison, 3 Ad. & E. ' Gauntlett v. Sea Ins. Co. 127
303; Davenport v. Peoria Marine & Mich. 504, 86 N. W. 1047, 30 Ins.
Fire Ins. Co. 17 Iowa, 276; Walker L. J. 986; Fitzherbert v. Mather, 1
v. Metropolitan Ins. Co. 56 Me. 371; Term Rep. 12; Laidlaw v. Liverpool
1 Phillips on Ins. (3d ed.) 502, sec. &_ London Ins. Co. 13 Grant (Ont.)
926; Firemen's Fund Ins. Co. v. 3/7; Mackie v. European Ins. Co. 21
Rogers, 108 Ga. 191, 33 S. E. 954. L. T. R. N. S. 102. See People v.
334
COMPLETION OF CONTRACT § 108
given a date prior to the loss.* If a person who has directed a ma-
rine insurance to be procured at a distant place receives intelli-
gence of a loss before his order is executed, he should countermand
the order, or transmit the intelligence by the earliest and most ex-
peditious usual route of mercantile communication. But it is not
obligatory on him to resort to an unusual and extraordinary mode
of transmission. So where the Atlantic cable had been only about
three months in operation, and the rates were high, it was held suf-
ficient to send notice by the first mail from Liverpool to New York,
where the insurer resided.^ In an Illinois case a marine policy was
obtained on goods lost or not lost, shipped on a vessel lost two days
prior to the date of the policy ; this loss was known to the insured
at the time, but he failed to inform the agent, and it was decided
that the particular agent effecting the insurance should have been
informed ; that knowledge by the company of the loss did not neces-
sarily arise from the fact that the daily papers received at the com-
pany's office on the day the policy was issued contained a notice of
the loss; and that notice to one agent of the company did not im-
port necessarily a notice to the other. ^° In Blake v. Hamburg-
Bremen Fire Insurance Company ^^ the agent agreed with the in-
sured that he might obtain additional insurance, such insurance to
take eff^ect for an amount named in a letter from the time it was
mailed. It was determined that the insurance could not be held
to, have attached from the mere posting of an unstamped letter, and
that giving notice after the fire began, the insured knowing of such
fact, was insufficient to bind the company.
§ 108. Assured not obligated to notify company of loss before
delivery of policy when risk has attached. — There is no legal nor
moral obligation resting on the assured to voluntarily notify the
company of a loss occurring after the risk has attached, although
the policy has not been delivered nor the premium paid.^^ So
where an application was accepted and the policy made out and
executed, but was permitted to remain in the hands of the com-
pany, and the plaintiff, directly after the occurrence of a loss paid
the premium and received the policy without disclosing the fact
that the property had been burned in the meantime, it was de-
Dimick, 107 N. Y. 13; Mittaker v. "67 Tex. 160, 60 Am. Rep. 15, 2
Farmers' Union Ins. Co. 29 Barb. S. W. 368.
(N. Y.) 312. ^2 j^eim v. Home Mutual Fire Ins.
8 Wales V. New York Bowery Fire Co. 42 Mo. 38, 97 Am. Dec. 291;
Ins. Co. 37 Minn. 106, 33 N. W. 322. American Home Ins. Co. v. Patter-
^ Snow V. Mercantile Mutual Ins. son, 28 Ind. 17. See El Dia Home
Co. 61 N. Y. 160. Ins. Co. v. Sinclair, 228 Fed. 833,
10 Merchants' Ins. Co. v. Paige, 60 840, 143 C. C. A. 231, 238, 47 Ins. L.
111. 448. J. 43, 49.
335
§ 108a JOYCE OX INSURANCE
termined that the company was liable and that upon receipt of the
premium and delivery of the policy the contract related back to
the date of the policy," and in such case the policy will also relate
back to the time when it was made out and signed, notwithstand-
ing a provision in the bj^-laws that the policy should take effect on
the day of approval and be binding thereafter ''providing the
premium has been paid, and not otherwise." ^*
§ 108a. Mutual benefit societies or associations: issuance of
certificate. — .Although a statute specifies what a certificate issued by
a fraternal benefit society shall contain, nevertheless this does not
require such societies to issue one.^^* But the issuance of a cer-
tificate is held to be necessary in a fraternal order,^^ and a pro-
vision requiring that the certificate be issued and dated requires
delivery and acceptance.^^ AVhere an application was made for
life insurance, the first annual premium contingently paid,
a receipt given which recited that it would be binding on the
company from the date of the medical examination, provided
the application Avas approved and a policy issued by the com-
pany, such application must be read with the receipt; thus read
it was an ofi'er for a contract of insurance to be accepted by ap-
proval of the application, and by issuance of a policy. Accept-
ance required both. Until so accepted neither party was obligated
and both parties had a right to a locus poenitentiae. therefore a
mere approval revoked or not does not constitute acceptance, and
no policy having issued no acceptance was made, there was no
meeting of minds of the parties." Again, the "issuing" of a policy
of life insurance, within the meaning of a statute providing that an
insurance company shall be estopped, in the absence of fraud, by
the certificate of its medical examiner from setting up that the in-
sured was not in the condition of health required by the policy at
the time it was issued, includes a delivery of the policy to the as-
13 Baldwin v. Chouteau Ins. Co. 56 ^^ Supreme Lodge Knights of
Mo. 151, 17 Am. Rep. 671. See also Pythia^ v. Graham, 49 Ind. x\pp.
Commercial Mutual Marine Ins. Co. 535, 97 N. E. 806.
V. Union Mutual Marine Ins. Co. 19 '-Issued,'' see Stringham v. Mutual
How. (60 U. S.) 318, 15 L. ed. 636. Life Ins, Co. 44 Oreg. 447, 75 Pac.
1* Keim v. Home Mutual Fire Ins. 822, 33 Ins. L. J. 463. See § 146
Co. 42 Mo. 38, 97 Am. Dec. 291. herein.
"^ Laws N. Y. 1911 (repealing art. ^^ Supreme Council Royal Arca-
VII. c. 33, Laws 1909, as am^d by e. uum v. Pels, 209 111. 33, 70 N. E.
589) p. 451, e. 198, sec. 232. Report 697.
of Attv. Genl. 1912, Vol. 2, p. 220. " Kennedy v. Mutual Benefit Life
See § i46 herein. Ins. Co. (U. S. D. C.) 205 Fed. 677.
336
COMPLETION OF CONTRACT §§ 108b, 108c
sured. Until such delivery is made there is no "issuing" of the
policy.^*
Issuance and delivery of a certificate is not made effective though
obtained by replevin where such issuance and delivery have been
refused and the certificate is not in force.^'
§ 108b. Mutual benefit societies or associations: actual delivery
of certificate unnecessary, unless. — Actual delivery of a certificate is
imnecessary in the absence of an express agreement or contract there-
for.^" But if delivery of a benefit certificate is a condition prece-
dent to the company's liability it must be complied with.^ And if
the parties agree that actual delivery of a certificate is essential to
the completion and binding effect of the contract such actual de-
livery is necessary.^ But even though a delivery in person to the
applicant is made a condition precedent under the by-laws this doas
not mean actual manual possession by insured, and the acts of the
society may be such as to constitute a sufficient delivery even though
there has been no delivery in person.^ And, although the consti-
tution and by-laws may require a delivery of a benefit certificate as
a condition upon which liability of the order depends, still it is held
that actual delivery is not a condition precedent to recovery where
the member was in good standing when he died.*
§ 108c. Mutual benefit societies or associations: Initiation as
prerequisite to delivery. — If initiation is reciuu'ed under the by-
laws of a fraternal benefit association as a prerequisite to delivery
of a certificate it must be complied with.^ And mere delivery of a
certificate by a local officer of a fraternal beneficiary association
does not obligate the association where conditions precedent to such
delivery have not been complied with.^ But even though delivery
** Cunningham v. ISoval Neiglibors McLendon v. Woodmen of the
of America, 24 S. Dak/489, 140 Am. World, 106 Tenn. 695, 64 S. W. 36,
St. Rep. 793, 124 N. W. 434. 52 L.R.A. 444.
^^ National Aid Assoc, v. Braohter, ^ Crohn v. Order of United Com-
65 Neb. 378, 91 N. W. 379, aft'd 93 mercial Travelers of America, 170
N. W. 1122. Mo. App. 273, 156 S. W. 472.
^° Crohn V. Order of United Com- ^ O'Neal v. Sovereigii Woodmen of
mercial Travelers of America, 170 the World, 130 Kv. 68, 113 S. W.
Mo. App. 273, 156 S. W. 472 ; Wag- 52.
ner v. Supreme Lodge Knights & * Pledger v. Sovereign Camp
Ladies of Honor, 128 Mich. 660, 8 Woodmen of the World, 17 Tex. Civ.
Del. Leg. N. 815, 87 N. W. 903. App. 18, 42 S. W. 653.
In certain societies no certificates ^ Kolosinski v. Modem Brother-
issued, see § 146 herein. hood of America, 175 Mich. 684, 141
^ Wilson V. Interstate Business N. W. 589. See i\[c Williams v. Mod-
Men's Accident Assoc. 160 Iowa, 184, ern Woodmen of America (1912)
140 N. W. 860; Kirk v. Sovereign — Tex. Civ. App. — , 142 S. W.
Camp of Woodmen of the World, 641. See § 53c herein.
169 M .. App. 449, 1.55 S. W. 39; ^ kolosinski v. Modern Brother-
.royte Ins. Vol. T— 22. 337
§ lU8d JOYCE OX INSURANCE
to the applicant in person is required still the society may be es-
topped to deny tlie regularity of an initiation as where it was per-
mitted to proceed although the society had knowledge of an error
in the certiticate.'
If initiation is expressly forbidden by the association's constitu-
tion the fact that deceased liad l)een initiated will not warrant a
recovery on a certificate never delivered to him, when such delivery
is a condition precedent to a binding contract.*
§ 108d. Delivery of certificate to subordinate lodge, local camp,
etc. — Delivery may be made and the contract completed by send-
ing a certificate to a subordinate lodge for a meml)er.^ So where
the Supreme Lodge of the Knights of Honor sends a benefit cer-
tificate properly signed and sealed to a subordinate lodge, for a
person who has applied for membership, been balloted for, elected,
and had a degree conferred upon him, and has paid his fees and
passed a medical examination which has been approved, the con-
tract relations between him and the supreme lodge are complete, .
although the subordinate lodge has not delivered to him the cer-
tificate.^" But compliance with conditions precedent contained in
the constitution and by-laws or in the certificate may become neces-
sary to make sufficient a delivery to an oflicer of a subordinate lodge
'for delivery to the member." And delivery of a certificate and
payment of assessments and dues may be prerequisite to liability on
a duly executed certificate sent to the clerk of a local society.^^ Rut
the clerk of a local camp, without authority under the laws of the
order so to do, cannot preclude recovery by not delivering a bene-
fit certificate, where the member had fulfilled all requirements en-
titling him to such certificate, and was in good standing at the time
of his death and this is so even though insured was not in good
health when the certificate was demanded.^^
The beneficiary may recover where the certificate issued by the
sovereign camp was sent to the wrong local camp through mistake,
even though the insured was killed before correction of the error
hood of America, 175 Mich. 684, 141 ^° Lorscher v. Supreme Lodge
N. \V. 589. Kniglits of Honor, 72 Mich. 316, 2
'O'Neal v. Sovereign Camp Wood- L.R.A. 206, 40 N. W. 545.
men of the World, 130 Kv. 68, 113 " Wilcox v. Sovereign Camp
S. W. 52. Woodmen of the World, 76 Mo. App.
^McLendon v. Sovereign Camp 578, 1 Mo. App. Rep. 525.
Woodmen of tlie World, 106 Tenn. ^^ ^Yii^^.^,^ v. Sovereign Camp
695, 52 L.R.A. 444, 64 S. W. 36. Woodnu-n of the World, 76 Mo.
^Wagner v. Supreme Lodge App. 5/3, 1 Mo. App. Rep. 525.
Knights & Ladies of Honor, 128 ^^ Pledger v. Sovereign Camp
Mich. 660, 8 Det. Leg. N. 815, 87 Woodmen of the World, 17 Tex. Civ.
N. W. 903. App. 18, 42 S. AV. 653.
338
COMPLETION OF CONTJJACT §§ 108e-108g-
I)y >c!i(Iiii.u it to the riglit local camp for delivery and although it
\viis a condition ])recedent that the certificate t^hould be personally
dehvercd and an assessment paid before benefits should accrue it
appeai-ing that deceased had oft'ered to pay said assessment.^*
§ 108e. Mutual benefit societies or associations: delay in execut-
ing and delivering certificate: retention of certificate. — Mere delay
in executing and delivering a benefit certificate, during which the
applicant dies, will not give any right of recovery on the certificate
where the terms of the contract prevent it from taking effect until
its delivery to the applicant in good health, the delay not being un-
reasonable or caused l>y bad faith, and there being no time pre-
scribed within which the delivery should be made.^^ If an associa-
tion retains the certificate after the contract rights of a member
with the association have become fixed such retention does not pre-
clude a I'ecovery.^^
§ 108f. Where officer of society acts as custodian of certificate. —
It constitutes a sufficient delivery of a. certificate when mven to an
officer of a beneficial society who acts by request as custodian for
assured.^''
§ 108g. Mutual benefit societies or associations: delivery of cer-
tificate or prepayment of dues during life or good health. — No
recovery can be had against fraternal and beneficial orders on the
death of an applicant before delivery to him of the benefit certi-
ficate where such delivery, while in good health, Avag by the terms
of the application, certificate, constitution and by-laws, a condi-
tion precedent to its taking eft'ect.^* So the actual payment of the
premium during the applicant's good health may by the terms of
the application and the policy be a condition precedent to the
liability of an as.sociation which no agent thereof can waive
by accepting a note contrary to the policy prohibition.^^ Nor
can any recovery be had by the beneficiary upon a certificate
where the insured named therein died before it was issued and
^* Sovereign Camp Woodmen of healtli, notes in 17 L.R.A.(N.S.)
the World v. Dees, 45 Tex. Civ. App. 2144; 43 L.R.A.(N.S.) 725; and
318, 100 S. W. 366. L.R.A.1916F, 171.
^^ McLendon v. Sovereign Camp ^® Groat Hive Ladies of Modern
Woodmen of the World, 106 Tenn. Maccabees v. Hodge, 130 111. App. 1.
695, 52 L.R.A. 444. 64 S. W. 36. ^^ Supreme Court, Order of Pa-
On ett'oct of delav in passing ui)oii Iricians v. Davis, 129 Mich. 318, 8
application, see notes in 36 L.R.A. Det. Leg. N. 970, 88 N. W. 874.
(N.S.) 1211, and r>l L.R.A. (N.S.) !» McLendim v. Sovereign Camp
873. On effect of stij)uliition in ni>- Witudnion of tlu' Woi-ld, 106 Tenn.
Iilicnlioii on i)olicy of life insurance 695, 52 T>.IJ.A. 444, ()4 S. \V. 36.
that it shall not l)ecoine hindiiio \!n- ^^ Kccsc \-. Fidelity INfiitual Life
less (l('li\('i-ed to a.'^surcd while in iiool /xh.soc. Ill (Ja. 182, 36 S. K. ()37.
339
§ 108g JOYCE ON INSURANCE
which was never dehvered either actually or constructively,^"
and where, under the by-laws, expressly made a part of the
contract delivery of the certificate by the cani}) clerk and the
payment of dues and assessments to the applicant is required,
such condition i^recedent must be complied with and, a de-
livery by the head office is insufficient. And if the insured is in-
jured before compliance with such condition no liability attaches,
nor is a payment sufficient when made after the accident to a local
clerk in the absence of a ratification or waiver.^ But the clerk
of a benevolent society, without authority so to do cannot prevent
a recovery on the certificate by refusing delivery because of a
change in the applicant's health, even though under the consti-
tution and by-laws of the society delivery of the certificate is a
prerequisite to liability.^ And an agreement or stipulation in a
contract of fraternal insiu'ance with a married woman, that the con-
tract shall not take eft'ect unless delivered to her "while in sound
health" is not violated by reason of the applicant being pregnant
at the time of the delivery of the policy.^ If the by-laws provide
for an increase of ])enefits and tlie issuance of a new certificate to
a member in good standing, upon compliance with certain condi-
tions as to health and. fees, without any other reservation or dis-
cretion as to the issuance, — the society is liable where such condi-
tions are complied with even though insured dies after issuance of
the new certificate but before its delivery to him.'*
2° Alexander v. Woodmen of the ^ Rasieot v. Roval Neighbors of
World, 161 Ala. 561, 49 So. 883. Amerioa, 18 Idaho, 8.5, 29 L.R.A.
iLathrop v. xModern Woodmen of (N.S.) 433, 108 Pac. 1048.
America, 5() Oreg. 440, lOG Pae. 328, * Ran<'ii)her v. Women of AVood-
109 Pac. 81. craft, 50 Wash. 68, 96 Pac. 829.
2 Pledger v. Sovereign Camp
Woodmen of World. 17 Tex. Civ.
App. 18, 42 S. W. 653.
340
CHAPTER V.
REINSURANCE.
§ 112. Reinsurance defined.
§ 112a. Evidence admissible to show "reinsurance" has technical mean-
ing of agency reinsurance.
§ 112b. When transfer is not reinsurance, but an illegal transaction :
assets a trust fund : deposit with state.
§ 113. Reinsurance: nature of contract.
§ 114. Reinsurance: validity of contract.
§ 115. Reinsurance : validity of company's acts : its powers.
§ 115a. Same subject.
§ 115b. Same subject : mutual benefit societies, associations, and co-oper-
ative companies : Lloyds.
§ 116. Reinsurance not within statute of frauds.
§ 117. Relations between parties and between insured and reinsurer.
§ 117a. Same subject : Lloyds.
§ 118. Insurable interest of reinsurer.
§ 118a. Same subject: wagering contract.
§ 118b. Same subject : Lloyds.
^ 119. Reinsurance: the risk.
§ 119a. Same subject.
§ 119b. Same subject: mutual, etc., companies,
§ 120. Duration: term of risk may be controlled by original insurance.
§ 121. Custom of underwriters may affect risk.
§ 122. Limitation of risk of specified date: change of risk.
§ 122a. Reinsurance not retroactive : property destroyed when contract
made.
§ 123. Limitation of risk to particular locality.
§ 124. Condition as to assignment.
§ 125. Condition as to other insurance.
§ 126. Conditions: time limit for suing: award.
§ 127. Amount of reinsurance.
?5 127a. Same subject: separate risks: notice.
§ 128. Representations and warranties in reinsurance: eoneealment.
§ 129. Abandonment unnecessary in reinsurance.
§ 130. Proofs of loss in reinsurance.
§ 131. Extent of reinsurer's liability.
341
§ 112 JOYCE OX INSURANCE
§ 131a. Same subject.
§ 131b. Same subject : mutual benefit societies, etc.
§ 131e. Same subject : reinsurer not liable where risk materially altered.
§ 132. Agreements affecting reinsurer's liability.
^ 133. Reinsurer's liability: pro rata clause.
§ 133a. Same subject.
§ 134. Reinsurer's liability: compromise: insolvency of insurer,
§ 134a. Same subject : mutual benefit societies, etc. : trust fund.
§ 135. When suit may be brought against reinsurer: rights of origi-
nal insured.
§ 135a. Same subject.
§ 135b. Same subject : mutual benefit societies, etc.
§ 135c. Same subject : Lloyds.
§ 136. Reinsurance: recovery: evidence.
§ 136a. Same subject : mutual benefit societies, etc. : fraud of directors.
§ 136b. Same subject: recovery of statutory deposits.
S 136c. Reinsurance: recovery induced by fraud: subrogation: deduction
of expenses of recover^'.
§ 137. Reinsurer bound by judgment : notice to defend.
§ 138. Defenses available to reinsurer.
§ 112. Reinsurance defined. — Tveinsuranee is a contract whereby
one for a consideration agrees to indemnify another against loss
or liability assumed by the latter a.s insurer of a third party. Other
definitions have been given as follow.s: A contract ''by which one
insurer causes the sum which he has insured to be reassured to
him by a distinct contract with another insurer, with the object
of indemnifying himself against his own responsibility.'"' * ''Re-
insurance is an indenmity against a risk incurred bj^ the assured
in consequence of a prior insurance upon the same property or
some part of it." ® Reinsurance is an insurance by the first in-
surer of the whole or of some part of his interest in the risk
created by his contract of insurance. Reinsurance is a contract
that one insurer makes with another to protect the first from the
risk he has already assumed.''^ "A contract whereby one party,
called the 'rein.surer,' in consideration of a premuim paid to him,
agrees to indemnify the other against the risk assumed by the lat-
^ Phoenix Ins. Co. v. Erie Trausp. Dak. 1895, sec. 4533 ; Rev. Codes, Id.
Co. 117 U. S. 312, 323, 29 L. ed. 1899; Civ. Code, sec. 4533; Rev.
873, 6 Sup. Ct. 750, 1176, per Gray. Codes S. Dak. 1903, sec. 1879.
See Doering's Annot. Cal. Civ. Code, ^ Mutual Safetv Ins. Co. v. Hone,
sees. 2646-49; I^vLsee's Dak. Code, 2 N. Y. 235, 240," per Gardiner, J.
sees. 1559-62; Annot. Code Mont. ' Ruohs v. Traders Fire Ins. Co.
(1895), sec. .^530; Civ. Code Mont. Ill Tenn. 405. 102 Am. St. Rep.
(Rev. Codes 1907) ; Rev. Code N. 720, 78 S. W. 85.
342
REINSURANCE § 112
ter by a policy in favor of a third party." ' "Reinsurance is where
an insurer procures the whole or part of the sum which he has in-
sured (i. e., contracted to pay in case of loss, death, etc.) to be
insured again to him by another person. This is commonly done
in case of marine insurance. . . . Formerly, by 19 George
11., chapter 37, section 4, reinsurance Ava^ prohibited except in
certain cases, but this provision was repealed by 30 and 31 ^^ic-
toria, chapter 23." ^ Sometimes, however, reinsurance exists where
an insurer about to become insolvent, or for other reasons, trans-
fers his risks to another company, or consolidates with some other
company, and the transferee or consolidated company assumes all
the risks. ^° Whether a contract is or is not one of reinsurance
has been before tlie courts in several cases. It was held in New
'1 Phillips on Ins. (3d ed.) 209, 1 Biddle on Ins. sec. 378; New York
see. 374. . Boweiy Fire Ins. Co. v. New York
9 Sweet's Dictionary of English Fire Ins. Co. 17 Wend. (N. Y.) 359,
Law (1882) 689. " 363.
For other definitions see : North Carolina. — Shoaf v. Pala-
Uniled States. — Allemannia Fire tine Ins. Co. 127 N. Car. 308, 80
Ins. Co. V. Firemen's Ins. Co. 209 Am. St. Rep. 798, 37 S. E. 451, 30
U. S. 326, 52 L. ed. 815, 28 Sup. Ins. L. J. 276.
Ct. 544, 14 Am. & lllng. Ann. Cas. Ohio. — Commercial Mutual Ins.
948, 37 Ins. L. J. 316; Providence- Co. v. Detroit Fire & Marine Ins. Co.
Washington Fire Ins. Co. v. Atlanta- 38 Ohio St. 11, 15, 16, 43 Am. Rep.
Birmingham Fire Ins. Co. (U. S. C. 413.
C.) 166 Fed. 548, 38 Ins. L. J. 461. See also Rapalje & La\vrence's
California.— Union Mutual Ins. Law Diet. 1089, title "Reinsurance;"
Co. V. American Fire Ins. Co. 107 1 jMay on Ins. (3d ed.) sec. 11; 11
Cal. 327, 28 L.R.A. 692, 330, 40 Pac. Am. & Eng. Ency. of Law, 343;
431. Words & Phrases, vols. 7, 8.
Illinois. — Vial v. Norwich Union "Beinfuirance reserve'' meaning oi:
Fire Ins. Co. 257 111. 355, Ann. Cas. Assessment associations. Betts v.
I914A, 1224n, 44 L.R.A. (N.S.) 317n, Connectieu't Indemnity Association,
100 N. E. 929, aff'g 172 111. App. 71 Conn. 751, 44 Atl. 65; Conn.
134. Genl. Stat. sees. 2854, 2870.
Louisiana. — Chalaron v. Insurance ^° Glen v. Hope Mutual Life Ins.
Co. of North America, 48 La. Ann. Co. 56 N. Y. 3^9; .Johannes v. Phoenix
1582, 1590, 36 L.R.A. 742, 21 So. Ins. Co. 66 Wis. 50, 57 Am. Rep.
267. 249.
Xebraska. — Allison v. Fidelity Mu- "The insurance of the solvency of
tual Fire Ins. Co. 81 Neb. 494, 129 an insurer is permitted and practiced
Am. St. Rep. 694, 116 N. W. 274, in some foreign countries (Le Guid-
37 Ins. L. J. 602. on, c. 2, art. 20; Ord. Louis XIV. h.
New Jersefi. — Iowa Life Ins. Co. t. art. 20; Valin, h. t. 65), but it
V. Eastern Mutual Life Ins. Co. 64 seems never to have been in use
N. ,J. L. 340, 45 Atl. 762, 29 Ins. amongst us:" 1 Marshall on Ins. (ed.
L. J. 299, 305. 1810) *145; Emerigon on Ins. (Mere-
New York. — London Assur. Co. v. dith's ed. 1850) c. viii. sec. 114, p.
Thompson, 170 N. Y. 94, 62 N. E. 205.
1066, 31 Ins. L. J. 351, quoting from
343
§ 112 JOYCE ON INSURANCE
York that there was no contract of reinsurance, but simply an
original insurance, where certain policies upon a mortgage interest
were directed to be canceled, and the agent applied to defendant to
reinsure the risks, which it agi-eed to do, but under a subsequent
agreement the policies were issued directly to the insured. ^^
The word "reinsurance" is sometimes used in the sense of a
renewal insurance. Thus, where partnership property was in-
sured by the defendants, and thereafter one of the partners hav-
ing purchased the others' interest applied to defendant's agent for
reinsurance, which was agreed to be effected; but the agent gave
the latter a paper which he supposed was a policy and so did not
examine it, but it was in fact only a renewal of the old policy, and
the court held it a new contract, subject to the same terms and con-
ditions as the first.^^ There is, however, as is evidenced by the pre-
ceding definitions of reinsurance, a clear distinction between that
contract and a renewal of a contract of insurance.
Reinsurance is also entirely different from what is termed ''dou-
ble insurance" or an insurance of the same interest.^^
Again, an agreement whereby one insurance company cove-
nants that it will make as prompt adjustments and payments of
loss, if any, under any and all of its policies of another insur-
ance company, as it would under its own policies, is a much
broader contract thain a mere technical contract of reinsurance."
If a tax is imposed upon gross premiums received including in
addition to all other premiums, such premiums as are collected from
policies subsequently canceled and "from reinsurance" the word
"reinsurance," as used in the statute imposing such tax means prem-
iums collected by such company for reinsuring the risks of other
companies, and such premiums are included in the term "gross
premxiums received," the sum paid out by such company to other
companies for reinsuring its own risks is also included and cannot
be deducted from the amount thereof, since such sum is an expense
of the business. ■^^
" Excelsior Fire Ins. Co. v. Royal 553. 38 Ins. L. J. 461 , 469. See also
Ins. Co. 55 N. Y. 343, 14 Am. Rep. § 2455 herein.
271. ^* Whitney v. American Ins. Co. —
12 Pierce v. Nashua Ins. Co. 50 N. Cal. — , 56 Pac. 50, 28 Ins. L. J.
H. 297, 9 Am. Rep. 235. 254, aff d 127 Cal. 464, 59 Pac. 897.
i^Allemannia Fire Ins. Co. v. ^^ People (ex rel. Continental Ins.
Firemen's Ins. Co. 209 U. S. 326, 52 Co.) v. Miller, 177 N. Y. 515, 70 N.
L. ed. 815, 28 Sup. Ct. 544, 14 Am. E. 10, modifying and affg 85 N. Y.
& Eng. Ann. Cas. 948, 37 Ins. L. J. Supp. 1142, 90 App. Div. 618, under
316, per Mr. Justice Peckham, cited N. Y. Tax Law, sec. 187 (Laws 1896,
in Providence-Washington Fire Ins. c. 908, p. 859, Laws 1901, c. 118, sec.
Co. v, Atlanta-Birmingham Fire Ins. 1, p. 297).
Co. (U. S. C. C.) 166 Fed. 548, 551,
344
EEINSURANCE §§ 112a-113
§ 112a. Evidence admissible to show "reinsurance" has technical
meaning of agency reinsurance. — It may be shown that the word
''reinsurance" as used in dealings between Hre insurance companies
and their agents has a technical meaning of agency reinsurance and
excludes home office reinsurance.^*
§ 112b. When transfer is not reinsurance, but an illegal trans-
action: assets a trust fund: deposit with state. — A transfer made
by a coriDoration of all its assets, which constitute a trust fund for
the payment of its debts and upon wdiich creditors have a lien
against stockholders and all transferees except bona fide purchas-
ers, including bonds deposited under the insurance law with the
superintendent of insurance as a condition to its being permitted
to do business, to a transferee upon its agi*eement to assume lia-
bility on all outstanding policies, pay all death losses reported, as
per schedule attached to the contract, and certain named commis-
sions to the agents as well as rents named, is, where the transferee
must be deemed to have known that the transfer would make the
corporation unable to pay its debts and terminate its exist-
ence by depriving it of all means of carrying into effect the
object of its existence, and where the transfer is made against the
will of a considerable number of stockholders and leaves a certain
number of creditors unprotected, it is not such a reinsurance as is
contemplated by the insurance law of New York, but is as to credi-
tors an illegal transaction which will be set aside."
§ 113. Reinsurance: nature of contract. — Although the decisions
show a difference in many respects betw^een the contract of insur-
ance and reinsurance, yet the contract involves no legal principles
essentially different from those applicable to contracts generally.^'
Nor does the contract necessarily differ in form from original in-
surance.^^ It is held that an agreement to reinsure is not a con-
tract of guaranty.^"
As we have seen elsewhere, reinsurance is a contract of indemnity
to the reinsured.^ This rule, however, is qualified in Illinois to the
1^ Federal Ins. Co. v. Gilmonr, 206 v. New York Fire Ins. Co. 17 Wend
Mass. 203, 92 N. E. 36, 39 Ins. L. J. (N. Y.) 359; Pliiladelphia Ins. Co.
1135. V. Washington Ins. Co. 23 Pa. St.
" Raymond v. Security Trust & 250, 253.
Ins. Co. 89 N. Y. Supp. 753, 44 20 Bartlett v. Firemen's Ins. Co. 77
Misc. 31; Ins. Law N. Y. 1892, c. Iowa, 158, 41 N. W. 601.
690. p. 1940, sec. 22. See §§ 134a, ^ § 28 lierein. See also the follow-
136b herein. See Wolfe v. Wash- ing- cases :
ington Life Ins. Co. 118 N. Y. Supp. 7>?r//ff»o.— Eagle Ins. Co. v. Lafay-
ette Ins. Co. 9 Ind. 443, 446.
59!)
^^ Smith V. St. Louis Mutual Life Iowa. — Bartlett v. Firemen's Ins
Ins. Co. 2 Tenn. Ch. 727, 742. Co. 77 loAva, 158, 41 N. W. 601.
^^New York Bowery Fire Ins. Co. Massachusetts. — Faneuil Hall Ins.
345
§ 114 JOYCE ON INSURANCE
extent tliat tlie aiTioiiiit paid by the reinsured to tlio insured is the
measure of indemnity from the reinsurer.^ We shall consider the
force of this qualification hereafter.^ But by a contract of reinsur-
ance, in whatever language expressed, the obligation of the rein-
surer's to indemnify the insurer against his liability for the loss by
(ire of the property insured.* It is a contract of indemnity against
liability and not merely against damage.* It is simply to indem-
nify the original insurer for a loss he may sustain upon his con-
tract of insurance; it is a guaranty to reimburse him for any sum
he maj^ be compelled to pay under his contract of insurance with
the owner.^
Reinsurance not to take effect except above a stated amount of
loss is a contract of a special character, and cannot be inferred from
the mere statement of the original insurer, "we carry our line,"
made when effecting the reinsurance, least of all when the written
contract of reinsurance is in the ordinary form of insurance against
loss to the extent of the amount specified in the policy.'
§ 114. Reinsurance: validity of contract. — Reinsurance was a
valid contract at conmion law.^ but in 1746 an act was passed^
in England providing that it should not be lawful to make reas-
surance unless the insurer should be insolvent, become a bankrupt,
or die.^° This statute remained in force till the act of 1864 "
Co. V. Liverpool & London & Globe * Hunt v. New Hampshire Under-
Ins. Co. 153 Mass. 63, 67, 68, 10 writers Assn. 68 N. H. 305, 73 Am.
L.R.A. 423, 2'6 N. E. 244, per Mor- St. Rep. 602, 38 L.R.A. 514, 38 Atl.
Ion, .T. ; Manufacturers' Fire & Ma- 14.").
rine Ins. Co. v. Western Assur. Co. * Union Mutual Ins. Co. v. Ameri-
145 Mass. 419, 423, 14 N. E. 632, can Fire Ins. Co. 107 Cal. 327, 330,
per Knowlton, J. 28 L.R.A. 692, 40 Pac. 431; Cal. Civ.
Minnesota.— Bixrnes v. Hekla Fire ^'^de sec. 2648.
Ins. Co. 56 Minn. 38, 45 Am. St. Rep. Allison v. Fidelity Mutual Fire
438, 57 N. W. 314. I"^- ^'"- §1 Neb. 494, 129 Am. St.
nj. r. ■ 1 Tir f 1 T RPP- '''*4, 116 N. W. 274, 37 Ins.
Ohio. — ( ommercial Mutual Ins. y j ^^^ '
Co. V. Detroit Fire & Marine Ins. Co. '7'/,! ,"' -, n e
38 Ohio St. 11, 15, 16. ^ H a'"'"''"- ""- ,«"'r^''f i^«o
' ' _ North Amenca, 48 La. Ann. 1582,
Pennsi/lranm.— Fame Insurance 33 l j^ ^ j^o, 21 So. 267, 26 Ins. L.
Company s Appeal, 83 Pa. St. 396, j 4(55
398; Philadelphia Trust, Safe De- ' 'spyopiiix Ins. Co. v. Erie & West-
posit & Ins. Co. V. Fame Ins. Co. 9 grn Transp. Co. 117 U. S. 312, 323.
Phila. (Pa.) 292 (a contract of in- 09 L. ed. 873, 6 Sup. Ct. 750, 1176:
demnity against liability and not Merrv v. Prince, 2 Mass. 176, 185;
merely against damage). New York Bowery Fire Ins. Co. v.
2 Illinois Mutual Ins. Co. v. Andes New York Fire Ins. Co. 17 Wend.
Ins. Co. 67 111. 362, 16 Am. Rep. (520. ( N. Y.) 359, 362;
See also Commercial Mutual Ins. ^ 10 Geo. II. c. 37.
Co. V. Detroit Fire & Marine Ins. i" This act covered reassurances in
Co. 38 Ohio St. 11, 15, 16, England made in England either l)y
' See § 118 herein. British subjects or foreigners, whoth-
34()
REINSURANCE § ll.j
was passed, providing that reassurance of sea risks might lawfully
he made. ^2 Reinsurances have always been valid and lawful in
this country, and in an early Ahi.>*sachusetts case the court de-
cides that the statute 19 George II., chapter 37, did not extend to
the then British colonies here, and was not the law of" that common-
wealth." It was held, however, in a ISIaryland case " that the
English prohibitory statute " was in force in that state, and re-
lated exclusivelv to marine reinsurance. Reinsurance is, however,
*- 7 7
not only a valid contract, but is now commonly practiced, and it
is held that a parol agreement by the underwriter to transfer a
risk to another is not within the prohibition of the .statute 19 George
II., chapter ?u }^
§ 115. Reinsurance: validity of company's acts: its powers. —
An insurance company euii>o\vered ''to make contracts of insur-
ance," or "all kinds of insurance against losses by tire," may make
a contract of reinsurance." So an insurance company having
a controlling interest in another company may delay a statement
demanded of the superintendent of insurance from the latter com-
pany, and may reinsure its risks and absorb its assets pro rata, and
the assets of both companies being available to the superintendent
and the reinsured company, which is solvent, the act of the rein-
surer is neither a fraud against the state nor against public policy,^*
and a failure to comply with a state law requiring a certain amount
of capital as a condition precedent to doing business, wdll not pre-
vent an in.surance company from indemnifying itself by reinsur-
ance against risks already assumed. ^^ Again, where a majority of
the policy holders of a reinsured company assented to the transfer
cr on Briti.sh or foreign sliips: An- Erie & Western Transp. Co. 117 U.
<lree v. Fletcher, 2 Term Rep. 161; S. 32.3, 20 L. ed. 873, 6 Sup. Ct. 750,
1 Marshall on Ins. (ed. 1810) *144. 117ti; Commercial Mutual Ins. Co. v.
See Edgar v. Fowler, 3 East, 222. Detroit Fire & Marine Ins, Co. 38
"27 & 28 Viet. c. 56. See also Ohio St. 11, 16, 17, 43 Am. Rep.
30 & 31 Vict. c. 23. 413; Merchants' Manufacturei-s Mu-
^^ Reinsurance valid under inland tual Ins. Co. v. Washington Mutual
revenue (stamp duties) act, 1864 Ins. Co. 1 Handy (Ohio) 408, 425.
(27 & 28 Vict. c. 56) sec. 1; marine ^^ Consolidated Real Estate & Fire
ins. act, 1906 (6 Edw. VII. c. 41, sec. Ins. Co. v. Cashow, 41 Md. 59.
9) (1); 17 Earl of Halsbury's Laws ^^ 10 Geo. II. c. 37.
of Eng. p. 375, see. 742. is Delver v. Barnes, 1 Taunt. 48.
^3 Merry v. Prince, 2 Mass. 176, ^'^ New York Bowery Fire Ins. Co.
185; Hastie v. De Pevster, 3 Caines v. New York Fire Ins. Co. 17 Wend.
(N. Y.) 190, 103; New York Bow- (N. Y.) 359, 363.
ery Fire Ins. Co. v. New York Fire " Alexander v. Williams, 14 Mo.
Ins. Co. 17 Wend. (N. Y.) 359, 362. App. 13.
This case holds that there is no dif- ^^ Davenport Fire Ins, Co. v.
ference between cases of fire and Moore, 50 Iowa, 619.
marine risks. Phceni-x Ins. Co. v.
347
§ 115 JOYCE ON INSURANCE
of the assets to the reinsuring company, it was held that the court
might decree that all the secm'ities deposited as a trust fund be
given .to those policy holders who liad neither expressed assent nor
disx'^ent.^" and a policy holder in the reinsured company who has
paid premiums to the transferee company without such latter com-
pany issuing a new policy to liim is entitled to recover from the
reinsurer the premiums so jDaid. with interest thereon.^ But the
reinsurance of the policies and the transfer of the whole reserve of
a solvent life insurance company to an insolvent company without
security by managers who have bought the st-ock of the former un-
der an agreement that its contract obligations shall be rigorously
fulfilcd to the same extent and in the same manner as if no change
had taken place, is a breach of such contract obligations and of
such agi'eement; ^ and where the intendment of a law was that in-
surance should be made in the name of and for the benefit of
the company, and not individual policy holders, such law cannot
be construed so as to allow reinsurance in favor of a policy holder,
and thus bring it into conflict with a statute forbidding a corpora-
tion giving preferences.^
In Iowa it is held that a contract by a mutual benefit society,
by which it agrees to assume the liabilities and death losses of an-
other association, is ultra vires and void.* And an agreement by
Avhich one life insurance company transfers to another all its
assets in consideration that the latter company will reinsure the
risks and assume the debts and liabilities of the former company,
is ultra vires and void, although the vendor company is authorized
to reinsure its risk.^ So the right of a mutual life insurance
company to reinsure does not carry with it the power to sell or trans-
fer all its property against the will of the minority of its policy
holders, and a contract to so sell or transfer is ultra vires and void
as against the dissenting policy holders.^ If the subject matter
has been destroyed and the reinsurer, with knowledge thereof is-
sues a policy such act is ultra vires.' But where the act of incor-
20 Relfe V. Columbia Life Ins. Co. ^ g„ji(h y g^. Louis Mutual Life
10 Mo. App. 150. Ins. Co. 2 Tenn. Ch. 727.
^ Smitli V. St. Louis Mutual Life ^ Price v. St. Louis Mutual Life
Ins. Co. 2 Tenn. Ch. 727. Ins. Co. 3 Mo. App. 262; see Harden
2 Mason v. Cronk, 125 N. Y. 496, v. St. Louis Mutual Life Ins. Co. 3
28 N. E. 224, 35 N. Y. 859, reversing Mo. App. 248.
27 N. Y. 122. ' Henshaw v. Insurance Co. of
3 Cassevly v. Manners, 48 How. State of N. Y. 73 N. Y. Supp. 1, 36
Pr. (N. Y.) 219. Misc. 405. See Union Ins. Co. v.
* Tw iss V. Guaranty Life Assn. 87 American Fire Ins. Co. 107 Cal. 327,
•Iowa, 733, 55 N. W. 8, 22 Ins. L. J. 28 L.R.A. 692, 48 Am. St. Rep. 140,
ri39. As to ultra vires, see §§ 115b, 40 Pac. 431, Avhere both parties were
334, 350 herein. ignorant of the loss.
348
^
REINSURANCE § 113a
poration of tlie F. company made it subject to the general laws of
(lie i^tate authorizing companies to "reinsure themselves/' and the
F. Company agreed to reinsure the E. Company on all its term
risks in certain enumerated states, and to indemnify it upon all
losses in one class not exceeding five thousand dollars, and in others
known as "extra-hazardous," exceeding a certain sum, and to con-
tribute in various proportionate amounts on another class of risks,
and the losses were payable under a j^ro rata clause, and losses
were sustained in the Cliicago fire in 1871, it was held that the
contract was not ultra vires, and would be enforced by a court of
equity.'
§ 115a. Same subject. — The right of an insurance company to
manage its business, to determine the terms of its continuance, how
long it shall carry on its general business, Avhether or not and when,
if at all, it shall turn over business by reinsuring its risks, and ceas-
ing to do business is vital to its existence,^ and the charter of an in-
svu-ance company may empower it to make contracts of reinsurance
through its board of directors of any or all risks, ^° where a life in-
surance company is not insolvent in a conuiiercial or insurance sense
when doing a losing business and unable to continue without fur-
ther loss, it may by a contract made in good faith for the best
interests of its creditors and stockholders, sell out its business to
another corporation and cease operations; but a policy holder can-
not be compelled to relinquish the old company and accept reinsur-
ance in the new one.^^ An insurer may- also have power to reinsure
a single risk even though a statute requires the consent in writiii<>;
of two thirds of the "holders of the policies" proposed to be insured,
where the antecedent words "the reinsurance of any . . , out-
standing risks" are used. ^^ If the original insured is notified by the
reinsurer of the transfer of the risk and that it will be continued on
the same terms the presumption is that the company have power to
insure him on the terms specified.^
13
'Fame Insuranre Company's Ap- 89 N. Y. Supp. 7.53, 44 Misc. 31,
peal, 83 Pa. St. 39G. cilinrj to the last proposition People
9 Moore v. Security Trust & Life v. Empire Mutual Life Ins. Co. 02
Ins. Co. 168 Fed. 496, 93 C. C. A. N. Y. 105.
052, 38 Ins. L. .J. 745, ease of agency ^^ Iowa Life Ins. Co. v. Eastern
contract and reinsurance. Mutual Life Ins. Co. 64 N. J. L. 340.
"Jameson v. Hartford Eire Ins. 45 Atl. 762, 29 Ins. L. J. 299. 2
Co. 44 N. Y. Supp. 15, 14 App. Div. "Genl. Stat. N. J. p. 1755, sec. 66
380. Ins. act.
^^ Raymond v. Socurilv Trust & ^^ iMutual Reserve Life Ins. Co.
Life Ins. Co. 97 N. Y. Supp. 557, v. Koss, 42 Tud. App. 021. SG X. E.
Ill App. Div. 191, rev";; !)1 N. Y. 506.
Supp. 1041, 101 App. Div. 54(i, revV
349
§ 115b JOYCE OX INSURANCE
§ 115b. Same subject: mutual benefit societies, associations, and
co-operative companies: Lloyds. — Under a Federal decision the
transfer of membership of one company to another being legally
made results in making ipso facto members those who did
not request to be transferred. But unless surrendered and ex-
changed for certificates of the reinsuring company nothing con-
tained in the contract of transfer or reinsurance between the two
associations or companies can alter the express terms of the original
contracts of the members of the reinsured company or association.^*
But under another Federal case a member may be l)ovnid by subse-
quently enacted by-laws of the reinsurer where the reinsurance con-
tract so provides, and the policy holder accepts reinsurance and
without dissent pays premiums to the reinsurer after notice received
of such by-laws.^^ In Iowa a statute which provides for the transfer
of risks by reinsurance conditioned upon a two-thirds vote of a
meeting of the members and that upon approval of such transfer
a member who files his preference for transfer to another corpora-
tion than the one specified in the contract shall be accorded privi-
leges in aid of such transfer, and also limiting rein.surance or trans-
fers to companies authorized to transact business in the State of
the enactment, does not dictate the reinsurance contract nor pro-
hibit limiting thereby the reinsurance or transfer only of members
in o'ood standino-.ifi In INIis-souri it is decided that a fraternal in-
surance company as a reinsurer of a like company cannot impose
upon a member of the reinsured company who applied for rein-
surance a condition precedent, such as a medical examination, to
membership, where the terms of the reinsurance contract plainly
])rovided that any member of the fraternal company, which had
reinsured, should if in good standing be entitled unconditionally to
reinsurance.^''^ Under a Pennsylvania decision a mutual insurance
company agreed to transfer, or cause to be transferred to the best of
its ability its membership to another company and the statute under
which the contract was made expressly conceded the right of every
member, on giving the required notice, to elect to be transferred to,
or reinsured by another comijany. Tlie latter company agreed to
1* Robinson v. I\Iutual Reserve Life ^^ Parvin v. Mutual Reserve Life
Ins. Co. (Scovill v. Same) (U. S. C. Ins. Co. 125 Iowa, 05, 100 N. W. 39.
C.) 182 Fed. 850, 40 Ins. L. J. 190. " Cox v. Kansas City Life Ins.
189 Fed. .348, 111 C. C. A. 79; 175 Co. 154 Mo. App. 464, 135 S. W.
Fed. ()24, (529, 159 Fed. 564. 1013. Exawiiie Holies v. :\Iutual
^5 Stark V. Northwestern National K'oserve Fund Life Assoc. 220 111.
Life In.s. Co. (U. S. C. C.) 167 Fed. -00, 77 N. E. 198.
191. See also Ni)rtliwesleni Life Ins.
Co. V. (irav. Kit Feci. 488, 88 C. C.
A. 430, 37 Ins. L. .J. 757.
350
I
REINSURANCE § 115b
reinsure the members of the former company upon execution of
satisfactory transfer a|ij)lications. on the basis of their original ap-
plications to it. and to rate them at the same amount, with premi-
ums payable at the same date, as they were then paying in it. It
was determined ihal the reinsurer was bound to reinsure all the
members who elected to have their insurance transferred, and could
not insist upon a condition that the age and health of the applicant
must be satisfactory, and that a subsequent tender of the premium
was waived by a refusal to accept the same.^^ Under a Kew York
decision a reinsuring company may accept upon consolidation a
policy of a person who is of a prohibited age at that time where he
had attained that age when the policy was originally issued to him.^^
]n Nebraska a con.-^olidation contract between associations of dif-
ferent states whereby a domestic association assumes the risks of a
foreign corporation is ultra vires and being so is void also in the
State of the forei^Q,n corporation even though the laws of the latter
State regulate the consolidation of such societies.^" Under another
decision in that State nmtual fire insurance companies organized
under the laws of 1897, are not authorized to transact a reinsurance
business. So that a contract of reinsurance made by such a com-
pany is ultra vires. ^
If, however, a mutual insurance company on the assessment plan
reinsures in another like company and there is no express provision
in the statute governing such companies which prohibits them from
reinsuring property,— a claim will not be sustained in an action on
a fully executed contract of reinsurance that such contract is ultra
vires.^ In Washington a beneficial association which reinsures
" National Mutual Ins. Co. v. Mutual Ins. Co. 188 Mo. 1, 86 S. W.
Home Benefit Soc. 181 Pa. 443, 237, 34 Ins. L. J. 435. The Court,
40 W. N. C. 517, 5!) Am. St. Rep. per Burgess, P. J., said: "Defen'd-
()66, 37 Atl. 519, 26 Ins. L. J. 917. ant, however, claims that this eon-
See Welch V. Chicago Guaranty Fund tract is ultra vires for the reason
Life Soc. 2 Mo. App. Rep. 678, that the defendant had no power to
noted under § 131b herein. make it, and that the State Town
^8 Rand v. Massachusetts Beneti- Mutual had no power to enter into
cial Life Assoc. 42 N. Y. Supp. 26, such a contract, Ix'cause it is e.x-
18 ]\Iisc. 336. pressly prohibited from transacting
20 Starr v. Bankers' Union of the such "business. But we are unable
Worhd, 81 Neb. 377, 129 Am. St. to agree to this contention, for the
Rep. 684, 116 N. W. 61, 37 Ins. L. reason, as we have before said, that
J. 74(5, there is no express provision in the
^Allison v. Fidelitv Mutual Fire statute prohibiting such companies
Ins. Co. 81 Neb. 494, 129 Am. St. from reinsuring property which has
Rep. 694, 116 N. W. 274, 37 Ins. already been insured by another. At
L. J. 602, Sess. Laws Neb. 1897, c. most the prohibition is only by im-
45, p. 257. plication; and as the contract be-
2 Cass County v. Mercantile Town I ween the companies was executed to
351
§ IIG
JOYCE ON INSURANCE
another association is estopped, after the death of a reinsured mem •
ber, to deny its authority to enter into such a contract where it re-
ceiyes dues from such member paid under tlie original contract.^
The risks of town and co-operatiye insurance companies may,
under the hiws of New York 1898, be reinsured in another com])any
of like character and the subject matter thereupon becomes "in-
sured property" within the meaning of said law.*
In New Jersey the legislation of 1895,, 1896, does not prohibit,
but confers upon Lloyds associations authority to reinsure and in-
demnify themsehes against loss in whole or in part, sustained by
reason of risks taken by them against loss by fire or lightning.*
§ 116. Reinsurance not within statute of frauds. — Reinsurance
is not a contract within the statute of frauds, and is not a promise
to pay the debt of another, and need not be in writing.^ Notwith-
standing the aboye rule, it is held in Egan v. Fireman's Insurance
Company' that if one insurance company assumes the policies of
another, that such agreement cannot be enforced unless in writing,
as it is a promise to pay the debt of another. Under an Oregon de-
cision a consideration must be shown in order to satisfy the statute
of frauds, inasmuch as a reinsurance contract, whereby a life com-
pany reinsures the members of a fraternal benefit company and
agrees to meet its liabilities, constitutes a promise to pay another's
debt.*
the fullest extent on the part of the
Nevada company, and the policy is-
siu'd to it by dftVndant in considera-
tion thereof, the defense of viltra
vires is not open to defendant in
this case. It is well settled in this
State that the defense of ultra vires
is not open to a corporation when
tlie contract has been fully executed
on the part of the other contracting
party, and is not expressly prohibit-
ed by law. . . . There is no ques-
tion of pul)lic policy invoked in this
case, and it woidd operate as a fraud
upon j)laintitf not to compel de-
fendant to pay the amount of the
policy in question; and it should
not be allowed to keep the premium
paid and escape liability upon the
policy on the ])lea of ultra vires,"
reviewing numerous authorities. See
also Sage v. Finney, 156 Mo. App.
30, 13o S. W. 996. See §§ 334,
350 herein.
^ Campbell v. Order of Washing-
ton, 53 Wash. 398, 102 Pac. 410.
* Skaneateles Paper Co. v. Ameri-
can Undei-writers Fire Ins. Co. 114
N. Y. Supp. 200, 61 Misc. 457; Ins.
Law (Laws N. Y. 1898, p. 1506, c.
654) sec. 278 as am'd.
* Sun Insurance Office of London
v. Merz, 64 N. J. L. 301, 52 L.K.A.
330, 45 Atl. 785, 29 Ins. L. J. 344,
under "Fire Lloyd's Statute of March
25, 1895" as am'd by act March 26,
1896 (P. L. N. J. 1896, p. 156).
6 Bartlett v. Fireman's Fund Ins.
Co. 77 Iowa, 155, 41 N. W. 601. See
Commercial Mutual Marine Ins. Co.
V. Union Mutual Marine Ins. Co. 19
How. (60 U. S.) 318, 15 L. ed. 636.
7 2^7 La. Ann. 368.
* Spande v. Western Life Indemni-
ty Co. 61 Oreg. 220, 111 Pac. 973,
122 Pac. 38.
352
REINSURANCE § 117
§ 117. Relations between parties and between insured and rein-
surer.— The reinsured sustains as to the reinsurer the same relation
wliich tlie original insured bears to the reinsured, but the contract
of reinsurance does not inure to the benefit of the assured, and he
has no claim, legal or equitable, against the reinsurer,^ nor any in-
terest in the contract, ^° and the reinsurer is not liable to him either
as surety or otherwise." There is no privity of contract between
them, and the reinsured remains solely liable on the original insur-
ance, and he alone has a claim against the reinsurer.^^ jj^^j. ^.^^ ^^^
insured claim a right to share in the assets in case of reinsurance
where he has not paid for ten years, on the ground that the mnsur-
ance excused such payment ;" and in case of insolvency of the re-
insured and a recovery in full against the reinsurer, the insured
ha.s no claim against the reinsured over the per cent received
from him.^^ Notwithstanding this rule, we are inclined to agree
with Mr. Parsons that the statement that assured has no claim on
such funds is ''too sweeping, but that his claim is one in common
with other creditors. "^^ The rule that there is no privity of contract
^ Herckenrath v. American Mutual Co. 62 Mo. 289, 296, 297, 21 Am.
Ins. Co. 3 Barb. Cb. (N. Y.) 63, 1 Rep. 417.
Barb. Cb. (N. Y.) 363; Flint v. New Yotk.—Kastie v. De Peyster,
Westebester Fire Ins. Co. 207 Mass. 3 Caines (N. Y.) 190; Hoffman v.
337, 93 N. E. 646. Nortb Britisb & Mercantile Ins. Co.
^"Faneuil Hall Ins. Co. v. Liver- 70 N. Y. Supp. 106.
pool & London & Cllobe Ins. Co. 1.53 Tennessee.— -Ruohs v. Traders Fire
Mass. 67, 68, 10 L.R.A. 423, 26 N. E. Ins. Co. Ill Tenn. 405, 102 Am. St.
244, per Morton, J. ; Barnes v. Hekla Rep. 790, 78 S. W. 85.
Fire Ins. Co. 56 Minn. 38, 45 Am. St. Texas.— Mutual Reserve Fund
Rep. 438, 57 N. W. 314; Delaware Life Assoc, v. Green, — Tex. Civ.
Ins. Co. v. Quaker City Ins. Co. 3 App. — , 109 S. W. 1131.
Grant's Cas. 71. " Empire Mutual Life Ins. Co., In
Deeruig's Annot. Civ. Code, Cal. re, 64 How. Pr. (N. Y.) 51.
sec. 2649; Comp. Laws, Dak. 1887, i* Consohdated Real Estate & Fire
sec. 4186; Annot. Civ. Code Mon. Ins. Co. v. Casbow, 41 Md. 59, 74.
]805, sec. 3533; Rev. Code, N. Dak. ^^ He savs (1 Mav on Ins. [Par-
1895, see. 4.5,36. sons'] sec. IIA) : "Tbe assured bas
Tbe original insured under a ma- no distinctive claim on tbose funds,
rine pobey has no rigbt or interest no claim different from tbat of any
in respect to tbe reinsurance. 17 otber creditor of tbe insolvent eom-
Earl of Halsbury's Laws of Eng. p. pany, but in common witb tbe otber
375, sec. 743. creditors be did bave a claim. . . .
Ruobs V. Traders Fire Ins. Co. Tbe claim against the receiver was
111 Tenn. 405, 102 Am. St. Rep. part of tbe assets in tbe bands of tbe
790, 78 S. W. 85, 93 N. E. 646. receiver to be administered for tbo
^2 Minnesota. — Barnes v. Hekla benefit of creditors." This statement
Fire Ins. Co. 56 Minn. 38, 45 Am. of Mr. Parsons refers to words of
St. Rep. 438, 57 N, W, 314. the court in tbe case of Consobdatod
Missouri. —Strong v. Phoenix Ins. Real Estate etc. Go. last above cited,
Joyce Ins. Vol. I.— 23. 353
§§ 117a, 118 JOYCE OX INSURANCE
between the insured and the reinsurer is subject, however, to such
exceptions as may arise from the agreement of the i)arties. as Avhere
the contract provides that the assured may sue the reassurer;^^ or
in ease of transfer of its business and consohdation of the insurer
with another company, the reinsurer becomes directly hable, or
where the reinsurer assumes all risks and liabilities of the insurer
here, the insured may sue the reinsurer.^' And direct liability may
be incurred bj' the insurer to the original insured, if the intention to
create it sufficiently appears from the contract of reinsurance.^^
A clause in a policy of reinsurance to the effect that the reinsurer
is made the agent of the original insurer for the purpose of doing, in
regard to outstanding policies covered by the contract of reinsur-
ance, all acts necessary to transfer said policies according to their
terms and conditions, does not make the reinsurer the sole agent for
that purpose, or prevent the original insurer from lawfully consent-
ing to a transfer.^'
§ 117a. Same subject: Lloyds. — The contract of reinsurance is
not with the members individually of a Lloyds association. 2°
§ 118. Insurable interest of reinsurer. — The fact that the insurer
has assumed a risk gives him an insurable interest.^ The relation
which the reinsured sustains to the property at risk, as the original
insurer thereof, gives an insurable interest.^ Insurers, however,
have no insurable interest in the property insured by them, regard-
ed in the light of owners.^ It is not necessary to specify in the pol-
icy that the interest is a reinsurance, although the nature of the
contract would make it advisable so to do for practical reasons.*
and quoted by him as follows : " 'The ^ New York Bowery Ins. Co. v.
original insured has no claim in re- New York Fire Ins. Co. 17 Wend,
spect of the money so paid.'" (N. Y.) 359; Yonkers & New York
^^Glen V. Hope Mutual Life Ins. Fire Ins. Co. v. Hoffman, 6 Rob. (N.
Co. 56 N. Y. 379. Y.) 316; Philadelphia Ins. Co. v.
"Barnes v. Hekla Fire Ins. Co. Washington Ins. Co. 23 Pa. St. 250;
56 Minn. 38, 45 Am. St. Rep. 438, 57 1 Phillips on Ins. (3d ed.) 209, see.
N. W. 314; Fischer v. Hope Mutual 375. See also § 941 herein.
Life Ins. Co. 69 N. Y. 161 ; Glen v. "An insurer under a contract of
Hope Mutual Ins. Co. 56 N. Y. 37 ; marine insurance has an insurable in-
Johannes v. Phoenix Ins. Co. 66 Wis. terest in his risk, and mav insure in
50, 57 Am. Rep. 248. respect of it." 17 Earl of "Halsbuiw's
^* Ruohs V. Traders' Fire Ins. Co. Laws of Eng. p. 375, sec. 742.
Ill Tenn. 405, 102 Am. St. Rep. 790, 2 Manufacturers' Fire & Marine
78 S. W. 85. Ins. Co. v. Western Assur. Co. 145
i^Faneuil Hall Ins. Co. v. Liver- Mass. 419, 423, 14 N. E. 632, per
pool & London & Globe Ins. Co. 153 Knowlton, J.
Mass. 63, 26 N. E. 244, 10 L.R.A. » Alliance Marine Assur. Co. v.
423. Louisiana State Ins. Co. 8 La. 1,
2° Thompson v. Colonial Assur. Co. 28 Am. Dec. 117.
70 N. Y. Supp. 85, 60 App. Div. 325. * This question is considered in 1
354
REINSURANCE § 118a
§ 118a. Same subject: wagering contract. — A contract of rein-
surance of such marine ri^ks as the reinsured has when the contract
was entered into, or might have or take during the year that it was
to run, is not void as a wager policy, but is a valid contract of in-
surance.^ So a contract of reinsurance against claims for loss by
fire, not to exceed a certain amount, of property located anywhere
in the United States, is not void as a wagering contract, although
at the time of the issuance of the policy the party indemnified has
no insurable interest in a portion of the property, where he acquires
such interest during the life of the policy, and retains it at the time
when the loss occurs.^ A reinsurance of losses by fire as part of a
marine risk is in substance and eft'ect a marine insurance, and an
open policy of this character for one year is not a wager policy al-
though it is intended to cover not only risks which the reinsured
had taken, and Avhich were in force at the date of the policy, but
is also intended to attach to and cover such marine risks as the re-
insured should take thereafter during the continuance of the policy.
A contract is a valid one of indenniity in regard to such risks by
one insurance company with another, which shall attach as the risks
Phillips on Ins. (3d ed.) 270, sees, hands of this court" (ease decided
498, 499, and he concludes: "That in 1900). The court continues: "An
an assured may eft'ect reins.uranee examination of the reasons upon
directly on the insured subject which the earlier rule rests has led
against the risks or any part of the us to the conclusion that they were
risks insured against in the original not well founded, and, that a con-
policy, without any disclosure in the tract by which parties provide for
policy, or otherwise, that it is a re- indemnity against loss by fire upon
insurance;" but he adds: "A pi'acti- property to be subsequently acquired
cal objection may arise unless a re- by the party indemnified is not in any
insurance is expressed to be such sense a gaming contract, and void on
in the policy ... on account of that account; in other words, that an
the usual stipulations . . . rela- insurable interest, subsisting during
tive to notice of prior and subsequent the risk and at the time of the loss,
insurance, . . . which renders it is sufficient to support a policy in-
expedient for both parties that it suring against loss by tire." The
should be so expressed;" citing Mu- following eases were cited and con-
tual Safety Ins. Co. v. Hone, 2 N. ^idered:
Y. 235; Hone v. Mutual Safety Ins. Iowa. — Mills v. Farmers Ins. Co.
Co. 1 Sand. (N, Y.) 137. ' 37 Iowa, 400.
^ Boston Ins. Co. v. Globe Fire Maine. — Lane v. Maine Mutual
Ins. Co. 174 Mass. 229, 75 Am. St. Fire Ins. Co. 3 Fairf. (Me.) 44.
Rep. 303, 54 N. E. 543. Massachusetts.— Lee v. Howard
«Sun Ins. Office of London v. Fire Ins. Co. 11 Cush. (65 Mass.)
Merz, 64 N. J. L. 301, 52 L.R.A. 330, 324.
45 Atl. 785, 29 Ins. L. J. 344. The New York.— WoUe v. Security
court, per Gummere, J., said that Fire Ins. Co. 39 N. Y. 49; Hoffman
"up to the present time the question v. ^l^tna Fire Ins. Co. 32 N. Y. 405,
has not received consideration at the 88 Am. Dec. 337; Hooper v. Hudson
355
§§ 118b, 119
JOYCE ON INSURANCE
are taken by the original insurer^ But although a purely wager
policy is void still one who has accepted the benefits of a partly in-
valid policy will be estopped from setting up its invalidity.*
§ 118b. Same subject; Lloyds.^A Lloyds association as an in-
surer of property against fire acquires, under the New Jersey stat-
utes of 1895, 1896, by his contract an insurable interest therein
which he may protect in whole or in part by reinsurance, by a con-
tract of indemnity against loss.^
§ 119. Reinsurance: the risk. — The insurer may reinsure all or
])art of the risk or liability he has assumed,^" in the absence of any
usage or specific stipulation in the policy to the contrary,^"" whether
the perils be of the sea or fire,^^ but the same subject-matter or peril
is implied as in the original, although it need not be the same spec-
ific risk or identical hazard,^^ and while it mav cover a less it cannot
cover a greater risk,^^ for the contract of reinsurance covers only the
insurable interest or liability of the original insurer, and extends no
River Fire Ins. Co. 17 N. Y.
424.
Pennsylvania. — Western & Atlantic
Pipe Lines v. Home Ins. Co. 145 Pa.
346, 27 Am. St. Rep. 703, 22 Atl. 665.
Vermont. — Wood v. Rutland & Ad-
dison Mutual Fire Ins. Co. 31 Vt.
552.
Wisconsin. — Sawyer v. Dodge
County Mut. Ins. Co. 37 Wis. 503.
See §S 148 et seq., 901-904 herein.
' Boston Ins. Co. v. Globe Fire
Ins. Co. 174 Mass. 229, 75 Am. St.
Rep. 303, 54 N. E. 543, 28 Ins. L. J.
927.
* Sage V. Finney, 156 Mo. App.
30, 135 S. W. 996.
® Sun Insurance OfFice of London
V. Merz, 64 N. J. L. 301, 52 L.R.A.
330, 45 Atl. 785, 29 Ins. L. J. 344;
N. J. Fire Llovds act March 25,
1895, as am'd March 26, 1896 (P. L.
1896, p. 156).
i°l Phillips on Ins. (3d ed.) sec.
376; Insurance Co. of North Ameri-
ca V. Hibemia Ins. Co. 140 U. S.
565, 11 Sup. Ct. 909, 35 L. ed. 517;
Chalaron v. Insurance Co. of North
America, 48 La. Ann. 1582, 36 L.R.A.
742, 21 So. 267; London Assur. Corp.
V. Thompson, 170 N. Y. 94, 62 N. E.
1066, 31 Ins. L. J. 351. Examine
Insurance Co. of State of Pa. v. Tel-
fair, 57 N. Y. Supp. 780, 27 Misc.
247, rev'd 61 N. Y. Supp. 322, 45
App. Div. 564. See § 127 herein.
"Section 92 of the Insurance Law
(Laws of 1892, c. 690) permits re-
insurance of the whole or any part
of any policy obligation in any other
insurance corporation. It is said,
however, that this provision of the
statute does not permit an insurance
company to reinsure its policy obli-
gations as a whole, whether it does
or not, no policy holder has made
himself a pai'ty to this action and
objected, nor has anj- individual cred-
itor done so." Ravmond v. Security
Trust & Life Ins. Co. 97 N. Y. Supp\
557, 111 App. Div. 191, rev'g 91
N. Y. Supp. 1041, 101 App. Div.
546, 44 ^lisc. 31, per Houghton, J.
^^^ Insurance Co. of North America
V. Hibemia Ins. Co. 140 U. S. 565,
11 Sup. Ct. 909, 35 L. ed. 517.
^^ New York Bowery Ins. Co. v.
New York Fire Ins. Co. 17 Wend.
(N. Y.) 359.
^2 Philadelphia Ins. Co. v. Wash-
ington Ins. Co. 23 Pa. St. 250; Lon-
don Assur. Corp. v. Thompson, 170
N. Y. 94, 62 N. E. 1066, 31 Ins.
L. J. 351.
^3 London Assur. Corp. v. Thomp-
son, 170 N. Y. 94, 62 N. E. 1066,
31 Ins. L. J. 351.
356
REINSURANCE
§ 119
further than the risk taken by it; it cannot stipulate for indemnity
against a risk Avhich it has not assumed.^* So where the original
insurance covers a certain voj-age, there can be no indemnity for a
different voyage under the contract of reinsurance, ahhougli the
pohcy for reinsurance is made "subject to such risks, vaUiations,
and conditions, incUiding the risk of premium note, as are or may
be taken*' by the insurer.^* And where a reinsurance policy was by
its terms equally applicable to two charters, both of which were
known to the reinsuring company, such policy will be presumed to
refer to the charter on which the insured company had issued its
policy, and which the evidence shows was the one intended. ^^ Al-
though the contract of reinsurance applies to the subject matter of
insurance specified in the original policy and to risks of the same
kind, the risk need not be identical, and this is the law, in the ab-
sence of special stipulations except such as have no application to
reinsurance, and the words ''subject to coinsurance clause," in the
application of the reinsured company, may constitute a material
part of the description of the risk upon which reinsurance is sought,
and so affect the liability of the reinsurer."
^* Commonwealth Ins. Co. v. Globe
Mutual Ins. Co. 35 Pa. St. 475.
^^ Commonwealth Ins. Co. v. Globe
Mutual Ins. Co. 35 Pa. St. 475.
1^ Ocean Ins. Co. v. Sun Mut. Ins.
Co. 15 Blatchf. (U. S. C. C.) 249,
Fed. Cas. No. 10,408.
^' Royal Ins. Co. v. Home Ins. Co.
68 Fed. 698, 15 C. C. A. 609. Mc-
Cormick, C. J., says: "The appellee
— the Home Ins. Co. — applied to the
appellants for reinsurance, and re-
ceived the respective policies, Avhicli
are the subjects of the litigation. The
applications to the Koyal were made
on printed forms, with certain blanks
filled in in writing. The application
to the Imperial does not appear to
have been in writing, but was sub-
stantially the same in effect as those
made to the Royal, the features of
which material to note here Avere and
are that the applicant warranted to
retain tAventy-five thousand dollars,
and described the property -applicant
had insured as 'cotton subject to coin-
surance clause.' The Royal has now
abandoned anj' contention on the re-
tention clause. The Imperial still
insists on its construction of thai
clause, but the proof abundantly sup-
ports the action of the circuit court
on the issues made on the warranty
by the Home to retain twenty-five
thousand dollars or more on the risk.
During the life of these policies of
coinsurance a large amount of tlie
cotton was desti'oyed by fire. At the
lime of the fire the appellee had writ-
ten, and in force on the cotton, sub-
ject to the fire, policies Avith the co-
insurance clause to the amount of
ninety-seven thousand seven hundred
dollars and policies w-ithout the co-
insurance clause to the amount of
tAventy-five thousand dollars. The
loss on the cotton covered by the first-
named class of these policies Avas
thirty-eight thousand seven hundred
and seven dollars and fifty-eight
cents, and the loss on the other ex-
ceeded the amount of the pohcies.
There is substantially no issue as to
Avliat AA'ere the actual facts as to the
conh-acts and the loss, and there can
be no dispute that if the contention
of the appellee as to the construction
of the contract of coinsurance is cor-
rect, the decree of the circuit court
should be affirmed.
357
Having found
§ 119a
JOYCE ON INSURANCE
§ 119a. Same subject. — Reinsurance of a single policy oljligation
may be made under a statute requiring the assent of two-tliirds in
that its construction of the retention insurance policies is that the Home
clause is eoiTect, it only remains to are insured on ten thousand dollars
consider the other clauses of the poli- of their liability as insurers under
cies on which issue is joined. The their various policies issued to vari-
judgment and decree of the circuit ous parties for various amounts, and
court construe these clauses in favor covering as follows: Ten thousand
of the appellee, and a majority of dollars on cotton in bales, their
the judges of this court concur in own or held by them in trust or on
that decision. The questions here in- commission, Avhile contained in the
volved are so w-ell stated, and the au- yard No. 1, Shippers' Press, New Or-
Ihorities. so far as any authority ex- leans. A part of this description is
ists, bearing on the Cjuestion are so clearly inapplicable to the reinsur-
well applied in the brief of counsel ance, for the words, 'their own or
for appellee, that, in justice to our- held in trust or on commission,' have
selves and to him, we must adopt no meaning as between the insurer
and use his reasoning almost literal- and the reinsurer. The cotton itself
ly, and substantially to the full ex- was not the subject of reinsurance as
tent thai he has advanced it, there between the insurer and reinsurer,
being left little or nothing to add to but as between them the subject of
or cjualify what he had said, viz.: It the insurance was the liability of the
is urged that the defendants are not insurer, as an insurer, on the cot-
liable for the losses paid by the ton, owned or held by the original
plaintiff to F. and B. because the insui-ed. This policy was issued for
jjolicies issued to them did not con- a year, and to cover any liability
tain the coinsurance clause. It is that the insurer, • during the year,
urged that the two slips pasted on might assume as insurer of cotton in
the policies of reinsurance are de- the designated j^ress. It was not re-
scriptive of the risk assumed by the strieted to a liability then existing,
reinsurer. The defendants are driven but extended to future liability which
to take this ground because the re- might be incurred by the Home on
insurer has insured the liability of cotton in the Shippers' Press-yard 1.
the original insurer, whatever that What was the stipulation as to the
be, unless in the contract of reinsur- risk assumed by the reinsurer? He
ance there can be found some clause agreed to cover any risk which the
"whereby the reinsurer stipulated that insurer might be willing to take, for
it assumed no risk, unless llio original that is the meaning of the words,
contract contained the coinsurance 'This policy to be subject to the same
clause. It is observed that the i)oli- risks, conditions, etc., as are or may
cies of reinsurance bear the follow- be assumed by the reinsured, and
ing dates: That of the Imperial is the loss, if any, payable pro rata at
dated Nov. 23, 1891, and those of the same time and in the same man-
the Koyal Nov. 12, '91, and Dec. 26, ner as by said company, etc' Any
'91; the F. and B. policies are dated printed stipulation having reference
Oct. 12, '91, Nov. 19. '91, Feb. 9, '92, to the property itself or the cash
Feb. 11, '92, and Feb. 26, '92. Only value thereof cannot be applied to
one of the policies is dated before the contract of reinsurance between
those of the Royal, and only two the reinsurer and the reinsured, be-
are dated Ijefore that of the Imperial, cause the property is not the sub-
Three of them are dated after all the ject matter of their contract. It is
policies of reinsui'ance were issued, true that the contract of reinsurance
The description of the risk in the re- juust apply to the subject matter of
358
4
REINSURANCE § 119a
number of the ''holders of the policies" proposed to be reinsured
where the antecedent words "the reinsurance of any . . . out-
insurance specified in the original iul how far provisions which relate
policy; that is to say, to cotton in to the conduct of an insured person,
Press-yard 1, and to risks of the as general owner of that which is
same kind as those specified in the the subject of the contract, shall be
original policy. In other words, if given effect in a policy to indemnify
tlie original policy is a contract of against a risk which the insured has
insurance against loss by fire, the re- taken on the property of another,
insurance must be against loss by The nature of the risk against Avhich
fire, and not against loss by storms it insured, if there was no special
on land or at sea. But the specific stipulation regarding it, Avould sug-
risk in the policy of reinsurance need gest troublesome questions with ref-
not be identical with that in the orig- erence to the applicability of these
inal policy; that is to say, an orig- provisions of this peculiar kind of
inal insurance may be effected for insurance, some of which it might be
six months, Avith use of all ports of necessary to decide.' But in con-
the world, except those of Texas, nection with the statement of the risk,
The reinsurance may be for a single the following sentence was inserted,
voyage within bounds not prohibited whicli relieves the court of this dif-
and for a less amount : Philadelphia Mculty; 'This policy to be subject
Ins. Co. V. Washington Ins. Co. 23 to the same risks, conditions,' etc., 'as
Pa. St. 250. Such is the law in are or may be assumed or accepted
the absence of stipulations contained by the insured company,' etc. The
in the lower printed slip annexed hingUMge of the clause is almost
to the policies sued on. That slip identic;ii with the language used in
provides that this policy is to be the lower slij) or rider attached to
subject to the same risks, conditions, the policies sued on in these cases,
etc., that are or may be assumed by The court said: 'By this language
the original insurer. Hence rein- the defendant bound itself by what
surance, under these policies, is re- had been done and by what might be
insurance against any of the fire risks assumed by the plaintiff, properly
assumed by the original insurer in pertaining- to the risk which it Avas
any of its policies on cotton in Press- reinsuring. This agreement rendered
yard 1, and on the same conditions raigatory many printed portions of
as those contained in any of the orig- the policy in Avhich it Avas inserted,
inal policies issued by the original This Avas special and peculiar, per-
insurer to the original insured on taining directly to the subject matter
cotton thus located. This clause of the contract, and it controlled
gives to the original insurer the privi- those pai'ts of the policy which were
lege of taking such risks on cotton inconsistent Avith it. It assumed
in the designated place as it may knowledge on the part of the defend-
choose. The reinsurer says: 'I will ant of all the terms and conditions
reinsure whatever contract you make, of the plaintiff's policy, and it im-
and, to protect me from any impru- plied that the plaintiff", as original in-
dence on your part, you must re- surer, migiit properly assume risks,
tain at least tAventy-five thousand conditions, etc., without materially
dollars on tlie same risk.' This view changing the nature of the liability
is taken by the supreme court of created by the original policy.' This
Massachusetts in Manufacturers' Fire Avas a ease of reinsurance of a risk
& Marine Ins. Co. v. Western Assur. on a factory Avhich had been assumed
Co. 145 Mass. 424, 14 N. E. 632. by the reinsured company, and the
The court said: 'It is often doubt- number of the policy designating the
359
§ 119a JOYCE ON INSURANCE
risk was inserted in the contract of ted by the reinsurer. How was it
reinsurance. The court of appeals of possible to desci-ibe these future con-
New York, in the case of Jackson tracts of insurance intended to be
V. St. Paul Fire & Marine Insurance covered by the reinsurance? They
Co. 99 N. Y. 129, 1 N. E. 539, con- could not be described except as to
lirms the doctrine of the Massa- the species of property and their
chiasetts court. Justice Danforth locality, and therefore the reinsurer
says: 'The reinsurers had no prop- said to the reinsured: 'We will
erty right in the subject insured by protect you against any loss on
them, but, by underwriting the pol- the cotton in Shippers' Press-yard 1
ic}', rendered themselves liable to loss which you may assume as insurer,
by fire, and they thereby acquired an and we agree to accept the terms and
insurable interest to the extent of conditions 3^ou may make with your
that liability. But it Avas in relation customers, but you must retain, as
only to the peril against which they insurer, a liability of at least twenty-
had insured. It is that to which five thousand dollars on the risk
their request for reinsurance applied.' which we take, though we permit you
By it, in effect, they say as insurers : to take other reinsurance, and, in case
'We have undertaken a risk as fol- of loss, we fix the proportions in
lows : It amounts to four thousand which we are to make payment. For
five hundred dollars, and we ask in- that purpose we put in the follow-
demnity against a portion of it.' It ing stipulation: This policy to be
is not pretended that they did not subject to the same risks as are or
state the risk literally as they had may be assumed by the reinsured corn-
taken it, and it Avas, in fact, de- pany, and any loss payable pro rata
scribed in their policy in terms simi- at the same time and in the same
lar to those used in the policy of re- manner as by said company',' etc.
insurance. The case may indeed be The court of appeals of New York
taken in like mann'er as if they had says, in Blackstone v. Alemannia In-
exhibited to the defendants the orig- surance Co., 56 N. Y. 107, that by
inal policy, and the defendants had the virtue of this clause the defend-
indorsed upon it an assumption of ant is not bound to pay the full
the risk of one thousand five hundred amount reinsured by its policy, but
dollars. In both these eases the re- only such proportion of the amount
insurance applied to a specific orig- of the loss as is in the ratio of the
inal policy of insurance, designated amount of reinsurance to the amount
by number in the contract of rein- originally insured. Thus, the de-
surance. In these cases the original fendant's reinsurance being for half
contract of insurance had been made the amount of the onginal insurance,
before the reinsurance contract. In the defendant is to pay half the loss,
this case most of the original insur- The agreement to pay pro rata Avith
ance was subsequent to the contract the original insurer whatever liabili-
of reinsurance, and none of the poli- ty may be assumed is entirely in-
cies of insui'ance originally issued consistent with the clause providing
prior to the contract of reinsurance for a different basis of liability, and
are designated by numbers or other- it has no application to reinsurance,
Avise. Tlie original policies are not Avhich does not cover property, but .
only not described in the contract of covers only the insurable interest of
reinsurance, but the contract covers the reinsured groAving out of his lia-
a period of one year, and it contem- bility as insurer. In the Massa-
plated subsequent insurance. It also chusetts case (145 Mass. 42-i, 14 N.
contemplated that existing policies E. Rep. 632) it AA-as held that the
might expire and ncAV policies be clause requiring the Avritten consent
made. Other insurance was permit- of the company to a change in the
360
II
REINSURANCE
§ 119a
iitle or possession of llie property the ship, as betAveen the plaintiffs
insured had no application to the re- and the defendants, is insured at one
insurer, and no notice of such change thousand pounds. The policy itself
need be given to him. It sufficed if is declared to be a reinsurance, and
such change Avas assented to by the also it contains the suing and labor-
original insurer. In Uzielli v. Boston ing clause. If it were not for the
Marine Ins. Co. 15 Q. B. 11, 13, it clause whereby the defendants were
was held that the reinsurer was not rendered subject to the same terms
entitled to notice of abandonment, and conditions as were contained in
though the primitive insured may the original policy, and were to pay
have abandoned to his insurer. The as might be paid thereon, the plain-
court quotes Phillips on Insurance tiffs, in my opinion, would be en-
and Hastie v. De Peyster, 3 Caines titled to recover only eighty-eight
(N. Y.) 196. In that case Chief Jus- per cent, etc. The plaintiffs rely,
tice Kent says : 'The reinsurer has no however, upon the special clause,
connection or concern with the first whereby the defendants have under-
insurance, and is at all times bound taken to pay as the French company
in indemnify his own assured when shall have paid, and under this clause
the other can show that he has been Ihey aie entitled to recover any sum
damnified in consequence of the first not exceeding one thousand pounds.'
insurance.' Mr. Justice Livingston This special clause ref en-ed to is in
sa^ys there was no privity at all be- the main similar to that contained in
tween the primitive insured and the the lower slip of the policies sued
reinsurer. In the Uzielli case it was on. The defendants in this English
held that the suing and laboring case were reinsurers of the French
clause in an original insurance policy company, Avhich itself was a reinsur-
and in the policy of reinsurance has er of English underwriters. In this
no application to reinsurers. That case it will be observed that though
clause provides that in the ease of the suing and laboring clause was a
loss or misfortune it shall be lawful part of the policy of reinsurance, the
for the assured, his agents, etc., to court held it had no application to
sue, labor, and travel in and about the reinsurers. Why? For.no other
the safeguard, defense, and recovery reason than that the reinsurer does
of goods, etc., and the ship, without not insure the owner of the ship, but
prejudice to this insurance, to the the insurable interest of the insurer,
charges whereof the insurers agree Hence that interest is the loss that
to contribute. In that case the rein- the insurer might suffer under the
surance was for one thousand policy issued by him, and the master
pounds, but the loss as betAveen the of the rolls said the suing and labor-
insurer and the assured was one hun- ing in that case for the safeguard of
dred and twelve per cent, because the ship AA-as not by the assured un-
Ihe loss Avas eighty-eight per cent, der the policy of reinsurance,
and the expenses incurred, Avhen add- but b.y the assured under the
ed to the loss, made the original in- original policy, for the ship
surer responsible for one hundred was not insured under the reinsur-
and twehe per cent; that is to say, ance policy. So totally distinct is
eighty-eight per cent of the loss, the original insurance from the re-
plus the expenses. The court said: insurance, that the premium of re-
'The plaintiffs seeks to recover eighty- insurance may be less or greater than
eight per cent Avhich the French com- that of the original insurance, as
pany have paid for a total loss, and Avell as the extent of the risk. The
they seek to recover more under the most instructive case on the subject is
suing and laboring clause in the the most recent — Faneuil Hall Ins.
policy. NoAv, in the policy sued on, Co. v. Liverpool & London & Globe
361
§ llUa JOYCE OxV INSURANCE
Ins. Co. 153 Mass. 70, 10 L.K.A. tention clause in policies of reinsur-
423, 26 N. E. 244. The reinsurance ance is intended to discourage and
policy in that ease contained a clause prevent lull reinsurance, and is, in
similar to that in the lower slip at- fact, a coinsurance clause as between
tached to the policies sued on, to the reinsured and his reinsurer, for
wit : 'This i)oliey is subject to the the retention clause is a contract be-
same risks, conditions, mode of set- tween the insurer and his reinsurer
tlenient, and, in case of loss, payable that the original insurer will not ef-
at the same time and in the same feet reinsurance to the extent of his
manner as the policies reinsured.' entire liability, but will carry himself
The court said that many of the pro- a part of that liability, and the part
visions in the printed blank would to be carried was fixed in this case
be inapplicable, and quotes one pro- as not less than twcnty-tive thousand
vision at the very commencement of dollars. Hence the retention clause,
the blank, viz : 'This company shall the coinsurance clause, as between the
not be liable beyond the actual value reinsured and the reinsurer, is in-
ot the insured property at the time tended to accomplish an object total-
of any loss or damage.' This, said ly diffei-ent from the object intended
the court, does not measure the de- to be secured by the coinsurance
fendant's liability under the contract clause in the primitive policy issued
of indemnity. Tnder that it may be to the insured. It is, therefore, plain
liable, not only for the original loss, that the clause in the upper slip or
but for the costs and expenses in- rider attached to the policies of re-
curred l)y the German company in insurance has no application to re-
defending itself against Chauncey's insurance. That clause provides 'that
suit. Again, in si)eaking of the pro- this company shall be liable for only
vision (juoted above, the court says: such proportion of the whole loss as
'We think this provision means, not the sum hereby insured bears to the
that the various terms in the rein- cash value of the property hereby
sured policy as to risk, etc., and insured.' No property whatever is
time and mode of payment in case insured by the reinsurer. His policy
of loss are incorporated with, and applies to a liability of the original
form part of, the contract for indem- insurer, arising out of his insurance
nity — so that, for instance, claims by of the property, and this liability is
the plaintiff on the defendant here the incorporeal subject matter of the
be settled by arbitration, or the i)lain- reinsurance contract, and is collateral
tiff shall submit its books to the in- to the property. If the above-quoted
spection of the defendant, or shall clause were applicable to reinsurance,
bring suit within one year — but that the liability of the Imperial com-
the reinsured or original policies pany on its ])olicy for ten thousand
furnish in these and other particulars dollars would be only eight hundred
the basis upon which the contract of and thirty-three dollars and thirty-
indenmity stands, and that in all three cents, or one-twelfth thereof,
dealings with the original insured inasmuch as the amount insured (ten
the provisions of the policy issued thousand dollars) is one-twelfth of
to him are to l)e observed.' The ob- one hundred and twenty thousand
ject of the coinsurance clause is to dollars, which sum, for the purpose
make the owner of the property carry of illustration, is assumed to be the
a part of the risk, unless he insures total value of the cotton insured,
to the t'lUl value of his property. The This result is almost absurd in the
purpose is to compel the owner to face of an agreement contained in
take out policies to the full value the i)olicy of reinsurance that 'this
of the proj)eity, and pay premiums company will be liable, in case of re-
on such full value, whereas the re- insurance, for the loss sustained
362
REINSURANCE § 119a
only in the proportion whieli the sum value of the whole property at the
reinsured shall bear to tlie whole sum lime of the Are. The answers insist
covered by the reinsured company.' that all the terms of the contract be-
Besides, there is an express pro rata tween the parties are to be found in
clause in the lower slip attached the policies of reinsurance. We need
lo the policy which proviiles for not therefore go beyond these poli-
])ro rata payments to be made by cies to determine the rights of the
the reinsurer at the same time and in parties, and lience no case of conceal-
the same manner as by the Home ment or misrepresentation is present -
company. It is apparent, therefore, ed by the ple^ding-s. The defendant.s
that in case of reinsurance the value claim that the clause just quoted is
of the property is abandoned as a the co-insurance claim and that their
test of proportionate liability, and liability is for only 'such proportion
in place thereof is substituted the pro- of tlie whole loss as the sum insured
portion which exists between the bears to the cash value of the whole
iunount of insurance carried by the property insured.' It appears to us
reinsurer and the total amount of in- that this clause has no application to
suranee carried by the original in- reinsurance and is inconsistent with
surer. This is necessarily the case, the pro rata clause which provides
as the property is not insured by the that the reinsurance is sul)ject to the
reinsurer; the liability of the original risk specihed in the original policy,
insurer in respect to the property, and that the reinsurer is to pay the
being the subject matter of the re- loss pro rata with the reinsured. It
insurance contract. The coinsurance is urged that one of the applications
clause cannot be said to be deserip- for reinsurance expressly asks for
live of the risk, as lietween the reinsurance subject to coinsurance,
reinsured and the reinsurer, be- and appellants insist that this is not
cause the risk which the reinsurer only a material, but the most ma-
takes is the risk described in the terial, of the descriptions of the risk,
original policy, whatever that may because when these contracts of re-
be, unless some clause can be found insurance were made, the market rate
ill the reinsurance contract which ex- at New Orleans upon policies on
pressly varies that description. We cotton containing the coinsurance
Mnd no clause in the reinsurance poli- clause was one per cent, while those
cies which modifies the risk as as- not containing such clause command-
sumed by the original insurer. Tlie ed a premium of one one-half per
comi)laint is not that any clause in cent. Let us see: F. and B. had —
the reinsurance policy has been vio- to use round numbers — sixty thou-
hited by the Home company, but that sand dollars' worth of cotton. They
the Home company did not insert lost tiiirty thousand dollars' worth,
llie coinsurance clause in its contract On this they had twenty-five thou-
with the primitive insured. This re- sand dollars of insurance without the
duces the case to one of misrepresen- coinsurance clause, for which they
tation or concealment. No averment paid one and one-half per cent pre-
in the answers is made on which such mium, Or three hundred and seventy-
a defense can be liased. Indeed, such hve dollars, and got twenty-tive tliou-
a defense is inconsistent with the sand dollars on these policies. Now,
answers, which assert that the coin- on that property and that amount of
suranee clause is contained in the loss, how much coinsurance must they
policies sued on, and treat as such have had to get twenty-tive thousand
that part of the policy which declares dollars indemnity? That received
that the insurer shall be lial)le for was tive-sixths of the loss. To have
only such part of the whole loss as received a like anwuint under coinsur-
the sum insured l)ears to the cash ance policies thev must have had
3fi3
§ 119a JOYCE ON INSURANCE
standing risks" are used. ^^ The surrender of a policy in the rein-
sured company and the relinquishment of the right to a return pre-
mium constitutes a consideration for issuance of a policy by the re-
insurer, and in addition thereto gaining of new business by the re-
insurance of the reinsured's risks is to be considered as a factor.^'
policies written nominally for five- ties concerning matters of insurance
sixths of the value of the property concur in the position that, if the
insured; that is to saj^, to the amount concealment is material, it will avoid
of fifty thousand dollars, which, at the policy, notwithstanding the in-
one per cent, would have cost them sured did not intend to commit any
five hundred dollars, instead of three fraud. The suppressio veri may hap-
hundred and seventy-five dollars, pen by mistake and be entirely with-
This is basing our calculations on out fraudulent intention; still the
the facts of the case. The proof underwriter is deceived and the policy
shows that Mr. B, is a director in is thus void for the very plain rea-
the Home company, and that he son that the risk run is really differ-
would not accept coinsurance policies ent from the risk understood and in-
ou his cotton at risk. It shows that tended to be run at the time of the
another firm of cotton factors, who agreement. A concealment which is
took more insurance in the Home on only the effect of accident, inadvert-
cotton than all other persons com- ence, or mistake is equally fatal to
bined, Avould not take coinsurance the contract as if it were designed,
policies. It is not contended that The principle is that, if the party
they are not as binding according to loroposing insurance conceals any-
their terms as other policies, or that thing which may influence the rate
they present any dilficulty in the of premiums which the underwriter
matter of adjustment. We incline may require, although he does not
to think that those who preferred know that it would have that effect,
policies without the coinsurance such concealment entirely vitiates the
clause were justified in resting their policy. By a 'material fact' is meant
choice on the knowledge they had one which, if known by the under-
that such insurance Avas the cheapest, writer, would induce him either to
Therefore, in addition to the reason- decline the insurance altogethei*, or
ing of appellee's counsel which we not to accept it unless at a higher
have above adopted, we suggest that, iiremium:' Angell on Insurance, sec.
considered as a representation, tlie 1~5. ^Vithin the meaning of the au-
materiality of the Avords, 'subject to thorities, it was not material, even
coinsurance,' is not made to ajipear if it can have relation to the con-
by the proposition which we have tracts of reinsurance here involved,
quoted from the brief of appellant's The decree of the circuit court in
counsel, which is the proof text of each case is affirmed." Pardee, C. J.,
their discoui'se. It seems to be clear dissented from the above opinion,
that the purpose of the coinsurance ^^ Iowa Life Ins. Co. v. Eastern
clause is to stimulate full insurance. ^Mutual Life Ins. Co. 64 N. J. L.
This being the chief object, insurance 340, 45 Atl. 762, 29 Ins. L. J. 299,
companies cannot claim that it les- sec. 66, 2 Genl. Stat. N. Y. ins. act,
sens the moral hazard. It cannot p. 1755.
affect tlie physical hazard. The fact ^^ (-lazzam v. German Union Fire
that some of the appellee's policies Ins. Co. 155 N. Car. 330, Ann. Cas.
did not have the coinsurance clause 1912C, 362, 71 S. E. 434, 40 Ins. L.
cannot, therefore, be relied on as a J. 1586.
concealment, though 'all the authori-
364
m
REINSURANCE § 120
A contract for reinsurance cannot be sustained where the sul^ject
matter has been destroyed and the reinsurer has knowledge thereof
before issuing the policy.^" But although a A-essel is lost before par-
ticulars are furnished in accordance with an ad interim covering
memorandum providing for the issue of a policy on goods on re-
ceipt of particulars, a contract for reinsurance on such goods is not
affected by said loss. A reasonable time will be allowed to furnish
particulars.^
Failure of one insurance company to object to risks contained in
schedules sent to it by another company, a certain amount of whose
risks it has made a compact to reinsure, will not amount to an ac-
quiescence on which the latter can rely in case they are not covered
by the compact, since reliance may be placed on the good faith of
the other company and its acting within the contract, without the
necessity of making a personal investigation of the property cov-
ered by each schedule.^
§ 119b. Same subject: mutual, etc., companies. — Where a stock
company offers to the policy holders of a defunct mutual company
free insurance for the period for which the premiums had been paid
in the insolvent company there is no guaranty or assumption of
the old contract and the substituted policy need not conform to the
original one, especially so when the insured, in accepting the offer,
agreed that upon the issue of such new policy his existing policies
in the defunct company should thereafter be void and of no effect.^
A contract of insurance is not completed by surrendering and send-
ing in a certificate of original insurance to the reinsurer with a re-
quest for a policy where it appears that the latter issued several dif-
ferent kinds of policies at different rates, and so even though it had
offered to exchange its policies for certificates of members of the re-
insured company.'*
§ 120, Duration: term of risk may be controlled by original in-
surance. — This is illustrated by a Pennsylvania case, where the dur-
ation of the reinsurance was stated as for one year, but the policy
did not mention when that period was to commence or terminate.
The original insurance was for one year from February 24:th, with
^•^ Henshaw v. Insurance Co. of Commercial Fire Ins. Co. 95 Ala.
State of N. Y. 73 N. Y. Supp. 1, 469, 11 So. 117, 16 L.R.A. 291.
36 Misc. 405. Examine Union Ins. ' ^ Brown v. United States Casual-
Co. V. American Fire Ins. Co. 107 tv Co. (U. S. C. C.) 88 Fed. 38, 27
Cal. 327, 28 L.R.A. 692, 48 Am. St. Ins. L. J. 951. Dismissed 90 Fed.
Rep. 140, 40 Pac. 431. 829.
^ General Marine Assur. Co. v. * Cotton v. Southwestern Mutual
Ocean Marine Ins. Co. 16 Rap. Jud. Life Assoc. 115 Iowa, 729, 87 N. W.
Que. C. S. 170. 675.
^ German American Ins. Co. v.
' 365
§ 121 JOYCE ON INSURANCE
])iivilege of renewing, and the reinsurance was taken out May olst
of the ensuing year, and it was decided that the reinsurance should
be construed as running one year from tlie date February 24th, that
being the date of commencement of the original risk, and that the
reinsurer was liable, the death of the insured having occurred be-
tween February 24th and May Blst.^ So the terms of the original
policy may control the contract of reinsurance.^ Contracts of re-
insurance can be made covering a different period of time from that
covered by the original policy of insurance, they need not be co-
terminus^
§ 121. Custom of underwriters may affect risk. — Where the
custom among underwriters in the city of New Orleans was to di-
vide the risk, and not take the whole of it, such a custom wall be
understood, although not mentioned in the application.^ If a con-
tract of reinsurance is made by partias with reference to a custom
that such contracts are to take effect from the time when granted,
such custom W'ill govern and the reinsurer is not liable for a loss of
which neither party had knowledge, but wdiich occurred prior to
said time. "In the present case w-e find no circumstance indicating
the mutual intention of .the parties to give to their contract a retro-
spective effect. The stipulated facts show that at all tlie times men-
tioned it was the custom among fire insurance companies doing bus-
iness upon the Pacitic Coast, granting reinsurance to other fire
insurance companies, to charge and collect premiums as and from
the date of reinsurance, and to write th^ir policies so as to cover the
reinsured company from the date upon w^hich the reinsurance
would be granted. Both plaintiff and defendant were fire insurf.nce
companies, doing business in San Francisco, and may be presumed
to be familial' with these customs, and, in the absence of a showing
to the contrary, to have contracted with reference to them. Indeed,
plaintiff' alleges, in effect, that its contract with defendant was sub-
ject to the customs in vogue, and understood by insurance men.
when it avers that 'defendant did agree to and did reinsure plaintiff
thereon in said sum, and did agree to issue to it a policy of reinsur-
ance in the usual form, and for the premium usually chargeable
upon risks of the character assumed.' Where there is a known us-
5 Philadelphia Life Ins. Co. v. On limitation clause a.s part of con-
American Life & Health Ins. Co. 23. tract of reinsurance, see note in 1 B.
Pa. St. 65. R. C. 184.
^ Commonwealth Ins. Co. v. Globe ' Milwaukee Mechanics' Ins. Co. v.
Mutual Ins. Co. 35 Pa. St. 475; Palatine Ins. Co. 128 Cal. 71, 60
London Assur. Co. v. Thompson, 47 Pac. 518, 30 Ins. L. J. 84.
N. Y. Supp. 830, 22 App. Div. 64, « Louisiana Mutual Ins. Co. v. New
aff'd (mem.) 54 App. Div. 637, aff'd Orleans Ins. Co. 13 La. Ann. 246.
170 N. Y. 94, 62 N. E. 1066, 31 Ins.
L. J. 351.
366
REINSURANCE § 122
age of trade, persons carrying on that trade are held to have con-
tracted with reference to the usage, unless the contrary appears, and
the usage forms a part of the contract.' Without pursuing the au-
thorities further, we are of opinion : 1. Where the exact time of tlie
commencement and termination of the risk are specified in the pol-
icy, or, if no policy has been written, in the contract, such specifi-
cation governs; 2. Where no time has been expressly indicated, the
circumstances of the case will be considered for the purpose of de-
termining it ; 3. If there are no circumstances indicating the inten-
tion of the parties, and no time is specified in the contract, the risk
will be deemed to have commenced at the date of the contract; 4.
Tn the ease last mentioned, if before the contract of insurance is
made, the property has ceased to exist, although unknown to the
parties, the risk never attaches." ^° If a contract for reinsurance is
made where a custom exists among insurers to charge and collect
premiums as and from the date of reinsurance, and to write policies
so as to cover the reinsured risk from the date of reinsurance, and
there is nothing indicating a mutual intention of the parties to give
the contract of reinsurance in suit a retroactive ett'ect, the reinsurer
is not liable if the property is destroyed prior to the execution of the
contract of reinsurance without the knowledge of either party of
the loss at that time.^^ But a general custom to issue reinsurance
policies for the same period of time covered by the original policy
cannot be shown against the plain letter of a contract prescribing
a different period of time for its termination.^^
§ 122. Limitation of risk of specified date: change of risk. —
If a policy of reinsurance covers by limitation only risks existing
at a specified date, in such case a subsequent alteration or change
in the risk by the original insured, even with the consent of the
original insurer, releases the reinsurer.^'
If the reinsurance is made subject to all the conditions of the orig-
inal policy, which are or may be adopted by the insurer therein,
the reinsurer binds itself by what the insurer adopts within the
terms of the original contract, and where the original policy is con-
' Citing Auzerais v. Naglee, 74 ^^ Milwaukee Mechanics' Ins. Co.
Cal. 60, 15 Pac. 371 ; Taylor v. Cas- v. Palatine Ins. Co. 128 Cal. 71, 60
tie, 42 Cal. 367; Brown v. Howard, Pac. 518, 30 lus. L. J. 84. Examine
1 Cal. 423. London Assur. Corp. v. Thompson,
1° Union Ins. Co. v. American Fire 47 N. Y. Supp. 830, 22 App. Div.
Ins. Co. 107 Cal. 327, 28 L.R.A. 692, 64, aff'd 54 App. Div. 637, atif'd 170
40 Pac. 431. N. Y. 94, 62 N. E. 1066, 31 Ins. L.
^^ Union Ins. Co. v. American Fire J. 351.
Ins. Co. 107 Cal. 327, 48 Am. St. " gt. Nicholas Ins. Co. v. Mer-
Rep. 140, 28 L.R.A. 692, 40 Pac. chants' Fire Ins. Co. 83 N. Y. 604.
431.
367
§ 122a JOYCE ON INSURANCE
clitioncd to be void in case of a change of ownership of the property,
without consent of the insurer, and the reinsurance is made subj-ect
to such condition, the insured need only be required to look to. the
insurer for consent to such change.^* The court said in this case:
"When Marden wished to transfer his policy, that (the original
insurer) was the company for him to go to. The policy provided
that he should procure its assent, and not that of any other com-
pany. Moreover there was no provision either in the policy received
by the German American Company from the plaintiff, or by the
plaintiff from the defendant, or in the contract between the plain-
tiff" and the defendant that the German American Company or its
agent should not a.ssent to the transfer of its policies. The insur-
ance companies must be held to have entered into their respective
contracts with the knowledge that as matter of law neither jNlarden
nor any other German-American policy holder could be compelled
to procure the assent of any other company, and with the knowledge
that in the ordinary course of business applications of this kind
would be made to that company by its policy holders, and therefore
to have contemplated and understood, in the absence of any con-
trary provision, that the original insurer or its agent was to give the
required assent to transfers, to receive proof of loss, and to attend
to what may be called the local conditions of the policy, subject, in
all cases, to the implied condition that nothing should be done with-
out its assent to enhance the risk. We do not, therefore, think there
IS anything in the nature of the contract of reinsurance or of in-
demnity inconsistent Avith the power of the original insurer or its
agent to assent to the assignment of the policy." ^^ The reinsurer
may be bound by the insurer's assent in writing to a change of title
and by an assignment of the policy, as where a mortgage was fore-
closed by a trustee to whom the policy was payable, and the prop-
erty was bought by an agent of the mortgage bondholders, where
the original policy permitted such change upon written consent of
the insurer.^®
§ 122a. Reinsurance not retroactive: property destroyed when
contract made. — An agreement to issue a policy of reinsurance in
ihe usual form and for the usual premium, made after the property
i*Faneuil Hall Ins. Co. v. Liver- Mass. 419, 14 N. E. 632; Jackson v.
pool & Londou & Globe Ins. Co. 153 St. Paul Ins. Co. 99 N. Y. 124; Fire
Mass. 63, 10 L.R.A. 423, 26 N. E. Ins. Assn. v. Canada Ins. Co. 2 On-
244. tario, 481, 495.
^* Citing Consolidated Real Estate ^^ ^Manufacturers' Fiie & Marine
& Fire Ins. Co. v. Cashow, 41 Md. Ins. Co. v. Western Assur. Co. 145
59; Manufacturers' Fire & Marine Mass. 419, 14 N. E. 632.
Ins. Co. V. Western Assur. Co. 145
368
REINSURANCE §§ 123, 124
was destroyed, of which fact both parties were ignorant, will not
become operative by relating back to the beginning of the original
insurance, but will be deemed to commence at the date of the con-
tract."
§ 123. Limitation of risk to particular locality. — When th-e con-
tract of reinsurance limits the risks to a particular locality, it will
only include policies within that locality, as where the contract lim-
ited the reinsurcmce to risks in the state of New York, and schedules
describing the risks to be reinsured embraced certain risks else-
where, as well as those in that state. It was decided that although
the policies of reinsurance covered in terms the risks which were set
forth in the schedules, yet they only included the risks in New York
state.^^ So locality is important as where wheat is reinsured "while
located and contained as described herein and not elsewhere" and
it was contained in an elevator for which the rate of premium was
higher than that of the warehouse in which it was represented that
it was stored ; and the policy is thereby avoided.^^ And w^here the
reinsured risk was only of property while stored in a certain man-
ner, in a certain place, as in case of rosin which was not to be cov-
ered unless it was in or on specified warehouses and sheds, and the
reinsurance policy does not mention property in any other place,
it is necessary in order to recover that the rosin destroyed should
have been so located.^"
§ 124. Condition as to assignment. — "Where upon the decease of
the insured the plaintiff obtained a judgment against the original
■insurer, and an assignment from it of its contract of reinsurance
which prohibited any assignment or sale thereof, it was held that
an action would lie against the reinsurer upon said contract, and
that the prohibition was limited to assignment prior to loss.^ An
insurer who has reinsured his risks with another insurer has power
to assent to the transfer of one of his policies, according to its pro-
visions, in the absence of anything in the contract of reinsurance
expressly depriving him of such power. And a provision in. a pol-
icy of remsurance issued in accordance with a contract made months
previously cannot avail to make invalid a consent by the original
"Union Ins. Co. v. American Fire Location, locality important see
Ins. Co. 107 Cal. 327, 28 L.R.A. 692, generally §§ 1742-1750, 2068 herein.
48 Am. St. Rep. 140, 40 Pae. 431. 20 London Assur. Corp. v. Thomp-
See § 1442 herein. son, 170 N. Y. 94, 62 N. E. 1066. 31
^* London and Lancashire Fire Ins. Ins. L. J. 351, aff'g 54 App. Div.
Co. V. Lycoming Fire Ins. Co. 105 637, aff'g 47 N. Y. Supp. 890, 22
Pa. St. 424. App. Div. 64.
^^ Fireman's Fund Ins. Co. v. ^ Lee v. Fraternal Mutual Ins. Co.
Aaclien & Munich Ins. Co. 2 Cal. 1 Handy (Ohio) 217. See Faneuil
App. 690, 84 Par. 253. Hall Ins. Co. v. Liverpool & London
Joyce Ins. Vol. I. — 24. 369
§§ 125-127 JOYCE ON INSURANCE
insurer to the transfer of one of the policies covered by tlie con-
tract, which wa8 oranted between the date of the contract and the
issuance of the pohcy, where such consent was permitted by the
contract.'^
§ 125. Condition as to other insurance. — A condition in a policy
of reinsurance, providing: auainst otiier insurance, refers to other
reinsurance, and the reinsurer cannot evade liability under this
chuise where there is no other reinsurance;^ and where it is con-
ditioned that the written consent of the company shall be obtained
within ten days^ in case the jiroperty should be reinsured, the mere
})roof of the existence of an unauthorized reinsurance, without evi-
dence that the same had been in existence at lea.^t ten days before
the tire, will not avail the comi)any.*
§ 126. Conditions: time limit for suing: award. — Althou<i;h the
original contract for insurance contains certain limitations provid-
ino- for an appraisal and award before suit, and limit's the time for
suing, such conditions do not become a part of, nor affect the con-
tract of reinsurance.^ But the six years' limitation a})plies to a pol-
icy of reinsurance.^
§ 127. Amount of reinsurance. — it is the loss or liability of tlie
insurer assumed by him under his contract with the insured which
forms the bavsis of the contract of reinsurance. The contract is one
of indemnity, and the insurer has an insurable interest only to tlie
(extent of that liability, and for this reason the amount of interest
in reinsurance is limited by the insurer's liability under the original
contract. Tt need not, however, be for the si^ecilic risk thereunder,
a.'^ the insurer may reinsure for a smaller amount than his total lia-
bility."=^
& Globe Ins. Co. 153 Mass. 03, 10 Tcnii. 2(54, .-^2 S. W. 168, 28 Ins. L.
L.K.A. 423, 26 N. E. 244. -). OK).
2 Faneuil Hall Ins. Co. v. Liver- ^ Allver v. Rlioads, 76 N. Y. Supp.
j)ool & London & Globe lus. Co. 153 808, 73 App. Div. 158.
Mass. 63, 26 N. E. 244, 10 L.R.A. When statute of limitations begins
423. to run against reinsured, see Insur-
3 Mulual Safety Ins. Co. v. Hone, ance Co. of Pa. v. Telfair, 57 N. Y.
2 N. Y. (2 Comst.) 235. ' Supp. 780, 27 Misc. 247, rev'd 61 N.
4 Cundierland Mutual Fire Ins. Co. Y. Supp. .322, 45 App. Div. 564.
V. Giltinan, 48 N. J. L. 495, 57 Am. 'See Philadelphia Ins. Co. v.
Rep. 586, 7 Atl. 424. Washington ins. Co. 23 Pa. St. 250.
* Eagle Ins. Co. v. Lafayette Ins. "In reinsurance the amount of inter-
Co. 9 Ind. 446; -Jackson v. St. Paul est is the sum insured in the original
Fire & Marine Ins. Co. 99 N. Y. 124. policy, with the addition of the pre-
Ejamine Providence Ins. Cn. v. mium of reinsurance deducting the
^Etna Ins. Co. 16 U. C. Q. B. 13-'). oriu-inal premium:" 2 Phillips on
See also Alker v. Rhoads, 76 N. Y. Ins. see. 1248. See §^ 113, 119
Supp. 808, 73 Ai)p. Div. l."8; Roval herein.
Ins. Co. V. Vandeibilt Ins. Co. 102
370
REINSURANCE §§ r27a, 128
A policy of reinsurance, to apply to the excess wliieli tlic original
insurer iiia\' liave in its vai'ious ])olicies over $50,000. ])ro rata with
all insui'ance policies on the same excess, does not prevent the orig-
inal insui-er from protecting himself hy ohtaining reinsurance fi'om
ither c()iiij)anies within that sum.* And if a statute limits the
amount which an indenniity company may accept as a single risk
to a certain j)er cent of its capital and surplus hut also j)ermits it to
reinsure such excess it is obligated to reimburse where it accepts a
risk in excess of such |)er cent.^
§ 127a. Same subject: separate risks: notice. — 'i'lie existence of
brick partitions extending above the I'oof and dividing a building
into stores or sections will not constitute each section a separate
building or the goods therein a separate risk, within the meaning
of a reinsurance contract limiting tlie amount of insurance to be
placed on any one ''building of risk," if all the sections are inclosed
by a con)mon exterior wall and are all under one management and
devoted to the same use, while the floors of the different stories are
on the same level and connected by large doors through the parti-
lion. And notice that three stores belonging to the same person
are all located at the foot of the saine street is not notice to the re-
insurer that they are all in the same building so as to l)ind it under
a contract for reinsurance which limits the amount of insurance
on any one building or risk.^°
§ 128. Representations and warranties in reinsurance: conceal-
ment. — in the contract of reinsurance it is incumbent u))on tbe in-
surer to comimniicate to the reinsurer all the facts of which he has
knowledge which are material to the I'isk. And where he states as
ri fact soruething untrue with intent to deceive, or where he states
a fact positivelv as true without knowing it to be ti'ue. and which
tends to mislead, the policy is avoided where such facts materially
affect the risk. And any undue concealment or intentional with-
holding of facts material lo the risk which ought in good consciences
to be connnunicated bv him likewise a\()ids the contract. ^^ lUil if
/
* Insurance Co. of Noi'tli Amerioa v. New York Fire Tns. Co. 17 Wond.
V. Hihernin Tns. Co. 140 V. S. 5G5, (N. Y.) 35!); Sun Mutual Ins. Co.
35 L. I'd. 517, 11 Sup. Ct. !)()!). v. Ocean Ins. Co. 107 U. S. 485. 1
Miosicr V. United States Fidelity Sup. C{. 582, 27 L. ed. 337. It is
& (luaranty Co. 11!) N. Y. Su]))). also said in lliis case lliat the "ex-
157, l.')4 App. Div. 84!), N. Y. Ins. action of inlorinalion in some in-
Law (Laws 18!)2, c. (>!)(), p. 1941) stances may be {greater in a case of
sec. 24, and Laws lOOli, p. 7(58, c. 226, jcinsui'ance than as between tlie jiar-
sec. 7. ties to an orif::iiial insurance.'' Mer-
^° German American Ins. Co. v. chants' ]\fanufacturers Mutual tns.
Commercial Fire Ins. Co. 95 Ala. Co. v. Washinii'lon Ins. Co. 1 Ilaiidv
4m, 11 So. 117, K) L.R.A. 291. (Ohio) 408. Insurer must connnii-
^^ New York Bowei'v Fire Ins. Co. nicate all the representations of orig-
371
§ 128 JOYCE ON INSURANCE
the reinsurer issues a new policy as a substitute for one issued by
the reinsured, any warranty of the truth of the representations re-
lates to the date of the original application, and not to the date of
the new policy, and if such representations were true when made,
no breach of warranty arises from tlie fact that they were false at
the date of the new policy, nor is it any defense that the risk was
not a safe one at the time of the issuance of the latter policy, where
by the agi'eement between the reinsurer and insurer the former was
obligated to reinsure all the risks of the latter. ^^ And where it ap-
peared that at the time the original insurance was affected the word
"charter" was understood by the parties thereto to mean a guano
charter, and the insurer did not communicate such fact to the re-
insurer before making the contract of reinsurance, it was held that
the information was material to the risk, and the reinsured was not
entitled to recover in view of the fact that in the absence of an ex-
planation to the contrary the "charter" intended must be regarded
under the policy as covering only the route of the voyage described
in the policy, and that a recovery against the reinsured for part of
the insurance money based upon parol proof of the understanding
of the parties to the original insurance as to the meaning of the
word "charter/' did not bind the reinsurer, and that a payment be-
fore said suit of a portion of said money did not amount to a recog-
nition of an insurance on the guano charter ; ^^ and in a case in the
United States Supreme Court ^* it was held ^^ that it was not sulh-
cient to convey specific information material to the risk in general
terms.
Under an English decision a reinsurance policy is not invalidated
by nondisclosure of a clause in the original policy, where the for-
mer is subject to the same clauses and conditions as the original pol-
icy, and "to pay as may be paid thereon." Both policies were for
the same period and the original policy provided that should the
vessel be at sea or abroad on the expiration of the policy it should
inal insured, and also all the knowl- ^^ Cohen v. Continental Life Ins.
edge and information he possesses Co. U9 N. Y. 300. See also Jackson
material to risk, whether previously v. St. Paul Fire & jMarine Ins. Co.
or siibsequently acquired. See opin- 99 N. Y. 12-i.
ion (near end) in note 17, § 119 here- ^^ Ocean Ins. Co. v. Sun Mutual
in. Ins. Co. 8 Ben. (U. S. C. C.) 272,
See Comp. Laws, Dak. 1887, see. Fed. Cas. No. 10407; Sun Mutual
4184; Civ. Code, Cal. sec. 2647; Ins. Co. v. Ocean Ins. Co. 107 U. S.
Booth's Aunot. Civ. Code, Mon. 1895, 485, 27 L. ed. 497, 2 Sup. Ct. 355.
sec. 3531; Rev. Code, N. Dak. 1895, ^^ Sun Mutual Ins. Co. v. Ocean
sec. 4534. lus. Co. 107 U. S. 485, 510, 511, 27
When moral character of a-'^sured L. ed. 497, 2 Sup. Ct. 355.
may become material: Beinsiirance. ^^ Three justices dissenting.
See § 1864 herein.
372
REINSURANCE § 129
be held covered until her arrival at her port of final destination at
a pro rata daily premium, said continuation clause being a usual
clause. The policy was, however, held void as it covered a period
exceeding twelve months that being the duration of the risk ex-
]*re.~sed in the original policy.^^ Under another English case fraud-
ulent misrepresentations of an official in the employment of ship-
OAvners whereb}'- the payment of losses on vessels is induced are a
ground for a recovery from the shipowners."
In Louisiana a statement made to the reinsurer by the original
insurer, in obtaining reinsurance, "We carry our line," without
specifying any amount, will not be deemed falsified if in point
of fact the insurer does bear a part of the risk, i. e., to the extent
not reinsured. And the failure of the original insurer to beax any
part of the risk, owing to the fact that the assured did not put on
board the entire cargo agreed to be insured, will not avoid a rein-
surance on the ground of fraud, although the original insurer in
obtaining it said, ''We carry our line," when this was said in the
belief that the full cargo would be placed On board, in which case
he would have borne a large part of the risk.^^
Where a statute empowers insurers to reinsure their risks with
insured's consent and makes the reinsurer liable to the same extent
as if it had originally issued the policy, a vested right under the
original policy cannot be impaired by a reinsurance contract which
imposes conditions as to representations and warranties limiting in
effect the reinsurer's liability, where the original policy is incontest-
able after two years for breach of warranty or misstatement in the
application.^^
§ 129. Abandonment unnecessary in reinsurance. — The insurer
is under no obligation to abandon to the reinsurer, nor give the lat-
ter notice of abandonment to him by the insured, for it would be
of disadvantage to the reassured to compel him to accept the aban-
donment of his assured, as he would be compelled to do before he
himself could abandon.^"
^® Charlesworth v. Faber, 5 Coml. Reinsiu'ance : concealment by agent
Cas. 408. of insured, .see § 048 herein.
Reinsurance : nondisclosure of ^' Assicurazioni Generali De
material fact : policy "subject Avith- Trieste v. Empress Assur. Corp. Ltd.
out notice to the same clauses and [1907] 2 K. B. Law Rep. 814.
conditions as the original policy :" ^^ Chalaron v. Insurance Co. of N.
liability of reinsurer. Property Ins. A. 48 La. Ann. 1582, 21 So. 267, 36
Co. V. National Protector Ins. Co. L.R.A. 742.
108 L. T. 104, 18 Com. Cas. 119, 12 ^^ Federal Life Ins. Co. v. Kerr,
Asp. M. C. 287, 57 S. J. 284. See — Ind.-App. — , 82 N. E. 943, 85
Scottish National Ins. Co. v. Poole, N. E. 196, aff'd 173 Ind. 613, 91
18 Com. Cas. 9, 57 S. J. 45, 29 T. N. E. 230, 89 N. E. 398.
L. R. 16. See note 17, § 119 herein. ^o Hastie v. De Peyster, 3 Caines
373
§§ 130, 131 JOYCE OX INSURANCE
§ 130. Proofs of loss in reinsurance. — Generally, the ori,o;inal no-
tices and ])r(j()t's of lo.<s are sutlicienl a.-^ against the reinsurer,^ and
if the reinsurer is ])re.<c'nted Avith copies of the proofs of loss, he must
object and deniand the originals at the time, or the right to object
will be presumed to have Ijeen waived.^ If a ])olicy of reinsurance
is conditioned that all j)ersons having a claim for loss shall proceed
at once to give immediate notice and render a particular account
of the loss, this means that the notice and schedule must be served
m a reasonable time under the circumstances.^ Proofs of loss may,
imder an agreement authorizing the company assuming the liabil-
ities of another company to receive proofs of loss, be made to the
former com])any.* Preliminary proofs of loss may. however, be
<lispensed with by the terms of the policy of reinsurance.^ If risks
of an insurance company have been reinsured it is not necessary to
furnish proofs of death to the original insurer.^ If prompt notice
is given by the reinsured to the reinsurer of the loss immediately
after its occurrence, and also notice of the resistance of the rein-
sured to payment of the loss in which the reinsurer acquiesces, it
is sufficient, and recovery is not barred even though no formal
})roofs of loss or demand for reimbursement is made until after
settlement with the original insured by the reinsured which had
been furnished proofs of loss immediately by the former.'
§ 131. Extent of reinsurer's liability. — In the absence of an
agreement to the contrary or a limitation clause, the reinsurer is
hound to indenmify the reinsured to the extent of the hitter's lia-
bility,* pro\ ided the amount of such liability does not e.xceed the
(N. Y.) 190. 194, per Kent, C. J.. ^ jN^^rwood, Ex parte, 3 Biss. (U.
195, per Livingston, J.: 2 Phillips S. C. C.) 504, 516, 517, Fed. Cas.
on Ins. (3d ed. ) 246, sec. 150(i. No. 103(54.
^ New York Bowerv Life Ins. Co. ^ Cashau v. Northwestern Mutual
v. New York Fire Ins. Co. 17 Wend. Ins. Co. 5 Biss. (U. S. C, C.) 470,
(N. Y.) 359. See also Cashau v. Fed. Cas. No. 2499.
North Western Mutual Ins. Co. 5 * Whitnev v. American Ins. Co.
Biss. (U. S. C. C.) 476, Fed. Cas. 127 Cal. 464, 59 Pac. 897, affg 56
No. 2499. See § 3295 iierein. Pac. 50, 28 Ins. L. J. 254.
The reinsured must prove loss in ^ Consolidated Real Estate & Fire
the same manner as assured must Ins. Co. v. Cashow, 41 Md. 59.
have proved it against him : Yonkers ^ Federal Life Ins. Co. v. Pettv,
& New York Fire Ins. Co. v. Hoff- 177 Ind. 256, 97 N. E. 1011.
man Fire Ins. Co. 6 Rob. (N. Y.) ' Roval Ins. Co. v. Vanderbilt Ins.
316. Co. 10"2 Tcnn. 264, 52 S. W. 168, 28
Proofs of loss must be made by Ins. L. .J. 910.
the reinsured under a marine policy * Eagle Ins. Co. v. Lafayette, 9
in the absence of any provision to Ind. 443; Chalaron v. Ins. Co. of
the contrarv in tlie reinsurance con- North America, 48 La. Ann. 1582.
tract. 17 Earl of Halsbury's Laws 36 L.R.A. 742, 21 So. 267, 26 Ins.
of Eng. p. 375, sec. 744. L. J. 465; Hone v. ]\Iutual Safetv
374
I
REINSURANCE
§ 131a
actual lo.-^s and is within the amount reinsured,^ and in ease of a
reinsurance (jf a tire risk a total loss is the full value in the policy
of reinsurance, provided it does not exceed the value in the original
policy, nor is the liability of the reinsurer limited to a proportionate
sum, nor can the liability be thus limited by evidence of a custom
of the place of contract so to do.^** The above statements are sub-
ject to such qualilications as appear under the next following sec-
lions.
§ 131a. Same subject. — The terms of the reinsurance contract
are the test. of the reinsurer's liability and not whether a legal loss
lias been suffered by the insured under the original policy." If
(Hie third of a risk is reinsured, and one half of this, ()r one sixth of
;he whole risk, is again reinsured for the lirst reinsuring company,
which afterward becomes insolvent, the last reinsuring company is
answerable ui case of loss, for the whole amount against which it
is indenmified; and not merely for one half the sum which the in-
solvent com})any may pay to its creditors.^^ Again, a coni))any re-
ceiving the transfer of all the busines.^ and assets of a life insurance
company will be bound by its express contract to assume and pay
all the latter's outstanding contractual liabilities." And the surren-
der by a reinsured to the reinsurer of its covering note on the day
after the insured property has, without the knowledge of either
party, been injured by fire, upon the request of the reinsurer that
Ills. Co. 1 Sand. (N. Y.) i:!7; Heck-
ciiralli v. American Mntual Ins. Co.
;!'Barb. Cli. ( N. Y.) 63; Hastie v.
De Peyster, 3 Caines (N. Y.) 190;
Delaware Ins. Co. v. Quaker City
ins. Co. 3 Grant's Ca.s. (Pa.) 71.
See Ocean Sleamsiiip Co. v. JEiiia.
Ins. Co. (U. S. C. C.) 121 Fed. 882.
As to liabilitv of reinsurer see notes
in 8 L.K.A.(N.S.) 844, and 44 L.R.A.
( X.S. ) 317. See § 119 herein, at end
Uiereof, and note.
"Il seciiis to me tliat upon tlie
I'linciples of tlie common law, under
like circumslaiK-es, the party reas-
sured is entitled to recover a full in-
demnity for the entire loss sustained
by him, and also for the costs and
o.xpenses which he has reasonably
and necessarily incurred, in order to
protect himself and entitle him to a
recovery over ao:ainst the reassur-
ers." New York State Mutual Ins.
Co. V. Protection Ins. Co. 1 Story
(U. S. C. C.) 4o8,#461, Fed. Cas. No.
o
10,216,. per Story, J., cited in Hone
v. Mutual Safety Ins. Co. 1 Sand.
(N. Y.) 137, 148. See also, as to
costs, Hastie v. De Pevster, 3 Caines
(N. Y.) 190. See S§ 28, 132 herein.
9 New York State Mutual Ins. Co.
V. Protection Ins. Co. 1 Story (U.
S. C. C.) 458, Fed. Cas. No. 10,216;
Commercial Alutual Ins. Co. v. De-
troit Fire tV; Marine Ins. Co. 38 Ohio
St. 11, 43 Am. Kep. 413.
10 Hone v. Mutual Safetv Ins. Co.
1 Sand (N. Y.) 137; 2 Comst. (2 N.
Y.) 23.-).
11 Firemen's Fund Ins.
& Muiiicli Fire Ins.
Co. V. Aacli-
Co. 2 Cal.
See § 132
en
App. (590, 84 Pac. 253.
herein.
12 Hunt V. New Hampshire Fire &
Underwriters Assn. 68 N. H. 305, 73
Am. St. Hep- 602, 38 L.R.A. 514, 38
Atl. 145.
12 Crowell v. Northwestern Life &
SaviniTs Co. 99 Minn. 214, 108 N.
W. 962.
§ 131b JOYCE ON INSURANCE
the risk be placed elsewhere, being made under a mistake of fact,
may under the statute be rescinded; and therefore it does not re-
lieve the reinsurer from liability for the existing loss.^* But a com-
pany is not liable for a prior occurring loss by assuming a contin-
gent liability of another insurer.^* And a reinsurer may reject a risk
and relieve itself of liability even though it retains the premium
sent as part of a larger check in settlement of current accounts, and
there is no estoppel to "assert the.nonbinding force of the policy.^^
The extent of the reinsurer's liability was also determined in the
following English case. It appeared that a time policy of insurance
on a ship was expressed to be "a reinsurance of policy or policies" ^^^
''and subject to the same terms, conditions and clauses as original
policy or policies, and to pay as may be paid thereon." The
assured had underwritten two time policies on the shij:*, and these
were in force when the reinsurance was effected. Subsequently,
during the currency of the reinsurance policy, the two other
policies came to an end, and assured undenvrote a fresh time
policy of insurance on the same subject matter, differing as to
the valuation of the ship, and in other respects from the two earlier
policies. A loss occurred and was paid under the fresh policy. It
was decided that the original policies referred to in the reinsurance
polic}^ were the policies then in existence, and that the liability of
the reinsurer did not extend to losses which might be incurred by
the assured under a policy not containing the same terms, condi-
tions and clauses as the original policies.^'
§ 131b. Same subject: mutual benefit societies, etc. — A reinsur-
ing association which assumes the certificate contracts of another
association may obligate itself by the terms of a rider attached to
an original certificate assuming the obligations and benefits there-
of." And if an assessment company receives the benefits of a writ-
1* Traders Ins. Co. v. Aaclien & 8 Asp. M. C. 380, 466, rev'g (1899)
Munich Fire Ins. Co. 150 Cal. 370, 1 Q. B. 739, 07 L. J. Q. B. N. S. 330,
8 L.R.A.(N.S.) 844 note, 89 Pac. 78 Law. T. R. 496. Also held that
109. the words "original policy or policies"
^^ Olson V. California Ins. Co. 11 in tlie policy might he explained by
Tex. Civ. App. 371, 32 S. W. 446. admitting in evidence the slip on
^^ Noi'thwestern Fire & Marine Ins. which the reinsurance was written.
Co. V. Connecticut Fire Ins. Co. 105 As to clause : "Subject to same
Minn. 483, 117 S. W. 825. risks, conditions," etc., see note 17,
^^* There was an unfilled blank § 119 herein.
space after "policies," as in above ^^ Weber v. Ancient Order of Pvra-
text. mids, 104 Mo. App. 724, 78 S."W.
" Lower Rhine and Wurtemburg 660. Examine Federal Life Ins. Co.
Insurance Assoc, v. Sedgwick (1899) v. Kerr (1908) — Ind. App. — ,
1 Q. B. Div. Law Rep. i79 (Syl.) 80 82 N. E. 943, 85 N. E. 796, 173 Ind.
Law T. N. S. 6, 47 Wkly. Rep. 261, 613, 91 N. E. 230, 89 N. E. 398.
376
I
REINSURANCE § 131c
ten contract of reinsurance it is estopped from denying liability.^^
So a statute together with a reinsurance contract and as a part there-
of may obligate the reinsurer to the same extent as under the orig-
inal certificate.^" And if a fraternal order issues benefit certificates,
which are treated by its successor, another order of like character,
as though issued by it, and the holders of such certificates are in
every respect also treated as members of the new association and
ihe officers of the old are continued as oflicers of the new associa-
tion, such association will, upon death of the beneficiaries, be held
liable to the same extent, that the association issuing the certificate
would have been liable had it continued in business.^ Again, there
may be a w^aiver of the reinsurer's requirement that a member shall
be in good health before a certificate is issued to him, so that the
reinsurer will be held liable.^ A reinsuring company will also be
liable upon a certificate of a member, even though his name does
not appear upon its books, where he was in fact in good standing,
where it is the company's duty to ascertain what persons are en-
titled to appear upon its books as members in good standing.^
But the wrongful, unjust or mistaken exclusion, by reinsured
company, of a member from a transfer under a reinsurance con-
tract cannot affect the reinsurer's liability.* And a legally incorpo-
rated company is not liable upon a policy or certificate issued by an
old but illegally incorporated company having the same name,
doing the same general business and composed of some of the same
members even though the latter has transferred to the former its
reserve fund upon certain advantages of which members of the old
association may avail themselves if they choose.*
§ 131c. Same subject: reinsurer not liable where risk materially
altered. — In an English case insurance was by a covernote issued
by plaintiffs to a certain firm with intent to provide for insurance
of all shipments of coal and coke for one yesa', the premiums there-
for varying in accordance with the date of sailing and port of desti-
nation. On July 30, 1900, declaration was made to plaintiffs under
19 Watts V. Equitable Mutual Life Life Assoc. 220 111. 400, 77 N. E.
Assoc. Ill Iowa, 90, 82 N. W. 441. 198, 111. act 1898, see. 16; Hurd's
20 Federal Life Ins. Co. V. Risinoer, Rev. Stat. 111. 1903, c. 73, par. 246.
46 Ind. App. 146, 91 N. E. 533, See also Brown v. Mutual Reserve
Burn's Ann. Stat. Ind. 1908, sec. Fund Life Assoc. 224 111. 576, 79 N.
4753. E. 943, rev'g 124 111. App. 277; 111.
1 Coolev v. Gilliam, 80 Kan. 278, Laws, 1893, p. 124, sec. 16.
102 Pac.^ 1091, 38 Ins. L. J. 954. * Parvin v. Mutual Reserve Life
See § 135b lierein. Ins. Co. 125 Iowa, 95, 100 N. W. 39.
2 Welch ^•. Chicago Guaranty Fund: * Adams v. Northwestern Endow-
Life Soc. 2 Mo, App. Rep. 678. See ment & Life Assoc. 63 Minn. 184, 65
§ 115b herein. N. W. 360, 25 Ins. L. J. 352.
^ Bolles V. Mutual Reserve Fund
377
§ 132 JOYCE (JX INSURANCE
the covernole of a cari^o of coals from the Tyiie. Upon receiving
said declaration plaintittV gave instructions to reinsure and reinsur-
ance was effected witli defendant and others at I.loyds on August
2d at a premium which wiis the lowest for a summer risk
and varied from the premium the plaintiff's were entitled to charge
for August and Sei)tember. The slip was initialed on said day hy
underwriters who were under the impression tliat the sliip would sail
in a few days, or at least during .Vugust. Said slip named the vessel
and j)urported to be subject to the reinsurance and deviation clauses.
The Brenttor did not sail until September 2r)th. and became with
her cargo a total loss on October 2d. The policy of reinsurance
was issued October oth in j^ursuance of the coverslip of August 2d.
The plaintiff's having paid the coal owners for a total loss, claimed
payment from the defendant uj)on the ])olicv of reinsurance. It
was held that the delay in the date of sailing liaving materially al-
tered the risk, the underwriters were not lial)le.®
§ 132. Agreements affecting reinsurer's liability. — The parties
may agree to such terms in reinsurance as will bind the reinsurer
10 the settlement or adjustment of loss made between the parties to
The original insurance, fis where the policy of reinsurance provided
that the contract was "to be subject to the saiue risks, valuations,
conditions and mode of settlements as are or may be adopted by the"
company reinsuring.' and tlie agreement may be such as to make
the reinsurer and reinsured jointly lialjle.* The reinsurer may also
t)y agreement become liable directly to the original insurer. So in
a New York case ^ the reinsurer agreed to reinsure and assume all
risks on outstanding policies of another company and to pay to the
policy liolders all sums thereon for which the insurer would be lia-
ble. Two of said policies were life risks payable to ydaintiff' upon
the death of the insured, 'i'he insured collected the sums due under
said policies, and it was held that the collection of .such insurance
by tlie insurer did not under the agreement prevent a recovery
again.st the reinsurer by plaintiff'. Where a policy of reinsurance
to a company which had insured a ship contained the clause "sub-
ject to tlie same terms and conditions as tlie original policy and to
pa}' as may be paid thereon," and the reinsured company became
^Maritime Ins. Co. v. Stearns, 'Wliitiu'v v. American In.>^. Co.
71 Law. .1. K. B. 86, [1901] 2 K. B. 11:17 Cal. 464, 59 Pac. 897, aff'g 56
912, 50 Wkly. Rep. 2.38, (i Com'I Cas. Pac. .-)0, 28 In.s. L. J. 254.
182. As to delay in comraencing ad- ^ Glen v. Hope Mutual Life Ins.
venture, see SS 1494 et seq. herein. Co. .")6 N. Y. 379; Whitney v. Ameri-
As to chanjiro of vovage, see chapter can Ins. Co. — Cal. — , 56 Pac. .lO, 28
thereon §§ 2365 et seq. herein. Ins. L. J. 254, aff'd 127 Cal. 464, 59
' Consolidated Real Estate & Fire Pac. 897.
Co. V. CaslioWj 41 Md. 59. See note
17, § 119 herein.
378
i
REINSURANCE § 133
liable for a los.s, but bad not yet \n\u\ tbe aiuount of tlie same, it wa.s
held tbat payment by such reinsured conii)any of tbe loss was not a
v-ondition precedent to tbe recovery by the reinsured of the rein-
surer." But a clause in a contract for reinsurance, tiiat "tliis policy
is subject to the same risks, conditions, mode of settlement, and, in
case of loss, payable at tbe same time and in the same manner as
the policies reinsured." — does not mean tbat the various terms in
tbe reinsured policies as to risks, conditions, mode of settlement.
Time, and manner of payment, in case of loss, and limitation period,
were incorporated with and form a part of tbe contract of reinsur-
ance, but that the oriii,inal policies furnisb in those particulars the
oasis on which tbe contract of reinsnranee stands, and tbat in all
(lealings witb tbe oriii,inal insured the provisions of the policy is-
sued to him are to be observed. ^^ The reinsurance contract may
also limit tiie reinsurer's liability by excludin.ii, all lial)ilities of the
reinsured to members or beneliciaries except claims for death oc-
currin.i>, after the agreement has been ratified, and thereby preclude
recovery upon a policy providing for a cash surrender value. ^^ Jf.
however, the reinsurer agreas unconditionally to assume the rein-
surecl's liability to members in good standing it cannot im])ose as a
condition precedent upon a member tbat be submit to a medical
examination in order to. obtain tbe Ijenefits of the reinsurance.^^ Jf
a provision of a reinsurance contract conflict^ with the policy it ha.-^
no ef¥ect upon insured's rights a.s fixed l)y the i)olicy and this ap-
plies to a i)rovision whereby the reinsurer atteuii)ted by tbe contract
to provide for forfeitnre for non])ayment of premiums.^*
Tbe New York standard lire jjolicy })rovides thai •'liability for
reinsurance siiall be as specilically agreed hereon."'
§ 133. Reinsurer's liability: pro rata clause. — If the jwlicy con-
tains a clause, "loss, if any. payable pro rata and at the same time
with the reinsured."" oi' like words, the recovery is limited thereby
to that i)roiM)rtion which tbe amount reinsured sustains to the orig-
inal amount. ^^ If two insurers ol>tain reinsurance from a third ''the
" Eddystone Marine Ins. Co. Ill re, Co. i:)4 Mo. App. 4(i4, 135 S. W.
Western Ins. Co. Ex parte (En.ii'. ('. 101;!.
A. Cli D 1892) L. R. '2 Cli. I). i* Federal Lite Ins. Co. v. Arnold.
(1892) '423', 7 Asp. M.' C. 167. 46 Ind. App. 114, 90 N. E. 493.
^1 Faiieuil Hall Ins. Co. v. Liver-i ^^ Casliau v. Northwestern Mutual
pool & London & Globe Ins. Co. 153 Ins. Co. 5 Biss. U. S. (C. C.) 4/().
Mass. 63, 26 N. E. 244, 10 L.R.A. Fed. ('as. No. 2499; Con.'^olidated
423. Cited and considered in note Real Estate & Fire Ins. Co. ^v.
17, {^ 119 herein. Cashow, 41 Md. 5!); Hone Ins. Co.
^2 Mutual Reserve Fund Life v. Continental [n.s. Co. 70 N. Y.
Assoe. V. Green (1908) — Tex. Civ. Siipp. 824, 62 App. Div. 63, aff'd 89
App. -, 109 S. W. 1131. App. Div. 1, 180 N. Y. 389, 73
" Cox V. Kansas Citv Life Ins. N. E. 65. See § 134 hereui.
379
§ 133 JOYCE ON INSURANCE
loss, if any, payable pro rata at the same time, and in the same man-
ner as by such companies," the respective amounts of loss which the
original insurers and the reinsurer must pa}' is proportionate to the
amount of tJie original and the amount of the reinsurance, and this
proportion cannot be changed by any act of the original insurers in
diminishing the amount of the insurance. Therefore, if the original
insurance was for ten thousand dollars and the reinsurance for five
thou^^and dollars, and afterward the original insurance was reduced
to two thousand dollars, and subsequently a loss occurs, the rein-
surer's liability is for one half of the last-named sum only.^® So in
case the reinsurance is for half the amount originally insured and
a loss occurs which is less in amount than the original insurance,
the recovery is limited to one half the loss.'^'^ In this case the court,
per Johnson, J,, says: "In the case of Hone v. The Mutual Safety
Insurance Company,^^ it was adjudged that under a contract of re-
insurance the extent of the liability of the reinsurer was not affected
by the insolvency of the reassured, nor by its inability to fulfil its
own contract with the original insured. This proposition was main-
tained by Mr. Justice Sandford, giving the judgment of the superior
court of New York in a careful and learned opinion, thoroughly set-
ting forth the reasons on which the decision rested and the author-
ities supporting it. This judgment was affirmed in the court of ap-
peals.^^ We have examined the printed record as it was presented
to the court, and find that the questions mentioned were distinctly
raised both by the exceptions taken at the trial and by the points
of the counsel on both sides used in the argument. That these ques-
tions were not particularly noticed in the opinions delivered in the
court of appeals must be attributed to their being regarded as too
well settled to require notice. They were necessarily involved in
the judgment pronounced, and the silence of the opinions scarcely
diminishes the force of the precedent. A recovery was had in the ■
case for the full amount of the reinsurance, notwithstanding it ap-
peared that the reassured company was insolvent and had been dis-
solved, and that its assets were not sufficient to pay more than .fifty
per cent of its debts. The policy now in suit differs from that in
the case cited in containing the following clause : 'Loss, if any, pay-
able pro rata, and at the same time with the reinsured.' By virtue
of the first part of this clause the defendant is not bound to pay the
full amount reinsured by its policy, but only such a proportion of
16 Home Ins. Co. v. Continental ^^ i gand. (N. Y.) 137.
Ins. Co. 180 N. Y. 389, 105 Am. St. ^^ In 2 N. Y. 235.
Rep. 772, 73 N. E. 65.
1'^ Blackstone v. Alemannia Fire
Ins. Co. 50 N. Y. 104.
380
REINSURANCE § 133a
the amount of the los.? as is in the ratio of the amount of the rein-
surance to the amount ori2;inallv insured. Thus, the defendant's
reinsurance being for half the amount of the original insurance,
the defendant is to pay half the loss." The latter part of such clause
does not require that payment by the reinsured should precede or
accompany payment by the reinsurer,^" and where in addition to
the pro rata clause the policy also contained a provision that the
loss should be settled in the proportion whi<'h the amount reinsured
bore to the whole amount originally covered, the reinsurer was held
liable to the reinsured in the same propoi-tion it was obligated to in-
demnify its insured.^ It is held, however, that the pro rata clause
merely gives the company the benefit of any defense, deduction, or
equity winch the first insurer may have, making the liability of the
reinsurer the same as the original insurer, and that it does not limit
such liability to what the original insurer may have paid or be able
to pay,^ and in Illinois ^ it is decided that the pro rata clause limits
the liability of the reinsurer to a proportionate share of the amount
actually paid by the reinsured. In this case the original insurance
was for six thousand dollars, the reinsurance was for two thousand
dollars, and the insurer becoming insolvent settled with the insurer
at ten per centum or six hundred dollars, and the court held that
the reinsurer's liability was only two hundred dollars. This deci-
sion. hCwever. involves a question as to what extent the insolvency
of the insurer affects the liability of the reinsurer, which will be
considered in the next section.
§ 133a. Same subject. — AVhere an ordinary policy is used, and
only one of the conditions is applicable to a contract of reinsurance,
but a slip is pasted thereon to cover the reinsured's liability, and it
stipulates that such reinsurance is a pro rata part of each and every
item insured by the policy of the reinsured, and is subject to the
same conditions and mode of settlement assumed by the reinsured,
and that the loss is payable at the same time, in the same manner,
and pro rata with the amount paid by the reinsured, such contract
should be construed most strongly against the reinsurer, where a
time limitation clause therein is inconsistent with said stipulations
and tlie reinsurer is liable in accordance with its agreement.* Again,
inability of the reinsured, by reason of insolvency, to pay a fire
loss in full or in part, does not affect the liability of the reinsurer
^° Blackstone v. Alemannia Fire ^ Illinois Mutual Ins. Co. v. Andes
Ins. Co. 5G N. Y. 104. Ins. Co. G7 111. 362, 16 Am. Rejx GiO.
^Norwood V. Resolute Fire Ins. ^Roval Ins. Co. v. Vnnderhilt Ins.
Co. 4 Jones & L. (N. Y.) 552. Co. 102 Tenn. 264, 52 S. W. 168, 28
2 Norwood, Ex parte, 3 Biss. (IJ. S. Ins. L. J. 910.
C. C.) 504, and note, 519, Fed. Cas.
No. 10364.
381
§ 134 JOYCE OX INSURANCE
under tlio conlraet of reinsurance, even tlioufth it provides that the
reinsurer sliall in no event l>e hable for an amount in excess of a
I'atable proportion of the sum "actually paid."' etc.. since the.se words
will be construed to mean. ''actually payable." *
The terms of the contract may make it one of reinsurance and
not of coinsurance to pro rate the loss as where a marine carrier re-
insured a I'i.'^k. assumed by him under an insured bill of lading is-
sued to a shipper, by a policy providing for I'einsurance of risks a.s-
sumed or to be assumed by said rea.^sured and agreeing to pay
assured in full all claims for such los,ses arising from perils enumer-
ated in the policy ''as the a.ssured may, in their judgment, settle
for with the owners or other persons interested in the merchan-
dise;"' and the reinsurer was therefore held liable for the full
amount paid by the rea.ssured for the loss to the extent specified in
the policy.^ Under a Missouri decision if the extent of the rein-
surer's liability is not in any way contingent upon the amount paid
on a loss by the reinsured company and the contracts of both were
independent, and their performance did not depend upon each
other the reinsurer cannot sustain a claim that it is liable only for
a pro rata share of the amount paid on a loss by the reinsured.'
§ 134. Reinsurer's liability: compromise: insolvency of insurer. —
There has been much discussion. Ijoth l)y the courts and text-writers,
as to what effect the insolvency of the insurer and his cou'^equent
inability to fully pay the insured, or his coujpi'omise with the as-
sured, has upon the liability of the ]'einsurer to him. the insurer.
Mr. ]\hirshall * asserts that the reinsurer can gain nothing by the
insurer's insolvency but must pay his loss in full. Mr. Parsons,^
however, upholds the doctrine which makes the reinsurer liable not
in full but only to the extent projiortionally for which thfe ini«ured
settled. He bases this conclusion upon the principle of indemnity,
and makes a distinction between a settlement by the insurer with
the insured before and after having rccoiu-se to the I'einsurer. and
says that in the former case the insurer may recover to the extent
of his liability As governed by the i-einsunmce conti'act, and settle
as best he can with the insured, while in the latter case he can re-
cover no more than he has paid. Mr. Wood ^° says: "The reinsur-
^ Allemannia Fire Ins. Co. v. Fire- On effect of compromise by origi-
nicn's Ins. Co. '28 Apii. 1). C. '^'lO, ual insurer upon reinsurer's liabilitv,
14 L.K.A.(N.S.) 104!). see note m (i P,. li. C. 896.
^ Ocean Steamship Co. v. ^tna ^1 Mav on Ins. (3d ed.) sec. 11a.
Ins. Co. (U. S. C. C.) 121 Fed. 882. See also' Id. (4th ed. Gould's) sec.
'Cass Couiitv V. Mercantile Town Ha, pp. 18, 19.
Mutual Ins. ("o. 188 Mo. 1, SO S. W. ^^ 1 Wood on Fire Ins. (2d ed.) p.
2:57, 34 Ins. L. J. 43."). 194, sec. 87.
^1 Marshall on Ins. 143, citituj
Emeri£?on.
382
REINSURANCE § 134
er mufit pay bis share of the lo^^s whether tlio insurer has paid, or
has the ability to pay. its proportion of the loss or not : "" but
he also declares " that the (juestion is an open one, and thai
wliile the 'Sveitibt of authority" does not oive the reinsurer tlie
benefit of the eoniproniise. the opposite eonehision ''wouhl be more
consistent and consonant with principle,'' on the ground of indem-
nit\'. If it be assumed that there is no settled rule of law in view
of which the parties would be presumed to have contracted, and the
question were now for the first time to be determined, then there
would seem to be no reason why the reinsurer should not be obli-
gated to the full extent of the liability of the insurer under the orig-
inal contract, notwithstanding the latter's insolvency or settlement
for a, less sum with the insured, provided always that such liability
is not in excess of the amount covered by the reinsurance. If re-
insurance is one of indenmity, the reinsured should only recover
for the actual loss sustained. The principle of indemnity would
not seem to conflict with such a rule since the indenmity contem-
plated relates to the loss or liability of the insurer under the orig-
inal insurance, ^^ and the reinsurer's liability must be held to have
attached when that loss arises and the insurer becomes liable to the
insured. The reinsurer has agreed to pay according to the terms
of its contract, nor can another and different agreement be engraft-
ed thereon to the effect that any compromise by the insurer with
the insured of his liability shall inure to the benefit of the rein-
surer. Again if the principle of indemnity is governed by the fact
whether a settlement is made before or after recourse to the rein-
surer, it must be a peculiar one, since it would then admit of a j-trof-
it in one case and not in the other, which is a perversion of the ])rin-
ciple. Again there is no privity of contract between the insured
and the reinsurer in any case Avhere this question could arise. ^^ If
the insurer be insolvent, the reinsurance moneys form part of the
general fund for the payment of its debts, ^* and the sum due from
the reinsurer belongs to his creditors pro i-ata: ^^ and the original
^^ 2 Id. 818. On proceeds of reinsurance as S|)e-
^^ § 112 herein. cial fund in case of insolvency, see
"i^ 117 herein. note in 38 L.R.A. 110.
^* Ilerckenrath v. American IMutual ^^ Hone v. Mutual Safety Ins. Co.
Ins. Co. 3 Barb. Ch. (N. Y.) 03. 1 Sand. (N. Y.) 137. 2 N. Y. (2
See also May on Ins. (3d ed.) see. Comst.) 23.'); Goodrich's xVppeal
lla, \vhere Mr. Parsons says: "Tlie (Pa. S. C.) lOn Pa. St. ry23. See
cianu against the reinsurer \vas part Mason v. Cronk, 127^ N. Y. 4J)(), 28
(if the assets in the hand.s of the re- N. E. 224, 35 N. Y. SfjO, reversing
ceiver to be administered for the 27 N. Y. 122. See Home Ins. Co. y.
benefit of all the creditors." See also Continental Ins. Co. 180 N. Y. 309,
Id. (4th ed. Gould's) sec. 11a, p. 19. 105 Am. St. Rep. 772, 73 N. E. 65.
383
§ 134 JOYCE ON INSURANCE
insured has no equitable lien or preferable claim upon the money
duo upon the contract of reassurance.^^ Again, the indemnity in-
tended is that which the contract of reinsurance contemplates.
Finally, the weight of authority is that the reinsurer can derive
no advantage from the insolvency of the insurer, and the settlement
by him with the insured for a less sum than his liability under the
original contract. So where the amount insured was ten thousand
dollars and the reinsurance five thousand dollars, and the policy
contained a pro rata clause, the reinsurer was held liable for one-
half the insurer's loss, notwithstanding his bankruptcy and settle-
ment for a small dividend,^' and other cases hold that the reinsurer
is bound to pay the amount which the original insurer becomes
legally liable to pay to the assured in consec^uence of the risk as-
sumed, and not merely the amount which the original insurer ac-
tually pays in consequence of the risk assumed by liim.^^ Since the
liability of the reinsurer does not depend upon the insolvency of
the reinsured or upon the latter's inability to fulfil its contract with
the original insured, the reinsured's claim is not based upon its
greater or less ability to pay, but upon its liability to pay.^^ And
under a New Hampshire decision the liability of a reinsurer is not
lessened by the insolvency of an intermediate insurer which has be-
come unalDle to pay the loss, but the reinsurer's liability is for the
entire amount of the loss against which they agreed to indemnify
the prior insurer.^"
^^Consolidated Real Estate Fire Gantt v. American Central Ins.. Co. 68
Ins. Co. V. Cashow, 41 Md. 59. Mo. 503; Strong v. Phoenix Ins. Co.
Strong- V. Pha-nix In.s. Co. 62 Mo. 62 Mo. 289, 296, 297, 21 Am. Rep.
289, 296, 297, 21 Am. Rep. 417; 417; Blackstone v. Alemannia Fire
Herckenrath v. American Mutual Ins. Co. 56 N. Y. 104; Herckenrath
Ins. Co. 3 Barb. Ch. (N. Y.) 63. v. American Mutual Ins. Co. 3 Barb.
1"' Consolidated Real Estate Fire Ch. '(N. Y.) 63; Hone v. Mutual
Ins. Co. V. Cashow, 41 Md. 59. Safety Ins. Co. 1 Sand. (N. Y.) 138,
Clause in this case was, "Loss, if 2 N. Y. (2 Comst.) 2.35; Hastic v.
any, payable pro rata to them . . . De Peyster, 3 Caines (N. Y.) 193,
at same time and in .same manner as 194, per Kent, C. J.; 1 i\Iarshall on
Ihcy pay." See' also Providence- Ins. (ed. 1810) *143. See § 133
Washington Fire Ins. Co. v. Atlanta- herein.
Birmingham Fire Ins. Co. (U. S. 19 AUemannia Fire Ins. Co. v.
C. C.) 166 Fed. 548. Here the settle- Firemen's Ins. Co. 209 U. S. 326, 52
ment with the creditors was 30 per l_ ej_ 3^5^ 28 Sup. Ct. 544, 14 Am.
cent in full of proved claims and & Eng. Ann. Cas. 948, 37 Ins. L. J.
reinsurers were held liable for full 2I6; Providence-Washington Fire
amount and were not allowed the 70 j^g. Co. v. Atlanta-Birmingham Fire
per cent. Jns. Co. (U. S. C. C.) 166 Fed. 548,
" Cashau v. Northwestern Mutual 33 Ins. L. J. 461. See § 135 herein.
Ins Co. 5 Biss (U. S. C. C.) 476, 20 Hunt v. New Hampshire Fire
Fed. Cas. No. 2499; Eagle Ins. Co. -^ , * ra xt ti on- -q
V. Lafavette Ins. Co. 9 Ind. 443; Underwriters' Asso. 68 N. H. 30o, /3
384
REINSURANCE
134a
There are decisions, however, which hold that the sum i3aid by
the insurer is the measure of indemnity.^
A reinsurer of an insolvent company may by assuming all its
outstanding risks and by taking possession of all its assets be pre-
cluded from as.<erting its non-liability to the policy holders.^ .Vnd
a reinsurer may be required to pay the amount of the loss which it
is liable for, directly to the insured or the party ultimately entitled
to the money when the prior insurer which it has indemnified has
become insolvent.^
§ 134a. Same subject: mutual benefit societies, etc.: trust fund. —
A society which reinsures an insolvent order of like nature is liable
uj)on a certificate issued by the reinsured to the same extent that
tiie latter would have been, had it continued in business. And where
the reinsurer succeeded to the insolvent's business, property, and to
a fund raised by assessments to pay in full a death claim which it
had approved, said fund constitutes a trust fund for the payment
of the claim to the amount due under the certificate.'* If reinsur-
ance is obtained in companies which had either gone out of business
or had become insolvent a policy holder who has paid a ca.sh pre-
mium to a mirtual insurance company is entitled upon cancelation
Am. St. Rep. 602, 38 L.R.A. 514, 38 leeted was intermingled with other
Atl. 14o. fund.s, but having- on hand money
^ Illinois Mutual Ins. Co. v. Andes sufficient to complete the payment
Ins. Co. 67 111. 362, 16 Am. Kep. 620; set it apart and reserved it in the
for facts in this case, see end of § hands of its secretary and treasurer
133, ante; Commercial Mutual Ins. for that purpose. Becoming embar-
Co. V. Detroit Fire & Marine Ins. rassed, the association entered into
Co. 38 Ohio St. 11, 43 Am. Rep. an agreement with another of like
413; 2 Wood on Fire Ins. 818, note 8. nature which thereby succeeded to its
^Ruohs V. Traders' Fire Ins. Co. business, property, and effects, to
111 Tenn. 405, 102 Am. St. Rep. 790, which successor the secretary and
78 S. W. 85. treasurer paid the fund so resened
' Hunt V. New Hampshire Fire upon the express agreement and
Underwriters' Assoc. 68 N. H. 305, ])romise that such successor should
38 L.R.A. 514, 73 Am. St. Rep. 602, ai)ply the fund to the purpose for
38 Atl. 145. whicli it had been so reserved. This
*Cooley V. Gilliam, 80 Kan. 278, application was not made, the bal-
102 Pac. 1091, 38 Ins. L. J. 954. The ance due upon the certificate has not
following syllabus is by the court in been paid, and the association whicli
this case: issued it is insolvent. Held, That the
A fraternal order approved proofs fund so set apart and leserved was
furnished upon the death of a benefit impressed with a trust for the pay-
certificate holder, made and collected ment of this claim, and that the
an a.ssessment for a fund to pay the officer so parting with it. and the
same in full, and ordered its secre- company so receiving it, are liable
tary and treasurei' to pay the claim, to tlie claimant for the amount due
who did pay a i)art thereof. The upon tlie certificate. See §§ 112b,
remainder of the amount so col- 135, 136b herein.
Joyce Ins. Vol. I. — 25. 385
§ 135 JOYCE ON INSURANCE
of the policy to the return of a proportion of such cash premium
and this ohligation of the company to pay must be discharged by
the receiver.*
§ 135. When suit may be brought against reinsurer: rights of
original insured. — The insurer may wait until suit brought and
judgment obtained by the insured before seeking indemnity from
the reinsurer,^ and the reinsurer is bound under a valid contract of
reinsurance when the reinsured has been found liable or the loss
adjusted.'^ It is also held, however, that before reinsurers can re-
cover, they must show that they have paid a valid claim, bj' show-
ing that the primitive insurers had a risk upon the subject insured
and that such subject was destroyed; * but it is not necessary that
the insured should have paid the loss before proceeding against the
reinsurer. Suit may be brought as soon as the liability occurs, for
the contract is one of indemnity against the liability of the insurer
for loss, and it is sufficient that such liability to pay for the loss ex-
ists, for the contract does not go to the insurer's payment of, or
ability to pay, the loss.^
Where a company transfers its stock to a reinsuring company
upon a guaranty that its obligations to its policy holders shall be
fulfilled, some liability to such policy holders must accrue before
any action lies upon such guaranty, but when the reinsurer passes
into a receiver's hands, and the claims of the policy holders are pre-
sented and established, the guaranty should be turned into assets
to meet the claims of creditors.^" If a policy holder, upon learning
of the insolvency of the company, enters into a contract of reinsur-
ance with another company, he may lose his remedy against the
original company," and where a New York company had an office
5 Raegener v. Equitable Mutual Ins. Co. v. Atlanta-Birmingham Fire
Eire Ins. Corp. 60 N. Y. Supp. 478, Ins. Co. (U. S. C. C.) 106 Fed. 548,
44 App. Div. 41. 38 Ins. L. J. 4Q1 ; Norwood, Ex parte,
6 Hone V. Mutual Safety Ins. Co. 3 Biss. (U. S. C. C.) 504, Fed. Cas.
1 Sand. (N. Y.) 137, 2 N. Y. (2 No. 10364; Eagle Ins. Co. v. La-
Comst.) 235. i'ayette Ins. Co. 9 Tnd. 443; Gantt v.
'Jackson v. St. Paul Fire & Ma- American Central Ins. Co. 68 Mo.
rine Ins. Co. 99 N. Y. 124, 1 N. E. 503; Hone v. Mutual Safety Ins. Co.
539. See Noi-wood, Ex parte, 3 1 Sand. (N. Y.) 137; 2 N. Y. (2
Biss. (U. S. C. C.) 504, Fed. Cas. No. Comst.) 235; Blaekstone v. Aleman-
10,364. Ilia Fire Ins. Co. 4 Daly (N. Y.) 299 ;
8 Yonkers & New York Fire Ins. Philadelphia Trust, Safe & Deposit
Co. V. Hoffman Fire Ins. Co. 6 Bob. Ins. Co. v. Fame Ins. Co. 9 Phila.
(N. Y.) 316. (Pa.) 292.
9 Alemannia Firo Ins. Co. v. i» Mason v. Cronk, 125 N. Y. 496,
Firemens' Ins. Co. 209 U. S. 326, 52 28 N. E. 224, 35 N. Y. 859.
L. ed. 815, 28 Sup. Ct. 544, 14 Am. " Ewing v. Coffman, 12 Lea (80
& Eng. Ann. Ca.s. 948, 37 Ins. L. J. Tenn.) 79.
316 ; Providence-Washington Fire
386
REINSURANCE § 135
in Chicago, and reinsured with another company which afterward
became bankrupt, and the reinsured went into insolvency and a re-
ceiver was appointed by a New York court, it was held that such
receiver miglit prove the debt against a bankrupt in the United
States court. ^^ Where the defendant reinsured all its risks and had
a large sum of money in the treasury', being the proceeds of cash
payments hj the then present and also by the past policy holders,
and the interest on the investments thereof, which sum had been
of about the same amount for several years, it was held that all the
policy Jiolders who contributed to such sur|)his were entitled to a
proportion thereof according to the amount of their respective pay-
ments, whether they continued to be policy holders at the period of
distribution or not.^^ Where an insurance company sells out its
business to another company, and in consideration thereof the lat-
ter reinsured the former company's risks, and agreed to pay, satisfy,
and discharge the losses, this is a mere contract of reinsurance, and
there is sufficient privity between a policy holder and the vendee
company to enable the former to maintain an action against the
latter for a loss?^* And it is held that it is a breach of contract which
constitutes a cause of action where a company transfers and assigns
to a rein.suring company all its assets including its legal reserve on
life policies. ^^ The deposit required under the Missouri statute of
a life insurance company is a trust fund for tlie benefit of the policy
holders of the company making such deposit, and where notes are
made to take the place of this fund by a company which has as-
sumed the policies of the original company, these notes are held up-
on the same trust as the funds they were intended to replace.^^ The
fact that the policy holders of the reinsured company have paid
premiums to the reinsuring company does not deprive them of the
remedy against the trust fund, nor does the fact that the reinsuring
company has paid many policies of the reinsured company dis-
charge the trust." In Glen v. Hope Mutual Life Insurance Com-
pany ^^ the insurer reinsured the life of one of its policy holders in
two other companies for ten thousand dollars, the original insurance
being for fifteen thousand dollai-s. Subsequently a third company
reinsured all the outstanding policies of the original insurer, and
12 Norwood, Ex parte, 3 Biss. (U. Co. 63 Misc. 571, 118 N. Y. Supp.
S. C. C.) 504, Fed. Cas. No. 10364. 50!). See § 112b herein.
" Smith V. Hunterdon Conntv ^^ Relfe v. Columbia Life Ins. Co.
Mutual Fire Ins. Co. 41 N. J. Eq. 10 Mo. App. 150. See §§ 112b.
473, 4 Atl. 652. 134a, 136b herein.
1* Johannes v. Phoeni.x Ins. Co. 66 ^"^ Relfe v. Columbia Life Ins. Co.
Wis. 50, 57 Am. Rep. 249. 10 Mo. App. 150.
" Wolfe ^_ Washington Life Ins. ^^ 56 N. Y. 379.
387
§ mia JOYCE OX IXSllJANCE
thereafter the insured died. In an action upon the policies it was
decided that the last reinsurer was liable directly to the policy hold-
ers, notwitlistandinti; its agreement to indemnify the original in-
surer against losses. It was also held that said last reinsurer was
liable to the policy holders for the whole amount reinsured, al-
tliough arbitrators acting between such reinsurer and the original
insurer alone, the policy holders not being parties thereto, had ren-
dered a decision limiting such liability to five thousand dollars.
§ 135a. Same 'subject. — The original insurer by instituting an
action against the reinsurer adopts only such a reinsurance contract
as the law^ authorizes. ^^
If an insurance company covenants with another to make as
prompt adjustments and payments of loss under any and all of the
latter's policies as it would under its own policies if issued direct to
said assurer the reinsuring company is directly liable to insured.^"
So where an original insurer sells its lousiness and good will to an-
other person, and the latter, in consideration thereof, reinsures the
risks of the first insurer, and contracts to pay losses under its out-
standing policies, the reinsurer becomes liable to the originally in-
sured policy holders. And if in reinsuring risks for which policies
are outstanding, the reinsurer contracts with the reinsured to as-
sume the policies and to pay the holders thereof all such sums a.s
the reinsured may become liable to pay, the original policy-holders
suffering loss may recover from the reinsurer directly, aUhough not
named in the contract.^ A policy holder in a reinsured company
2nay also sue a reinsurer direct to recover a loss under his policy
without first suing the reinsured, although he is not a party to or
in privity with the reinsurance agreement under which the rein-
sured company was not to be paid for losses exce]:)t upon duly proven
claims in a suit against it, which the reinsurer agreed to defend.^
Again, the original insured may have the same rights and the re-
insurer may be obligated to the same extent as under the original
co!itract where a statute fixes said rights and obligations as a part
of the reinsurance agreement.^ And where the reinsurer and orig-
in Federal Life In.s. Co. v. Kerr, ^ Shoaf v. Palatine Ins. Co. 127
(in08) — Jnd. App. — 82 N. E. N. Car. 308, 37 S. E. 451, 80 Am. ^
1)43, 85 N. E. 796, aff'd 173 Ind. 013, St. Rep. 798, 30 Ins. L. J. 276. First
89 N. E. 398, 91 N. E. 230. time this question before tliis court.
20 Whitney v. American Ins. Co. ^ ppf],,,..^! Ljfp jj^^^ (^o y j^isinoner,
_ Cal. — , 50 Pac. 50, 28 Ins. L. J. 40 Ind. App. 146, 91 N. E. 533,
254, aff'd 127 Cal. 464, 59 Pac. 897, Burns' Ann. Stat. Ind. 1908, sec.
Cal. Civ. Code. 55§ 2646 et aeq. 4753.
^ Ruohs V. Traders' Fire Ins. Co.
Ill Tenn. 405, 102 Am. St. Rep. 790,
78 S. W. 85.
388
REINSURANCE § 135b
inal insurer are the same a suit may be brought upon proper alle-
gations setting forth the fact.* So holders of policies outstanding
at the time of the transfer of assets and who were entitled to certain
payments by Ihe original insurer, may join in a bill for enforce-
ment of a trust against the transferee of said assets.*
But an original assured is estopped where he fails to as.sert liis
original contract rights hut accepts conditions expressly incoiT^o-
rated in an agreement under which one company al^sorbs and rein-
sures another company.^
Under a Mississi])pi decision a policy holder cannot sue on a strict
contract of reinsurance.''^ Nor can the insured sue the reinsurer
under a code provision wdiich only permits the party in whom the
legal interest is vested to sue the party who made the contract in
person or by agent.*
§ 135b. Same subject: mutual benefit societies, etc. — If an in-
surance certilicate is surrendered and another is issued in its place
and stead any claim which can be enforced must be against the
company issuing the last certificate and the former company which
issued the first certificate is relieved of all obligation thereunder.®
If an insurance company enters into a contract by which it agrees
to transfer its membership to another company, and the latter
agrees to take such members and reinsure them on the basis of their
original applications in the former company, on the execution of
satisfactory transfer applications, and a member of the former com-
pany sends a check for a premium due, and fills out a transfer ap-
plication, in which he states that he has recently recovered from an
attack of pneumonia, but that his health is then fair, the latter
company has no right to return his check and reject his a]iplication
on the ground that it "is not satisfactory on account of physical
condition and age," nor to insist that the applicant submit to a med-
ical examination, and hi.s failure to pay a subsequent premium
Avhen it falls due does not forfeit the right to recover on the ])()li( y.^°
So where an association in addition to a.ssuming all the liabilities
on certiticates of membership of another -society in consideration of
*SniilIi V. Bankers' Union of Chi- ^ j^Tq^.^j British & Mercantilp Ins.
c-ao-o, 144 111. A))]). 384. Co. v. Speer. 7 Ga. App. 330, 66 N.
MVat.son v. National Life & Trust E. 815, Ga. Civ. Code, 1895, see.
Co. (U. S. C. C.) 162 Fed. 87. 4930.
^Davilt V. National Life A.ssoe. 56 ^ Gallenbeok v. Northwe.stern
.N. Y. Snpp. 839, 36 Apji. Div. 632. :\Iutnal Benefit Assoc. 84 Minn. 184,
''' Moseley v. Liverpool & London 87 N. W. 614,
.& Globe Ins. Co. 104 Miss. 326, 61 i" National Mutual Ins, Co. v.
So. 428. See also Hoffman v. North Howe Benefit Soe. 181 Pa. St. 443,
British & Mercantile Ins. Co. 35 59 Am. St. Rep. 666.
-Misc. 10, 70 N. Y. Supp. 106.
389
§§ 135c, 136 JOYCE ON INSURANCE
a transfer of its assets and good will, specifically assumes liability
upon a certain cerlificate it is a direct contract of reinsurance meas-
uring the reinsurer's liability thereon to the certificate holder from
the date of the reinsuring agreement.^^
Where a mutual insurance company on the assessment plan rein-
sures in another like company, and the performance of their con-
tracts does not depend upon each other but the contracts are inde-
pendent, if a loss occurs which is covered by both policies, suits can
be instituted at once upon both policies by the holders thereof, un-
less otherwise provided by the policies. ^^
§ 135c. Same subject: Lloyds. — A contract of reinsurance with a
Lloyds association as the reinsured is not. one with the individual
members so as to enable one of tliem to sue thereon for his propor-
tionate share of the loss even though each of them is liable only
for his proportionate share of losses sustained on policies issued by
the association.^^
§ 136. Reinsurance: recovery: evidence. — If it appears that no
liability has attached against the insurer under the original con-
tract, there can be no recovery against the reinsurer, for nothing
exists upon which to base an indemnity,^* and if the claim of the
insured is paid it must have been a valid one to warrant a recovery
from the reinsurer.^^ It must also appear that the insurer has an
insurable interest, although this is evidenced by the fact that he is
a reinsurer of the original insured; he must also prove his loss and
the amount the same as the original insured must have proved it
against him; ^^ and proof of a judgment against the insurer upon
the original contract, in defense of which the reinsurer engaged, is
sufficient evidence of the insurable interest of the insurer, and a
sufficient proof of the loss.^''' An order for the production on oath
of ship's papers will be granted in an action on a marine policy of
reinsurance by a reinsured underwriter against the reinsurer. ^^
When a reinsurer has agreed to pay the amount stipuUited in the
original certificate the beneliciary cannot recover the amount speci-
^^ Cosmopolitan Ufe Ins. 'Assoc, v. Co. v. Hoffman In.'?. Co. (i Rob. (N.
Koegel, 104 Va. 619; 52 So. 166. Y.) 316.
See § 131b herein. ^^ Yonkers & New York Fire Ins.
12 Cass County v. Mercantile Town Co. v. lloi^'man Ins. Co. 6 Eob. (N.
Mutual Ins. Co." 188 Mo. 1, 86 S. W. Y.) 316.
237, 34 Ins. L. J. 435. ^"^ Ocean Ins. Co. v. Sun. Mut. Ins.
13 Thompson V. Colonial Assur. Co. Co. 15 Blatclif. (U. S. C. C.) 249,
70 N. Y. Supp. 85, 60 App. Div. 325, Fed. Cas. No. 10408.
afE'g 68 N. Y. Supp. 143, 33 Mm: ^^ China Traders' Ins. Co^ v. Royal
37 Exchanoe Assur. Corp. 6/ Law J.
14 Eagle Ins. Co. v. Lafavette Ins. Q. B. 736 [1898] 2 Q. B. 187, 78 Law
Co. 9 Ind. 443. ' T. N. S. 783, 46 Wkly. Rep. 497, 8
15 Yonkers & New York Fire Ins. Asp. 409.
390
REINSURANCE § 136a
fied in a rider attached to such certificate.^' In a New Jersey case
the defendant, a life insurance company, agreed in writing with
the plaintiff, another life company, to pay the plaintiff, in consid-
eration of a specified premium, a certain sum of money upon proof
that a named person, who was originally insin-ed in the latter's com-
pany should have died on or before a certain future date, a later date
was fixed by a supplementary written agreement. The plaintiff
sued on the agreements, alleging the death of said insured before
said date, proof thereof to defendant, and payment by the plaintiff
of the amount of the insurance on said life. It did not appear from
the declaration what this amount was. The general issue was plead-
ed and also specifically in bar of the action, that the defendant was
a New Jersey corporation, and that the agreements were contracts
of reinsurance and were invalid, because not made in conformity
with the statutory requirements. A demurrer was overruled and
judgment rendered in favor of the defendant on which record error
was assigned. It was'held that there was no error.^^
If there is a second reinsurance of fire risks, and a loss covered by
one of the original policies, and a suit by the insured against the
reinsurer, of which the second reinsurer is not notified, in which the
reinsurer is successful ; and a subsequent suit by the original insur-
er, after paying the loss, against the reinsurer of which the second
reinsurer is notified, in which the reinsurer is defeated, — in a suit
by the reinsurer on the second reinsurance policy a recovery may
be had against the second reinsurer for the costs incurred by the
reinsurer in the second suit against him, but not for those incurred
in the first on"e.-^
§ 136a. Same subject: mutual benefit societies, etc.: fraud of
directors. — If a reinsurer a.'^sociation expressly, agrees to pay the full
benefit provided for in the certificate at death less amounts previous-
ly paid for disability benefits, and unpaid assessments, whether such
benefit is provided for under its laws or not, it cannot claim the ben-
efit of its by-law reducing benefits where the original contract of iu-
.'^urance neither contained nor was subject to such a by-law ; noth-
ing can be deducted except amounts previously paid for disability
etc.. and none such amounts were shown.^ Under an Iowa decision
if the directors of a mutual benefit insurance com[)any dissolve the
corporation by consolidating it with another, and attempt to turn
^' Ilatolier v. National Annuity ^ Faneuil Hall Tns. Co. v. Liver-
As.soc. 153 Mo. App. 538, 134 S. pool & L. & (J. Ins. Co. 153 Mass.
W. 1. 63, 26 N. E. 244, 10 L.K.A. 423.
^° Iowa Life Ins. .Co. v. Eastern ^National Annuity Ins. Assoc, v.
Mutual Life Ins. Co. 64 N. J. L. 340, Carter, 96 Ark. 4!)5" 132 S. W. 633,
45 All. 762, 29 Ins. L. J. 299. 40 Ins. L. J. 205.
391
§ 136b JOYCE ON INSURANCE
over the insurance to such other company ; and such company re-
fuses to issue to a i)olicy holder a new policy in lieu of the one held
by him, on the ground that he has contracted a certain disease. —
such policy holder may maintain an action for fraud against the
directors of the former corporation, and may recover from them the
amount which he has paid into the company. And he is not es-
topped by his application to the consolidating company, as such ap-
plication does not amount to a ratitication of the consolidation.^ A
member of an accident company which has reinsured its business
is not obliged, where he has not so agreed, to show in an action on
his policy, that he has complied with the constitution and by-laws of
the reinsuring company, even though compliance with the rein-
sured's constitution and by-laws was a condition ])recedent to as-
sured's right to ])artici])ate in its benefit fund.*
§ 136b. Same subject: recovery of statutory deposits. — The re-
insurer is entitled to deposits made with the state treasurer by the
reinsured company under mistake that the law required such de-
posits, where there is nothing in the contract of reinsurance requir-
ing the reinsurer to maintain the same, and a decree winding up the
affairs of the reinsured, and which embodied the reinsurance con-
tract, granted the reinsurer all securities and property of the rein-
sured with authority to sue for possession thereof. And the fact
that the reinsurer stated in letters to each policy holder that the de-
posits would be maintained does not estop it from recovering them
where the state departnient held them unlawfully.^ In an English
ca.se it appeared that in 1904 the Popular Life Assurance Company
was incorporated and made the statutory deposit of i"20,000. They
did not accumulate out of premiums any life assurance fund, and
in 1906 they agreed to sell their busines^s and a.^sets to the United
Provident Assurance Company in consideration of shares in that
company. The vendor company passed resolutions for a voluntary
Avinding-up, and their property and policies had been transferred,
the shares allotted, all claims on the vendor company discharged,
and the company itself dissolved. The })urchasiug company now
petitioned for the payment out of court to them of the £20.000
deposited by the vendor company. It was held that, although the
^ Gravson v. Willouohby, 78 Iowa, p. 511, c. 320, sec. 3 ; Kan. Const.
83, 4 L.R.A. 3()5n. 42 N. "W. 591. art. 12, sec. 1.
* Young V. Eaihvay ]\Iail Assoc. Wlicu foreign company entitled to
120 i\Io. App. 325, 103 S. W. 557. withdraw funds on deposit where it
* lllinoi.s Lite Ins! Co. v. TuUy, 174 reinsures domestic company, see
Fed. 355, 98 C. C. A. 259, Kan. Laws Prewitt v. llhnois Life Ins. "Co. 29
1901, sec. 3424, ins. act, 1879 (Kan. Kv. L. Rej). 447, 93 S. W. 633. 35
Laws 1879, c. 115, p. 225, amending Jns. L. J. 688. See §§ 112b, 134a,
Laws 1871, c. 93), Kan. Laws 1903. 135 herein.
392
REINSURANCE § 13Gc
vendor conipany liad not accumulated a life a?^^llrance fund, yet,
inasniucli as their obligations had come to an end on di.'ssolution,
the deposit ought to be paid out to the petitioners as their assignees.^
§ 136c. Reinsurance: recovery induced by fraud: subrogation:
deduction of expenses of recovery. — The rig] it of the reinsurer to
subrogation where the reinsured recovers damages over the in.surer
appears under the following facts. The plaintiffs gave the defend-
ants an open cover slip by which they undertook to reinsure the
defendants to tlie extent of one-half their interest up to £1,000 on
certain shipments of lumber. Pursuant to the cover slip, the plain-
tifi's reinsured tlie defendants by two policies respectively on inter-
ests by two vessels. Under the policies the defendants claimed and
were paid by the plaintiffs sums amounting to £1,354 4s. lOd. The
defendants subsequently recovered from the shipowners damages
by reason of having been induced to pay losses on the two vessels by
fraudulent misrepresentations of an official in their emj^loynient.
The measure of the damages so recovered by the defendants was the
sum which upon inquiry appeared to flow from the liability of the
defendants as insurers in respect of the two vessels, and included
the £1,354 4s. lOd. The plaintiff's then sued the defendants for the
repayment of the £1,354 4s. lOd. as money received by them to tlie
use of the plaintiffs. Held, (1) That the plaintiff's were entitled
upon principles laid down in prior cases, to recover the £1,354 4s.
lOd. upon the ground that the money was obtained by the defend-
ants by enforcing a right which diminished the defendants' loss,
and that therefore the doctrine of subrogation applied; (2) that the
^ Popular Life Ins. Co. Ltd., In re dissohition, and there, therefore,
(Syl.) [1909] 1 Ch. Div. Law Rep. being no.suoh body in existence as the
80," (Life Assur. Co.'s act, 1870 [33 original contracting party, all con-
& 34 Vict. 61] sec. 3) dist'g Scottish tracts to which that body was a party
Economic Life Assur. Soc. [1890] 45 must of necessity have come to an
Ch. Div. 220. The court, per War- end, not merely by the action of the
rington, J., said : "Under these cir- creditors in not making a claim, but
cumstances the question is, what is the by the fact that through no such
proper thing to be done? In the claim having been made the statutory
first place the mere payment of the provision has taken effect and the
]iremiums l)y tlie ]ioli(-y holders does obligor has cea.'^ed to exist. It .seems
}iot, in accordance with the provisions to read, therefoi'c, that, so far a.s
of the act of 1872, amount to a re- that is concerned, the position of the
lease of the liability of the Popular ]iolicy holders is exactly the same as
Life Assurance Company, but it if they had relca.sed tlie I^opular Life
seems to me that in this case, no Assurance Company from their obli-
daim having been made in the wind- gation, and not merely as if the Unit-
ing up by any policy holder, the ed Provident Assurance Company
winding up having resulted in the had made itself liable to them."
393
§ 137 JOYCE OX IN8L'RANCE
defendants were entitled to deduct from the £1,354 4s. lOd. the
reasonable expenses of recovering that sum from the owners.'
§ 137. Reinsurer bound by judgment: notice to defend. — The
insurer may, before proceeding against the reinsurer, contest the
right of the insured to recover on the original contract, and in such
cases, if the reinsurer is notified and it refuses or neglects to defend,
it is bound by the judgment against the insurer and is liable for the
reasonable and necessary expenses and costs incurred bona fide in
such defense,* although the reinsurer is not a party of record.^ espe-
cially where such suit was defended by the advice and for the benefit
of the reinsurer.^" So it is liable for the costs and expenses incurred
bona fide and paid to the insured after notice to it to defend. ^^ In
Gantt V. American Central Insurance Company,^^ an agreement was
made with the reinsurers by the insurer under which the latter Ava.s
to employ counsel and defend a suit of the insured, and, in case of
a successful defense, the reinsurers were to pay pro rata the counsel
fees and costs. If unsuccessful, then to pay its pro rata of the judg-
ment, counsel fees and costs. Pending suit a compromise was effect-
ed with the insured without the reinsurer's consent, whereby the
insured was paid a certain amount of cash and the policies of rein-
surance were to be assigned to him in case of judgment in his favor,
and he was to enter satisfaction of the judgments on receiving the
assignments. The right of the insurer to continue the suit was re-
served, but the money paid the insured was to be retained whether
the suit should be lost or won. The insured obtained judgment.
The policies were assigned to him and satisfaction was entered of
the judgment. Although the reinsurers knew of this agreement,
they did not defend nor prevent the insurer's doing so. An action
was brought by a trustee of the insured upon the assigned policies.
The court decided that the insurer was the agent of the reinsurers
to conduct the defense, but that the reinsurers were not prevented
from also coming in and defending for themselves ; that the insurer
had the right to compromise as it did, and the authority to continue
' Assicurazioni Generali De Trieste Y.) 190b; Hone v. Mutual Safety
V. Empress Assur. Corp. Ltd. [1907] Ins. Co. 1 Sand. (N. Y.) 148.
2 K. B. Law R. 814 (Svl. for greater ^ Strong v. Pha?nix Ins. Co. 02 Mo.
part.) ' 289, 21 Am. Rep. 417.
8 New York State Marine Ins. Co. 1° Strong v. Pho?nix Ins. Co. 62
V, Protection Ins. Co. 1 Story (U. S. Mo. 289, 21 Am. Rep. 417.
C. C.) 4:58, Fed. Cas. No. 10216; " New York State Marine Ins. Co.
Strong V. Phcpnix In.s. Co. 62 Mo. v. National Protection Ins. Co. 1
289, 21 Am. Rep. 417; New York Storv (U. S. C. C.) 458, Fed. Cas.
Central Ins. Co. v. National Protee- No. 1021(5.
tion Ins. Co. 20 Barb. (N. Y.) 468; ^^ 08 Mo. 503.
Hastie V. De Peyster, 3 Caines (N.
394
i
REINSURANCE § 138
the suit thereafter; that the reinsurers' neglect to defend must be
considered as an acquiescence on their part to the defense made by
the insurer, and that tlie reinsurers, in the absence of a showing of
a lack of bona fides on the part of the insurer in defending were
liable.
§ 138. Defenses available to reinsurer. — liiasmuch as the rein-
surer is only liable for the amount for which the insurer is legally
liable," the former may avail himself of every defense which could
have been made by the insurer. This rule is well settled.^* So the
reinsurer may defend on the ground that the loss was partial and
obtain the benefit thereof notwithstanding the insurer has paid a
total loss.^* But the reinsurer cannot avail himself of defenses
which did not exist in favor of the reinsured. ^^ And policies in-
contestable when reinsurance is taken out are incontestable bv the
reinsurer." If the insurer makes an assignment, and before the
tiling of a petition in bankruptcy the reinsurer purchases claims
against the insurer for losses, such claims may be set up as counter-
claims when covered by the reinsurance, otherwise not.^^ But where
the insurer, without fraud or falsehood, makes an oral promi.ssorv
representation before the policy issues, and it is not mentioned in
the policy, the failure to comply therewith by the insurer, does not
constitute a defense.^^ A reinsurer who ha.s accepted the benefits of
, a contract is estopped to deny liability on the ground that its con-
tract is ultra vires even though a part of said contract is invalid, nor
can he deny such parts thereof as are against his interests.^
"Delaware Ins. Co. v. Quaker IVIanufacturer.s' ^futual Ins. Co. 5
City Ins. Co. 3 Grant Cas. (Pa.) 71. Ohio St. 4.')().
See cases next note. ^^ Merchants' Mutual In.s. Co. v.
^* United States. — New York State New Orleans Ins. Co. 24 La. Ann.
Marine Ins. Co. v. National Prot. 30.").
Ins. Co. 1 Stoiy (U. S. C. C.) 458. ^^ Federal Life Ins. Co. v. Kerr
Fed. Cas. No. 10210. (1908) — Ind. A pp. — , 85 N. E.
/«rf(a«a.— Eagle Ins. Co. v. La- 'i'SG, s. c. 82 N. E. !)4;{, s. c. 173
fayette Ins. Co. 9 Ind. 443, 447. I»c1. 613, 91 N. E. 230, 89 N. E. 398.
LoM/.sw«a.— Merchants' Mut. Ins. ^^<' Brown v. ^lutual Reserve Fund
Co. V. New Orleans Mutual Ins. Co. I^'^'^ ^^ssoc. 224 111. 57_6, 79 N. E. 949,
24 La. Ann. 305. ''^\^^^~^ ^!'- ApP' •■^''"•
New York.-Uastie v. De Peyster, -,-- r*^*:^L. n- It'^-t.^'^. ''• ^^^^^^
3 Can.es (N. Y.) 190, *195. '' ^'t--^^'' "/o,^" ^^ \^-^\^^''''
P.«».sv/rr,»m.-Dclaware Ins. Co. i"^" If ^ /^ « ' '!--q ''' ^"'"'
„ n 1 ,^-, T ri o r^ ^ r< A""- ^^^t. 1908, see. 4/o3.
^Quaker City Ins. Co. 3 Grant Ca... 18 cievelan.l ln.s. Co. In re, 22
U:i-) '1. . Fed 200
See Hone ;^ Mual Safety Ins. i9 Prudential Assur. Co. v. mna
Co. 1 Sand. (N. Y.) 13^; St. Nioho- Life Ins. Co. 23 Fed. 438.
las Ins. Co. v. IMercIiants' Ins. Co. i Sage v. Finnev, 156 Mo. App. 30,
11 Hun (N. Y.) 103. Washington 135 S. W. 996. " See §§ 115, 115b
Mutual Ins. Co. v. Merchants' & heroin.
395
CHAPTER VI.
THE POLICY— ITS FORM AND REQUISITES— SUBSTANCE
GENERALLY.
§ 145. Policy defined.
§ 146. Certificates in mutual benefit societies or associations.
§ 147. Division and kinds of policies.
§ 148. Wager policies.
§ 149. AYager policies, valid at common law, now void.
§ 150. Wager policy : conflict oi* laws.
§ 151. Valued policy may be shown to be a wager.
§ 152. Policy valid at inception cannot become wager.
§ 153. Wager policies: loss should be total.
§ 154. Wager policies: what are and are not. (Transferred to §§ 894a,
954a herein.)
§ 155. Interest policy defined.
§ 156. Open or unvalued policy defined.
^ 156a. Named policy defined.
§ 157. Running policies: blanket policies: floating policies.
§ 157a. Blanket or compound policies: floating policies: distinguished
from specific policies.
§ 157b. "Drummer floater" policy defined: when risk suspended.
§ 158. Open or unvalued policies: what are: whether policy open or
valued.
§ 158a. Same subject : standard policy.
§ 159. Valued policy defined.
§ 160. Valued policy : what the valuation includes.
S 161. Valued policy: how far valuation conclusive.
§ 162. Valued policy: effect of overvaluation: fraudulent valuation.
§ 163. Valued policies: statutory regulations.
§ 163a. Same subject : confiicting clauses.
§ 163b. Valued policy laws: three-fourths value.
§ 163c. Valued policy laws: overvaluation: fraudulent valuation.
i^ 163d. Valued policy law : property destroyed by more than one fire.
§ 163e. Valued policy law : real and personal property.
§ 163f. Valued policy law : improvements upon real proj^erty : loss of
rents not covered.
§ 163g. Valued policy laws: mutual companies: mutual benefit societies.
396
THE POLICY § 145
§ 164. Valued policies: partial loss.
§ 165. Valued policy : pro rata recovery.
§ 166. Valued policies: "valued at" not conclusive.
§ 167. Valued policies : prior insurance.
§ 168. Valued policies: what are.
§ 168a. ]?ent insurance policy analogous to valued policy.
^ 169. Mixed policy defined.
^5 170. Time policy defined.
§ 171. Time policy: computation of time.
5^ 172. Time policy: trading voyage: nature of contract.
i^ 173. Time policy: continuance after expiration of time.
§ 174. Voyage policy defined.
5:) 175. Voyage policy: voyage must conform to course fixed by usage.
^ 176. The form of the policy: statutory provisions: standard policy.
§ 176a. Standard policy: constitutional law: power of legislature and
of commission: review by court: injunction.
§ 176b. Standard policy: stipulations contra, additions, changes, etc.
§ 176c. Standard policy : waiver.
§ 176d. Standard policy law: effect as to valued policy law.
§ 176e. Statutory requirements as to size of type, written conditions, etc.
§ 176f . Standard policy : mutual companies or associations : "special reg-
ulations" as part of policy.
§ 177. The policy: what it usually contains: policy to contain entire
contract : statutes.
§ 178. Execution of the policy.
§ 178a. Fidelity bond : necessity of signing by employee : agency: waiver.
§ 179. Execution of policy : affixing date.
§ 180. Execution of policy: affixing seal.
§ 180a. Life annuity: insurance contract : non-necessity of seal.
§ 180b. Printed signatui'e is sullieient to satisfy the statute of frauds.
§ 181. Requisites of a valid policy.
§ 145. Policy defined. — A policy of insurance is the written or
printed form to which the contract has been reduced, and Avhich
evidences the agreement or contract between the parties, and it may,
as we have stated, be either a specialty or simple contract.^
^"Policy" covers any contract or Hart v. Simey) pp. 8, 9, sec. 7; Id. p.
agreement for sea insurance under 4."), sec. .31.
the stamp act : 30 Vict. e. 23, sec. 4. When "Open Cover" is "contract
Definitions under stamp act, for sea insnrance under stamp act
England, of policy of insurance: 1891 (54 & 55 Vict. c. 39) sec. 9.'),
"policy of sea-insurance;" "a con- subsec. 1, but iield invalid as such
tract of sea-insurance." See 1 jiolicy under subsec. 3. Home Ma-
Aruould on Marine Ins. (8th ed. rine Ins. Co. Ltd. v. Smith [1898] 2
397
§ 146 JOYCE ON INSURANCE
§ 146. Certificates in mutual benefit societies or associations. —
In mntiial benefit companies or associations whose legal status is
that of mutual insurance companies, and which issue certificates of
membership, such certificates are in effect insurance policies and
the measure, to a certain extent, of the rights of the parties,^ al-
though they may not be strictly policies,* especially in regard to the
Q. B. D. Law R. 351, 67 L. J. Q. B. Throughout the insurance laws and
N. S. 777, 78 Law T. Rep. 734, aft'g in insurance parlance the word
[1898]_ 1 Q. B. 829, 78 Law T. R. ''policy" is ordinarily used to indi-
465, 6/ L. J. Q. B. N. S. 554. cate the contract of insurance upon
"The instrument in which the con- which there is a fixed premium,
tract of marine insurance is general- Pennsylvania Life Ins. Co. of Phila.
ly embodied is called a policy'" (ma- In re, 36 Pa. Co. Ct. 687 (opinion of
rine insurance). Earl of Halsbury's atty. genl.). For other definitions
Laws of England, vol. 17, p. 336. see 6 Words & Phrases, pp. 5440-
Anchor policy: Lloyds. "Strict- 5442.
ly speaking, however, the term Fire policy after loss not an instru-
'Lloyds policy' denotes a policy with ment for payment of money under N.
the device of an anchor in the mar- Y. Code Civ. Proc. sec. 649, subdiv.
gin, encircled by the words : 'For 2, providing for levy upon such an
signature by the underwriting mem- instrument since the obligation of in-
bers of Lloyds only.' " 1 Aruould surer is conditioned upon proofs of
on Marine Ins. (8th ed. Hart & loss being submitted. But levy was
Simey) p. 17, sec. 10. held valid. Trapagnier & Bros. Ltd.
"A policy is a contract in writing v. Rose, 46 N. Y. Supp. 397, 20 App.
by which the insurer for a reasonable Div. 621, aff'd (mem.) loo N. Y.
compensation, engages that certain 637, 49 N. E. 1105 (N. Y. C. A.)
property of the insured, specified in ^ Chart rand v. Brace, 16 Col. 19,
the policy, shall sustain no loss or 25 Am. St. Rep. 235, 32 Cent. L. J.
damage from any of the perils enu- '410. Supreme Council Order of
rcerated in tlie contract between the Chosen Friends v. Foi'singer, 125
parties." Ins. Co. of North America Ind. 52, 9 L.R.A. 501, 25 N. E. 129,
V. Jones, 2 Bin. (Pa.) 547, 561. 21 Am. St. Rep. 196: Elkhart Mutual
"Policy" will be construed as re- Aid Benevolent & Relief Assoc, v.
ferring to the insurance contract pro- Houghton, 98 Ind. 149, 103 Ind. 286,
viding for the payment to the bene- 2 N. E. 763, 53 Am. Rep. 513. See
fieiary of a certain sum on the death Holland v. Taylor, 111 Ind. 125, 12
of the insured. Schaeffer, In re (JJ. N. E. 116; National Ben. Assn. v.
S. D. C.) 189 Fed. 187. Bowman, 110 Ind. 357, 11 N. E.
"The written instrument in which 316; Bolton v. Bolton, 73 Me. 299;
a contract of insurance is set forth Knights of Honor v. Nairn, 60 Mich,
is called a policy of insurance." Cal. 44, 26 N. W. 826; State v. Farmers^
Civ. Code, sec. 2586; Comp. Laws, & Mechanics' Mut. Ben. Association,
Dak. 1887, sees. 4141, 4142; 1 Lev- 18 Neb. 276. 281, 25 N. W. 81. 1
isee's Dak. Codes, sec. 1517. Same Bacon on Benefit Societies and Life
definitions in Civ. Code Mont. (Rev. Ins. (2d ed.) sec. 304.
Codes Mont. 1907) sec. 5591 (sec. On whether benefit association is an
3450) ; Rev. Codes N. Dak. 1899, sec. insurance company, see note in 38
4487: Rev. Codes S. Dak. 1903, L.R.A. 33.
sec. 1837, p. 808. * Alabama. — Supreme Command-
"Old line i)olicv" defined. Knott erv Kniyhts of the Golden Rule v.
v. Security INIntnal Life Ins. Co. 161 Ainsworlli. 71 Ala. 436, 46 Am. Rep.
Mo. App. 579, 144 S. W. 178. 332.
398
THE POLICY § 146
right to change beneficiaries and as regards assignment.^ Again,
a ^'certificate of niembership" refers only to the contract between a
mutual company or a beneficial association and its members. It
difi'ers from a "policy" in that the latter indicates a contract based
upon a fixed premium and does not indicate a certificate of member-
ship or a contract with a member of a beneficial association or mu-
tual insurance company.^ But under a Georgia decision if a cer-
tain sum of money is payable on the death of a member of an
association who agrees to pay a fixed sum at fixed periods the con-
tract is a life insurance policy irrespective of its designation and not
merely a certificate of membership.''^
Again, as said by Mr. Niblack, they are only a part of the written
evidence of the contract, the charter, constitution, and by-laws in
Illinois.— Mavtin v, Stubbings, 126 of the World, 165 Pa. St. 292, 30 Atl.
111. 387, 403, 18 N. E. 657, 9 Am. 830 (under act Pa. May 11, 1881, No.
St. Rep. 625. 23. P. L. 20).
Kansas.— State v. Viedant Ins. Co. ^ Freund v. Freund, 218 111. 189,
30 Kan. 585, 587, 588,^2 Pac. 840. 109 Am. St. Rep. 283, 75 N. E. 925;
Kentucky. — Sherman v. Common- Holland v. Taylor, 111 Ind. 125, 12
wealth, 82 Ky. 102. N. E. 116; Nye v. Grand Lodge
Massachusetts. — Commonwealth v. Ancient Order U. W. 9 Ind. App.
Weatherbee, 105 Mass. 160. 148, 36 N. E. 429, per Lotz, J., who
Missouri. — State v. Merchants' Ex- says : "For many purposes such as-
change Mutual Benevolent Soe. 72 sociations as the appellee, the A. 0.
Mo. 160. U. W., are insurance companies, and
Nebraska. — State v. Farmers' & the certificate issued by them is gov-
Mechanics' Mutual Benefit Assoc. 18 erned by the same rules applicable
Neb. 276. to insurance policies. There are,
As to distinction between certiti- however, essential differences between
cate and policy, see notes 5 L.R.A. them; the most usual is the pow<^r
98, 12 Id. 210. on the part of the assured in such
The application and certificate associations to change the bene-
constitute the contract: Supreme ficiary:" Where charter, etc. against
Lodge New England Order of Pro- such right. See chapter on Beneh-
tection v. Hine, 82 Conn. 315, 73 ciaries §§ 727 et seq. herein; Nib-
Atl. 79] ; Redmond v. Industrial Ben. lack's Mutual Benefit Societies and
Assn. 78 Ilun (N. Y.) 104, 60 N. Y. Accident Ins. (ed. 1888) 199, sec.
531, 28 N. Y. Supp. 1075; citing 166a; Id. 2d ed. sees. 136 et seq., 165
Hutchinson v. Supreme Tent Knights et seq. 211 et se*]. ; 1 Bacon's Benefit
of Maccabees of The World, 68 Hun Societies and Life Ins. (2d ed.) sec.
(N. Y.) 355; Smith v.- Brown, 75 304.
Hun, 231, 27 N. Y. Supp. 11. ^ Pennsylvania Mutual Life Ins.
Wlien not a policy : The certificate Co. of Phila. In re, 36 Pa. Co. Ct.
of membership of a beneficial associa- Rep. 687 (opinion of atty. genl.).
tion is not an insurance policy with- ' Cosmopolitan Life Ins. Co. v.
in the meaning of an act providing Koegel, 104 Va. 619, 52 S. E. 166,
for the attachment of application to Va. Code, sec, 3251, Va. Code 1904,
policy, otherwise that it shall not be p. 1178, sec. 2415a, acts 1897, 1898,
admitted in evidence: Lithgow v. p.' 734, c. 688.
Supreme Tent Knights of Maccabees
• 309
§ 146 JOYCK ON INSURANCE
force at the time of the meml)er's admisj^ion. being a part of the con-
tract, while a policy should express the entire contract.* It has been
held that, under certain requirement.^ of the charter and by-laws
of a mutual l)enefit society relating to beneficiaries, the issuing of a
certificate of membership was not a condition precedent to the right
to recover the benefit fund, and that such certificate was only neces-
sary where the money was to be paid as directed by a member to
some person or body other than the family, heirs, or legal represen-
tatives of the decea.'^ed member.^ It is decided, however, that such
certificate of membership issued by an insurance benefit society i.s
a contract, and can be changed only by and with the consent of both
l)arties.^*' But a certificate of a benefit society, such as the Ancient
Order of United Workmen, is, like a policy of insurance, evidence
of a property right. ^^ 80 a certificate in a fraternal benefit associa-
tion constitutes the measure of the rights of the parties as it also
does of the contract rights of the named beneficiaries.^*^ And in
making a prima facie case for recovery upon a benefit certificate,
the action is to be treated as founded on so much of the contract as
is set forth in the policy. ^^
When the company is one that issues certificates, these together
with the charter or articles of association and the by-laws or rules
of the organization, and the general laws of the state, constitute the
contract; " but the certificate may show that certain by-laws have
been waived, or that they are inconsistent with its terms, or they
may not be annexed thereto as required by certain statutes,^^ all of
which factors are important in considering what weight should be
given to the certificate as evidence in controlling the construction
of the contract, and such contracts are, therefore, subject to the
rules of law governing insurance policies in like cases, except so far
1
^Niblack's Benefit Societies and i2]vji„i(| y, Reliannie, 51 Col. 129,
Occident Ins. (I2d ed.) p. '271, sec. Ann. Cas. 19L3A, I'i^H, 117 Pae. 159.
|3(i 13 ox'onncil v. Snpreuie Conclave
9 Bishop v. Grand Loda:e of Em- Kniahts of Damon, 102 Ga. 143, .6
pire Order of IMutual Aid^ 112 N. Y. Am. Si. Rep. i:)9, 28 S. E. 282.
627, 20 N. E. 562, reversing 43 Hnn "See SS 186, 191, herein; King
(N. Y.) 472. "^ . Wynema Council No. 10, Dangh-
i** Russ v. Supreme Council Ameri- lers of Pocalionta.-^, etc. 25 Del. (2
can Legion of Honor, 110 La. 588, 9S Boyce's) 255, 78 Atl. 845; Downes
Am. St. Rep. 469, 34 So. 697. See v. Knights of Columbus, 76 N. H.
also Supreme Council of the Order of 165, 80 Atl. 227; Haywood v. Grand
Chosen Friends v. Forsinger, 125 Lodge of Texas K. P. — Tex. Civ.
Tnd. 52, 21 Am. St. Rep. 196, 9 App. — , 138 S. W. 1194.
L.R.A. 501, 25 N. E. 129. ^^ §§ 186-I88 herein.
"Grimblev v. Harrold, 125 Cal.
24, 73 Am. St. Hep 19, 57 Pac. 558.
400
THE POLICY §§ 147, 148
as these rules must be held to be modified by the peculiar organiza-
tion, objects, and policy of such societies or companies.^^
In certain mutual benefit or fraternal societies, however, no cer-
tificate is required to be issued. In such case the charter, constitu-
tion, and by-laws must be looked to to determine the contract, both
in relation to the member himself and the beneficiary.^"^
§ 147. Division and kinds of policies. — Policies are divided with
reference to (1) insurable interest, (2) the amount, and (3) dura-
tion. Insurable interest covers wager and interest policies. The
amount covers open and value policies. Open policies are sometimes
known as floating or blanket policies. Duration covers time and
voyage policies. There is also a class of policies known as ''mixed
policies," which may relate to the amount, as where the policy is
partly open and partly valued; or to the duration, as where the
policy sets out the termini but limits the risk by time. There are
also many other kinds of policies, or, rather, plans of insurance,
such as endowment, tontine, semi-tontine, etc. These will be con-
sidered hereafter, however, under the sections relating to the terms
and stipulations in the policy, so far as there are decisions bearing
thereon.
§ 148. Wager policies. — Wager policies are those in which the
insured has no interest whatever in the subject matter insured, but
only an interest in its loss or destruction.^^ This contract is an in-
^6 Martin v. Stubbings, 126 111. 104 U. S. 775, 26 L. ed. 924; ^tna
38/, 403, 9 Am. St. Rep. 62.-^, 18 N. Life Ins. Co. v. France, 94 U. S. 561,
E. 657; Elkliart Mutual Aid Benevo- 24 L. ed. 287; Cammack v. Lewis, 15
lent & Relief Assoc, v. Houoliton, 98 Wall. (82 U. S.) 643, 21 L. ed. 244;
Ind. 149. Gordon v. Ware National Bk. 132
See, as to change of beneficiary, Fed. 444, 65 C. C. A. 580, 67 L.R.A.
Miner v. Michigan Mutual Benefit 550; Langdon v. Union Mutual Life
Assn. 63 Mich. 338, 29 N. W. 852; Ins. Co. 14 Fed. 272, 274.
Titsworth v. Titsworth, 40 Kan. 571, Georgia.— West v. Sanders, 104
20 Pac. 213; Union Mut. Assn. v. Ga. 727, 31 S. E. 619.
Montgomery, 70 Mich. 587. 14 i\m. I II hi o is. —Cisna v. Shelbley, 58111.
St. R_ep. 519, 38 N. W. 588, and note, App. 385.
526, 527. Indiana. — American Mutual Life
"Baldwin v. Golden Star Fra- Ins. Co. v. Bertram, 163 Ind. 51, 64
ternity, 47 N. J. L. Ill, 112. See L.R.A. 935, 70 N. E. 258; Davis v.
Tyrell v. Washburn, 6 Allen (88 Brown, 159 Ind. 644, 647, 65 N. E.
Mass.) 466, 468; Bishop v. Grand 908; Prudential Insurance Co. of
Lodge of Empire Order of Mutual America v. Ilunn, 21 Ind. App. 525,
Aid, 112 N. Y. 627, 20 N. E. 562, re- 69 Am. St. Rep. 380, 52 N. E. 772.
versing 43 Hun (N. Y.) 472. A'awsa.s.—Metropolitan Life Ins.
^8 Connecticut Mutual Life Ins. Co. Co. v. Elison, 72 Kan. 199, 115 Am.
V. Scliaefer, 94 U. S. 457, 460, 24 L. St. Rep. 189, 3 L.R.A. (N.S.) 934, 83
ed. 291. Pae. 410.
See also the following cases: Michigan. — Smith v. Pinch, 80
Uiiited State.'i.—WarnoQk v. Davis, i\Iieh. 332, 45 N. W. 183.
Joyce Ins. Vol. I. — 26. 40I
§ 148
JOYCE ON mSUKANCE
surance in name only.^^ It is speculative in its nature and does not
deal with real values. The usual words in a wager policy are * 'in-
terest or no interest," or ''without further proof of interest than the
policy," or ''free of average without benefit of salvage to the as-
sured " although these words are not conclusive in this country in
determining whether or not the policy is a wager.^" So w^here a
Missouri. — Whitmore v. Supreme maritime wagers although framed ex-
Lodge Knights & Ladies of Honor, teriially as policies of sea-assurance,
100 yio. 36, 35 S. W. 495. and therefore called wager i^olicies
North Carolina. — Hinton v. ]\Iu- were . . . prohibited in this
tual Reserve Fund Life Assoc. 135 country nearly two centuries ago by
N. Car. 314, 323, 65 L.R.A. 161, 165, a solemn act of the legislature, anil
166, 102 Am. St. Rep. 545, 47 S. E. in most other maritime states are
474. either expressly forbidden or practi-
Wisconsitu — Sawj'er v. Dodge callv disused, and thus on the ground
County Mutual Ins. Co. 37 Wis. 538, that it is plainly opposed to the true
539. interests of a mercantile state to
See 17 Earl of Halsbury's Laws of enable those who have no real stake
Eng. pp. 377, 378. Wager policies; in the safety of a maritime adven-
gambling act of 1774. See Id. pp. ture to give themselves (by means of
514 et secj. See next following sec- such a contract) a great interest in
tion herein. its loss or destruction." See also Id.
When charge does not define pp. 409 et seq., sees. 311 et seq. '
wagering contract. McFarlane v. ^^ Emerigon on Ins. (Meredith's
Robertson, 137 Ga. 132, 73 S. E. 490. ed. 1850) 4.
For other definitions see 8 Words & 2° A wager (or honor policy)
Phrases pp. 7368-9. may be defined as one in which the
An insurance against fire must be parties, by express terms, disclaim
based on an interest in the property on the face of it, the intention of
insured or it is void. Bennett v. making a contract of indemnity.
Mutual Fire Ins. Co. 100 Md. 337, Such a iiolicj^ is generally known by
60 Atl. 99. having one or other of the following
"The term Wager Policij relates to clauses wi-itten on the face of it :
the form of the instrument as well 'Interest or no interest,' or 'This
as to the nature of the contract." 1 policy to be deemed sufficient proof
Amould on Marine Ins. (8th ed. of interest,' or any other terms which
Hart & Simey, 1909) see. 311, p. 409. purport either to entitle the assured
As to the distinction between con- to recover against the underwriters
tracts of marine insurance and a stipulated sum of money, wliether
wagers it is said, 1 Arnovild on he has any interest in the ship or
Marine Ins. (8th ed. Hart & Simey) cargo or not; or to bind the under-
p. 7, sec. 6: "It appears that two writer not to require anj' proof of
things are mainly essential to every the a.^sured's interest other than the
contract of marine insurance : 1. An policy itself." {Citing judgment of
interest in the subject-matter insured. Best, C. J., in Murphy v. Bell [1828]
2. ■ Exposure of that interest to risk 4 Bing. 567-572, "A clause of this
of loss or detriment by sea perils, kind is usually called a 'p. p. i.'
It is the necessity for these requisites [policy proof of interest] clause, and
which entirely distinguishes contract the policy containing it is also known
of marine insurance, properly so- as a 'p. p. i.' policy"). "As, more-
called from mere wagers upon the over, in these cases there is nothing
issue of maritime adventures. Such actually at ri.sk which can be sea-
402
THE POLICY § 149
policy was underwritten for ten thousand dollars on profits on mer-
chandise on board a brig from C. to B., free of average and salvage,
and the policy to be the only proof of interest required, it was held
not a gaming policy, the insured having property on board and
neither he nor the insurers intending a wager policy, but an in-
terest policy,^ it being declared in this case tliat both parties must
intend to wager, and that if one party only intends a gaming pol-
icy, and procures the otlier to underwrite it as a policy on interest,
the policy is void for fraud. The Avhole question depends upon
whether the contract covers an actual insurable interest or is intend-
ed as an indemnity therefor, or whether it is a mere wager. For
an insurance made without such interest is void,^ the presumption
being in such case that the policy was taken out for the purpose of
a wager or speculation ; ^ although where for a premium of two and
a half per cent A. agreed with B. to insure a negro slave, at the time
reported to be lost while on board a boat, and B. had no interest in
the negro, but his loss was proved as reported, he was held entitled
to recover his value.* But precisely what interest is necessary to
exist in order to make the policy not a wager has been much dis-
cussed. In that class of insurances where the contract is strictly
one of indemnity, as in marine and like insurances, there is not so
much difficulty as in life insurance or in accident insurance where
the injury results in death, since in such cases the loss can seldom
be measured by pecuniary values.* A wager policy may exist where
the insured has an interest in the subject matter and still wagers
respecting it.^
§ 149. Wager policies, valid at common law, now void. — It
is well settled that wager policies and wagers which were not con-
trary to the policy of the law were valid contracts at common law.'
damaged or abandoned, such policies y. McDonald, 122 Pa. 324, 1 L.R.A.
frequently also contain the clause, 238, 15 Atl. 439, 9 Am. St. Rep. Ill,
'Free of all average, and without 1 L.R.A. 238.
benefit of salvage." 1 Arnould on * Shepherd v. Sawyer, 2 Murph. (6
:\rarine Ins. (8th ed. Hart & Simey, N. C.) 26, 5 Am. Dec. 517.
1009) sec. 311, p. 409. Interest or * Connecticut Mutual Life Ins. Co.
no interest. See article 40 L. T. 83; v. Schaefer, 94 U. S. 457, 460, 24 L
same art. 21 Ir. L. T. 313. ed. 251, per Bradley, J.
^ Alsop V. Commercial Ins. Co. 1 ^ Kent v. P>ird. 2 Cowp. 583. See
Sum. (U. S. C. C.) 451, Fed. Cas. Juliel v. Church, 2 Johns. Cas. (N.
No. 262. See Hemminwav v. Eaton, Y.) 333.
13 Mass. 108; Glendinning v. Church, 'Trenton Mutual Life & Fire Ins.
3 Caines (N.. Y.) 141, 144. Co. v. .Johnson, 4 Zab. (24 N. J. L.)
^Goddart v. Garrett, 2 Vern. 269. 576, 583; Buchanan v. Ocean Ins.
See Spare v. Home ^Mutual Ins. Co. Co. 6 Cow. (N. Y.) 331; Abbott v.
15 Fed. 707; Farmers' Ins. Co. v. Scbor, 3 Johns. Cas. (N. Y.) 39, 2
Butler, 38 Ohio St. 128, 133. Am. Dec. 239; Juhel v. Church, 2
3 United Brethren Mutual Aid Soc. .Tohns. Cas. (N. Y.) 333, note b;
403
§ 149
JOYCE OX INSURANCE
Although it if? said that this doctrine had never been applied to fire
insurance,* yet it has been held that such insurances were void as
wager policies at the common law.^ In 1740, however, the statute
19 George II., chapter 37, was enacted prohibiting this class of con-
tracts in marine risks with certain exceptions, and a few years later,
in 1774, the statute 14 George III., chapter 48, was passed prohib-
iting insurances upon lives by way of gaming or wagering.^° Al-
Dalbv V. India & London Life Assur.
Co. 1.3 Com. B. 365, 386, 13 Eng. Rul.
Cas. 383 ; Crauf ord v. Hunter, 8
Term. Rep. 23; Cousins v. Nantes, 3
Taunt. 522, 13 Eng. Rul. Cas. 312;
Dean v. Dicker, 2 Str. *1250. See
Allen V. Hearn, 1 Term Rep. 56, 12
Eng. Rul. Cas. 385; Atherton v.
Beard, 2 Term Rep. 610; Roebuck v.
Hammerton, Cowp. 737; Evans v.
Jones, 5 Mees. & W. 77; Goddart
V. Garrett, 2 Vem. 269 ; Bunyon on of marine insurance by way of gam-
Life Assui'ance (2d ed.) 8 Arnould ing or wagering is void. (2) A con-
on Marine Ins. (8tli ed. Hart & tract of marine insurance is deemed
Simey) see. 311, p. 410. Contra, to be a gaming or wagering contract
Ruse V. Mutual Benefit Life Ins. Co. — (a) Where the as.sured has not an
23 N. Y. 516. See cases pro and con it>surable iutere.st as defined by this
surance "on the life or lives of any
person or i^ersons, or on any other
event or events whatsoever wherein
the person or persons for whose use,
benefit, or on whose account such
policy or policies shall be made sliall
have no interest, or by way of
gaming or wagering."
Act George II., c. 37, repealed by
sec. 92 marine insurance act, .sec. 4,
which provides: (1) Every conti'act
*c5o. See also notes 6 L.R.A
7 Id. 217, 12 Id. 409, 13 Id.
J. 632-3, 699; 17
as to validity of wagers generally : 2
Parsons on Contract (7t-h ed.) 896,
137,
434;
Articles in 43 L.
Bench & Bar, 43-48; 53 Sol. L. J.
209-10; 15 Case & Comment, 78-9;
100 L. T. 195, 213.
* Wood on Fire Ins. sec. 37, p. 94.
^ Fi'eeman v. Fulton Fire Ins. Co.
14 Abb. Pr. (N. Y.) 398. But see
Juhel V. Church, 2 Johns. Cas. (N.
Y.) 333, note b.
10 The act 19 George IT., chapter
act, and the contract is entered into
with no expectation of acquiring
such an interest; or (b) Where the
policy is made "interest or no inter-
est," or "without further proof of
interest than the policy itself," or
"without benefit of salvage to the in-
surer," or subject to any other like
term : Provided that, where there is
no possibility of salvage, a policy
may be etfected without benefit of
.salvage to the insurer. 1 Arnould
on Marine Ins. (8th ed. Hart &
Simey, 1909) see. 313, p. 412, con-
37, provides that any assurance made sidering the changes which this act
on ships, "or on any goods, merchan- effects, stating that wager policies
discs, or effects laden or to be laden are void in Ireland, considering the
on board of any such sJiip or ships, effect of no expectation of interest,
interest or no interest, or without also whether wager policies are void
further proof of interest than the under the gaming act 1845 (8 & 9
policy or by way of gaming or wager-
ing, or without benefit of salvage to
the assurer," shall be void, excepting,
however, assurance on private ships
of war, assurances on effects from
Spain and Portugal, etc. The act 14
George III., chapter 48, prohibits in-
Vict. c. 109), sec. 18 (although no
imderwriter had raised the question,
and reviewing the cases." See also
17 Earl of Halsbury's Laws of Eng-
land, sees. 746 et seq., pp. 377 et seq.
where the above matters are con-
sidered, and it is also said: "A still
4U4
THE POLICY
149
though there are statutes in some of the states against wagering con-
tracts, and although wager policies were held valid in New York
prior to the enactment of the statute in that state," yet a wager in-
surance should be held void on general principles of public policy
and morality, and the tendency of our courts has been against up-
holding these contracts, ^2 and courts should not concern themselves
more modern statute, marine insur- necticut Mutual Life Ins. Co. v.
anee (gambling policies) act 1909 (9 Schaefer, 94 U. S. 457, 460, 24 L. ed.
Edw. VII. c. 12) sec. 1, declares 251 ; Gordon v. Ware National Bank,
every contract of marine insurance 132 Fed. 444, 65 C. C. A, 580, 67
effected by any person not having a L.R.A. 550; Kentucky Life & Acci-
bona fide interest or expectation of dent Ins. Co. v. Hamilton, 63 Fed.
interest, and every such contract ef- 101, 11 C. C. A. 50, 22 U. S. App.
tected by any person, not being a 548.
part owner, in the employment of the Alahanw. — White v. Equitable
owner" ("owner" includes charterer Nuptial Benefit Union Co. 76 Ala.
under sec. 1 [8] of the act) "of a 251, 52 Am. Rep. 325.
ship, in relation to that ship in the Maryland. — Bennett v. Mutual
terms above specified (marine insur- Fire Ins. Co. 100 Md. 337, 60 Atl.
anc€ act 1906 [6 Edw. Yll. e. 41], 99.
sec. 4 [2] [b]), to be a 'contract by Massachusetts. — King v. State Mu-
way of gambling on loss by maritime tial Fire Ins. Co. 7 Cush. (61 Mass.)
perils;' and the person who effects it, 1, 10, 54 Am. Dec. 683.
and the broker through whom and Missouri. — Sage v. Finney, 156
the insurer with whom it is effected Mo. App. 30, 135 S. W. 996.
(if these persons act knowingly) are New Hampshire. — Hoit v. Hodge,
guilty of a criminal offense "punish- 6 N. H. 104, 105, 25 Am. Dec. 451.
able on summarv conviction." Id. New York. — Ruse v. Mutual Bene-
.sec. 747, pp. 377, "378. See 53 Sol. L. fit Life Ins. Co. 23 X. Y. 422.
J. 464. North Carolina. — Trinity College
" See Buchanan v. Ocean Ins. Co. v. Travelei-s' Ins. Co. 113 N. C. 248,
6 Cow. (N. Y.) 318; Juhel v. Church, 22 L.R.A. 291, 18 S. E. 175, 23 Ins.
2 Johns. Cas. (N. Y.) 333, note b. L. J. 53, per Burwell, J.
As to statutes affecting wagering Pennsiilvauia. — United Brethren
policies see note 128 Am. St. Rep. Mutual Aid Soc. v. McDonald, 122
304, 305. ■ Pa. 324, 1 L.R.A. 238, 15 Atl. 439;
"Every stipulation in a policy of Pritchett v. Insurance Co. of North
insurance for the payment of loss, America, 3 Yentes (Pa.) 461.
whether the person in.suredhas or has Texas. — iVIanhattan Life Ins. Co. v.
not anv interest in the property in- Cohen (1911) — Tex. Civ. Ajip. — ,
sured, or that the policy shall be re- 139 S. W. 51, 40 Ins. L. J. 1685.
ceived as proof of such" interest, and Vermont. — Callamer v. Day, 2 Vt.
every policy executed by way of 144.
gaming or wagering, is void:" Cal. England. — Anctil v. Manufactur-
Civ. Code, sec. 2558. ' ers Life Ins. Co. 68 L. J. P. C. 123
Statutes 14 Geo. lir. chap. 48. was [1899] App. Cas._ Law R. 604, 81
never in force in Wisconsin, Hard v. Law L. T. N. S. 2/9; >AIanufacturers
Dotv, 86 Wis. 1, 21 L.R.A. 746, 56 Life Ins. Co. v. AnctU, 28 Can. S.
N. W. 371. C. 103.
12 United States.— Crotty v. Union See also 3 Kent's Comm. (13th ed.)
Mutual Life Ins. Co. 144 'U. S. 621, 277; 1 Duer on Ins. (ed. 1845) 92.
12 Sup. Ct. 749, 36 L. ed. 566; Con Emerigon, in his work on Insurance
405
§ 130 JOYCE ON INSURANCE ,
with the dis^position of the proceeds of wagering policie;^," for tlie
above reason and also on the ground ah-eady indicated, that the
contract of insurance is intended only to protect an actual insurable
interest, or to indemnify for an actual loss, and deals with real
values, and is not intended to be speculative, and it is innnaterial
that the policy is taken in good faith and with full knowledge. The
policy of the law does not admit of such insurance, although the
parties may willingly contract therefor. The foundation of all in-
surance,'^, unless of the wager kind, is the real value of the thing
insured. ^^
§ 150. Wager policy: conflict of laws. — It is held in Pennsylva-
nia that a wagering life policy cannot be enforced there, although
valid in the state where it was signed and is to be paid." And under
(Meredith's ed. 18.50) c. i. see, 1, p. Fire Ins. Co. 38 Barb. (N, Y.) 247,
4), writing of wager policies, declares 14 Abb. Pr. (N. Y.) 398.
that the reason of their not being Ohio. — Farmers' Ins. Co. v. Butler,
more generally allowed to embrace 38 Ohio St. 133, per Mcllyaine, J.
the fortune of ships is, that ''naviga- Reinsurance; Wagering contracts,
tion has been viewed as a matter in- see § 118a herein,
teresting the state. . . . It is not Concealment of "honour" policies
to be borne, therefore, that one should and of overinsuranee will make poli-
be placed in a situation to desire ey void. Thames tfe Mersey Marine
the loss of a vessel. The greediness Ins. Co. v. "Gunford" Ship Co.;
of gain is capable of producing Southern Marine Ins. Assoc, v. "Gun-
crimes which it is desirable to pre- ford" Ship Co. 80 L. J. P. C. 146,
vent. Hence the cause that in most [1911] A. C. 529, 105 L. T. 312, 15
commercial places wager insurances Com. Cas. 270, 55 L. J. 631, 27 T. L.
have been prohibited." R. 518, H. L. (Sc).
See note 128 Am. St. Rep. 304. " :\IcDermott v. Prudential Ins.
13 Exchange Bank v. Loh, 104 Ga. Co. 7 Kulp (Pa.) 246. See § 232
446, 44 L.R.A. 372, 31 S. E. 459, a herein.
case of insurance of life for creditor's Upon the general rule it is held
benefit. that if a contract is valid by the laws
1* See the following eases : of one state and invalid by those of
United States. — Connecticut Mutu- another, the parties are presumed to
al Life Ins. Co. v. Schaefer, 94 U. S. incorporate in the contract the law
457, 460, 24 L. ed. 251; Snell v. Del- which would piake it operative. Ca-
aware Ins. Co. 1 Wash. (U. S. C. C.) rev v. Mackey, 82 Me. 516, 9 L.R.A.
509, Fed. Cas. No. 13,137. 113, 20 Atl. 84, 17 Am. St. Rep. 500.
Massachusetts. — Mutual Life Ins. But it is also held that courts will
Co. v. Allen, 138 Mass. 24, 27, 52 Am. enforce contracts valid by the laws
Rep. 246, 247; Stetson v. Massachu- of the state or country wherein they
setts IMutual Fire Ins. Co. 4 Mass. were made, unless clearly contrary to
336, 337, 3 Am. Dec. 219, per Sewall, good morals or repugnant to the poli-
J. cy or positive statutes of the juris-
Michigan. — Agricultural Ins. Co. v. diction in which it is sought to be
Montague, 38 Mich. 548, 7 Ins. L. J. enforced. Sondlieim v. Gilbert, 117
708, 31 Am. Rep. 326. Tnd. 71, 5 L.R.A. 432, 18 N. E. 687,
Neiv York. — Freeman v. Fulton 10 Am. St. Rep. 23; Robinson v.
406
THE POLICY
151
a Texas decision where an assignment of a policy was made in that
state by a resident there to the assignee's agent there it was held
that the Texas law governed in determining the validity of the as-
signment and not the laws of Georgia where the assignee resided. ^^
But in Indiana a statute which makes void assignments of policies,
of corporations organized in that state, where the assignee has no
insurable interest does not apply to policies issued by a foreign cor-
poration."
§ 151. Valued policy may be shown to be a wager. — Since
wager policies were valid prior to the act 19 George II., chapter 37,
the value in a valued policy ought, it would seem, to have been con-
clusive whether merely speculative or founded on a real interest.
But subsequent to the statute, Lord Mansfield, in Lewis v. Rucker,^*
while declaring that it was only necessary for the assured to prove
some interest in case of valued policies to take them out of the stat-
ute, ^^ yet he adds that ''the insured can never be allowed in a court
of justice to plead that he has greatly overvalued or that his interest
was a trifle only," and that "if it should come out in proof that a
man had insured two thousand pounds, and had interest on board
to the value of a cable only," the statute could not be defeated by
such an evasion. 2° This doctrine of Lord Mansfield is, of course,
Queen, 87 Tenn. 445, 3 L.R.A. 214,
11 S. W. 38, 10 Am. St. Kep. 690.
And a contract made in Connecti-
cut after sunset on Sunday, being
\alid in that state, may be enforced
in Rhode Lsland, altliough tlie law of
the latter state prohibits business in
one's ordinary calling during all Sun-
day. The enforcement of such a con-
tract does not involve a breach of
good morals. Brown v. Browning,
15 R. I. 222, 7 Atl. 403, 2 Am. St.
Rep. 908.
^^ Manhattan Life Ins. Co. v. Co-
hen (1911) — Tex. Civ. App. — . 139
S. W. 51, 40 Ins. L. J. 1685. The
court per Neill, J., declares that there
is a conflict of authorities as to what
law governs such an assignment re-
views the authorities at length and
holds that the contract was consum-
mated in Texas, The court also says :
"The consideration for the assign-
ment of these policies having been
advanced by Hilsman for the express
purpo.se of assisting the insured to
participate in a gambling transac-
40
tion with said Hilsman and his agent
at San Antonio, Tex., the considera-
tion was void in law and the attempt-
ed assignment of the policies for that
reason alone vested no right in Hils-
man to either the policies or the pro-
ceeds thereof." See § 232 herein.
^■^ jMetropolitan Life Ins. Co. v.
Brown (Davis v. Brown) 159 Ind.
644, 65 N. E. 908, 32 Ins. L. J. 322.
18 2 Burr. 1171, 14 Eng. Rul. Cas.
215.
1^ See Barclay v. Cousins, 2 East,
544; Kane v. Commercial Ins. Co. 8
Johns. (N. Y.) 229.
20 1 Marshall on Ins. (ed. 1810)
*136, et seq., Mr. Wood (1 Wood on
Fire Ins. [2d ed.] sec. 3S_, p. 94) says
that "a partial interest in the prop-
erty insured, bearing a small propor-
tion to the sums insured if the policy
is valued, does not save the policy
from being a mere wager, unless the
assured stands in such a relation to
the property that, as to all the bal-
ance of the sura insured, he stands as
trustee for the owner."
§§ 15^-155 JOYCE ON INSURANCE
based upon the statute, and should be held applicable in all cases
where there is legislative prohibition against wagering contracts, and
in those cases where a wager policy is held void on the ground of
public policy, there would seem to be no reason why the same rule
should not govern. But in Alsop v. Commercial Insurance Com-
pany ^ it is decided that there cannot in strictness be a gaming pol-
icy under the laws of I\lassachusetts unless both parties intend to
wager, and that if the valuation is a mere cover for a wager it will
be set aside and the insured may recover according to his actual in-
terest.*^
§ 152. Policy valid at inception cannot become wager. — Where
a life insurance policy is valid at its inception, the insured may dis-
pose of it at his pleasure, nor can it be afterward converted into a
wager policy by any use of it by the insured subsequent to effecting
a valid contract.^
§ 153. Wager policies: loss should be total. — In wager policies
the loss must be absolutely total. This follows from the fact that
the contract is not based on any insurable interest, and necessarily
there can be no liability for a partial loss. And for the reason that
the insurer could claim no benefit from what may have been saved,
the clauses existed in wager policies ''free of average," and "without
benefit of salvage." *
§ 154. Wager policies: what are and are not. (Transferred see
§§ 894a, 914a, 954a herein.)
§ 155. Interest policy defined. — An interest policy is one in
which it appears that the insured has an actual, assignable,
insurable interest in the subject matter, and this is the im-
port of the general form of contract now in use.^ In cases
^1 Sumner (U. S. C. C.) 451, Fed. 'interest or no interest,' or 'without
Cas. No. 262. further proof of interest than the
2 Clark V. Ocean Ins. Co. 16 Pick, policy,' to preclude all inquiry into
(33 Mass.) 289. See Wolcott v. the interest of the insured. . . .
Eagle Ins. Co. 4 Pick. (21 Mass.) The parties mean to play for the
429. v\'hole stake, and when the underwrit-
^ Yalton v. National Assur. Soc. er pays a loss, he cannot, as in the
22 Barb. (N. Y.) 9; Phillips Estate, case of an insurance upon interest,
In re, 238 Pa. 423, 45 L.R.A.(N.S.) claim any benefit from what may
982, note, 86 Atl. 289; Grant v. Inde- have been saved, and to preclude all
pendent Order Sons & Daughters of claim of that sort, the words 'free of
Jacob, 97 Miss. 182, 52 So. 698 ; Peck average' and 'without benefit of sal-
V. Washington Life Ins. Co. 87 N. vage' are always introduced into
Y. Supp. 210, 91 App. Div. 597. wager policies." 1 ^Marshall on Ins.
But compare §§ 914-919 herein. (ed. 1810) *121. See § 148 herein.
* See Glendenning v. Chi;rcb, 3 ^ See Sawver v. Dodge County
Caines (N. Y.) 141; Buchanan v. Mutual Ins. Co. 37 Wis. 539; Will-
Ocean Ins. Co. 6 Cow. (N. Y.) 318. iams v. Smith, 2 Caines (N. Y.) 13;
"It is usually conceived in the terms 1 May on Ins. (Parsons') sec. 33;
408
THE POLICY
§ 156
of fire risks the policies are interest policies.'
§ 156. Open or unvalued policy defined, — An open policy is one
in which the value is not fixed, but is left to be definitely determined
in case of lossJ An open policy is frequently necessitated by rea-
son of the character of the subject matter, as in case of an insur-
ance upon a class rather than upon a particular or specitic thing,
or where the property insured has changed as to specific articles
at the time of loss, although the class is of the same character as at
Black's Law Diet. 908, "Policy." 1 ly called, an open policy is one which
Arnould on Marine Ins. (8th ed. does not specify the value of the
Hart & Simey) p. 11, sec. 9. subject-matter but leaves it to be
^ 1 Wood on Fire Ins. (2d ed.) 95, subsequently ascertained." Earl of
see. 39. Halsbury's Laws of England, vol. 17,
'See Snell v. Delaware Ins. Co. 4 p. 378 {citing marine ins. act 190G
Dall. (4 U. S.) 430, 1 L. ed. 896; L<J Edw. VII. c. 41j sec. 28). See also
Peninsular & Occidental Steamship Id. p. 336 note.
Co. v. Atlantic Mutual Ins. Co. (U. "An open or unvalued policy is one
S. D. C.) 185 Fed. 172, 40 Ins. L. J. where the value of the property in-
1274 (in this case there was a valu- sured is not settled in the policy, and
ation clause but the blank for th3 in case of loss must be agreed upon
amount was not filled in) ; Snowden or proved." Insurance Co. of North
v. Guion, 101 N. Y. 458, 5 N. E. 322; America v. Willey, 212 Mass. 75, 77,
Lawver v. Globe Mutual Ins. Co. 25 98 N. E. 677, citing Hemminway v.
S. Dak. 549, 560, 127 N. W. 615. Eaton, 13 Mass. 107, 108.
"The expression 'open policy' is al- English statute adopts term ''un-
so sometimes used in reference to one valued policy" instead of "open poli-
kept open for neAv subscriptions, or ci/' definition: reasdn for clmnge.
one on cargo kept open for new sub- "An unvalued policy is defined in see.
jeets of insurance, in which latter 28" (of the marine insurance act,
case the voyage and risks are de- 1906 [6 Edw. VII., c. 41]. Butter-
scribed in the body of the policy, and worth's 20th Cent. Stat. [1900-1909]
additional amounts or new cargoes p. 406) "as a policy which does not
are afterward entered from time to specify the value of the subject-mat -
time at the foot of the instrument, ter insured, but, subject to the limit
by merely specifying the amount or of the sum insured, leaves the insur-
by naming a different vessel, or spe- able value to be subsequently ascer-
cifying whatever eircurastanee dis- tained, in the manner specified in the
tinguishes the risk or subject from act. Hitherto the policy called an un-
those described in the body of the valued ]iolicy in the Act has usual-
policy." 1 Phillips on Ins. (3d ed.) ly been called an open policy. The
25, see. 27; Ricliards on Ins. (2d ed.) reason why the former name has
sec. 14; 2 Bouvier's Law Diet. 430; been adopted in the act is that the
6 Words & Phras. pp. 4987 et seq. term open policy is sometimes used
See Comp. Laws Dak. 1887, see. in mercantile language to denote a
4150; Lester, Rowell & Hill's Ga. floating policy which has not been
Code 1882, see. 2833; S. Dak. Civ. exliausted by declarations." 1 Ar-
Codes see. 1846. considered in Law- nould on Marine Ins. (8th ed. Hart
ver v. Globe INIutual Ins. Co. 25 S. & Simey) p. 12, see. 9. The author
Dak. 549, 127 N. W. 615, 39 Ins. L. gives also the definitions of valued
J. 1588. and open policies "in the previous
"An unvalued, or, as it is frequent- editions of this work."
409
§§ IjGu, 157
JOYCE ON INSURANCE
the inception, as is instanced by merchandise in store, or the risk
may bo fluctuating as to quantity and location.* In an open policy
it is held that the plaintiff must prove his interest and the value of
his property or he cannot recover,^ but the bill of lading of the out-
ward cargo is no proof of the interest of the plaintiii' in the home-
ward cargo. ^°
§ 156a. Named policy defined. — ''Named policy is one in which
the adventure is limited to a ship specifically named therein." "
§ 157. Running policies: blanket policies: floating policies. — A
running policy contemplates successive insurance;? whereby the ob-
ject of the policy may from time to time be defined as to the sub-
ject, places, and amounts of insurance by additional indorsements
as agreed upon by the parties. ^^ An open or running policy is also
defined as one to insure goods shipped at a distant ])ort where it is
impossible to be advised to the particular ship upon which the goods
are laden and it cannot be named in the policy. ^^ A floating policy
ai)plies to goods of a class or kind which from its fluctuating, chang-
ing nature diff^ers as to specific articles, as in case of a stock of mer-
chandise or fluctuating goods where the insurance covers to a certain
amount goods of the same character and description successively in
store,^* and the goods on hand at the time of loss may not be the
* 1 Wood ou Fire Ins. see. 40 p.
95; Richards on Ins. (2d. ed.) sec.
1-t (3d ed.) sees. 18, 20, pp. 21, 22,
734; 1 May on Ins. (3d ed.) sees. 30,
31.
^ Millaudon v. Western Ins. Co. 5
La. (9 La. 0. S.) (top pa^e 20) 27,
29 Am. Dec. 433: Beale v. Pettit,
1 Wash. (U. S. C. C.) 241, Fed. Cas.
No. 1158.
"Tvstirahle value" of ship in open
policy, see Peninsular Si Occidental
Steamship Co. v. Atlantic Mutual
Ins. Co. (U. S. D. C.) 185 Fed. 172,
40 Ins. L. J. 1274.
lORsale v; Pettit, 1 Wash. (U. S.
C. C.) 241, Fed. Cas. No. 1158.
See, as to averment and proof of
interest, the following- cases:
Kentucky Life & Accident Ins. Co.
V. Hamilton, 63 Fed. 93, 11 C. C. A.
42; Illinois Mutual Fire Ins. Co. v.
Marseilles Mf^r. Co. 1 Gilm. (111.)
236; Gilbert v. North American Ins.
Co. 23 Wend. (N. Y.) 43, 35 Am.
Dec. 543 ; Dickerman v. Vermont Mu-
tual Fire Ins. Co. 67 Vt. 99, 30 Atl.
808.
410
^^ 1 Arnould on Marine Ins. (8th
ed. Hart & Simey), p. 14, see. 9.
^^ See the following- eases :
United States. — Orient Mutual Ins.
Co. v. W^ioht, 23 How. (64 U. S.)
401, 16 L. ed. 524.
California. — Wells v. Pacific Ins.
Co. 44 Cal. 397.
Maryland. — Sehaefer v. Baltimore
Marine Ins. Co. 33 Md. 109.
Massachusetts. — Carver Co. v.
Manufacturers' Ins. Co. 6 Gray (72
Mass.) 215; Kennebec v. Anausta
Ins. Co. 6 Gray (72 Mass.) 204."
Neic York. — Snowden v. Guion,
101 N. Y. 458, 5 N. E. 322; Arnold
v. Pacific Mut. Ins. Co. 78 N. Y. 7.
England. — Stephens v. Australa-
sian ins. Co. L. R. 8 Com. P. 18.
13 Orient Mutual Ins. Co. v.
Wright, 23 How. (64 U. S.) 401, 16
L. ed. 524; Sun Mutual Ins. Co. v.
Wright. 23 How. (64 U. S.) 412, 16
L. ed. 529.
1* Hoffman v. ^^tna Fire Ins. Co.
32 N. Y. 405, 411, 416, 88 Am. Dec.
337. ''The policy in question havin<?
been issued to a mercantile firm, the
/
THE POLICY § 157a
specific ones in stock at the inception of the risk, or it may be ap-
plied to goods which cannot be well described, because fluctuating
or shifting as to ciuality or location, as goods in warehouses, etc.
Blanket and floating policies are sometimes issued to factors or to
warehousemen, intended only to cover margins uninsured In- other
policies, or to cover nothing more than the limited interest which
the factor or warehouseman may have in the property which he has
in charge. ^^
§ 157a. Blanket or compound policies: floating policies: distin-
guished from specific policies. — lUaukel policies ditier from specific
policies in certain particulars. The diflerence is one which inheres
in the nature of the two contracts and has its recognition in the ac-
cepted advantages of a blanket policy to the assured and its dis-
advantages .to the insurer, and in the more exacting terms which
are customarily demanded for its issue. The very essence of a
blanket policy of tire insurance is that it invarial)ly attaches to and
covers to its full amount every item of property described in it.
If the loss upon one item exhausts the full amount of the policy, the
whole insurance must be paid and there can be no apportionment
company must be deemed to have had See Macon Fire Ins. Co. v. Pow-
in view the fluctuating nature of a ell, 116 Ga. 703, 43 S. E. 73, S'i Ins.
partnership business, and the changes L. J. 283 ; United Underwriters Ins.
of relative interest incident to that Co. v. Powell, 94 Ga. 359, 21 S.^ E.
relation. These might be very ira- 565, 26 L. J. 526. See also 17 Earl
portant to the assured, though wholly of Halsbury's Laws of England, p.
immaterial to the risk." Id. 4li. 362, sec. 713, p. 336, sec. 672.
" 'It was manifestly tlie intention of "A floating policy was defined in
the parties to the policy that it should this work as one in which there is
cover to the amount of the insurance no limitation of the risk to a par-
anv goods of the character and de- ticular ship, as where goods 'on sliip
.scription specified in the policy or ships' are insured for the same
which, from time to time during its voyage. In sec. 29 (1) of the marine
continuation, might be in the store, insurance act it is more broadly de-
A ]:)olicy for a long period upon fined as 'a policy which describes the
goods in a retail shop applies to the insurance in general terms, and loaves
goods successively in the shop from either the name of the ship or ships
time to time. Any other construction or other particulars to be defined by
of a policy of insurance upon a stock subsequent declaration.' " 1 Arnould
in trade continually changing would on Marine Ins. (8th ed. Hart & Si-
render it worthless as an indemnity.' mey) p. 14, sec. 9.
. . . The insurance was intended i^ jjome Ins. Co. v. Baltimore
to cover the mercantile stock of which Warehouse Co. 93 U. S. 527, 541,
the assured were proprietors, stored 23 L. ed. 868, per Strong, J. See
from time to time in the building in Smith v. Carmack (1901) — Tenu.
which the business was conducted." Ch. App. — , 64 S. W. 372.
Id. 415, 416, citing Hooper v. Hud-
son Fire Ins. Co. 17 N. Y. 425.
411
§§ 157b, 158 JOYCE OX IXSURAX'CE
of it. In a case in which these principles are asserted thirty-one of
the policies Avere of the kind known as ''blanket" or "compound"
policies ; that is, they insured buildings, machinery and stock as a
whole, without distributing the amount of the insurance among the
several items. The remaining policies were of the kind known as
"specific ; " that is, the amount insured thereby was distributed
among the several items of property, a specified amount to each
item. Each of the specific policies covered in the whole precisely
the same property as did the compound insurance, but distributive-
ly. This distribution was uniform among the specific policies.^^
So in another case mills and machinery were insured under a num-
ber of policies, each specific item being insured for a fixed sum by
some of the policies, and all the machinery being insured for a
gross sum under other policies.^' And where cotton Avas insured in
a designated warehouse it was held "specific" insurance as distin-
guished from "floating" policies insuring cotton in bales, in all or
any of the stores, presses, warehouses, sheds, yards, railroad yards
and wharves, or while in transit in, or while in any of the streets
in, etc., but mentioning no particular warehouse. The loss was
also in excess of that covered by the specific policies. ^^
§ 157b. "Drummer floater" policy defined: when risk suspended..
— The purpose of a '"drummer floater" policy is to cover the goods
mentioned while the commercial salesman is on the road selling
goods, and the samples and goods carried by him would not be
covered by the ordinary insurance cai-ried upon merchandise lo-
cated in the stores or warehouses of the merchants. And where the
goods are insured "while located and contained as described herein
andnotelsewhere, to wit: Drummer Floater . . . w^hile travel-
ing in any part of the United States," the term "while traveling"'
etc., implies that where the goods have been returned to the stalling
point and are in the store and are not traveling, the insurance is
suspended and the same goods are then covered by the general in-
surance carried by the merchant upon all his goods in his store
or warehouse. ^^
§ 158. Open or unvalued policies: what are: whether policy open
or valued. — Whether a policy is open or valued depends upon the
16 Schmaelzle v. London & Lanca- Ins. L. J. 526. See also Macon Fire
shire Fire Ins. Co. 75 Conn. 3fl7, 96 Ins. Co. v. Powell, 116 Ga. 703, 43
Am. St. Rep. 233, 60 L.R.A. 536, 53 S. E. 73, 32 Ins. L. J. 283.
Atl. 863, 33 Ins. L. J. 632. See §§ ^^ Jacobson v. Liverpool, London
2492, 2493, 3457 herein. & Globe Ins. Co. 135 111. App. 20
" American Central Ins. Co. v. vM<\. on point of practice 231 111. 61,
Landau, 62 N. J. Eq. 73, 49 Atl. 738. 83 X. E. 95. See as to location §§
18 United Underwriters Ins. Co. v. 1742 et seq. 1966, 2068 herein. Sus-
Powell, 94 Ga. 359, 21 S. E. 565, 26 pension of Risk, see § 1473 herein.
412
THE POLICY § 158
intention of the parties to be ascertained by a legal construction of
the whole instrument and the question is frequently difficult of
determination.^" It may also depend upon the terms of a valued
policy statute without which the policy would be an open one.^
Where the value of wheat shipped can be determined, in ca,se of
its loss, only by proof of its market price, no value being fixed in
the certificate, the policy is an open, not a valued, one.^ So a policy
of insurance for eight hundred dollars on a certain dwelling-house,
which sum does not exceed two-thirds of the value of the house, as
appears from the application which was made a part of the policy,
which also contains a stipulation that the company will pay ''all
loss or damage" not exceeding the sum named within ninety days
after notice and proof of loss, is an open and not a valued policy.^
A marine policy providing that no risk shall attach to it until the
amount and description of the same shall be approved and indorsed
thereon by the insureris not changed into an open and unrestricted
policy covering all property which the assured elects to report, even
after notice of loss, by the adoption of an agreement fixing a uni-
form premium, the supplying of the assured with blanks on which
to report risks, and the custom, extending over a long period of
years, of reporting risks by the assured, when convenient, in due
course of business after departure of the vessel, and the uniform ac-
ceptance of the risks by the insurer.* In a recent Massachusetts
case it was held that the policy was in form a valued rather than an
20 See the following cases: Pe^uis/jlvavia.—Lyeoming Ins. Co.
United States.— McKim v. Phoenix v. Mitchell, 48 Pa. St. 3G/.
Ins. Co. 2 Wash. (U. S. C. C.) 89, South CaroUna.-Cox v. Cliarles-
Fed. Cas. No. 8,862. ton Five & Marine Ins. Co 3 Rich.
Connecticnt.-miev v. Hartford (S- C.) 331, 332, 45. Arn^ Dec ^1-
T /-I o /-c or'o Oklahoma i armers Mutual in-
Ins. Co. 2 Conn. 3b8. ^^^^^ ^^^^^^ ^^ ^^^^.^1 21 Okla. 006,
Lou^.«>m.-^\allace v^ Insurance g_ p^^^ ^70, 38 Ins. L. J. 108; under
Co. 4 La. 0. S. (2 La. 559) «289. ^ wUson's Rev. & Ann. Stat. Okla.
Maine.— Ci^ahman v. Northwestern -^gQg^ ^^ -f,()^ ^^^ 3204. See this
Ins. Co. 34 Me. 48/. page ^^^^^^^ § qq^, "iving statute.
Massachusetts.— Brown v. Quincy 2 ^yiUiams v. Continental Ins. Co.
Mutual Fire Ins. Co. 105 ]\Iass. 39G, 24 Fed. 767, And see eases in last
7 Am. Rep. 538. note.
Neiv York. — Snowden v. Guion, 3 Farmers' Ins. Co. v. Butler, 38
101 N. Y. 458, 5 N. E. 322; Oj?den v. Ohio St. 128.
Columbian Ins. Co. 10 Johns. (N. « Delaware Ins. Co. v. S. S. Wliito
Y.) 273 (considered under § 166 Dental :\If2:. Co. 109 Fed. 334, 48 C.
herein) ; Mellen v. National Ins. Co. C. A. 332, 65 L.R.A. 387, writ of cer-
1 Hall (N. Y.) 500; Laurent v. Chat- liorari denied (mem.) 183 U. S. 700,
ham Ins. Co. 1 Hall (N. Y.) 50, 51. 4(i L. ed. 396, 22 Sup. Ct. 937.
413
§ 158 JOYCE ON INSURANCE
open policy, but that upon the facts and points under discussion it
took effect as an open policy.*
5 Insurance Co. of North America plain that the invoice price with the
V. Willey, 212 Mas.s. 75, 98 N. E. 677. rate of exchange fixed for the Eng-
The court per Rugg, C. J., said: lish pound and the percentage to be
"The contract in the" case at bar pro- added to the American dollar was the
vidod that 'the said goods and mer- agreed value of the property at risk.
( haudises, hereby insured, arc valued Wliile it is not expressed with dear-
( premium included) at as per form uess nor with grammatical accuracy,
attached.' These words, as far as more of the words can be given a
they go, tend to indicate that the par- reasonable effect if the clause is in-
lies contemplated a valued rather terpreted as fixing the value at in-
than an open policy. But as no voice plus the additions stated than
amount is stated in that immediate to hold tlie meaning to be no valua-
connection, they are indecisive. Ref- tion at all. There was no sufficient
erence is made" to the form attached occasion for referring to the invoice
which contained these words: 'Val- except for fixing value. This con-
ned premium included, at $5.50 to the struetion receives some confirmation
£ sterling and if invoiced in Ameri- from the clause printed on the side
can Gold at invoice and 10%.' The of the policy which required of the
point to be decided is the fair mean- insured, 'all risks to be reported as
ing of these words. If after the Avord soon as known, the amounts declared
Sained' in this clause only the rate as soon as ascertained.' There seems
of exchange had appeared, it would to be no reason for a stipulation for
not have been a valued policy. It declaration of amount of risk as soon
then would not have been a statement as it is learned except for the purpose
of value of the subject of the risk, of determining valuation. These con-
but onlv a means of translating into siderations incline us to the conclu-
United States money the unit of Eng- sion that this was a valued rather
lish monev. To this effect is Ogden than an open policy, and that the
V. Columbian Insurance Co. 10 .Johns, value agreed upon was that given
(N. Y.) 273. While the expenses of in the invoice. There can be no
insurance premiums are added to the agreement upon value, however, until
true value at the place of shipment the amount is actually known to both
in an open policy and are not added parties, the effect of which will be
to the stipulated value of the prop- discussed later.
orty in a valued policy, the use of The question then arises as to the
the" words 'premium included' may meaning of invoice value. The plain-
be. in explanation of the high rate tiff alleges that the word as used in a
of exchange for the English pound contract of insurance to cover inl-
and the ten per cent added to the ports alone, as this one did, made in,
American valuation. Moreover, it is this Commonwealth means such an
not unusual to state in valued poli- invoice as is required by U. S. St. of
cies of marine insurance whether the -Tune 10, 1890, c. 407 (26 U. S. Sts.
stipulated value includes or excludes at Large, 131) which governed all
the premium. INIayo v. Maine Fire importations at the times of the
& .Alarine Ins. Co. 12 Mass. 258. But events here in issue. That act pro-
the clause to be inteVpreted contains vided in brief that no importation
something more than the mere rate of merchandise exceeding $100 in
of exchange, in the words 'at invoice.' value (with an exception not liere
If these words were transposed and material) should be made into tliis
apfieared directlv after the word country. exce)it upon an invoice and
'valued' the sense would have been aflidavit, Avhich should show 'the actu-
414 ,
THE POLICY
§ 158a
§ 158a. Same subject: standard policy. — If a standard policy
contains no words showing that the property insured is worth or
al cost/ if purchased, or if obtained scribed in see. 5 of the act, which pur-
otherwise, 'the actual market value
or wholesale price thereof at the time
of exportation to the United States
in the principal markets of the coun-
trj- from whiclT the importation is
made, verified by tlic oath of the own-
er or his agent. This act is general
in its terms and applies to all impor-
tations of merchandise of every char-
acter. The use of the word 'in^'oice'
in the policy under these circum-
stances, in the absence of anything
to show that thei-e was any other in-
voice known or commonly employed
in importations, must be held to re-
fer to that required by this statute.
Apparently this is not in dispute be-
tween the parties. The defendants
claimed and received their payment
upon presentation of a paper which
purported to be sucli an invoice. The
defendants contend, however, that
the policy takes etfect as a valued
policy to the same extent by refer-
ported to state a faithful valuation
of the merchandise at its 'actual
market value or wholesale price' in
the principal markets of England
whence the importation was made.
A valued policy is ordinarily one
Avhere the agreed value in terms of
a money standard are written into
the contract of insurance. It is still
a valued policy, when the agreement
by parties is that the value shall be
fixed and defined by reference to
some other instrument. Such an
agreement must be based upon some
standard certain in itself or capable
of being made certain, and known to
and accepted by both parties. It
cannot be a valued policy, which by
its terms means a value fixed by
agreement, when the value is deter-
mined wholly by the volition of one
]iarty to the contract, and may be
invoice based on value at place of
lading or on expected value at place
ence to the invoice as it would if the of import, including the anticipated
profit and all intervening expenses.
Wliere the reference in the policy for
the standard of value is to a legal
document, which by law has a fixed,
definite and unchangeable method
of ascertaining value, a value found
by that standard, and by that alone,
must be held to have been in con-
templation of the parties. There
could be no value stated in an in-
voice for importation save market
value in the country of export. It
is urged by the defendants that al-
though the invoice may not have been
in compliance with the federal stat-
ute, yet the value as stated in the
actual invoice, when ascertained and
declared to the plaintiff, because the
agreed price for the purpose of the
insurance. There is force in the ar-
gument. But the stronger reason ap-
ing the payment, and that the invoice pears to support the view that in\oice
in fact used by the defendants in meant the invoice required by law, a
making the impoi-tation was accom- standard known to all parties. 0th-
jjanied by that form of anidavit pre- crwise, the insured would be enabled
415
figures of the invoice had been writ-
ten into the valuation clause. The
plaintiff alleges that the reference to
the in\oico value meant not the fig-
ures actually written into the invoice,
but such valuation as should have
been written into a true and just in-
voice, which in its statement of val-
ue actually conformed to the terms
of the federal act. The plaintiff
further alleges that the defendants
procured the payment to them of loss
by presentation to it of an invoice
showing values of wool ranging from
eight and one quarter to fourteen
and one half pence per pound, when
in fact it was worth only seven pence
per pound in the general markets
of Englanil, from which the impor-
tation was made, and that it relied
upon the truth of this invoice in mak-
§ 159 JOYCE ON INSURANCE
valued at, the amount stated as limiting the loss, but, on the con-
trary, shows that the intent of the parties is that proof should be
ottered as to the value of the property in case of loss it is an open
and not a valued policy.^
§ 159. Valued policy defined. — A valued policy is one wherein
the value of the subject matter is agreed upon beforehand at a speci-
fied sum.' A valued policy is also defined as one where the parties
to fix any value, provided only that parties, thei-efore, stand on the same
he was willing to pay the premium, footing as though no statement of
But this would greatly increase the invoice value had been made before
moral liazard and the actual risk the loss. In that event the policy
without giving the insurer any real would have been an open policy,
knowledge of time value or of the Harman v. Kingston, 3 Camp. 150,
setise in which value was used upon 14 Eng. Rul. Cas. 232; Gledstanes
which to charge premium. Carson v. Roval Exchange Ins. Co. 34 L. J.
V. Marine Ins. Co. 2 Wash. C. C. Q. B.' 30, 14 Eng. Rul. Cas. 234; 1
468, 470, Fed. Cas. No. 2,465. It Arnould in Marine Insurance (7th
would put it in the power of the in- ed.) sec. 360. That is the basis on
sured to fix absolutely the value while which the rights of the parties must
the whole theory of a valued policy is be settled. The invoice value fur-
that i^arties on an equality have come nished was not such an invoice as
to an understanding as to value. The the contract required, and hence no
declaration alleges that the invoice value became known to the parties
values did not comply with the fed- and fixed by the standard which they
eral statute in that they were far too had adopted before it was too late
high. Hence the invoice value did to make it a valued policy,
not comply with the contract of in- The plaintiff's declaration sets out
surance. The policy was in form a cause of action to recover excess
a valued one, but to be completed it of paj'ment of insurance above the
required a declaration of value in ae- amount which should have been paid
cordance with its terms before the under an open or unvalued policy of
loss. In substance the policy was on insurance. Demurrer overruled; de-
goods thereafter to be declared and fendants to answer over."
at the agreed value, namely, that ^ Ulmer v. Phnenix Fire Ins. Co. 61
shown upon such an invoice as the S. Car. 459, 39 S. E. 712, 31 Ins. L.
federal statute required. In order J. 38. As to valued policy laws in-
that such a policy may become ef- corporated in standard policy, see
fective as a valued policy, the in- Minnesota, New Hampshire and
voice must be notified to the insurer South Dakota cited under § 176 here-
before loss, although such notifiea- in.
tion is not a condition precedent to ' Schaefer v. Baltimore Marine
the right to recover on the contract Ins. Co. 33 Md. 109 ; Cox v. Charles-
of insurance. The policy could not ton Fire & Marine Ins. Co. 3 Rich,
become a valued policy until the in- (S. Car.) 331, 45 Am. Dec. 771;
formation as to the invoice, which of Lawver v. Glove Mutual Ins. Co. 25
nor-fssity must come from the insured, S. Dak. 549, 560, 127 N. W. 6l5, 39
had been communicated to the insur- Ins. L. J. 1588; 1 Arnould on Ma-
er. No such invoice price having rine Ins. (8th ed. Hart & Simey)
been furnished by the insured, this p. 12, sec. 9; 8 Words & Phrases
policy never became operative as a p. 7282; Comp. Laws Dak. 1887, see.
valued policv. The rights of the 4151; Deering's Anno. Civ. Code,
416
I
THE POLICY § 159
by the contract of insurance fix for the purpose of the risk the defi-
nite vakie of the property insured so that dispute on that subject is
foreclosed for all time thereafter, except in cases of fraud or wager,
no matter how high the valuation may be.' It estimates not merel\'
the value of the property or interest insured, but values the loss,
and is equivalent to an assessment of damages, or is in the nature of
liquidated damages in case of loss.^ And where there is an abso-
lute loss of any article distinctly valued in the policy, the loss is
to be estimated according to the valuation, it being in the nature of
liquidated damages."
Again, a valued policy is ordinarily one where the agreed value
in terms of a money standard are written into the contract of insur-
ance. It is still a valued policy when the agreement by parties is
that the value shall be fixed and determined by reference to some
other instrument. Such an agreement must be based upon some
standard certain in itself of being made certain and known to and
accepted b}' both parties.^^
Valued policies may be made upon the ship, or on ship and
freight and under the same policy, or upon freight or goods, and
valuation may be in policies upon profits. ^^
Valued policies are also effected upon fire risks.
Cal. sec. 2596; Levisee's Dak. Code, E. 677 (citing Marine Ins. Co. of
sec. 1527; Civ. Code S. Dak. sec. Alexandria v. Hodgson, 6 Cranch
1847, see § 163 herein. (10 U. S.) 206, 220; Coolidge v.
"A valued policy is one which Gloucester Marine Ins. Co. 15 Mass.
specifies the agreed value of the sub- 340 ; Irving v. Manning, 1 H. L.
ject-matter insured." Earl of Hals- Cas. 287, 307; Barker v. Jansen, L.
bury's Laws of England, Vol. 17, R. 3 C. P. 303, 14 Eng. Rul. Cas.
p. 378, sec. 748 (citing marine ins. 222).
act, 1906 [6 Edw. VII., c. 41] sec. ^ Lveoming Ins. Co. v. Mitchell, 48
27 [1] [2] ) ; Id. p. 336 and note, sec. Pa. St. 367. See Shaw v. Felton, 2
672. East, 114, 13 Eng. Rul. Cas. 631, per
Valuation clause: Lloyd's marine Mr. Justice Laurence.
policy. The said ship, etc., goods "Hams v. Eagle Fire Co. 5
and merchandise, etc., for so much Johns. (N. Y.) 368.
as concerns the assured by agreement ^^ Insurance Co. of North America
between the assured and assurers in v. Wille\-, 212 Mass. 75, 80, 98 N. E.
this policy are and shall be valued 677, per Rugg, C. J.
at [ ]. 1 Amould on Marine Ins. ^^ ^yg^-gp^ y Insurance Co. of
(8th ed. Hart & Simey) p. 31, sec. North America, 3 Wash. (U. S. C.
19. "This clause is in all the com- C.) 1, Fed. Cas. No. 17,286 (valued
mon printed forms of policy, though policy on ship, valuation generally
the blank it contains is not always conclusive) : Coolidge v. Gloucester
filled up; if filled up, the policy 'is Mutual Ins. Co. 15 Mass. 341 (in-
called a valued policy; if not filled surance of ship and freight each
up, an open or unralued policy." Id. separately valued, and liability for
On conflict of laws as to valued total loss of freight, even though
policy, see note in 63 L.R.A. 866. overvalued) ; Mayo v. Maine Fire &
'Insurance Co. of N'>rth America Marine Ins. Co.' 12 Mass. 250 (in-
V. Willey, 212 Mas,^. ,.'), 77, 98 N. surance on ship valued, assured mak-
Joyce Ing. Vol. I. — 27. 417
§ 160 JOYCE ON INSURANCE
A valued policy does not cover propertj^ which is fluctuating or
changeable, but applies to that which is fixed or to specific articles/^
or it is used where it is difficult or impossible to ascertain the amount
of interest of the insured in the subject matter, "as where returns
are expected from abroad, the exact value and even the nature of
which are uncertain. So in case of a prize where the real value of
it can only be ascertained when it is brought into port and sold, and
in every instance where the owners have been prevented from re-
ceiving regular or satisfactory advices from which the true amount
of their interest might be ascertained." ^*
§ 160. Valued policy: what the valuation includes. — The valu-
ation determines prima facie the amount of interest of the insur^d,^*
and a gross valuation should include the premium, unless the man-
ner of valuing or a construction of the policy indicates otherwise.^®
And it is also held that the owner of a ship and cargo may insure
in a valued policy to the amount of the prime cost of the goods
and the premium and the cost of freight thereon to the first port,
ing no representation as to owner- ^^1 Wood on Fire Ins. (2d ed.)
ship, and was owner of one-third 96, see. 41.
only, and was held entitled to recover ^* 1 Marshall on Ins. (ed. 1810)
whole loss) ; Post v. Phoenix Ins. *288.
Co.. 10 Johns. (N. Y.) 79 (one-quar- ^^ pgigg v_ Aguilar, 3 Taunt. 506,
ter of ship valued at sum insured; per Mansfield, J.; Shaw v. Felton, 2
recovery for whole loss for sum -in- East, 109, 115, 13 Eng. Rul. Cas. 631;
sured; valuation applicable to inter- 1 Marshall on Ins. (ed. 1810) *290;
est insured and not to whole ship) ; 1 Arnould on Marine Ins. (Perkins'
Mintum v. Columbia Ins. Co. 10 ed. 1850), 317, sec. 125; 2 Id. (Mae-
Johns. (N. Y.) 75 (case of valuation lachlan's ed. 1887) 303, et seq.
on cargo); Mumford v. Hallett, 1 ^^ Brooks v. Oriental Ins. Co. 7
Johns. (N. Y.) 433 (where a printed Pick. (24 Mass.) 259 (premium in-
blank policy on cargo was used, and eluded) ; Insurance Co. of North
the blank filled up for an insurance America v. Willey, 212 Mass. 75, 98
on profits, and the valuation in writ- N. E. 677 ("are valued [premium
ing, when taken in connection with included] at" and "valued, premium
the printed words, was a valuation included, at," but held an open and
of the goods and not of the profits; not a valued policy) ; Mayo v. Maine
every policy on profits must of ne- Fire & Marine Ins. Co. 12 Mass.
cassity be a valued, and not an open 259, where premivim was held in-
policy) ; Davy v, Hallett, 3 Caines eluded; Ogden v. Columbian Ins. Co.
CN. Y.) 16 (on a valued policy on 10 Johns. (N. Y.) 273 (premium in-
freight; if there be an inchoate right eluded but held an open poHcy) ;
to save, and the transaction bona Mintum v. Columbian Ins. Co. 10
fide, the value cannot be inquired Johns. (N. Y.) 75 (premium, prime
into) ; Crauford v. Hunter, 8 Term, cost, and charges included) ; 2 Phil-
Rep. 10, n. 13 (case of value to be de- lips on Ins. (3d ed.) 16, 1200, 1201;
clared upon ship and goods; loss 1 Marshall on Ins. (ed. 1810) *288,
happened before any declaration of 2 Id. 621, who says: "The value in
value could be made). the policy being always considered
418
THE POLICY § 161
the insurance being to two ports in the West Indies." Though in
estimating the vahie of the vessel the valuation in the policy, ex-
clusive of the premium, is, it is held, to be taken as the value of the
vessel. ^^
§ 161. Valued policy: how far valuation conclusive. — As a gen-
eral rule a valued policy is conclusive of the value of the subject
covered and the assured is entitled to recover the whole amount of
the valuation in the policy in case of total loss by the perils insured
against, unless the valuation is fraudulent or enormously excessive/*
or unless the policy be a wager.^" And neither party will be heard
to claim a different valuation of a vessel than that stated in the
policy; nor, after loss by collision, and the full payment of the
policy valuation by the insurer, can a larger valuation be claimed by
the owner.^ And the value stated in the application is also binding
upon the parties, and after a loss the assured is not at liberty to show
that in fact the property was worth a much larger sum.^
But the rule only applies as between parties to the same policy.
Thus, where a portion of the insured's interest in the ship was
valued at six thousand pounds, and insured six hundred pounds,
as the fair amount of the prime cost Missouri. — Loekwood v. Sangamo
and charges." Ins. Co. 46 Mo. 71.
^"^ Pritchett v. Insurance Co. of New York. — Kane v. Commercial
North America, 3 Yeates (Pa.) 458. Ins. Co. 8 Johns. (N. Y.) 229; Amer-
It is said in Lewis v. Rucker, 2 Burr, ican Ins. Co. v. Whitney, 5 Cow. (N.
1167, 1171, 14 Eng. Ruh Cas. 215, Y.) 712; Whitney v. American Ins.
that the effect of the valuation is to Co. 3 Cow. (N. Y.) 210.
tix conclusively the prime cost. Pennsylvania. — Commonwealth Ins.
Prime cost and charges included: Co. v. Sennett, 37 Pa. St. 205, 78
McKim V. Phopnix Ins. Co. 2 Wash. Am. Dec. 418.
(U. S. C. C.) 94; Id. 189. Valued policy: Evidence of value,
^^ Orrok v. Commonwealth Ins. Co. see § 3771 herein.
21 Pick. (38 Mass.) 456, 32 Am. Indemnity: Stipulation as to
Dec. 271. In Lewis v. Rucker, 2 value in policy, see § 25 herein.
Burr. 1167, 1169, 14 Eng. Rul. Cas. 20 gee § 151 herein. ■
215, the valuation was considered the "As long as the contract of insur-
prime cost. a nee is unimpeached the valuation is
^^ United States. — Griswold v. binding on the parties." 17 Earl of
Union Ins. Co. 3 Blatchf. (U. S. C. Halsbury's Laws of England, p. 379,
C.) 231; Fed. Cas. No. 5840; Wat- sec. 749.
son V. Insurance Co. of North Amer- i St. Johns, The (U. S. D. C.) 101
ica, 3 Wash. (U. S. C. C.) 1. Fed. 469; Central Railroad Co. of N.
Louisiana. — Howes v. Union Ins. J. In re. Id.; Sea Ins. Co. v. In-
Co. 16 La. Ann. 235; Millaudon v. teiwenors. Id.
Western Ins. Co. 9 La. 0. S. (5 La. ^ Holmes v. Charlestown IMutual
20), 27, 29 Am. Dec. 433. Fire Ins. Co. 10 Mete. (51 Mass.)
Maryland. — Patapsco Ins. Co. v. 211, 43 Am. Dee. 428.
Biscoe, 7 Gill & J. (Md.) 293, 28
Am. Dec. 219.
419
§ 162 JOYCE ON INSURANCE
and in another policy upon another portion of his interest in the
ship the vahiation was fixed at eight thousand pounds, and she was
insured six thousand pounds, the vahiation in the first policy does
not limit the insured to the sum he may recover on. the other, for
the policy upon which the suit is brought is conclusive between the
parties thereto, and transactions between the insured and third
parties cannot be considered unless the sum received amounts to a
complete indemnity. In this case the insured showed that the ship
was worth over eight thousand pounds.^ The rule as to conclusive-
ness is also further qualified by the question of what was intended
to be valued, and the underwriter may show that only part of the
subject-matter was actually at risk, so that valuation is declared to
be binding only as far as it goes.*
Where a policy of fire insurance was issued to plaintiff, "the
amount insured being not more than three-fourths of the value of
the property as stated by the applicant," it was held that this valua-
tion was conclusive, in the absence of fraud, although a subsequent
proviso restricted the whole amount of insurance, if an additional
policy was obtained, to 'Hhree-fourths of the actual value of the
property at the time of loss," and although there was a covenant
in the application (but not in the policy) that such valuation should
not be conclusive.^
If the same valuation is fixed under two policies upon the same
subject, the insured is conclusively bound and cannot show a great-
er value. Even though the subject insured be in fact worth more
than the sum fixed, the valuation limits the recovery.®
§ 162. Valued policy: effect of overvaluation: fraudulent valu-
ation. — When the insured has some interest at risk, and there is no
fraud, a valuation of the subject insured in the policy is held con-
clusive upon the parties in law and equity notwithstanding an over-
valuation,' unless such overvaluation be grossly excessive, but this
3 Bousfield v. Barnes, 4 Camp. 228, ^ Irving v. Richardson, 1 Moody &
229, per Lord Ellenborougli. R. 153.
* Substantially so declared in 17 ' United States.— Gardner v. Co-
Earl of Halsbury's Laws of England, lumbian Ins. Co. 2 Crauch (U. S.
p. 379, sec. 750, quoting marine ins. C. C.) 550; Carson v. Marine Ins.
act 1906 (6 Edw. VII., c. 41), see. Co. 2 Wash. (U. S. C. C.) 468, Fed.
75 (2), which is also given in But- Cas. No. 2465.
terworth's 20th Cent. Stat. (1900- loiva.—Behren v. Germania Fire
1909), p. 418. Ins. Co. 64 Iowa, 19.
5 Luce V. Dorchester Mutual Fire Kentiich)j. — Teutonic Ins. Co. v.
Ins. Co. 105 Mass. 297, 7 Am. Rep. Howell, 21 Ky. L. Rep. 1245, 54 S.
522. See §§ 163a, 3461 herein. W. 852, 29 Ins. L. J. 356.
420
THE POLICY § 162
is in itself presumptive evidence of fraud,^ although not sufficient.^
And fraud is not established by the fact that the property is con-
siderably overvalued.^" But it is held that a gross exaggeration of
the value prevents a recovery,^^ and fraudulent overvaluation
avoids.^^ And if the owner of property insured knowingly exag-
gerates the value of the property to an amount far beyond the cost
price and the market value, and the insurer relies upon the state-
ment of such excessive value in entering into the contract, such
overvaluation is a conclusive presumption of fraud, sufficient to
Maiiie. —Cnshman v. Northwestern Co. 3 Blatchf. (U. S. C. C.) 233,
Ins. Co. 34 Me. 487. Fed. Cas. No. 5840 ; Alsop v. Com-
Maryland. — Patapsco Ins. Co. v. mercial Ins. Co. 1 Sumn. (U. S. C.
Biscoe, 7 Gill & J. (Md.) 293, 28 C.) 471, Fed. Cas. No. 262; Phoenix
Am. Dee. 219. Ins. Co. v. McLoon, 100 Mass. 476;
Massachusetts. — Phoenix Ins. Co. Michael v. Prussian National Ins.
V. McLoon, 100 Mass. 475. Co. 171 N. Y. 33, 63 N. E. 810;
Missouri. — Loekwood v. Sangamo Whitnev v. American Ins. Co. 3 Cow.
Ins. Co. 46 Mo. 71. . (N. Y.) 219; Milwaukee Mechanics
New York. — Davy v. Hallett, 3 Ins. Co. v. Russell, 65 Ohio State
Caines (N. Y.) 16, 2 Am. Dec. 241; 258, 56 L.R.A. 161, 62 N. E. 338.
Mumford v. Hallett, 1 Johns. (N. Y.) ^ Sturm v. Atlantic Ins. Co. 63 N,
434. Y. 77.
Virginia. — Morostock Ins. Co. v. ^ See § 25 herein.
Fostoria Novelty Glass Co. 94 Va. ^° Insurance Co. of North America
361, 26 S. E. 850; Lynchburg Fire v. Coombs, 19 Ind. App. 331, 49 N.
Ins. Co. V. West, 76 Va. 575, 44 Am. E. 471.
Rep. 177. " Whittle v. Farmville Ins. Co. 3
Indemnity: Stipulation as to Hughes (U. S. C. C.) 421, Fed. Cas.
value in policy, see § 25 herein. 17()03.
Valued policy laws : overvaluation, ^^ Hersey v. Merrimack Co. Ins.
see § 163c herein. Co. 7 Fost. (27 N. H.) 149; Ger^
Overvaluation : Proofs of loss, see hauser v. North British »& jMercantile
§ 3320 herein. Ins. Co. 7 Nev. 174. See the follow-
Overinsurance defined, see § 2456 ing cases:
herein. United States. — Oshkosh Packing
Valued policy : double insurance, & Provision Co. v. Mercantile Ins.
see 17 Eari of* Halsbury's Laws of Co. 31 Fed. 200.
England, pp. 380 et seq. Kentucky. — Protection Ins. Co. v.
It is no ground for mitigating Hall, 15 B. Mon. (54 Ky.) 411.
damages that the value of the in- Maine. — Williams v. Phoenix Fire
sured vessel is less than that stated Ins. Co. 61 Me. 67.
in a valued policy, as the policy is North Carolina. — Dupree v. Vir-
conclusive on that point in the ab- ginia Home Ins. Co. 92 N. C. 417.
sence of fraud and false representa- England. — Chapman v. Pole, 22 L.
tions. Marine Ins. Co. v. Hodgson, T. R. N. S. 306.
1 6 Cranch (10 U. S.) 206, 3 L. ed. "Overvaluation may be a ground
200. Cited in Livingstone, The, 122 for avoiding the contract. Thus, if
Fed. 281 ; St. Johns, The, 101 Fed. the overvaluation be part of a scheme
475; International Navigation Co. v. for defrauding tlie underwi-iters, the
Atlantic Mutual Ins. Co. 100 Fed. poHcy will be voidable {citing Haigh
316; Griswold v. Union Mutual Ins. v. De la Cour (1812) 3 Camp. 319;
421
§ 162
JOYCE ON INSURANCE
annul the contract.*' The fact that the assured was an ignorant
German, and did not understand English, is held no excuse for his
rating his house at double its value in effecting insurance on it.**
The courts, however, are little disposed to permit the insurer to
object to a valuation which has been deliberately fixed upon in good
faith, *^ and in order to avoid a policy for overvaluation, it must
appear that such overvaluation was intentional, fraudulent, and not
an honest expression of opinion.*^ So an honest representation of
the value of a building does not avoid the policy, even though it is
somewhat in excess of the actual value; *'' and an overestimate by
the insured of the value of his property and the amount of the loss,
if unintentional and with no purpose of defrauding the company,
will not preclude a recoyery.*^ So where there is a slight over-
marine ins. act. 1906 [6 Edw. VII., true valuation, will not invalidate a
c. 41], sec. 27 [3]). Similarly an policy of fire insurance, notwith-
overvaluation made in order to standing a provision that any over-
cover a gambling transaction will valuation of the property or interest
avoid the whole contract. . . .to be insured shall render absolutely
Thirdly, an overvaluation, although void any policy issued upon such de-
not fraudulent, may be so great as scription or valuation." Susquehan-
to constitute a material fact, the con- na JMutual Fire Ins. Co. v. Staats,
eealment of which will enable the 102 Pa. 529, quoted in Post v. Araeri-
underwriter to avoid the policy." 17 can Central Ins. Co. 51 Pa. Super.
Earl of Halsbury's Laws of Eng- Ct. 352, 360, per Jones, J.
land, p. 379, sec. 749. *^ United States. — Rochester Ger-
^^ Sturm V. Great Western Ins. Co. man Ins. Co. v. Schmidt (U. S. C.
40 How. Pr. (N. Y.) 423. C.) 151 Fed. 681, 36 Ins. L. J. 726,
1* Nassauer v. Susquehanna Mu- rev'd 162 Fed. 447, 89 C. C. A. 333 ;
tual Fire Ins. Co. 100 Pa. St. 507. 175 Fed. 720, 99 C. C. A. 296, 37
^^ Miller v. Alliance Tns. Co. 7 Fed. Ins. L. J. 1044, on gi'ound that in-
049 ; Brooke v. Louisiana State Tns. sured was not sole, etc., owner.
Co. 8 Mart. (La.) 322 (4 N. S. 640) ; Z//i»o;s.— Merchants' & Mechanics'
Fuller V. Boston Mutual Ins. Co. 4 Ins. Co. v. Schroeder, 18 111. App.
Met. (45 Mass.) 206. See National 216.
Bank v. Hartford Fire Ins. Co. 95 Indiana. — Insurance Co. of North
U. S. 673, 24 L. ed. 563; Franklin America v. Coombs, 19 Ind. App.
Fire Ins. Co. v. Vaughan, 92 U. S. 331, 49 N. E. 471.
516, 23 L. ed. 740 ; Helbig v. Svea loiva. — Behrens v. Gerraania Fire
Ins. Co. 54 Cal. 156, 35 Am. Rep. 72; Ins. Co. 64 Iowa, 19, 19 N. W. 838.
Cox V. ^]tna Ins. Co. 29 Ind. 586; Kentucky. — Protection Ins. Co. v.
Huth V. New York Mutual Ins. Co. Hall, 15 B. Mon. (54 Ky.) 411.
8 Bosw. (N. Y.) 538. Massachuf<etts. — Phillips v. Merri-
*6 Wheaton v. North British & mack Mutual Fire Ins. Co. 10 Cush.
Mercantile Ins. Co. 76 Cal. 415, 9 (64 Mass.) 350.
Am. St. Rep. 216, 18 Pac. 758. Virginia. — Lynchburg Fire Ins.
*' Susquehanna Mutual Fire Ins. Co. v. West, 76 Va. 575, 44 Am. Rep.
Co. v. Staats, 102 Pa. 529. 177.
"The honest representation of the Wisconsin. — Vergeront v. German
valuje of the property to be insured, Ins. Co. 86 Wis. 425, 56 N. W. 1096.
although somewhat in excess of its
422
THE POLICY § 162
estimate which may be accounted for by a difference of opinion, and
the amount of the policy is within the actual value, and the prop-
erty was examined by the agent before the risk was accepted, the
fact that there is a warranty as to value does not make such over-
estimate a sufficient ground for avoiding the policy.-'^ And when
the sum slightly exceeds the value of the thing insured and the
freight added to the point of destination, the valuation is conclu-
sive,^" and where the excess of a bona fide valuation of the ship was
twelve thousand five hundred dollars and that of the freight and
outfits ten thousand three hundred dollars, such overvaluation was
held not fraudulent, and the valuation was recovered.^
An overvaluation of property in an application for insurance will
not avoid policy, where the policy contains no condition to that ef-
fect, and where the agent of the insurance company knows or can
judge of the value of the property, and accepts the application with-
out objection : although an overvaluation is a circumstance which
may be considered, in connection w4th others, in determining
whether the insured destroyed the property for the purpose of de-
frauding the company, where that is relied upon, as a defense.^
And if an agent of the insurer who negotiates the insurance in-
dorses on the a])plication that he is personally acquainted with the
application and the risk and advises its acceptance and the repre-
sentation of vahie of the building is honestly made the policy is
not avoided even though the stated value somewhat exceeds the
19 Hubbard v. North British & v. Schmidt (U. S. C. C.) 151 Fed.
Mercantile Ins. Co. 57 Mo. App. 197. 681, 36 Ins. L. J. 726, revd. 162 Fed.
See also Laird v. Piedmont Mutual 447, 89 C. C. A. 333, 175 Fed. 720,
Fire Ins. Co. 82 S. Car. 424, 64 S. 99 C. C. A. 296, 37 Ins. L. J. 1044,
E. 404. But see case noted in test on ground that insured was not sole,
at end of this section. etc., owner.
That overvaluation not conclusive, As to value stated in application,
see Miller v. Alhance Ins. Co. 7 Fed. see :
649 ; Ocean Ins. Co. V. Fields, 2 Stoi-y Calif orriM.—Wheaton v. North
(U. S. C. C.) 59, Fed. Cas. No. 10,- ^ntish & ^Mercantile Ins. Co 76 Cal.
406; Behrens v. Germania Fire Ins. 415, 9 Am. St. Rep. 216 18 Pac. /58
Co. 64 Iowa, 19, 19 N. W. 838; Bon- , ///'"O'^.-Merchants & Mechanics
, T /-.i-T /-10-T Ins. Co. V. bchroeder, 18 111. App.
ham V. Iowa Cent. Ins. Co. 2o Iowa, r)-|fj
328 ; Harrington V. FitchburgMutu- " 3/«,-„,._williams v. Phoenix Fire
al Fire Ins. Co. 124 Mass. 126. j^^ (.^ g^ j^I^ qj
20Pritchett V. Insurance Co. of 3fas.sac/j Jtse^s.— Holmes v. Charles-
North America, 3 Yeates (Pa.) 463, ton Mutual Fire Ins. Co. 10 Met.
464. (51 Mass.) 211, 43 Am. Dec. 428.
1 Phopnix Ins. Co. v. McLoon, 100 New Ilampshire. — Hersey v. Mer-
Mass. 475. rimack Co. Ins. Co. 7 Fost. (27 N.
^Insurance Co. of North America H.) 149.
V. McDowell, 50 111. 120, 99 Am. Dec. North Carolina.— Dupree v. Vir-
497. See Rochester German Ins. Co. ginia Home Ins. Co. 92 N. C. 417.
423
§ 162 JOYCE ON LS'SURANCE
actual value.' And an overvaluation of a vessel, upon applica-
tion for marine insurance, does not necessai'ily avoid the policy.'*
The insurer may also be estopped to question the valuation and
to set up a wilfully false statement in the application, by the agent's
acts in valuing the property with which he is familiar and in mak-
ing out the application.^ It is held that except in case of valued
policies the contract is not avoided by misrepresentations as to value,
even though fraudulent, where the risk is in no manner affected
thereby,^ and where the policy is not a valued one, misrepresenta-
tions as to value only go to the question of fraud and false swearing
generally, and are not material to the riskj And in case of valued
policies a misrepresentation as to value, even if material, to the risk,
must, it is held, be more than a liiere error in judgment, it must
be fraudulently or intentionally made. It is insufficient that
the property was not worth the value stated.* Again, the rule that
to avoid a policy for overvaluation, it must appear that such over-
valuation was intentional, fraudulent, and not an honest expression
of opinion, prevails although the policy contains the stipulation and
condition: ''If any false representation is made by the assured of
the condition, situation, or occupancy of the property, or any over-
valuation, or any misrepresentation whatever, either in a written
application or otherwise, this policy is void." ^
' Susquehanna Mutual Fire Ins. notwithstanding Ga. Civ. Code, sees.
Co. V. Staats, 102 Pa. 529. 2008, 2099, requiring representations,
* Hodgson V. Marine Ins. Co. 5 if material, to be true or the policy
Cranoh (9 U. S.) 100, 3 L. ed. 48. is void.
Cited in Brooke v. Louisiana State 'Delaware Ins. Co. v. Hill (1910)
Ins. Co. 4 Mart. N. S. (La.) 643; — Tex. Civ. App. — , 127 S. W. 283.
Phwnix Ins. Co. v. MeLoon, 100 Fraud and false swearing: fraud-
Mass. 476; Milwaukee Mechanics' ulent .«:tatements as to value, see §
Ins. Co. V. Russell, 65 Ohio St. 258, 3339 herein.
56 L.R.A. 161, 62 N. E. 338. Fraud and false swearing: proofs
5 Miller v. Fireman's Fund Ins. of loss, see §§ 3319, 3320, 3339-
Co. 6 Cal. App. 395, 92 Pac. 332. 3344.
See also Teutonic Ins. Co. v. Howell, As to overvaluation in open policy
21 Kj'. L. Rep. 1245, 54 S. W. 852, being immaterial, see Aurora F. Ins.
29 Ins. L. J. 356 (there being no Co. v. Johnson, 46 Ind. 315; Cohen
fraud) ; Williams v. Bankers & Mer- v. Charleston Ins. Co. Dudl. L. (S.
chants ToAvn Mutual Fire Ins. Co. C.) 147; 31 Am. Dec. 549.
73 Mo. App. 607, 1 Mo. App. Rep. * Delaware Ins. Co. v. Hill (1910)
100. See Laird v. Piedmont Mutual — Tex. Civ. App. — , 127 S. W. 283.
Fire Ins. Co. 82 S. Car. 424, 64 S. See Co-Operative Ins. Assoc, of San
E. 404. Angelo v. Ray (1911) — Tex. Civ.
As to valued policy laws, misrepre- App. — , 138 S. W. 1122.
sentations and warranties, see § 163b ^ TMieaton v. North British & Mer-
herein. eantile Ins. Co. 76 Cal. 415, 9 Am.
6Rosser v. Georgia Home Ins. Co. St. Rep. 216, 18 Pac. 758.
101 Ga. 718, 29 S. E. 286, and so
424
THE POLICY § 163
But if statements as to value are made warranties, the assured is
obligated to place a fair and reasonable value upon the property,
otherwise the policy may not be enforced; ^° and a false warranty
as to value will annul the policy, as where the value is warranted to
be tlie value, it goes beyond the expression of opinion. ^^ And an
untrue affirmative warranty as to the value of an automobile, made
in an application will avoid the policy, the policy stipulation being
that statements are material and if untrue will avoid the policy."
So statements in an application that the value of the property is
estimated by applicant does not prevent a gross overvaluation from
avoiding the policy, where the statement of value is warranted. And
the valuation at .$1,500 in an application for insurance of a build-
ing which is worth only $200 cannot be regarded as so approximate-
ly correct as to comply with such a warranty." But it is held that
there must be a substantial breach to avoid a policy on account of
a breach of warranty as to value,^* and a substantially true state-
ment of the value of a building, in an application is a compliance
with a warranty of the statement of value." So it is also held that
if a policy of fire insurance is conditioned to be void for overvalua-
tion, it is avoided by any substantial overvaluation, whether fraudu-
lent or innocent."
If the facts are admitted by demurrer the question of overvalua-
tion is for the court, otherwise it is one for the jury.^'
§ 163. Valued policies: statutory regulations. — Several states
have adopted valued policy laws " relating to fire risks on real
" Sun Fire Office v. Wich, 6 Col, Ins. Co. 51 Vt. 4, 31 Am. Rep. 666 ;
App. 103, 39 Pac. 587. Shelden v. Michigan Millers' Fire
" School District v. State Ins. Co. Ins. Co. 124 Mich. 303, 82 N. AV.
61 Mo. App. 597. See Carson v. 1068 (not changed by Pub. Acts
Jersey City Fire Ins. Co. 43 N. J. L. 1897, act no. 167). See Lycoming
300, '39 Am. Rep. 584. But see Fire Ins. Co. y. Rubin, 79 111. 402;
Wheaton y. North British Ins. Co. Bobbitt y. Liyerpool & London &
76 Cal. 415, 18 Pac. 758, 9 Am. St. Globe Ins. Co. 66 N. C. 70, 8 Am.
Rep. 216. Rep. 494; Keeler v. Niagara Ins. Co.
^2 Miller v. Commercial Union 16 Wis. 523, 84 Am. Dec. 714. But
Assur. Co. 69 Wash. 529, 125 Pac. compare Insurance Co. of North
782. America y. Coombs, 19 Ind. App.
" Duncan y. National Mutual Fire 331, 49 N. E. 471.
Ins. Co. 44 Colo. 472, 20 L.R.A. ^^ gjafter v. Concordia Fire Ins.
(N.S.) 340, 98 Pac. 634. Co. 142 Iowa 116, 120 N. W. 706;
^* Phoenix Ins. Co. y. Pickel, 119 Laird v. Piedmont jNIutual Fire Ins.
Ind. 155, 12 Am. St. Rep. 393, 21 Co. 82 S. Car. 424, 64 S. E. 404.
N. E. 546. is^rA-flHsas.— Sandels & Hill's Dig.
" Duncan v. National Mutual Fire Stat. Ark. 1894, p. 982, sec. 4140,
Ins. Co. 44 Colo. 472, 20 L.R.A. Laws 1889, p. 57, c. 42; acts 1899,
(N.S.) 340, 98 Pac. 634. p. 112, no. 61.
^^ Boutelle y. Westchester Fire
425
§ 1G3 JOYCE ON INSURANCE
property or on buildings, making the value in the policy the meas-
ure of damages and conclusive in case of a total loss or a loss within
the intent of the statute, notwithstanding there may be stipulations
California. — Civ. Code 1903, sees. 7970, 7979 (last section takes prece-
2596, 2756. denee as amendment of sees. 7969,
Dakota. — Comp. Laws 1887, sees. 7970, so far as in conflict, Hower-
-1151, 4243; Levisee's Dak. Codes, ton v. Iowa State Ins. Co. 105 Mo.
sees. 1527, 1619. App. 575, 80 S. W. 27) construed in
Delaware. — Laws Del. Rev. Code Williams v. Bankers & Merchants
1852, as amended 1893, pp. 586, 587, Town Mutual Fire Ins. Co. 73 Mo.
vol. 18, c. 696, vol. 19; Act March App. 607, 1 Mo. App. Rep. 100.
29, 1889, vol. 18 Laws 1889, p. 961, Montana.— Booth's Ann. Civ.
c. 695, sees. 1, 2, am'd vol. 19 Laws Code, 1895, sec. 3553.
p. 889, e. 696. Nebraska.— Bvown & Wheeler's
F/o rider..— Chap. 4677, p. 33, act Comp. Stat. 1893, p. 536. c. 43, sec.
approved Mav 31, 1899; Gen. Stat. 43; Comp. Stat. 1903, sec. 3906.
1906, sees. 1528, 2776. New Hampshire.— Fiih. Stat. 1891,
Georgia. — Lester, Rowell & Hills' p. 485, c. 170, sees. 1, 5 ; Pub. Stat.
Ga. Code, 1882, sees. 2814, 2815, 1901, c. 170, sec. 5, p. 571.
2834; Code 1895, sec. 2110; see North Dakota.— Rev. Code, sees.
Laws 1895, p. 51. 4497, 4593, 4607; Laws 1907, c.
/o»a.— McClain's Ann. Code 1888, 158, p. 253.
p. 434, see. 1734; Ann. Code 1897, 0/(/o.— Smith & Ben. Ver. Rev.
see. 1742, Supp. 1907, sec. 1742, con- Stat. 6th ed. 1890, sec. 3643 ; Bates
strued in Zalesky v. Home Ins. Co. Ann. Stat. 1906, sec. 3643.
108 Iowa, 341, 79 N. W. 69. Oklahoma.— Stat. 1890, p. 631, sec.
Kaiisa.s. — Laws 1893, c. 102; Laws 3159. c. 44, art. 3, see. 4; 1 Wilson's
1897, c. 142; Gen. Stat. 1905, sec. Rev. & Ann. Stat. 1903, p. 790, sees.
3538; Gen Stat. 1909, sees. 4260-3199,3204.
4263. Oregon. — Ballinger & Cotton's
Kentucky.— Act 1893, see. 700 Ky. Ann. Codes & Stats. 1902, sees. 3720,
Stat, (construed in Sachs v. London 3721.
& Lancashire Fire Ins. Co. 23 Ky. Pennsylvania. — Laws 1887, p. 186,
L. Rep. 2397, 67 S. W. 23, 31 Ins. No. 128, Pepper & Lewis' Di^. p.
L. J. 426); Stat. 1909, sees. 4307, 2387, par. 101 (boiler insurance).
4308 (live stock). South Carolina. — Civ. Code, see.
Louisiana. — Const. & Rev. Laws 1816, vol. 1; Code of Laws 1902,
1904, pp. 888, 889; Laws 1906, p. 695; see act Feb. 28, 1896, 22
adopted in 1900, act no. 135. Stat, at Large, 113, 114, construed in
Maine. — Rev. Stat. 1883, p. 445, Home Ins. Co. v. Virginia Carolina
c. 49, title IV. see. 20 (statements of Chemical Co. (U. S. C. C.) 109 Fed.
\alue in application are representa- 681.
tions and not warranties). South Dakota. — Laws 1905, c. 126;
Minnesota. — Rev. Laws 1905, sec. Civ. Code 1903 (mar.) sec. 1939,
1642, see also Minn. Standard policy, (fire) sec. 1953; (life) sec. 1958.
Mississippi. — Pamph. acts 1894, p. Tennessee. — Shannon's Ann. Code
51; Laws 1896, c. 56; Code 1906, 1896, p. 775, sec. 3348.
sec. 2592. Texas.— Civ. Stat. art. 2971, title
Missouri.— Hev. Stat. 1889, p. 53, e. 3; Rev. Stat. 1895, art. 3089;
1401, sees. 5897, 5898, 5899; Laws Suppl. Sayle's Rev. Civ. Stat. 1903,
1895, p. 194; Ann. Stat. 1896, p. art. 3089.
3793; Rev. Stat. 1899, sees. 7969, Washington.— Ballingefs Ann.
426
THE POLICY § 163
in the policy that the true value shall be proved, and notwithstand-
ing other clauses inconsistent with the statute. And the actual
value of the real estate when destroyed, or the value when insured,
and the consequent actual loss to the insured have been held wholly
immaterial. The statute is a part of the contract, and the amount
written in the policy is regarded as liquidated damages agreed upon
by the parties conclusively in such contract.^^ The insured, under
Codes & Stats. 1897 & Suppl. 1899- Ins. Co. 107 Mo. App. 456, 81 S. W.
1903, sec. 2833. 637 (policy conclusively fixes value).
West Virginia.— Acts 1899, p. 120, Bode v. Firemen's Ins. Co. 103 Mo.
c. 33; Code 190G, sec. 1108. App. 289, 77 S. W. 116, Rev. Stat.
Wisconsin.— 1 Sanborn & Berr. 1899, sec. 7<)69 (policy conclusively
Ann. Stat. p. 1165, sec. 1943. fixes value). Millis v. Scottish
^^ Arkansas. — Minneapolis Fire & Union & National Ins. Co. 95 Mo.
Marine Ins. Co. v. Fultz, 72 Ark. App. 211, 68 S. W. 1066 ; R^v. Stat.
365, 80 S. W. 576, 33 Ins. L. J. 690; 1899, sees. 7969, 7970 (insurer liable
acts 1890, p. 112, no. 61 (insurer to full value stated in policy, not-
bound to pay amount of insurance withstanding policy provisions con-
on house in ease of total loss). tra).
Kentiicky.—GeTmiima. Ins. Co. v. Nebraska. — Lancashire Fire Ins.
Ashlv, 112 Kv. 303, 99 Am. St. R*p. Co. v. Bush, 60 Neb. 116, 82 N. W.
295, 65 S. W.' 611 (all policies cover- 313, 29 Ins. L. J. 1028 (policy
ing real estate are valued policies amount conclusive; statute is part of
and the value fixed therein on which contract). Home Fire Ins. Co. v.
the premium is paid is conclusive Bean, 42 Neb. 537, 47 Am. St. Rep.
notwithstanding a clause in the pol- 711, 60 N. W. 907 (amount in policy
icy contra). Continental Ins. Co. v. conclusive); German Ins. Co. v.
Moore, 23 Kv. L. Rep. 72, 62 S. W. Eddv, 36 Neb. 461, 22 Ins. L. J. 468,
517, 30 Ins. L. J. 1021 (amount in 19 L.R.A. 707, 54 N. W. 856.
poUcv on dwelling house conclusive). Ohio. — Queen Ins. Co. v. Leslie, 47
Phcenix Ins. Co. v. Peak, 20 Kv. L. Ohio St. 409, 9 L.R.A. 45, 24 N. E.
Rep. 1035, 47 S. W. 1089; act 1893, 1072 (value fixed, conclusive). See
Ky. Stat. sec. 700 (conclusive in case Sun Mutual Ins. Co. v. Hock, 8 Ohio
of total loss). Cir. Ct. R. 341, 32 Week. L. Bui.
Mississippi. — Western Assur. Co. 341; United Firemen's Ins. Co. v.
v. Phelps, 77 Miss. 625, 27 So. Kukral, 7 Ohio Cir. Ct. 356, 30
745, 29 Ins. L. J. 506 (amount Week. L. Bull. 356.
named in policy and on which Texas. — Co-operative Ins. Assoc,
the insured pays premiums is of San Angelo v. Kay (1911) — Tex.
practically liquidated damages in Civ. App. — , 138 S. W. 1122; acts
case of loss, and valued policy stat- Tex. 1903, c. 69 (amount specified in
ute is integrated into and made part policy conclusive as liquidated de-
of policy of insurance; Laws 1896, mand, in ease of total loss irrespec-
c. 56. See as to statutory law being tive of value of property) ; Sun Mu-
part of policy, § 194 herein. tual Ins. Co. v. Holland, 2 Tex. App.
Missouri. — Gragg & Gragg v. Civ. Cas. sec. 448.
Northwestern National Ins. Co. 132 West Virginia. — Ritchie County
Mo. App. 405, 111 S. W. 1184, Rev. Bank v. Firemen's Ins. Co. 55 W.
Stat. 1899, sec. 7979 (in case of Va. 261, 47 S. E. 94; acts 1890,
total loss recovery may be had to p. 120, c. 33 (amount stated in pol-
value of insured property less dcpre- icy ou real estate conclusive in case
ciation). Siegle &j Sou v. Phcenix of total loss).
427
§ 163 JOYCE ON INSURANCE
an allegation describing the property, need not attempt to show
that the property was personal, or that the loss was upon real prop-
erty and total and so rely upon the valued policy law, but he may
prove its value immediately before and after the loss with evidence
of its total destruction as a basis for recovery.^" It is only necessary
to show a total loss.^ But in Washington proof must be given as to
the value of insured's special interest in personal property.^ If,
however, the policy contains no words showing that the policy is a
valued one, but is an open policy the statutory provision that in
case of a total loss the insured can recover the full amount of the
insurance does not apply, especially so where the statute prescribes
no penalty and contains no provision fixing the amount named in
the policy as conclusive evidence of value, so that, in such case, tlie
insurer is only liable for loss not to exceed the amount named in
the policy.'
So it is held in California that a contract between a life insur-
ance company and the insured, whereby the latter waives his
statutory rights, is ultra vires and void.* But a submission to arbitra-
TT'iscoHsf??.— Bourgeois v. North- Car. 459, 39 S. E. 712, 31 Ins. L. J.
■western National Ins. Co. 86 Wis. 38.
606, 57 N. W. 347 ; Sevk v. Millei-s * In this case the condition related
National Ins. Co. 74 ' Wis. 67, 3 to forfeiture : Griffith v. New York
L.R.A. 523n, 41 N. W. 443; Oshkosh Life Ins. Co. 101 Cal. 627, 40 Am.
Gas Light Co. v. Germania Fire Ins. St. Rep. 96, 36 Pac. 113.
Co. 71 Wis. 457, 5 Am. St. Rep. 233, As to right to tix conditions as to
37 N. W. 819; Cayon v. Dwelling- the cancellation under sections 3664
House Ins. Co. 68 Wis. 510, 516, 32 to 3667 of R-evised Statutes of Ohio,
N. W. 772; Baumessel v. Bruners and obligation to comply with stat-
Fire Ins, Co. 43 Wis. 463; Thomp- ute, see Phoenix Mutual Fii-e Ins. Co.
son V. St. Louis Ins. Co. 43 Wis. v. Brecheisen, 50 Ohio St. 542, 23
459; Reilly v. Franklin Ins. Co. 43 Ins. L. J. 56, 35 N. E. 53. Insured
Wis. 449 ; 7 Ins. L. J. 391 ; 28 Ajn. cannot waive statutory provision re-
Rep. 552. quiring insurer to tix the insurable
That policy may contain clause value of the property conclusively in
not provided for by statute, see Arm- the policy as the measure of recovery
strong V. Western Manufacturers' in ease of total loss. Queen Ins. Co.
Mutual Fire Ins. Co. 95 Mich. 137, v. Leslie, 47 Ohio St. 409, 9 L.R.A.
54 N. W. 637, under How. Stat. 45, 24 N. E. 1072; Ohio Rev. Stat.
Mich. 4349. sec. 3643, 3644.
^^ Granite State Fire Ins. Co. v. That condition as to limitation of
Buckstaff Bros. Mfg. Co. 53 Neb. action (Rev. Stat. Ind. 1881, sec.
123, 73 N. W. 544. 37*0) controls condition in polic}',
^ Oklahoma Farmers' JMutual In- see Small v. Westchester Fire Ins.
dem. Assoc, v. MeCorkle, 21 Okla! Co. (U. S. C. C.) 51 Fed. 789.
606, 97 Pac. 270, 38 Ins. L. J. 108; That statute relating to statements
1 Wilson's Rev. & Ann. Stat. Okla. in application controls, see Hermany
1903, p. 790, sec. 3204. v. Fidelitv Mutual Life Assn. 151
2 Bright v. Hanover Fire Ins. Co. Pa. St. 17, 24 Atl. 1064.
48 Wash. 60, 92 Pac. 779.
'Ulrner v. Phenix Ins. Co. 61 S.
428
THE POLICY § 163
tion of the amount of loss on an insured building does not consti-
tute a waiver of the benefits of the statute ^ nor is the statute waived
by accepting a policy prescribing a different rule for fixing the
amount of the loss to be paid, nor does it exclude the operation of
the statute.^
These laws have been declared valid and founded upon con-
siderations of public policy, being intended to guard against over-
insurance and against carelessness, and every other incentive to de-
stroy property or permit its destruction for the purpose of gain on
the part of the insured.' So it is held in the Federal Supreme
Court that the Missouri valued policy law is constitutional; that it
does not present the alternative of wager policies to indemnity pol-
icies but changes open policies into valued policies; and the court
declares that it makes no contract for the parties, but permits ab-
solute freedom in this, and leaves them to fix the valuation upon
such prudence and inquiry as they choose.* So, under a Florida
decision, a statute requiring insurer to fix the insurable value of the
property insured and to state such value in the policy, the measure
Where policies are not signed as (ed. 1892) sees. 243, 505 et seq. ;
required by statute, and the poUcy New Orleans Real Estate Mortgage
failed to specify that funds alone & Security Co. v. Teutonia Ins. Co.
are liable, a deed of settlement is 128 La. 45, 54 So. 466, 40 Ins. L. J,
required, and the policy has no valid- 998 (valued policy "is a measure in
ity: Hambro v. Hull & London Fire public interest and in order to secure
Ins. Co. 3 Hurl. & N. 789. See greater certainty in the contract of
Prince of Wales L. Assur. Co. v. insurance," per Breaux, C. J.) ; Lan-
Harding, El. B. & E. 183. cashire Fire Ins. Co. v. Bush, 60 Neb.
The fact that a statutory condition 116, 82 N. W. 313, 29 Ins. L. J.
is not inserted does not, it is held, 1028; Comp. Stat. Neb. 1899, c.
prevent its being read as a condition 43, sec. 43. ("This statute is ground-
in the contract, even though there ed on public policy. It is designed
are other conditions not printed as to prevent overinsurance, and to
variations: Findley v. Fire Ins. Co. avoid the evils resulting therefrom."
of North America (1894) 14 Can. Citing Oshkosh Gaslight Co. v. Ger-
L. T. 340. mania Fire Ins. Co. 71 Wis. 454, 37
5 Seyk v. Milldrs National Ins. Co. N. W. 819, 5 Am. St. Rep. 233 ;
74 Wis. 67, 3 L.R.A. 523, 41 N. W. Queen Ins. Co. v. Leslie, 47 Ohio St.
443. 409, 9 L.R.A. 45, 24 N. E. 1072.)
On effect of valued policy statutes * Orient Ins. Co. v. Daggs, 172 U.
on agreements for arbitration, see S. 557, 19 Sup. Ct. 281, 43 L. ed.
note in 47 LR.A.(N.S.) 433. 552, 28 Ins. L. J. 97, 48 Cent. L. J.
« Western Assur. Co. v. Phelps, 77 228, aff'g Daggs v. Orient Ins. Co.
Miss. 625, 27 So. 745, 29 Ins. L. J. 136 Mo. 382, 35 L.R.A. 227, 38 S.
506. ("Public policy declared by W. 85, 26 Ins. L. J. 67, see list of
the statute cannot thus be contracted valued policy laws at beginning of
away," per Whitfield, J.) this section."^ See also Word v.
'See Reilly v. Franklin Ins. Co. Southern Mutual Ins. Co. 112 Ga.
43 Wis. 449, 7 Ins. L. J. 391, 28 Am. 585, 37 S. E. 897 (valued policy
Rep. 552; Ostrander on Fire Ins. laws are constitutional).
429
§ 163 JOYCE ON INSURANCE
of damaf^es in cage of total loss to be the amount so fixed, and
in case of partial loss, such proportion of the amount upon which
premiums are paid as the damage sustained is of the insurable
value as fixed by the agent, and providing that the insurer shall be
estopped to deny that the property insured was worth at the time of
insuring the amount so fixed, and that the agent soliciting the
insurance shall be held the agent of the insurer, — is not repug-
nant to either the state or Federal Constitution.® So it is held in
Georgia that the statute does not make an arbitrary or unreasonable
classification because it is limited to insurance companies, and be-
cause it excludes from its operation losses sustained by reason of
the destruction of specified kinds of personal property.^"
® Hartford Fire Ins. Co. v. Red- tual value of the property at the
ding, 47 Fla. 228, 67 L.R.A. 518, 37 time of loss may be recovered; pro-
So. 62; act approved May 31, 1899, vided, the loss does not exceed the
e. 4677, p. 33. amount expressed in the poliej\' The
See article on "Effect of Fixing the point raised in the assignment of
Face of a Policy of Insurance as a error is without merit, for, even if
Liquidated Demand." Concluding it be conceded that the section quoted
that it is authoritatively settled '"that abridges some privilege or immunity
these valued policies are effective of citizens of the United States pro-
and binding," by W. C. Rogers in 53 tected by the Fourteenth Amendment
Cent. L. Joum. (1901) 106. to the "Constitution of the United
^^ JEtna Ins. Co. v. Brigham, 120 States, it has been detinitelv settled
Ga. 925, 48 S. E. 348, 33 Ins. L. J. by the decisions of the Supreme
941. The court, per Cobb, J., said: Court of the United States that a
"What is familiarly known as the corporation is not a citizen, within
'Dodson Law,' contained in Civ. Code the meaning of that provision of the
1895, sec. 2110, is attacked in this amendment. See Orient Insurance
case as being unconstitutional, upon Co. v. Daggs, 172 U. S. 557, 19 Sup.
the ground that it impairs and re- Ct. 281, 43 L. ed. 552, 28 Ins. L. J.
stricts the right of contract, which 97, 48 Cent. L. J. 228, and citations,
is one of the privileges and immuni- It was argued that the law also in-
ties guaranteed to citizens by the fringes those clauses of the Four-
Fourteenth Amendment to the Con- teenth Amendment which prohibit the
stitution of the United States. The states, from passing any law which
act in question is as follows: 'All deprives 'any pei-son'. of Ufe, liberty
insurance companies shall pay the or property without due process of
full amount of loss sustained upon law, or which deny to any person
the property insured by them; pro- within their jurisdiction the equal
vided, said amount of loss does not protection of the laws. The assign-
exceed the amount of insurance ex- ments of error in the record are not
pressed in the policy; and all stipu- broad enough to cover these ques-
lations in such policies to the tions; but, even if they had been,
contrary shall be null and void; pro- they would seem to be without merit,
vided, that in eases of loss on stocks under the decision in Orient Insur-
of goods and merchandise and other ance Co. v. Daggs, supra, affirming
species of personal property chang- Daggs v. Orient Ins. Co. 136 Mo. 382,
ing in specifics and quantity by the 35 L.R.A. 227, 38 S. W. 85, 26 Ins.
usual customs of trade, only the ac- L. J. 67, where a similar law was
430
THE POLICY
§ 163
Notwithstanding the rule stare decisis, we are inclined to the be-
lief that the system is open to serious objections, for the reason that
the assured can gain nothing in case of undervaluation, and the
same inducement to incendiarism exists in case of overvaluation.
Nor can such legislation protect against overinsuranee even though
the insurer incurs a great expense and loss of time in determining
the actual value of property. Again, the legislation is restrictive, and
abridges the rights of parties to freely enter into contracts, and it
would seem that it would best conform to tlie doctrine of indemnity
that the value of the property at the time of loss should be proved."
held not to be violative of these tion, and that especially is the classi-
clauses of the Fourteenth Amend- fication arbitrary when it is kept in
ment. Various attacks have been mind that the legislation does not
made upon laws similar to the one apply at all to private individuals
now under discussion, and in almost engaged in the business of writing
every instance they have been held fire insurance. While the General
to be constitutional and valid. See Assembly is permitted to classify
Reilly v. Franklin Insurance Co. 43 subjects for legislation, the courts
Wis. 449, 28 Am. Rep. 552 ; Phoenix will restrain them from making arbi-
Ins. Co. V. Levy, 12 Tex. Civ. App. trary and unreasonable classifica-
45, 33 S. W. 992; Dugger v. Me- tions. At the same time the law-
chanics & Traders Ins. Co. 95 Tenn. making power is allowed a wide
245, 28 L.R.A. 796, 32 S. W. 5; In- latitude in respect of such matters.
Burance Co. of North America v. Without undertaking to discuss the
Bachler, 44 Neb. 549, 62 N. W. 911, question at length, we hold that the
915. Our decision is, however, neces- legislation under consideration is not
sarily confined to the one ground of subject to the objection made. See
attack raised by the assignment of majority opinion in Union Savings
error. 4. One of the assignments of Bank & Trust Co. v. Dottenheim, 107
error is that the law above quoted in Ga. 606, 34 S. E. 217 ; Dugger v.
'unconstitutional, in that it is special Mechanics & Traders Ins. Co. 95
legislation affecting the rights of con- Tenn. 246, 28 L.K:A. 796, 32 S. W.
tract on the part of insurance com- 5."
panics, without the consent of said "It is said by Mr. Richards that
companies, which is prohibited by "these laws are not to be commended,
paragraph 1, sec. 4, art. 1, of the because they impose too arbitrary a
Constitution of the state of Georgia, standard and may be used as an in-
which provides that laws of a general strumeut of fraud:" (Richards on
nature shall have uniform operation Ins. ed. 1892, sec. 20 "and encourage
throughout the state, and no general fraudulent oven-aluation and arson"
law affecting private rights shall be Id. 3rd ed. note p. 31) ; and another
varied in any particular case by spe- author, while maintaining their ya-
cial legislation, except with the con- lidity, admits that the policy of these
sent in writing of all persons to be laws "contemplates an abridgment of
affected thereby.' Civ. Code 1895, the natural rights of the parties to
sec. 5732. Under this assignment of make contracts :" Ostrander on Fire
eiTor, it is argued that the act makes Ins. sec. 245, p. 510.
tire insurance companies writing The system of "valued policies"
policies upon houses and personal is open to "grave objections, for
property other than specified kinds apart from the labor and cost of
the subject of an arbitrary classifica- valuing a thousand properties in
431
163a
JOYCE OX INSURANCE
§ 163a. Same subject: conflicting clauses. — The rule above stated
that the value specified in a valued policy is conclusive in case of a
total loss, or a loss within the intent of the statute, notwithstanding
stipulations or clauses inconsistent or in conflict with the expres.^
terms of the statute applies to and makes invalid a clause which
limits recovery to an amount less than that fixed in the policy; ^
the rule also applies to and voids a condition that insurer shall not
be liable beyond the actual cash value at the time of any loss ; ^^ to a
condition limiting the amount of recovery to the sum or sums item-
ized, and to the actual cash value at the time of loss ; ^* that appraisal
preparation for the total destruction large is directly concerned in prevent-
of four or five, it is obvious, if tbe ing the recovery on any lire insur-
value fixed is less than the real value, ance policy of more than the actual
there is no advantage to the insured, value of the property destroyed."
but the contrary; and if it is greater Id. pp. 654, 655.
than the real value, then no doubt the Compare Editorial, entitled ''Fire
insured might make a profit by a Insurance — Adjustment of Loss."
fire, but this would offer an induce- urging enactment of valued policy
ment to carelessness, if not to in- law, in 19 Canadian Law Times
eendiarism. In the United States, (1899) 124.
however, several state legislatures ^^ Daggs v. Orient Ins. Co. 136 Mo.
have been so imprudent as to force 382, 35 L.R.A. 227. 38 S. W. 85, 26
the issue of 'valued policies:'" 13 Ins. L. J. 67, aff'd Orient Ins. Co.
Encv. Britt. 164. v. Daggs, 172 U. S. 557, 43 L. ed.
It' is worthy of note that at the 552, 19 Sup. Ct. 281, 28 Ins. L. J.
30th annual meeting of the American 97, 48 Cent. L. J. 228 (clause limit-
Bar Assoc, held at Portland Me. in ing insurer's liability in ease of loss
Aug. 1907, the committee on Insur- contrary to express provisions of val-
ance Law recommended the adop- ued policy law will not be sustained) ;
tion of certain re.solutions one of Home Fire Ins. Co. v. Weed, 55 Neb.
which was the repeal of the valued 146, 75 N. W. 539 ; Comp. Stat. 1893,
policy laws. And this recommenda- e. 43, sec. 43, see Comp. Stat. 1903,
tion was one of those adopted. Vol. sec. 3906; Home Fire Ins. Co. v.
31 Reports of American Bar Associ- Bean, 42 Neb. 537, 47 Am. St. Rep.
ation 1907, pp. 11, 654-659. ''In 19 711, 60 N. W. 907.
or 20 of the states are statutes known ^^ Hartford Fire Ins. Co. v. Bour-
as valued policy laws, which require bon County Court, 24 Ky. L. Rep.
insurance companies to pay their as- 1850, 72 S. W. 739, 32 Ins. L. J.
sured in the event of the total de- 481 (act 1893, Ky. Stat. 700);
struction of real or personal propertv Queen Ins. Co. v. Leslie, 41 Ohio St.
insured, the full amount of the in- 409, 9 L.R.A. 45, 24 N. E. 1072. But
surance on said property without compare Burkett v. Georgia Home
regard to the value thereof at the Ins. Co. 105 Tenn. 548, 58 S. W.
time of the loss. These laws have in- 848; act 1893.
creased both the cost of insurance ^* Oklahoma Farmers Mutual In-
and the fire waste; they invite fraud, dem. Assoc, v. McCorkle, 21 Okla.
perjury, and arson; they present be- 606, 97 Pac. 270, 38 Ins. L. J. 108;
fore every evilly-disposed person the 1 Wilson's Rev. & Ann. Stat. Okla.
temptation to over-insure and then 1903, p. 790, sec. 3204, providing that
to bum his property for the gain "if there is no valuation in the policy,
there is in it. . . . Society at the measure of indemnity in an in-
432
THE POLICY
lG3a
fix tlie cash value of the loss with proper decluotion for deprecia-
tion, however caused; ^* an agreement to submit the question to ar-
bitration ; ^^ that the loss or damage shall in no event exceed what
it would cost insured to repair or replace the same." But, under a
Tennessee decision, a policy provision thai the amount of loss or
damage should be based upon the actual cash value of the property
at the time of the fire, not to exceed the cost of replacing the build-
surance against fire is the full
amount stated in the policy, but the
eflfeet of a valuation in a policy of
lire insurance is the same as in a
policy of marine insurance."
^5 Hartford Fire Ins. Co. v. Bour-
bon County Coui-t, 24 Kv. L. Rep.
1850, 72 S. W. 739, 32 "ins. L. J.
481. Examine Stevens v. Norwich
Union Fire Ins. Co. 120 Mo. App.
88, 96 S. W. 684, as to allowing de-
preciation in value under Rev. Stat.
1890, sec. 7969; Siegle & Son v.
Phoenix Ins. Co. 107 Mo. App. 456,
81 S. W. 637. Rev. Stat. 1899, sec.
7979.
But compare Zaleskv v. Home Ins.
Co. 108 Iowa, 341, 79 N. W. 69
(Iowa Code sec. 1742, does not pre-
clude making appraisement a condi-
tion precedent to action on policy, as
the statute does not tix the value of
the property destroyed but makes it
necessary for assured to' prove the
loss, as the amount stated is only
prima facie evidence of insurable
value).
^6 Hartford Fire Ins. Co. v. Bour-
bon County Court, 24 Kv. L. Rep.
1850, 72 S. W. 739, 32 'ins. L. J.
481; act 1893, Ky. Stat. 700; Mer-
chants Ins. Co. V. Stephens, 22 Ky.
L. Rep. 999, 59 S. W. 511 (agree-
ment to arbitrate or arbitration not
valid under act 1893, Ky. Stat. 700) ;
Lancashire Ins. Co. v. Bush, 60 Neb.
116, 82 N. W. 313, 29 Ins. L. J.
1028; Comp. Stat. Neb. 1899, c.
43, sec. 43. ("The statute, which is
to be regarded as part of the con-
tract, fixes conclusively the worth of
the building which is the subject of
insurance. If the property is wholly
destroyed, its actual value is not to
Joyce Ins. Vol. I.— 28.
be determined by evidence, agree-
ment or arbitration. The damages
are liquidated and the measure of
recovery already ascertained. . . .
To receive evidence for the purpose
of ascertaining the amount of the
loss . . . would violate the pol-
icy of the law, which is to make the
insurer pay the amount of the risk
on which he has taken premiums.
. . . It is believed that it" (the
insurer) "could have made no bargain
by which, in the event of a total loss
of the insured propertj', it could
escape from its obligation to pay the
full amount of the indemnity for
which the policy was written. As be-
fore remarked, the statute re.sts on
considerations of public policy, and
it is probable that the insured could
not, even by ex])ress contract, relin-
quish the beneiit of its provisions.
Reillv V. Franklin Ins. Co. 43 Wis.
449, "28 Am. Rep. 552; Emery v.
Piscataqua Fire & Marine Ins. Co.
52 Me. 322." Per Sullivan, J.)
Queen Ins. Co. v. Leslie, 47 Ohio St.
409, 9 L.R.A. 45, 24 N. E. 1079.
Examine Stevens v. Norwich Union
Fire Ins. Co. 120 Mo. App. 88, 96
S. W. 684, under Rev. Stat. 1899,
sec. 7964; Seyk v. Millers National
Ins. Co. 74 Wis. 67, 3 L.R.A. 523, 41
N. W. 443.
^'' Hartford Fire Ins. Co. v. Bour-
bon County Court, 24 Ky. L. Rep.
1850, 72 S. W. 739, 32 "ins. L. J.
481; act 1893, Ky. Stat. 700; Mil-
waukee Mechanics' Ins. Co. v. Rus-
sell. 65 Ohio St. 230, 56 L.R.A. 159,
62 N. E. 388; Rev. Stat. sec. 3643
(condition void which gives insurer
option to rebuild in case of total
loss).
433
§ 163a JOYCE ON INSURANCE
ing is held valid. ^^ Again, a policy stipulation requiring insured
if required to furnish verified plans and specifications of the de-
stroyed or damaged property is of no binding force.^^ So a three-
quarters clause whereby insured is made a coinsurer and reducing
the insurer's liability below the amount specified in the policy is
nugatory .2° So where a policy Avas issued after the enactment of
a valued policy law the insurers, whether foreign or domestic com-
panies, cannot deny that the value of the property Avas that upon
which the insurance was calculated, nor can they deny that the
amount of the policy was but three-fourths the valuation.^ And
under a statute making the amount of insurance Avritten on real
property conclusive as to its value, insurance companies cannot
avoid their fixed liability for losses on such property by agjreeing
with the owner to denominate it personal property.'^
The valued policy law of Louisiana, adopted in 1900,^ conflicts
with the standard policij, borrowed from the New York standard
policy and made a law in 1808,* and repeals it. A valued policy
statute does not confer a personal privilege w^hich may be renounced.
The statute was adopted as a measure of policy, and it controls as a
measure of public interest and to secure greater certainty so that
an attempt to limit the insurer's lial)ility by exempting them from
liability for loss occasioned by ordinance or law^ regulating con-
struction or repair of buildings in conflict with the valued policy
statute cannot avail the insurer.^ And the same limitation of lia-
bility clause is held void in Mississippi.^
"Burkett v. Georgia Home Ins. 822, 30 Ins. L. J. 181, under act
Co. 105 Teun. 548, 58 S. W. 848; act 1894, Pamph. acts Miss. 1894, p. 51;
1893. Code see. 2592. See also Mitcliell
^^ Mississippi Home Ins. Co. v. v. Potomac Ins. Co. 16 App. D. C.
Barron, 91 Miss. 722, 45 So. 875, 241 (under Mo. Laws 1895, p. 194),
Code Miss. 1906, sec. 2592. affd. on other points 183 U. S. 42,
20 Western Assurance Co. v. 46 L. ed. 74, 22 Sup. Ct. 22, 31 Ins.
Phelps, 77 Miss. 625, 27 So. 745, 29 L. J. 570.
Ins. L. J. 506 ; Sachs v. London & ^ Havens v. Germania Fire Ins.
Lancashire Fire Ins. Co. 23 Kv. L. Co. 123 Mo. 403, 45 Am. St. Rep.
Rep. 2397, 67 S. W. 23, 31 Ins. L. 570, 27 S. W. 718, 26 L.R.A.. 107.
J. 426 (coinsurance clause void as ^ Act no. 135.
contra to act 1893, Kv. Stat. 700); *Aet no. 105, of 1898, art. 3, see.
Phcenix Ins. Co. v. Peak, 20 Kv. L. 22.
Rep. 1035, 47 S. W. 1089 (Insurer ^ New Orleans Real Estate Mort-
cannot limit liability to three-fourths gage & Securities Co. v. Teutonia
value where total loss. Compare Ins. Co. 128 La. 45, 54 So. 466, 40
Hudson v. Scottish Union & National Ins. L. J. 999. Compare Melancon
Ins. Co. 110 Ky. 722, 23 Kv. L. Rep. v. Phoenix Ins. Co. 116 La. 324, 40
116, 62 S. W.. 513, 30 Ins. L. J. So. 718.
1023, an insurance on personal prop- As to legislature adopting stand-
erty). ard form so as not to conflict with
^ Scottish Union & National Ins. valued policy law, see opinion of
Co. v. Enslie, 78 Miss. 157, 28 So. Elliott, J., in Wild Rice Lumber Co.
434
THE POLICY
§ 163b
§ 163b. Valued policy laws: three-fourths value. — A policy
fixing the amount at risk not in excess of three-fourths the vaUie of
the property as required by statute constitutes a valued policy and
the amount so fixed cannot be questioned.' So a statute which pro-
hibits an insurer from taking a risk at a ratio greater than three-
fourths of the value of the property, and precludes questioning such
value, does not estop the insurer from proving the value of insured
mercantile stock at the time of- loss, but only precludes denying
their specified value at the time the insurance was taken.^ And the
same rule applies where the policy covers an engine and dynamo on
a power house, so attached as to be part of the realty and not per-
sonal property, the items not being separately insured but insured
together as a lump sum.^ And the amount fixed may be reduced
by showing depreciation, decay or salvage ; " and a policy clause
limiting recovery to the cash value at the time of loss, is valid, and
an arbitration clause is a condition precedent ; " such a statute does
not conflict with an enactment which prohibits requiring insured
V. Koyal Ins. Co. 99 Minn. 190, 108 Stat. 1899, sec. 7979; Stevens v.
N. W. 871, 35 Ins. L. J. 824. Norwich Union Fire Ins. Co. 120
Standard policy in South Dakota Mo. App. 88, 96 S. W. 684; City of
is a strictly valued one as to real De Soto v. American Guaranty Fund
property when wholly destroyed. Mut. Fire Ins. Co. 102 Mo. App.' 1,
Lawver v. Globe Mutual Ins. Co. 25 74 S. W. 1. And it is unnecessary
S. Dak. 549, 127 N. W. 615, 39 Ins. to prove such value. Hilburn v.
L J 1588 Phoenix Ins. Co. 140 Mo. App. 355,
'« Palatine Ins. Co. Ltd. v. Nunn, 124 S. W. 63; Mo. Rev. Stat. 1899,
99 Miss. 493, 55 So. 44; Code 1906, sec. 7969; Howerton v. Iowa State
sec. 2592. Ins. Co. 105 Mo. App. 575, 80 S. W.
'Gibson v. Missouri Town Mu- 27; Rev. Stat. 1899, sec. 7979. And
tual Ins. Co. 82 Mo. App. 515, Mo. it is sufficient to allege, in an action,
Laws 1895, p. 194. See §§ 3461 the amount so fixed by the policy,
et seq. herein. Bode v. Firemens Ins. Co. 103 Mo.
* Surface v. Northwestern Nation- App. 287, 77 S. W. 116. Compare
al Insurance Co. 157 Mo. App. 570, Farmers' Bank v. Manchester Assur.
139 S. W. 262; Rev. Stat. 1909, sec. Co. 106 Mo. App. 114, 80 S. W. 299.
7030. ^° Mitchell v. Potomac Ins. Co. 16
8 Rogers v. Connecticut Fire Ins. App. D. C. 241 (Mo. Laws 1895, p.
Co. 157 Mo. App. 671, 139 S. W. 194). Aff'd on other points, 183 U.
265, 40 Ins. L. J. 1776. The company S. 42, 46 L. ed. 74, 22 Sup. Ct. 22,
under the statute "estopped itself 31 Ins. L. J. 570; Stevens v. Nor^
from aftei-wards asserting that the wich Union Fire Ins. Co. 120 Mo.
total insurance exceeded 75 per cent App. 88, 96 S. W. 684; Rev. Stat.
of the value of the property at the 1899, sec. 7979; Gibson v. Missouri
lime the policy wa.s issued" per John- Town Mutual Ins. Co. 82 Mo. App.
son, J. Statute fixes value of prop- 515; Laws 1895, p. 194.
erty at time of contract and is " Stevens v. Norwich Union Fire
conclusive. Gragg & Gragg v. North- Ins. Co. 120 Mo. App. 88, 96 S. W.
western National Ins. Co. 132 Mo. 684; Mo. Rev. Stat. 1899, sec. 7979.
App. 405, 111 S. W. 1184; Rev.
435
§§ 163c-163e JOYCE ON INSURANCE
beoomino; a coinsurer;^^ nor preclude oilier insurance up to the
miionnt liiniterl.^'
§ 163c. Valued policy laws: overvaluation: fraudulent valuation.
— Even in case of i)olioies under the valued |)olicy law where an-
other statute provides that misrepresentations must be material to
the risk or contribute to the loss to avoid the policy it is no defense
that insui'od misrei^rasented the value. ^* And a policy is valid
though the property is overinsured, under the valued policy law of
]\Iississippi.^^ But subsequent insurance to a larger value than
under a prior policy contrary to the express terms of a statute voids
the policy.^® So a statute requiring insurer to state in the policy the
insurable value of the property insured and that the sum so fixed
shall constitute the measure of damages in case of loss, and provid-
ing also that the insurer shall thereby be estopped that the value of
the property at the time of insuring was worth the amount so fixed,
• does not take away from the insurer the right to plead that the in-
sured by fraud procured the insurable value to l)e fixed at an
excessive amount.^' And gross overvaluation, fraudulent misrepre-
sentation, and concealment may be alleged as a ground for contest-
ing the valuation notwithstanding an incontestable clause of a
valued policy law.^^
§ 163d. Valued policy law: property destroyed by more than one
tire. — The statute applies none the less because the property is de-
stroyed by two fires instead of one, and if the actual damages for
the partial loss occasioned by the first fire are paid, and the prop-
erty is thereafter wholly destroyed, the amount lixed in the policy
is conclusive and the value of the remainder is the policy valuation
less the actual amount paid for loss by the first fire.^^
§ 163e. Valued policy law: real and personal property. — The
Delaware act confines the valuation to real property but if realty and
12 Surface v. Northwestern Ins. ding, 47 Fla. 228, 67 L.R.A. 518, 37
Co. 157 Mo. App. 570, 139 S. W. So. 02; act approved IMav 31, 1899,
262; Mo. Rev. Stat. 1909, sec. 7030. c. 4677, p. 33.
12 Busli V. Missovari Town Mutual ^^ Home Ins. Co. v. Virginia-Caro-
Ins. Co. 85 Mo. App. 155. lina Chemical Co. (U. S. C. C.) 109
1* Co-Operative Ins. Assoc, of San Fed. 681. See § 162 lierein.
Angelo V. Rav (1911) — Tex. Civ. ^^ Lancashire Fire Ins. Co. v.
App. — , 138 "S. W. 1122; acts Tex. Bush, 60 Neb. 116, 82 N. W. 313,
1903, c. 09. See § 162 herein. 29 Ins. L. J. 1028 ; Comp. Stat. Neb.
15 Mississippi Home Ins. Co. v. 1899, c. 43, sec. 43.
Barron, 91 Miss. 722, 45 So. 875. Total loss under policy issued after
See § 162 herein. loss by fire and before building re-
1^ Thurber v. Roval Ins. Co. 1 paired. See § 3030 herein.
Marv. (Del.) 251, 40 Atl. 1111. Total loss subseriuent to partial
1' Hartford Fire Ins. Co. v. Red- loss; marine risk. See § 3016 herein.
436
THE POLICY § 163e
personalty are valued specifically the contract is so far divisible as
not to be invalid as to the personal property.^" The Kentucky
valued policy law of 1893, act 1893, sec. 700, Ky. Stat., ap-
plies only to real estate and has no reference to a policy up-
on personal property.^ But a valued policy law as to real
estate does not apply to a three-fourths value stipulation in
a policy on personal property.^ In Louisiana it is decided
that only property immovable by nature is within the valued pol-
icy law of that state.^ In Missouri it is held that the direct provi-
sions of the statute * apply only to real property and not to personal
property,* and also, that a stipulation that property insured shall be
considered personal property cannot change the nature of the prop-
erty so as to take it out of a statute making the amount of insur-
ance written on such property conclusive as to its value,^ and
that buildings and machinery placed on a mining lease are not real
property within the statute.''' But an engine and dynamo in a
power house are covered when so attached as to be part of the realty
and not personal property.* And an uncompleted structure may
be regarded as a building.^ But it is also held that the statute of
1899 applies to personal as well as to real property ^° and the valued
policy law of that state applies in favor of a builder, who, as such
has insured a building being constructed by him under a contract
with the owners of real property in which real estate said builder
20Thurber v. Royal Ins. Co. 1 Co. . 102 Mo. App. 1, 74 S. W. 1;
Marv. (Del.) 251, 40 Atl. 1111. Millis v. Scottish Union & National
1 Hudson v. Scottish Union & Na- Ins. Co. 95 Mo. App. 211, 68 S. W.
tional Ins. Co. 110 Ky. 722, 23 Kv. 1066.
L. Rep. 116, 62 S. W. 513, 30 Ins. ^ Havens v. Germania Fire Ins.
L. J. 1023; Germania Ins. Co. v. Co. 123 Mo. 403, 26 L.R.A. 107, 45
Ashby, 112 Ky. 303, 99 Am. St. Am. St. Rep. 570, 27 S. W. 718.
Rep. 295, 65 S. W. 611. ' Millis v. Scottish Union & Nation-
2 Hudson V. Scottish Union & Na- al Ins. Co. 95 Mo. App. 211, 68 So.
tional Ins. Co. 110 Ky. 722, 23 Kv. 1066.
L. Rep. 116, 62 S. W. 513, 30 Ins. * Rogers v. Connecticut Fire Ins.
L. J. 1023; Kv. Stat. sec. 700; case Co. 157 Mo. App. 671, 139 S. W.
decided 1901. 265, 40 Ins. L. J. 1776.
^ Melancon v. Phoenix Ins. Co. 116 ^ Bode v. Firemen's Ins. Co. 103
La. 324, 40 So. 718; Act No. 135, Mo. App. 287, 77 S. W. 116.
of 1900, p. 209. But compare as ^° Hilburn v. Phoenix Ins. Co. 140
to ett'eet in relation to standard pol- Mo. Ai)p. 355, 124 S. W. 63; R<>v.
icy law (act no. lO.i, of 1908, art. Stat. 1899, sec. 7969; Gragg & Grair<?
3, sec. 22) ; New Orleans Real Estate v. Northwestern National Ins. Co. 132
Mortgage & Securities Co. v. Teu- Mo. App. 405, 111 S. W. 1184, Rev.
tonia Ins. Co. 128 La. 45, 54 So. Stat. 1899, sec. 7979 (Ann. Stat.
466, 40 Ins. L. J. 999. 1896, p. 3973), prohibiting taking
^ Rev, Stat. 1899, sees. 7969, 7970. risks on any property at a rale
* City of De Sota v. American greater than three-fourths its value.
Guaranty Fund Mutual Fire Ins. See also Rev. Stat. 1909, sec. 7030.
* 437
§§ 163f, 163g JOYCE ON INSURANCE
has no interest.^^ Again, under an Ohio decision, the rule as to
the eonchisiveness of the amount stated in a policy under the val-
ued policy law has heen a])plied to an insurance of a life estate in a
huilding, even though the policy amount was gTeater than the life
estate was wortli.^*^ It is held in Texas that property will be prima
facie regarded as realty where the description in the policy shows
that it was so considered under a statute making the amount stated
in the policy conclusive except insurance on personal property.^^
In Washington the valued policy law does not apply to insurance
on personal property/* and the West Virginia statute applies to
real estate.^*
§ 163f. Valued policy law: improvements upon real property:
loss of rents not covered. — A valued policy law providing that the
amount of insurance written in a policy insuring improvements
upon real property shall, in case of a total loss, be taken conclusive-
ly to be the true value of the property insured, does not apply to a
policy which insured against the loss of rents through the destruc-
tion of such improvements, even though such a policy insures real
property within the meaning of that term as used in the statut^.^^
§ 163g. Valued policy laws: mutual companies: mutual benefit
societies. — A statute limiting the amount of risk which the insurer
may take to a ratio not greater than three fourths of the value of
the property applies to mutual insurance companies even though
such companies are by another statute exempt from the operation
of the general insurance laws.^'' And the valued policy law of
"Property" under said statute in- men's Ins. Co. 55 W. Va. 261, 47 S.
eludes both real and personal. How- E. 94.
erton v. Iowa State Ins. Co. 105 Mo. ^^ Amusement Syndicate Co. v.
in conflict therewith. But see § Gen. Stat. 1909, sees. 4260-426.3;
163b herein. Laws 1893, e. 102.) See §§ 13a, 168
^^ King V. Phoenix Ins. Co. 195 herein.
Mo. 290, 113 Am. St. Rep. 678, 92 i'^ Mitchell v. Potomac Ins. Co. 16
S. W. 892. App. D. C. 241 (Laws Mo. 1895, p.
12 Hubbard v. Winshel's Exetr. 6 194; Laws Mo. 1895, p. 200) aflf'd on
Ohio Nisi P. Rep. (41 Wklv. Law other points 183 U. S. 42, 46 L. _ed.
Bull.) 249, Rev. Stat. see. 3643 (Rev. 74, 22 Sup. Ct. 22, 31 Ins. L. J. 5/0;
Stat. 1906, sec. 3643). Gibson v. Missouri Town Mutual Ins.
13 Co-operative Assoc, v. Hubbs, 53 Co. 82 Mo. App. 515; Laws 1895, p.
Tex. Civ. App. 68, 115 S. W. 670; 194.
Tex. Rev. Stat. 1895, art. 3089. Under the Missouri statute of 1889,
1* Bright v. Hanover Fire Ins. Co. Mo. Rev. Stat. sees. 589/, .3898, town
48 Wash. 60, 92 Pac. 779 ; Laws 1899, mutual insurance companies have
p. 332, c. 145, sec. 2. been exempt from the provisions of
1* Ritchie County Bank v. Fire- the statute which fixes liability for
438
THE POLICY § l(>i
1895, of Ceorgia " requiring "all insurance companies to pay the
full amount of loss" etc., applies to purely mutual fire insurance
companies as they are not exempted. ^^ So the valued policy law
of Nebraska applies to mutual companies even though incorporated
under a special act of later date.^"
Under the Missouri statute of 1899 ^ the insurer is required to
specify in the policy or certificate the exact amount which it prom-
ises to pay and it becomes thereby obligated to pay the beneficiary
the specilied amount unless the contract shall have become void.^
§ 164, Valued policies: partial loss. — In the case of a partial
loss under a valued poHcy the valuation may be inquired into to
a certain extent ^ merely for the purpose of ascertaining how it
may be applied, rather than for the purpose of setting it aside.*
So in a case in Mif^sissippi,^ the partial loss was estimated upon the
basis of the valuation in the policy, the loss tliere being held to be
the difference between the agreed value and the damaged value,
adding the costs and expenses.® That the loss should be adjusted
so far as practicable upon the basis of the valuation seems to be
the settled doctrine.''' It is held that in ca.'^e of a partial loss under a
valued policy on a vessel the insurer pays that proportion of the
property destroyed at the amount East, 327, 13 Eng. Rul Cas. 673; per
stated in the policy. Warren v. Lord Ellenborough.
Bankers & Merchants Town Mutual * Forbes v. Aspinall, 13 East, 327,
Ins. Co. 72 Mo. App. 188. 13 En^. Rul. Cas. G73, per Lord
18 Ga. Civ. Code see. 2100 (act Ellenborough. See Howell v. Pro-
Nov. 23, 1895). tection Ins. Co. 7 Ohio, 287.
1^ Word v. Southern Mutual Ins. ^ Natchez Ins. Co. v. Buckner, 4
Co. 112 Ga. 585, 37 S. E. 897. How. (5 Miss.) 63.
20 Farmers Mutual Ins. Co. v. Cole, 6 gpg Stanton v. Natchez Ins. Co.
4 Neb. (Unof.) 130, 93 N. W. 730, 5 How. (6 Miss.) 744 Le Pyre
Comp. Stat. Neb. 1899, e. 43, sec. 43. y Parr 2 Vem 716
iRev. Stat. 1899, sec. 7903. '70 pi mi- t 10m i,
2 a 1- „ M rl R fl Phillips on Ins. sec. 1203, who
, jr.. '^ ■ ^■-i.ii.^T.f ^"^ * ^^ r?no' says: "The valuation is to be ad-
hood of America, 126 Mo. App. 693, . ^ , , , an,)lied so far as it
105 S. W. 685 (amount due from as- -^ .^.^eticable, in settling partial as
sessment company a question for ^^/^ ^^ ^^^^, j^^^^^ „
court ) .
3 Watson V. Insurance Co. of North ^ See Forbes v^ Manufacturers' Ins.
America, 3 Wash. (U. S. C. C.) 1, ^o. 1 Gray (6/ Mass.) 3/1; Lewis
Fed. Cas. 17,286; Forbes v. Manu- v. Rucker, 2 burr. 116/, 14 Eng. Rul.
facturers' Ins. Co. 1 Gray (67 Mass.) C'^^- "^^•
375; Clark v. United Fire & Marine Mr. Marshall says (2 Marshall on
Ins. Co. 7 Mass. 365, 5 Am. Dec. 50; Ins. [ed. 1810] *631) : "Where
Murray v. Ins. Co. of Pennsylvania there is a partial loss upon a valued
2 AVas'h. (U. S. C. C.) 186, Fed. Cas. policy, but the value in the policy
No, 9,961; Harris v. Eagle Fire Co. exceeds the interest of the assured,
5 Johns. (N. Y.) 368; Lewis v. it is the constant usage to adjust a
Rucker, 2 Burr. 1170, 14 Eng. Rul. partial loss in the same manner as
Cas. 215; Forbes v. Aspinall, 13 it the policy were an open one, and
439
§§ l(io, 166 JOYCE ON INSURANCE
actual loss as the sum insured sustains to the value of the vessel.^
If a valued policy law provides that in cases of partial loss the in-
surer's liability shall not exceed the actual loss of the party insured
the insured is obligated to pay insured the actual damage he sus-
tains.^
§ 165. Valued policy: pro rata recovery. — Although a valued
policy fixes the price, this is not an admission that so much is at
risk,^° as where by mistake or design only a part of the goods have
been shipped, a recovery can only be had of such proportion of the
valuation as the goods at risk bear to the whole value." So the
amount of a bottomry bond may be deducted from the real value,^^
and if one insures property expected to be on board ship to a certain
amount upon a valued policy, and much less is in fact shipped, he
is entitled to recover, in case of loss, a proportion pro rata notwith-
standing the valuation. ^3
§ 166. Valued policies: "valued at" not conclusive. — Usually in
a valued policy the phrase appears ''valued at ," and the blank
being filled, the agreed value is settled. But the policy remains
open if this blank is unfilled and no valuation of the subject insured
is specified in the indorsement; ^* and since the question of inten-
tion controls, the policy must disclose an intent to make it a valued
one,^* for the words ''valued at" are not in themselves conclusive.
So in a case wdiere the policy contained this clause: "The said goods
and merchandise hereby insured are valued at as indorsed ; "
the computation must therefore be ^^ Haven v. Gray, 12 Mass. 76.
by the real interest on board, and " Wolcott v. Eagle Ins. Co. 4 Pick,
not by the value in the polify." (21 Mass.) 429; Tobin v. Hartford,
Under a Massachusetts decision it 17 Com. B. N. S. 528. See Brook v.
seems that the valuation may be Louisiana Ins. Co. 4 Mart. N. S.
opened: Clark v. United Fire & (La.) 640, 681; Atlantic Ins. Co. v.
Marine Ins. Co. 7 Mass. 365 ; Brewer Lunar, 1 Sand. Ch. (N. Y.) 91;
V. American Ins. Co. 123 Mass. 78. Patrick v. Eames, 3 Camp. 441;
8 Western Assur. Co. v. South- Forbes v. Aspinall, 13 East. 327, 13
western Transp. Co. 68 Fed. 923, 16 Eng. Rul. Cas. 673; Denoon v. Home
C. C. A. 65. See §§ 3452, 3075, & Colonial Assur. Co. L. R. 7 C. P.
3077 et seq. herein. 341.
^ Sachs V. London & Lancashire ^^ Watson Ins. Co. of North Ameri-
Fire Ins. Co. 23 Kv. L. Rep. 2397, ca, 3 Wash. (U. S. C. C.) 1, Fed.
67 S. W. 23, 31 Ins. L. J. 426; Cas. 17,286.
Lancashire Fire Ins. Co. v. Bush, 60 ^^ Alsop v. Insurance Co. 1 Sumn.
Neb. 116, 82 N. W. 313, 29 Ins. L. (U. S. C. C.) 451, Fed. Cas. 262.
J. 1028 (if a partial loss occurs un- ^^ Snowden v. Guion, 101 N. Y.
der a valued policy the insured is 458. 46/. 5 N. E. 322. case reverses
entitled to actual damages only, be- 18 Jones & S. (N. Y.) 137. See
cause the statute has not tixed the Hemmenway v. Eaton, 13 Mass. 108.
value of any part of the insured ^^ Cox v. Charleston Ins. Co. 4 La.
property). 0. S. (2 La. 559) 289.
440
THE POLICY § 167
the blank was not filled up. It wa>s stipulated therein as follows:
"No shipment to be considered as insured until approved and in-
dorsed on this policy by the assurer. , . . Indorsements val-
ued at the same, provided they do not vary from the cost more
than per cent," and it was held that the policy was an open,
not a valued one ; that the statement in the indorsement of the sum
insured was not a valuation.^® And where the policy contained the
following words: ''The said goods and merchandise are valued at
eighteen francs, valued at four dollars and forty-four cents," it
was held to be an open policy, these words merely ascertaining at
what rate the value of the cargo paid for in francs was to be re-
duced into our money.^'^ And a policy enumerating certain articles
with figures indicating dollars placed opposite to each, does not
constitute a valued policy. ^^
§ 167. Valued policies: prior insurance. — Where insurance was
effected on a vessel, valuing her at the amount insured, being four
thousand dollars, and afterward another policy was effected to the
amount of four thousand dollars, without notice of the prior insur-
ance, and a partial loss occurred which the phiintiffs claimed as a
charge upon the whole amount insured in the second policy, it was
held that defendants were liable for as much of the agreed value of
the vessel as was not covered by the prior insurance, being to the
extent of two thousand dollars, and that it was not necessary to
give notice of the first insurance to the defendants.^^ In another
case it is held that on a double insurance, if the first policy be open
and the other valued, and the insured cedes to the insurers on the
open policy as much as they insured, and obtains payment as for a
total loss, and he has short property on board, he can only recover
on the valued policy for the loss of the property he could cede on
the same.^° In a Massachusetts case the question arose whether the
goods were covered by a valued policy or an open one. Under
the valued policy goods were included which were shipped between
the first day of February and the fifteenth day of July, the second
policy to cover goods shipped subsequently to July 14th and prior
to October loth. The goods in question were shipped on the 15th
of July, and the court held that they were not within the protec-
ts Snowden V. Guion, 101 N. Y. iniurray v. Insurance Co. of
458, 5 N. E. 322. See § 158 herein. Pennsylvania, 2 Wash. (U. S. C. C.)
"Ogden V. Columbia Ins. Co. 10 186, Fed. Cas. 9961. See § 2489
Johns. (N. Y.) 273. See § 158 herein,
herein. * 2° Crais? v. Murgatroyd, 4 Yeates
"Luce V. Springfield Fire & Ma- (Pa.) 161.
rine Ins. Co. 1 Flip. (U. S. C. C.)
281, Fed. Cas. 8,589.
441
§ 168 JOYCE ON INSURANCE
tion of the first policy.^ Where a cargo is insured by diverse pol-
icies, in some of which the rate of exchange is fixed at which tlie
prime cost of the cargo shall be valued, in ascertaining the amount
of the interest of the insured, upon settlement of those policies in
which the rate of exchange is fixed, the whole cargo is to be valued
at that rate, without regard to the rate by which the values were
ascertained in the other policy.^
§ 168. Valued policies: what are. — Life insurance policies are.
valued in that the amount is fixed as the sum to be paid, without
deduction, in case of loss, or the happening of the specified con-
tingency,^ and in so far as mutual benefit certificates resemble life
policies,' the same rule applies as it does also in accident policies
where a certain amount is to be paid in case of death resulting from
injury. So every policy on profits is necessarily a valued policy,'*
and policies on ships are generally valued.^ When a policy recites
that the amount insured is not more than three fourths of the value
of the property, ''as appears by the proposal of the insured," and the
application of the insured contains a valuation of the property, the
policy is a valued one.^ AVhere a running policy of marine insur-
ance contained a stipulation, "No shipments to be considered as
insured until approved and indorsed on this policy by this com-
pany," the valuation to be fixed by the indorsement, it was held that
the policy was not an open, but a valued one ; that each indorse-
ment of a shipment and the valuation thereof constituted a separate
and distinct contract of insurance, and that the contract was not
complete, as to any specific shipment, until the indorsement of value
on the policy.'
A policy covering loss caused by lightning is held not to be within
a valued policy law.*
1 Atkins V. Bovlstoii Fire & Ma- * Patapseo Ins. Co. v. Coulter, 3
rine Ins. Co. 5 " Mete. (46 Mass.) Pet. (28 U. S.) 222, 239, 7 L. ed.
439 659; Riley v. Hartford Ins. Co. 2
2 Pleasants v. Maryland Ins. Co. 8 Conn. 368 ; Mumtord v. Hallett, 1
Craneh (12 U. S.) 55, 3 L. ed. 486. Johns. (N. Y.) 433. See Eyre v.
(This was not a valued policy.) Glover, 16 East, 218; Barclay v.
3 Connecticut Mutual Life Ins. Co. Cousins, 2 East, 544; 2 Phillips on
V. Schaefer, 94 U. S. 457, 463, 24 Ins. (3d ed.) 1209.
L. ed. 251; per Bradley, J. ; Cammack * Examine 14 Am. & Eng. Ency. of
V. Lewis, 15 Wall. (82 U. S.) 643, 21 Law, 340.
L. ed. 244: Chisholm v. National ^Nichols v. Fayette Mutual Fire
Capital Life Ins. Co. 52 Mo. 213, 215, Ins. Co. 1 Allen (83 Mass.) 6.3.
14 Am. Rej). 414. 416, per Wagner, '' Schaefer y. Baltimore Manna
J.; St. John y. American Life^Ins. Ins. Co. 33 Md. 109.
Co. 2 Duer (N. Y.) 419, 13 N. Y. » Katjleman v. Fire Assoc, of
38, 64 Am. Dec. 529, per Crippen, Phila. /9 Mo. App. 447, 2 Mo. App.
J.; Miller v. Eagle Life & Health Repr. 487.
Ins. Co. 2 E. D. Smith (N. Y.) 268.
442
THE POLICY §§ l(i8a-170
§ 168a. Rent insurance policy analogous to valued policy. —
A policy insuring against loss of rent may validly stipulate for a
method of ascertaining and computing the loss without violating
in any way the principle that insurance shall furnish only indem-
nity against loss. And w^here it is stipulated that the loss of rents
shall be deemed to be the amount of rentals that would be collected
by the insured during the period required to restore the building to
a tenantable condition, assuming that the rentals would have con-
tinued to be the same in amount as at the time of fire, excluding all
elements except those of actual rentals at the time of fire and the
time required for rcpaii'. in such a case the policy is analogous to
a valued policy in so far as it prescribes a method of determining
as between the parties the amount of loss.^
§ 169. Mixed policy defined. — Sometimes a policy may be open
as to certain proi)erty and valued as to other property, as where a
policy is for ten thousand dollars, being on a vassel and freight, and
the vessel is Talued at eight thousand dollars, but the blank for
valuation of the freight is not filled. It is a mixed policy, open as
to the freight, and valued as to the vessel ; ^° or as in case of a house
and furniture, the house being valued and the furniture not/^
although in this case the valuation was held not conclusive; or u
policy may be mixed as to the duration, as where it sets out the
termini but limits the risk by time.^^ AVhere a policy insured a
vessel for a specified time for a particular voyage outward, after the
voyage was made bui before the time had expired the same under-
writer insured the vessel for the return voyage, by a certificate made
"under and subject to the conditions of the existing policy," it was
held that no liability accrued for a loss occurring after the time
specified in the original policy. ^^
§ 170. Time policy defined. — A time policy limits the duration
of the risk by definite periods of time by fixing its beginning and
end ; " as where a policy was effected December 17, 1845, for one
^Whitney Estate Co. v. Northern ^^14 Am. & Eng. Ency. of Law,
Assurance Co. 155 Cal. 521, 2.3 335. See Manly v. United Marine &
L.R.A.(N.S.) 123, 101 Pae. 911, 18 Fire Ins. Co. 9 Mass. 85; Martin v.
Am. & Eng. Ann. Cas. 512. See §§ Fishing Ins. Co. 20 Pick. (37 Mass.
13a, 163f herein. 389; 1 Arnould on Marine Ins. (6th
On construction of policy or con- ed.) 373; Id. (8th ed. Hart & Simey)
tract insuring against loss of rents, p. 13, sec. 9; 17 Earl of Halshury's
see notes in 16 L.K.A.(N.S.) 1055; Laws of England, p. 383, sec. 759.
23 L.R.A.(N.S.) 123; 47 L.R.A. Attachment and duration of risk:
(N.S.) 296, and L.R.A.r916F, 694. mixed policy. See § 1490 herein.
10 Riley v. Hartford Ins. Co. 2 ^^ Pitt v. Phtt'nix Ins. Co. 10 Dalv
Conn. 368. (N. Y.) 281.
11 Post V. Hampshire Mutual Ins. i^ Grousett v. Sea Ins. Co. 24
Co. 12 Met. (53 Mass.) 555, 46 Am. Wend. (N. Y.) 209; 1 Arnould on
Dec. 702. Marine Ins. (6th ed. Maclachlan) p.
443
§ 171 JOYCE ON INSURANCE
year commencing and ending at 12 o'clock noon." In the cai?e
here instanced it was lield that the meridian of the phice where
the contract was made determined the ]»arties' rights." "Sometimes
attempts are made to construe time poUcies as voyage policies, but
the courts have not encouraged them." "
§ 171. Time policy: computation of time. — It is held that ''from
the day of the date" excludes the day, while "from the date" in-
cludes it:" while in Pugh v. Leeds ^^ it was determined that no
distinction exists between those terms.^" In Perry v. Provident Life
Insurance & Investment Company,^ the rule of computation was
that. time computed from the act done includes the day, but com-
puted from the day of the act excludes the day. In this case the
policy was from noon to noon where the injury should ''occasion
death within ninety days from the happening thereof," and it was
held that an accident happening at nine o'clock A. M., causing
death at the same hour, on the ninty-lirst day, was not within the
policy ,2 although in a later case in the same state ^ concerning a
deposit of a copy of the writ and of the return of the attachment in
the town clerk's office, it w^as held that in computing time from the
date or from the day of the date or from a certain act or event, the
day of the date is to be excluded, unless a different intention is
manifested by the instrument or statute under which the question
arises.* So in a South Carolina case the day of passage of an act
laying an embargo for a specified time from its passage was ex-
.S71; Id. (8th ed. Hart & Simey) .shipped between February 1 and July
p. 13, sec. 9; 17 Earl of Halsbury^s 15, 1840, it was held that the policy
Laws of England, p. 336 and note, did not cover shipments made on the
sec. 170; Id. pp. 381, 382, sees. 754, fifteenth day of July, 1840: Atkins
755, V. Boylston Fire & INIarine Ins. Co.
"Walker v. Protection Ins. Co. 5 Met. (46 Mass.) 439.
29 Me. 317. Computation of time: attachment
16 Walker v. Protection Ins. Co. xind duration of risk, see § 1446.
29 Me. 317. Time policy : attachment and dura-
1' Porter's Law of Ins. (2d ed.) tion of risk, "see § 1489 herein.
100, citing Crowlev v. Cohen, 3 Bam. " Cowp. 714.
& Adol. 478, 13 Eng. Rul. Cas. 314; 20 gee Atkins v. Boylston Fire &
Joyce V. Kennard, L. R. 7 Q. B. 78. M. Ins. Co. 5 Mete. (46 Mass.) 440.
18 Sir Robert Howard's case, 2 ^ 99 Mass. 162.
Salk. 625; Holt, K. B. 195 (case of 2 ggg also Perry v. Provident Life
policy of assurance on H.'s life for Ins. & Investment Co. 103 Mass. 242.
a year. He died on the last dav, and ^ Bemis v. Leonard, 118 Mass. 502,
insurer was held liable). See Weeks 19 Am. Rep. 470. This is a leading
V. Hull, 19 Conn. 376, 1 Am. Dec. case, reviewing the authorities at
249 ; Blake v. Crowninshield, 9 N. H. length.
304; Isaacs v. Roval Ins. Co. 39 L. J. * Case cited with approval m Lane
Ex. 189, 22 L. J." Q. B. 681; Cornell v. Holman, 145 Mass. 222, 13 N. E.
v. Moulton, 3 Denio (N. Y.) 12. 602.
Where the goods were to be
444
THE POLICY § 171
eluded, and a policy made on that day was held yalid.^ Again, in
case of insurances in mutual benefit societies, where the member is
required to pay an assessment within a specified number of days
from the date of notice or from the time notice is ''served on" or
''sent to"' the assured, that day is excluded.^ The intent of the
parties as to the commencement and end of the risk, however, gov-
erns if it can be ascertained from the policy or subject matter^
Where a policy of insurance is expressed to be "from August 1,
1854, to August 1, 1854," it may be shown by reference to the in-
dorsements made by the insurers on the back of the policy, to the
application, which is made a part of the policy, and to the amount
of the premium and deposit note, to be an insurance for five years
from August 1, 1854.* In conclusion, the general rule on the
question of exclusion or inclusion of the day, so far as it is possible
to formulate one, seems to be that the question is, in the absence of
some governing statute, one of construction, dependent upon the
intent of the parties evidenced and deducible from the contract and
attendant circumstances, so far as the latter are admissible in evi-
dence. "If, however," says Mr. Parsons, "there is nothing in the
language which clearly indicates the intention of the parties, time
should be computed exclusive of the day when the contract was
made." ^ Mr. May says: "The circumstances and intent of the
parties are to control ; and such construction should l)e given as will
operate most to the ease of the party entitled to fav.or. and by which
riiihts will be secured and forfeitures avoided." ^^ We are inclined,
however, to the opinion that time computed from the date or day
of date, or from some certain act or event, excludes the day or
event,^^ particularly so when such a construction would come with-
5 Lorent v. South Carolina Ins. Co. ing, 43 Conn. 56, 21 Am. Rep. 634
1 Nott. & McC. (S. C.) 505. (see 48 Vt. '201, given below).
^ Protection Life Ins. Co. v. Palm- Kentuckij. — Chiles v. Smith, 13 B.
er, 81 111. 88. See § 1339 heroin. Mon. (Kv.) 460.
'O'Connor v. Towns, 1 Te.x. 107; Mkhi<jan.—\Yixvren v. Slade, 23
1 Phillips on Ins. (3cl ed.) 918 et seq. I\Iicli. 1, i) Am. Rep. 70 (here judg-
p. 499 et seq.; 2 May on Ins. (Par- ment was barred by statute ten yeai-s
sons') sec. 400, see also Id. (4lli ed. after judgment was entered. The
Gould's) sec. 400, p. 919. day of entry was held e.xduded).
* Liberty Hall Assoc, v. Housa- Missouri. — Baumeister v. Conti-
tonic Mutual Fire Ins. Co. 7 Gray nental Casualty Co. 124 Mo. App.
(73 Mass.) 261. 38, 101 S. W. 152 (notice of dis-
^2 Parsons on Contracts (7th ed.) ability sufTicient when given within
bottom p. 796, *p. 663. time specified after beginning of dis-
^°2 May on Insurance (3d ed.) ability: accident policy),
sec. 400, id. (4th ed. Gould's) sec. Bhode Island.— Ci\rro\ v. Salis-
400, p. 919. bury, 28 R. I. 16, 65 Atl. 274 (day
^^ Connecticut. — Blackman v. Near- of date on which act was done ex-
445
§ 172 JOYCE ON INSURANCE
in the rule contra proferentem, whereby in insurance policies the
conHtruction is against tlie insurer and most favorable to the as-
sured, or where such a rule would operate to save forfeitures.^^
§ 172. Time policy: trading voyage: nature of contract. — A
policy, on time simply, where no ports are mentioned or goods laden
or to be laden, the risk to commence from the loading on board the
vessel, necessarily implies a trading voyage with liberty to dispose
of the goods insured; and the policy attaches, however often the
goods may be changed;^' and it is held that a time policy, upon
the cargo, on a trading voyage is in tlie nature of a new insurance
upon the new cargo or the goods remaining at risk, every time the
cargo is increased or diminished otherwise than by the perils in-
sured against, but the total amount for which the underwriters are
to be made liable during the whole time or voyage cannot be an
amount exceeding his subscription, except for general average and
expenses incurred in preserving or attempting to recover the prop-
erty for his benefit. If after the delivery of a portion of the first
cargo, the residue, to an amount equal to or exceeding the subscrip-
tion, be lost on a voyage to another port, the insurer is liable to the
amount of his subscription,^*
eluded: levying execution so as to New York. — Judd v. Fukon, 10
prevent discharge of attachment). Barb. (N. Y.) 118.
Vermont. — Beeman v. Cook, 48 Vt. England. — Mercantile Marine Ins.
201, 21 Am. Rep. 123 (it was held Co. v. Titherington, 5 Best & S. 765.
in this and the 43 Conn. 56, case See also 2 Parsons on Contracts
given above, that in computing the (7th ed.) bottom p. 635, n. A. *p.
time of the limitation of an action 504, bottom pp. 795-98, *pp. 662-
on a promissory note the day on 65, where the authorities are ex-
which it matures is to be excluded.) haustively considered; 7 Wait's Ac-
See a.s to general rule : tions & Defenses, 231,
United States. — Pearpoint v. Gra- General rule as to first and last
ham, 4 Wash. (U. S. C. C) 232, Fed. davs in computation of time, see
Cas. 10,877. notes 49 L.R.A. 193, 15 L.R.A.(N.S.)
Alabama. — Boyett v. Frankfort 686; i8 Am. St. Rep. 370 et se<].;
Chair Co. 152 Ala. 317, 44 So. 546 notes 7 Am. Dee. 250; 46 Am. Rep.
(tirst day excluded and last day in- 410.
eluded for taking appeal) ; Lang v. The code^^ of many states make
Phillips, 27 Ala. 311. special provisions governing the mat-
('(difornia. — Bank of Lemoore v. ler.
Fulgham, 151 Cal. 234, 90 Pac. 936 ^^ ^ee e. viii. herein, and §§ 220-
( first day excluded, last day includ- 24.
ed: notice of tax sale). ^^ Grousset v, Louisiana Ins, Co. 24
Louisiana. — Wetmore v. Mutual Wend. (N. Y.) 209; Coggeshall v.
Aid & Ben. Life Assoc. 23 La. Ann. American Ins. Co. 3 Wend. (N. Y.)
770. 283.
Neio Hampshire. — Blake v. Crown- ^* American Ins. Co. v. Griswold,
inshield, 9 N. H. 304. 14 AVend. (N. Y.) 399, 479.
446
THE POLICY §§ 173-175
§ 173. Time policy: continuance after expiration of time. — A
time policy may also be made to be continued in force from the date
of its expiration until notice of discontinuance, as where a marine
policy provided that it should "continue in force from the date of
expiration until notice is given to this company of its discontinu-
ance, the assured to pay for such privilege pro rata for the time
used," and the term of the policy expired October 5th. The as-
sured sent on October 9th a month's premium, stating that it was
"one monthly premium from October 5th to November 5th" on
the insurance "as specified in the policy," and it was determined
that the company was liable for a loss occurring November 6th, and
that the payment was not notice to discontinue the policy, nor an
election to continue it another month, and no longer, but that the
policy continued in force by its own terms until notice given by
assured of discontinuance.^^
§ 174. Voyage policy defined. — A voyage policy is one which
establishes the duration of the risk and specifies the voyage by
setting out the termini, as where the words are used "at and from
New York to San Francisco" they describe the voyage during which
the risk is to continue. ^^ It may cover risks of transportation by
land and may also include a voyage out and home, a.s a single risk."
§ 175. Voyage policy: voyage must conform to course fixed by
usage. — It is a well-settled rule of law that the underwriters are
bound to know the usages of trade in which they are insurers, and
to make their contracts in reference thereto, ^^ and the insurer in
estimating the premium is presumed to have considered the usual
course of the voyage as fixed by mercantile usage between the termi-
ni, and describing the voyage in the policy is an express reference
15 Greenwich Ins. Co. v. Provi- limits. Practically, they impose up-
dence & Stonington Steamship Co. on the insurer the liahility of the
119 U. S. 481, 7 Sup. Ct. 292, 30 common carrier between the two ends
■ L. ed. 473. of the journey. The risk begins in
See § 1506 herein, as to extending such policies when the goods start or
the time where the ship is "on a pas- get into the carrier's hands, and con-
sage," etc. tinues from thence until arrival in
18 xMeh'lier v. Ocean Ins. Co. 5fl Me. the hands of the consignee or other
217; 17 Enr\ of Halsbury's Laws specified determination of the transit,
of England, p. 336, sec. 174. See I'ut it will not continue during a
§ 2365 lierein. deviation. In some cases the carrier
" Patapsco Ins. Co. v. Biscoe, 7 makes himself the insurer. Thus,
Gill & J. (Md.) 293; Bermon v. railway companies will grant insur-
Woodbridge, 2 Dong. 781, 14 Eng. ances on goods carried by them for
Bui. Cas. 507. "Voyage policies the safe carriage of which they are
against land risks are sometimes tak- not liable under the carriers' act."
en out, but are not so common as Porter's Law of Ins. (2<1 ed.) 100.
time policies. They cover the things ^^ Grant v. Lexington Fire, Life &
insured between certain geographical Marine Ins. Co. 5 Ind. 23, 61 Am.
447
§ 17G JOYCE ON INSURANCE
to the usual manner of making it as much as if every circumstance
were mentioned. ^^ Therefore, the voyage must conform to the
usual course of sailing prescrihed by mercantile usage between the
places designated as the termini; ^° but if no usual course be tixed
by usage, then the way should be that which the master, if of ordi-
nary skill and discretion and acting according to his best judgment,
shall determine to be the safest and most direct, and which shall
conduct the adventure in the most advantageous and expeditious
manner consistent with safety.^ This subject of description of the
voyage will, however, be more fully considered hereafter.^
§ 176, The form of the policy: statutory provisions: standard
policy. — A policy of insurance is the contract reduced to writing.
It is a simple or parol contract, since it need not be under seal,^ and
is of very ancient date. But slight changes had been made therein
prior to 1785, when the statute 25 George III., chapter 44, requir-
ing the insertion of names in certain policies, was enacted.* Pol-
Dee. 74; AVall v. Howard Ins. Co. numerous disputes, the committee of
14 Barb. (N. Y.) 383; Wadsworth v. Lloyds proposed a general form
Pacific Ins. Co. 4 Wend. (N. Y.) 33; wliicli was adopted by the members
Noble V. Kennoway, 2 IDoug. 511; on the 12th of January, 1779, and
Salvador v. Hopkins, 3 Burr. 1707. remains in use, with few slight al-
19 Pellv V. Kovul Ex. Assur. 1 terations to this day." IGth. Ency.
Burr. 341, 14 Eng. Rul. Cas. 30; 1 Britannica (11th ed.) ^'Llovds" pp.
Arnould on Ins. 340. 833, 834. See also 14th Id. "In-
^^ See Deering's Annot. Civ. Code, suranee" (subhead "Lloyds") p. 661.
Cal. sees. 2692, 2693. For forms of policies of insur-
1 See Deering's Annot. Civ. Code, ance, sued on in early English cases,
Cal. sec. 2693. in tiie originals and in their trans-
^ See § 2365 herein. lations, see 11 Publicat. Seldon Soc.
^ Viele V. Germania Ins. Co. 26 pp. 45 et seq. in Cavalchant v. May-
Iowa, 9, 96 Am. Dec. 83; Sanborn v. nard, 1548; Broke v. Maynard, 1547;
Fireman's Ins. Co. 16 Gray (82 De Salizar (or Salazar) v. Black-
Mass.) 448, 77 Am. Dec. 419, man, 1555; Braschett v. Smithe,
* Changes were made some j^ears 1559; Ravens v. Hopton, 1558; Rid-
prioi- to 1785 by inserting a memo- olploye v. Nunez, 1562; Whyte v.
randum at the foot of the policy, and Beeswicke, 15(13 De ]Moucheron v.
the words "as well in his own name Sadler, 1565; Dutch policy, 1638.
as for and in the name and names of For statutory form of marine pol-
all and every person or persons to icy in England, see 1 Arnould's Ma-
whom the same doth, may, or shall rine Ins. (Perkins' ed. 1850) 20, *21;
appertain in part or in all," and 1 Id. (Maclachlan's ed. 1887) 231,
the words "as interest mav appear:" 232, who says it was printed in
See Stat. 25 Geo. III. c. 56 (1788). schedule 35 George III. c. 63, and
"One of the first improvements in reprinted in schedule 30 Vict. e. 23,
the mode of effecting marine insur- Consohdated Stat. Ins. Law; Gorman -
ance was the introduction of a print- v. Lineating, 2 Saund. 201, n. c;
ed form of policy. Hitherto various "Wolfe v. Horncastle, 1 Bos. & P.
forms had been in use; and, to avoid 316, 320, 13 Eng. Rul. Cas. 265,
448
II
THE POLICY
§ 170
icies have been, however, very inaccurately and loosely drawn in-
struments, although it would necessarily follow that some degree of
certaint}' would have been attained through usage, lengthened ex-
perience, and frequent constructions thereof by the courts.* An
examination of the numerous cases arising upon the construction
of policies in the United States shows a lack of uniformity in form
of policies written in this country, and owing to attempted modifi-
cations and introduction of new features, the policies here are varied,
and this applies even to standard fire policies.
Buller, J. See also as to form or tract. See Henderson (ed. 1911) p.
copy of Lloyds policy, 17 Earl of 339.
HalsVjurv's Laws of England, p. 340; For form of clause, insuring
15 Chitty's Stat. England, p. 906. against loss or damage io properti/
Almost all insurances in England and also against loss of human, life
are framed on model of form given or injury to person whether to as-
in 17 Earl of Halsbury's Laws of sured, to employees or to any other
England, p. 340. In an English case pei-son caused by the explosion or
Lord Alverstone, C. J., says: "It rupture of steam boilers, under policy-
is necessary, in the first place, to issued prior to New York act of
point out that we must not attach 1892, c. 690, sec. 55, expressly au-
any special importance to the fact thorizing employer to take an acei-
that the form of policy which has dent insurance covering his em-
been adopted in this case is that of a ployees collectively for the benefit of
Lloyd's policy, for it is well known such as should be injured. See Em-
that that form of policy is no longer bier v. Hartford Steam Boiler Ins.
confined to the marine risks to which Co. 158 N. Y. 431, 44 L.R.A. 512, 53
it is more strictly applical)le but is N. E. 212.
now used to cover many other kinds For form of certification of benefit
of risks." Tannebaum & Co. v. association and of its by-laws and
Heath, 77 L. J. K. B. 634, [1908] 1 rules, see Lawler v. Murphy, 58
K. B. 1032, 99 L. T. 237, 13 Ann. Conn. 294, 8 L.R.A. 113.
Cas. 264, 24 T. L. R. 450-C. A. a * In 1791 Lord Kenyon, in Brough
case where an order for discovery of v. Whitmore, 4 Term Rep. 208, says :
ships papers was refused, such dis- "I remember it was said many years
covery being peculiar to marine in- ago that if Lombard street had not
suranee. The policy was in the form given a construction to policies of
of Lloyd's marine policy insuring insurance, a declaration on a policy
goods against risk of fire on land and would have been bad on a general
risks of transportation on shipments, demurrer, but that the uniform prac-
For forms of policies in use in the tice of merchants and underwriters
commercial world in 1834, see Van- had rendered them intelligible;" and
cher's Guide to Marine Ins. (ed. Buller, J., in the same case, adds
1834). "that a policy of assurance has at
Form of Philadelphia Marine pol- all times beeti considered in courts of
icv of 1749. See History of Ins. Co. law as an absurd and incoherent in-
of North America, published 1885 in strument." See also Maryland Ins.
Philadelphia. Co. v. Woods, 6 Cranch (10 U. S.)
Form of fire policy, England. See 29, 45, 3 L. ed. 143; Yeaton v. Fry,
17 Earl of Halsbury's Laws of Eng- 5 Cranch (9 U. S.) 335, 342, 3 L.
land, p. 527. ed. 117; Simond v. Boydell, 1 Doug.
Form of casualty insurance con- 270; Marsden v. Reid, 3 East, 578.
Joyce Ins. Vol. I. — 29. 449
§ 176 JOYCE ON INSURANCE
The form, however, is not essential unless required hy statute.
Statutes, however, have been passed in a number of states adopting
standard fire policies.^
Statutory provisions also exist in New York for forms of life,
accident and health policies J So the statute may authorize forms
^ Connecticut.— Comp. Ins. Laws 1887, c. 429, amd'g Laws 1886, c.
1905, p. 18, sees. 3497, 3499, Genl. 488.
Stat. 1902, sees. 3497, 3499. North Carolina.— Rev. Stat. 1905,
/owa.— Acts 1907, pp. 79-83, c. sees. 4759, 4760.
76, additional to e. 4, title IX. of North Dakota.— Civ. Code 1899,
Code. See also ' acts 1911, p. 13, sec. 4608 ; Laws 1890, p. 253, c. 74.
amdg. sec. 1758-b of Suppl. to Oregon.— L&ws 1907, c. 137.
Code 1907, sees. 1758a, 1758b. Bhode Island.— Genl. Laws 1896,
Loicisiana.-Act No. 105 of 1908, pp. 570, 580, sees. 4, 5.
art. 3, sec. 22; Const. & Rev. Laws South Dakota.— Lnws 1907, c. 170,
1904, p. 864. N. Y. form was adopt- amdg. Sess. Laws 1905, c. 126, re-
ed by sec. 22 of act no. 105 of 1898, pealing Rev. Codes 1903, p. 682,
p. 151. sees. 664-666.
Maine. — Laws 1905, e. 18, Rev. West Virrjinia. — Acts 1907, c. 77,
Stat. c. 49, see. 4, Laws 1895, p. sec. 68, p. 313, amending and re-en-
14 c. 18, expressly repealed all in- acting c. 34, Code.
consistent prior laws. See Kuowl- Wisconsin. — Laws 1907, c. 525;
ton V Patrons Androscoggin Mut. Laws 1905, c. 102, 108; Laws 1895,
Fire Ins. Co. 100 Me. 481, 2 L.R.A. e. 387, Rev. Stat. 1898, sec. 1941,
(NS) 517n, 62 Atl. 289, 35 Ins. subsees. 43-65; (Sand. & Berr. Ann.
L. J. 81. i^tat. 1898); Laws 1891, vol. 1, c.
Massachusetts. — Acts 1907, e. 576, 195, last law invalid. See Vorous v.
sec. 60, pp. 882-886; Rev. Laws c. Phoenix Ins. Co. 102 Wis. 76y 78 N.
118, see 60; Stat. 1894, c. 522, sec. W. 162.
59, Pub. Stat. c. 119, sec. 138; acts England.— In Canada the statutes
1887, c. 214, sec. 60; St. 1881, c. regulate the form of the policy : See
166- Stat. ]873 c. 331. Hartney v. North British Fire Ins.
Michigan.— Fuh. acts 1905, p. Co. 13 Ont. R. 581; Citizens' Ins. Co.
423, act No. 277, Howell's Annot. v. Parsons, 4 Can. Sup. Ct. R. 215.
Stat 1882 sees 4344—53. Reasons for adoption of standard
Minnesota.— Rev. Laws 1905, see. poUcy considered. Gazzam v. Ger-
1640, Genl. Laws 1897, e. 254; Genl. man Union Fire Ins. Co. 155 N. Car.
Laws 1895, c. 175; Stat. 1891, vol. 330, 336, Ann. Cas. 1913E, 282, 71
1, sees. 2973-77; Gen. Laws 1889, c. S. E. 434.
927 Marshall, however, in his work on
Neiv Hampshire.— Fnh. Stat. 1901, Insurances (vol. 1, ed. 1810), says:
.c. 170; Laws 1885, c. 93, see. 3. "There does not seem to be any rea-
For historv of New Hampsliire laws son for prescribing by law the con-
as to standard policy, see Franklin tents of a policy of insurance any >
v. New Hampshire Fire Ins. Co. 70 more than those of any other species
N. H. 251, 47 Atl. 91, 30 Ins. L. J. of contract. . . . The common
73 (decided in 1900). course appears to be the better one,
New Jerseij.-r-1902, p. 437, c. 134, namely, to leave parties to make such
par. 77' Laws 1892, c. 231. stipulations and in such terms as
Neiv ' YorA-.— Laws 1903, c. 106, they may choose."
amd'g Laws 1901, c. 513, amd'g Laws ' Laws N. Y. 1910, sec. 107 (in
450
I
THE POLICY § 176a
of life policies M'hich provide for payment of fixed premiums or as-
sessments at certain times for a term of years or during life.'
§ 176a. Standard policy: constitutional law: power of legisla-
ture and of commission: review by court: injunction. — That a
state has the right or power to prescribe by legislative enactment
one standard form of fire insurance policy and to limit incorporated
insurance companies, domestic or foreign, to the issuance thereof
upon property witliin its borders, is undoubted, and such statutes
are constitutional.^
effect, Jan. 1, 1911) amdg. art 2, c. fire insurance companies. "While the
33. Laws 1909, constituting c. 636 individual ha-s existence and conse-
of Consol. Laws. Laws N. Y. 1907, quent rights independent of the legis-
c. 623, am'd'g Laws 1906, c. 326, .sec. lature, the corporation or incorporat-
101. See Conn. Pub. Laws 1909-11, ed company derived its existence and
p. 1297, for form of accident policy; rights solely from legislative action.
Mich. Pub. acts 1907, no. 187, The legislature may refuse to grant
Minn. Laws 1907, c. 220 ; N. Dak. any corporate rights or pow ers what-
act March 19, 1907. Ohio act ap- ever, and even existence, or it may
proved May 21, 1910, am'd'g and re- grant one only. Until the legisla-
pealing sec. 9419, Genl. Code; Laws ture acts, these do not and cannot
1908, pp. 139 et seq. exist. So the legL'ilature may by gen-
In New York, single policy may eral law or special act 'amend, alter,
embrace life, health, accident and dis- or repeal' any corporate charter or
ablement from sickness. Laws N. Y. corporate right or existence once
1912, p. 446, c. 232, sec. 70, subd. granted (except, of course, where it
10. But in Massachusetts the form has stipulated not to do so), and in
of policy cannot, under the statute so doing it may cut away the powers
combine classes of insurance such as of a corporation one after another,
life, accident and health in the same and from time to time, and finally
policy, or health and accident as in- destroy the last one and the corpora-
cidental to life insurance. x'Etna Life tion itself. It cannot, of coui-se, con-
Ins. Co. V. Hardison (Travelers Life fiscate the property of the corpora-
Ins. Co. V. Hardison) 199 Mass. 181, tion once lawfully acquired. It
85 N. E. 410, 37 Ins. L. J. 818. cannot impair the obligation of a
® Home Life Assur. Co. v. May- contract once lawfully made by a cor-
nard, 112 Mich. 497, 4 Det. L. N. 96, iioralion. So far tJie legishTturo is
70 N. W. 103; Mich. Pub. acts 1895, restrained by the State and Federal
act No. 58, see. 11, am'd'g Pub. actS' Constilulions. But it can prohibit
1887, act no. 187. See Franklin tlie acquisition oE any more proper-
Life Ins. Co. V. Commissioner of ty by the corporation. It can pro-
Ins. 159 Mich. 636, 16 Det. L. N. hibit tlie making of any new con-
994, 39 Ins. L. .1. 468 construing Pub. tracts whatever by the corporation,
acts 1907, no. 187, sec. 1, subd. 1 and or any new contract except one of
2. a particular prescribed kind and
^ Opinion of Justices, In re, 97 Me. form with prescribed stipulations
590, 55 Atl. 828, 33 Ins. L. J. 44. therein. This power, sweeping as it
It was declared in iliis case that: if. in its scope, is necessarily im]ilied
*'We do not find in <'ither Constitu- and included in the reserved power to
tion, Federal or State, any section or amend, alter, or repeal the very Icgis-
clause in terms inhibiting such an lative acts which gave life powers
exercise of the legislative power over and rights to the corporation. This
451
176a
JOYCE OX INSURANCE
But a delegation of power to a commission to draft, etc., a stand-
ard form of fire insurance policy is unconstitutional as conferring
power is inberent in tlie legislature,
unlimited by any section or clause
in the Federal or state Constitution
which we have been able to And.
Head v. Providence Insurance Co. 2
Cranch (6 U. S.) 127, 2 L. ed. 229;
Bank of Augusta v. Earle, 13 Pet.
(38 U. S.) 519, 10 L. ed. 274; Miller
V. New York, 15 Wall. (82 U. S.) 478,
21 L. ed. 98 ; Greenwood v. Union
Freight Co. 105 U. S. 13, 26 L. ed.
961; Spring Vallev Water Works v.
Schottler, 110 U.'S. 347, 28 L. ed.
173, 4 Sup. Ct. 48; Norfolk & West-
ern Railroad Company v. Pennsyl-
vania, 136 U. S. 114, 34 L. ed. 394,
10 Sup. Ct. 958; State v. Brown &
Sharpe Manufacturing Co. 18 R. I.
16, 17 L.R.A. 856, 25 Atl. 246;
Schaft'er v. Union IMiuing Co. 55 Md.
74; State v. Maine Central R. Co. 60
Me. 490, affirmed in Maine Cent. R.
Co. V. Maine, 96 U. S. 499, 2 L. ed.
836.
"As to foreign fire insurance com-
panies, those incorporated in other
states and countries, they, of course,
are equally subject to the legislative
power of this state so far as the ex-
t<rcise of their rights or powers, and
their presence or existence within this
state, are concerned. They are not
protected by the intei-state commerce
clause of the Federal Constitution.
Hooper v. California, 155 U. S. 648,
39 L. ed. 247, 15 Sup. Ct. 207. The
legislature can wholly exclude them
from the state, and hence can impose
such conditions and limitations upon
the exercise of any rights and pow-
ers and business, and even presence,
in this State, as it sees fit. Norfolk
& Western Railroad Company v.
Pennsylvania, 136 U. S. 114. 34 L.
ed. 394, 10 Sup. Ct. 958; Hooper v.
California, 155 U. S. 648, 39 L. ed.
247, 15 Sup. Ct. 207; Dryden v.
Grand Trunk Rv. of Canada, 60 Me.
512.
"The statute does not" offend
against the 14tli Amendment to the
452
Constitution of the United States,
since it bears equally upon all fire
insurance companies, domestic and
foreign, without attempting any
discriminations, and does not de-
prive any person of life, liberty,
or property without due process of
law. . . . But the broad question
of the constitutional right of the in-
dividual to make and enforce con-
tracts for the acquirement, posses-
sion, and protection of property, by
insurance or othenvise, free from leg-
islative interference, is not presented
here. Whatever the extent of the
constitutional right of the individual
to make insurance contracts with
other individuals, or unincorporated
associations of individuals, we think
it clear from the principles above
stated that he has no constitutional
right to make any particular insur-
ance contract with a corporation.
True, the complete power of the legis-
lature to limit or destroy the right
of a corporation to make contracts
necessarily includes the power to
limit or destroj' the right of the in-
dividual to make contracts with it,
but this incidental result cannot be
held to limit the power of the legis-
lature over its own creature, the cor-
poration. The legislature is not re-
quired by the Constitution to create
corporations for individuals to make
contracts with, nor is it prohibited
from limiting or dissolving corpora-
tions with which individuals may
wish to contract.
"It follows that the statute cited
and inquired about is constitutional,
being within the legislative cogni-
zance, and not forbidden by any sec-
tion or clause of the Constitution,
state or Federal."
As to the power of the legislature
to regulate the insurance bu.siness,
see also opinion of the court, per
Knowlton, C. J., in New York Life
Ins. Co. V. Hardison, 199 Mass. 190,
127 Am. St. Rep. 478. 85 N. E. 410,
I
THE POLICY § 176a
legif^lative •po^A-el■.^" So in Pennsylvania it is held that, whether
or not, the legislature itself may prescribe a form of contract of in-
surance, it cannot delegate the power to an insurance commissioner
to prescribe a standard policy of insurance ; and that a statute pro-
viding "for a uniform contract or policy of insurance to be made
and issued by all insurance companies taking lire risks on property
within tlie state," directing the insurance connnissioner to prescribe
a standard policy of insurance, and forbidding the use of any other,
is unconstitutional, as an unauthorized delegation of legislative
power.^^ So in Minnesota a statute directing the insurance com-
missioner of the state to prepare and adopt a blank policy, together
with such provisions and conditions as may be added thereto or in-
dorsed thereon to form a part thereof, such form to conform as near
as the same can be made practicable to the form known as the New
York standard life insurance policy, and requiring all insurance
corporations, after the adoption of such form, to use it in all pol-
icies for fire insurance, and all renewals thereof, does not, of itself,
adopt the form referred to as in use in New York, but leaves the
commissioner a discretion to add to, or omit from, the provisions
of such policy, and is therefore void, because it delegates to tlie com-
missioner legislative power, which can be exercised only by the leg-
islative department of the state. ^^ Tn INIassachusetts the legislature
has power to prescribe requirements controlling or regulating the
forms of life insurance policies and to give to the insurance com-
missioner authority to pass upon forms of policies issued and to
provide that the insurance companies shall be liable criminally for
issuing policies in a form not approved by him. And it may not
only prescribe such requirements and confer on such commissioner
37 Ins. L. J. 848, see §§ 327, 328 per Peasleo, J. (historical statement
herein. m opinion).
^•^ Kin^^ V. Concoidia Fire Ins. Co. Tliat stanflard policy law invalid
140 ]\Iich. 258, 12 Det. L. N. 160. as delegating power to insurance
See Phenix Ins. Co. v. Perkins, 19 commi.ssioner, see Vorous v. Phenix
S. Dak. 59, 101 N. W. 1110. Ins. Co. 102 Wis. 76, 78 N. W. 162,
^^ O'Neil V. American Fire Ins. Co. so declared as to Laws 1891, c. 195,
166 Pa. St. 72, 45 Am. St. Rep. 650, sec. 1, and under Laws of 1895, p.
26 L.R.A. 715, 30 Atl. 943. 778, .sec. 5, the form of policy was
^2 Ander.son v. Manchester Fire As- pre.scribed by the legislature. See
sur. Co. 59 Minn. 182, 50 Am. St. also Dowlins: v. Lancashire Ins. Co.
Rep. 400, 28 L.R.A. 609, 60 N. W. 92 Wis. 63, 31 L.R.A. 112, 65 N. W.
1095. 738.
As to statute delegating- power to Secretarif of State has power to
comrais.sioner and subsequent enact- approve. rei}isurance contract!^ of life
ments under the New Hampshire risks; statute conferring such i)ower
standard policy act, see Franklin v. constitutional. Iowa Life Ins. Co. v.
Now Ilampsliirc Fire Ins. Co. 70 N. Fa.^torn Mutual Life Ins. Co. 64 N.
H. 251, 47 Atl. 91, 30 Ins. L. J. 73, J. L. 340, 45 Atl. 762.
453
§ 176a
JOYCE UN INSURANCE
authority to see that said requirements are ('01111)116(1 witli., l)iit it may
also autliorize a court, where there is a qiiestion between the com-
missioner and the companies concerning the point wliether the
forms used by them comply with the statute, to determine the ques-
tion. ^^ In Missouri it is held that an injunction against the ap-
^^ New York Life Ins. Co. v. Har- court for the determination of the
(lison, 199 Mass. 190, 127 Am. St. que.stion whetlicr their proposed
Rop. 478, 85 N. E. 410, 37 Ins. L. J. action was within the law.
848 (Stat. 1907, p. 895, c. 576, sec. "With the power of regulation of
75). The court, per Knowlton, C. the business of insurance, and of the
J., said: "The tirst suggestion is conduct of corporations, domestic
that the legishiture could not give and foreign, belonging to tlie legis-
the insurance commissioner power to lature, it seems to us that such com-
jiass upon the forms of policies to panies may be forbidden to issue
be issued, and, especially, could not policies that are deemed contrary to
jirovide that an insurance company law by an administrative oflicer, un-
sliould be liable criminally for issu- til the court can determine the legal
ing a policy in a form not approved questions involved. The insurance
by liim. Secondly, it is suggested commissioner cannot decide liiudly,
tliat jurisdiction could not be given
to this court to review the action of
the insjLirance commissioner in a case
of this kind.
nor exercise any judicial p(nver in
the premises. In these cases, the
companies failed to satisfv an ad-
ministrative ollicev, nclina for' 1ho
"The insurance commissioner is an protection of the public, that they
administrative officer. The legis- were ]>roceeding legally. The stal-
lature prescribed the requirements in ute declares that, thereupon, they
the forms of policies. It did not see shall do no more business until there
fit to prescrilie a standard form for is a judicial determination of their
life insurance companies, but stopped rights by tliis court. This part of
witii an enactment of substantive the case is cov(?red by the decision in
provisions for all jmlicies. It was Provident Savings Life Assur. Soc.
j)roper to leave to the insurance com- v. Cutting, 181 Mass. 261, 92 Am. St.
missioner the management of details Rep. 415, 6.'5 N. E. 433, and there
in the administration of tlie law. It are many other cases in which au-
was pro))er to proliibit the use of thority souu'what like this is held to
policies that did not (Conform to the have been rightly exercised by public
law, and to miiiish disobedience on officers: Dwelling House Ins. Co. v.
the i)art of an insurance company.
It was a reasonable regulation to re-
quire companies to sulimit the forms
of policies to the insurance commis-
AVilder, 40 Kan. 561, 20 Pac. 265;
State ex rel. v. Moore, 42 Ohio St.
103; Rrodt)ine v. Revere, 182 Mass.
598, 66 N. E. 607; Commonwealth v.
sioner before using them, so tliat he Sisson, 189 Mass. 247, 109 Am. St.
could see whether the law was being
obeyed. His <luty was to approve of
every form of policy that seemed to
him correct. The insurance com-
panies, after submitting their forms
to him, had notliing to do but to go
on with their business, unless he
Rep. tr.O, 1 L.R.A.(N.S.) 752n, 75
N. E. 71.
"The authority for a so-called re-
view by this court is simplv a pro-
vision for an original judicial pro-
ceeding which an insurance company
mav bring Ijcfore a court of law, to
made objection within thirty days, ascertain whether its action in estab-
If he made such objection, they were lishing the form of its jiolicy is legal,
given a right to bring suit in this The jtarty on one side is the com-
454
THE POLICY § 176b
proval by the superintendent of insurance of a uniform policy of
insurance, under a statute which is alleged to be unconstitutional
as an attempt to delegate to him legislative powers, cannot be grant-
ed on behalf of individuals in order to protect them in the right
to make contracts of insurance to suit their vaiying needs and cir-
cumstances, as the statute if luiconstitutional cannot stand in the
way of any contracts that may be made. And the mere possibility
of injury by an unconstitutional statute which may prevent insur-
ance companies from making such contracts as persons might other-
wise procure them to make will not authorize injunctive relief in
behalf of those wlio wish such contracts.^*
§ 176b. Standard policy: stipulations contra, additions, changes,
etc. — Emerigon, in considering whether it is "permitted to stipu-
late agreements contrary to the dispositions of the Ordonnance,"
says: ''One may not derogate from the prohibitory dispositions of
the Ordonnance" or "from the directions of the Ordonnance in
points that are of essence of the contract. But it is jjermitted to
vary from them in all points which not being prohibited by any
express text concern neither the essence of the contract nor good
morals nor public law, and such is the doctrine of the common
law." ^* And where a statute authorizes the attachment to the pol-
icy of separate slips or riders upon which the insurer may write or
print in type, not smaller than long primer, provisions adding to
pany, tlie party on the other side is The Ordonnance de la Marine, art.
the in.surance commissioner, repre- 3 des Assur., makes certain pre-
senting the public. It is a convenient visions as to what the policy shall
and proper method of settling the contain. Emerigon (id.) also says:
rights of the company and of the "The Reglement of Barcelona and
people, by a regular trial of the dis- the Reglement of Anis((M-dam declare
puted question whether the company, null and of no value all contracts of
in its plan for conducting its busi- assurance made and pas.'^ed in their
ness, is within the statute. Tiiere is prejudice, tliough the ]iarties have
no reason why the legislature should stipulated and contracted to the con-
iiot provide such a judicial tribunal trary. This principle is too general;"
for such a purpose. See Stat. 1800, tlien follows what we have above
]>. 258, c. 304. Employers' Liability quoted in the text.
Assur. Corp. v. Merrill, 155 Mass. As to effect of variations from
404, 29 N. E. 529; Janvrin, In re, statutory ])rovisions concerning
374 Mass. 514, 47 L.R.A. 319, 55 N. policy in Canada, see Hartney v.
E. 381; Movnihan, Appeal of, 75 North British Fire Ins. Co. 13 Ont.
Conn. 358, 53 Atl. 903. We see no R. 581 ; Parsons v. Queen Ins. Co. 2
constitutional objection to this part Ont. R. 45.
of the act." ' As to statutory provisions see
^* Business Men's League v. Wad- Connecticut, Massachusetts, Minne-
dill, 143 Mo. 495, 40 L.R.A. 501, 45 sola, New Hampshire, New Jersey,
S. W. 262. New York, North Carolina, Pennsyl-
^^ Emerigon on Insurance (Mere- vania, Rhode Island, South Dakota.
dith's ed. 1850) e. ii. sec. 8, p. 48.
455
1701)
JOYCE ON INSUKANCE
or modifying those contained in the standard form of policy, more
tlian one such niodifyino; provisions may be written or printed on
the same slip of paper, and the words ''separate" and "to be at-
tached thereto," used in the statute, expresses the idea of something
not originally a part of the policy, but distinct therefrom. ^^ But
the Minnesota statute of 1895 did not authorize the parties to modi-
fy or add to the stdtutory form, and the enactment of 1897 in ex-
press terms prohibited the making of any changes except such as
were specifically enumerated in the statute; and the purpose of
the law required that all conditions should appear in one written
instrument. ^'^ In New Hampshire every policy stipulation in con-
^* Rolfe V. Patrons' Androseogo-in
Mutual Fire Ins. Co. 105 Me. 58,^76
Atl. 879, Rev. Stat. e. 49, sec. 4.
^"^ Wild Rice Lumber (Jo. v. Roval
Ins. Co. 99 Minn. 190, 108 N. W.
871, 35 Ins. L. J. 824. The court,
per Elliott, J., said: "The lumber
company contends that the provision
injects forbidden conditions into the
standard policy, and the insurance
companies that it merely determines
one of the 'conditions of insurance'
authorized by see. 52, c. 175, p. 417,
Gen. Laws 1895, and is also express-
ly authorized bv sec. 1, subd. 2, c.
254, p. 468, Gen. Laws 1897. A
glance at the history of the standard
form of policy makes it very clear
tliat the legislature of this state in-
tended to deprive fire insurance com-
panies of the right to add to or
change the terms and conditions of
the prescribed form. The right to
make such changes and additions is
one of the principal distinguishing
characteristics of the two class&s of
standard forms. The Massachusetts
and New York standard policies went
into effect about the same time, and
have formed the models for the legis-
lation in other states. Bolli states
were seeking uniformity of insur-
ance conti'acts, but Massncluisotts did
not attempt to deprive llie |)tnties ot"
the liberty of making their own con-
tracts. It merely adojjted a model
which the parties Avere at liberty to
modify at will. But New York went
further, and determined the form
Avhieh all must use, with the privilege
of adopting certain prescribed
clauses to cover particular conditions.
The Minnesota act of 1889 imposed
upon the insurance commissioner the
duty of preparing a standard form
of policy which should be obligatory
after that year. The New York form'
was prepared and went into use, but
the act was declared unconstitution-
al because it attempted to delegate
legislative powers to the insurance
commissioner. In 1895 the legis-
lature adopted the Massachusetts
form, with such modifications as
were necessary to avoid conflict witli
the valued policy law. Section 53
provided that a company may write
upon the margin or across the face
of the polie}^, or write or print in
type not smaller than long primer,
upon separate slips or riders to be
attached thereto, provisions adding
to or modifying those contained in
the standard form. The insurance
companies then adopted a general
rider which embraced substantially
all tlie provisions of the New York
form. But the legislature of 1897,
amending .sec. 53, c. 175, p. 417,
Gen. Laws 1895, in express terms
prohibited the making of any changes
excejit such as were specifically
enumerated in the statute. The
conclusion is inevitable that the legis-
lature intended to deprive the parties
of the right to make insurance con-
tracts in any form except as pre-
scribed by the statute." The court
456
THE POLICY § 176c
flict with llie statutory form is void.^* Under the Massachusetts
statute, whicli requires every life insurance company to tile with
the insurance commissioner for his approval a copy of any form
of policy that it purposes to issue," it is his duty to determine
whether the policy contains the substantive provisions of the law
called for by statute, in such a form as to give the contract proper
eflfect. In other words, it is the commissioner's duty to consider
matters of substance called for by the statute, and he is not con-
fined in his examination to merely matters of form, such as the size
or shape of the paper on which the contract appears, or to the size
of type, or the order in whicli the different parts of the contract are
set forth. And provisions inserted in the policy need not be identi-
cal with those provided for by statute ; it is suflicient if they are con-
tained in substance in the policy, and their form may be varied,
and additional provisions beneficial to insured may be inserted, pro-
vided they satisfy the statutory requirement, and do not diminish
them by such added policy provisions.^" Under another case in
that state it is held that no departure from the exact provisions of
a life policy required by statute should be permitted, unless the sub-
stituted provision is plainly as advantageous in every way to the
insured as the prescribed one.^
§ 176c. Standard policy: vi^aiver. — In New Hampshire the stand-
ard policy act is a part of every contract of insurance. No waiver
of any part of it can be set up by the insurer, every policy stipula-
tion in conflict therewith is void, and every other form is forbidden. ^
then gives tlie statute (sec. 53, e. 254, and specification of the property in-
p. 468, Gen. Laws 1897) and con- sured, the .so-called "space clause"
tinues: "The prescribed form with may contain effective languag'e limit-
the changes thus authorized is the ing the general descriptive language
only form of tire insurance contract of the policy.
authorized by the laws of the state. ^^ Franklin v. New Hamp-shire
. . . Changes and additions are Fire Ins. Co. 70 N. H. 251, 4i Atl.
now forbidden, except as specifically 91, 30 Ins. L. J. 73, considered in
permitted, but the policy must still next following section herein,
contain all the conditions of insur- ^^ Mass. Stat. 1907, p. 895, c. 576,
anee." And it is held that a fire in- see. 75.-
suranee company has no authority to ^^ 2FAna Life In's. Co. v. Hardison
attach to the standard form of (Travelers Life Ins. Co. v. llardi-
policy a clause by which the insured son) 199 Mass. 181, 85 N. E. 410,
Avarrants the maintenance of a desig- 37 Ins. L. J. 818.
nated clear space about the insured ^ New York Life Ins. Co. v. Ilardi-
premises. Such a "space' clause," at- son, 199 Mass. 190, 127 Am. St. Rep.
tached as a rider, is void in so far 478, 85 N. E. 410, 37 Ins. L. J. 848.
as the warranty is concerned; but, as ^ j^-'i-yj^i^ji,! y ]Sfew Hampshire
the statute expressly authorizes an Fire Ins. Co. 70 N. H. 251, 47 Atl.
insurance company to print or ii.se 91, 30 Ins. L. J. 73 (decided in
in its policies forms of description 1900); Laws 1879, c. 13 (Pub. Stat.
457
§ 17Gd JOYCE ON INSURANCE
But although the Maine act of 1895 prescribes the form of a stand-
ard policy and the stipulations to be contained therein it does not
restrict tlie ri,2,ht of waiver, and even though the policy requires
"assent in writing or in print of the"' insurer a waiver of the exj)ress
terms of the policy may arise from acts done and knowledge on the
part of the insurer without ''assent in writing or in print." ^ And
in North Dakota while the enactment of a standard form of policy
law may affect a question of pure waiver it does not abrogate the
doctrine of estoi)pel, especially where policies are by statute such
policies are subject to waiver the same as other policies * and under
a Michigan decision a defense of forfeiture under a standard policy
by a mutual company may be waived.^ In Pennsylvania the pro-
visions of a policy under an unconstitutional statute, providing for
a uniform fire policy and directing the insurance commissioner to
prescribe a standard form of policy, must be construed as those of
a voluntary contract between the parties which may be" waived by
them in any manner, and not as the requirements of a statute,
which can be waived only in the manner prescribed thereby.^
§ 176d. Standard policy law: effect as to valued policy law. —
In Louisiana the standard policy law has been held to have been
repealed by the valued policy law in so far as the latter conflicts
with the former.' But the Minnesota legislature in 1895 adoj^ted
the Massachusetts standard form of policy with such modifications
as were necessary to avoid conflict with the valued policy law.* In
South Dakota the standard form of fire insurance policy is open as
0. 170) enacted immediately after de- One judge dissented. See chaps.
eision that a provision in the policy 18-21, §§ 432 et seq. herein as to
which conflicted with the statute was waiver by agents.
a waiver of the lattei-: Ta.sker v. ^ First Baptist Cluircli of Jackson
Kenton Ins. Co. 58 N. H. 469. See v. Citizens' Mutual Fire Ins._Co._lin
Gleason v. Canterbury Mutual Fire I\Iich. 203, 5 Det. L. N. i6,, It N.
Ins. Co. 73 N. H. '583, fi4 Atl. 187, \V. 702, 28 Ins. L. J. I(i5.
35 Ins L J 932. ^ O'Neil v. American Fire Ins. Co.
3 Bigelow" v. Granite State Fire 166 Pa. 72, 45 Am. St. Rep. 650, ^^6
Ins. Co. 94 Me. 39. 46 Atl. 808, 30 L.R.A. 715, 30 Atl. 945, revV 3 D.
Ins. L. J. 77; Pub. Laws 1895, c. 18. R. 778 (act April 1891, Pub. L. 22,
See also Goodhue v. Hartford Fire see. 1).
Ins. Co. 175 Mass. 187, 55 N. E. 'New Orleans Real Estate Mort-
1039, 29 Ins. L. J. 1087. But com- gage & Securities Co. v. Teutonia
pare Straker v. Phoenix Ins. Co. 101 Ins. Co. 128 La. 45, 54 So. 466, 40
Wis. 413, 77 N. W. 143, 28 Ins. L. Ins. L. J. 999. Compare Melancon
J. 143. V. Plio^nix Ins. Co. 116 La. 324, 40
* Leisen v. St. Paul Fire & Marine So. 718.
Ins. Co. 20 N. Uak. 316, .30 L.R.A. « WUd Rice Lumber Co. v. Royal
(N.S.) 539, 127 N. W. 837, 39 Ins. Ins. Co. 99 Minn. 190, 108 N. W.
L. J. 1729, the question of waiver 871, 35 Ins. L. J. 824, per Elliott, J.
by agents is exhaustively considered.
458
THE POLICY §§ 176e-177
to personal property and a strictl}^ valued policy as to real estate
where the .^anie is wholly destroyed.^
§ 176e. Statutory requirements as to size of type, written con-
ditions, etc. — Statutory provisions requiring conditions or restric-
tions to be printed in a certain sized type or written in ink in
order to constitute a valid defense to the non-performance of such
conditions or restrictive provisions, must be complied with.^° And
this aj)plies to the application as well as to the policy,^^ but does not
apply to conditions concerning risks insured which impose no bur-
den on the insured. ^^ In an action against an ''old-line company"
it is held error to instruct the jury that, under the Kentucky stat-
ute,^^ such parts of an application as were printed in type smaller
than brevier were not to be considered by them as constituting any
part of the application, as the statute does not apply to such com-
panies, but only to co-operative insurance companies.^*
§ 176f. Standard policy: mutual companies or associations:
"special regulations" as part of policy. — Where a standard form of
fire policy is prescribed and the statute is subsequently amended so
as to enable mutual companies or associations incor})orated under
the law of the same state, having special regulations to eml)ody
them in the policy as a part thereof, such companies cannot, by
merely designating some regulations as ''special," overthrow the
provisions of the law otherwise binding upon all insurance com-
panies. It was the intent of the legislature l)y the amendment to
limit such regulations to those lawful regulations which are s])ecial
or ])eculiar to such nmtual organizations; to those specially appli-
cable to its organization, etc., as distinguished from other kinds of
insurance companies.^*
§ 177. The policy: what it usually contains: policy to contain
entire contract: statutes. — Although the form is not essential unless
9 Lawver v. Globe Mutual Ins. Co. ^^ Provident Savings Life Assur.
25 S. Dak. 549, 127 N. W. 615, 39 Sop. v. Elliott, 29 Ky. L. Rep. 552,
Ins. L. J. 1588. 9.", S. W. 659, 35 Ins. L., J. 7i:^.
1" Equitable Life Assur. Soe. of U. ^^ Nielsen v. Mercliants' Mutual
S. V. Wilson, 110 Va. 571, 2 Va. App. Ins. Co. 26 S. Dak. 405, 128 N. W.
943, 4() S. E. 836, Va. Code 1904, 491, 40 Ins. L. J. 65; Laws 1905,
sec. 3252. See National Life Assoc, c. 126, sec. 2 (standard policy law),
V. Berkeley, 97 Va. 571, 34 S. E. amd. Laws 1907, e. 170, sec. 1 (iiuitu-
469. See 2514 herein. al companies: ''Special re<iu-
iiRurruss v. National Life Assoc, lations"). See Gleason v. Canter-
96 Va. 543, 1 Va. S. C. Rep. 57, 32 bury Mutual Fire Ins. Co. 73 N. H.
S. E. 49. 583", 64 Atl. 187. 35 Ins. L. J. 932;
^2 Cline V. Western Assur. Co. 101 Conunonwealth Mutual Fire Ins. Co.
Va. 496, 44 S. E. 100; Code 1887, v. Edwards, 124 N. Car. 116, 32 S.
sec. 3252. E. 404.
" Kv. Stat. 1903, sec. 679.
459
§ 177 . JOYCE ON INSURANCE
required by statute, and although the parties may enter into what-
ever legal and valid contract they choose, yet the policy usually
contains, either in itself or by express reference to the application or
other papers, (1) the names of the parties, (2) the consideration
or premium, (3) duration or term insured, (4) the peril or risk or
voyage insured, (5) the amount insured, (G) the subject matter
or the description of the interest when necessary, (7) the warranties
and conditions, (8) the attestation clause, signatures, dates, etc.,
and, if necessary, the seal.^* This rule, however, is subject to many
16 The 30 Vict. c. 23 (1867), sec. sured; 3. Of the subject insured;
7, provides that no contract for sea 4. Of the perils insured against; -5.
in.surance, other than that referred to The name of the sliip and master
in the merdiant sliipping act 1862 (except where the insurance is on
sec. 55, shall be valid unless expressed goods by ship or ships) ; 6. The
in the policy, and that every policy premium or consideration of the con-
shall specify the particular risk or tract; 7. The sums insured; 8. The
adventure, the names of the sub- subscription of the underwriter; 9.
scriber, or underwriter, and the sum Dated; 10. Stamped before exe-
or sums insured, and the omission of cution ;" and he states the statutory
any of them shall avoid the policy; requisites to be: 1. The insertion of
and see statute 25 & 26 Vict. e. 63, the name of some party really or
sec. 64; 28 Geo. III. c. 56, sec. 2. nominally assured; 2. The stamp; 3.
Mr. Marshall (Marshall on Insur- The risk or adventure; 4. The names
ance, ed. 1810, 305-43), says "the of the undei-\vriters; 5. The sums in-
usual requisites of a policy are ten," sured; 6. At common law, the premi-
they relate to marine insurance, and urn. This author also inserts what
are: 1. The name of the insured, is known as the running down clause:
his agent, or trustee ; 2. The name of Id. 251. This differs slightly from
the ship and the master; 3. The sub- those given by Mr. Arnould (Perkins'
ject matter of the insurance; 4. A de- ed. 1850) page 40. And also from 1
scription of the voyage with the com- Arnould on Marine Ins. (8th Ed.
meneement and end of the ri.sk; Hart & Simey) p. 41, sec. 28. See 17
5. The perils insured against ; 6. The Earl of Ilalsbury's Laws of England,
powers of the insured in case of a pp. 337, 338. By sec. 23 of the
misfortune; 7. The promise of the marine ins. act. "'A marine policy
insurers and their receipt for the must specify (1) the name of the as-
preraium; 8. The common memoran- sured or of some person who effects
dum; 9. The date and subscription; the insurance in his behalf; (2) the
10. The stamp. This first I'equiro- subject-matter insured and tlie risk
ment arose from llie statutes 25 Geo. insured against; (3) the voyage, or
]1I. c. 44, and 28 Geo. III. c. 56. The period of time, or both, as the case
second depends upon usage, since it may be, covered by the insurance;
is very ancient and exists in the (4) the sum or sums insured ; (5) tlie
forms of foreign policies. name or names of the subscribers,
Mr. jMaclaciilan (1 Arnould on and sec. 24 (1) declares that a 'ma-
Marine Ins. [ed. 1887] 251) states rine policy must be signed by or on
the following as substantial requisites behalf of the insurer.' " 1 Arnould
of a marine policy in England: on Marine Ins. (8th ed. Hart &
1. The name of some party, either Simey) sec. 8, p. 11; Id. sec. 11, p.
really or nominally insured; 2. A 20. And in case of a corpoi'ation the
description of the voyage or I'isk in- r-orporate seal may be sufficient. 17
460
THE POLICY § 177
qualifications. Thus, it is not absolutely necessary to the validity
of the policy in all cases that the name should appear,^' nor need
the nature and extent of the interest be specifically set out in every
case,^* and the valuation is sometimes not written in the policy.
Thus, a cargo policy may provide in the blank form that if no valu-
Earl of Halsbury's Laws of England, tliat defendant intended to insure
pp. 337, 338. such persons and their interests in
Although a contract may be one said premises as were or miglit be
of sea insurance within Stamp Act represented under said name or title.
1891 (54 & 55 Vict. c. 39) sec. 93, But see 30 Viet. c. 23. sec. 7; Lee v.
subsec. 1, still it will be invalid as Massachusetts Fire & Marine Ins.
such policy which cannot be stamped Co. 6 Mass. 215, 216.
or sued on as such or as a contract A policy issued in the adopted
to issue a policy wliere it does not name of the applicant, rather than
specify, as required by subsec. 3 of in that given him by his [)areuts is
said act, the sum or sums insured, valid. Smith v. United States Casu-
Ilome Marine Ins. Co. Ltd. v. Smith, alty Co. 197 N. Y. 420, 26 L.R.A.
(1898] 2 Q. B. D. Law R. 351, 67 (N.S.) 1167, 18 Am. & Eng. Ann.
L. J. Q. B. N. S. 777, 78 Law T. Rep. Cas. 631, 90 N» E. 947.
734, affg. [1898] 1 Q. B. 829, 78 Law A policy issued to one in his own
T. Rep. 465, 67 L. J. Q. B. N. S. name as "receiver for" a firm on their
554. "one-half interest" in a certain build-
Stamp tax on policies (marine, in- ing evidences clearly an intent to in-
land, fire); war revenue act consti- sure the receiver as the representative
tutional : whether insurance policies of the interest: Steel v. Phoenix Ins.
as documents are exports. See Co. 51 Fed. 715; 2 C. C. A. 463, 154
Thames & Mersey Marine Ins. Co. U. S. 518, 14 Sup. Ct. 1153, 38 L. ed.
Ltd. V. United States (U. S. D. C.) 1064 (court divided). See also Tliomp-
217 Fed. 683, war revenue act 1898, son v. Phenix Ins. Co. 136 U. S. 287,
act June 13, 1898, c. 448, see. 25, 34 L. ed. 408, 10 Sup. Ct. 1019, 19
Sched. A, 30 Stat. 461. Ins. L. J. 481.
The "sum at risk," in a marine As to policy to corporations in
policy, is the valuation placed upim their name, see Holbrook v. St. Paul
the property by the policy itself. Ins. Co. 25 Minn. 229; Clark v. Ger-
Standard Marine Ins. Co. v. Nome man Mutual Fire Ins. Co. 7 Mo. App.
Beach Lighterage & Transp. Co. 133 77; Bon Aqua Imp. Co. v. Standard
Fed. 636, 67 C. C. A. 602, 1 L.R.A. Fire Ins. Co. 34 W. Va. 764, 12 S.
(N.S.) 1095. E. 771. And an insurance company
"The thing or property insured cannot escape liability for a fire loss
is called the subject matter of insur- because the deed to the plaintiff
ance (Marine insurance) 17 Earl of corporation was made before it
Halsbury's Laws of England, p. received its cliarter, and the name
336. used in the deed was slightly difter-
^' See §§ 310, 1689 herein. ent from that subsequently given it.
See AVeed v. London & Lancashire Sumter Tobacco Warehouse Co. v.
Fire Ins. Co. 116 N. Y. 106, 112, Ph«?nix Ins. Co. 76 S. Car. 76, 10
22 N. E. 231, where the defend- L.R.A. 736, 121 Am. St. Rep. 941,
ant by the policy in suit under- 56 S. E. 654.
took to insure tlie "Estate of 0. ^^ Vannatta v. Mutual Security
Richards" against loss or. damage by Ins. Co. 2 Sand. (N. Y.) 490, 494.
fire, and the referee found as a fact See §§ 1691 et seq. herein.
461
§ 177
JOYCE ON INSURANCE
ation be written herein then the property inserted is herel)y vahied
at invoice cost on board. Nor is a written date essential/^ except
possibly in case of marine policies in England subscribed by Lloyds
underwriters,^" and stipulations relating to signing and counter-
signing are sometimes dispensed with.^
Where a statute prohibits unjust discrimination between insurants
of the same class and makes it unlawful for any life insurance com-
pany to promise to give any advantage or valuable consideration
whatever, not expressed or specified in the policy and requires the
contract to be wholly expressed therein, an option to purchase
shares of the insurers stock, not expressed in the policy, violates the
statute, a.s any act which is a benefit to one party and a disadvantage
to the other is a valuable consider ation. ^
Under the statutes of several states a life policy must contain the
entire contract,' and what must or must not be specified in a policy
is provided for by statute in many states,*
^^ Lee V. Massachusetts Ins. Co. 6
Mass. 218, 219. See § 157 herein.
If oral agreement mentions no date,
the risk begins immediately: Potter
V. Phoenix Ins. Co. 63 Fed.' ,382.
2° 1 Arnould on ^larine Ins. (Mac-
lachhin's ed. 1887) 249, 250.
^ Mvers v. Kevstone ^Nlntual Life
Ins. Co. 27 Pa. St. 268, 67 Am. Dec.
462. See §§ 33-35, 528, 530-532
lierein.
^ People V. Commercial Life Ins.
Co. 247 111. 92, 93 N. E. 60, 40 Ins.
L. J. 163; act June 19, 1891. Laws
1891, p. 148.
3 Colorado. — Sess. Laws 1907, c.
193, .see. 36, p. 455.
Delaware. — Laws 1907, c. 106, p.
190.
Illinois. — Laws 1891, p. 148, dis-
crimination as to rates etc. requires
fontracts to be \\iiolly expressed in
the application and policy construed
in People v. Commercial Life Ins.
Co. 247 111. 92, 93 N. E. 90, 40 Ins. L.
J, 163 : Rev. Stat. sec. 208u, clause 3,
& sec. 209, c. 73, Rev. Stat, construed
in McCarthy v. Pacific Mutual Life
Ins. Co. 178 111. App. 502.
Keiitiickij.—Siat. 1909, sec. 4400.
Louisiana. — Acts 1906, act no. 52,
p. 86.
Massachusetts. — Acts and Res.
46
1907, c. 576, sec. 75, pp. 895 et .seq.
providing that life policy and appli-
cation must contain entire contract.
Construed in New York Life Ins. Co.
v. HardLsen, 199 ^lass. 190, 127 Am.
St. R^^p. 478, 85 N. E. 410, 37 Ins.
L. J. 848; .Etna Life Ins. Co. v.
Hardison (Travelers Life Ins. Co. v.
Hardi.'^on) 199 Ma.ss. 181, 85 N. E.
407, 37 Ins. L. J. 818. See §§ 186,
187 herein.
Michigan. — Pub. acts 1907, p.
243.
Minnesota. — Laws 1907, e. 44, p.
49.
Montana. — Rev. Codes 1907, see.
5593.
New Hampshire. — Laws 1907, c.
110, p. 109.
Netv York.— Ins. Law 1892, e. 690,
se,c. 58, and 1906, c. 326, construed,
in connection with non-attachment
of medical examination to policy, in
Becker v. Colonial Life Ins. Co. 138
N. Y. Supp. 491, 153 App. Div. 382,
a%. 133 N. Y. Supp. 481, 75 Misc.
213.
North Dakota. — Laws 1907, c. 155,
p. 246.
Tennessee.— Acts 1907, p. 1530.
See 5<i5 190, 190a herein.
* Alabama. — Code 1907, sec. 4579,
provides that no Ufe, nor any other
THE POLICY
§ 178
§ 178. Execution of the policy. — The policy is executed by the
insurer, and although it is not signed by the assured, except where
certificates of membership in certain mutual benefit societies are re-
quired to be signed by the assured, and although the promise is by
the assurer and not by the assured, except in causes where the pre-
mium is not presumed to have been prepaid, he is bound to an ob-
servance of all its valid conditions if he intends to claim the indem-
nity, or as in life policies, the sum specified, his right to recover de-
pends upon a performance by the insured of the valid conditions of
the policy, since the violation of conditions of any policy constitutes
a valid defense by the insurer. A policy may be subscribed by the
insurance company, nor any agent
tliereof, shall make any contract of
insurance or agreement other than
is plainly expressed in the policy.
"Plainly expressed'' construed in
Hunt V. Preferred Accdt. Ins. Co.
172 Ala. 442, 55 So. 201, sec. 2002,
Code 1890, is same, and is construed
in Manliattan Life Ins. Co. v. Veme-
uille, 150 Ala. 592, 47 So. 72, 37 Ins.
L. .1. 892. When application and
policy one contract under code. See
SS 186, 187, 190 herein. When
(loenmcnts are part of policy under
code, see § 191 herein.
Arizona. — Civ. Code, par. 809,
and act March 21, 1907, Sess. L.
1907, p. 162.
Cah'forvia. — Civ. Code, sees. 450,
2587, .>^ec. 2587 covers parties, rate of
l)remium ; property or life insured ;
interest of insured in property, if not
absolute owner; risks insured
against; period during wiiicli insur-
ance to continue. Cited in Davis v.
Plia-nix Ins. Co. Ill Cal. 409, 411,
412, 43 Pac. 1115. Quoted in part
in Union Mutual Ins. Co. v. Ameri-
can Fire Ins. Co. 107 Cal. 327, 330,
28 L.R.A. 092, 40 Pac. 431.
Colorado. — Sess. Laws 1907, p.
455, sees. 36, 37, c. 193.
Illinois.— Rev. Stat. 1908, pp.
1248-1250, sees. 208u, 208v.
Indiana.-^^ee Burns Ann. Stat.
Rev. 1908, sees. 4725, 4752.
.I/fl,s,sflc7(M.s(?^/.'.— Stat. 1894, c. 522,
sec. 59, requring conditions of fire in-
surance to be stated in full. Con-
.strued, in connection with Pub. Stat.
c. 119, sec. 138 (standard policy) so
as not to preclude certain temporaiy
oral agreement in Goodhue v. Hart-
ford Fire Ins. Co. 175 .Ma.ss. 187, 29
Ins. L. J. 207, 55 N. PI 1039.
Michigan.— Puh. acts 1907, p. 252.
Minnesota. — Genl. Laws 1895, c.
175, p. 417, as am'd Genl. Laws 1897,
c. 254, p. 468, all conditions of fire
policy to appear in one written
instrument. So construed in Wild
Rice Lumber Co. v. Royal Ins. Co.
99 Minn. 190, 108 N. W."871, 35 Ins.
L. J. 824. See § 170b herein.
Missouri. — Rev. Stat. 1899, sec.
7903. Exact sum of money which
insurer promises to pay must be
specified in policy or certificate.
Construed in Courtney v. Fidelity
Mutual Aid Assoc. 120 Mo. App. 110,
94 S. W. 768, 101 S. W. 1098. Good-
son V. National ^Ia.sonic Accident
A.SSOC. 91 Mo. App. 339.
Montana. — Civ. Code (Rev. Codes
1907) sec. 5592 (sec. 3451).
New Jersey. — Laws 1907, c.
133.
North Carolina. — See Rev. of 1905,
sec. 4773.
North Dakota.— Tiev. Codes, 1899,
sec. 4488 (same as Cal.).
(97((V).— Laws 1908, pp. 171-174.
Porto Pico. — Rev. Codes (Civ.)
1902, sec. 1095.
South Dakota.— Jlev. Codes 1903,
sec. 1837 (same as Cal.).
Tennessee.^Acis 1907, c. 457, p.
1529. See e. 441, p. 1490.
72,
463
178
JOYCE ON INSURANCE
underwriter or by his duly authorized agent or attorney ,5 and the
statute niav require that tlie contract be signed by the insurer or
some authorized person.^. But in this country the business of in-
surance is carried on principally by chartered or incorporated com-
panies or associations, and the policy or certificate is generally sub-
scribed by the executive officers of the company, although the act
of incorporation, charter, articles of association, or by-laws may
designate certain ofhcers or agents to attest the policy, and the pol-
icy may also provide for the countersignature of a certain agent as
a condition precedent to its validity.' And it is held that a provi-
5 Guthrie v. Armstrong, 5 Barn. & Form of execution; standard fire
Aid. 628; 1 D. & K. 248. iiolicij of Massachusetts: "In wit-
6 Delaware Ins. Co. v. Pennsyl- uess whereof, the said company
vania Fire Ins. Co. 126 Ga. ■^S0, 55 has caused this policy to be signed by
S. E. 330. its president, and attested by its sec-
'7 See §§ 528, 530-532 herein, retary (or by such proper officers as
See also '§§ 39-41 herein; Com- may be desig-nated). at their office in
niercial Mutual Ins. Co. V. Union Ma- (date)."
rine Ins. Co. 19 How. (60 U. S.) Forw of execution; ^elv YorK
318, 15 L. ed. 636, 2 Curt. (U. S. C. Standard pre poVioi : "In witness
C.) 524; Head v. Providence Ins. whereof, this company has executed
Co. 2 Cranch (6 U. S.) 127, 150, 2 and attested these presents, but this
L. ed. 229 ; Peoria Fire & Marine Ins. policy shall not be valid unless
Co. V. Walser, 22 Ind. 73; Myers v. countersigned by the duly authorized
Keystone Mutual Life Ins. Co. 27 agent of the company at
Pa.' St. 268, 67 Am. Dec. 462. this day of 19—."
Form of execution of marine and Form, of execution; certificate of
fire policy: "In witness whereof, membership of mutual companij:
tlie Insurance Company has "In witness whereof, the .said
caused these presents to be signed company of have- caused tliis
by its duly authorized officers in the certificate to be signed by tlieir presi-
_: state of this — day of dent, and attested by tiunr secretary
^ one thousand hundred and in the city of , state of , this
^ secretary, presi- day of , a. d. 18 — .
dent." president, . secretary. Counter-
Anotlier marine form of execution signed at
is: "In witness whereof, the presi- ]8 — . —
dent or vice-president of the said
Insurance Company hath here-
unto subscribed his name and the
— this — day of
-, agent."
sum insured, and caused the same to
be attested by the secretary in
the — day of , one thousand,"
etc. Memorandum clause: " ,
secretary, , president."
Another form of execution; fire
polici/: "In witness whereof, this
Form of execution; certificate in
m.utual benefit or heneficiarij associa-
tion: "In witness whereof, the said
association of , state of
-, has by its president and sec-
retary signed, sealed, and delivered
this certificate at its office in ,
state of , this day of , 18 — .
-, president.
, secretary',"
noiicii: "in wiuie-ss' witncuj. n'^a «. • * -■ i
company has executed and attested affixing corporation seal.
these presents this - day of , I' orm ^ofexecntwn of Jew Jork
189—. —
president."
secretary,
464
standard life policy: "In witiie-ss
whereof, the company has caused this
THE POLICY § 178
sion requiring the policy to be countersigned must be complied
with.^ Again, that a policy of life insurance shall be countersigned
by the agent of the company before it shall become a valid obliga-
tion is a stipulation that the company has a right to make, and the
completion of tlie contract with the signature of such agent during
the lifetime of the insured is essential to the existence of an obliga-
tion which can be enforced against the company.^ A mutual ben-
efit certificate is not properly and completely executed where it is
not countersigned by the protector and secretary of the subordinate
lodge as provided by said certificate although the seal of such lodge
is impressed thereon, and the mere possession of the certificate is
not a waiver of such requirement.^" The validity of a policy or cer-
tificate constituting a contract between a benefit society and a mem-
ber thereof is not destroyed by the adoption of some impracticable
scheme for execution of the contract. ^^ So it is held that if the copi-
pany's charter requires that contracts shall be signed by the presi-
dent and countersigned by the secretary the subscription to be valid
must be made in that way.^^ The statute of ^Massachusetts, how-
ever, which provides that insurance corporations can make valid
policies only by having them signed by their president and secre-
tary only directs the formal mode of signing policies, and has no
application to agreements for insurance. ^^ Again, it is held that
it does not constitute subscribing a pohcy where the insurer's name
appears only at the beginning but not at the end of the instru-
ment.^* In Nebraska the statute of 1903 requiring all policies and
contracts of whatever kind for life insurance to be signed by cer-
policv to be executed this — v. Walton, 24 Okla. 671, 104 Pae.
day of . 009.
Form of execution; life policy: ^° Caywood v. Supreme Lodare
"In witness whereof, the said ■ Knights & Ladies of Honor, 171
Life Insurance Company [or society] Tnd. 410, 131 Am. St. Rep. 2o3, 23
has caused this policy to be signed L.R.A.(X.S.) 304n, 17 Am. & Eng.
by two of the executive officers at its Ann. Cas. 503, 86 N. E. 482, 38 Ins.
office in this day of , L. J. 147.
A. D. one thousand . , As to countersigning by agent or
secretary, actual^." sub-agent, see S§ 530, 531 herein.
Another form of execution; life ^^ Failey v. Fee, 83 Md. 83, 32
policy: "In witness whereof, the L.R.A. 311, 34 Atl. 8.39.
said Life Insurance Company ^^ gpi^^er v. St. ]\Jarks Ins. Co. 6
has by its president and secretary Duer (N. Y.) 6. But see §§ 31,
signed and delivered this contract at 32, 423, 425-27 herein.
the , this day of , one - ^^ Commercial ]\Iutual Marine Ins.
thousand , , secretary, Co. v. Union Mutual Ins. Co. 1!) How.
, president." (60 U. S.) 318, l.') L. ed. 63().
8 Badger v. American Popular Life ^* Globe Accident Ins. Co. v. Reid,
Ins. Co. 103 ^lass. 244. 19 Ind. App. 203, 47 N. E. 947,
9 Fidelity & Casualty Co. of N. Y. modified 49 N. E. 291, 7 Am. & Eng.
Jcivce Ins. Vol." I.— 30. 465
§ 178
JOYCE ON INSURANCE
tain officers of tlie companies is limited to companies formed tTiere-
under.^* And wliere a contract for employer's insurance provides
for indemnity to the insured in case of liability to employees for
damages for accidents and injuries sustained by them in the coui-se
of their employment, and also further provides for hospital treat-
ment for sick or disabled employees, in consideration that the in-
sured pays a monthly assessment based on the number of employees,
such a contract, being in the name of the corporation as the insur-
er, may be signed officially by its president, and such subscription
IS valid.^^
In case of marine policies in England private insurers underwrite
with their own names, and Lloyds' policy is ordinarily executed by
individual underwriters, and against each subscription is generally
set in words and figures the date and also the sum insured.^' And
in fact the act incorporating the society of Lloyds ^^ prohibits sub-
scribing in the name of a partnership or otherwise than in the name
Corp. Cas. N. S. 770; Rev. Stat.
1894, sec. 455. But compare Dela-
Avare Ins. Co. v. Pennsvlvania Fire
Ins. Co. 126 Ga. SSO, So'S. E. 330.
^^ Carter v. Bankers Life Ins. Co.
83 Neb. 810, 120 N. W. 455, acts
1903, c. 52, see. 15, p. 332.
^^ National Protective Ai^soc. v.
Prentice Brown Stone Co. 49 Minn.
220, 51 N. W. 916.
^"^ Form of subscript ion of Englisli
marine policy as recognized in the
marine insurance act as the standard
form of policy (Lloyds) : "In wit-
ness wliereof, we, the assurers, have
subscribed our names and sums as-
sured in London ;" then follows
memorandum clause, then si^jnatures
and sums affixed as follows: £
[figures] ; A B [sum in figures and
words], day of , A. D." for
each underwriter the sum subscribed
being specified, and date of each'
subscription affixed. See 1 Arnould
on Marine, Ins. (8th ed.) Hart &
Simey) p. 17, sec. 10; Id. p. 37, sec.
26 (as to club policy, sec. 2 Id. Ap
of Halsbury's
p. 339, citing
( 6 Edw. TIL c.
foot of the policy, writing opposite
thereto the sum insured by each;
and the effect of this is that each
makes a separate contract with the
assured for the amount, set opposite
to liis name, the assured thereby
acquiring a right of action against
each separately and not against all
jointly." 17 Earl
Laws of England,
marine ins. act 1906
41) see. 24 (2) : Tyser v. Ship Own-
ers Syndicate (reassured), [1896] 1
Q. B."l35; Leo Steamship Co. Ltd. v.
Corderoy (1896), 1 Com. Cas. 300,
379, C. A.
"The mode employed in effecting
an insurance at Lloyds is simple.
The business is done entirely by
brokers, who write upon a .slip of
paper the name of the ship and ship-
master, the nature of the voyage, the
subject to be insured, and the amount
at which it is valued. If the risk is
accepted, each underwriter subscribes
his name, and the amount he agrees
to take or underwrite, the insurance
pendix B.) 17 Earl of Halsbury's being effected as soon as the J^otal
Laws of Eng. p. 340, sec. 678, note.
Execution of policg. "\Yhere the
policy is underwritten by individuals
as, as in clause nineteen of Lloyd's
policy, they sign their names at the
value is made up." 16th Ency.
Britannica (11th ed.) "Llovds," pp.
833, 834. See also 14th Id. "Insur-
ance," subliead "Llovds," p. 661.
18 34 Vict. (1871), c. 21.
466
THE POLICY
§ 178
of an individual, being an underwriting member of the society for
each separate sum subscribed. The policy becomes, therefore, a
separate contract with each underwriter obligating him to the ex-
tent of his subscription or for some proportionate part thereof in
case of a pai'tial or average loss, thereby precluding an action
against the subscribers jointly, and necessitating a separate action
against each underwriter. Partnerships should subscribe as such,
and if there be a separate subscription by indi\idual partners this
does not preclude resort to partnership assets. The mode of sub-
scription by companies may depend upon the act of incorporation,
charter, or deed of formation. In case of subscription by what w-ere
known as insurance clubs in England some question has arisen as
to the manner of subscription, and the specilication of the sum or
sums insured, owing to the principles upon which these organiza-
tions were originally formed, and the necessity of conforming with
the requirements of the act of 1867, 30 Victoria, chapter 23, section
7, that each policy shall specify the names of the underwriters and
the sum or sums insured. These clubs, however, are now registered
under the companies act of 1862,^^ still preserving, as far as consis-
tent with existing laws, their mutual features.^"
1^25 & 26 Viet. e. 89. See also
7 & 8 Vict. c. 110. See stamp act
1891. See §§ IV., V. 33, 41d herein.
^° Validily of policy wliere sums
not specified. Policy in the common
form by an insnrance chib, where the
members are not responsible for the
solvency of each other, is valid, al-
though the sums which they re-
spectively insure are not speeitied on
the face of the policy. Dowell v.
Moore, 4 Camp. 166 (1815).
No stamped policy executed and no
recovery allowed, under 30 Vict. c.
23, sees. 7, 9 : Foster v. Liverpool
Marine Ins. Co. 9 L. R. Q. B. 418,
43 L. J. Q. B. 114, ariirminj; 42 L. J.
Q. B. 224 (1874). See §§ 33, 41d
herein.
As to stamping of policies of ma-
rine insurance in the United King-
dom see 1 Arnould on Marine Ins.
(8th ed. Hart & Simoy) p. 44, sec.
31, stamp act 1891 (54 & 55 Vict. c.
39), repealing all theretofore exist-
ing enactments as to stamping
policies, a.s amended bv the finance
act 1908 (8 Edw. VII. c. 16) sec. 5.
467
As to stamping the policy after exe-
cution. See Id. (1 Arnould) p. 47,
sec. 32; as to effect of the provision,
see Id. p. 46, sec. 32; as to penalties
for breach of stamp act see Id. p.
47, sec. 32; as to spoiled stamps see
Id. p. 48, sec. 33; as to legal effect
of the slips under the stamp act, see
Id. p. 48, sees. 34 et seq.
"Policy of sea insurance other
than such insurance as is refei'red to
in the merchant shipping act 1894,
sec. 506, is not valid unless expressed
in a policy, Avhich cannot be given in
evidence unless stamped, and this
must, except in certain specilied cases
be done before it is executed; but a
])olicy, although not duly stamix'd,
may for the purpose of production
in evidence, be stamped after exe-
cution on payment of a penaltv of
£100." 17 Karl of Halsbury's Laws
of England, sec. 676, p. 338.
Unregistered association; Com-
panies act: A mutual marine insur-
ance association was not registered
under companies' act. Eules provid-
ed that all persons insuring with the
§ 178a
JOYCE ON INSURANCE
§ 178a. Fidelity bond: necessity of signing by employee:
agency: waiver. — The failure of aii employee to sign a bond of in-
association should be members. No nection with these mutual assurance
ship was to be insured for more than associations. In the ease of Lion
tliree-fourths its value. The person Mutual Marine Ins. Assn. v. Tucker
insuring paid a deposit of twenty- (49 L. T. 7ti4, 12 Q. B. D. 17G), I
five shillings per cent on the amount endeavored to explain the business
for which he had insured it, ratably relation of the members of such an
according- to tiie amounts assured to association to each other. It is nec-
them respectively. There were more es&ary to consider the form in which
than twenty members. An insured the parties have carried out those
vessel was lost, and the amount was business relations in order to ascer-
ref erred to arbitration. The insured tain what remedies are available for
assigned his claim, judgment wa.s ob- the purpose of enforcing them. The
tained, and a petition presented to first tiuestion which it may be materi-
wind up the association, as its com- al to consider is, whether the different
pany consisted of more than twenty members of the association have any
members and was not registered. Its remedies or rights of action, and if
formation was forbidden by the com- so, wha< as between themselves. It
panics' act, 1862, sec. 4, and the is obvious, as explained in the case
court discharged an order for wind- I have referred to, that members can-
ing up, as it could not recognize the not sue other members in respect of
association as having any legal exist- payments due from the other mem-
ence: Padstow Total Loss Assur. bers as such to the association. Only
Assn. In re, L. R. 20, Ch. D. 137 the association can sue in respect to
(1882) ; Arthur Average Assn. Ch. & such pjiyments. Then can members
In re, L. R. 10 Ch. 542 (1875). sue other members in respect of
Contributions; Managing oicner; claims arising out of the insurance
Relations of members; Oicners' lia- of ships"? In the case of Lion Ins.
hility clauses: One T. was the man- Assn. v. Tucker (ubi sup.), I stated
ager and part owner of a steamship, that the business relation between the
of which N., the defendant, was also members was that they were in
part owner. T. became a member of i-eality both insurers and insured ; but
jjlaintiffs' association and took out that business relation is carried out
a policy with sucli association in re- by means of a policy given under
spect to the steamship. T. became seal of the a.ssociation. The members
bankrupt, and, being unable to pay of each class are insurers and insured
contributions due to association, ac- as between themselves and the other
rion was brought to make N. liable as members of the class ; they are in-
luiilisclosed principal. Lord Esher, sured, not by the whole association,
M. a., said: "The action is brought but by a part only of the association,
against the defendant, the part own- viz., the members of the same class.
cr of a ship, as the undisclosed prin- A member wlio had suffered a loss
cipal of Tully, the ship's manager, must, however, sue on the policy
who had taken out a policy on the given by the association. In order
ship in his own name, and had become to sue the other members of the class
thereby a member of the plaintiffs' who are really his insurers, he would
association according to its rules. The have to say that they were the prin-
question, therefore, arises whether cipals of the association in giving
the plaintiffs can sue the defendant him a policy under the seal of th.j
as TuUy's principal. There is much corporation. I do not think he could
complication and difficulty in con- do so. I think that in the case of
468
I
THE POLICY
§ 178a
demnity renders it entirely inoperative, where such bond declares
on its face that it will be invalid unless signed by the employee, and
that it is essential to the validity of the bond that his signature
be thereto subscribed, and that these are conditions precedent to the
right of the employer to recover under the bond. This freedom
from liability on the part of the insurer continues notwithstanding
such a contract as thi? under seal, it that he is a member of the association
is not allowable to go behind the in- to which he is wholly disclosed and
strument to make undisclosed prin- unknown. The association was divid-
cipals responsible because they are ed into three different classes, with
not parties, and have not attached a separate code of rules for each
their seals to the contract under seal, class, and the agi-eement in the policy
Moreover, it is to be observed that was, 'that the association, under all
in this case the contract is that he is their policies of insurance of the said
to be paid, in respect of the loss he class, shall be liable in the whole only
has suffered, only the amount which to the extent of so much of the funds
the association can collect from the as the said association is able to re-
other members of the class. Tliere cover from the members of the said
would be this difficulty in suing the class, and their respective heirs, ex-
other members, viz., that they might ecutors, and administrators liable for
have satisfied their liability W pay- the same, and which, under and by
ment of their contributions to* the virtue of the rules of said class, are
association, and the member is not to for the time being applicable for the
receive his pavment direct from them, purpose of paying claims under this
but is to receive the sum collected by and other policies issued in respect
the association. There is no contract, of the said class.' " United Kingdom
as it seems to me, between the mem- Mut. S. S. Assur. Assn. Lim. v. Nev-
ber who has suffered the loss and the ill, 6 Asp. M. C. 226 (1887), dis-
other mombers, but only between him tinguished in Ocean Iron Steamship
and the association, aiid such mem- Ins. Assn. v. Leslie, 6 Asp. M. C.
ber, therefore, cannot sue the other 226 (1887).
members, although they are really his But where insurance was effected
insurers. If a member could not sue, by managing owners, "as well in his
a person could not sue as his undis- or their own names as for and in the
closed principal. Then, as regards name or names of all and every other
anv action against the person alleged person or persons to whom tlic same
to 'be the undisclosed principal of a doth, may, or shall appertain, in part
member by the other members, it or in all," etc., and contributions
would be impossible to allege that a were to be paid by "assured," it was
person is an undisclosed principal, held that other part owners were lia-
in respect of the contract, unless the ble as the "assured" for contributions,
parties who allege that lie is a party but it was questioned whether they
to the contract as an undisclosed prin- became members of the association,
cipal could be sued bv him as well Great Britain lOOAl Steamship Ins.
as by them. . . . I do not think Assn. v. Wyllie, 6 Asp. ^lar. Cas.
that" a person actually interested in N. S. 3f)8 (1889), noting the last
a .ship, who has authorized another two cases above,
person to enter into a policy in his Estoppel of member to deny va-
own name with the a.ssociation, is lidity of contract because not stamped
a party to the contract as an undis- or in writing. Barrow-in-Furness
closed * principal, because, to make Mut. Ship Ins. Co. Lim. v. Ashburn-
him so, it would be necessary to say er, 5 Asp. M. C. 443, 527,
469
§ 179 JOYCE ON INSURANCE
the receipt of premiums and the issuing of two renewal receipts, if
they declare tliat they are subject to all the conditions contained
in the original bond.^ The conditions of a fidelity bond to indem-
nify against an employee's dishonesty, and which also contains an
undertaking of the employee to the obligor, may require signing by
the employee to bind the obligor unless such signing is waived and
the employee is not made the obligor's agent to waive such signa-
. ture by the obligor's signing the bond and delivering it to the em-
ployee nor is such signing waived by a retention of the premium
l)aid by the employee.^
§ 179. Execution of policy: affixing date. — Although it is cus-
tomary in this country to affix the date, a policy bearing date the
day the premium is paid, but not delivered till after its date, will
take effect by relation from its date.^ So the policy may relate
back and take effect so as to cover a loss prior to its date where the
contract has been completed ; * although where the policy was ex-
ecuted and dated but not delivered, because the insured had not
called for the same and paid the premium as required, the contract
was held not completed.^ And, as a general rule, the date is not
conclusive evidence of the fact, and if the actual date of execution
and delivery differs from and is subsequent to that specified, such
fact may be shown, although it is questioned whether the error may
be corrected in law courts where the execution and delivery precede
the date written.^ And it is not such a material variation, as to in-
1 Union Central Life Ins. Co. v. N. W. 836, signature of employee:
United States Fidelitv & Guaranty omission when not fatal, see 100 Am.
Co. 99 Md. 423, 105 "'Am. St. Rep. St. Rep. 779.
313, r)8 Atl. 437, 33 Ins. L. J. 808. ^ Ljo^h^jjo^iy y, North American
See Blackmore v. Guarantee Co. of Ins. Co. 23 Wend. (N. Y.) 18. See
North America, 71 Fed. 3(53, 18 C. C. Potter v. Phoenix Ins. Co. 63 Fed.
A. 77; Novak v. Pitlick, 120 Iowa, 382.
286, 94 N. W. 916; Adelberg v. ^ Commercial In«. Co. v. Halloek,
United States Fidelity & Guar- 27 N. J. L. 645, 72 Am. Dec. 374,
anty Co. 90 N. Y. Supp. 463. affirming 26 N. J. 268. See § 105
Examine Proctor Coal Co. v. United herein.
States Fidelity & Guaranty Co. (U. ^ Flint v. Ohio Ins. Co. 8 Ohio,
S. C. C.) 124 Fed. 424. Compare 502. See §§ 100 et seq. herein,
^tna Indemnity Co. v. J. R. Crowe ® See Jackson v. Bard, 4 Johns.
Coal & Mining Co. 154 Fed. 545, 83 (N. Y.) 230, 233; Lorent v. South
C. C. A. 431, certiorari denied Carolina Ins. Co. 1 Nott & McC. (S.
(mem.) 207 U. S. 589, 52 L. ed. 354, C.) 505; Hall v. Cazenone, 4 East;
28 Sup. Ct. 256; Title Guaranty & 477, 14 Eng. Rul. Cas. 737; 1 Duer
Surety Co. v. Bank of Fulton, 89 on Marine Ins. (ed. 1845) 90; 1
Ark. 471, 33 L:R.A.(N.S.) 676, 38 Phillips on Ins. (3d ed.) p. 84, see.
Ins. L. J. 722. 128.
2 United States Fidelity & Guar- Attachment and duration of risk-
anty Co. v. Ridgelev, 70 Neb. 622, 97 date of contract, see § 1441 herein.
470
THE POLICY § 180
validate a life policy that it is of a later date than called for by the
application.' In a Massachusetts case a policy of fire insurance in
the form required by statute ^ purported to insure a buildin,^ for
five years from its date, January 2o, 1889. On that day the plain-
tiff called upon an agent of the defendant company and signed the
application, and was told that it would be considered and decided
upon later. About two weeks after that time he received notice
from the agent that the policy was ready for him, and he did not
call for it until about March 13, 1889, when he went to the agent's
office, paid the premium, and it wa.s delivered, and it was held tliat
the contract did not take effect till March llUh.^ But it is held in
Ohio that where an application naming the day for the commence-
ment of the risk has been sent to the office of the agent authorized
to issue the policy, that the company is liable for a loss occurring
after the date named and before the policy issued.^"
§ 180. Execution of policy: affixing seal. — A seal is not neces-
sary in the absence of a statutory requirement or some provision of
the company's or association's charter, act of incorporation, or ar-
ticles of association." It is decided in Maine that a printed impres-
sion of a seal is not a seal, and that upon a contract of insurance
having thereon such an impression an action of assumpsit can be
maintained, since it is not a sealed instrument.^^ So a scroll with
the word "seal" affixed to an instrument not required to be sealed
'Porter v. Mutual Life Ins. Co. tive consideration of the entire sub-
70 Vt. 504, 41 Atl. 070. See Hal- jeet of execution of corporate con-
stead V. Iivan (9 Kan. App. 860 tracts, seals, etc., 4 Thompson on
not reported in full) 57 Pac. 852 Corporations, title 9, c. cv. sees,
reported in full. 5015-39; Id. art. 2; 2 Id. (2d ed.)
8 Stat. 1887, c. 214, sec. 60. As to sees. 1809 et .seq., c. 66, pp. 93.') et
act relating to dating life insurance seq. "Manner of executing sealed
policy, see acts & res. Mass. 1912, instruments by corporations:" Id.
p. 85. sees. 5069 et seq.; Id. (2d ed.) see.
^Wainer v. Milford Mutual Fire 1915.
Ins. Co. 153 Mass. 335, 11 L.R.A. Execution of policy: seal. Where
598, 26 N. E. 877. a policy is underwritten by a com-
^° Krumm v. Jefferson Fire Ins. pany "the corporate seal may be suf-
Co. 40 Ohio St. 225. ficient; but the form of execution
" See Bank of United States v. may be indefinitely varied by the
Dandridge, 12 Wheat. (25 U. S.) 64, statute, charter, deed, or memoran-
67 et .seq., L. ed. 552; McCullough diim of association under which the
V. TaUadei^a Ins. Co. 46 Ala. 376; company is constituted or the arti-
Nationai Banking & Ins. Co. v. cles by wiiich .it is regulated. 17
Knaup, 55 Mo. 154; Hamilton v. Earl of Halsbury's Laws of P'ngland.
Lycoming Mutual Ins. Co. 5 Pa. St. pp. 337-339, and note.
(5 Barr.) 344, 345. See also c. iii. ^^ j^iitei,^.!! y^ Union Life Ins. Co.
§ 35 herein. See for general rule, 45 Me. 104, 71 Am. Dec. 529; See
1 Morawetz on Private Corporations, Freeman's Supp. Stat. Me. 1885-95,
2d ed. sees. 338^1. See for exhaus- p. 271 (5) ; Laws 1889, c. 163, p. 153.
471
§ 180a JOYCE ON INSURANCE
does not necessarily and conclusively show that a sealed instrument
was intended." If a policy is sealed and renewed for another year
it is not necessary that the renewal receipt should be sealed, for the
policy evidences the contract and covenant lies therein.^* Even
though a seal is impressed upon a mutual benefit certificate still the
contract will not be properly executed where the certificate also re-
quires countersigning and it is not done." A presumption, how-
ever, is held to exist that the fundamental law of a fraternal bene-
fit order, requiring a seal to a certificate, has not been violated by
the officers of such order." In many of the states there are legis-
lative enactments by virtue of which policies of insurance do not
require a seal." Under an Indiana decision based upon a statute
a policy need not have a seal affixed but it is executed by subscrib-
ing and delivering it, so as to be admissible in evidence.^^
§ 180a. Life annuity: insurance contract: non-necessity of seal. —
A contract for a life annuity not issuing out of or charged upon
lands, but by which an insurance company, in consideration of a
sum certain, agrees to pay the annuitant specified sums annually
^' Clegg V. Le Messurier, 15 Gratt. 575. See 3 Sanders' Annot. Codes
(Va.) 108. (1895). sees. 3220-25; Id. Civ. Code,
1* Herron v. Peoria Marine & Fire sees. 2189-91.
Ins. Co. 28 111. 235, 81 Am. Dec. 272. Nebraska.— Comp. Stat. 1903, sec.
15 Cavwood v. Supreme Lodge of 3876; Comp. Stat. 1891, p. 529, e. 43,
Knights & Ladies of Honor, 171 Ind. sec. 12. See Laws 1907, p. 282, c.
410, 131 Am. St. Rep. 253, 23 L.R.A. 75, sec. 9.
(N.S.) 304n, 17 Am. & Eng. Ann. New Mexico. — Comp. Laws 1897,
Cas. 503, 86 N. W. 482, 38 Ins. L. sec. 2106; Comp. Laws 1884, sec.
J. 147. 1465.
1^ MeClure v. Supreme Lodge North Dakota. — Rev. Code 1895,
Knights of Honor, 59 N. Y. Supp. sees. 3891, 3892.
764, 41 App. Div. 131. Ohio. — Bates Ann. Stat. 1906, sec.
^'^ Arizona.— Rev. Stat. 1891, see. 3645; 1 Smith & Ben. Rev. Stat.
786; Rev. Stat. 1887, sec. 253. 1890, sec. 3645.
Colorado. — Sess. Laws 1907, p. Penusi/lvania. — 1 Pepper & Lewis'
453, c. 193, see. 31 ; 1 Mills' Annot. Dig. Col. 2364, sec. 41 : Bright. Pur.
Stat. 1891, sec. 2227. Dig. 12th ed. 1700-1894, vol. 1, p.
Idalio.— Civ. Code 1901, see. 2216; 1046, see. 63.
Rev. Stat. 1887. see. 2742. Washington.— mil's Annot. Code,
■ Indiana. — Burns' Anno. Stat. Rev. 1891, sec. 2/39.
1908, sec. 4652. Wyoming.— Rev. Stat. 1899, sec.
/owa.— Ann. Code, 1897, sec. 1712. 3166; Rev. Stat. 1887, p. 223, sec.
Kansas.— Gen. Stat. 1905, sec. 614.
3528; Gen. Stat. 1889, vol. 1, sec. " Globe Accident Ins. Co. v. Reid,
.3347. 19 Ind. App. 203, 47 N. E. 947,
' Maine.— Rev. Stat. 1903, p. 476, modified 49 N. E. 291, 7 Am. & Eng.
■c. 49, sec. 15; Rev. Stat. 1883, p. Corp. Cas. N. S. 770; Rev. Stat.
• 445, e. 49, sec. 12. 1894, sees. 454, 455. See § 3758
Montana. — Rev. Code 1907, sec. herein.
4051; Rev. Stat. 1887, p. 772, sec.
472
THE POLICY §§ 180b, 181
during life, is a mere chose in action for the payment of money,
which need not be made in the form of a deed or under seal. And
a charter authorizing an insurance company to grant purchase or
dispose of annuities, does not limit the company to the grant of an-
nuities by deed or contract under seal. Nor does the failure to at-
tach the seal of the insurance company to a policy granting an
annuity, nor the omission of some other technical requirement con-
stitute a defense to a suit for annuity after the insurer has received
the purchase money. ^^
§ 180b. Printed signature is sufficient to satisfy the statute of
frauds. — Where the instrument is delivered under circumstances
showing an intention to regard the printed name as the person's
own, and this appHes to the printed signature of insurer's president
and secretary to an indorsement on the back of a policy the face of
which is signed by the president in his own hand. The court per
Hobson C. J., said: "It is insisted that the contract is one not to
be performed in a year, and that under our statute a contract, which
is required by law to be signed, must be subscribed at the end or
close of the writing. The policy is signed by the president in his
own hand. The names of the president and secretary are printed
at the close of the list of privileges indorsed on the back of the
policy. When the president signed his name on the face of the
policy, with his name printed under what w^as on the back of the
policy, he made the whole policy the contract of the company. A
printed signature is suflicient to satisfy the statute of frauds, where
the paper is delivered under circumstances showing an intention to
regard the printed name as the person's own." ^^^
§ 181. Requisites of a valid policy. — In case the form of the
policy is not prescribed by statute and the contract is reduced to
writing, it should contain either by itself or by reference to other
papers the exact agTeement between the parties set forth therein in
clear, precise, and unambiguous terms. The policy should likewise
embody all the requirements of a valid insurance contract; 2° for
policies of insurance have ever been considered instruments of a
solemn nature, though not under seal, and should embody in their
terms expressly or by reference the w-hole contract between the par-
ties.^ It is upon this contract that the suit must be brought, where
^^ Cahill V. Maryland Life Ins. Co. as to sufficiency of printed signature
90 Md. 333, 47 L.R.A. 614, 45 Atl. within statute of frauds.
180. 2° See §§ 43, 176, 177 herein.
^^1 Equitable Life Assurance Soc. ^ See Merchants' Mutual Ins. Co.
V. Meuth, 145 Ky. 160, 140 S. W. v. Lyman, 15 Wall. (82 U. S.) 664,
137, 41 In.s. L. J." 71, 73, ease modi- 21 L. ed. 246 ; Higginson v. Ball, 13
tied 145 Kv. 746, 141 S. W. 37, Mass. 96, per Parker, C. J.
Annot. Cas. lOlBB, 661, and note 663,
473
§ 181
JOYCE ON INSURANCE
tliere is no fraud, duress, or mistake. All prior negotiations, pro-
posals, and conversations are considered waived or merged in this
written contract.^ And no rule is better settled than that parol evi-
dence is inadmissible to vary or control the plain and unambiguous
terms of a written contract of insurance.^
2 Merchants' Mutual Ins. Co. v. Barker, 2 Johns. (N. Y.) 346, 3 Am.
Lyman, 15 Wall. (82 U. S.) 664, 21 Dec. 437; Vandervoort v. Smith, 2
L. ed. 246; Higginson v. Dall, 13 Caines (N. Y.) 155.
Mass. 96, per Parker, C. J. Pennsylvania. — Stacey v. Franklin
3 United States.— VA Dia Home Fire Ins. Co. 2 Watts & S. (Pa.)
Ins. Co. V. Sinclair, 228 Fed. 833, 506.
143 C. C. A. 231, 47 Ins. L. J. 43. y^ms.— Waxahachie Bank v. Lan-
Missouri. — Keim v. Home Mu- casliire Ins. Co. 62 Tex. 461.
-Weston V. Emes, 1
V.
tual Ins. Co. 42 Mo. 38, 97 Am. Dec.
291.
New York. — Walton v. Agricultu-
ral Ins. Co. 116 N. Y. 317, 26 N. Y.
S. 780, 22 N. E. 443; Cheriot v.
474
England.-
Taunt. 115.
See also 1 Marshall on Ins. (ed.
1810) 345a. See § 160 herein.
CHAPTER VII.
CONSTRUCTION— WHAT IvS PART OF THE POLICY.
§ 185. What is part of the policy : general rule : parol evidence.
§ 185a. Same subject.
§ 186. When application is part of the policy.
§ 186a. Same subject. i
§ 187. When application is not part of policy.
§ 187a. Same subject : subsequent application.
§ 188. When charter and by-laws are and are not part of contract.
§ 188a. Same subject.
§ 189. Effect of subsequent amendment of by-laws or enactment of ne\l
by-laws.
§ ISOa. Same subject.
§ 190. Application and by-laws: when part of contract: statutory pro-
visions.
§ 190a. Standard policy : what is part of contract : application, by-laws,
etc., special provisions.
§ 190b. What is part of contract : contract to be plainly expressed in pol-
icy : policy to contain entire contract : statutes.
§ 190c. State has power to enact: such statutes constitutional.
§ 190d. Purpose or intent of such statutes.
§ 190e. Construction of such statutes, the policy and application or con-
tract.
§ 190f. Such statutes govern only relative rights of parties.
§ 190g. Retroactive effect of such statutory requirements.
§ 190h. Necessity of true, correct, or entire copy of application.
§ 190i. Such statutes do not apply to oral contracts.
§ 190 j. Copy of application for renewal or reinstatement to be annexed,
etc.
§ 190k. Mere reference to application insuflftcient under such statutes.
§ 1901. Right of insurer to provide forms of application under such stat«
utes.
§ 190m. What is and is not part of contract : statutes.
§ 190n. Same subject: medical examination.
§ 190o. Foreign contracts : effect of statutes.
§ 190p. What companies or associations are within such statutes.
§ 190q. Failure to comply with such statutes does not preclude defensea
based upon policy alone.
475
§ 185 JOYCE ON INSURANCE
§ 190r. Application as part of contract: statutes: fraud as defense: mis-
representations.
§ 190s. Conspiracy a defense though application not attacked.
§ 190t. Waiver of statutory rights by insurer or insured.
§ 190u. When question whether copy of application annexed to or in-
dorsed on policy is for jurj'.
§ 191. When other papers are and are not part of policy.
§ 191a. Receipt books, manuals, and schedules as part of contract.
§ 191b. Riders or slips as part of contract : standard policy,
§ 192. Whether prospectus ox pamphlet part of policy.
§ 193. Same subject: the cases.
§ 194. Whether common or statutorv^ law part of contract : city ordi-
nances or local laws.
(a) City ordinances or local laws.
(b) Statutes relating to foreign insurance companies.
(c) As to prospective or retroactive statutes, or in case of re-
peal or amendment.
(d) As to mutual companies, benefit societies, and the like.
(e) Total loss: vahaed policy statutes.
(f) As to representations and warranties.
(g) As to stipulations in the policy contrary to statutory re-
quirements,
(h) Express statutory provisions making void policy stipula-
tions contra.
§ 194a. Same subject: what statutes are and are not part of contract:
miscellaneous cases.
§ 195. Indorsements: marginal references: when part of policy: when
not.
§ 195a. Same subject.
§ 196. Indorsements continued: conditions annexed to policy, etc.: when
and when not part of same.
(a) Conditions and stipulations when indorsed upon the back
of a policy.
§ 197. Whether premium note part of policy.
§ 197a. Same subject : statutory provisions : standard policy.
^ 198. Usage : how far a part of policy.
§ 185. What is part of the policy: general rule: parol evidence. —
Whatever is intended to be made a part of the policy should be
either inserted therein or be incorporated by proper words of refer-
ence, and whether the correspondence or application, or other pa-
pers or indorsements on the jiolicy. are a part thereof, are questions
that have frequently been before the courts. If parol evidence were
admissible to vary a written contract of insurance, then all prior
476
CONSTRUCTION § 185
negotiations, correspondence, proposals, and other acts would be-
come as much a part of the contract as though actually embodied
in the policy, and it could never be known exactly what the terms
of the contract were, except, perhaps, after extended litigation, and
the safeguard wliich a poHcy ought to afford would be valueless if
its terms could thus be added to or limited. It is, therefore, a gen-
eral rule that all prior negotiations are considered as waived or
merged in the written contract, and that in the absence of fraud,
duress, or mistake, parol evidence is inadmissible to contradict or
vary its terms. The entire engagement of the parties, with all the
conditions upon which its fulfillment can be claimed, must be con-
clusively presumed to have been stated in the policy, as the terms of
the policy when explicit must control.* So it cannot be shown that
* United States. — Union Mutual Massachusetts. — Sanborn v. Fire-
Life Ins. Co. V. Mowry, 96 U. S. 544, man's Ins. Co. 16 Gray (82 Mass.)
24 L. ed. 674; El Dia Home Ins. Co. 448, 77 Am. Dec. 419; Finney v.
y. Sinclair, 228 Fed. 833, 143 C. C. A. Bedford Commercial Ins. Co. 8 Mete.
231, 47 Ins. L. J. 43; United States (49 Mass.) 348, 41 Am. Dec. 515.
Casualty Co. y. Charleston South Car- Michigan. — Hartford Fire Ins. Co.
olina Mining & Mfg. Co. (U. S. C. C.) v. Davenport, 37 Mich. 609.
183 Fed. 238; Candee y. Citizens' Minnesota. — Calmenson v. Equita-
Ins. Co. 4 Fed. 143; Connecticut ble Mutual Fire Ins. Co. 92 Minn.
Fire Ins. Co. y. Buchanan, 4 L.R.A. 390, 100 N. W. 88.
(N.S.) 758, 141 Fed. 877, 73 C. C. A. Netv Hampshire.— Gleason v. Can-
Ill, 157 Fed. 604; Payne v. Mutual terbury Mutual Fire Ins. Co. 73 N.
Life Ins. Co. 141 Fed. 339, 72 C. C. H. 583, 64 Atl. 187, 35 Ins. L. J. 932.
A. 487; Ocean Steamship Co. v. z-Bt- Neiv Jersey. — Franklin Fire Ins.
na Ins. Co. (U. S. C. C.) 121 Fed. Co. v. Martin, 40 N. J. L. 568, 29
882; McIMaster v. New York Life Am. Rep. 271.
Ins. Co. 99 Fed. 856, 40 C. C. A. 119, Neiv TorA;.— Ripley v. yEtna Ins.
35 Ins. L. J. 385, afif'g 90 Fed. 40, Co. 30 N. Y. 130, 86 Am. Dec. 362;
rev'd 183 U. S. 25, 46 L. ed. 64, 22 Enthoyen v. American Fidelity Co.
Sup. Ct. 10. 128 N. Y. Supp. 805, aff'd (inem.)
.4/aba>w«.— Blanks v. Moore, 139 135 N. Y. Supp. 1110, 150 A pp. Diy.
Ala. 624, 36 S. E. 783. 928 ; Black y. New York Life Ins.
California. — Kinney y. Maryland Co. 69 Misc. 167, 126 N. Y. Suj^p.
Casualty Co. 15 Cal. App. 571, 115 234; Saunders v. Agricultural Ins.
Pae. 456. Co. 57 N. Y. Supp. 683, 39 App.
Georgia. — Mutual Benefit Life Ins. Div. 631.
Co. y. Reise, 8 Ga. 536. Ohio. — Union Central Life Ins. Co.
7»mo?s.— Davis y. Fidelity Fire y. Hook, 62 Ohio St. 256, 56 N. E.
Ins. Co. 208 111. 375, 70 N. E. 359; 900, 29 Ins. L. J. 646.
Winnesheik Ins. Co. y. Holzgrafe, 53 Oklahoma. — Deming Inyestment
111. 516, 5 Am. Rep. 64. Co. v. Shawnee Fire Ins. Co. 16
/oua.— Kirkpatrick y. London Qkla. 1, 4 L.R.A. (N.S.) 607n, 83
Guarantee & Accdt. Co. 139 Iowa Pac. 918, 35 Ins. L. J. 241; Liyerpool
370, 115 N. W. 1107, 19 L.R.A. & London & Globe Ins. Co. v. T. M.
(N.S.) 102n. Richardson Lumber Co. 11 Okla. 579,
Louisiana.— Bail v. Western Ma- 09 Pac. 936, 938, 31 Ins. L. J. 993.
rine & Fire Ins. Co. 5 Rob. (La.)
423, 39 Am. Dec. 542.
477
§ 185 JOYCE ON INSURANCE
only a pai'ticiilar interest, as that of a warehouseman, was intended
where the contract is unambiguous ; ^ nor can the intention of the
parties be explained by parol evidence, although part of the policy is
written and part printed, where there is no contradiction between the
two parts and there is no ambiguity.^ Nor is parol evidence admis-
sible to show that the insured did not agree to the conditions ; ' for
whatever proposals or negotiations are made or conversations had
are to be considered as w^aived or merged in the written contract.'
In case the vessel insured be warranted as neutral, it cannot be
shown by parol evidence that such warranty was not intended,^ nor
can the intention be shown by parol evidence in contradiction of
the terms of the policy,^" nor is the memorandum admissible to
change the intent evidenced by the policy.^'^
And where a writing which assigns a bond and mortgage does
not in terms transfer a chose in action, nor the policy of insurance
on which it is claimed to rest, and neither party intends that it
should, a contract different from that made by the written agree-
ment cannot be read into it to give it a more extensive meaning
than that expressed. This applies in an action at law, founded up-
on a written contract expressed in unambiguous language.^^ Nor
can a condition as to the time and place of payment of the premiums
be varied by such evidence; ^^"nor is it permitted to show that prior
Englmtd. — AVeston v. Ernes, 1 S.) 664, 21 L. ed. 646; Dewees v.
Taunt. 115. Manhattan Ins. Co. 35 N. J. L. 366,
As to parol evidence rule, see note 372; United States Casualty Co. v.
36 L.R.A.(N.S.) 1165, see also §§ Charleston South Carolina Mining? &
3802-3809 herein. Mfg. Co. (U. S. C. C.) 183 Fed.
"The law is well settled that, in the 238 ; Union Central Life Ins. Co. v.
absence of a plea and showing of Hook, 62 Ohio St. 256, 56 N. E. 906,
fraud or mistake, the intention of 29 Ins. L. J. 646.
the parties to a written contract ^ Lewis v. Thatcher, 15 Mass. 431.
must be gathered, not from what the ^^ Hough v. People's Fire Ins. Co.
parties said or did, or thought they 36 Md. 398.
intended, but fi'om the contract it- ^^ Hogan v. Delaware Ins. Co. 1
self." Prussian National Ins. Co. v. AVash. (U. S. C. C.) 419, Fed. Cas.
Terrell, 142 Kv. 732, 135 S. W. 416, 6582; Ewer v. Washington Ins. Co.
40 Ins. L. J. 944, per Clay, C. 16 Pick. (33 Mass.) 502, 28 Am.
5 Lancaster Infills v. JNIerchants' Dec. 258; Higginson v. Dall, 13
Cotton-Press Co. 89 Tenn. 1, 24 Am. Mass. 96.
St. Rep. 586, 14 S. W. 317. ^^ Kupferschmidt v. Agricultural
SMumford v. Hallett, 1 Johns. (N. Ins. Co. 80 N. J. L. 441, 34 L.R.A.
Y.) 433. (N.S.) 503 (annotated on admissi-
' Liverpool & London & Globe Ins. bility of extrinsic evidence to extend
Co. V. Morris, 79 Ga. 666, 5 S. E. 125. scope of mortgage clause) 78 Atl.
8 See opinion of Chief Justice Par- 225. 40 Ins. L. J. 1938.
ker in Higginson v. Dall, 13 Mass. ^^ Mobile Life Ins. Co. v. Pruett,
ft6, 98, cited in Merchants' ]\Iutual 74 Ala. 487.
Ins. Co. V. Lyman, 15 Wall. (82 1^.
478
II
CONSTRUCTION § 185a
to issuing the policy an agreement was made and not inFcrted there-
in that upon the happening of a certain event the policy should be-
come void ; ^* nor that before the contract was executed the parties
agreed to insure "outfits" under the term "advances; " ^* nor can a
contemporaneous agreement to waive a provision affecting the risk
in the policy be shown by parol ; ^^ nor can it be shown after a loss
that the application was for a policy materially different from the
one issued; ^' and parol evidence is inadmissible of the contents of
an application which is not attached to the policy as required by
statute; ^* nor in an action on a fire policy which clearly states the
property insured is parol evidence admissible to show a mistake,
and that it was the intention to insure other property.^'
So parol evidence cannot be received to control a warranty in a
policy of insurance, and accordingly evidence to prove that the in-
surer was informed that a watchman was not kept in the building
insured from twelve o'clock Saturday night till twelve o'clock Sun-
day night, there being a warranty for a watchman every night,
should be rejected.^"
§ 185a. Same subject. — A written contract of insurance cannot be
altered or varied by parol evidence of what occurred between the
insured and the agent of the insurer at the time of effecting the in-
surance. Such evidence will not be received to raise up an estoppel
in pais which shall conclude the insurer from setting up the defense
that the policy was forfeited by a breach of the conditions of insur-
ance.^ Although the better rule is that parol evidence is admissible
of the agent's misrepresentations or mistakes in filling out the ap-
plication where he has knowledge or has been correctly informed
as to the facts ; ^ and where an application is procured by a soliciting
agent through the influence of fraud parol evidence is admissible
to show the circumstances evidencing the fraud.^ And it may be
"Candee v. Citizens' Ins. Co. 4 Fire Co. 10 Met. (51 Mass.) 211, 43
Fed. 143. Am. Dec. 428.
1* Burnham v. Boston Marine Ins. 2° Riplev v. ^tna Ins. Co. 30 N,
Co. 139 Mass. 399, 1 N. E. 837. Y. 130, 86 Am. Dee. 362.
^^Lamott V. Hudson River Ins. Co. ^ Franklin Fire Ins. Co. v. Martin,
17 N. Y. 199. 40 N. J. L. 568, 579, 11 Vroom (N.
I'' Pindar v. Resolute Ins. Co. 47 J. L.) 568, 29 Am. Rep. 271; I^mon
N. Y. 114. Central Life Ins. Co. v. Hook, 62
" Southern States Mutual Life Ohio St. 256, 56 N. E. 906, 29 Ins.
Ins. Co. V. Herlihv, 138 Kv. 359, 128 L. J. 646. Compare Royal Ins. Co.
S. W. 91; Wheeiock v. Home Life v. Walrath, 17 Ohio Cir. Ct. Rep.
Ins. Co. 115 Minn. 177, 131 N. W. (41 Wkly. L. Bull.) 509.
1081. See Metropolitan Life Ins. ^ See chapter on A}2;ents, herein.
Co. V. Gibbs, 34 Tex. Civ. App. 131, ^ Maxson v. Llewelyn, 122 Cal.
78 S. W. 398. See also § 190 herein. 195, 54 Pac. 732^ Cal. Code Civ.
"Holmes v. Charlestown Mutual Proc. sec. 1856.
479
§ 185a JOYCE ON INSURANCE
phown that the a,i2;ent inserted a different date in the application
than that agreed upon.* 80 in an action to rescind a contract parol
evidence is competent to establish fraud on the part of the medical
examiner in writing false statements in the application, and such
proof is admissible to show that the contract as written does not ex-
press the real contract and intention of the parties.^ But a policy
cannot be changed or altered by parol evidence where the party is
named and his interest specified, except fraud or mistake be al-
leged. The intent as shown by the instrument itself must be sought,
since the same principles of construction obtain in this regard as in
other written contracts.^
In case of fraud or mistake, as where the terms of an order to
insure have been materially departed from in the policy by fraud
or mistake, the order will be considered as containing the contract
between the parties, although it can only be resorted to in so far as
it varies from the policy. In all other respects the-policy should be
considered as the contract.' But the order for insurance may be
adopted as a part of the policy, and is to be resorted to when con-
struing it.'
AVhere a party made an application in writing, signed by him,
for insurance upon certain property, gave his note payable to the
insurance company to the agent of the company for the premium,
and took from the agent a receipt showing the giving of the note,
and stating that, in ca.«e the policy shopld not be issued, the note
was to be returned, it was decided that these papers must be regard-
ed as the contract of the parties, and could not be varied or explain-
ed by parol evidence.^
In another case it appeared that the agent of the company omit-
ted to insert in a policy on general merchandise permission to the
assured to keep kerosene oil and powder in the same building with
such stock, which permission was in accordance with the actual con-
tract. It wa.* held that parol evidence was admissible to show knowl-
* Pacific Mutual Ins. Co. v. Shaf- Ins. Co. 5 Rob. (La.) 423, 39 Am.
fer, 30 Tex. Civ. App. 313, 70 S. W. Dee. 542.
566. "^ Delaware Ins. Co. v. Hogan, 2
5 Bennett v. Massachusetts Mutual Wash. (U. S. C. C.) 4, Fed. Cas.
Life Ins. Co. 107 Tenn. 371, 64 S. 3765.
W. 758, 31 Ins. L. J. 150. The ' :\raryland v. Bossiere, 9 Gill. & J.
court declared, however, that had the (Md. ) 121.
suit been upon the contract and in ^ Winnesheik Ins. Co. v. Holz-
aflfirmance thereof the evidence might grafe, 53 111. 516, 5 Am. Rep. 64.
properly have been rejected as seek- See also Creditors Union v. Lundy,
ing to vary by parol the terms of a 16 Cal. App. 567, 117 Pac. 624, 40
wi-itten contract. Ins. L. J. 1981. Compare Maxson v.
6 Bell V. Western Marine & Fire Llewelvn, 122 Cal. 195, 54 Pac. 732.
480
CONSTRUCTION § 186
edge by the agent both before and at the time of issuing the policy
that such goods were to be kept.^° If the terms of the policy are
not clear and unambiguous, parol evidence not inconsistent there-
with may be resorted to to explain the same ; as in case of a clause,
"loss, if any, payable to G. and B. of N." " So the words ''in full
of all claims" in a receipt given in settlement of a loss under a pol-
icy may be explained by parol evidence of the agreement under
which the receipt was executed ; ^^ and an additional contempora-
neous agreement in writing may be admitted in evidence to explain
a release." So parol evidence of the contents of an order verbally
communicated by the broker to the insurer is admissible, as this is
not evidence of the contents of a writing.^* So where an insurance
was on goods in the D. & Co.'s car factory it may be shown by parol
what building was meant,^^ or what property was included where
by design or inadvertence certain property was not covered by the
policy. ^^
§ 186. When application is part of the policy. — The question
whether the application is part of the 'contract or not is of great
importance in construing policies and determining the force and
effect of the statements in such application. There is a great want
of unanimity in the cases, but it may be stated as a general rule
that a clear purpose, unequivocally expressed, manifest from the
papers, to make an aj^plication a part of the contract will have that
effect, and make them one entire contract. But where the reference
to the application is expressed to be for another purpose, or where
it is not clearly expressed that it is intended to make the applica-
tion a part of the contract, the courts are not inclined to make it
so by construction. This rule accords with the rules of construc-
tion regarding the intent of the parties, and that warranties and
forfeitures are not favored, as well as with such rules in other re-
spects." So if the policy exprcs.sly refers to the application as a
part thereof, all the stipulations and conditions in the application
^^ Mobile Fire Department Ins. Co. (Same v. Hanks) 8.3 Kan. 96, 110
V. Miller, 58 Ga. 420. Pae. 99.
^^ Graham v. Fireman's Ins. Co. 2 ^* Livinsfston v. Delafield, 1 Johns.
Disn. (Ohio) 255. See also Maxson (N. Y.) 522.
V. Llewelyn, 122 Cal. 195, 54 Pac. ^^ Blake v. Exchange Mutual Ins.
732. Co. 12 Gray (78 Mass.) 265.
^^ Haas Bios. v. Hamburger-Brc- ^^ Roval Ins. Co. v. Walrath, 17
men Fire In.^. Co. 181 Fed. 916, 104 Ohio Cir. Ct. Rep. (41 Wkly. L.
C. C. A. 354, 40 Ins. L. J. 93. See Bull.) 509.
Prussian National Ins. Co. v. Ter- " See Campbell v. New England
rell, 142 Ky. 732, 135 S. .W. 410, 40 Mutual Life Ins. Co. 98 Mass. 380,
Ins. L. J. 944, and criticism by editor, 391, per the court; Daniels v. Hud-
p. 050. son River Ins. Co. 12 Cush. (66
13 Farmers Alliance Ins. Co. v. At- IVLiss.) 423, 59 Am. Dec. 192; Kelly
chison, Topeka & Santa Fe Rv. Co. v. Metropohtan Life Ins. Co. 152 111.
Joyce Ins. Vol. I.— 31. ' 481
§ 186 JOYCE ON INSURANCE
are thereby engrafted into it, and made as much a part of the pol-
icy as if written in terms therein, and are to be construed together
with it.^* And a written and printed copy of the application on
the back of the policy is a part thereof where the latter states that
a copy of the former is annexed.^^ And a statement in a writing
over assured's signature, attached to a policy and purporting to be
an application is a part of the application and the application is a
part of the contract where the application is also expressly made a
part of the policy by a provision therein.^" So where a written ap-
plication calls for insurance for a certain amount, specifying the
different items and the sum for which each is insured, the insur-
ance will be for the total amount specified even though one of the
items is omitted in the descriptive clause of the policy where such
clause is followed by another which refers to and makes the appli-
cation a copy of which is attached, a part of the policy.^
It is also said that the application is in itself collateral merely
to the contract of insurance, and to make it a part of the policy
there must be an obvious intent so to do ; ^ and that the language
App. 179, 39 Nat. Corp. App. 710; Kentucky. — See Kentucky & Louis-
Supreme Lodge of Sons & Daugh- ville Mutual Ins. Co. v. Southard, 8
ters of Protection v. Underwood, 3 B. Mon. (Ky.) 634.
Neb. (Unoff.) 798, 92 N. W. 1051. J/rts'^ac/rMse^s.— Holmes v. Charles-
On conflict of laws as to necessity ^o^n Mutual Fii-e Ins. Co. 10 Met.
of attaching application or copy ^^1 Mass.) 211, 43 Am. Dec. 428.
thereof to policy, see notes in 63 ^«'"' lorA:.— Bumtt v. Saratoga
L.R.A. 867; 23 L.R.A.(N.S.) 982; County Mutual lire Ins. Co. 5 Hill
and 52 LR A.(N.S.^ 285 (N- Y.) 188, 40 Am. Dec. 345; Eban
" United States.-C\^xV v. Manu- ^- ^^''^^]^ ^^\ % ^^ , Albany, 5
facturers' Ins. Co. 8 How. (49 U. S.) ^f^ ^ \r ;^ t ' p'^'Tff ''•
oQf; io T A inn ^t ivr <- Chenango Mutual Ins. Co. 2 Demo
.^35, 12 L. ed. 1061 MeMaster v. /xr v\ r^ q, , ^,
XT V 1 T •* T n /TT c? r- ^^- J^-) '^'j Shoemaker v. Glen
New York Lite Ins. Co. (U. S. C. -r^^u^ t ^ n an x> v. /xt v \ o^
r< \ nn T? J ^n oo t t t nan 1^ alls Ins. Co. 60 Barb. (N. Y.) 84.
C.) 90 led. 40, 28 Ins. L. J. 960, nn i o^ t ivr i. i t r-
1QO TT o OK xi« T ;: (n oo c Oklahoma. — State Mutual Ins. ( o.
183 U. S. 25, 46 L. ed. 64, 22 Sup. <-, • ot m i nn m n o.^c
p, ,Q ' ' ^ V. Craig, 2/ Okla. 90, 111 Pae. 325.
Oreoon. — Chrisman v. State Ins.
Alabama. — Satterfield v. Fidelity Qq \q Qr. 283 18 Pac. 466
Mutual Life Ins. Co. 171 Ala. 429, England.— \Xors\ey 'v. Wood, 6
55 So. 200. So construed in coiinec- Durn. & E. 710.
tion^with Ala. Code 1907, sec. 4579, 19 Kellv "v. Metropolitan Life Ins
requiring contract to be plainly ex- Co. 152 111. App. 179, 39 Nat. Corp.
pressed in policy. Same principle an Rep. 710. See Pearson v. Knights
Powell V. Prudential Ins. Co. 153 Templars & Masons Life Indemnity
Ala. 611, 45 So. 208, 37 Ins. L. J. ing. Co. 114 Mo. App. 283, 89 S. W.
•l-l- 588.
Illinois. — Quinn v. North Ameri- ^o Heilig v. National Life Ins. Co. •
can Union, 162 111. App. 319, 42 162 N. Car. 521, 77 S. E. 997.
Nat. Corp. Rep. 593; Kellv v. Met- ^American Ins. Co. v. Dillahuntv,
ropolitan Life Ins. Co. 152 111. App. 89 Ark. 416, 117 S. W. 245.
179, 39 Nat. Corp. Rep. 710; Peck- 2 (Campbell v. New England Mu-
ham V. Modern Woodmen of Amer- tual Life Ins. Co. 98 Mass. 380, 389,
ica, 151 111. App. 95. 391, per the court; Holmes v.
482
CONSTRUCTION § 186a
making tlie application a part of the policy must unequivocally
api)ear on the face of the policy.' But the phraseology is imma-
lerial where the intent to make the application a part of the policy
is clear.* The langiiage of the policy, however, and not that of
the ai^plication must be considered in determining whether the
latter is a part of the contract. The fact must affirmatively ap-
pear from the policy itself.* But a clause cannot be eliminated
from the policy on the ground that it was not expressly referred
to in the application, as the application and the policy constitute
the contract.^ So the words "reference being had to the applica-
tion . . . for a more particular description, and as forming
a part of this policy," are held a sufficient reference.'
An insurance company which absorbs another by merger, may
by reference make the application to the absorbed company a part
of a substituted policy.*
Again, where there was a provision in a policy that "in con-
sideration of the statement of facts warranted to be true in the ap-
plication for this policy, and of the payment" of certain specified
sums, the company assumed the risk, it was held that the applica-
• tion was thus made a part of the contract.^ So a declaration in
an application constitutes a portion of the policy where the latter
provides that it shall be void if the declaration "upon the faith of
which this agreement was made" is untrue.^"
. § 186a. Same subject. — It is held that where a policy is made and
issued upon a survey and description of certain property, the sur-
vey being referred to by number as filed in the office of the com-
Charlestown Mutual Fire Ins. Co. 10 ' Kennedy v. St. Lawrence County
Met. (51 Mass.) 211, 43 Am. Dec. Mut. Ins. Co. 10 Barb. (N. .Y.) 285.
428. What reference sufficient to make
3 Hartford Protection Ins. Co. v. application part of policy, see notes
Ilarmer, 2 Ohio St. 452, 59 Am. Dec. 33 L.R.A.(N.S.) 676, and 19 L.R.A.
684; Stebbins v. Globe Ins. Co. 2 (N.S.) 88.
Hall (N. Y.) 632. See Supreme * T^j^jidox v. Southern Mutual Life
Lodge of Sons & Daughters of Pro- Assoc. 6 Ga. App. 681, 65 S. E. 789.
lection v. Underwood, 3 Neb. See Nelson v. Equitable Life Assur.
(Unoff.) 798, 92 N. W. lO.'^l. Soe. 73 111. App. 133, 3 Chic. L. J.
*Arrowsmith v. Old Colony Life Wklv. 32; Vilas v. New York Cen-
Ins. Co. 164 111. App. 44; Kelly v. tral Ins. Co. 72 N. Y. 590, 28 Am.
Metropolitan Life Ins. Co. 152 111. Rep. 186, both noted under § 187
App. 179; Blasingarae v. Royal Cir- herein,
cle, 111 111. App. 202. 9 Standard Life & Accident Ins.
* Spence v. Central Accident Ins. Co. v. Martin, 133 Ind. 376, 33 N.
Co. 236 111. 444, 19 L.R.A.(N.S.) E. 105. See §§ 1886-1891, 1916,
88n, 86 N. E. 104, 38 Ins. L. J. 87. 1958-1960 herein.
« Blunt V. Fidelity & Casualty Co. i° Dav v. Mutual Benefit Life Ins.
145 Cal. 268, 104 Am. St. Rep. 34, Co. 1 Mac Arthur (D. C.) 41. 29 Am.
67 L.R.A. 793, 78 Pac. 729, 34 Ins. Rep. 565. See §§ 1886-1891, 1916,
L. J. 166. 1958-1960 herein.
483
§ 186a JOYCE ON INSURANCE
pany, such survey is a basis of the contract and part of the policy.^*
So where the reference is to the appHcation filed in the oftice of the
conipany,^^ and where an application and surve}' is made to ac-
company a policy or is referred to therein as a part thereof, they
should be construed together with the policy as one entire con-
tract.i3
So the proposals and conditions attached to the policy form a
part of it, and are of the same force as if embodied in the policy,^*
But it is also held that the application need not be expressly re-
ferred to in the policy as a part thereof,^* and that a written aj)pli-
cation for a fire policy becomes a part of the contract if the policy
is issued thereon.^^ It is also held that the application is a part
of the policy where the latter recites that "the basis of this con-
tract is the application of the insured; " " and where the "applica-
tion is made and accepted subject to all other clauses and condi-
tions in the policies of the company," it is part of the policj'- ; ^* and
this is so where the policy is issued and accepted in consideratioc
of the agreements made in the application.^^
11 Stewart v. Phoonix Ins. Co. 5 55, 81 S. E. 1014, which follows also
Hun (N. Y.) 261. Examine Rankin Cuthbertson v. North Carolina Home
V. Amazon Ins. Co. 89 Cal. 203, 23 Ins. Co. 96 N. Car. 400, 2 S. E. 258.
Am. St. Rep. 460, 26 Pae. 872. See ^^ ^v^inberger v. Merchants' Ins.
§§ 187, 1916, 1958-1960 herein. Co. 41 La. Ann. 31, 5 So. 728.
On what must be attached in order ^^ Mandego v. Centennial Mutual
to satisfy requirement, that '-applica- Life Assn. 64 Iowa, 134, 17 N. W.
tion" be attached to poUcv, see note 656, 19 N. W. 877; Parish v. Mulual
in 18 L.R.A.(N.S.) 1190. " Benetit Life Ins, Co. 19 Tex. Civ.
12 Draper v. Charter Oak Fire Ins. App. 457, 49 S. W. 153. See also
Co. 2 Allen (84 Mass.) 569. See Becker v. Colonial Life Ins. Co. 138
also Aiiierican Ins. Co. v. Dillahunty, N. Y. Supp. 491, 153 App. Div. 382,
89 Ark. 416, 117 S. W. 245. See aftg. 133 N. Y. Supp. 481, 75 Misc.
§ 187 herein. 213. so under statute of N. Y. Com-
1^ Clinton V. Hope Ins. Co. 51 pare Speiice v. Central Accident Ins.
Barb. (N. Y.) 647. Examine Rankin Co. 236 111. 444, 19 L.R.A.(N.S.)
V. Amazon Ins. Co. 89 Cal. 203, 23 88n, 86 N. E. 104, 38 Ins. L. J. 87;
Am. St. Rep. 460, 26 Pac. 872. See Kansas Mutual Life Ins. Co. v. Pin-
§§ 1916, 1958-1960 liercin. son, 94 Tex. 553, 63 S. W. 531.
1* Dewees v. Manhattan Ins. Co. AVhat is part of policj^, see the fol-
34 N. J. L. 244; Duncan v. Sun Fire lowing cases:
Ins. Co. 6 AA'end. (N. Y.) 488, 22 United States.— Jewries v. Life
Am. Dec. 539. Ins. Co. 22 Wall. (89 U. S.) 47, 22
1^ IVturdock v. Chenango Mutual L. ed. 833.
Ins. Co. 2 N. Y. 210. Illinois. — Supreme Council Royal
16 Cronin v. Fire Assoc, of Phila. Templars v. Curd, 111 111. 284. Com-
123 Mich. 277, 6 Det. L. News 1048, jjare Spence v. Central Accident Ins.
82 N. W. 40, 29 Ins. L. J. 564. Co. 236 111. 444, 19 L.R.A.(N.S.)
I'Bobbitt V. Liverpool & London 8Sn, 86 N. E. 104, 38 Ins. L. J. 87.
& Globe Ins. Co. 66 N. C. 70, 8 Am. .l/rt/»r.— Philbrook v. New Eug-
Rep. 494, followed in Sehas v. Equi- land Mutual Fire Ins. Co. 37 Me.
table Life Assur. Soc. 166 N. Car. 137.
484
CONSTRUCTION § 186a
Again tlie application, bond and schedule in credit .insurance
are a part of the contract.^"
It is held that the application for membership in a mutual bene-
fit society constitutes a part of the contract even without regard to
the fact whether there is any constitutional requirement of such
character.^ And if the application is referred to in the contract
and made a part thereof it binds the named beneficiary.^* And
the application becomes a part of the contract in a fraternal in-
surance association where it is expressly so provided by indoi-se-
ments upon the certilicatc and it is also expressly stated that both
the application and certificate constitute the complete and only
contract.^ An insurance application with answers to questions,
the medical examiners report, and an agreement which recites
that the preceding statements and answers, the application, and
Massachusetts.— Lee v. Prudential ^o Lexington Grocery Co. v. Phila-
Life Ins. Co. 203 Mass. 299, 17 Am. delphia Casualty Co. 157 N. Car.
& Eng. Ann. Cas. 236, 89 N. E. 529, 116, 72 S. E. 870.
considered in § 190 herein. ^ Grand Lodge Ancient Order of
Nebraska.— Yarmers' Mutual Aid United Workmen v. Jesse, 50 111.
Assoc. Co. V. Kinney, 64 Neb. 808, App. 101. See Quiun v. North
90 N. W. 926. American Union, 162 HI. App. 319,
New York.— ¥oot v. Life Ins. Co. 42 Nat. Corp. Rep. 593 ; Peekham v.
61 N. Y. 575; Studwell v. Mutual Modern Woodmen of America, 151
Benefit L. Assoc, of America, 29 111. App. 95; London v. Modern
Jones & S. 287, 19 N. Y. Supp. 709, Brotherhood of America, 107 Minn,
aff'd (mem.) 139 N. Y. 615, 35 N. 12, 119 N. W. 425; Robson v. United
E. 204. Order of Eorestere, 93 Minn. 24, 100
North Carolina.— Cnihhertson v. N. W. 381, 33 Ins. L. J. 945; Farm-
North Carolina Home Ins. Co. 96 N. ers' IMutual Ins. Co. v. Kinney, 64
C. 480, 2 S. E. 238. See also Follette Neb. 808, 90 N. W. 926. (Compare
V. United States Mutual Accident Supreme Lodo-e of Sons & Daughters
Assoc. 107 N. Car. 240, 12 L.R.A. of Protection^ v. Underwood, 3 Neb.
315, 22 Am. St. Rep. 878. 12 S. E. (unoff.) 798, 92 N. W. 1051) ; Mont-
370 ; Mace v. Provident Life Assn. gomery v. Whitbeck, 12 N. Dak. 385,
101 N. C. 122, 7 S. E. 624; also note 90 'N. W. 327, 32 Ins. L. J. 983;
33 L.R.A. (N.S.) 676. Niekum v. Grand Lodge, A. 0. U. W.
North Dakota.— Montgomery v. 37 Pa. Co. Ct. 104; McLendon v.
Whitbeck, 12 N. Dak. 385, 96 N. W. Sovereign Camp of Woodmen of the
327, 32 Ins. L. J. 983. World, 106 Tenn. 695, 32 L.R.A.
Tennessee.— Kimhro v. Continental 444, 64 S. W. 36. Examine §§
Ins. Co. 101 Tenn. 245, 41 S. W. 413. 188, 1886-1891, 1916, 1958-1960
See further on these points chapters herein.
on Representations and Warranties, ^'^ Blasingame v. Royal Circle, 111
§§ 1886-1891, 1916, 1958-1960 here- 111. App. 202.
in. ^ Covenant Mutual Life Assoc, v.
Where policy refers to application Tuttle, 87 111. App. 309. See Grand
as part, and it is defective or even Lodge of Brotherhood of Railroad
not made in writing, see Blake v. Trainmen v. Daly, 54 Ohio Law Bull.
Exchange Mutual Ins. Co. 12 Gray 391.
(78 Mass.) 265.
485
§ 187 JOYCE ON INSUKANCE
this agTeement are made part of the poHcy, form a part of the
insurance contract.^ And if the appHcation in a fraternal and
beneficial order provides that it with this constitution and by-laws
shall form the basis of the contract it becomes a part thereof.*
§ 187. When application is not part of policy. — When the refer-
ence to the application is expressed to be for another purpose, or
when no purpose or intention is indicated to make it a part of the
policy, it will not be so treated.^ So it is held that a mere general
reference to the application or survey does not make it a- part of
the contract.^ It is also held that the application is not a part
of the contract so as to require setting forth in pleading, though
the policy provides that if it is issued upon or refers to "an applica-
tion, survey, plan, or description," it should be made a part of the
contract, and this although the policy was issued on such applica-
tion signed by the insured ; '^ and a reference to and making an
application a part of the contract does not bind the applicant where
the application is not signed, authorized, or ratified by him.^ It
is also held that the agreements and statements in the application
do not become a part of the policy, although it is provided in the
application that they should "be the basis and form part of the con-
tract or policy," and although the policy provided that the contract
was "in consideration of the representations." ^ Nor does an indi-
cation in the policy of the place where the application is on file
make it a part of the policy,^" and a condition in the application
does not make it a part of the policy where the policy does not re-
fer to it,^ and it is held that a slip or application is inadmissible to
^ Northwestern Masonic Aid Assoc, sentins: upon the authority of nu-
V. Bodurtha, 23 Ind. App. 121, 77 merous cases. See §§ 186, 1958-
Am. St. Rep. 414, 53 N. E. 787. 1960 herein.
* McLendon v. Sovereign Camp of ^ Lvcomins' Fire Ins. Co. v. Jack-
Woodmen of the World, 106 Tenn. son, 83 111. 302, 25 Am. Rep. 386.
695, 52 L.R.A. 444, 64 S. W. 36. , ^ American Popular Life Ins. Co.
5 Campbell v. New Enoland Mu- v. Day, 39 N. J. L. 89, 23 Am. Rep.
tual Life Ins. Co. 98 Mass. 380, 389, 198. See also Spence v. Central Ac-
392, per the court ; Jefferson Ins. Co. cident Ins. Co. 236 111. 444, 19 L.R.A.
V. Cotheal, 7 Wend. (N. Y.) 72, 22 (N.S.) 88 note, 86 N. E. 104, 38
Am. Dec. 567; Supreme Lodge of Ins. L. J. 87.
Sons & Daughters of Protection v. ^^ Commonwealth Ins. Co. v. Mon-
Underwood, 3 Neb. (Unoffic.) 798, ninger, 18 Ind. 352. Compare §
92 N. W. 1051. 186 herein.
^ Wheelton v. Hardisty, 8 El. & B. ^ Brogan v. Manufacturers' & Mer-
285, 295; Burritt v. Saratoga County chants' ^Mutual Fire Ins. Co. 29 U.
Mutual Fire Ins. Co. 5 Hill (N. Y.) C. C. P. 414.
188, 40 Am. Dee. 345 ; Weed v. Sche- On retention of policy as waiver of
nectady Ins. Co. 7 Lans. (N. Y.) 452. mistake or fraud in insurer or its
See §§ 1958-1960 herein. agent as to facts appearing in appli-
' Tliroop V. North American Fire cation only where copy is attached to
Ins. Co. 19 Mich. 423, one judge dis- policy, see note in 67 L.R.A. 734.
486
CONSTRUCTION § 187a
show the intention of the parties, since the policy is the only legal
evidence of the contract.^ Where a fire policy had expired and the
application therefor was used in obtaining insurance in another
company, the policy in which contained the words "as per applica-
tion No. 1234," which was the nuinber of the original application,
it was determined not to be a sufficient reference to make it a part
of the policy.^ And where a policy issued subsequently to and in
lieu of another refers to "said application," such a reference does
not make the application on which the original policy was based
a part of the second policy where such an intent does not appear.*
In another case the court excluded the application as evidence in
an action on a time policy of marine insurance, on the ground that
the application was merged in the policy.^ And where the policy
refers only to the application as the consideration in part for the
insurance, the legal construction of the policy cannot be controlled
by a statement in the application of the understanding of the as-
sured and what the insurance will "extend to." ^
An application addressed to a certain company is not a part of
contracts with other companies which the agent represents and
among which he splits up the insurance, where no reference is made
to the application except in the policy issued by the company to
which it is addressed and it is therein "made the basis upon which
said policy is issued and becomes a part of the same." '
§ 187a. Same subject: subsequent application. — An application
subsequently delivered is not a part of the original completed con-
tract where the policy is issued without a written application, or
where it does not appear that the execution of the application was
a condition precedent to the policy taking eftect, or that it was issued
under an agreement to execute one afterward.* In the first Colo-
2 Dow V. Whelton, 8 Wend. (N. 213, 12 S. E. 1027. See further on
Y.) 160. See Spenee v. Central Ae- this point chapter on Kepresentations
cident Ins. Co. 236 111. 444, 19 L.R.A. and Warranties §§ 1886-1891, 191G,
(N.S.) 88, 86 N. E. 104. 1958-1960 herein.
3 Vilas V. New York Central Ins. ' Waukau Milling Co. v. Citizens
Co. 72 N. Y. 590, 28 Am. Rep. 186. Mutual Eire Ins. Co. 130 Wis. 47,
* Nelson v. Equitable Life Assur. 118 Am. St. Rep. 998, 10 Am. & Eng.
Soe. 73 111. App. 133, 3 Chic. L. J. Ann. Cas. 795, 109 N. W. 937, 36
Wklv. 32. See Maddox v. Southern Ins. L. J. 119.
Mutual Life Ins. Co. 6 Ga. App. 681, » j^oyal IMutual Fire Ins. Co. v. J.
65 S. E. 789, noted under § 186 S. Brown & Bro. Mercantile Co. 47
herein. Colo. 467, 107 Pac. 1098, 39 Ins. L.
*Folsom V. Mercantile Ins. Co. 9 J. 870; Fire A.ssociation of Phila.
Blatchf. (U. S. C. C.) 201, Fed. Cas. v. Bynum, — Tex. Civ. App. — , 44
No. 4 903, S. W. 579. See Michigan Fire &
8 Accident Ins. Co. V. Crandal, 120 Marine Ins. Co. v. Wicb, 8 Colo.
U. S. 527, 7 Sup. Ct. 685, 30 L. ed. App. 409, 46 Pac. 687.
740. See Hunter v. Scott, 108 N. C.
487
§ 187a
JOYCE ON INSURANCE
rado case, cited below to the above rule, it appeared that the agent of
the company, a mutual one, called at insured's place of business to
solicit insurance, the latter was absent and his wife was requested
to sign an application in his name but she refused. The agent then
stated that he would send insured a policy and an application which
the latter could sign and return. A few days later he mailed to
insured the policy involved and also a blank application which he
requested insured to sign and return to him. The policy was ac-
cepted by insured who signed the application in blank without
answering any of the questions or making any statements in rela-
tion to the property insured. The policy referred to an application
made by insured and made it a part thereof, and recited that one
of the considerations for its issuance was the agreements, cove-
nants, statements, and w^arranties of the assured in the application.^
So an application constitutes no part of the written contract
where it was issued by request of the general agent after the policy
was issued and delivered and was not suggested, considered, written
or signed prior to said delivery. ■^°
^ See criticism of this case in note policy to the plaintiif in error, and
in 39 Ins. L. J. 876.
^° Colorado Leasing, Mining &
Millins: Co. v. Palatine Ins. Co. 57
Colo. 235, 141 Pac. 860. The court,
per Scott, J., gave the following
opinion: "Every contention raised
in this ease has been adjudicated in
the case of Connecticut Ins. Co. v.
Leasing Min. & Mill. Company, 50
Colo. 424, 116 Pac. 154, Ann. Ca.>^.
1912C, 597. This case involves one
of the insurance policies issued at the
same time upon the same property
and to the same owner as in the fore-
going case.
The defendant in error here issued
its policy for $20,000, being one
third of the entire insurance taken
upon the mill and property of plain-
tiff in error, on the 27th day of iMay,
1904. An exhaustive and detailed
statement of the case will be found in
Connecticut Company v. Colorado
Company, supra, and it can ser\-e no
good purpose to repeat it here. The
only question urged in this case is
the admission in evidence of an ap-
plication for insurance signed and de-
livered to the defendant company,
after the delivery of the company's
the consideration given by the court
to one of the questions and answers
contained in such application. These
points liave been determined in the
Connecticut Insurance Case, supra,
but it may be well to refer to them
further.
"The record makes it clear that the
application relied on by the insurance
company in this case was not written,
signed, suggested, or considered prior
to the delivery of the policy in ques-
tion, but was first requested by the
general agent of the company, in a
letter written from his office in San
Francisco, two days after the policy
was issued and delivered by the agent
of the company at Florence, Colo.,
where this cause of action arose.
This very application was offered in
the Connecticut Company Case and
there held to be inadmissible in any
case under the state of facts present-
ed, and particularly so in that case,
where it did not purport to be an ap-
plication for the policy nor to the
company involved in the action. The
court there said of this application :
'The defendant says the court eiTed
in refusing to admit in evidence an
488
CONSTRUCTION
§ 188
§ 188, When charter and by-laws are and are not part of con-
tract. — Wlien a party complies with the requirements of a mutual
benefit or like society, association or corporation, and becomes a
member, its charter, constitution, and by-laws are presumed to have
been known by him from the date of his membership, and they
enter into and form a part of his contract even though, in the ab-
sence of a statutory requirement to the contrary, they are not set
forth in his policy nor expressly made a part of it by reference,^^
application for insurance made by
the plaintifif to a company other than
the defendant, and dehvered to Me-
Candless several days after the poli-
cy in this case was issued. That the
application was inadmissible, even if
made to the defendant, when it does
not appear that the making of the
application was a condition prece-
dent to the policy taking effect or
that it was made under an agreement
on the part of plaintiff to make one
after the issuance of tlie policy, is
settled by this court in Loyal ]\Iutu-
al Fire Ins. Companv v. J. S. Brown
& Bros. Company, 47 Colo. 467, 107
Pae. 1078. and, when made to an en-
tirely different compaiiv than the
defendant, there is much more reason
for not admitting it.'
"This lias been the consistent hold-
ing of this court.
"In Loyal Mutual Company v.
Brown, supra, the court said: 'It
should be borne in mind that it does
not appear the execution of the ap-
plication was a condition precedent
to the policy taking effect, or that it
was issued under an agreement on
the part of Beach to execute one
afterwards. In such circumstances
the rule of law is that where a policy
of insurance has been issued without
a written application, and without
an agreement to execute one after-
wards, an application subsequently
delivered is not a part of the contract
of insurance. Michigan Fire and
Marine Ins. Co. v. Wich, 8 Colo.
App. 409, 46 Pac. 687; Le Roy v.
Park Fire Ins. Co. 39 N. Y. 56.'
"The court in the case at bar in-
structed a verdict for the defendant
company, and such instructed verdict
was based solely upon the erroneous
theory that such application was a
part of the contract of insui'ance,
and therefore admissible, and that
the answer to a specific question in
such application was material.
"Holding, then, that the applica-
tion was no part of the contract of
insurance in this case, it is immateri-
al as to what questions and answers
it contained. They were not under
such circumstances either represen-
tations or warranties and constituted
no consideration or basis for the is-
suance of the policy. The questions
raised by the appellee having been
fully disposed of and determined in
this case and in Connecticut Compa-
ny V. Colorado Company supra, and
the amount of the judgment to be ren-
dered exactly ascertainable from the
record, the judgment is reversed, and
the cause remanded, Avith directions
to enter judgment in favor of plain-
tiff's below and against the defend-
ant below in the sum of one-third of
the amount found by the adjuster's
committee to be the actual loss by
reason of the burning of the insured
property together with interest from
the commencement of this suit and
with costs to be taxed." Colorado
Leasing, Mining & Milling Co. v. Pal-
atine Ins. Co. 57 Colo. 235, 141 Pac.
860. See §§ 1886-1891, 1916, 1958-
1960 herein.
11 United States. — Fry v. Charter
Oak Ins. Co. 31 Fed. 197 ; Wiggin v.
Knights of Pythias, 31 Fed. 122.
Arkansas. — Supreme Royal Circle
of Friends of the "World v. MoiTison,
105 Ark. 140, 150 S. W. 561.
489
§ 188 JOYCE ON INSURANCE
for a certificate, in a fraternal benefit society, standing by itself,
does not measure the rights of the parties, but it must be read in
Calif ornm.— Conway v. Supreme W. 949; Wendt v. Iowa Legion of
Council Catholic Knights of America, Honor, 72 Iowa, 682, 34 N. W. 470;
131 Cal. 437, 63 Pae. 727; Hass v. Simeral v. Dubuque Mutual Fire Ins.
Mutual Relief Assoc, of Petaluma, Co. 18 Iowa, 319.
118 Cal. 6, 49 Pac. 1056, 26 Ins. L. Kansas.— Triple Tie Benefit A.ssoe.
J. 992. V. Wood, 73 Kan. 124, 84 Pae. 565.
Connecticut. — Treadway v. Hamil- Louisimm. — Maginnis v. New Or-
ton Mutual Ins. Co. 29 Conn. 68. leans Cotton Exchange Mutual Aid
District of Columbia. — Clark v. Assoc. 43 La. Ann. 1136, 10 So. 180.
Mutual Reserve Fund Life Assoc. 14 Maryland. — Supreme Council of
App. D. C. 154, 27 Wash. Law Rep. Royal Arcanum v. Brashears, 89 Md.
114, 43 L.R.A. 390. 624, 73 Am. St. Rep. 244, 43 Atl.
Georgia. — Union Fraternal League 866, 28 Ins. L. J. 751; Condon v.
V. Walton, 109 Ga. 1, 77 Am. St. Rep. Mutual Reserve. Fund Life Assoc. 89
350, 46 L.R.A. 424, 34 S. E. 317, 29 Md. 99, 73 Am. St. Rep. 169, 42
Ins. L. J. 1055; Barbot v. Mutual Atl. 944, 44 L.R.A. 149.
Reserve Fund Life Assoc. 100 Ga. Massachusetts.— ']^\\\q v. Hamilton
681, 28 S. E. 498, 27 Ins. L.' J. 338. Mutual Ins. Co. 6 Gray (72 Mass.)
Illinois. — Love v. Modern Wood- 174.
men of America, 259 111. 102, 102 N. Michigan. — Douville v. Farmers
E. 183, rev'g 177 111. App. 76; Pro- Mutual Fire Ins. Co. 113 Mich. 158,
tection Life Ins. Co. v. Foote, 79 111. 4 Det. Leg. N. 245, 71 N. W. 517.
361. See also Enright v. National Minnesota. — Davidson v. Old Peo-
Council, Knights & Ladies of Honor, pie's Mutual Benefit Soc. 39 Minn.
253 111. 460, 91 N. E. 681, rev'g 161 303, 304, 1 L.R.A. 482.
111. App. 365; Kaemmerer v. Kaem- Mississiiipi. — Supreme Lodse
merer, 231 111. 154, 83 N. E. 133; Knights of Pythias v. Stein, 75 Miss.
Benes v. Supreme Lodge Knights & 107, 37 L.R.A. 775, 65 Am. St. Rep.
Ladies of Honor, 231 111. 134, 14 589, 21 So. 559.
L.R.A. (N.S.) 540 (annotated on es- ' Missouri. — Purdy v. Bankers' Life
toppel of mutual benefit society by Assoc. 104 Mo. App. 91, 74 S. W.
misreiDresentations as to laws of or- 486.
der) 83 N. E. 127, 121 Am. Montana.— Kennedy v. Grand Fra-
St. Rep. 304; Quinn v. North ternity, 36 Mont. 325, 25 L.R.A.
American Union, 162 111. App. (N.S.) 78n, 92 Pac. 971.
319, 42 Nat. Corp. Rep. 593 ; Harvick Neiv Hampshire.- — Burbank v.
V. Modern Woodmen of America, 158 Rockingham Ins. Co. 24 N. H. 550,
111. App. 570; Supreme Council 558, 57 Am. Dee. 300.
Catholic Knights & Ladies of Ameri- Neiv Jersey. — Grand Lodge An^
ca V. Beggs, 110 111. App. 139 ; Roy- cient Order United Workmen v. Con-
al Arcanum v. Coverdale, 93 111. nolly, 58 N. J. Eq. 180, 43 Atl. 286.
App. 373. Neiv York. — Hvatt v. Wait, 37
Indiana.— V&ster v. Gerwig, 122 Barb. (N. Y.) 29; Bird v. Mutual
Ind. 567, 23 N. E. 1041; Farra v. Union Assoc. 52 N. Y. Supp. 1044,
Braman, 171 Ind. 529, 86 N. E. 843; 30 App. Div. 346.
Gray v. Supreme Lodge Knights of North Carolina. — Boyle v. North
Honor, 118 Ind. 293, 20 N. E. 833; Carolina Mutual Ins. Co. 7 Jones (N.
Almy V. Commercial Travelers Ins. C.) 373.
Assoc. 59 Ind. App. 249, 106 N. E. North Dakota.— J. P. Lamb & Co.
893. V. Merchants National Mutual Fire
/owa.— Farmers Mutual Hail As- Ins. Co. 18 N. Dak. 253, 119 N. W.
soc. V. Slattery, 115 Iowa, 410, 88 N. 1048.
490
CONSTRUCTION
§ 188
connection with the constitution and by-laws of the society, and the
application for membership, and the nature, object, and purposes
of the society must also be considered.^^ And all the provisions of
Pennsylvania. — Susquehanna Mut.
Fire Ins. Co. v. Leavy, 136 Pa. St.
499, 20 Atl. 502, 505.
Texas. — Bennett v. Sovereign
Camp, Woodmen of the World, —
Tex. Civ. App. — , 168 S. W. 1023;
775, 21 So. 559. And an amended
charter may become a part of a con-
tract thereafter issued. Harrison v.
Philadelphia Contributionship for
Insurance of Houses from Loss bv
Fire, 171 Fed. 178, aff'd 176 Fed.
Hayworth v. Grand Lodge of Texas, 323, 99 C. C. A. 613
Knights of Pythias, — Tex. Civ.
App. — , 138 S. W. 1194; Modern
Woodmen of America v. Owens, —
Tex. Civ. App. — , 130 S. W. 858.
Vermont. — Wilson v. Union Mutu-
al Fire Ins. Co. 77 A' t. 28, 58 Atl.
799.
Virginia. — Supreme Lodge
Knights of Honor v. Oeters, 95 Va.
610, 29 S. E. 322.
England. — Great Britain Steam-
ship Assn. V. Wyllie, L. R. 22 Q. B.
D. 710.
"Undoubtedly, when the plaintiff 884.
complied with what was required of Neiv
him as a member, the by-laws con-
stituted a contract." Stohr v. San
Francisco Musical Fund Soe. 82 Cal.
557, 559, 22 Pac. 1125. See § 318
herein.
When application etc. a part of
certificate or contract, see Bacon on
Benefit Soe. & Life Ins. (3d ed.)
sees. 181-184.
So by-laws existing when the in-
sured became a member of the asso-
ciation are a i^art of the contract.
Illinois. — Covenant ^lutual Life
Assoc. V. Kentner, 188 111. 431, 58
N. E. 966.
Michigan. — Pokrefky v. Detroit
Firemens Fund Assoc. 121 iMich.
456, 6 Det. Leg. N. 527, 80 N. W.
240.
Missouri.— Grn-weW v. National
Council Knights & Ladies of Securi-
ty, 126 Mo. App. 496, 104 S. W.
Hampshire. — Downs v.
Knights of Columbus, 76 N. H. 165,
80 Atl. 227, 40 Ins. L. J. 1674.
Rhode Island. — Newton v. North-
ern Mutual Relief Assoc. 21 R. I.
476, 44 Atl. 690.
Member is bound to take notice of
by-laws. Farmers Ins. Co. v. Bord-
ers, 26 Ind. App. 491, 60 N. E. 174;
Montgomery v. Whitbeck, 12 N. Dak.
The constitution and bv-laws of a 385, 96 N. W. 327, 32 Ins. L. J. 983;
beneficial association are elements of,
and enter into, its contracts of insui--
anee, and, while they measure and de-
termine the member's duties and lia-
bilities, also measure his right as Avell.
Sourwine v. Supreme Lodge, 12 Ind.
App. 447, 54 Am. St. Rep. 532, 40
N. E. 646. See also Haywood v.
Grand Lodge of Texas Knights P.
(1911) — Tex. Civ. App. — , 138
S. W. 1194.
The charter of a beneficial associa-
tion is as much a part of the con-
Wilson V. Union ]Mutual Fire Ins.
Co. 77 Vt. 28, 58 Atl. 799.
Constitution and by-laws of secret
society bind a member as he is pre-
sumed to know them. Emmons v.
Hope Lodge, No. 21, I. 0. 0. F. 1
Mury. (Del.) 187, 40 Atl. 956.
^2 FuUen wider v. Supreme Coun-
cil of the Royal League, 73 III. App.
321, per Windes, J. case is aff'd, on
the point of the right to change by-
laws, in 180 111. 621, 72 Aiii. St. Rep.
239, 54 N. E. 485, but the court, per
tract of insurance made by it as if Phillips, J., also declares that : ''The
written therein. Sui)reme Lodge contract between a beneficiary mem-
Knights of Pythias v. Stein, 75 Miss, ber and the corporation is not to be
107, 65 Am. St. Rep. 589, 37 L.R.A. construed as merely a part of any
491
§ 188 JOYCE OX INSURANCE
the by-laws not inconsistent with the terms of the policy," or with
the charter provisions, or the law of the land, and which are law-
fully enacted, bind the member,^* and become a part of the con-
tract ; " and when they are within the scope of the purposes and
nature of the organization, will be held binding.^^
So the constitution by-laws and regulations are a part of the
contract of membership as it is presumed to have been entered into
with reference to them ; ^'^ and it is harmless error in instructing the
jury to state that the policy and application constitute the contract
without mentioning the by-laws and rules."
The constitution and by-laws are binding on a charter member
and form part of the contract where his attention has been directed
to them ; " or Avhere they are referred to in the policy and printed
on the back thereof,^^ or where they are expressly referred to in a
deposit note as a part thereof said note being a part of the contract
both by statute and by a policy reference, and so even through such
by-laws are not copied into the policy nor upon any attached rider
or paper.^
proceeding in connection with or in See Conway v. Supreme Council
relation to the issuing of a certifi- Catholic Knights of America, 131
cate. In construing the contract by Cal. 437, 63 Pac. 727; Hass v. Mu-
the holder of the certificate,— or rath- tnal Relief Assoc, of Pet^luma, 118
er that made between the member and Cal. 6, 49 Pac. 1056, 26 Ins. L. J.
the corporation, — the application, the 992.
examination by the phvsician, the ^"^ King v. Wynema Council, No.
constitution and' by-laws and the cer- 10, Daughters of Pocahontas Imp.
tificate issued are all to be construed Ord. Red Men, 25 Del. (2 Boyce's)
too-ether as the contract between the 255, 78 Atl. 845. See also Kimball
pa'i-ties " See Triple Tie Benefit As- v. Lester, 59 N. Y. Supp. 540, 43
^oc V AVood, 73 Kan. 124, 84 Pac. App. Div. 2i ; Wilson v. Union Mu-
565; Examine Soehner v. Grand tual F. Ins. Co. 77 Vt. 28, 58 Atl. 799.
Lodo-e of Order of Sons of Herman, ^^ Smith v. Covenant Mutual Bene-
74 Neb. 399, 104 N. W. 871. fit Assoc. 16 Tex. Civ. App. 593, 43
13 Davidson v. Old People's Mutu- S. W. 819.
al Ben. Soc. 39 Minn. 303, 1 L.R.A. 19 Sargent v. Supreme Lodge
482. Knights of Honor, 158 Mass. 557,
On conflict between by-laws and 33 N. E. 650, 22 Ins. L. J. 545;
certificate or policy of mutual bene- Sabin v. Senate of National Union,
fit society or insurance company, see 90 Mich. 177, 51 N. W. 202; and see
note in 47 L.R.A. 681. cases in last note.
1* Purdy v. Bankers Life Assoc. 20 Pearson v. Knight's Templars &
104 Alo App. 91, 74 S. W. 486. Mason's Life Indemnity Ins. Co. 114
i5Bra.shears v. Perry County Mo. App. 283, 89 S. W. 588. See
Farmers Protective Ins. Co. 51 Ind. also Montgomery v, Whitbeek, 12 N.
App. 8, 98 N. E. 889. J. P. Lamb Dak. 385, 96 N. W. 327, 32 Ins. L. J.
6 Co V. Merchant's National .Mutu- 983; Stone v. Lorentz, 19 Pa. Co.
al Fire Ins. Co. 18 N. Dak. 253, 119 Ct. 51, 6 Pa. Dist. R. 17; Wilson v.
N. W. 1048. Union Mutual Ins. Co. 77 Vt. 28, 58
" Mutual Assurance Soc. v. Korn, Atl. 999.
7 Craneh (11 U. S.) 396, 3 L. ed. 383. 1 Russell v. Oxford County Patrons
492
CONSTRUCTION § 188a
§ 18Sa. Same subject. — AVliere the application provides that it
as well a,s the constitution and by-laws shall form the ba.sis of the
contract they become a part of it,^ and bind the designated bene-
ficiary.^ So where a member of a benevolent, fraternal or mutual
benefit association agrees to be bound by its constitution and by-
laws the terms of his contract are determined thereby ; * and this
is so where the certificate is expressly conditioned that the member
will abide by the laws, rules and regulations of the society ; ^ or
where in the application the member agrees to be bound by the con-
stitution, laws, rules and regulations of the order.^ And where the
by-laws are expressly recognized in the certificate which is issued
subject to all the conditions and provisions of the articles of in-
corporation and by-laws thereof they constitute a part of the con-
tract and the member cannot be heard to deny a knowledge of
their contents."^
The constitution and by-laws of an insurance on the assessment
plan may constitute a part of the contract even though the policy
does not in terms make them a part,* and they become a part of
the contract with such a company where the application expressly
refers to and makes them a part, and the member thereby becomes
charged with a knowledge thereof.^
Where the policy declares that the insurance is made with ref-
of Husbandry Mutual Fire Ins. Co. of America v. Beshara, 42 Okla. 684.
107 Me. 362,"' 78 Atl. 459. 142 Pac. 1014.
2 McLendon v. Sovereign Camp of ^ Grand Lodge A. 0. U. W. of N.
Woodmen of the World, 106 Tenn. J. v. Gandv, 63 N. J. Eq. 692, 53 Atl.
695, 52 L.R.A. 444, 64 S. W. 36. 142. See also French v. Society of
^ Cotter V. Grand Lodge Ancient Select Guardians, 51 N. Y. Supp.
Order United Workmen, 23 Mont. 82, 675, 23 :\Ii.^c. 86.
37 Pac. 650. Compare Knowles v. ^ United Moderns v. Colligan, 34
Knowles, 205 Mass. 290, 91 N. E. Tex. Civ. App. 173, 77 S. W. 1032.
213. . 'Fee v. National Masonic Accident
* Connecticut. — Coughlin v. Assoc. 110 Iowa, 271, 81 N. W. 483,
Knights of Columbu.s, 79 Conn. 218, 29 Ins. L. J. 6.35.
64 Atl. 223, 36 Ins. L. J. 44. * ]\roran v. Franklin Life Ins. Co.
District of Columbia.— Bvnm At- 160 Mo. App. 140*, 140 S. W. 954,
my Mutual Aid Assoc, v. Benton, 13 dependent upon .statute defining and
App. D. C. 245, 26 Wash. Law Rep. relating to the assessment plan. Rev.
642, 31 Chic. Leg. News, 72. Stat. Mo. sec. 1889, Rev. Stat. 1909,
Nebraska. — Farmers' Mutual Aid 6950. Citing and quoting from
As-soc. V. Kinney, 64 Neb. SOS, 90 Havden v. Franklin Life Ins. Co.
N. W. 926. 136 Fed. 285, 290, 291, 69 C. C. A.
Missouri. — Gibbs v. Knights of 423, 428. But compare McDonald v.
Pvthias of I\lo. 173 Mo. App. 34, Bankers Life Assoc. 154 IMo. 618, 55
356 S. W. 11; Gallop v. Royal Neigh- S. W. 999, 29 Ins. L. J. 780.
bors of America, 107 ]\Io. App. 85, ^ Willison v. Jewelers' & Trades-
150 S. W. 1118. men's Co. 30 IMisc. 197, 61 N. Y.
Oklahoma. — Modern Brotherhood Supp. 1125; Barbot v. IMutual Re-
493
§ 189 JOYCE ON INSURANCE
erence to its conditions and the terms of its constitution and by-
laws, the fact that each of the conditions annexed to the policy re-
fers to a by-law cannot warrant the assumption on the part of the
insured that the by-laws contain no other conditions/" and the
rights of the parties in a fraternal benefit association are measured
by the certificate.^^ Where the charter and by-laws are a part of
the contract between the member and the society, the latter is also
bound thereby, and where the by-laws provide for mortuary bene-
fits the fact that the certificate does not provide for such benefits
will not relieve the society from its liability.^^
If there is nothing in the contract making any reference to by-
laws, and nothing in the record to show what" by-laws were in force
when the certificate was issued, it cannot be held that any provi-
sion of them is a part of the contract, ^^ arid a by-laAv prohibiting
insurance for over two-thirds the estimated value of the property is
not a part of the contract, but is merely directory ; ^* and the charter
of a foreign insurance company must be brought to the notice of a
party to bind him as to conditions therein. ^^ And the constitution,
by-laws and application are not a part of the contract where
the fact is not shown by the language used or by proper aver-
ments in the pleadings.^^ And by-laws are not included as a part of
the contract under a stipulation that the above application and
declaration with the certificate issued thereon constituted the basis
of the contract. -^"^
Where insured is a member of a subsociety its constitution is a
part of his contract with the principal society in so far as his mem-
bership rights are concerned.^*
§ 189. Effect of subsequent amendment of by-laws or enactment
of new by-laws. — The question has arisen not infrequently in our
serve Fund Life Assoc. 100 Ga. 681, " Cumberland Valley Mutual Pro-
28 S. E. 498, 27 Ins. L. J. 338. teetion Co. v. Schell, 29 Pa. St. 31.
10 Miller v. Hillsborough Mutual ^^ City Fire Ins. Co. v. Carrugi, 41
Fire Assur. Assoc. 42 N. J. Eq. 459, Ga. 660.
462, 7 Ail. 895. ^^ Supreme Lodge of Sons &
11 Mund v. Rehaume, 51 Colo. 129, Dauohters of Protection v. Under-
Ann. Cas. 1913A, 1243, 117 Pae. wood, 3 Neb. (unonie.) 798, 92 N.
159. W. 1051. Compare Grand Lodge of
12 Railway Passenger & Freight Brotherhood of Railroad Trainmen v.
Conduetoi-s Mut. Aid & Benev. Assoc. Dalv, 54 Ohio L. Bull. 391.
V. Robin.son, 147 111. 138, 35 N. E. i' Purdy v. Bankers Life A;^^oc.
168, 23 Ins. L. J. 79. 104 Mo. App. 91, 74 S. W. 486.
1^ Covenant Mutual Life Assoc, v. i^ Polish Roman Catholic Union of
Kentner, 188 111. 431, 441, 58 N. E. America v. Warczak, 182 111. 27, 55
966. See Elliott v. Monroe Citv N. E. 64, aff'g 82 111. App. 351. •
Safety Fund Life Ins. Co. 76 Mo.
App. '562, 1 Mo. App. Rep. 523.
494
CONSTRUCTION § 189
courts as to the point whether or not the amendment of the by-laws
or subsequent enactment of new laws or modifications of existing
ones affects the contract so as to enter into the terms of it and be-
come a part of it, or not. AVe believe, however, that such amend-
ments or new laws cannot operate retroactively or infringe upon
or divest the insured of rights which are already determined or
ascertained by his contract. But the a.ssured may, however, under
the terms of his contract or by agreement or ratification, be bound
by such subsequent amendments, modifications, or new laws,^' for
parties may undoubtedly so contract as to make subsequently en-
acted by-laws operate retrospectively and become a part of the con-
tract.^" So where a certificate in a mutual benefit society is to be
paid "in an amount to be computed according to the laws" of the
society, and such laws provide that the provisions therein relative
to the payment of such certificates may be changed at any time, a
member who has procured such a certificate will be bound by any
change which is made therein between the time of procuring the
certificate and the time of its payment.^ If a by-law is adopted
after the issuance of a benefit certificate prescribing only a new
form of certificate it relates to future contracts and has no retro-
active effect.^ So a resolution of a mutual insurance society chang-
ing the form of its policies and including the class issued to insured
does not operate retrospectively so as to include the previously issued
policy to insured unless he complies.^
It is held, however, that it is incident to the very nature and
purpose of beneficial and like insurance associations that they
should have power to modify and change their by-laws so as to
^^ See Supreme Commanderv ^° Covenant Mutual Life Assoc, v.
Knights of the Golden Rule v. Ains- Tuttle, 87 111. App. 309.
worth, 71 Ala. 436, 449, 46 Am. Rep. A contract may be so expressly
332; Hass v. Mutual Relief Assoc, of conflitioned, that subsequently enact-
Petaluma, 118 Cal. 6, 49 Pac. 1056, ed by-laws become a part thereof.
26 Ins. L. J. 992; Coughlin v. Reynolds v. Supreme Conclave Im-
Knights of Columbus, 79 Conn. 218, proved Order of Hepta.sophs, 18
64 Atl. 223, 36 Ins. L. J. 44; Poult- Lancaster L. Rev. 125.
ney v. Bachman, 62 How. Pr. (N. ^ Bowie v. Grand Lodge of the Le-
Y.) 466; Bacon on Benefit Soc. and cion of West, 99 Cal. 392, 34 Pae.
Life Ins. (ed. 1888) .sees. 185-88; 103.
Id. (3d ed.) sees. 185-188a; §§ 377- 2 Modern Woodmen of America v.
380 herein. Bauersfield, 62 Kan. 340, 62 Pae.
As to right to amend by-laws, see 1012.
note 1 L.R.A.(N.S.) 1065, et seq. ^ gexton v. National Life Ins. Co.
That secret order has right to 40 Colo. 60, 12 L.R.A.(N.S.) 504
amend hy-laivs and rules -wliere no (annotated on retroactive effect of
limitation in its power, see Lawson v. resolution or by-law of mutual insur-
Ilewell, 118 Cal. 613, 49 L.R.A. 400 ance company changing period dur-
note, 50 Pac. 763. ing which policy may be contested
495
§ 189 JOYCE ON INSURANCE
graduate claims upon them under their contracts in such manner
as experience and necessity may require. Tliey may regukite the
manner in which they shall most reasonably carry out the pur-
poses for which they are associated, although they cannot pervert
the objects of their organization. It is also held that a society may
limit the amount of recovery for sick benefits by a subsequently en-
acted by-law, in view of the above principles, and that such a by-
law does not impair vested rights. The court, however, in this
particular case modified the statements by the fact that when the
certificate was taken out there was existing a special provision for
altering or changing the by-laws.* In an Illinois case it is de-
clared by the court that : ''The power to enact by-laws for the gov-
ernment of a corporate body is an incident to the existence of a
body corporate and is inherent in it. The power to make such
changes as may be deemed advisable is a continuous one. Where
the contract contains an express provision reserving the right to
amend or change by-laws it cannot be doubted that the society ha.s
the right so to do, and where, in a certificate of membership, it is
provided that members shall be bound by the rules and regulations
now governing the council and fund or that may thereafter be en-
acted for such government, and those conditions are assented to
and the member accepts the certificate under the conditions pro-
vided therein, it is a sufficient reservation of the right in the society
to amend or change its by-laws." ^
for suicide), 90 Pae. 58, 36 Ins. L. J. the members shall comply in the fu-
861. ture with the laws, rule.s and regula-
* Fugure v. Mutual Society of St. tions now governing' the council and
Joseph, 46 Vt. 362, 369, §§ 377, fund or those that may hereafter be
479 herein. enacted, which are made a part of
Member is presumed to have con- the contract. It was further express-
templated such by-laws as are passed ly provided in the certificate: 'These
for the purpose of regulating busi- conditions being expressly assented
ness and general affairs of associa- to and complied with, the Supreroe
tion. Covenant Mutual Life Assoc. Council of the Royal League hereby
V. Kentner, 188 111. 431, 440, 58 N. promises and binds itself to pay,'
E. 966. etc. And attached to the certificate
A benefit association has power to wa.s the provision, 'I accept this cer-
pass such by-laws as will enable it tificate on the conditions named here-
to accomplish the design of its ex- in,' Avhich was signed by the benefi-
istence, and so regulate its business ciary member.") This case is cited
and affairs in general and the mem- or quoted in Murphy v. Nowak, 223
ber is presumed to have contemplat- 111. 301, 314, 7 KR.A.CN.S.) 393
ed such by-laws. Covenant Mutual note, 79 N. E. 112; Scow v. Supreme
Life Assoc, v. Kentner, 188 111. 431, Council of the Roval League, 223
440, 58 N. E. 906. 111. 32, 36, 39 N. E. 42; Covenant
^ Fullenwider v. Royal League, 180 Mutual Life Assoc, v. Kentner, 188
111. 621, 625, 72 Am. St. Rep. 239, 111. 431, 441, 58 N. E. 9G0; IVIoersch-
54 N. E. 485 (the certificate of mem- baecher v. Supreme Council of tlio-
bership in this ease provided "that Royal League, 188 111. 1, 13, 59 N.
496
CONSTRUCTION § 189a
§ 189a. Same subject. — It is decided that the fact that amend-
ments wcic made to the articles of incorporation do not estop the
insured from denying that they were part of the contract where they
were not made known to him at the time of taking out the policy.®
It is also held that a new article of incorporation adopted subse-
quently to the issue of a certificate does not make it a part of the
contract so as to destroy a right which the insured- previously had
under his policy; ' but it is otherwise where the insured agrees to be
governed b}' changes which may afterward be made, and receives
a copy of the new by-law, and does not object thereto and continues
his membership.* Although future by-laws of an insurance society
or association may by agreement be made a part of the policy or
certificate issued by such association or society still by-laws subver-
sive of statutory rights cannot enter into and form a part of such a
general agreement and a by-law which seeks to deprive the policy
liolder of a substantial statutory right is invalid and not binding
under such an agreement.^ And where insured never intended to
place it within the association's power to break his contract or render
it valueless by subsequent stipulations or regulations without his
consent such changes are not authorized. A mere general consent
that the constitution and by-laws may be amended is insufficient.
Whatever changes a mutual association may be empowered to make
nmst not be destructive of vested rights.^"
Where the general law of the state and the by-laws gives power to
repeal, alter, or amend by-laws, both the statute and by-laws be-
come part of the contract, and the amendment of the by-laws is not
a breach of contract. ^^ If the statute provides for or permits certain
E. 17; Baldwin v. Beglev, 185 111. society by mi.srepresentations as to
180, 190, 5(J N. E. 1065: Tlieorell v. laws of the order) 121 Am. St. Rep.
Supreme Court of Honor, 115 111. .304, 83 N. E. 127.
App. 313, 317; Blasingame v. Royal ' Hobbs v. Iowa Mutual Benoflt
Circle, 111 111. App. 202, 205; Reyn- Assoc. 82 Iowa, 107, 47 N. W. 983,
olds V. Supreme Council of the Roy- 11 L.R.A. 299, 20 Jns. L. J. 434. See
al Arcanum, 192 Mass. 150^ 156, 7 also Stewart v. Mutual Fire Insur-
L.R.A. (N.S.) 1154 note. 7 Am. & auce Assoc. 64 Miss. 499. See §§
En?. Ann. Ca.s. 776, 78 N. E. 129. 379, 380 lierein.
See § 379 herein. * Bo^ard.'^ v. Farmers' IVfutual Ins.
On the right of mutual benefit .so- Co. 79 Mich. 440, 44 N. W. 856. See
ciotv to increase rates, see notes in 7 i^^ 377-380 herein.
I..R.A.(N.S.) 1154, and 31 L.R.A. ^ Eaton v. International Travelers'
(N.S.) 417. On rioht to decrease Assoc (1911) — Tex. Civ. App. — ,
benefits, 31 L.R.A. (N.S.) 423. 136 S. W. 817.
* Day V. Mill Owners' Fire Ins. Co. ^° Strauss v. Mutual Reserve Fund
75 Iowa, 694, 38 N. W. 113. Com- Life Assoc. 128 N. Car. 465, 83 Am.
pare Renes v. Supreme Lodge St. Rep. 699 and note, 54 L.R.A. 605,
Knights & Ladies oC Honor, 231 IlL 3!) S. E. 55. 30 Ins. L. J. 818.
134, 14 L.K.A.(N.S.) 540 (anno- ^^ Stoln- v. San Francisco Mu.sical
tated on e.stoppel of mutual benefit Fund Soc. 82 Cal. 557, 22 Pac. 1125 j
Joyce Ins. VoL I.— 32. 497
190
JOYCE ON INSURANCE
changes in the by-laws all members will be bound by by-laws regu-
larly made or amended even in the absence of an express stipula-
tion in the application or certificate.^^
Where nothing in an association's constitution authorizes an
amendment binding a member to any change in the contract with-
out his assent, an amendment of the articles of incorporation and
by-laws does not affect certificates issued prior thereto as such
amended articles cannot be treated as retroactive in their operation,
especially where the amended articles do not purport to change ex-
isting contracts or to authorize any such change by the adoption of
by-laws ; nor does mere silence as to the effect of such amendments
Avarrant the inference that any change wrought will extend or limit
a pre-existing obligation created by the issuance of certificates of
membership. ^^ Nor will a by-law be retroactive where there is noth-
ing therein evidencing such an intent," and such intent must clear-
ly appear.^*
§ 190. Application and by-laws: when part of contract: statutory
provisions. — In many of the states there are statutory provisions re-
quiring the annexation of the application to the policy or its in-
corporation therein or indorsement thereon, or that copies of the
application and by-laws shall be contained in or attached to the pol-
icies or referred to therein. ^^ So the application must be incorpor-
Sargent v. Supreme Lodge Knights
of Honor, 158 Mass. 557, 33 N. E.
650, 22 Ins. L. J. 545. See § 379.
^2 Reynolds v. Supreme Council of
the Royal Arcanum, 192 Mass. 150,
7 L.R.A.(N.S.) 1154 note, 7 Am. &
Eng. Ann. Cas. 776, 78 N. E. 129.
^3 Carnes v. Iowa Traveling Men's
Assoc. 106 Iowa, 281, 68 Am. St.
Rep. 306, 28 Ins. L. J. 345. See §
379 herein.
i^Pittinger v. Pittinger, 28 Colo.
308, 89 Am. St. Rep. 193 and note,
64 Pac. 195.
1^ Haley v. Supreme Court of
Honor, 139 111. App. 478.
1® California. — Civ. Code, sec. 2605.
Connecticut. — ^Gen. Stat. 1888, sec.
2826.
District of Columbia. — Civ. Code,
sec. 657, 32 Stat, at L. 534, c. 1329.
Georgia. — Civ. Code 1910, sec.
2471, acts 1906, p. 107, No. 466.
See Torbert v. Cherokee Ins. Co.
141 Ga. 773, 82 S. E. 134; Southern
Life Ins. Co. v. Logan, 9 Ga. App.
503, 71 S. E. 742; Southern Life Ins.
498
Co. V. Hill, 8 Ga. App. 857, 70 S.
E. 186.
Illinois.— Rev. Stat. 1908, p. 1248,
sec. 208n (3) c. 273, sec. 209.
Iowa. — Ann. Code 1897, sees. 1741,
1819, 1826, Suppl. 1907, sees. 1741,
1819, 1826; McClain's Stat. 1888,
sec. 1733.
Kansas. — Gen. Stat. 1889, vol. 1,
sec. 3437.
Kentucky. — Stat. sec. 679, Rus-
sell's Stat. sec. 4400, Ky. Stat. see.
656. See Masonic Life Assoc, of
Western N. Y. v. Robinson, 149 Ky.
80, 41 L.R.A.(N.S.) 505n, 147 S. W.
882; Providence Savings Life Assur.
Soc. V. Bever, 23 Ky. L. Rep. 2460,
67 S. W. 827; Rice v. Rice's Admr.
23 Ky. L. Rep. 635, 63 S. W. 586;
Provident Savings Life Assur. Soc.
V. Purvear's Admr. 22 Kv. L. Rep.
980, 59 S. W. 15 (construing Ky.
Stat. sees. 656 and 679 together) ;
Manhattan Life Ins. Co. v. Myers, 22
Ky. L. Rep. 875, 59 S. W. 30.
.l/fl/Hc— Laws 1907, c. 30, p. 28;
c. 187, p. 204; Rev. Stat. 1883, c.
49, sec. 24.
CONSTRUCTION
§ 190
ated in the policy to be a part thereof." And the statute must be
complied with otherwise the apjDlication and all testimony relating
thereto Avill be excluded.^* So an application which is not made a
part of the policy or shown by it in any way cannot be considered. ^^
And statements made by the applicant in a writing a copy of which
is not endorsed on or attached to the policy are rightly excluded
from evidence.^"
A demurrer will lie to a plea of misrepresentations when such
act has not been complied with ; ^ and under such act an affidavit of
defense is defective if it fails to allege that the application was so
annexed.^ So the application may be stricken from the complaint
when referred to in but not attached to the policy as it is not a part
of the contract.^
Massachusetts. — Rev. Laws, e. 118,
see. 73, acts & res. 1907, c. 576, sec.
73, p. 894; act 1890, c. 421, sec. 21;
acts 1887, c. 2l4, see. 59.
Mich i gun. — Pub. acts 1907, No.
187, subdiv. 4, sec. 1 (3 How. Stat.
[2cl ed.] see. 8312) ; Pul). acts No. 380
(3 How. Stat. [2d ed.] sec. 8310
see. 1.
Minnesota.— Laws 1907, o. 220,
Rev. Laws Suppl. 1909, sees. 1695-2
to 1695-12 Rev. Laws 1905, see. 1616.
Mississiijpi.— Code 1906, sec. 2675.
Missouri. — Rev. Stat. 1890, sec.
7929.
Ohio.— Bates Ann. Stat. 1906, sec.
3623; Giauque's Rev. Stat. 1890, 6tb
ed. sec. 3623. See Andrews v. Na-
tional Life Ins. Co. 7 Obio Dec. (5
Ohio Leg. N. 1898) 307.
Oklahoma. — Rev. Stat. 1903, see.
3200, Stat. 1890, sec. 3155.
Pennsylvania. — 1 Bright. Purd.
Dig. 12th ed. p. ICli, see. 62, act
May 11, 1881, P. L. 20.
Texas.— Rev. Civ. Stat. 1911, art.
4951, Suppl. 1903, to Sayles Civ.
Stat. see. 3096 eo. See Lone Star
Lodge, No. 1,935, Knights & Ladies
of Honor v. Cole (1911) — Tex. Civ.
App. — , 131 S. W. 1180; Metro-
politan Life Ins Co. v. Gibbs, 34 Tex.
Civ. App. 131, 78 S. W. 398.
Wisconsin. — Laws 1905, c. 51. ]i.
108, 1 Sanb. & Berr. Ann. Stat. 1889,
sec. 1945 a.
Law governing as to necessity of
attaching application or copy thereof
to policy, see notes in 63 L.R.A. 867,
868; 23 L.R.A. (N.S.) 982, and 52
L.R.A. (N.S.) 285.
On what must be attached in order
to satisfy requirement that "applica-
tion" be attached to policv, see note in
18 L.R.A. (N.S.) 1190.
^^ Bush V. Indiana & Iowa Live
Stock Ins. Co. 74 W. Va. 244, 81 S.
E. 984.
18 Fidelity Title & Trust Co. v.
Illinois Life Ins. Co. 213 Pa. 415, 63
Atl. 51, act May 11, 1881 (P. L. 20).
The application is not admissible
where not attached. Mahon v.
Pacific Mutual Life Ins. Co. 144 Pa.
St. 409, 22 Atl. 876; Pickett v. Pa-
cific jMutual Life Ins. Co. 144 Pa. St.
79, 22 Atl. 871, 13 L.R.A. 661.
The application for insurance con-
stitutes no part of the policy or of
contract between the parties, and is
therefore not receivable in evidence,
unless a copy is attached to the ])olicy
as required by statute, Pennsvlvania
act of Mav 11, 1881. Imperial Fire
Ins. Co. V. Dunham, 117 Pa. St. 460,
2 Am. St. Rep. 686, 12 Atl. 668.
1^ Breedon v. Western & Southern
Life Ins, Co. 148 Kv. 488, 146 S. W.
1104.
2° Wheeloek v. Home Life Ins. Co,
115 Minn. 177, 131 N. W. 1081,
Laws 1907, c. 220; Rev. Laws, sees.
1695-2 to 1695-12.
1 Cook V. Federal Life Assoc, 74
Iowa, 746, 35 N. W. 500.
2 Metropolitan Life Ins. Co. v,
Jenkins, — Pa. —, 10 Atl. 474,
^ Western & Southern Life Ins, Co,
499
§ 190a JOYCE ON INSURANCE
If however a copy of the application is attached to poUcy and
filed with the petition il oannot l)e excluded as evidence.* And if
the existence of by-laws is expressly recognized in the certificate so
that they become a part of the contract the insured is bound even
though such by-laws are not posted in the company's office for pub-
lic inspection as required by statute.*
Where the application is not admissible its contents cannot he
shown by parol evidence.® And it is error to admit in evidence only
a part of the contract where what purports to be a copy of the appli-
cation appears on the back of the policy in writing and printing and
the policy states that a copy of the application is annexed and also
makes the statements in the application warranties and a part there-
of."^
Again, if the statute, in addition to the requirement that a copy
of the application be attached to the policy, also provides that each
application shall have printed thereon in boldfaced type the words :
each applicant ''is entitled to be furnished with a copy of this ap-
plication attached to any policy issued thereon," the omission of
these words is not fatal as the intention of the legislature is held
merely to have been to inform the as.-^ured that he was entitled to
have a copy of the application attached to his policy, and that when
this was done the application formed a part of the contract.'
It is held in England that a deed-poll containing an insurance
against fire may refer to conditions in the printed proposals with-
out stamp, seal, or signature.^
§ 190a. Standard policy: what is part of contract: application, by-
laws, etc. : special provisions. — If a statute expressly makes the pol-
icy and deposit note one contract and the note, which is also re-
ferred to in the policy, refers to and makes the by-laws a part there-
of, said by-laws thereby become a part of the contract even though
a standard form of policy is prescribed.^" Under a statute providing
a standard form of fire policy and requiring a true copy of any ap-
plication etc. to be attached to or indorsed upon the policy an agree-
V. Davis, 141 Kv. 3.-)8, 1.12 S. W. 410, Co. 152 111. App. 179, 38 Nat. Corp.
40 Ins. L. J. 248. Rep. 710.
* Supreme Lodge Knights of * Moore v. Northwestern Mutual
Pvtliias V. Bradlev, 33 Ky.^ L. Rep. Life Ins. Co. 192 Mass. 468, 7 Am.
4i3, 109 S. W. li78. & Eng. Annot. Cas. 656, 78 N. E.
5 Fee v. National Masonic Ace. 488, 3.') Ins. L. J. 769 ; Rev. Stat.
Assoc. 110 Iowa. 271, 81 N. W. 483, Mass. c. 118, sec. 73.
29 Ins. L. J. 635, Code Iowa, 1873. ^Rutledge v. Burrell, 1 H. Black,
see. 1076. 255.
6 Southern States :\rutual Life Ins. ^° Russell v. Oxford County Pa-
Co V Herlihy, 138 Kv. .359, 128 S. trons of Hushandrv Mutual Fire Ins.
W.' 91. ■ ■ Co. 107 Me. 362, 78 Atl. 459.
■^ Kellv v. Metropolitan Life Ins.
500
CONSTRUCTION § 190b
ment or condition is binding; when it is within the express wording
of the policy and the ai)plication therefor signed and attached to
tlie poh"cy.^^ By-laws are not a part of tlie contract where they :ire
not annexed to or printed upon a standard form of policy which re-
quires special provisions or stipulations, not inserted and which re-
quire mention in effecting insurance, to be legibly written or print-
ed and permanently and securely attached to the policy and signed
separately by the comjjany or agent.^^
§ 190b. What is part of contract: contract to be plainly expressed
in policy: policy to contain entire contract: statutes. — Under the
Alabama statute no life nor any other insurance company, nor any
agent thereof, shall make any contract of insurance, or agreement
as to policy contract, other tban is plainly expressed in the policy
written thereon. ^^ And this provision is complied with by attach-
ing the application to the policy, with a stipulation that the appli-
cation is a part thereof and the two together constitute one contract
to be construed as such.^* And it is further held that the policy.
including documents adopted by reference and attached constitute
the sole expositor of the contract although the court said that par-
ties are still disagreed as to the meaning and effect of the statute.^*
The statute also excludes all anterior or contemporaneous agree-
ments not plainly expressed in the policy, also conditions in the ap-
plication when it is not attached to the policy nor incorporated by
IH'oper reference. ^^ The Kentucky statute requiring the contract to
" Straker v. Plienix Ins. Co. 101 neuille, 156 Ala. 392, 47 So. 72, .37
Wis. 413, 77 N. W. 752, 28 Ins. L. J. Ins. L. .L 892. The court, per
14.3, under Sand. & Ber. Ann. Stat. Anderson, .1., said : The languase of
1898, sec. 1945a. the statute "is dear and unambiirn-
^2 Gleason v. Canterbury ^lutual ous. It means what it says and says
Fire Ins. Co. 73 N. H. 583, 64 Atl. what it means. To hold that Ihe in-
187, 35 Ins. L. J. 932. See as to sured is boinid by any anterior or
special rciiulations; standard policy, contemporaneous ajrreements, not
Nielsen v. ^Merchants' Mutual Ins. i)lainly expresj^ed in the policy,
Assoc. 26 S. Dak. 405, 40 Ins. L. J. wonhl strike down l)oth the spirit
65, 128 N. ^Y. 491; § 176f herein. and letter of the statute. Certainly
Mutual co!ni)anies or a.'^sociations: ihe partie.s could, in the absence ot
"Special ]-eanlations" as part of the statute, make the application a
policy, see § 17()f herein. part of the contract by proper refer-
^' Code 1907, sec. 4579. ence thereto, and without settinp: out
What lite policy must contain, said asirecnient in the policy; but to
See § 177 herein. h-old that they can do so in the very
^* Satterfield v. Fidelity ^Mutual face of this statute would be to
Life Ins. Co. 171 Ala. 429, 55 So. emasculate it. It was intended to
200. prevent the very conditions set up in
" Fmi)ire Life Ins. Co. v. Gee, 171 the defendant's special pleas, and to
Ala. 435, 40 Ins. L. J. 1384, 55 So. relieve the insured from any state-
166. ments or a<iTeements not plainly ex-
^^Manlmtlap Lii^' Ins. Co. v. Ver- pressed in the policy. The trial court
501
190c
JOYCE ON INSURANCE
be plainly exprc?;sed in the policy is construed as having the same
meaning as the statute of that state requiring the application to be
attached to the policy. ^'^ In Missouri, where a policy is one of as-
sessment insurance it is not within the intent of a statute which ap-
plies only to old time jDolicies and prohibits life insurance companies
from making any contract of insurance or agreement as to such
contract other than as plainly expressed in the policy issued there-
on. ^^ In Massachusetts, where the statute provides that a life policy
and application shall constitute the entire contract the words "the
application is attached hereto" must be added to a policy provision
''this instrument contains the entire contract." ^' Under a New
York decision where a policy of life insurance states that the con-
sideration therefor is the application of the assured, which is made
a part of the contract and a copy of the application is annexed to
the policy and the statute requires that every policy of life insurance
shall contain the entire contract and that nothing shall be incorpor-
ated therein by reference to other writings not indorsed upon or
attached to the policy, the word ''consideration" therein is not lim-
ited to its technical definition of '"some right, interest, profit, or
benefit accruing to the one party, or some forbearance, detriment,
loss, or responsibility, given, sufl:'ered, or undertaken by the other,"
but rather is used in the sense of "inducing cause." ^°
§ 190c. State has power to enact: such statutes constitutional. —
It is clearly within the power of the state to enact such statutes and
to require that the entire contract between the parties and all con-
did not err in sustaining the de- Laws, cliai). 28 (Laws ]909, c. 33)
murrers to tlie defendant's pleas." see. 58 N. Y. Ins. Law, Consol. Laws,
"Provident Shavings Life Assur. c. 28 (Laws 1909, c. 33) sec. 58
See. V. Purvear's Adinr. 22 Ky. L. (tirst appeared in Laws 190G, e. 326),
Rep. 980, 59 S. W. 15. provides that every policy of life in-
^^ Easter v. Yeomen. 172 Mo. App. suranee shall contain the entire eon-
292, 157 S. W. 992, Rev. Stat. 1909, tract between the parties, and nolh-
sec. 6934 (enacted Laws 1907, p. ing shall be incorporated therein by
316). reference to any constitution, by-
^^ iEtna Life Ins. Co. v. Hardison laws, rules, application or other writ-
( Travelers' Life Lis. Co. v. Hardi- ings unless the same are indorsed
son) 199 Mass. 181, 85 N. E. 407, ui>on or attached to the policy when
37 Ins. L. J. 818. See also New issued, etc.
York Life Ins. Co. v. Hardison Policy to contain "entire contract."
(Mutual Benefit Life Ins. Co. v. N. Y. Consol. Laws, c. 28 (Ins. Law)
Hardison) 199 Mass. 190, 12/ Am. sec. 58 construed, in connection with
St. Rep. 478, 85 N. E. 410, 37 Ins. nonattachment of medical examina-
L. .1. 848. See § 177 herein. tion to policv, in Becker v. Colonial
20 Becker v. Colonial Life Ins. Co. Life Ins. Co. 138 N. Y. Supp. 491,
138 N. Y. Supp. 491, 153 App. Div. 153 App. Div. 382, aff'g 133 N. Y.
382. aff'g 133 N. Y. Supp. 481, Supp. 481, 75 Misc. 213.
75 Misc. 213, Ins. Law, Consol.
502
CONSTRLX'TION §§ 190d, 190e
ditions and stipulations by which the policy may be avoided shall
he embodied in or attached to the policy delivered to insured and
this is the manifest intent of statutes requiring a copy of the appli-
cation to be attached or of like statutes.^ So an act requiring that
the application be annexed to or copied into the policy has been held
constitutional. Such act does not impair the obligation of con-
t.racts.2
§ 190d. Purpose or intent of such statutes. — Statutes of this char-
acter are clearly intended to protect the policy-holder by requiring
the insurer to place in his hands written evidence of the entire con-
tract between them,^ or in other words by requiring all the terms,
conditions and representations to be incorporated or embodied in
the policy.* It is held in Pennsylvania that the intent of the stat-
ute, making applications for insurance and by-laws of companies
inadmissible in evidence unless a copy thereof is attached to the
policy, was to produce a uniform rule of procedure and to apply
to all insurance companies incorporated by the laws of the state, as
well as to all other corporations insuring within the state. ^
§ 190e. Construction of such statutes, the policy and application
or contract. — Tlie court slumld construe such statutes so as to give
them force and effect so as best to accomplish the legislative intent.^
And all defenses based on the application when a copy thereof is
not attached will be ineffective and the policy should be treated,
construed and enforced as if no written application had been made
or as if no such paper existed.'^ If both the application and the pol-
icy make the former a part of the contract and it is also made in the
policy a part of the consideration both should be construed together
in determining the parties' rights.*
While a policy or contract for credit insurance refers to the ap-
plication as a part of it but does not in terms refer to the form of
the policy to be issued for an explanation or delinition of its terms
the policy cannot be resorted to in construing the application.^
^ Rauen v. Prudential Ins. Co. of ^ Kiltaning Ins. Co. v. Hebb, 138
America, 129 Iowa, 725, 106 N. W. Pa. St. 174, 21 I'itts. L. J. N. S. 153,
198, 35 Ins. L. J. 288. 27 Week. N. C. 97, 48 Phila. Leo.
2 New Era Life Assoc, v. Musser, jns. 35, 20 Ins. L. J. 92, 20 Atl. 837.
120 Pa. St. 384, 14 Atl. 155. g n r. i f i t n e
1 T> 1-. 1 ,• 1 T n f ''Kauen v. Prudential Ins. Co. of
'' Rauen v. Prudentiat In.s. Lo. or , _ _ „p „ ,„
A • ion T r-cr inft XT wr Amenca, 129 Jowa, (25, lOb W. VV.
America, 129 Iowa, i2'o, 10b IN. V\ . ' ' '
198. 35 Ins. L. J. 288. ^^^' *^'' ^^^- ^- '^^ -^^•
*Kirkpatrick v. London Guar- ''Rauen v. Prudential Ins. Co. of
antee & Accident Co. 139 Iowa, 370, America, 129 Iowa, 725, lOG N. W.
19 L.R.A.(N.S.) 102 (annotated on i9ii, 35 Ins. L. -T. 288.
failure to attach copy ui: application g j^^^ ^^ Prudential Life Ins. Co.
to policy as attecting riglit of insurer .^^.^ ^,^^^ ^_ ^^^^^^,^. ^ ^ ^^^_
to rely on representations or war- '
rantie^- incorporated in the policy it- Cai,. 236, 89 ^. t.. o.J.
self) 115 N. W. 1107. ^ L. Black & Co. v. I^ndon Guar-
503
§§ 190t-190h JOYCE OX INSURANCE
§ 190f. Such statutes govern only relative rights of parties. — The
statute is intended only to govern the relative rights of, or the con-
tractual rehitions hetween the insurer and policy-holder, so that
where the proceeds of the insurance are claimed by different per-
sons the application may be admissible even though it is not at-
tached to the policy.^** But while the fact that a true copy of the
application is not attached may preclude the company from using
it, in pleading or evidence, still an othcer or incorporator is not so
precluded where it is sought to hold him personally liable on a death
claim. ^^
§ 190g. Retroactive effect of such statutory requirements. —
Where a certiticate was issued before the enactment of the statute a
by-law subsequently enacted but not attached to the policy is in-
admissible in evidence.^^ But the requirement that that part of the
constitution referred to must be attached is not retroactive especial-
ly where the statute only covers policies or certificates "hereafter
issued." ^^
§ 190h. Necessity of true, correct, or entire copy of application. —
The attached copy of the application must be a true copy,^* as an
incomplete copy of the application is not within the intent of the
statute," and a copy of the entire application even though sul^di-
vided, or on different pages must be attached under the Pennsylva-
nia statute. ^^ So where a copy of the entire application must be
attached to the policy an omission of a part of the application even
though supplementary operates to exclude the whole. ^"^ But it is
not necessary that the attached copy of the application should be a
facsimile, although it must show by comparison, without resorting
to construction, that it is so exact and accurate as to be a "true
copy," " and if the copy varies from the original application so that
antee & Accident Co. 144 N. Y. Supp. ^^ Corson v. Anchor Mutual Fire
424, 159 App. Div. 186. Ins. Co. 113 Iowa, 641, 85 N. W.
lORnowles v. KnoAvles, 205 Mass. goG; Manhattan Life Ins. Co. v.
290, 91 N. E 213. Compare Cotter j^^^ -^^T Fed. 281, 62 C. C. A. 5l3
''^ ^w "? ^"^ "o. aP"';* ?o fv P.; (under Mass. acts 1894, p. 718, c.
ed Workmen, 23 Mont. 82, 3t Pac 1 ^_ • i i mi
..-rj ' ;j22, sec. lo) certiorari denied 194
'"'li Moore v. Fraternal Ace. Assoc. U. S. 633, 48 L. ed. 1159, 24 Sup. Ct.
103 Iowa, 424, 72 N. W. 645, acts 857; Albro v. Manhattan Life Ins.
18th Gen. Assemb. c. 211, sec. 2. Co. 119 Fed. 629.
12 Hunziker v. Supreme Lodge ,, ^^^^^.^ ^. g^^^^ ^^^^^^^ ^ife Ins.
Knmhts of Pythias, 11/ Ky. 41b, JD loo xi -m At wM,r v r ^i^'x
Kv.' L. Rep. 1510, 78 S. W. 201. Co. 183 Pa. o6o, 41 ^ kly. N. C. 353,
13 Grand Lodge A. O. U. W. of Ky. 39 Atl. o2.
V. Denzer, 129 Kv. 202, 33 Ky. L. "Fisher v. Fidelity Mutual Life
Rep. 643, 110 S. W. 882, 37 Ins. L. ^g^o,. ^gg Pa. 1, 29 Pitts. L. J. N.
'b 726. <^ 163^ 41 Atl. 457, Pa. act May 11,
1* Metropolitan Life Ins. Co. v. igg^ (p j oq )
•Moore, 117 Kv. 651, 25 Ky. L. Rep. v • - - ;•
1613 79 S W '^19 ^^ Johnson v. Des Moines Lite Ins.
504
CONSTRUCTION §§ 190i, 190j
its real moaning depends u]Kjn reference to anotlier paper it is not
a true or correct copy.^^ The signature of the applicant as it was in
the original must also appear as the use of the word ''signed/' of it-
self alone is insufficient to constitute a "true copy." 2° A photo-
graphic copy of the application attached, which comparison with
the original shows to be a correct one, even though such copy is
greatly reduced in reproduction, is a sufficient compliance with the
statute.^ If the description of the property differs the copied appli-
cation is not a correct copy.^ And where a copy of tlie application
annexed to the policy does not correctly state the place to which
notice of premiums shall be addressed, and omits some of the state-
ments of the assured referring to his past afflictions and all of the
examiner's report, the insurer must be deemed to have violated a
statute requiring a copy of the application to be annexed to every
policy.^
In case of a variance between the original application for a policy
of life insurance, which is made a part of the contract, and a copy
of the application appended to the policy, but not referred to in
the body thereof, the original application must control.*
It will, however, be presumed, in the absence of evidence to the
contrary tliat the copy of the apj)licatinn is a true copy.*
§ 190i. Such statutes do not apply to oral contracts. — The
Pennsylvania statute is limited in every particular to written pol-
icies and does not apply to oral contracts.^
§ 190j. Copy of application for renewal or reinstatement to be an-
nexed, etc. — A copy of an application for renewal or reinstatement
of a policy must be annexed to it, to enable the insurer to rely on
false statements therein.'^
Co. 105 Iowa, 273, MeCIain's Code, Life Assur. A.ssn. 97 Iowa, 22(), 59
sec. 1733. Am. St. Rep. 411, 32 L.R.A. 473, 6G
i^Greiner v. Safety Mutual Fire N. W. 157.
Ins. Co. 25 Lancaster L. Rev. 338. * Metropolitan L. Ins. Co. v. Dim-
20 Seller v. Economic Life Assoc, ick, 69 N. .). L. 384, 55 Atl. 291, ()2
105 Iowa, 87, 43 L.R.A. 5.37, 8 Am. & L.R.A. 774.
Eng. Corp. Cas. N. S. 601, 74 N. W. ^ Hollcran v. Life Assur. Co. of
941, acts 18th Gen. Assenib. c. 211, America, 18 Pa. Super. Ct. 573.
sec. 2. 6 Benner v. Fire Assoc, of Phila.
^ Arter v. Nortlnvestern Mutual 229 Pa. 75, 140 Am. St. Rep. 706, 78
Life Ins. Co. 130 Fed. 768, 65 C. C. Atl. 44, 40 Ins. L. J. 84, Pa. act
A. 156, 33 Tns. L. .). 852, Pa. act Mav 11, 1881 (P. L. 20).
May 11, 1881 (P. L. 20). 'Goodwin v. Provident Savinsrs
^Greiner, to use, etc. v. Safety Life Assur. Soc. 97 Iowa, 226, 32
Mutual Fire Jus. Co. 24 Lancaster L. L.R.A. 473, 59 Am. St. Rep. 411, 66
Rev. 16L N. W. 157.
^ Goodwin v. Provident Savings
505
$§ 190k, 1901
JOYCE ON INSURANCE
§ 190k. Mere reference to application insufficient under such stat-
utes. — It is not suliicient to merely refer in the policy to the appli-
cation nor to adopt the same in terms where the statute requires
that a copy thereof be attached to the policy,' and the application,
if not attached, is properly excluded in evidence, though the policy
provides that it is to be a part thereof,^ so the fact that the applica-
tion Avas referred to by the policy and made a part of the contract
does not of itself alone constitute a compliance with the contract.^"
A statement unsigned, although annexed and entitled ''copy of ap-
plication/' is not admissible in evidence," and a statement written
at the end of a policy entitled "copy of application," not containing
any signature, is not a part of the policy, nor are any of its recitals
binding on the insured. ^^ Again, a reference to the application in
certain paragraphs relating to occupation and suicide is not suf-
ficient to make it a part of the policy.''^ And even though the cer-
tificate declares that it is subject to the by-laAvs of the order, this is
not a sufficient compliance with the statute such by-laws not being-
made a part of the certihcate.^* So a special time limitation in the
constitution of the corporation cannot be pleaded in bar of an action
where it does not appear in the certificate, and no copy of the con-
stitution or by-laws is attached although they are ''made a part of
this certificate." ^^
§ 1901. Right of insurer to provide forms of application under such
statutes. — Where a statute provides that an application unless at-
tached to the policy cannot be treated as a part of the contract or
received in evidence in any controversy between the parties to or
interested in such policy, an insurance company has the right to
provide a form of application for its business, to require that it be
used by its agents and those desiring insurance of it. and that a sep-
arate application be made and signed for each policy. ^^
* Bowyer v. Continental Casualty
Co. 72 W. Va. 333, 78 S. E. 1000,
Code 1906, c. 34, as am'd by acts
1907, c. 77, sees. 15, 62, 69.
^ Imperial Fire Ins. Co. v. Dun-
ham, 117 Pa. St. 460, 2 Am. St. Rep.
680, 12 Atl. 668, under act May 11,
1881; Provident Savings Life Assur.
Soc. V. Puryear'.s Admr. 22 Ky. L.
Rep. 980, 59 S. W. 15.
^^ Rauen v. Prudential Ins. Co. of
America, 129 Iowa, 725, 106 N. W.
198, 35 Ins. L. J. 288.
^^ Susquehanna Mutual Ins. Co. v.
Hallock, 22 Wklv. Notes Cas. 151,
14 Atl. 167.
506
12 Under act Pa. May 11, 1881;
Susquelianna Mutual Fire Ins. Co.
v. Hallock, 22 W. N. C. 151, 14 Atl.
167; Dunbar v. Phoenix Ins. Co. 72
Wis. 492, 40 N. W. 386.
1^ Mutual Life Ins. Co. v. Morgan,
39 Okla. 205, 135 Pae. 279.
1* Mooney y. Ancient Order United
Workmen. Grand Lodge of Ky. 114
Ky. 950, 24 Ky. L. Rep. 1787, 72
S. W. 288.
1^ Corley y. Travelers Protective
Assoc. 105 Fed. 854, 46 C. C. A. 278,
under Ky. Stat. sec. 679.
1^ Provident Savings Life Assur.
Soc. y. Elliott, 29 Ky.^L. Rep. 552, 93
CONSTRUCTION § i90m
§ 190m. What is and is not part of contract: statutes. — An ap-
plication is held to be a. part of the contract even though it is not
referred to in the certificate, wliere each of them provided that the
applicant should be bound by the by-laws etc. of the order and the
application was signed as required by the by-laws. ^"^ So a statutory
requirement of attachment of an application for insurance to the
policy is satisfied if the subdivision of a document designated, as a
whole, ''proposal for insurance," which is entitled "application," is
so attached, where all material portions of the contract are incorpor-
ated in such application ; and the fact that the name of the benefi-
ciary appears only in the proposal, and is not attached to the policy,
is immaterial, since it in no way affects any essential element of the
contract upon which the right of the insurer to avoid it depends.^*
So an agreement, written on the face of the policy making the mu-
tual agreements, benefits and privileges stated on subsequent pages
a part of the contract as fully as if recited at length over the signa-
tures affixed includes everything on subsequent pages following the
signatures of the ofiicers, especially so where the policy provides
that the contract is issued in consideration of the statements and
agreements made on the application and made a part of the l)olicy,
and the application is also thereby made a part of the policy unless
it is within an exception in the statute requiring that a copy of the
application accompany the policy or contract unless there is a clause
making the policy indisputable.^^ x4.gain, conditions or agreements
which modify or impair the effect of an insurance contract must
when required by statute be set out in full on the policy and this
applies to a fidelity guarantee agTeement, although the application
of insured is not excluded as a part of the contract under the stat-
ute.^" But unless the statute is complied with the by-laws are not
a part of the contract. even though delivered contemporaneously
with the certificate.^ Nor are the by-laws a part of the contract,
though attached to the poHcy, when unsigned by the company's of-
ficers as provided by statute.^ And where neither the insurer's by-
S. W. 650, 35 Ins. L. J. 713 ; Kv. ^^ Grell v. Sam Houston Life Ins.
Stat. 1903, sec. G79, Russell's Stal. Co. (1913) — Tex. Civ. App. — ,
see. 4,400. 157 S. W. 757, Tex. Rev. Civ. Stat.
1"' Williams v. Supreme Council of 1911, sec. 4951.
Catholic Mutual Benetit A.ssoc. 152 ^o pjoi,, Loan & Savings C«. v.
Mich. 1, 131 N. W. 1081. London Guarantee & Ace. Co. (Can.
As to wliat should be attached to 11. C. J.) 24 Canadian Law J. 354;
policy, see note 18 L.R.A.(N.S.) Ins. act R. S. O. 1897, c. 'iO.'!, sec.
1190." 144 (1) see. la.
^^Lano-deau v. John Hancock ^ P)ankers Fraternal Tlnion v.
Mutual Life Ins. Co. 194 ]\Iass. 56, Donahue, 33 Ky. L. Rep. 196, 109
18 L.R.A.(N.S.) 1190 annot. 80 N. S. W. 878.
E. 452, 36 Ins. L. J. 432. ^ Capitol Ins. Co. v. Pleasanton, 48
507
§ I9(>u JOYCE ON INSURANCE
laws nor the application of the insured is att<iclied to bi.>^ policy of
accident insurance, as required by statute, they are not admissible
in evidence in aid of the policy.^ So a preliminary statement of the
company's agent signed only by him and containing only informa-
tion of a general nature useful to the company, but which is not re-
ferred to in the policy is no part of the contract where the statute
requires a copy of the application made by the insured to be de-
livered with the policy.* Again neither a proposal for insurance,
for the applicant to fill out and sign, nor a memorandum for the
solicitor to sign as a part of the application is within the statute re-
quiring a correct copy thereof to be attached to the policy.^
§ 19bn. Same subject: medical examination, — An insurer cannot
avail itself of any defense ba.>^ed on matters contained in the medical
examination which is part of the application of which no copy is
attached to the policy,® for where the medical examiner's report is
a part of the application it is within the requirements of the stat-
ute.' and if the medical examination is a part of the application and
intended to accompany it it may properly be excluded where the ap-
plication is not attached.^ A supplementary application or state-
ment made to the medical examiner as supplemental to and part
of the application is also within the statute even though a copy of
the original application is endorsed upon the policy .^ It is held,
however, that it is not necessary to include the medical examiners
report in a copy of the a])])lication required to be attached to or in-
dorsed upon the iwlicy.^°
The medical examination, even though a copy is not attached, is
competent evidence in case of fraud. ^^
Kan. 397, 29 Pae. 578 ; Capitol Ins. ' Morris v^ State .Mutual Life Ins.
Co. V. Bank of Blue Mound, 48 Kan. Co. 183 Pa. 563, 41 Wkly. N. C. 3;)3,
393. 29 Pae. 576. 39 All. 52.
3 Pickett V. Pacific Mut. L. Ins. Co. 8 Soutliern States IVrutual Life Ins.
144 Pa. 79, 27 Am. St. Rep. 618, 13 Co. v. llcrlihv, 138 Ky. 359, 128 So.
L.R.A. 661, 22 Atl. 871. 91.
^C.iinitli V. Metropolitan Life Ins. ()„ meflical examiner as agrent of
(;o. 3() App. D. C. 8, 38 >Yasli. L. insurer or of insured, see note in 41
Rep. 758 (Civ. Code, D. C. see. 65 r L.R.A. (N.S.) 506.
[32 Stat, at L. 534. c. 1329]) citing 9 Fisher v. Fidelity :\rutual Life
Metropolitan Life Ins. Co. v. Ilawk- j^^^ ^^ ^gg p^^ 2, 2!) Pitts. L. J. N.
ins. 31 App. D. C. 493, 14 Am. & (. "-^gg^ ^^ ^^j 4^7 ^^^^^^^,Y Pa. act
KuiT. Ann. Cas. 1092. ^ja^. n^ jggi (p, l. 2O) requiring
SBonville v. John Hancock Mutual ; ^^^. ^^^^^,^ application.
Life_ Ins. Co. 200 Mass. 19., 80 N. E. ' „ ^^^^^^^^^^^ ^. ^^^ ^^^^^^^^ ^ife Ins.
"eRauen v. Prudential Ins. Co. of Co 105 Iowa, 273, 75 N. W. 101,
A 100 T ,.„ 7Q'. ^[^a V W McClam's Code, sec. 1<33.
America, 129 Iowa, 72.), iUb i\. \\ . t ■.. a
198 35 Ins. L. J. 288. E.vnmine " Hews v. Equitable Lite Assur.
NoAhwestern Life Assur. Co. v. Soc. 143 Fed. 850, 74 C. C. A, 611,
Tietze, 16 Colo. App. 205, 64 Pae. 35 Ins. L. J. 202, Pa. act May 11,
773 1881 (Pub. L. 20).
508
•CONSTRUCTION §§ l!)0o, lOOp
§ 190o, Foreign contracts: effect of statutes. — Tn Massacliusclts
the statute applies only to policies issued there and not to conlraets
issued or made in other states even though upon the lives of j)er-
sons doniiciled in Massachusetts.^^ In Wisconsin the statute jjro-
viding that all fire insurance corporations, except mutual com-
panies, in cities and villa.<2,es, shall. u])on issuing a policy, attach to
it a copy of any application which by the terms of the policy is
made a part thereof, does not except from its operation mutual com-
panies organized outside the state, but only those organized under
the laws of Wisconsiii.^^
§ 190p. What companies or associations are within such statutes.
— The ( Jeorgia statute requiring a copy of the a])plicati()n by-law or
rule etc. to be attached applies to fraternal associations as well as to
other insurance corporations.^* In Iowa the statute applies to all
ca.ses and a society or fraternal association must attach a copy of the
application to each certificate.^* Mutual fire companies are also
within the terms of that statute ^^ nor is such act super.^eded by an
act regulating mutual benefit societies.^' In Kentucky a fraternal
society which is under the supervision of a supreme council and se-
cures members through the lodge system exclusively and pays no
commissions, nor employs any agents except in the organization
and supervision of the work of the local council is exempt from the
operation of the Kentucky statute requiring the application, consti-
tution, by-laws, or other rules of the corporation or society to be
contained in or attached to the contract of insurance, before they
can be received in evidence.^^ But it is decided in a later case in
^2 Johnson v. INIutual Life Tns. Co. 279. On laws or judi^nient.s of courts
180 Mass. 407, 63 Ij.R.A. 833, 02 N. of state in wliicli insurant-e f'omj)any
E. 733, 31 Ins. L. J. 340. See is inforporated as bindin<4' in otiier
Rauen v. Prudential Ins. Co. of states, see note in L.R.A.IOIOA, 770.
America, 129 Iowa, 725, lOG N. W. ^^ Heralds of Liberty v. Bowen, 8
798, 3.5 Ins. L. J. 288. Tlie Pennsyl- Ga. App. 325, 68 S. E. 1008.
vania Stat, of May lltli, 1881 (Pub. ^^ Mullen (Lee, Intervenor) v.
L. 20) covers policies issued by Woodmen of the World, 144 Iowa,
forei£?n companies doing business 228, 122 N. W. 90.3; Stork v. Su-
tlierein. See Kittaning Ins. Co. v. jireme Lodge Knights of Pythias of
Hebb, 138 Pa. St. 174, 21 I'itts. L. J. the World, 113 Iowa, 724, 84 N. W.
N. S. 153, 27 Wkly. N. C. 97, 48 721 (acts 18th Gen. Assemb. c. 211.
Phila. Leg. Int. 35, 20 Ins. L. J. 92, sec. 2). Examine Grimes v. North-
20 Atl. 837, noted under i; 190d western Legion of Honor, 97 Iowa,
herein. See § 194 (b) herein. 315, ;527, 64 N. W. 806, ()6 N. W. 18.].
^' Waukau Milling Co. v. Citizens' ^^ Corson v. Iowa iMntual P^'ire Ins.
Mutual Fire Ins. Co. 130 Wis. 47, Assoc. 115 Iowa, 485, 88 N. W. 1086.
118 Am. St. Rep. 998, 109 N. W. 17 ^^.(^^onnell v. Iowa Mutual Aid
937. Assn. 79 Iowa, 757, 760, 43 N. W.
On conflict of laws as to construe- 188.
tion of insurance policv, see notes in ^* Yeomen of America v. Rott, 145
63 L.R.A. 856, and 52'L.R.A.(N.S.) Ky. 604, 140 S. W. 1018, Ky. Stat.
509
§ 1!)()(1 JOYCE ON IXSlJx'AXCK
that state that by-laws must be incorporated m or attaclied to policy
where the society is one not excepted from the operation of the stat-
ute.^^ It is also held in an earlier case there that the statute applies
also to assessment co-operative companies in the lodge plah.^" Be-
nevolent fraternal associations are not included in the Minnesota
statute.^ It is held in a Pennsylvania case that the by-laws may be
put in evidence by the insurer, notwithstanding they are not at-
tached to the policy as required by statute, since the statute does not
apply to orders doing business through lodges.^ And a beneficial
association incorporated as such under a statute providing therefor
is not within the statute.^ But it is also decided in that state that
an association which is in effect an insurance company must com-
ply with the statute requiring a copy of the constitution and by-laws
to be attached to the policy.^ In Wisconsin the statute does not
exempt from its operation mutual companies organized outside the
state but only those organized under the laws of that state. ^
Accident insurance is not within the Pennsylvania act of 1881.^
And it is held in Iowa that mutual accident companies need not
attach a copy of the by-laws to the certiticate.'''
A live stock policy of insurance is within the West Virginia stat-
ute requiring the application to be attached to or incorporated in the
policy in order to become a part of the contract.^
§ 190q. Failure to comply with such statutes does not preclude de-
fenses based upon policy alone. — The omission to indorse or attach
see. 679, by express terms provisions ^ Weisenbrodt v. Mutual Beneficial
do "not apply to secret or fraternal Assoc, of America, 36 Pa. Co. Ct.
societias, lodges or councils, -which are Rep. 570.
under the supervision of a grand or * Fahey v. Empire Life Ins. Co. 5
supreme body, and secure members Lack. Leg. News, 377, Pa. act May
through the lodge system exclusively, 11, 1881 (P. L. 20).
and pay no commission nor employ ^Waukau MilUng Co. v. Citizens'
any agents, except in the organiza- Mutual Fire Ins. Co. 130 Wis. 47,
tion and supervision of the work of 118 Am. St. Rep. 998, 109 N. W.
local subordinate lodges or councils." 937.
i^Home Protective Assoc, v. Wil- ^National Accident Soc. v. Dolph,
liams, 150 Ky. 134, 150 S. W. 11, 94 Fed. 748, 38 C. C. A. 1, act May
rev'd 151 Ky. 146, 151 S. W. 361, Ky. 11, 1881 (P. L. 20) ; Standard Life
St. see. 679. Russell's Stat. sec. 4400. & Accident Ins. Co. v. Carroll, 86
20 Supreme Commandery of the Fed. 567, 30 C. C. A. 253, 58 U. S.
United Order of the Golden Cross of App. 76, 41 L.R.A. 194, distg. Pickett
the World v. Hughes, 114 Ky. 175, v. Pacifie Mutual Life Ins. Co. 144
24 Ky. L. Rep. 984, 70 S. W. 405. P_a. St. 79, 13 L.R.A. 661, 22 Atl.
^Loudon V. Modern Brotherhood 871.
of America, 107 Minn. 12, 119 N. 'Fitzgerald v. Metropolitan Ace.
W. 425, Rev. Laws 1905. .sec. 1616. Assoc. 106 Iowa, 457, 76 N. W. 809,
2 Donlevy v. Supreme Lodse Shield acts 18th Gen. Assemb. c. 211, sec.
of Honor, 11 Pa. Co. Ct.^477; 49 2.
Leo- Intel! 145 ^ Bush v. Indiana & Ohio Live
510
CONSTRUCTION § 190r
a copy of the application does not, however,^ invalidate the policy,
but only goes to the pleading and proof of the representations.^"
So where by statute neither the application nor by-laws constitute
a part of the contract except so far as they are incorporated in the
policy the policy alone constitutes the contract, and where not so
incorporated the description or location in the application of the
property insured does not limit that stated in the policy and this is
so even though the policy refers to the application as a part thereof,
but no copy of it is attached to or incorporated therein." And
where there is no reference whatever to the application and no re-
liance thereon or assertion of rights thereunder by the insurer it
is not precluded from defenses based only upon the policy itself.^^
So in an action to recover on a life insurance policy,, the beneficiary
may olfer such policy in evidence without the application therefor,
as the policy constitutes the contract upon which the suit is brought,
when the application is no part of the policy and is in the possession
of the defendant.^^ And the policy itself is admissible in evidence
even though the application attached is not a correct copy.^* Again,
an insurance company is not precluded from relying on a breach by
the insured of conditions and warranties inserted in the policy by
failure to attach to it a copy of the application, which is not referred
to in the policy, although they are similar to those contained in the
application, under a statute providing that omission to attach a copy
of the application to the policy will preclude the company from al-
leging or proving any such application or representations, or falsity
thereof or any parts thereof, in an action on the policy, but permits
the insured to plead or prove the application or representation at his
pleasure to show waiver by the insurer. ^^
§ 190r. Application as part of contract: statutes: fraud as de-
fense : misrepresentations. — ^In Georgia the insurer is not precluded
from showing fraudulent misrepresentations in procuring the pol-
icy notwithstanding the statute requires a copy of the application
to be attached in order to constitute a part of the contract.^^ The
Stock Ins. Co. 74 W. Va. 244, 81 S. 122 N. C. 92, 65 Am. St. Rep. 693, 30
E. 984. S. E. 327, 28 Ins. L. J. 723.
» Under Iowa act, Miller's Code, ^^ Ellis v. Metropolitan Life Ins.
1888, p. 398. Co. 228 Pa. 230, 77 All. 400.
1° McConnell v. Iowa Mutual Aid ^^ Kirkpatrick v. London Guaran-
Assn. 79 Iowa, 7o7, 43 N. AV. 188. tee & Accident Co. 139 Iowa, 370, 19
"Coleman v. Retail Lumberman's L.R.A.(N.S.) 102 (annotated on
Ins. Assoc. 77 Minn. 31, 79 N. W. faUuve to attach copy of application
588, 28 Ins. L. J. 650, Laws 1895, c. to policy as affecting right of insurer
175, sec. 52. to rely on representations or warran-
12 Kirkpatrick v. London Guar- ties incorporated in the policy itself)
antee & Ace. Co. ]39 Iowa 370. 19 115 N. W. 1107, Code Iowa, see. 1741.
L.R.A. (N.S.) 102n, 115 N. W. 1107. See § 503 herein.
13 Albert v. Mutual Life Ins. Co. ^^ Southern Life Ins. Co. v. I^gan,
511
§ 190s
JOYCE ON INSURANCE
Minnesota statute requiring a copy of the application to be indorsed
on or attached to the policy covers ''all statements made by the in-
sured ... in the absence of fraud" and this is construed to mean
not statements made in the absence of fraud but the ordinary and
usual statements in the signed application whether made in the ab-
sence of fraud or not.^'^ In another case in that state it is held that
although an api)lication is not admissible in evidence as a part of
the contract when a copy thereof is not attached to nor incorporated
in the policy yet it may be competent evidence on the issue of fraud
or to show false representations inducing the issue of the policy."
The Pennsylvania statute does not apply where the policy Avas ob-
tained by fraud.^^ In Michigan fraud in applicant's statements are
held to constitute no defense where the application is not indorsed
upon nor attached to the policy when issued.^" And it is so held in
lowa.^^ Under a New York decision although fraud vitiates a con-
tract yet when applied to a life insurance contract the matters re-
lied upon as constituting fraud must not only have been fali^e with-
in the knowledge of the party against whom the fraud is alleged
but in addition must have been material and have been relied upon
as an inducement to the contract.^
§ 190s. Conspiracy a defense though application not attacked. —
Conspiracy in making the application, in being examined, and in
procuring the insurance, may be shown even though the applica-
tion is not attacked.^
9 Ga. App. 503, 71 S. E. 742; Soutli-
ern Life Ins. Co. v. Hill, 8 Ga. App.
857, 70 S. E. 186 ; Jolin.son v. Ameri-
can Mutual Life Ins. Co. 134 Ga. 800,
08 S. E. 731.
• Effect of fraud as to materiality of
fact; representations, see §§ 1896,
1897 herein.
^■^ Wheelock v. Home Life Ins. Co.
115 Minn. 177, 131 N. W. 1081.
Laws 1907. c. 220, Rev. Laws Suppl.
1909, sees. 1695-2 to 1695-12.
^^ Coleman v. Retail Lumberman's
Ins. Assoc. 77 Minn. 31, 79 N. W.
588, 28 Ins. L. J. 650, Laws 1895,
c. 175, sec. 52.
1^ Hews V. Equitable Life Assur.
Soc. 143 Fed. 850, 74 C. C. A. 611,
.35 Ins. L. J. 202. Pa. act Mav 11th
1881 (Pub. L. 20).
20 New York Life Ins. Co. v. Ham-
burger, 174 Mich. 254, 140 N. W.
510, Pub. acts 1907, No. 187, subd.
4, sec. 1 (3 How. Stat. [2d ed.] see.
8312) & Pub. acts No. 180 (3 How.
Stat. [2d ed.] sec. 8310) sec. 1.
2^ Parker v. Des Moines Life Assoc.
108 Iowa, 117, 78 N. W. 826. Ex-
amine Kirkpatrick v. London Guar-
antee & Accident Co. 139 Iowa, 370,
19 L.R.A.(N.S.) 102 (annot.) 115 N.
W. 1107.
^ Becker v. Colonial Life Ins. Co.
138 N. Y. Supp. 491, 153 App. Div.
382, aff'g 133 N. Y. Supp. 481, 75
Misc. 213. The court considers the
following cases and declares that they
are not in point viz: Empire Life
Ins. Co. v. Gee, 171 Ala. 435, 55 So.
166, 40 Ins. L. J. 1384; Johnson v.
American National Life Ins. Co. 134
Ga. 800, 68 N. E. 731; Soutlicrn Life
Ins. Co. V. Hill, 8 Ga. App. 857, 70
5. E. 186 ; Holden v. Prudential Ins.
Co. 191 Mass. 153, 77 N. E. 309.
2 Southern States Mutual Life Ins.
512
CONSTRUCTION §§ 190t-191
§ 190t. Waiver of statutory rights by insurer or insured. — An
insurer which issues a policy to which no copy of the application is
attached thereby expresses its purpose to waive or relinquish its
right to have the application considered as any part of the contract.'
If the statute permits the insured to plead or prove the application
or representation even though such application is not attached to
nor indorsed upon the policy, the purpose thereof is to show a waiver
by the insurer of a breach of conditions or warranties, but insured
cannot show oral or written representations not attached to or in-
corporated in the contract in order to defeat the contract.* But it is
held that insured may not waive compliance with the statute.*
§ 190u. When question whether copy of application annexed to or
indorsed on policy is for jury. — The question whether a copy of the
application was annexed to the policy is for the jury, and requests
to charge may be refused where each assumes as correct that the ap-
plication was annexed, or in other words assumes the existence of a
fact upon which the jury is to pass.^
§ 191. When other papers are and are not part of policy. — Other
papers may become a part of the policy by being annexed thereto
or subjoined, or by being referred to therein in plain terms as a part
thereof,''' but the intent to incorporate such other papers should be
plainly manifest and not dependent upon implication.* So docu-
Co. V. Herlihy, 138 Ky. 359, 128 S. tents consisting' almost entirely of
W. 91. oral evidence, no policy nor any
'Rauen v. Prudential Ins. Co. of claimed copy being offered, and de-
America, 129 Iowa, 72.'), 106 N. W. fendant introduced copies claimed to
198, 35 Ins. L. J. ,288; New York be true copies but they were con-
Life Ins. Co. V. Hamburger, 174 ceded to be such. These copies con-
Mich. 254, 140 N. W. 510. tained each a reference to the appli-
*Kirpatrick v. London Guarantee cation "as a part of this contract"
& Accident Co. 139 Iowa, 370, 19 and had annexed to it a copy of the
L.R.A.(N.S.) 102n, 115 N. W. 1107. application.
5 Mullen V. Woodmen of the World, "^ See Carson v. Jersey City Ins.
144 Iowa, 228, 122 N. W. 903; Iowa Co.. 43 N. J. L. 303 (14 Vroom. 300)
Code 1897, sec. 182(5. See also Sover- 39 Am. Rep. 584; Sheldon v. Hart-
eign Camp of Woodmen of the ford Fire Ins. Co. 22 Conn. 235, 58
World V. Salmon (1909) — Ky. — , Am. Dec. 420. As to mutual bene-
120 S. W. 358. That person has tit societies and other pai)er.s, see Ba-
right to waive statutory provision, con on Benefit Soc. & Life Ins. (3d
See Mutual Life Ins. Co. v. Burden, ed.) sees. 181, 184.
9 Ga. App. 797, 72 S. E. 295. 8 Moore v. State Ins. Co. 72 Iowa,
^ Mon jeau v. Metropolitan Life 414, 34 N. W. 183 ; Weed v. Schenec-
Tns. Co. 208 Mass. 1, 94 N. E. 302, tady Ins. Co. 7 Lans. (N. Y.) 452;
40 Ins. L. J. 917, under Mass. Rev. Buri-itt v. Snraloaa Countv iMutual
Laws, c. 118, .sec. 73. In this ca.se Fire Ins. Co. 5 liill (N. Y.) 188, 40
evidence was offered to show that Am. Dec. 345, ]ier Bronson, J.;
tlie i)olicies were lost and plaintiff put Merchants Tiis. Co. v. Dwyei", 1 Tex.
in secondary evidence of their con- Unrep. Cas. 445.
Joyce Ins. Vol. I.— 33. 513
§ 191 JOYCE ON INSURANCE
menis adopted by reference and attached to the policy constitute
the contract.^ So a mortgage slip making the loss payable to the
mortgagee may be attached to the policy and become a part of the
contract ; ^° and a paper written in lead pencil and signed by the
insured may be a part of the policy when it is referred to therein
by number.^^ A separate paper may by distinct and clear reference
be expressly made a part of the contract, but a simple reference is
not sufficient. ^2 And where a policy is delivered and there is pinned
thereon a smaller sheet of paper partly printed and partly written
and not signed, it is held that the two papers thus delivered consti-
tute the contract and differences between the two papers in texture,
color or quality are entitled to slight weight in determining wheth-
er the contract is contained in both or one only.^^
The whole of a survey may be incorporated by proper reference.^*
But where conditions in a policy of insurance, relating to misrepre-
sentations or concealments as to the situation or occupancy of the
property insured therein, are in a clause which refers to an applica-
tion, plan, sur\ey^ or description, and assumes to make such paper
a part of the policy and a warranty by the insured, but the record
fails to disclose the existence of any such paper, the clause which
refers to it, and attempts to describe its place and effect as a part of
the contract, and to determine the consequences of misstatements
or omissions therein, must be regarded as inapplicable to the facts
in the case, and therefore nugatory.^^ If drawings and specifica-
tions of the architect are identified by the signature of the parties
and are made a part of the contract and there is no question as to
their identity, and they are adopted by all the parties under a bond
for the due performance of a building contract, the failure to sign
them is immaterial as the formality of signing is waived by the con-
^ Empire Life In?. Co. v. Gee, 171 ^^ Hartford Protection Ins. Co. v.
Ala. 43.5, 5.5 So. 166, under Ala. Code Harmer. 2 Ohio St. 4.52, 59 Am. Deo.
1907, sec. 4579. 684. See Anderson v. Fitzgerald, 4
10 Westchester Fire Ins. Co. v. H. L. Cas. 474.
Coverdale, 48 Kan. 446, 29 Pac. 682, " Timlin v. Equitable Life Assur.
21 Ins. L. J. 530. See § 196 herein. Soc. 141 Wis. 276, 124 N. W. 253.
As to provision that conditions of This case is criticized as a radical
insurance as to mortsagee be written departure from the rule in 39 Ins. L.
upon policv or attached thereto, and J. 295, 302-306. Compare Co-oper-
as "Union Mortgage Clause," see ative Ins. Assoc, v. Ray, — Tex. Civ.
Brecht v. Law I^nion & Crown Ins. App. — , 138 S. W. 1122.
Co. 160 Fed. 899, 87 C. C. A. 351, 18 ^^ Sheldon v. Hartford Fire Ins.
L.R.A.(N.S.) 197 (annotated on ef- Co. 22 Conn. 235, 58 Am. Dee. 420.
feet of breach of policy of insurance ^^ Alleraannia Fire Ins. Co. v. Peck,
by mortgagor on rights of mortgagee) 133 111. 220, 23 Am. St. Rep. 610, 24
37 Ins. L. J. 621. N. E. 538.
" Citv Ins. Co. v. Bricker, 91 Pa.
St. 488.
514
M
CONSTRUCTION § 191
duct of the parties.^* Again, a receipt for the hu.^hand's notes given
in paNinent of a premium for a policy insuring liis Avife's interest
in his life, is a part of the contract.'^'^ So an ad interim receipt may
be a part."
Again, a separate paper may by express stipulation be made part
of a policy, but where from the manner of referring to it it would
seem that the insurers were satisfied to look to it only for the pur-
pose of estimating the risk, it is not a part of the policy.^'' So an
agreement for deduction from the amount of the premium for serv-
ices rendered which is a separate contract cannot be considered as
a part of the policy or introduced in evidence in an action to recover
on the policy .2" In Bize v. Fletcher,^ it appeared that at the time
the insurers underwrote the policy a slip of paper was wafered to it
describing the state, of the ship as to repairs and strength, and it
also mentioned several particulars as to her intended voyage, and
Lord Mansfield held that this was not a part of the policy so as to
make the statements other than re)jresentations. It was said of this
in a New York case ^ that it would be impossible to sustain the de-
cision if the slip so wafered had expressly declared itself to be con-
ditions. In this last case the policy was printed on one-half the
sheet and the ''conditions of insurance" on the other, and it was
held that the conditions were part of the policy, and that there was
no need of an express reference thereto in the policy; that the jux-
taposition of the papers was prima facie evidence of the parties' in-
tention, which might be rebutted, however, by parol evidence, as
by showing that the two were thus connected by mistake.' Again,
it is held that a paper detached from the policy containing instruc-
tions relative to the force with which the ship was to sail, and which
was shown to the underwriter at the time of subscribing, did not
thereby become a part thereof * and a diagram on the back of an
application Avhich is not itself properly made a part, there being no
evidence that the insured ever saw or knew of the diagram, it having
"^tna Indemnity Co. v. Waters, Loui-sville v. Bowling (1908) — Ky.
110 Mrl. 673, 73 Atl. 712. — 114 S. W. 327.
" Baker v. Union Mutual Life Ins. ^ 1 Doug. 284, 291 ; 13, n. 4.
Co. 6 Abb. Pr. N. S. (N. Y.) 144, 2 Roberts y^ Chenango Coimty Mu-
37 How. Pr. (N. Y.) 126. hinl Tns. Co. 3 Hill (N. Y.) 501, 503.
"Goodwin v.' Lancashire Fire & ^ Same point in M unlock v. Che-
Life Ins. Co. 16 L. C. Jur. 298. nango County Mutual Ins. Co. 2 N.
" Snvder v. Farmers' Insurance Y. 210, 220. See also Duncan v.
and Loan Co. 13 Wend. (N. Y.) 92, Sun Fire Ins. Co. 6 Wend. (N. Y.)
aff'd 16 Wend. (N. Y.) 481, 30 Am. 488, 22 Am. Dec. 539.
Dec. 118. * Pawson v. Watson, 2 Cowp. 785,
2» Commonwealth Life Ins. Co. of 13 Eng. Rul. Cas. 540.
515
§§ 191a, lUlb
JOYCE ON INSURANCE
been made by the agent,^ and a letter written after the application
was rejected in regard to insurable interest, and held not to be a
part of the policy thereafter issued, nor of the application,^ nor are
proofs of loss a part.'
§ 191a. Receipt books, manuals, and schedules as part of con-
tract. — A receipt book under the head of extracts from the rules,
regulations, etc., therein printed, when accepted by the insured be-
comes a part of the contract.* A "manual," however, giving defi-
nitions of terms and classifications of risks in accident insurance is
not a part of the policy when not mentioned or referred to therein.
To become a part of the policy it should have been embodied in the
face of the contract and made a part thereof in plain unmistakable
terms.^ But even though a "manual of occupation" may not l)e a
part of an accident policy still it is held that it may l>e looked to
for the purposes agreed upon by the parties, or as a means of ascer-
taining the amount of indemnity.^"
In an action brought to indenmify against loss by giving credit
the application bond and a schedule consisting of several distinctly
lettered paragraphs relating to customers and conditions, and to
which the bond refers constitute the contract of in.surance between
the parties. ^^
§ 191b. Riders or slips as part of contract: standard policy. — It
is well settled that a rider attaclied to the policy is a part of the con-
tract,^2 iQ ti^e same extent and witJi like eftect as i! embodied there-
5 Vilas V. New York Cent. Ins
72 N. Y. 590, 28 Am. Rep. 186.
^ Mace v. Providence
soc. 101 N. C. 122, 7 S
Life Ins. As-
E. 647. See
Menk v. Home Ins. Co. 76 Cal. 51,
9 Am. St. Rep. 158; Allemannia Fire
Ins. Co. v. Peck, 133 111. 220, 23 Am.
St. Rep. 610, 24 N. E. 538.
■^McMaster v. President & Direct-
ors of In.surance Co. of North Amor.
55 N. Y. 222, 14 Am. Rep. 239.
* Rowe V. United States Induslrial
Life Ins. Co. 90 S. Car
E. 1018.
3 Miller v. Missouri State Life Ins.
Co. 168 Mo. App. 330, 153 S. W.
1080.
10 McCarthy v. Pacific IMutual Life
Ins. Co. 178 111. App. 502, holding
also that the Rev. Stat. see. 208n,
clause 3, making a copy of the appli-
cation endorsed upon or attached to
a life policy with tlie policy the cn-
Ca tire contract and sec. 209, c. 73, R.
S. requiring accident policies to state
on their face the agreement with the
person receiving the same do not ap-
ply.
11 Lexington Grocery Co. v. Phila-
delphia Casualtv Co. 157 N. Car. 116,
72 S. E. 870. 'The application pro-
vided that : "Experience shall be the
basis for credit under as on Schedule
A," (the above-mentioned schedule)
with a specified account limit and it
168, 72 S. was expressly stipulated that Sched-
ule A should describe the class of
customers to be covered by the bond.
12 Sr-liarles v. N. Hubbard Jr. & Co.
131 N. Y. Supp. 848, 74 :\Iisc. 72.
As to effect of riders or slips at-
tached to policies, see note 30 L.R.A.
036-642.
As to slips conlaining "Union
Mart page Clause" and l-)ro^■ision that
conditions as to mortgagee be written
516
CONSTRUCTION § 191b
in.'^' Ant] a rider of it'^elf supersedes the policy, especially so where
the obvious intention of the rider is to substitute all its conditions,
exceptions and provisos for those of the policy.^* Again a credit
insurance policy may, by a rider, be made to relate back or to an-
tedate the policy as to outstanding accounts.^* So a rider attached
to a marine policy subsequent to its issuance giving permission to
navigate in other waters than allowed by the terms of the policy
becomes a part of the contract,^^ and a written notice of a contract
of transfer of insured's policy by the company in which his policy
was originally issued to another company, duly executed and sent
to insured with written directions to him to attach it, as a rider; to
the policy in his possession, when so attached becomes a part of the
policy and with it constitutes the contract.^'
A rider or slip attached to a standard policy making it payable
to the mortgagee as his interest may appear and also providing for
a pro rata liability of the company in case of other insurance is a
part under a statute authorizing slips or riders to be attached to
standard policies modifying the provisions in the body of the pol-
icy." So a clause in a rider attached to a policy in the standard
form, which provides that : ''It is a part of the consideration of this
policy, and the basis upon which the rate of premium is fixed, that
the insured shall maintain insurance on the property described by
this policy, to the extent of at least eighty per cent of the actual
cash value thereof; and failing so to do, the insured shall be an in-
surer to the extent of such deficit, and to that extent shall bear his,
her or their proportion of any loss that may happen to said prop-
erty," is a part of the contract, and is a provision "adding to or mod-
ifying those contained"' in the standard form.^^ And, under a New
York decision, where the statute specifies in certain exceptions the
nature of the clauses which may be added without being deemed a
upon policy or attached thereto, see ^^ Mark v. Home Ins. Co.' 52 Fed.
note 18 L.R.A.(N.S.) 197, to Breoht 170, afif'd 64 Fed. 804, 13 C. C. A.
V. Law Union & Crown Ins. Co. 160 157.
Fed. 899, 87 C. C. A. 351, 37 Ins. L. " Mutual Reserve Life Ins. Co. v.
J. 621. Ross, 42 Ind. App. 621, 86 N. E.
^^ Farmers' Bank v. Manchester 506.
Assurance Co. 106 Mo. App. 114, 80 " Hardy v. Lancashire Ins. Co. 166
S. W. 299. Mass. 210, 44 N. E. 209, 33 L.R.A.
i*New York & Porto Rico Steam- 241, 55 Am. St. Rep. 395, see Brecht
ship Co. V. ^tna Ins. Co. (U. S. C. v. Law Union & Crown Ins. Co. 160
C.) 192 Fed. 212, aff'd 204 Fed. 255, Fed. 899, 87 C. C. A. 351, 18 L.R.A.
as to construction, see §§ 223, 224 (N.S.) 157, and note 197, 37 Ins. L.
heroin. J. 621.
^^ Philadelphia Casualty Co. v. ^^ Quinn v. Fire Assoc, of Phila.
Canon & Byers Millinery Co. 133 Ky. 180 Mass. 560, 62 N. E. 980.
745, 118 S. W. 1004.
517
§ 191b JOYCE ON INSURANCE
departure from the statutory form and amono; such exceptions pro-
vides that printed or written forms of description and specifications
or schedules of the property covered by any particuhir policy, and
any other matter necessary to clearly express all the facts and con-
ditions of insurance or any particular' risk not inconsistent with or
a waiver of any of the conditions or provisions of the standard pol-
icy, a rider is within the exception where it states that it is issued
upon the understanding and warranty by assured that another cer-
tain company has a policy in force insuring the identical property
in identically the same proportions and at no higher rate of pre-
mium. 2° Under the Maine standard policy law^^ a company may
write upon the margin or across the face of a policy, or write, or
print in type not smaller than long primer, upon separate slips
or riders attached thereto, provisions adding to or modifying
those contained in the standard form, and it is held that the
statute does not require a separate slip or rider for each provision
modified or added to but that the word "separate" means something
separate from, or not physically a part of the policy, but something
originally distinct, apart from the policy, but to be attached thereto ;
and the statute permits the inclusion of more than one provision on
the same rider.^ So in that state a stipulation as to vacancy of the
premises may be modified by a slip or rider attached to the standard
policy.^
The policy and rider comprise the contract and effect will be
given to the "rider" attached to a policy of fire insurance on a steam
cotton-gin, where the rider is inserted in and made a part of the
entire policy for the purpose of adapting its provisions to this par-
ticular kind of property, especially with reference to the method
and conditions of its operation; where there is nothing uncertain
or restrictive in its terms, and it contains the provision, "attached
to and made a part of this policy ; " and where there is, at the end
of the entire policy, a stipulation that it is "made and accepted un-
der the foregoing stipulations and conditions, together with such
other provisions, agreements, and conditions as may be indorsed
hereto." ^ Although the Minnesota statutes prescribe the form of
fire policies and changes and additions are forbidden except as spe-
cifically permitted, and although the policy must contain a com-
20 Seharles V. N. Hubbard Jr. & Co. 481, 2 L.R.A.(N.S.) 517 (annotated
131 N. Y. Supp. 848, 74 Misc. 72. on when insured property is vacant
21 Rev. Stat. e. 49, sec. 4. or unoccupied) 62 Atl. 289, 35 Ins.
1 Rolfe V. Androscoggin Mutual L. J. 81, Rev. Stat. c. 49, sec. 4.
Fire Ins. Co. 106 Me. 345, 78 Atl. ^ Lancaster v. Southern Ins. Co.
879. 153 N. Car. 285, 138 Am. St. Rep.
2 Knowlton v. Patrons' Androscog- 665, 69 S. E. 214, 39 Ins. L. J. 1748.
gin Mutual Fire Ins. Co. 100 Me.
518
II
CONSTRUCTION § 192
plete description of the property insured, and while a "clear space"
clause attached as a rider is not authorized with respect to the war-
ranty therein, still, as the statute authorizes printing on the policy
forms of description and specification of the property reference may
be had to said '"space clause" for a description and identification
thereof as limiting the general descriptive language of the policy.*
§ 192. Whether prospectus or pamphlet part of policy. — Whetlier
a prospectus or pamphlet is a part of the policy is a question in
which there is a conflict between the cases wherein this issue has
l)een distinctly before the courts. It would seem that in many Eng-
lish decisions, where there has been an equitable replication,^ the
courts have been inclined to hold that the prospectus or pamphlet
is a part of the contract, especially if it appears that the representa-
tions therein were an inducement to the assured to enter into the
contract.^ The rule in this country is not settled. If the prospectus
or pamplilet is expressly, by reference or otherwise, made a part of
the policy, then such should be the effect, but in case it is not so
made a part of the policy, then the question is not so easily deter-
mined. If the question were to be decided upon equitable princi-
ples, then such prospectus or pamphlet, where the representations
therein were made a special inducement to the assured to enter into
the contract, and were relied upon by him, might be considered a
part of the policy on the ground of estoppel, or perhaps, if on no
other, of mistake, in that the policy did not contain all the terms
of the agreement. But we believe tliat inasmuch as it is within the
f)0\ver of the parties to the contract to expressly make such prospec-
tus or pamphlet a part of the policy by reference or otherwise, that
the neglect so to do ought not to give the right after delivery and
acceptance thereof to vary or enlarge or disannul the provisions of
a written contract which the pai-ties have solemnly consummated,
and which they are bound to know merges all prior negotiations.
This rule is subject, however, to such exceptions as may exist in cases
of clear estoppel or mistake, and we believe that the best considered
cases and authorities make this question to depend upon the same
general principles that underlie references to other papers, and
which require some evidence in the policy itself of a purpose or in-
tent to make such a prospectus or pamphlet a part of the contract,
or clear evidence of an estoppel or mistake. Otherwise, serious ques-
* Wild Rice Lumber Co. v. Royal ^ See Wood v. Dwarris, 11 Exeh.
Ins. Co. 99 Minn. 190, 108 N. "W. (Hurl. & G.) 493; Salvia v. James, 6
871, 3.5 Ins. L. J. 824. East, 571.
* Under the Common Law Pro-
cedure Act. 1854, 17 & 18 Viet. c.
125, sees. 83-86.
519
§ 193 JOYCE ON INSURANCE
tions might arise in construing a written contract of insurance. The
presumption that a policy contains the real terms of the contract
is a presumption against the existence of such prospectus or pamph-
let when it is not incorporated in the policy hy reference or other-
wise.' And subject to the above exceptions to permit such presump-
tion to be overcome by proof that it was intended to make such
papers a part of the policy, would be to open the doors to the admis-
sion of parol evidence, establishing a different contract entirely from
that evidenced by the policy which has been deliberately executed,
delivered, and accepted.
§ 193. Same subject: the cases. — In a New York case* it is held
that a prospectus issued by a life insurance company and delivered
to the insured by the company's agent, importing that the company
was careful to prevent forfeitures, and which is not referred to in,
nor in any manner annexed to, the policy, is not part of the con-
tract, and is inadmissible to control the express terms of the policy,
providing that it should determine upon failure to pay the pre-
mium. This case, however, came subsequently before the same
court ^ on a motion for reargument, based upon the ground that
the attention of the court on the prior hearing was not called to sev-
eral decisions in England, where a contrary ruling had been adopted
upon this point. The cases referred to were Wood v. Dwarris,^"
Wheelton v. Hardisty,^^ and Collett v. Morrison, ^^ and the court
says these cases ''do certainly hold that the prospectus might equit-
ably be regarded as forming a part of and controlling the terms of
the policy. It is not improbable that an examination of these cases
would have led this court to a different conclusion," but the ca«e
was not reopened, however. In the case of Wood v. Dwarris ^^ the
prospectus issued by the company represented that all policies ef-
fected by it should be indisputable, except in cases of fraud, and it
appeared that the prospectus was issued prior to the issuance of the
policy, and the statements therein were relied upon by the insured
as a basis of the contract, and that when he went to the office of the
company it professed to grant him assurance on those terms. These
facts were held to preclude the company from defending on grounds
which w^ould leave out of consideration the prospectus,^* and it was
said ^^ that it would no doubt have been competent for the company
'^ See Opinion of Earl, J., in Wheel- " 92 Eng. C. L. 231.
ton V. Hardisty, 8 El. & B. 232. 12 9 ija^.p^ 152, 173.
8 Ruse V. Mutual Benefit Life Ins. ^m Ex. (Hurl. & G.) 493.
Co. 23 N. Y. 516, 519, overruling s. 1* See opinion of Baron Alderson
e. 26 Barb. 556. in this case.
9 24 N. Y. 653. " By Martin, B.
10 11 Ex. 493.
520
CONSTRUCTION § 193
to have granted a policy upon terms which would have excluded the
prospectus. In the case of Wheelton v. Hardisty ^^ the facts were
similar, although it did not appear that the prospectus was ever in
fact seen by the plaintiff, or that its statements were an inducement
to him to enter into the contract, and it was held, reversing the judg-
ment of the Queen's Bench, that the plaintiff was not entitled to a
verdict, and that if a certain statement contained in a proposal as to
health was intended to be the basis of the contract, it should have
been inserted therein. It was further held that the prospectus was
not a part of the contract, nor made so by a mere reference hereto.^''
The case of Collett v. Morrison ^^ merely decided that if on a pro-
posal and agreement for a life insurance a policy be drawn up at the
insurance office in a form which differs from the terms of the agree-
ment and varies the rights of the parties assured, equity will inter-
fere and deal with, the case on the footing of the agreement and not
that of the policy. It is held, however, in a New York case ^^ that
the terms of the policy cannot be affected by a statement in the com-
pany's pamphlets that it would allow ''thirty days' grace ...
on all payments" subsequent to the first. So in Tennessee ^° a pro-
spectus of the company is not a part of the contract, and is not made
so by a statement on the back of the policy that it may be had gratis
on application. So in Georgia ^ a pamphlet promulgated as con-
taining the terms and conditions upon which insurance would be
granted, and which was not referred to in the policy, was held not
a part of the policy and inadmissible in evidence to vary its terms,
but that if referred to it might have been part of the policy.^ But
in that state a circular issued by a fraternal order and submitted to
the insured to obtain her application for insurance which set forth
the amount of protection or benefits and the terms of membership,
should be considered to explain any ambiguities or inconsistencies
in the language embraced in the contract, even though said circu-
1^ 8 El. & B. 285, 92 Eng. C. L. Fowler v. Metropolitan Life Ins. Co.
231. 41 Hun (N. Y.) 357.
" This ease was decided in 1858, ^o Knickerbocker Ins. Co. v. Heid-
the Collett case in 1851, and the el, 8 Lea (Tenn.) 488.
Wood -case in 1856. ^ Mutual Benefit Life Ins. Co. v.
18 9 Hare, 162. Ruse, 8 Ga. 534.
1^ Fowler v. Metropolitan Life Ins. ^ See 1 Parsons' Marine Ins. (ed.
Co. 116 N. Y. 389, 26 N. Y, St. Rep. 18G8) p. 124, Bliss on Life Ins. sec.
770; 5 L.R.A. 805, 22 N. E. 576; dis- 400; 1 Duer on Ins. lect. 1, see. 22,
tinguishing Ruse v. Mutual Benefit ed. 1845, p. 76, for general rule as to
Life Ins. Co. 23 N. Y. 516, 24 N. Y. other papers. But see Rohrschneider
653; and Howell v. Knickerbocker v. Knickerbocker Life Ins. Co. 76 N.
Life Ins. Co. 44 N. Y. 276, reversing Y. 216, 32 Am. Rep. 290, 8 Ins. L.
521
§ 194 JOYCE OX INSURANCE
lar was not by the terms of the contract made a part thereof.' And
in a Kentucky case * a prospectus or pamphlet issued by the com-
pany and shown to the assured at the time he took out the poHcy
provided that he should be entitled to a paid-up policy after the pay-
ment of a certain number of annual premiums, and also represented
that the policy was nonforfeitable. The policy itself provided for
forfeiture for nonpayment of the premiums at the time when due,
and that the right to a paid-up policy should be forfeited unless the
original contract Avas surrendered within thirty days after default
in payment of the premiums, and the terms of the prospectus were
held to govern the rights of the insured under the contract. So un-
der a Connecticut decision a canvassing pamphlet used as an ex-
planation of the plan of insurance and entitled "Key to the Re-
serve Dividend Plan/' must be read in connection with the terms of
the policy, although it is not the policy, and when its language may
be construed as consistent with those terms a different and incon-
sistent construction cannot be given.* In an Iowa case a circular
which may have induced the contract but which is not referred to
or made a part of the certificate and which is not identified as com-
ing from the insurer, nor does it appear that the insured ever saw
or relied upon it before becoming a member of the society, cannot
be made a basis of recovery and should be stricken from the plead-
ings.®
§ 194. Whether common or statutory law part of contract: city
ordinances or local laws. — A contract of insurance is presumed to
have been made in reference to common and statutorj^ laws, so far
as applicable, which are in force at the time of contracting. Such
laws enter into and form a part of every such contract as much as
if incorporated therein.' This rule also applies to certificates in
J. 392; Continental Life Ins. Co. v. gartner v. Charter Oak Life Ins. Co.
Hamilton, 41 Ohio St. 274; Walsh v. 32 I^ed. 314.
'.Etna Life Ins. Co. 30 Iowa, 133, 6 7///»o/.s-.— Freund v. Freiind, 218
Am. Rep. 664; Clemmett v. New III. 189, 109 Am. St. Rep. 283, 75 N.
York Life Ins. Co. 76 Va. 355. E. 925, 35 Ins. L. J. 23.
^ Hall V. Royal Fraternal Union, Mifisouri. — Christian v. Conneeti-
130 Ga. 820, 61 So. 977. cnt IVIutual Life Ins. Co. 143 Mo. 460,
* Southern Mutual Life Ins. Co. v. 45 S. W. 268, 27 Ins. L. J. 968 ;
Montague, 84 Kv. 653, 4 Am. St. WausehafiC v. Masonic Mutual Benefit
Rep. 218, 2 S. W. 443. Soc. 41 Mo. App. 211 (where section
* Fuller V. Metropolitan Life Ins. 5981 of the Revised Statutes of Mis-
Co. 70 Conn. 647, 41 Atl. 4. souri, 1879, is construed and held to
® Sleight V. Supreme Council of become a part of the contract).
Mystic Toilers, 121 Iowa, 724, 96 N. Texas. — Germania Life Ins. Co. v.
W. 1100. Peetz, — Tex. Civ. App. — , 47 S.
'^United Sfatei^.—FTy v. Charter W. 687, 690.
Oak Life Ins. Co. 31 Fed. 197; Wein- rirginia.Smith & Marsh v.
522
CONSTRUCTION
§ 194
mutual benefit societies, associations and the like.' Emerigon says : '
''In eases of doubt the parties are presumed to have intended to form
their agreements according to the rules established by the law, which
is nothing else than the universal will of the community." ^°
7/ a standard 'policy statute expressly provides that it shall be a
part of every contract of insurance such enactment controls."
Where the construction of a statute or of the Constitution becomes
settled by judicial construction, such construction, so far as contract
rights acquired under the statute are concerned, becomes a part of
the statute itself, and necessarily, therefore, a part of the obligation
of the con tract. ^2 So the construction given by courts in judicial
decisions and the ordinances of commercial countries, so far as these
latter may be applied or have been adopted by our own courts, are
presumed to have entered into the consideration of the parties when
making the contract and to have become a pai't thereof."
Northern Neck Mutual Fire Assoc, principles of justice and equity that
112 Va. 192, 38 L.R.A.(N.S.) 1016 abide in the written reason of the
(annotated on applicability to exist- law:" Id. "The obligation of a con-
ing contracts of statute avoiding con- tract consists in its binding force on
tract ual stipulations limiting time for the party who makes it. This de-
action) 70 S. E. 482, 40 Ins. L. J. pends on the laws in existence where
1018. it is made; these are neces-sarily re-
Wisconsm. — Breakstone v. Apple- ferred to in all contracts, and form-
ton Mutual Fire Ins. Co. 149 Wis. ing a part of them, as the measure
303, 135 N. W. 833 ; O.shkosh Gas of tlie obligation to perform them by
Light Co. V. Germania Fire Ins. Co. the one party and the right acquired
71 Wis. 454, 5 Am. St. Rep. 233, 37 by the other." McCracken v. Hay-
N. W. 810. ward, 2 How. (43 U. S.) 608, 612, 11
Laws in existence are necessarily L. ed. 397, per Mr. Justice Baldwin,
referred to in all contracts made un- " Franklin v. New Hampshire Fire
der such laws. Sliarp v. Niagara Ins. Co. 70 N. H. 251, 47 Atl. 91, 30
Fire Ins. Co. 164 Mo. App. 475, 147 Ins. L. J. 73; Laws 1879, c. 13, Pub.
S. W. 154. Stat. 1901, e. 170, sec. 18. See Hew-
' Union Fraternal League v. Walt- ins v. London Assur. Corp. (12
on, 109 Ga. 1, 77 Am. St. Rep. 350, cases) 184 Mass. 177, 08 N. E. 62
46 L.R.A. 424, 34 S. E. 31/; Kaem- considered under § 206b herein,
merer v. Kaemmerer, 231 111. 154, 88 ^^ Douglass v. County of Pike, 101
N. E. 133; Freund v. Freund, 218 U. S. 677. 25 L. ed. 698; Louisiana
HI. 189, 109 Am. St. Rep. 283, 75 N. v. Pilsbury, 105 U. S. 278, 294, 26 L.
E. 925, 35 Ins. L. J. 23. ed. 1090. See Knights Templars' &
^ Emerigon on Ins. (Meredith's ed. Masons' Life Ins. Co. v. Jarman, 187
1850) 49, 555, c. 2, sec. 7. U. S. 197, 47 L. ed. 139, 23 Sup. Ct.
^*' Verba conventionum secundum 108, 32 Ins. L. J. 57, aff'g 104 Fed.
ju.s commune debent intelligi. Nam 638, 44 C. C. A. 93, 30 Ins. L. J. 230;
jus commune informat conventiones Lowenstein v. Fidelity & Casualty
easque interpretatur. Et si conventio Co. 88 Fed. 474, 28 Ins. L. J. 52,
est ambigua redigilurad intellectum aff'd Fidelity & Casualty Co. v.
jur communi. Nam qui contrahit Lowenstein, 97 Fed. 17, 38 C. C. A.
praesumitur habere mentem quae con- 29, 46 L.R.A. 450.
gruit legis dispositioni: Id. The ^^ Tgimton Copper Co. v. Mer-
contract is "regulated bv the general chants' Ins. Co. 22 Pick. (39 Mass.)
523
194
JOYCE ON INSURANCE
So every contract of marine insurance is also presumed to have
been made in view of convmerckil treaties in force between this and
other maritime countries, which treaties are part of the private law
of the countries parties thereto/* for no risk can be the subject of
a valid marine insurance if the course of trade or voyage contravene
either the laws of the land or the laws of nations}^
(a) The parties are presumed to have knowledge of a city ordi-
nance or local laws affecting the property and risk,^^ for city or-
dinances which are within the police power and in the interests of
the public welfare become an integTal part of fire insurance con-
tracts upon property within the fire limits to which they apply."
(b) It is said in a Virginia case by the court that a statute relating
to foreign insurance companies, and providing- that they must have
a citizen as a resident therein, and must act through him, must be
111. See 1 Marshall on Ins. (ed. court, per Brown, J,, said: "The
1810) 19, et. seq. question is a new one in this State,
^* 1 Amould on Marine Ins. (ed. ^^^ ^^ examination of the books dis-
1850) 716, s. p. 714 (8th ed; Hart t-loses very few adjudged cases on the
and Simey) sec. 746, p. 907; Lord subject in other States. We have
Stowell in The Emson, 2 Rob. Adm
Rep. 6.
^^ 1 Arnould on Marine Ins. (ed
found only the following: Ham-
buj'g-Bremen Fire Ins. Co. v. Garl-
ington, 66 Tex. 103, 18 S. W. 337;
1850) 701, s. p. 698; Id. (8th ed. Brady v. Northwestern Ins. Co. 11
Hart and Simey) sec. 734, p. 896, t {?'-/T^'«Sf7^ ''' ^"'i P .S"'
where it is said "By the third section l?^- \ ^- S^^, 6 Eng. Rul. Cas 597;
Ju'e Association v. Rosenthal, 108
Pa. St. 474, 1 Atl. 303; Monteleone
V. Royal Ins. Co. 47 La. Ann. 1563,
of the marine insurance act it is de-
clared that, subject to the provisions
of the act, 'everv lawful marine ad- ^^ t i^ a r-o< -,c, o ^^r. m
venture m^y be the subject of a con- f^^ L.R.A .84 18 So. 4/2 These au-
tract of marine insurance.' The for- ^^^.^'^^^^^ ^^^ ^^^'^ the rule that such
ty-tirst section declares that 'there is ordinances are a part of the con-
an implied warranty that the adven- ^rac't of insurance, and tha the m-
ture insured is a lawful one, and that, f.^"'^^' % ^^^"^^ ^\^ovehy This is in
so far as the assured can control the ^"^^ ^'^^'^ ^^lie genera doctrine that
matter, the adventure shall be caiTied ^t^^^ ^-^^^ ^^' "'"''^T T"""" \^f^^''^
out in a lawful manner.' No species ^^^^.f,. ^^ sun-ounded by statutory
^■p -r^^^^^^^.f-cT ^^ ;v,f^,.^cf «f •..;r.i^ ^„ „ limitations and requirements, they
of property or interest at risk on a
sea venture can be the subject of a
valid contract of marine insurance,
if the course of trade, or the voyage,
in the prosecution of which it is so
exposed to risk, be in contravention
either of the laws or the war policy
of the country of the insurer."
^^ Bradv v. Northwestern Ins. Co.
11 Mich. 425.
are presumed to enter into their en-
gagements with reference to such
statute, and the same enters into and
becomes a part of the contract.
There would seem to be no logical
reason why this general rule should
not apply to a case of this kind.
The parties are presumed to know of
the ordinances. They directly and
materially affect their rights in case
"Larkin v. Glens Falls Ins. Co. of a loss under the policy, and should
80 Minn. 527, 81 Am. St. Rep. 286, <i-overn a.nd control in the adjustment
83 N. W. 409, 29 Ins. L. J. 833. The and settlement of such loss."
524
CONSTRUCTION § 194
read as a constituent part of the contract." And this question arose
in connection with that at issue in the case as to whether the non-
payment of premium when prevented by war avoided the contract.
And it is held that it is not within the power of an insurance com-
pany incorporated in a foreign state to make such provision in its
contracts as to overthrow the laws of another state in which it is per-
mitted by its laws to transact business.^^ It is also decided that the
statutes of a state in which a contract of insurance is made are as
much a part of it as if incorporated in it.^° And in Illinois the provi-
sions of a statute in force in a state where a life insurance policy is
issued become a part thereof as if embodied in the policy itself.^ So
the statute of another state must, it is decided, be considered as a part
of a contract of life insurance when the policy is issued by a corpora-
tion organized under its laws.^ And statutes which provide for con-
struction of policies by the laws of a foreign state are held to be part
of the contract.' So under a Missouri decision if a policy is executed
in one state the statute in force respecting its subject matter becomes
as much a part of the contract as if copied therein although tlie
policy is issued, by a foreign corporation, in another state and ex-
pressly provides that it shall be construed according to the law^s of
that state.*
(c) As to prospective or retroactive statutes, or in case of repeal or
amendment of statutes it may be stated that a certificate issued prior
to the enactment of a statute is not within its provisions,^ and if a
statute is repealed before the right given thereby becomes vested by
the policy, the right falls with the repeal.^ And it is lield that
general statutory provisions inconsistent wdth a charter granted sub-
sequently thereto are of no effect.''' And a statutory requirement as
^* IManhattan Life Ins. Co. v. * Cravens v. New York Life lus.
Wadsworth, 20 Gi'utt. (Ya.) 614,623. Co. 148 Mo. 583, 71 Am. St. Rep.
19 Fletcher v. New York Life Ins. 628, .53 L.R.A. 305, 50 S. W. 519,
Co. 4 MoCrary (U. S. C. C.) 440, 13 affd 178 U. S. 389, 44 L.- ed. 1116, 20
Fed. 526, 528.' Sujip. Ct. 762. Cited in Sraoot v.
20 Union Central Life Ins. Co. v. Bankers' Life Assoc. 138 Mo. App.
Pollard, 94 Va. 146, 64 Am. St. Re[). ^38, 120 S. W. 719.
715, 36 L.R.A. 271, 26 S. E. 421. ^ j^|,^,]j,py y^ ^Yestern Mutual Aid
See § 190o herein. Soc. 81 Iowa, 734, 50 N. W. 29;
^Freund v. Freund, 218 111. 189, Laws 21 St. Gen. A.ssm. Iowa, c. 65,
109 Am. St. Rep. 283, 75 N. E. 925, sec. 7.
35 Ins. L. J. 23. ^ Prvce v. Security Ins. Co. 29
^Nielson v. Provident Sav. Life Wis. 270, 274. Compare Knij^hts
Assur. Soc. 139 Cal. 332, 96 Am. St. Templars' & IMasons' Life Ins. Co. v.
Rep. 146, 73 Pac. 168. See also Nail .larman, 187 U. S. 197, 47 L. ed. 139,
V. Provident Savin-s Life Assurance '-•" Sup. .Ct. 108, 32 Ins. L. J. 57,
Soc. — Tenn. Ch. App. — , 54 S. W. alf'g: 104 Fed. 638, 44 C. C. 93, 30
109. Ins. L. J. 230.
3 New York Life Ins. Co. v. Orlopp, ' New York County INfutual Fire
25 Tex. Civ. App. 284, 61 S. W. 33(i. Ins. Co. v. York, 48 Me. 75.
525
§ 194 JOYCE ON INSCKAKCE
to notice in certain cases notwithstanding a stipulation to the con-
trary in the policy does not become a part of the contract by a
policy issued while the statute is in force so as to be operative after
the statute is rei^ealed, but the repeal simply permits the enforce-
ment of the contract according to its own terms and conditions.*
If a general statute is already a part of an existing contract, a sub-
sequent enactment, with certain exemptions as to policias there-
after issued, does not apply, but an amendment thereto repealing
such exemptions brings the policy within the original statute where
the assured does not die until after the date of the last statute.^
And a statute regulating assessments by mutual fire insurance com-
panies, in force at the date of the policy, becomes a part thereof
even though when the company was organized the statute was dif-
ferent and the then existing statute was embodied in the articles of
organization and is endorsed upon the policy: and wherever the
law and the language of the policy differ the law is paramount.^"
Again it is declared that while a contract is presumed to be made
with reference to existing laws, still it is well established that those
laws may be altered, amended or repealed without affecting tlie
binding force of the contract, so long as a sufiicient remedy is left
for its enforcement. And it is held in this connection that as the
legislature has power to shorten a period of limitation where a rea-
sonable time is left within which to invoke a remedy or to pro-
long such period where the right to plead it has not accrued, a
statute which extends the time within which suit or action may be
brought upon a policy after loss is not wholly prospective in its
operation but applies to policies theretofore issued, where there is
nothing to indicate a purpose on the part of the legislature to limit
the operation of the statute to policies thereafter to be issued."
But it is held in Iowa that a statute which relates to the remedy,
as where a time limitation for suing is fixed by statute, is not a part
of a contract issued when such statute was in force, where such en-
^Kosenplanter v. Provident Sav- Five Ins. Co. 149 Wis. 303, 135 N,
ings Life Assnr. Soc. 96 Fed. 721, 37 ^^-83., . ,r , .t ,
^ /-. A -nn Ao T Ti K A-o ^^ Smith & 31arsh V. Northern iS'eek
C. C. A. a66, 46 L.K.A. 4<3. at j^ 1 t^- \ tio at-^ too -iq
' , Mutual r ire Assoc. 112 Va. 19.:, oo
9 Knights Templars' & Masons^ L.R.A.(N.S.) 1016 and note, 70 S. E.
Life Indemnity Co. v. Jarman, 18 / 482, 40 Ins. L. J. 1018.
U. S. 197, 47 L. ed. 139, 23 Sup, Ct. As to rights of ]iarties not being
108, 32 Ins. L. J. 57, case affirming f^^riged by amemlment-nonfortei-
„ ^ , „ .. ^ ^ . ^^ n^ T ture statute, see Lhristensen v. >iew
104 Fed. 638, 44 C. C. A. 93, 30 Ins. York Life I^s. Co. 160 Mo. App. 486,
L. J. 230. 141 s. W. 6: Rev. St. 1899, sec. 7897,
^° Breakstone y. Appleton Mutual am'd Laws 1903, p. 208.
526
CONSTRUCTION § 194
actment was repealed reducing the time." And a contract of fire
insurance, stipulating as to the time within which suit may be
])rought after loss, is not affected by a subsequent statute relating to
the time for commencing actions on policies of insurance,^'
(d) As to mutual companies, benefit societies and the like the
provisions of a statute authorizing the organization of mutual in-
surance companies are a part of the contract.^* And if the general
law of the state provides that the by-laws of an incorporated so-
ciety may be changed; it enters into and forms a part of the con-
tract.^* So in another case in the United States Supreme Court ^^
it is held that the rights and benefits given to the beneficiary by
statute are a part of the contract. So where the statute specifies the
classes of beneficiaries that may be named and there is an extract
therefrom in the book of a fraternal benefit society containing its
constitution and by-laws, the statute becomes part of the laws of the
society and forms a part of every contract of insurance it makes."
Again where mutual insurance companies are required by statute
to execute a bond for the payment of all claims such bonds will, a«
to the rights of principal and surety, be construed as though the
statute were written therein. ^^ But a statute providing for the crea-
tion of an emergency fund by assessment insurance associations does
not become a part of existing contracts, so as to entitle their benefi-
ciaries to the benefit thereof, unlass the affirmative acts contemplated
by the legislature for the adoption of the statute by existing com-
panies are performed, although the constitution and by-laws of the
M.ssociation are changed to permit of creation of the fund, and the
fund is actually accumulated.^^
(e) If the facts involved in an insurance total loss bring the case
"Jones V. German Ins. Co. 110 777. Other points in this case were
Iowa, 75, 46 L.R.A. 860, 81 N. W. (1) That the honefieiary in a life
188, 29 Ins. L. J. 60. policy had a vested interest in the
" Sample v. London & T^anca-shire pohr-y and the money to become due
Fire Ins. Co. 46 S. Car. 491, 57 Am. tliereunder, (2) That a married man
St. Rep. 701, 47 L.R.A. 696, 24 S. might rightfully apply a part of his
E. 334. earnings to insure lii.'^ life for the
^* Farmers' ^Mutual Ins. Co. v. Kin- benefit of his wife and children, Avhere
ney, 64 Neb. 808, 90 N. W. 926 ; J. P. no fraudulent intent to hinder or de-
Lamb & Co. V. Merchants' National fraud creditors ajipegrs. See chap-
Mutual Fire Ins. Co. 18 N. Dak. 253, ters on beneficiaries herein.
119 N. W. 1048; Montgomery v. "Supreme Colony United Order,
Whitbeck, 12 N. Dak. 385,^96 N. W. Pilgrim Falliei-s v. Towne, 87 Conn.
327, 32 Ins. L. J. 983. 644, 89 Atl. 204.
15 Stohr V. San Francisco Musical ^^ Crawford v. Ozark Ins. Co. 97
Fund Soc. 82 Cal. 557, 22 Pac 1125. Ark. 549, 134 S. W. 951.
18 Central Bank of Washington V. "Crawford v. Northwestern
Hume, 128 U. S. 195, 206, 32 L. ed. Traveling Men's Assoc. 226 111. 57, 10
370, 9 Sup. Ct. 41, 16 Wash. L. Rep. L.R.A. (N.S.) 264, 80 N. E. 736.
527
§ 194 JOYCE ON INSURANCE
within regulations prescribed by statute, such statute enters into
and forms part of the contract of insurance as completely as if writ-
ten into it.^°
So a valued policy statute is integrated into and made part of the
policy; it supervenes all policies issued under it and writes out of
them all stipulations in conflict therewith.^ And where the statute
provided that in ca.se the property was wholly destroyed by fire the
amount written in the policy should "be taken conclusively to be the
true value of the property w^hen insured," and determine the meas-
ure of damages, and the terms of the policy provided a different rule,
it was decided that the provisions of the statute could not be thus
changed by a stipulation contra in the policy ,2 and it is so held in
Texas,^ for a policy stipulation as to liability in case of total loss by
fire is of no validity when repugnant to the statutory provision on
that point.'* Where concurrent policies of insurance on property
afterward destroyed were written with the consent of the respective
companies, the aggregate amount of such insurance written in the
policies is the value of property as stipulated in each policy, and
must be regarded as conclusive not only as to the true value of the
property when insured, but also as to the true amount of loss and
measure of damages when destroyed, under the provisions of the
Wisconsin statute, which must be regarded as a part of the contract
of insurance.*
(f ) As to representations and warranties: In a case which arose
20 Havens v. Germania Fire Ins. bon County Court, 24 Ky. L. Rep.
Co. 123 Mo. 403, 45 Am. St. Rep. 1850, 72 S. W. 739.
570, 26 L.R.A. 107, 27 S. VV. 718. See also New Orleans Real Estate
1 Western Assurance Co. v. Phelps, Mortgage & Securities Co. v. Teu-
77 J\liss. 625, 27 So. 745, 29 Ins. L. tonia Ins. Co. 128 La. 45, 54 So. 466,
J. 506. 40 Ins. L. J. 999 ; Havens v. Ger-
A valued policy law is to be treat- mania Fir_e Ins. Co. 123 Mo. 403, 26
ed as if incorporated in the policy. L.R.A. lOv, 27 S. W. 718, 45 Am. St.
Sharp v. Niagara Fire Ins. Co. 164 Rep. 570; Hiekei-son v. Germama
Mo. App. 475; 147 S. W. 154. Ins. Co. 96 Tenn. 193, 32 L.R.A. 1/2,
2 Reilly v. Franklin Ins. Co. 43 33 S. W. 1041 ; Dugger v. Mechanics'
Wis. 449, 28 Am. Rep. 552; Oshkosh & Traders' Ins. Co. 95 Tenn. 245, 28
Gaslight Co. v. Germania Fire Ins. L.R.A. 796, 32 S. W. 5. Milwaukee
Co. 7] Wis. 454, 5 Am. St. Rep. 233, Mechanics' Ins. Co. v. Russell, 65
37 N. W. 819; 1 Sanborn & B. Ann. Ohio St. 230, 56 L.R.A. 159, 62 N.
Stat. 1889, sec. 1943. See Wall v. E. 338; Queen Ins. Co. v. Leslie, 47
Equitable Life Assurance Soc. 32 Ohio St. 409, 9 L.R.A. 45, 24 N. E.
Fed. 273, 140 U. S. 226, 35 L. ed. 1072. Compare Burkett v. Georgia
497, 11 Sup. Ct. 822. Home Ins. Co. 105 Tenn. 548, 58 S.
3 Queen Ins. Co. v. Jefferson lee W. 848.
Co. 64 Tex. 578; Tex. Rev. Stat. sec. * Qshkosh Gas Light Co. v. Ger-
2971. mania F. I. Co. 71 Wis. 454, 5 Am.
* Hartford Fire Ins. Co. v. Bour- St. Rep. 233, 37 N. W. 819.
528
CONSTRUCTION § 194
in Kentucky^ it was held that a provision in a statute ''tliat all
stulciiicuts and descriptions in any application for a policy of in-
surance -hall be deemed and held rej)resentations and not warran-
ties, nor shall any misrepresentation, unless material or fraudulent,
prevent a recovery on the policy," was but declaratory of the law
then existing in that state. It was further declared by the court
that the very purpose of the statute was to bring such representations
and warranties within its provisions, and to prevent the insured
from losing his indeumity upon either a representation or warranty
that was not fraudulent or material to the risk, and when parties
have entered into an insurance contract since the adoption of this
statute they must be held as contracting with reference to the statu-
tory provision. So much of the opinion in the case of tlie Farmers'
and Drovers' Insurance Company v. Curry '^ which hehl a contrary
view was declared overruled. This latter case held that when the
parties undertake in the policy to declare the meaning and effect of
its stipulations, they have the right to do so, and cannot be con-
trolled by statute.^ Under a Pennsylvania statute,^ which declared
that any statement in an application for a life policy, though in-
correct, should not, if made in good faith, avoid the policy or be a
ground of defense, it was held that this was binding, though the in-
sured in his application warranted all statements therein to be true,
and that if untrue the policy should be void notwithstanding any
statute or law to the contrary."
(g) As to stipulations in the policy contrary to statvAory require-
ments: Emerigon," in considering the question whether one might
stipulate agreements contrary to the Ordonnance,^^ which provided
in terms what the policy should contain, but also provided in ad-
dition that it might contain all other covenants the parties should
choose to agree upon, states the rule to be substantially this: that it
might be varied from in all point^'< not expressly prohibited and
which did not concern the es.sence of the contract nor good morals
^Germania Ins. Co. v. Rudwig-, 80 Mutual Life Assn. 151 Pa. St. 17, 24
Ky. 223, under Ky. Gen. Stat. 1887, Atl. 10(i4. Examine as to reprc-
P- 308. mentations and warranties, §§ 1882
. '13 Bu.sh (Ky.) 312, 26 Am. Rep. et seq., and 1942 et seq. herein.
194. K.iamiiie Geiniania Ins. Co. v.
* See Barre Boot Co. v. Mulford Rudwig, 80 Ivy. 223. See MeElroy
Mutual Fire Ins. Co. 7 Allen (89 v. Continental Ins. Co. 48 Kan. 200,
Mass.) 42; Chamberlain v. New 29 Pac. 478. where it was held that
Hampshire Fire Ins. Co. 55 N. H. the statute of limitations in the state
249. ^[d not conflict with that in the
'Act Pa. June 23, 1885. policy.
"Barro Boot Co. v. Mulford iM-luicriiion on Ins. (Meredith's ed.
Mutual Fire Ins. Co. 7 Allen (89 1850) 48.
Mass.) 42; Hermany v. Fidelity ^^ Be la Marine, art. 3. des iissur.
Joyce Ins. Vol. I. — 34. 529
§ 194 JOYCE ON INSURANCE
nor public policy. It is also declared by a well-known writer ^^ that
"the right of the parties by a positive stipulation and within certain
limits to vary or prevent the application of any of the rules of law
by which their rights and liabilities under the contract are defined
and governed, is undoubted/' It will be observed that ^Ir. Duer's
statement, if it be held to be the law, is so far qualified by the words
"within certain limits," that it offers a wide field for controversy and
construction. Whether the parties may evade the positive require-
ments of a statute in its nature mandatory, or which contain provi-
sions in the nature of conditions precedent to acquiring certain
rights, is one thing; whether they may waive requirements calcu-
lated to benefit one of the parties is another matter, and whether
the}^ may waive positive prohibitions presents still another question.
Emerigon's rule above stated is reasonable, beyond that, and rulings
that parties cannot by agreement evade the operation of laws which
contain requirements in the nature of conditions precedent to ac-
quiring certain rights, the decisions are not clearly in harmony, with
the exception perhaps that courts seem inclined, as a rule, to favor
that construction which shall benefit the assured ; ^* and the genei'al
rule also seems to be that no contract can change laws in existence,
and stipulations in a policy must yield to the statute.^* So policy
conditions repugnant to the statute are not binding as they are in-
valid.^^ And stipulations in the policy which are not in conformity
with statutory requirements ai'e not binding ^' for statutes are para-
mount to repugnant or conflicting contracts or stipulations therein.^*
And clauses of a policy which are inconsistent with statutory re-
quirements and which materially change the scheme of the contract
as outlined by such statutory requirements and prohibitions are un-
authorized and invalid.^® And departure from the exact form of
13 1 Duer on Ins. (ed. 1845) 271. 1907, No. 187, see. 1, subdvs. 1 and
i*See § 1916 herein. 2. The court, per Blair, J., said:
1^ Sharj) V. Niagara Fire Ins. Co. "As we have heretofore held, 'the re-
164 Mb. App. 475,, 147 S. W. 154. quirement that certain provisions
1^ Merchants' Ins. Co. v. Stephens, shall be and certain others shall not
22 Ivy. L. Rep. 999, 59 So. 511. be incorporated in the policy requires
1"^ Equitable Life Assurance Soc. v. us to say that no provisions should
Wilson, 110 Va. 571, 3 Va. App. 943, be inserted which have the effect of
66 S. E. 836. See also Burruss v. avoiding or nullifying the required
National Life Assoc. 96 Va. 543, 1 provisions,' and 'no provision may
Va. Sup. Ct. Rep. 57, 32 S. E. 49. rightfully be used which shall, with
18 Marston v. Kennebec Mutual or without action of the policyholder,
Life Ins. Co. 89 Me. 266, 56 Am. St. materially change or avoid the stat-
Rep. 412, 36 Atl. 389. ute scheme of the contract.' Mutual
^ Franklin Life Ins. Co. v. Com- Benefit Life Ins. Co. v. Commis-
missioner of Insurance, 159 Mich, sioner of Insurance, 151 Mich. 610,
636, 124 N. W. 522, 16 Det. L. N. 115 N. W. 707. Prior to the enact-
994, 39 Ins. L. J. 468, pub. acts ment of the statute, it was optional
530
CONSTRUCTION § 194
life policy required by statute which are not beyond doubt, as ad-
vantageous to the insured and as desirable as the prescribed provi-
sion, and which are not in accordance with public policy are in-
valid.^" So an application which is not made a part of the policy in
the manner provided by statute is not a part thereof, although the
policy so provides.^ And a separate agreement contrary to a stat-
ute prohibiting discriminating between policy holders is void.^
While a nonforfeiture statute is part of the contract,^ still where
the statute provides for nonforfeiture, after payment of two full an-
nual premiums, and also provides for temporary insurance, this can-
not be changed by a stipulation in the policy requiring the payment
of three full annual premiums before insured can claim temporary
insurance, such stipulation being void.*
And a statutory provision in the nature of a statutory limitation
of actions on insurance policies cannot be eliminated from a policy
by providing therein that the contract is wholly embraced in its
terms and that of the application.^ So a time limitation for suing
in a policy contrary to the express prohibition of the statute as to
such stipulations is not enforceable.^ But a statute prescribing a
with the parties what provisions the Compare Citizens Life Ins. Co. v.
contract should contain upon the McCIure, 138 Ky. 138, 27 L.K.A.
subject of payment. Since the pass- (N.S.) 1026, 127 S. W. 749, con-
age of the act it has ceased to be aidered liereafter in this section,
optional with the parties and au- ■* Wall v. Equitable Life Assurance
thorities construing- the contract inde- Soe. 32 Fed. 273, 140 U. S. 226, 35
pendent of the statute ajre not con- L. ed. 497, 11 Sup. Ct. 822, Rev. Stat,
elusive. . . . The question of Mo. sec. 5983. But see Caffery v.
waiver has no application to the case. John Hancock Mutual Life Ins. Co.
The respondent's inquiry is limited (U. S. C. C.) 27 Fed. 25.
to a consideration of the question * Vose v. Hawkeye Ins. Co. 76
whether the policy forms submitted Iowa, 548, 41 N. W. 300; Acts 18th
are in compliance with the statute." Gen. Assembly Iowa, 1880, c. 211,
^° New York Life Ins. Co. v. Hard- sec. 3. Same effect, Taylor v. Mer-
ison, 199 Mass. 190, 127 Am. St. Rep. chants' & Bankers' Ins. Co. 83 Iowa,
478, 85 N. E. 410, 37 Ins. L. J. 848. 402, 49 N. W. 994; same statute^
See also, ^tna Life Ins. Co. v. Marden v. Hotel Owners' Ins. Co. 85
Ilardison (Travelers Ins. Co. v. Iowa, 584, 52 N. W. 509.
Hardison) 199 Mass. 181, 85 N. E. ^ Qejj(.j.al Accident Fire & Life
407, 37 Ins. L. J. 818. Assur. Co. v. Walker, 99 Miss. 404,
^Imperial Fire Ins. Co. v. Dun- 55 So. 51, 40 Ins.L. J. 1504.
ham, 117 Pa. St. 460, 2 Am. St. Rep. ^.s to time limilation in standard
686, 12 Atl. 668; act Pa. Mav 11 fire policy, see Bellinger v. German
1881. See §§ 186-187a, 190, "lOOa Ins. Co. 100 N. Y. Supp. 424, 113
herein. A pp. Div. 917.
^ Commonwealth Life Ins. Co. v. As to the right of the legislature
Bowling (1908) — Ky. — , 114 S. W. to shorten or prolong the period of
327. limitation for suing, see Smith &
^ Christensen v. New York Life Ins. Marsh v. Northern Neck Mutual Fire
Co. 160 Mo. App. 486, 141 S. W. 6. Assoc. 112 Va. 192, 38 L.R.A.(N.S.)
531
§ 194 JOYCE ON INSURANCE
period in which relief can be obtained from contracts secured hy
fraud has no effect upon an incontestable clause in a life insurance
policy, although such clause makes the policy incontestable in a
much shorter time than the statute allows for obtaining relief from
a fraudulent contract.' And conditions annexed to the policy con-
cerning notice and proof of loss may control a statutory provision,
as we have already sccn.^
Under a California decision the parties to a contract of rent in-
svrance may stipulate for a method of ascertaining and computing
the loss notMathstanding the statute provides that the sole object of
insurance is indemnity.^
(h) Express statutory provisions making void policy stipulations
contra. If by the terms of a statute any stipulation in a policy con-
trary to its provisions shall be void it imposes a condition upon every
policy thereafter issued notwithstanding any stipulation in the pol-
icy to the contrary. It is an independent and binding obligation
overriding and nullifying any stipulation of the parties.^" And
stipulations in conflict with a standard policy statute are void where
the enactment expressly so provides.^^ But a statutory requirement
that every contract of life insurance shall contain a certain provi-
sion under penalty of having the insurer's license withdrawn does
not become a part of a policy which does not contain such a provi-
sion. ^^
(i) As to ivaiver: There cannot be any waiver of statutory pro-
visions requiring a standard form of fire policy where the statute
expressly precludes waiver being set up by the company. ^^ Nor, it
is held, can the benefits of a statute be waived and renounced by the
policy-holders of a purely mutual fire insurance company so as to
1016 and note, 70 S. E. 482, 40 Ins. Fed. 638, 44 C. C. A. 93, 30 Ins. L.
L. J. 1018; Jones v. German Ins. J. 230.
Co. 110 Iowa, 75, 46 L.R.A. 860, 81 ^^ Franklin v. New Hampshire Fire
N. W. 188, 29 Ins. -L. J. 60. Con- Ins. Co. 70 N. H. 251, 4/ Atl. 91,
sidered ante under this section. ^0 Ins. L. J 73; Laws 18^9 c. 13,
7 n-,.- » T vp T.,c n^ ,r M« P»b- Stat. 1901, e. liO, sec. 18. bee
^Citizens' Lire Ins. Co. v. Me- /-. . i a,i <. „i
/-11 -too T 10Q OT T T? A /XT a \ Jnso Cileason v. C anterhary Mutual
Clure, 138 Ky. 138, 2/ L.n.A.(iN.b.) „. , /-> '70 at tt ro^ ra Afi
1 nor 1 97 <4 w 7W Fire Ins. Co. 73 N. H. o83, 64 Atl.
8 1^ 7 ^■- in T> r +• 187, 35 Ins. L. J. 932.
. ^^'^To ^'''^''Zi ^''- ""• '' Equitable Life Assur. Soc. v.
Ins. Co. 98 Mass. 420. Bal)bitt, 11 Ariz. 116, 13 L.R.A.
9 Whitney Estate Co. v. North^ern ^j^^j -^Q^g (annotated on efHeet of
As.sur. Co. 155 Cal. 521, 23 L.R.A. statute providin"- for application of
(N.S.) 123, 18 Am. & Eng. Ann. Cas. reserve to the purchase of extended
512, 101 Pac. 911. or paid-up insurance), 89 Pac. 531.
1° Knights Templars' & Masons' gee also Straube v. Pacific Mutual
Life Indemnity Co. y. Jarman, 187 Life Ins. Co. 123 Cal. 677, 56 Pac.
U. S. 197, 47 L. ed. 139, 23 Sup. Ct. 546.
108, 32 Ins. L. J. 57, case affirms 104 "LYanklin v. New Hampshire Fire
532
CONSTRIJCTION §§ 194a, 195
prevent tlie statute from operating npon its contracts.^* It is also
<lecidecl that there cannot be a waiver of statutory provisions requir-
ing poh'cies to be construed by the laws of a foreign state.^* But a
statutory provision may be waived, by a stipulation contra in the
policy where such w^aiver is not against public policy and public
policy favors the stipulation.^®
§ 194a. Same subject: what statutes are and are not part of con-
tract: miscellaneous cases. — A statute authorizing reinsurance or
the taking over of another company's risks become a part of the
contract.^' And a statute which permits only the Attorney General
to apply for the appointment of a receiver constitutes a part of
every contract of the state insurance company and even to policy-
holders who are citizens of foreign states." So a statute requiring
notice through the mails of annual premiums due is part of the
contract.^^ A statute does not; however, apply where the policy
was never issued and a receipt for the first premium and the appli-
cation constitute the only evidence of a contract, and the acceptance
of the application does not aid a recovery where the insured was not
in sound health when the policy was issued and one of the condi-
tions was that he should be in sound health at the date of issuance
and delivery of the policy.^"
§ 195. Indorsements: marginal references: when part of policy:
when not. — Where an indorsement is made upon the policy, it must
appear that the parties intended that it should be considered a i)art
thereof.^ An indorsement is construed as a part of the policy when
expressly referred to therein, and when so referred to it makes no
difference that it is upon the back of the policy,^ and the words and
figures may be written transversely.' So words and figures written
in the margin are generally a part of the policy.* A memorandum
Ins. Co. 70 N. H. 2")1, 47 Atl. 91, 30 Credit Indemnity Co. v. Carrollton
Ins. L. J. 73; Laws 1879, c. 13, Pub. Furniture Mfg. Co. 95 Fed. Ill, 3(i
Stat. 1901, c. 170, .^e<-. 18. C. C. A. G71.
^*Word V. Soutliern Mutual Ins. ^^ Nail v. Provident Saving-s Life
Co. 112 Ga. 585, 37 S. K. 897. Assurance Soe. — Tenn. Ch. App.
15 New York Life In.s. Co. v. — 54 S. W. 109.
Orlopp, 25 Tex. Civ. App. 284, 61 20 (;()„^„ion\veaUli Life Ins. Co. v.
S. W. 336. Davis, 136 Ky. 339. 124 S. W. 345.
1® Mutual Life Ins. Co. v. Burden, ^ Planlcrs' Mutual Ins. Co. v. Row-
9 Ga. App. 797, 72 S. F. 295. land, 66 Md. 236, 240, 7 Atl. 257.
"Federal Life Ins. Co. v. Risinger, ^ St. Clair County Benevolent Soe.
46 Tnd. App. 146. v. Fietsam, 97 111. 474; Harris v.
"Brown v. Equitable Life As.sur. Eagle Fire Ins. Co. 5 Johns. (N. Y.)
• Soo. 142 Fed. 835, S. C. Equitable 368. See § 19() herein.
: jLife Assoc, v. Brown, 213 U. S. 25, ^ X(>„y(^,^ y Bertbon, Doug. 12, n.
* 53 L. ed. 682, 29 Sup. Ct. 404. But * McLaughlin v. Atlantic Ins. Co.
lompare as to policies issued to citi- 57 Me. 170; Pierce v. Charter Oak
zens of forciun states, American Life In.s. Co. 138 Mass. 151; DeHalin
533
§ lOoa
JOYCE ON INSURANCE
written on the margin prior to its execution and delivery enters
into the construction of the instrument, and is a part thereof,* and
all intendments are in favor of construing a policy as nonforfeitable
where so defined in its margin.^ So words and printed figures on
the margin relating to payment of premiums are part of the pol-
icy.' The same is true of a description of goods in the margin,*
and the marginal words ''against actual total loss" may limit the
liability.^ It is held, however, that the fact that the indorsement is
written on the policy does not necessarily make it a part thereof.^"
So where a fire policy was indorsed with a proviso that when an
alteration in the property was intended to be made that certain
steps should be taken to determine whether the risk would be there-
l>y increased, it was held that such indorsement did not form a part
of the policy unless referred to therein as such.^^
§ 195a. Same subject. — Agreements, benefits and privileges stat-
ed on subsequent pages are made a part of the contract as fully m
if recited at length over the signatures affixed where such an ex-
press agreement appears upon the face of a life policy.^^ And if a
life insurance policy appears on one sheet of paper embracing foui
pages, the first containing the main contract, the next certain print-
ed conditions and agreements, the next the application and certain
acknowledgments and agreements of the applicant, and the last the
usual indorsement indicating that the folded paper contains a pol-
icy on the life of the insured, the policy consists of the whole docu-
ment, and an offer to submit it in evidence carries everything on
V. Hartley, 1 Term Rep. 34:5, 14 En^. Mutual Benefit Life Assoc. 118 N. Y.
Rul. Cas. 171; Cochran v. Retberg, 237, 6 L.R.A. 731. 23 N. E. 186, 16
3 Esp. 121. Am. St. Rep. 749, 43 Hun (N. Y.)
5 I'atch V. Piiopnix :Mutual Life In.s. 61.
Co. 44 Vt. 487. _See Emer.son v. Mur- The clause "camphene cannot be
ray, 4 N. H. 171, 17 Am. Dec. 407. used in buiklino" is part : Mead v.
For case where memorandum not a North Western Ins. Co. 7 N. Y. 530.
part, see ^McQuittv v. Continental i° Stone v. United States Casualtv
Life Ins. Co. 1.5 K. I. 573, 10 Atl. Co. 34 N. J. L. 371 ; Caraher v. Roval
635. . Ins. Co. 63 Hun (N. Y.) 82, 17 N.
6 Cowles V. Continental Life Ins. Y. Supp. 858, 44 N. Y. St. Rep. 141.
Co. 63 N. H. .300. "Planters' Mutual In.s. Co. v.
7 Pierce v. Charter Oak Life Ins. Rowland, 66 Md. 236, 240, 7 Atl. 257;
Co. 138 Mass. 151. Mullaney v. National Fire & ]\Iarine
8 Guerlain v. Columbian Ins. Co. Ins. Co. 118 Mass. 393. See further
7 Johns. (N. Y.) 527. as to when indorsement and maro-inal
^ P)urt V. Brewers' & Malsters' Ins. reference not a part, Kinsslev v. New
Co. 78 N. Y. 400. 9 Hun (N. Y.) 383. England Mutual Fire Ins^ Co". 8 Cusli.
That indorsements and marginal (62 Mass.) 393.
references are part of the policy, see ^^ Grell v. Sam Houston Life In.s.
also, Alabama Gold Life Ins. Co. v. Co. (1913) — Tex. Civ. App. — , 157
Thomas, 74 Ala. 578; Wright v. S. W. 756.
534
CONSTRUCTION § 196
the four pages, rendering it unnecessary to thereafter offer spec-
ially the copy of the application for the policy in order to get it be-
fore the court.^^ Again, where it is obviously so intended an in-
dorsement upon a previously issued policy may operate as equiva-
lent to an erttirely new and distinct policy containing all the stipu-
lations of the indorsed upon contract save those the adoption of
which the indorsement negatives, either expressly or by necessary
implication.^* And where the form used for a policy of reinsurance
was one primarily intended for the insurance of property by its
owners and only one of the printed conditions was applicable such
form may be made applicable in part by a slip pasted upon the face
of the policy.^* And where by express language the indorsement
on a certificate provides that it with the application shall constitute
the complete and only contract they will be construed together as
one instrument. ^^
§ 196. Indorsements continued: conditions annexed to policy, etc.:
when and when not part of same. — Conditions, although on anoth-
er paper, may be made a part of the policy by reference when an-
nexed thereto,^''' and where the conditions are annexed to and de-
livered with a policy, they are prima facie a part thereof, although
not referred to in the policy.^^ So the proposals and conditions at-
tached to a policy form part of the contract, the same as if written
in the body of it.^^ And an iron safe clause slip attached to the
policy and referred to in a descriptive attached slip as subject there-
to constitutes a part of the policy .^^ So, also, where a policy of in-
surance is made "as per form attached," it is held that the provi-
sions of the attached form nmst prevail over the inconsistent pro-
visions stated in the body of the policy.^ And a partly printed
partly wa-itten unsigned paper with a marginal note which is pin-
ned to, delivered and accepted with the policy is held a part of the
contract even though said paper is different in texture, color and
quality and notwithstanding the policy provisi<jn that the contract
"Grevening v. Washington Life iSMurdock v. Chenango Mutual
Ins. Co. 112 La. 879, 104 Am. St. In.^. Co. 2 N. Y. (2 Const.) 210;
Rep. 474, 36 So. 790. Hyatt v. Wait, 37 Barb. (N. Y.)
^* Corporation of London Assur- 29.
anec v. Paterson, 106 Ga. 538. 32 S. ^^ Duncan v. Sun Fire Ins. Co. 6
E. 650, 28 Ins. L. J. 38.3. ' Wend. (N. Y.) 488, 22 Am. Dec.
" Royal Ins. Co. v. Vanderbilt Ins. 539. Esaniine Jefferson Ins. Co. v.
Co. 102 Tenn. 264, 52 S. W. 168, 28 Cothoal^7 Wend. (N. Y.) 72, 22 Am.
In.=5. L. J. 910. Dec. 56/.
16 Covenant Mutual Life Assoc, v. 20 (-jty Drug Store v. Scottish
Tultle, 87 111. App. 309. I^nion & National Ins. Co. — Tex.
1''^ Jenninos v. Chenango Mutual Civ. App. — , 44 S. W. 21.
Ins. Co. 2 Denio (N. Y.) 75. ^ St. Paul Fire & Marine Ins. Co.
Riders or .s7/>s as part of contract: v. Kidd, 55 Fed. 23S, 5 C. C. A. 88,
standard policif, see § 191b herein. 14 U. S. App. 201, 22 lus. L. J. 457.
535
§ 196 JOYCE OX INSURANCE
is completely set forth tlierein together with the application there-
for and that none of its terms can be modified except by an agree-
ment in writing properly signed.*^ Where, however, the insured
accepts a policy with conditions printed on the other half of the
sheet with the policy or any sheet physically attached, the intent
that the two shall be taken togetlier is presumed, although they
are not referred to, but it may be shown that they were annexed by
mistake.^
(a) Conditions and stipulations when indorsed upon the back
of a policy, when properly referred to in the body of the instru-
ment, became a part of the contract the same as if recited therein
but they are not a part of the contract and must be ignored in con-
struing it if no sufficient reference to such indorsed conditions and
stipulations is made upon the face of the policy.* And the refer-
ence must be made expressly to the matters indorsed on the back
of the policy or certificate. A general reference on the face of the
contract to all the conditions therein named is insufhcient.^ If tlie
insured agrees on the face of the policy that the insurance shall be
''subject to all the conditions indorsed hereon" such conditions are
binding upon him as a part of his contract.^ So conditions printed
on the back and referred to in the body of the policy as follows:
"In conformity with the annexed conditions,'"' are part of the con-
tract, even tliough they are unsigned^ And where the policy pro-
vides that it is issued "on the special conditions stated on the back
of this policy, which are hereby accepted by the assured as part of
this contract," the insured is bound by the conditions so referred
to.* Again, indorsements on the back of a policy form a constit-
uent part of the contract where they supply certain essentials
necessary to complete said contract which essentials do not appear
upon the fact thereof and both the face and back of the policy
will constitute the contract, where such indorsements are duly
2 Timlin v. Equitable Life Assur. Assoc 60 ^Ya.'^ll. 253, Ann. Cas.
Soc. of the IT. S. 141 WL'^. -!70, 124 19123, 762, 110 Pac 1005, quotin(j a
N. W. 253, 39 Ins. L. J. 295 <n:f/c/se<:/ similar rule from Planters' .Mutual
in note Id. 302-306. See also For- Ins. Co. v. Rowland, iHi Md. 2;)6, 240,
man v. Mutual Life Ins. Co. (1917) 7 All. 257.
— Kv. — , — S. W. — , 49 Ins. L. ^Page v. Knights & Ladies of
J. 139, and note 154. Compwe Co- America (1900) — Tenn. Ch. — , 61
operative Ins. Assoc, of San Ancelo S. W. 1068. See § 196 herein.
v. Rav, — Tex. Civ. App. — , 138 ^ Brown v. United States Casualty
S. W.'H22. Co. (U. S. C. C.) 88 Fed. .38. 27 Ins.
3 Crigler v. Standard Fire Ins. Co. L. J. 951, dismissed 90 Fed. 829.
49 Mo. App. 11; Roberts v. Chenanijo "'^ Kensinston National Bank v.
lyiutual Ins. Co. 3 Hill (N. Y.) 501: Yorkes, 86 Pa. St. 227.
See Murdofk v. Chenanao Mutual » Porter v. United States Life Ins.
Ins. Co. 2 N. Y. (2 ComstJ 210. Co. 160 Ma.ss. 183, 35 N. E. 678.
* Burbank v. Pioneer Mutual Ins.
536
COXSTRUCTION § 1!)7
piancd.^ And an indorsement on the back of a policy uitli tlie
president",-; and secretary's name printed under such indorsement
makes the wliole policy the contract of the insurer Avhere the presi-
dent has also signed his name on the face of the policy.^" The
indorsement on the back of a certificate of membership and policy
must be construed together with the face of the certificate.^^ But
an indorsement printed on the back of a policy designating its
nature is no part thereof and insured cannot be held to have relied
upon it rather than on the terms of the instrument.^*^ And the
insured cannot generally be held bound by conditions which are
printed on the back in small type where they have not been called
to his attention, for usually the policy is transmitted to the insured
after the agent and the insured have contracted, after the premium
has been paid, and under circumstances which put it out of the
power of the insured to object to such provisions inserted in it as
Avere not in his mind or in the oral understanding Avhich was had
when he paid the premium."
§ 197. Whether premium note part of policy. — ^^The premium
note, together with the application and policy, are generally parts
of the same transaction, and are to be construed together in de-
termining the rights of the parties/^ especially so in case of ambi-
guity.^^ It is also held that a promissory note given for a
premium is a part of the contract, and therefore inadmissible
to change the terms of the policy in relation to forfeiture."
So a condition in a note of forfeiture for nonpayment of
premium is held to be nugatory where the policy contains no
such provision and no condition that it should not take eflect
until the premium is paid; but is executed on the theory that the
' Bushnell v. Farmers' Mutual Ins. part of the policy. In this ease the
Co. 81 Mo. App. 523. See § 212 copies contained in the complaint did
herein. not contain tliis indorsement, and
^° Equitable Life As.surance Soe. of Avhen the policies were offered in evi-
U. S. V. Menth, 145 Ky. IGO, 140 S. dence defendant objected on the
AV. 157, nioditied 145 Ky. 746, 141 S. ground of not beinij annexed to or
W. .37, An not. Cas. 19136, 661 and contained in tlie comphiint. Warwick
note 663, as to sufficiency of printed v. Scott, 4 Camp. 62; Hygum v.
signature within statute of frauds. Mtna Ins. Co. 11 Iowa, 21.
^^ Smoot V. Banlvcrs' Life A.ssoc. " Bassell v. American Fire Ins. Co.
138 Mo. App. 438. 120 S. W. 719. 2 Hughes (U. S. C. C.) 531, 5;{6,
12 Hill V. Travelers' Ins. Co. 146 Fed. Cas. 1004.
Iowa 133, 28 L.R.A.(N.S.) 742 and i* Schultz v. Hawkeve Ins. Co. 42
note, 124 N. W. 898. Iowa, 2.39; American Ins. Co. v. Slov.
Ferrer v. Home Mutual Ins. Co. 47 41 Midi. 385, 1 N. W. 877.
Cal. 416, hold.s that an indorsement ^^ Kimbro v. Continental Ins. Co.
on the back of the policy of the name 101 Tenn. 245, 47 S. W. 213.
and place of bu.siness of tlie com- ^^ New England Mutual Life Ins.
pany by which it is issued forms no Co. v. Hasbrook, 32 Ind. 447.
537
§§ 197a, 198 JOYCE ON INSURxiNCE
note is accej)tcd as payment of the premium, and that the policy
is to take etteet upon the acceptance of the note and the delivery
of the policy.^"' Where the note is not accepted as ahsolute pay-
ment it is inadmissible to contradict the terms of the policy." It is
also held that the premium note is so far a collateral instrument
that the courts will not permit it to be construed so as to defeat
the manifest intent of the parties expressed in the policy, as in a
case where the terms of the note in relation to forfeiture are incon-
sistent therewith." Other cases hold that the premium note and
the policy issued by a mutual company are independent contracts.^"
§ 197a. Same subject: statutory provisions: standard policy. —
A statute may operate to preclude certain defenses where a copy
of the premium note is not endorsed upon or attached to the pol-
icy .^^ And where the statute expressly provides that the policy
and deposit note given therefor are one contract,^ a premium note
given on a mutual fire policy forms a part of the contract of in-
surance, even though it is neither copied in full into the policy,
nor written upon its margin, nor across its face, nor attached to
it by slip or rider, according to the statute relating to the form and
use of the standard policy.^
§ 198. Usage: how far a part of policy. — It has been constantly
adjudicated that all usages which are so well established and so
well known as that parties engaged in the trade to which the usage
relates are presumed to have contracted in reference thereto, be-
come as much a part of the policy as if written therein in tcrms.^
1'^ Dwelling House Ins. Co. v. Har- "policy and note shall be treated as
die, 37 Kan. 674, 16 Pae. 92. parts of the same contract."
18 Continental Ins. Co. v. Dorman, ^ Russell v. Oxford County Patrons
I'^o Ind 189 25 N. E. 213. of Husbandry Mulual Fire Ins. Co.
~19 Fithian V. Northwestern Life Ins. 107 Me. 362, 78 Atl. 459. ''If it
Co. 4 Mo. App. 386. uiay have been a debatable question
2° American Ins. Co. v. Gallahan, whether this provision (which is now
75 Ind. 168; New England Mutual sec 30, c. 49) declaring that a policy
Fire Ins. Co. v. Butler, 34 Me. 431; and deposit note are one contract was
Shaw V. Republic Life Ins. Co. 67 so far inconsistent with the provisions
P.arb. (N. Y.) 586. of the statute of 1895, establishing
21 Summers v. Des Moines Ins. Co. and requiring the use of a standard
116 Iowa, 503, 88 N. W. 326, Iowa form of insurance policy, as to be
Code sec. 1741, nonpayment of note repealed thereby, that question was
l)recluded as defense. " See also Du- entirely eliminated by the revision of
buque Fire & Marine Ins. Co. v. the statutes in 1903 whereby sec. 30
Oster, 74 111. App. 139, Iowa Stat, was enacted equally with the other
Gen. sec. 1733, of 18th Gen. A.ssemb. provisions of c. 49, relating to the
(^rcClain's Iowa Code, sec. 2), c. 211, form and use of the standard policy."
claim of forfeiture not a defense. Id. per King, J.
iMe Rev. Stat. c. 49, sec. 30. 3 Colorado Ins. Co. v. Catlett, 12
Under original act Laws 1868 c. 194 Wheat. (25 U. S.) 383, 6 L. ed. 664;
538
CO.^STRUCTION
§ 198
But such inference is repelled where the express terms of the pol-
icy itself by iin])licution shows on its face an intent to contract
without reference to usage,* for the parties may undoubtedly make
whatever contract they please in this respect.^ An express contract
is always admissible to supersede or vary or control usage or cils-
tom, for the latter may always be waived at the will of the parties.^
Insurers, says the Connecticut supreme court, ''are presumed to
act and contract in reference to known and general usage, and to
submit to it, and such general usage may be well enough said to
become a part of all their contracts." ' So Lord ISIansfield declares
that "every man who contracts under a usage does it as if the point
of usage were inserted in the contract in terms." ' The established
Renner v. Bank of Columbia. 9 ' Crosby v. Fiteh, 12 Cona. 422, 31
Wheat. (22 U. S.) 581, 6 L. ed. 166; Am. Dec. 745.
Gracie v. Marine Ins. Co. 8 Craneh * Mason v. Skurray, U. P. Case, per
(12 U. S.) 75, .3 L. ed. 492; Lord Mansfield, cited in 1 Marshall
Rogers v. Mechanics' Ins. Co. 1 on Ins. (ed. 1810) 226. "Such usages
Story (U. S. C. C.) 60.3, 607, form part of the law-merchant,
608,' Fed. Cas. 12,016; Martin and to incorporate them with the
V. Delaware Ins. Co. 2 Wash. (U. S. policy is merely to admit the addi-
C. C.) 254, Fed. Cas. 9161; Trott v. tion of known terms not inconsistent
Wood, 1 Gall. (U. S. C. C.) 443, Fed. with the tenor of the instrument and
Ca.s. 14,190; Union Ins. Co. V. Ameri- well understood by the contracting
can Fire Ins. Co. 107 Cal. 327, 28 parties:" 1 Arnould on Ins. fPer-
L.R.A. 692, 40 Pac. 431, 48 Am. St. kins' ed.) 71; s. p. 72; Id. p. 66, sec.
Rep. 140; Taunton Copper Co. v. 42; Id. 65 side p. 66. "Whatever is
Merchants' Ins. Co. 22 Pick. (39 usually done is presumed to be fore-
Mass.) Ill; Stevens v. Reeves, 9 seen and to be in the contemplation
Pick (26 Mass.) 198; Brough v. of the parti 's in making the contract,
Wliitmore, 4 Term Rej). 206, per But- and is, therefore, understood to be re-
ler, J. See Savage v. Salem Mills Co. ferred to by every policy, and to make
48 Oreg. 1, 10 Araer. & Eng. Ann. a part of it much as if it were ex-
Cas. 1065, 85 Pac. 69; McClusky v. press:" 1 Marshall on Ins. (ed. 1810)
Klosterman 20 Oreg. 108, 10 L.R.A. 186, c/^/wr/ Pellv v. Roval Exch. Assur.
785, 25 Pac. 366. Co. 1 Burr. 348, 14 "Eng. Rul. Cas.
Usage; incorporation of; construe- ;;o. "While the usage is established,
tion, see Earl of Halsbury's Laws of j^ becomes part of the contract, and
England, pp. .344 et seq. ],aj, ^^g g^^e eft"(>ct upon the construe-
As _to con.struction etc.; usage, see ^-^^^ ^^ ^^^ p^ji^^ .^^ i^ it ^^j.^ .,,1^^^
^^a"?/;-?^ iV"'^'"- -r. , P ^T , 1 ed bv express words :" 1 Duer on Ins
* Mobile Marine Dock & Mutual ■' ^
Ins. Co. V. McMillan. 27 Ala. 77, and
see cases cited in last note. Varde-
man v. Penn Mutual Life Ins. Co.
125 Ga. 117, 54 S. E. 66, 5 Amer. &
Eng. Annot. Cas. 221.
press woras : ■ j. uuer on ins.
(ed. 1845) p. 195, sees. 42, 43, et
seq. p. 271. The introduction of a
clause referring to usage is super-
fluous, "since the contract itself by
legal construction, and without any
5 Parsons on Marine Ins. (ed. express provision, fully provides for
1868) p. 88. See § 245 herein. all that can be effected by a general
6 The Schooner Ree.'^ide, 2 Sum. (U. clause of this de^scription :" 1 Phil-
S. C. C.) 567, 570, Fed. Cas. 11,657, lips on Ids. sec. 36.
per Story, J.
539
§ 198 JOYCE ON INSURANCE
usage as to the course of a voyage constitutes a part of the policy
as much so as if expressed therein in ternis.^ So "what is usually
done by such a ship with such a cargo in such a voyage is under-
stood to be referred to by every policy, and to make a part of it
as much as if it were expressed." ^° In this case the usage was
to store rigging in a particular manner universal with all Pvuropean
ships for many years; so a general usage among shipowners and
underwriters in relation to the settlement of average loss, if known
to the parties, becomes part of the contract, and binds them.^^ In
marine insurances ''every policy, then, in the absence of any ex-
press stipulation to the contrar}^, is generally read as though it
contained on the face of it an exemption in terms against liability"'
for goods carried on deck contrary to the usage of trade in like
cases,^^ and a usage of a mutual benefit association that a ques-
tion whether a member was a Mason in good standing should be
decided by Masonic tribunals, is held to be as conclusively a part
of the contract of insurance as though it provided so in terms.^^
Mr. Duer, in considering how far an illegal usage enters into and
becomes a part of the contract of insurance, says "an illeg.'l usage
does not become a part of the contract merely by the consent of the
insurers to assume its risk, but it does become a part of the contract
where the effect of the policy is to sanction and encourage a prac-
tice which the law condemns, and in such cases the insurance is
doubtless void." ^*
^Bnlkelev v. Protection Ins. Co. 2 Eagle Ins. Co. 4 Pick. (21 Mass.)
Paine (U.*^S. C. C.) 82, Fed. Cas. 429, and other cases; Id. (Maclacb-
2,118; Eyre v. Marine Ins. Co. 5 lan's ed. 1887) 281, 282). See Earl
■\Vatts & S. (Pa.) 116: Salvador v. of Halsbury's Laws of England, pp.
Hopkins, :> Burr. 1707, 1714, per 344 et seq.
Lord Mansfield; 1 Arnould on Marine ^^ Connolly v. Masonic Mutual Ben-
Ins, (ed. 1868) 69, 360, side pp. 70, efit Assn. r)8 Conn. 552, 557, 18 Am.
.354. St. Kep. 296, 20 Atl. 671, 9 L.R.A.
1" Pellv v. Roval Exch. Assur. Co. 428.
1 Burr. "341, .350, 14 Eng. Rul. Cas. 1*1 Duer on Insurance (ed. 1845)
30, per Lord Man.sfic4d. ^ 274. See Hopper v. Sage, 112 N. Y.
" Sanderson v. Columbia Ins. Co. 530, 8 Am. St. R^-p. 771, 20 N. E.
2 Cranch {U. S. C. C) 218. 350; Columbus & H. Coal & Iron Co.
12 1 Arnould on Marine Ins. (Per- v. Tucker, 48 Ohio St. 41, 12 L.R.A.
kins' ed.) 1850, 68, 69 (cltiitg Taun- 577, 29 Am. St. Rep. 528, 26 N. E.
ton Cop. Co. V. Merchants' Ins. Co. 630. See § 252 herein.
22 Pick. (39 Mass.) 108; Wolcott v.
540
CHAPTER VIII.
CONSTRUCTION OF POLICY.
§ 205. Construction generally.
§ 205a. Recitals: when not conclusive.
§ 206, Whether same rules govern marine, fire, and life policies.
§ 206a. Rule as to standard policy.
§ 206b. Where standard policy statute declares policy binding though
not in form prescribed.
§ 206c. Rule as to guaranty or fidelity, contract, credit guaranty, title,
and employers' liability insurance.
§ 207. Construction: mutual companies: benefit societies.
§ 208. Policies construed like other written contracts.
§ 209. Construction : intention of parties governs.
§ 209a. Same subject: cases generally.
§ 209b. Same subject: construction of warranties.
§ 209c. Same subject: application, proposal, policy, et»J.
§ 209d. Contemporaneous agreements.
§ 210. Construction: reference must be had to nature of risk and sub.
ject-matter.
§ 211. Construction must be reasonable.
§ 212. Contract should be given effect if possible.
§ 213. Construction; rejection of words and clauses.
§ 214. General and special clauses.
§ 214a. General provisions not referred to in separate, independent para-
graph nor limited by prior clause: accident policy.
§ 215. Construction will 1)C given to uphold the law.
§ 216. Words are to be construed in ordinary and popular sense.
§ 217. Construction: technical, etc., words.
§ 218. Addition of words by construction.
§ 219. Courts cannot extend or enlarge by construction.
§ 220. Forfeitures and exceptions not favored by construction.
§ 220a. Same subject: benefit certificates.
§ 220b. Same subject: guaranty or fidelity insurance: employers' liability
policy.
§ 221. Construction should be liberal in favor of assured and for benefit
of trade.
§ 221a. Same subject.
541
§ 203 JOYCE OX IXSUKANCE
§ 221b. Same subject : kinds of insurance to which rule applicable.
§ 222. Same subject : the rule contra proferentem.
§ 222a. Same subject.
§ 222b. Same subject: employers' liability policy.
§ 222c. Same subject : accident policy under workmen's compensation act.
§ 222d. Same subject : reinsurance.
§ 222e. Rule as to standard policy.
§ 223. The written controls the printed part of policy.
§ 224. Same subject: eases.
§ 225. Construction: lex loci contractus.
§ 226. Same subject : eases.
§ 227. Same subject : exceptions to the rule.
§ 228. Same subject : mutual benefit, etc., societies.
§ 229. When place where policy is countersigned is place of contract.
§ 230. When place of delivery is place of contract.
§ 231. When place of acceptance and mailing is place of contract.
§ 231a. Lex loci: situation of insured property.
§ 231b. Lex loci : fidelity' or guaranty insurance.
§ 231e. Lex loci : contracts by unauthorized companies or agents.
§ 231d. Lex loci: contract stipulations.
§ 231e. Lex loci : statutory provisions.
*5 231f. Lex loci : public policy- : comity.
§ 231g. Lex loci: rights of beneticiaries or claimants.
§ 231h. Lex loci : adjustment of claim on forfeited policy.
§ 231i. Lex loci : reinstatement, extension or revival of policy.
§ 231j. Lex loci : policy pledged for loan : collateral note : capital-stock
note.
§ 232. Lex loci : assignment.
§ 232a. Lex loci: substituted policy.
§ 205. Construction generally. — Inasmuch as all prior negotia-
tions are assumed to be merged in the written contract, the policy
itself, in the absence of fraud, duress, or mistake must be looked
to to ascertain the meaning and intent of the parties,^ and
the policy will be construed as a whole ^ and where the con-
tract is clear, precise, and unambiguous in its terms, and the
sense is manifest and leads to nothing absurd, there is no need of
iHigdnson v. Dall, 13 Mass. 96. 16 L.R.A.(N.S.) 1166; 13 Id. 2«3; 11
See § 181 herein. Id. 340; 7 Id. 217; 5 Id. 790.
See Miller v. Interstate Indemnity ^ ^g^tna Life Ins. Co. v. Bowling
Co. 6 Lackawanna Leg. N. 62 ; Slaw- Green Gaslight Co. 150 Ky. 732, 150
son v. Equitable Fire Ins. Co. 82 S. S. W. 994, 43 L.R.A.(N.S.) 1128
C. 51, 62 S. E. 782. Construction note,
generallv; parol evidence. See notes
542
CONSTRUCTION OF POLICY
§ 205
a resort to rules of construction,^ and extrinsic evidence is then in-
admissible to vary or control its terms.* Nor can a contract differ-
ent from that made by the written agi*eement be read into it to give
it a more extensive meaning than that expressed,* and the parties
in such cases should be held to their agreement,^ for where there is
no uncertainty in the meaning of an insurance contract and it is
legal and not against public policy it is the duty of the court to en-
force the contract as made ; ' and words and phrases are to be con-
strued according to their context.' So the words used and their
relation each to the other determines their construction regardless
of the punctuation.^ If the policy be ambiguous, extrinsic evidence
is admissible not to contradict or change the contract, but to develop
and explain its true meaning.^" Resort may then be had to the facts
3Emerigon on Ins. (Meredith's ed. Okla. 286, 109 Pac. 535, 39 Ins. L.
1850) c. ii. see. 7, p. 49. J. 1258, 1264. See § 185 herein.
See also the followinj:^ cases: * Knpfersmith v. Delaware Ins.
United States.— Mc^^ixmey v. Gen- Co. 80 N. J. L. 441, 34 L.R.A.(N.S.)
eral Accident Fire & Life Assur. Co. 503 (annotated on admissibility of
211 Fed. 951; Holm&s v. Phoenix Ins. extrinsic evidence to extend scope of
Co. 98 Fed. 240, 39 C. C. A. 45, 47 mortgagee elau.se) 80 Atl. 561, 40
L.R.A. 308; Kiesel & Co. v. Sun In- Ins. L. J. 1938.
.suranee Office of London, 88 Fed. 243, ^ Laventhal v. Fidelity & Casualty
(iO U. S. App. 10, 31 C. C. A. 578. Co. 9 Cal. App. 275, 98 Pac. 1075.
Calif ornia.-^See Laventhal v, Fi- ' Cileck v. New York Life Ins. Co.
delity & Casualty Co. 9 Cal. App. 95 Neb. 274, 145 N. W. 693 {citing
275, 98 Pac. 1075.
Imperial Fire Ins. Co. v. Coos
Illinois. — Crandall v. Continental County, 151 U. S. 452, 14 Sup. Ct.
Casualty Co. 179 111. App. 330.
Indiana. — Union Life Ins. Co. v.
Jameson, 31 Ind. App. 28, 67 N. E.
199.
379, 38 L. ed. 231; Swartz v. Siegel,
117 Fed. 13, 54 C. C. A. 399 ; Dwight
v. Germania Life Ins. Co. 103 N.^Y.
341, 57 Am. Rep. 729, 8 N. E. 651) ;
Iowa. — Quinn v. Prudential Ins. Rye v. New York Life Ins. Co. 88
Co. 116 Iowa, 522, 90 N. W. 349.
New York. — Houlihan v. Preferred
Neb. 707, 130 N. W. 434, 40 Ins. L.
J. 910. See also Jefferson v. New
Accident Ins. Co. 196 N. Y. 337, 25 York Life Ins. Co. 151 Ky. 609, 152
L.R.A.(N.S.) 1261, 89 N. E. 927. S. W. 780 (contract should be en-
Texas. — Royal Ins. Co. v. Texas & forced as written) ; Royal Ins. Co. y.
G. Ry. Co. 53 Tex. Ciy. App. 154, Texas & G. A. Ry. Co"! 53 Tex. Ciy.
115 S. W. 117. App. 154, 115 S. W. 117.
Wisconsin. — Thui'ston v. Burnett & ' Hunter v. United States Fidelity
Beaver-Dam Farmers Mutual Fire & Guaranty Co. 129 Tenn. 572, 167
Ins. Co. 98 Wis. 476, 41 L.R.A. 316, S. W. 692.
74 N. W. 1021. ^ Holmes v. Phenix Ins. Co. 98 Fed.
* Dewees v. Manhattan Ins. Co. 35 240, 3!) CCA. 45, 47 L.R.A. 308.
N. J. L. 366. See also Baltimore Fire 1° Finney v. Bedford C. Ins. Co. 8
Ins. Co. v. Loney, 20 Md. 20, 36; Met. (49 Mass.) 348, 41 Am. Dec. 51.5.
Burnham y. Boston Marine Ins. Co. See also Sayles v. Northwestern Ins.
139 Mass. 399, 1 N. E. 837; Mumford Co. 2 Curt. (U. S. C C) 610, Fed.
V. Ilallett, 1 Johns. (N. Y.) 433; Cas. No. 12,422; St. Paul Fire &
Capital Fire Ins. Co. v. Carroll, 26 :\rarine Ins. Co. v. Balfour, 168 Fed.
543
§ 205
JOYCE ON INSURANCE
and circumstances attendant at the time the insurance was effected
to aid the interpretation," So conversations between the parties
had at such time is held competent. ^^
Where parties have by certain acts of their own placed a construc-
tion upon doubtful terms of a contract, this construction will be
adopted by the courts as against them.^^
212, 47 C. C. A. 498; Messeng'er v. but to state any distinction satb^fae-
(iernian American Ins. Co. 47 Colo, tory to my own mind upon which the
448, 107 Pac. (543; Tesson v. Atlantic propriety of a(hnitting the evidence
Mutual Ins. Co. 40 Mo. 33, 93 Am. can be founded." 1 Duer on Insur-
Dec. 293. ance (ed. 1845) 308.
^^ United States. — Fuller v. Metro- "An inquiry is often made into the
politan Life Ins. Co. 37 Fed. 163; history of a clause in a policy and the
Manger v. Holvoke Ins. Co. 1 Holmes pnrjiosc for which it was introduced.
(U. "S. C. C.) '287, Fed. Cas. No. 9,- But although thi.s may a fiord .some aid
305, per Shipley, J. in arriving at its uu^aning, yet it
Maine. — Bickford v. Aetna Ins. Co. cannot control the construction of its
101 Me. 124, (J.J Atl. .552. language." 1 Parsons on Ins. (ed.
Minne>ioia. — Frost's Detroit Lum- 1868) 129, citing Hugg v. Augusta
her & Wooden Ware Works v. Mil- Ins. & Banking Co. 7 How. (48 U.
lers & Mfg's Mut. Ins. Co. 37 .Minn. S.) 595, 12 L. ed. 834; Kettle v. Al-
300, 5 Am. Rep. 846, 34 N. W. 35. liance Ins. Co. 10 Gray (76 Mass.)
Missotiri. — Renshaw v. INlissouri 344; Heebner v. Eagle Ins. Co. 10
State Mutual Ins. Co. 103 Mo. 595, Gray (76 Mass.) 131, 69 Am. Dec.
23 Am. St. Rep. 904, 15 S. W. 945. 308.
New York. — Reynolds v. Connneree ^^ Brooklyn Life Ins*. Co. v. Dutch-
Fire Ins. Co. 47 N. Y, 597, per er, 95 U. S. 269, 24 L. ed. 410. See
Church, C. J. Missouri State Life Ins. Co. v. Ilill,
0/,Zrt//oma.— Capital Fire Ins. Co. 109 Ark. 17, 159 S. W. 31; Mutual
V. Carroll, 26 Okla. 286, 109 Pac. Reserve Fund Life Assoc, v. Taylor,
535, 39 Ins. L. J. 12.58, 1264. 99 Va. 208, 3 Va. Sup. Ct. 131, 3/
Pemhstflrania. — Philadelphia Tool S. E. 854.
Co. v. British-American Assur. Co. See also as to the general rule in
132 Pa. St. 236, 19 Am. St. Rep. 596, such cases :
W Atl. 77; Kauffman Brothers v. Colorado. — Lovell v. Go.ss, 45 Colo.
Western Ins. Co. 21 Lancaster L. 304, 132 Am. St. Rep. 184, 101 Pac.
Rev. 252. See § 210 herein. 72.
12 Gray v. Harper, 1 Storv (C. C.) y=7or/rf«.— Webster v. Clark, 34 Fla.
574, Fed. Cas. No. 5,716. 637, 27 L.R.A. 126. 16 So. 601.
"Whether parol evidence of the hidiana. — Union Trust Co. v. Rich-
declarations and conversations of the mond City Rd. Co. 154 Ind. 291, 48
parties at the time tlieir contract was L.R.A. 41, 55 N. E. 745; Yincennes
made may be received in order to \. Citizen's Ga.slight & C. Co. 132
show in what sense general words Ind. 114, 16 L.R.A. 485, 31 N. E.
were in fact used by them, or to de- 573.
lermine particular words to a dis- Nebraska. — Gorder v. Pankonin, 83
tinct and particular sense, is a ques- Neb. 204, 131 Am. St. Rep. 629, 119
tion that I have purposely omitted to N. W. 449.
discuss in the text. The authorities Pennsylvania. — Sternberg v. Brock,
are conflicting, and I hav6 found my- 225 Pa. 279, 133 Am. St. Rep. 837,
self not only unable to reconcile them, 74 Atl. 166.
544
CONSTRUCTION OF POLICY. §§ 205a, 20G
§ 205a. Recitals: when not conclusive. — Recitals in policies of
int-iirance which are not contractual elements thereof are not con-
clu.sive on the parties thereto.^*
§ 206. Whether same rules govern marine, fire, and life policies.
—The rules of marine insurance apply to the interpretation of pol-
icies on vessels expressly employed in inland navigation when not
inapplicahle from the particular subject matter. In a New Hamp-
shire case 1^ it is declared that "great strictness has always been held
in contracts of marine insurance. ... I apprehend that from
this strictness existing in the law of marine insurance have been
drawn the rigid rules laid down by many tribunals upon fire in-
surance policies, and that the authorities in cases of marine insur-
ance have been followed in actions upon policies against fire without
perhaps sufiiciently adverting to the difference that exists in the
knowledge of facts upon which the respective contracts are founded.
Kent says that the strictness and nicety required in the contract
of marine insurance do not so strongly apply to insurance against
fire, for the risk is generally assumed upon actual examination of
the subject by skillful agents on the part of insurance offices.^® The
severity of these rules has caused courts in manv instances to en-,
deavor to avoid their effect." " It is said that insurance on lives is
governed by the same legal rules which control other contracts,^^
and that it is to be construed by the terms in which it is couched. ^^
But in a New York case it is held that in respect to life policies the
rule in regard to the construction of the statements of the assured
in the application is different from that which prevails in constru-
ing statements in applications for marine and fire policies. In ap-
plications of the former class the statements of the insured concern-
ing his health or vital organs are not understood or intended as
warranties; because the applicant may not know enough of the
human system to be aware of the existence of some affection of a
vital organ, and because the insurers are supposed to rely upon the
opinions of their own medical advisers.^" The question, however,
" Commonwealth Mutual Fire Ins. Life Ins. Co. 13 N. Y. 31, 39, 64 Am
Co. V. Hayden, 60 Neb. 636, 83 Am. Dec. 52fl.
St. Rep. 545. 83 N. W. 922. i^ Connecticut Mutual Life In.s. Co.
^5 Campbell v. Merchants' & Farm- v. Pvle, 44 Ohio St. 19, 4 N. E. 465,
ers ]\hit. Fire Ins. Co. 37 N. H. 43, 58 Am. Rep. 781; Law v. London
72 Am. Dee. 324, per Eastman, J. Tndispulable Life Pol. Co. 1 Jur. N.
" 3 Kent's Commentaries, 373. S. 178, 1 Kav & .1. 2231, 24 L. J Ch
See 17 Earl of Halsbury's Laws of 196. 3 Eq. Rep. 338.
England, pp. 342, 527. 20 jjom v. Amicable Mutual Life
"Caldwell v. St. Louis Ins. Co. 1 Ins. Co. 64 Barb. (N. Y.) 81. As to
ir'^""' ^'^' representations and warranties, see
St. John V. American Mutual §§ 1882 et seq., 1942 et seq. herein.
Joyce Ins. Vol. I. — 35. 545
§ 20Ga JOYCE OX INSURANCE
of concealment in marine and other risks is important.''^ In a
United States Supreme Court case^ it is declared that "policies of life
insurance are governed in some respects by different rules of con-
struction from those applied by the courts in cases of policies against
marine risks or policies against loss by fire," which are contracts
of indemnity, while "life insurance is not necessarily one merely
of indemnity for a pecuniary loss," and we apprehend that this is
true whether life insurance be considered a contract of indemnity
or only a contract for the payment of a fixed sum. So the court
declares in an Alabama case that "a contract of life insurance is
simpler in form in the relative rights and duties of the insurer and
the assured, and differs in many respects from marine or from fire
insurance, and yet the general principles applicable to marine or
fire insurance are applied, so far as consistent with the nature and
obligations of the contract, to the contract of life insurance." ^ But
in a Georgia case, the court saj'S: "All provisions of our code in
reference to fire insurance, wherever applicable are equally the law
of life insurance." ^ It is said by the court in Chartrand v. Brace,*
that "a policy of life insurance is in the nature of a testament, and
although not a testament, in construing it the courts will, so far
as possible, treat it as a will."'^ And the question involved might
arise in the construction of wills. So, under a North Carolina de-
cision rules for interpreting the will of a testator may guide, as far
as they are applicable, in ascertaining the legal effect of the clause
in a life policy designating the beneficiaries. The difference in the
cases consists in the fact that the interest vests under the policy at
once upon its issue, but does not vest under the will until the death
of the testator.® It is held in Jolly v. Baltimore Equitable Society ^
that in the construction of policies of fire insurance the same strict-
ness is not to be observed as in the construction of policies of marine
insurance.*
§ 206a. Rule as to standard policy.** — Although a standard form
21 See § 1844 herein. ^ cititjg Bolton v. Bolton, 73 Me.
1 Phcenix Mutual Life Ins. Co. v. 299. See §§ 309, 738 herein.
Bailey, 13 Wall. (80 U. S.) 616, 619, ^ Hooker v. Su^o, 102 N. C. 115,
20 L. ed. 501. 11 Am. St. Rep. 717, 3 L.R.A. 217,
2 Supreme Commandery Kniahts of 8 S. E. 919. See § 738 herein.
the Golden Rule V. Ainsworth, 71 Ala. '1 Har. & G. (Md.) 295, 18 Am.
436, 446, 46 Am. Rep. 332. Dec. 288.
^ Massachusetts Benefit Life Assoc. * As to construction of marine and
V. Robinson, 104 Ga. 256, 42 L.R.A. fire policies, see 17 Earl of Hals-
261, 30 S. E. 910, 27 Ins. L. J. 1003, burv's Laws of England, pp. 342,
1014; Civ. Code sec. 2117. 527.
4 16 Colo. 19, 26 Pac. 152, 12 »» See § 222d herein.
L.R.A. 209, 25 Am. St. Rep. 235, 32
Cent. L. J. 410.
546
CONSTRUCTION OF POLICY
§ 2p6a
of policy is prescribed by statute, nevertheless upon its acceptance by
the parties it becomes a voluntary contract between them which de-
rives its force and efficacy from their consent. It constitutes their
contract,^ and it must be construed by the same rules as similar
contracts voluntarilv entered into.^° And the fact that the legis-
lature has prescribed a standard form of policy affords no reason
for giving to a clause any different construction from that theretofore
given by the courts to all similar contracts made without legislative
sanction. ^^ So where the terms employed in a standard policy have
been in previous use in insurance contracts and have had a judicial
construction, it will be assumed that said terms were used in the
standard forms in the sense in which they were previously used and
defined. ^^ It is determined, however, in Wisconsin that its standard
policy is to be treated and construed as a statutory law, as well as
a contract. ^^ A distinction also seems, impliedly at least, to be made
under a Minnesota decision by the court in these words: "The rule
of construction applicable to a contract of insurance in cases where,
as in this one, the Legislature has not prescribed a standard policy
is settled to the effect" etc., applying the rules of construction in case
of ambiguity, etc.^*
^Dnnton v. "Westchester Fire Ins. Maisel v. Fire Assoc, of Phila. 69
Co. 104 Me. 372, 71 Atl. 1037, 38 N. Y. Supp. 181, 59 App. Div. 461;
Ins. L. J. 600, 20 L.R.A.(N.S.) 1058 Gazzara v. German Union Fire Ins.
{citing Reed v. Washington Ins. Co. Co. 155 N. Car. 330, Ann. Cas. 1913E,
138 Mass. 572). See also Leisen v. 282 note, 71 S. E. 434; Horton v.
St. Paul Fire & Marine Ins. Co. 20 Life Ins. Co. of Va. (Horton v. Home
N. Dak. 316, 30 L.R.A.(N.S.) 530, Ins. Co.) 122 N. Car. 498, 65 Am.
127 N. W. 837); Shawnee Mutual St. Rep. 717, 29 S. E. 944; Leisen v.
Fire Ins. Co. v. School Board, 44 St. Paul Fire & Marine Ins. Co. 20
Okla. 3, 143 Pae. 194. N. Dak. 316, 30 L.R.A.(N.S.) 539,
10 Kollitz V. Equitable Mutual Fire 127 N. W. 8:57.
Ins. Co. 92 Minn. 234, 99 N. W. 892, " Dunton v. Westchester Fire Ins.
33 Ins. L. J. 755. Co. 104 IMe. 372, 20 L.R.A.(N.S.)
See also the following ea.sos where 1058, 71 Atl. 1037, 38 Ins. L. J. 600.
this principle has been applied: See § 222a herein.
Chiche.ster v. New Hamp.shire Fire ^^ John Davis & Co. v. Insurance
Tns. Co. 74 Conn. 510, 51 Atl. 545; Co. of North America, 115 :\lich. 382,
Cutler V. Roval Ins. Co. 70 Conn. 566, 73 N. W. 393, 27 Ins. L. J. 184.
41 L.R.A. 159, 40 Atl. 529: Soroput ^3 temple v. Niagara Fire Ins. Co.-
V. London & Liverpool & Globe Ins. 109 Wis. 372, 85 N. W. 361, 30 Ins.
Co. 155 N. Y. 349, 49 N. E. 935, 28 L. J. 549.
Ins. L. J. 59. rev'g 85 Hun, 31. 32 Standard policy; as to constn;c-
N. Y. Supp. 594; Matthews V. Ameri- tion favorable to insured and rule
can Central Ins. Co. 154 N. Y. 449, contra proferentum, see § 222d here-
456, 31 L.R.A. 433. 61 Am. St. Rop. in.
627, 48 N. E. 751 ; Nelson v. Traders ^^ Hormel & Co. v. American Bond-
Ins. Co. 83 N. Y. Supp. 220, 86 App. ing Co. of Bnltiraore, 112 Minn. 288,
Div. 66: Staire v. Home Ins. Co. 78 3.3 L.R.A. (N.S.) 513, 128 N. W. 12,
N. Y. Supp. 555, 76 App. Div. 509: 40 Ins. L. J. 137.
547
§§ 206b, 206c JOYCE ON INSURANCE
§ 206b. WJiere standard policy statute declares policy binding
though not in form prescribed. — If a policy is issued not in con-
formity with the statutory standard form and the statute declares
that such policies shall nevertheless be binding but does not pro-
vide any rule of interpretation of such a policy issued contrary to
law, no statute is incorporated into it and it will be construed as it
reads. ^^ In the decision supporting the above point the court de-
clares that an Ohio case,^^ and like decisions are not applicable as
they hold that where a statute provides a certain rule for the inter-
pretation of a policy the statute must be regarded as incorporated
in a policy issued when the law was in force and being so incorpor-
ated must prevail over such cases as are inconsistent with it.
§ 206c. Rule as to guaranty or fidelity, contract, credit guaranty,
title, and employers' liability insurance.^®^ — The rule as to Guar-
anty or Fidelity Insurance is that indemnity bonds, which are
not ordinary obligations given by a surety, but which insure
the fidelity or integrity of an employee and which are issued
by a paid surety or for a money consideration are in the nature
of or in effect a contract of insurance, and are to be construed
by the same general rules which' govern ordinary insurance con-
tracts. In a Wisconsin case the court, per Barnes, J., says: "The
bond in question was an indemnity contract entered into by
the defendant for a money consideration. It has all the essential
features of an insurance contract, and should be subject to the same
rules of construction applicable to such contracts." ^' In a Minne-
sota case the court, per Start, C. J., says: ''In considering the ques-
tion whether the surety was entitled to a directed verdict for any
of the reasons here urged, we must keep in view the character of con-
tracts of suretyship of corporations organized for the purpose of
engaging, for profit, in the business of guaranteeing the fidelity or
contracts of a third party, and the rules of construction applicable
to their contracts. While such contracts in form resemble those of
suretyship, they are in effect contracts of insurance, to which the
rules of construction peculiar to contracts of suretyship proper do
not apply, but to which the rules governing ordinary insurance
contracts are applicable.'' ^« In a Federal Supreme Court ca.se the
construction given to the bond in suit was based upon ''a well-es-
" Hewins v. London Assur. Corp. v. American Bonding Co. 146 Wis.
(12 cases) 184 Mass. 177, 68 N. E. 573, 40 L.R.A.(N.S.) 661 and note,
69 131 N. W. 994, 40 Ins. L. J. ISOo.
"is Oueen In^. Co. v. Leslie, 47 Ohio " Hormel & Co. v. American Bond-
St. 409, 9 L.R.A. 45, 24 N. E. 1072. ing Co. 112 Minn. 288, 293, 33 L.R.A.
16a See §§ 221b, 222a herein. (N.S.) 513 (annotated on character
"United American Fire Ins. Co. of and rules governing contracts by
r.AQ
CONSTRUCTION OF POLICY § 206c
tablislicd rule in the law of insurance." ^^ So in another case in
the Federal Circuit Court of Appeals such policies are declared to
be policies of insurance and that they arc to be treated as such.^°
In a Colorado case the court, per Campbell, J., declares tliat:
''Learned counsel for both parties are in accord that this instru-
ment, for a breach of whose conditions the action was brought,
though denominated a bond is, in legal effect, analogous to a policy
of insurance. Speaking generally, the same rules of interpretation
and construction, therefore, that apply to fire and life policies ai'e
applicable to it." ^ So in a Washington case it is declared that :
"While this class of suretyship is comparatively new, a distinction
has been clearly announced by the courts, and that this character
of suretyship is governed by rules governing insurance contracts.
. . . This class of insurance cannot be distinguished in principle
from what is called guaranty insurance, where the guaranty com-
pany guarantees the honesty and efficiency of employees. . .
'Bonds of this character are, in their nature, insurance contracts,
to indemnify the employer against the dishonesty of employees.
They are issued for profit, and the same rules of construction must
apply thereto as apply to other insurance contracts.' " ^ So under
an Illinois decision a bond guaranteeing fidelity o^ a bank employee
is an insurance contract and as such is subject to same rules of
construction ap]>licable to insurance policies generally and not the
rules applied to ordinary sureties for accommodations and the gen-
eral principles applicable to other classes of insurance are also ap-
plicable.^ The above-stated principles have also governed in numer-
ous other cases of this class of guaranty insurance.*
corporations engaged for profit in Pac. 989, a ca.se of guaranty bond
business of guarantying the tidelity for fidelity of employee,
or contracts of other persons), 128 N. ^United Stales Fidelity & Guar-
W. 12, 40 Ins. L. J. 137. anty Co. v. First Nat. Bank, 233 111.
13 American Surety Co. v. Pauly, "*^^' ^^ N. E. 670, quoting from
170 U. S. 133, 42 L. ed. 977, 18 Sup. People v. Rose, 174 111. 310, 313, 44
Ct. 552, 29 Ins. L. J. 3. L.R-A- 124, 51 N. E. 240.
2°Tebbetts V. Mercantile Credit ^ * h^'a''^ '^^''^''•Tr^''i'''ffc^''- ''^
Guarantee Co. 73 Fed. 95, 19 C. C. S° v /'r'^^rP ' in^'^T i?'''or''?.'
^ 992 Bank & trust Co. 80 Fed. 760. 20 C.
Ta ' • or r rr . ^ ^'- -^- 1^^' reliearing denied, 82 Fed.
1 America,! Bonding & Trust Co. 545, rev'd 173 U. S. 582, 43 L. ed.
1': ^"''H' T ^"f?- ^' ^'' ^^''- ^^-' ^'^18, 19 Sup. Ct. 551; Jackson v. Fi-
60 Ins. L. J. 642. ,l^.li(^ & Casualty Co. 75 Fed. 35!),
^Cowles V. United States Fidelity 41 U. S. App. 552, 21 C. C. A. .394.
& Guaranty Co. 32 Wasli. 120, 124- J[r/caj?sa.s.— Title Guarantv & Sure-
120, 98 Am. St. Rep. 838, 72 Pac. tv Co. v. Bank of Fulton,' 89 Ark.
1032, per Dunbar, J., citinff and 471, 33 L.R.A.(N.S.) 676, 117 S. W.
quothin from Remington v. Fidelity 537, 38 Ins. L. .J. 722; United States
& Deposit Co. 2i Wash. 429, 435, 67 Fidelity & Guaranty Co. y. Bank of
549
§ 206c
JOYCE ON INSURANCE
So in a suit upon a contractors or sureties bond the same rule of
interpretation has been applied as in insurance contracts.^
So under a New York decision a case of credit insurance was
treated as a policy of insurance and the same rule of construction,
in the case of ambiguity or uncertainty as to the meaning of con-
ditions, was applied as in ordinary insurance contracts.^
Again the same rules governing the construction of other policies
apply to title insurance.'
An employers' liability bond or policy is also subject to like rules
Batesville, 87 Ark. 348, 112 S. W.
957; American Bonding- Co. v. Mor-
row, 80 Ark. 49, 96 S. W. 613.
Georgia. — John Churcii Co. v.
^'Etna Indemnity Co. 13 Ga. App.
826, 80 S. E. 1093.
Indiana. — American Surety Co. of
N. Y. V. Pangburn, 182 Ind.'llO, 105
N. E. 769.
Kentucky. — Fidelity & Deposit Co.
of Md. V. Cliampion Ice ]Manufactur-
ing- & Cold Storage Co. 133 Ky. 74,
117 S. W. 393; Champion Ice Manu-
facturing & Cold Storage Co. v.
American Bonding & Trust Co. 115
Ivy. 863, 103 Am. St. Rep. 3-36, 75
S. W. 197.
Maryland — Union Central Life Ins.
Co. V. United States Fidelity & Guar-
anty Co. 99 Md. 423, 105 Am. St.
Rep. 313, 58 Atl. 413, .33 Ins. L. J.
808, per McSherry, C. J.
Missouri. — Fairbanks Canning Co.
V. London Guaranty & Accident Co.
154 Mo. App. 327^ 133 S. W. 064;
Long Brothers Grocery Co. v. United
States Fidelity & Guaranty Co. 130
Mo. App. 421, 110 S. W. 29: Roark
y. City Trust, Safe Deposit & Surety
Co. 130 Mo. App. 401, 110 S. W. 1.
North Carolina. — Bank of Tarboro
y. Fidelity & Depo.sit Co. 128 N. Car".
366, 83 Am. St. Rep. 682, 38 S. E.
908.
Ohio. — Rankin v. United States
Fidelity & Guaranty Co. 86 Ohio St.
267, 99 N. E. 314.
Oklahoma. — Guthrie National Bank
V. Fidelity & Deposit Co. of Md., 17
Okla. 397, 79 Pac. 102.
South Carolina. — Walker v. Holt/-
claw, 57 S. C. 459, 35 S. E. 754, a
case, however, of a statutory bond
550
which recited the requireznents of the
law, but also contained other con-
ditions inserted for the benefit of
defentlants. The court said : "Upon
the hearing of the case it was argued
that a surety is a favorite of the law,
and it should be strictly construed in
his favor. While this is true as a
general rule, it has no application to
a case like this, where the surety re-
ceives compensation and the surety-
ship is in the line of its regular busi-
ness." Tlie surety was a banking and
trust company.
South Dakota.— Yarmevs & Merch-
ants Slate Bank of Yerdon v. United
States Fidelity & Guaranty Co. 28 S.
Dak. 315, 36 L.R.A.(N.S.) 1152, 133
X. W. 247.
Tennessee. — Hunter y. United
States Fidelity & Guaranty Co. 129
Tenn. 572. 167 S. W. 692; Louisville
& Nashville Rd. Co. v. United States
Fidelity & Guaranty Co. 125 Tenn.
408. 148 S. W. 671.
Wisconsin. — United American Fire
Ins. Co. v. American Bonding Co. of
Baltimore, 146 Wis. 573, 40 L.R.A.
(N.S.) 661 note, 131 N. W. 994.
^ ^Ana Indemnity Co. v. Waters,
110 Md. 673, 73 Atl. 712: Fitzger
Brewing Co. v. American Bonding
Co. of Baltimore, 115 ^linn. 78, 131
N. W. 1067.
^ People y. Mercantile Credit Guar-
antee Co. 166 N. Y. 416. 60 N. E. 24,
30 Ins. L. J. 642. See also Mercantile
Credit & Guaranty Co. v. Littleford
Bros. 18 Cir. Ct. Rep. (42 AVklv. L.
Bull.) 889.
'Trenton Potteries Co. v. Title
Guarantee & Trust Co. 64 N. Y.
Supp. 116, 50 App. Div. 490.
CONSTRUCTION OF POLICY
§ 207
of construction as insurance contracts,^ and this applies to a policy
taken out under the WorlcTnen's Compensation Act of England of
1906, against accidents to employees.^
§ 207. Construction: mutual companies: benefit societies. — It
is a general rule that contracts of insurance with a mutual company
or benefit etc., society or association are construed in most respects
like other policies,^" although it is said that "the business of in-
surance [igainst fire has been greatly increased by the incorporation
and establishment of mutual companies, and the mode of transact-
ing business, as well as the property insured, differe very essentially
from that of marine insurance. The method of doing busin&ss in
these com]ianies also varies materially in some respects from that
wliich prevails in stock companies, as they are usually termed. And
where courts now for the first time to lay down, without regard
to authorit}^, the rules of law that should govern contracts made
between mutual companies and their members, I apprehend that
in many jurisdictions they would differ essentially from the rules
which at present prevail." ^^ But the interpretation can be no dif-
^ United States. — iEtna Indemnity Indi-ana. — Elkhart Mutual Aid,
Co. V. J. R. Crowe Coal & Mining Benevolent & Relief Assn. v. Hough-
Co. 154 Fed. .545, 83 C. C. A. 4.31.
Illinois. — London Guarantee & Ac-
cident Ins. Co. V. Morris, 156 111.
App. 533.
Missouri. — Clears Mining Co. v.
ton, 103 Tud. 280, 2 N. E. 763, 53 Am.
Rej). 514; Wilk-utts v. Xorthwestern
xMutual Life Ins. Co. 81 Ind. 300.
loun. — Matthes v. Imperial Acci-
dent As-soc. 110 Iowa, 222, 81 N. W.
]\rarvland Casualty Co. 162 Mo. App. 484, 29 Ins. L. J. 622.
178. 101, 144 S. W. 883: Fairbanks 7ieH/McA;«/.— Metropolitan Plate
Canning Co. v. London Guarantee & Glass & Casualty Tns. Co. v. Ilawes,
Accident Co. 154 Mo. App. 327, 133 150 Ky. .52, 42 L.R.A.(N.S.) 700,
S. W. 664. 149 S. W. 1110 (principle applied).
North Carolina. — Henderson Light- Maine. — Xew England Mutual Fire
ing & Power Co. v. ^larvland Casu- Ins. Co. v. Butler, 34 Me. 451.
altv Co. 153 N. C. 275; 30 L.R.A. Missouri.SmaW v. Court of
(N.S.) 1105 and note, 69 S. E. 234.
Ohio. — Travelers Ins. Co. v.
Meyers, 62 Ohio St. 529, 49 L.R.A.
760, 57 N. E. 458, 29 Ins. L. J. 894.
9 Bradley & Essex & Suffolk Acci-
dent Indemnity Soc, In re, 81 L. J.
Honor, 136 ^VIo. App. 434, 117 S. W.
116.
Neic Jersey. — Golden StaiT Fra-
ternitv v. Martin, 29 N. J. L. 207, 35
Atl. 908.
Oregon. — Independent Order of
K. B. 523, [1912] 1 K. B. 415, 105 Forester v. Kelilier, 36 Greg. 501, 59
L. T. 919. 28 T. L. R. 175, [1912] W. Pae. 324, 1109, 60 Pac. 563, 78 Am.
C. Rep. 6. See § 222b herein. St. Rep. 785.
On what constitutes insurance, see Texas.- — Ilavwood v. Grand Lodge
extensive note in 47 L.R.A. (N.S.) of Texa.s K. of P. — Tex. Civ. App.
290: on construction of bond or poli- —, 138 S. W. 1194.
cy indemnifying employer against See Bacon's Benefit Societies &
loss from negligence of employee, see Life Ins. sec. 180.
note in 31 L.R.A. (N.S.) 775. On whetlier a Ix'nefit association is
^° Georgia. — Warwick v. Supi^eme an insurance companv, see note in
Conclave K of D. 107 Ga. 115, 32 S. 38 L.R.A. 33.
E. 951. " Campbell v. :\Icrchant.s' & Farm-
551
§ 207 JOYCE ON INSURANCE
ferent in the policies or certificates in such companies than in other
insurance contracts, Avhere tl:ie words are used for a definite pur-
pose, and relate to clearly defined transactions, as that a policy shall
be void if the insured die in known violation of any law.^^ If the
language of such contracts be plain, unambiguous, and well under-
stood to have a fixed meaning, either generally or as technical terms
of law, that meaning will be given the same as in case of other con-
tracts of insurance, ^^ and the courts will adjudicate the rights of
members in reference to certificates in such companies upon the
same principles as apply to insurance companies.^* So the policy,
the conditions annexed thereto, the charter, and by-laws of the com-
pany must be all construed together in cases of discrepancy,^* and
the by-laws, it is held, must receive the interpretation put upon the
contracts of which they are a part.^^
The contract, and constitution relating to it, should be construed
according to the plain and obvious meaning of their provisions, and
with a view to accomplish the purpose for which the association is
maintained and persons become members thereof." And the in-
tent may be gathered from the language of the certificate read in
the light of the surrounding circumstances under which it was is-
sued, including the subject-matter to which the words relate and
such matters as are incident thereto. ^^ It is also held that the chart-
er and by-laws must be liberally construed to eft'ectuate the purposes
contemplated,^^ although other courts have adhered to a different
rule limiting the company or society strictly to the exercise of those
ers Mut. Fire Ins. Co. 37 N. H. 44, 425, 34 L.R.A.(N.S.) 126, 134 S. W.
per Eastman, J. 928, 40 Ins. L. J. 737.
12 Cluff V. Mutual Benefit Life Ins. ^^ JMullen v. Reed, 64 Conn. 240, 42
Co. 99 Mass. 317. Am. St. Rep. 174, 24 L.R.A. 664, 29
1^ Wiggin V, Knights of Pj'thias, 31 Atl. 4/8: Daniel v. Modern Woodmen
Fed. 122. of America, 53 Tex. Civ. App. 570.
1^ Goodman v. Jedidjah Lodge, 67 118 S. W. 311.
Md. 117. See Cliartrand v. Brace, 16 ^^ Indiana. — Supreme Lodge
Col. 19, 26 Pae. 152, 32 Cent. L. J. Knights of Pythias v. Schmidt, 98
420 Ind. 3/4.
iSHvatt V. Wait, 37 Barb. (N. Y.) , Massaclmsetts.-^l^ey v. Odd Fel-
29. See cases in i^s^ 175, 176, 18-5-88 i^T 7 N E 844
herein. See also Condon v. Mutual A. i i ' ' w^ a * *u
„ T- -i T -c K on ^t ^ nn Oklahoma. — u oodmen or the
Reserve F"nd Life Assoc. 89 Md. 99, ^-^,^^j^j ^^ Gilliland, 11 Okla. 384, 67
44 L.R.A. 149, 31 Chic. Leg. News, p^^ ^g-
273, 42 Atl. 944: Golden Star Fra- p'enn^yUa nm.— Ma^eely x.l^m^hXs.
ternity v. Martin, 29 N. .1. L. 20/, 3o of Birmingham, 115 Pa. St. 305, 7
Atl. 908. Cent. Rep. 633, 9 Atl. 41, 43.
16 Wiggins V. Knights of Pythias, Tl'/s(;o»s/:».— Ballon v. Gile, 50 Wis.
31 Fed. 122. See § 381 herein. 614, 7 N. W. 561 ; Erdman v. Mutual
1'' Bi'otherhood of Locomotive Fire- Ins. Co. of the Order of Herman's
men & Enginemen v. Aday, 97 Ark. Sons, 44 Wis. 376. See § 381 herein.
552
CONSTRUCTION OP POLICY § 207
powers conferred by their charter.^" But it is held that a stipulation
in the policy repugnant to a provision in the act of incorporation
controls the latter/ and the same is held to be true where by-laws
are inconsistent wdth the provisions of the policy, the company
having power under its charter to issue such a policy.^ And a con-
dition in a certificate controls a different one in a by-law^ where the
charter provides for such a condition in either the certificate or by-
laws.^ 80 where certain limitations upon liability are provided for
by the certificate and the application such conditions prevail over
by-laws which do not contain such limitations.'*
Conditions of a by-laW' or constitution may be such as to require
a strict construction even to the extent of a strained interpretation
to avoid them,^ and provisions for forfeiture will be strictly con-
strued so as to prevent their enforcement where there are repug-
nant conditions and such as are in favor of assured will be given
effect.6
The practice and opinion of the officers of such companies as to
the meaning of words used in the rules, regulations, and by-laws
cannot change by construction the plain terms of the policy or af-
fect the rights of the parties,' although the acts of assured and such
officers will, it is held, be considered.* •
So the customs and usages adopted by the society are inadmis.sible
to supersede the regularly adopted by-laws and thus change the
contract.^ So the interpretation which the ofhcers of a benefit as-
.sociation which have been accustomed to give to certain words in
certificates, but which have never been promulgated as a rule of the
2° Supreme Lodge Knights of fit society, or insurance company, see
Honor V. Nairn, 60 ]\Iich. 44, 26 N. note in 47 L.R.A. 681.
W. 826; National Mut. Aid A.ssn. v. ^ Bj.q^|,pj.|jqq(J q£ Railroad Train-
Gonser, 43 Ohio St. 1, 1 N. E. 11; men v. Newton, 79 111. App. oOO.
and see Bacon's Benefit Societies and ^ Havwood v. Grand Lodge of
Life Ins. sees. 170, 244, 245. Texas K. P. — Tex. Civ. App. — ,
1 Howard v. Franklin Marine & 138 S. W. 1194. See § 220a herein.
Fire Ins. Co. 9 How. Pr. (N. Y.) 45. ' Wiggin v. Knights of Pythias, 31
See Bacon's Mutual Benefit Societies Fed. 122; Manson v. Grand Lodge
and Life Ins. sec. 178. Ancient Order Pnited Workmen, 30
2 Davidson v. Old People's Mutual Minn. 509, ]6 N. \V. 395. See ?lso
Benefit Soc' 39 Minn. 303, 1 L.R.A. Morey v. Monk, 142 A hi. 175, 38 So
482, 39 N. W. 803. But see Bacon's 265. "
Mutual Benefit Societies and Life Ins. ^ Havnes v. Masonic Benefit Assoc,
sec. 178. 08 Ark. 421, 136 S. W. ]87. See
3 Failev v. Fee, 83 Md. 83, 32 Mutual Reserve Fund Life Assoc, v.
L.R.A. 311, 34 Atl. 839. Tavlor, 99 Va. 208, 3 Va. Sup. Ct.
^I\rcCov v. Norfliwestern Mutual Rep. 131, 37 S. E. 854. See § 309
Relief A.ssoc. 92 Wis. 577, 47 L.R.A. herein.
681, 66 N. W. 697. 9 District Grand Lodge v. Cohn, 20
On conflict between by-laws and 111. App. 335; Davidson v. Knights
certificate, or policy, of mutual bene- of Pythias, 22 Mo. App. 263.
553
§ 208 JOYCE ON INSURANCE
association, is immaterial even tliough certain acts had, without
notice to the members been based upon this custom.^"
§ 208. Policies construed like other written contracts. — Generally
stated, policies of insurance are subject to the rules of construction
which are applicable to other contracts." So Nelson, J., declares that
"there is no more reason for claiming a strict literal compliance with
its terms than in ordinary contracts." ^^ The clause in a policy of in-
1" Supreme Council Catholie Be- 132 Am. St. Rep. 428n, 22 L.R.A.
nevolent Legion v. Grove, 176 Ind. (N.S.) 964, 38 Ins. L. J. 895, 73 Atl.
356, 36 L.R.A.(N.S.) 913, 96 N. E. 187.
159. Massachusetts. — Hio-ginson v. Dall,
" United States.— Uverpool, Lon- 13 Mass. 96, 98.
don & Globe Ins. Co. v. Kearnev. 180 Missouri. — Rensbaw v. Missouri
U. S. 132, 45 L. ed. 460, 21 Sup. Ct. State Mutual Fire & Marine Ins. Co.
326, aTg 94 Fed. 314, 36 C. C. A. 103 IVIo. 595, 23 Am. St. Rep. 904, 15
265; Maryland Casualty Co. V. Finch, S. W. 945; Hoover v. Mercantile
147 Fed. 388, 77 C. C. A. 556: Dela- Town Mutual Ins. Co. 93 Mo. App.
ware Ins. Co. of Phila. v. Greer, 120 111, 69 S. W. 42.
Fed. 916, 57 C. C. A. 188, 61 L.R.A. Neio Hampshire. — Johnson v.
137 ; Crane v. Citv Ins. Co. 3 Fed. Maryland Casualty Co. 73 N. H. 259,
558. Ill Am. St. Rep.^ 609, 60 Atl. 1009.
California. — Pacific Heatino- Venti- Neic ror/i.^Pindar v. Resolute
lator Co. y. Williamsbursjh City Fire Fire Ins. Co. 47 N. Y. 114, per Rap-
In.s. Co. 158 Cal. 367, 111 Pac. 4; pallo. J.: St. John v. American
Scliroeder v. Imperial Fire Ins. Co. IMutual Life Ins. Co. 13 N. Y. 31, 39,
132 Cal. 18, 54 Am. St. Rep. 17, 63 64 Am. Dee. 529; Goix v. Low, in
Pac. 1074; Wells, Fargo Co. v. Paci- Johns. Cas. (N. Y.) 341, per Kent,
tic Ins. Co. 44 Cal. 39/ ; Laventhal v. J.; Lamb v. Prudential Ins. Co. 48
Fidelity & Casualty Co. 9 Cal. App. N. Y. Supp. 123, 22 App. Div. 552.
275, 98 Pac. 1075. 0/j/o.— Travelers' Ins. Co. v. Mvers,
Delaicare.— Continental Ins. Co. 62 Ohio St. 529, 49 L.R.A. 760, 57
v. Rosenberg, 7 Pen. (Del.) 174, 74 N. E. 458, 29 Ins. L. J. 894.
Atl. 1073. Oregon.— Weidert v. State Ins. Co.
Illinois.— AviTOTa, Fire Ins. Co. v. 19 Oreg. 261, 20 Am. St. Re]i. 809. 19
■ Eddy, 49 111. ,106. Ins. L. J. 740, 24 Pa*. 242.
Indiana. — Ohio Farmers Ins. Co. v. Pennsijlvanio. — McCaffrey v.
Vogel, 166 Ind. 239, 117 Am. St. Knights' & Ladies of Columbia, 213
Rep. 382, 76 N. E. 977. Pa. St. 609, 63 Atl. 189.
loua. — Dahms & Sons Co. v. Ger- South Dakota. — Ferguson v. North-
man Fire In.-. Co. 153 Iowa, 168. 40 em Assurance Co. of London, 26 S.
Ins.^ L. J. 2133, 132 N. W. 870. Dak. 346, 128 N. W. 125.
Kentuchij. — See ^^tna Ins. Co. v. TFrts7(/»j^ion.— Hocking v. British
Bowlino- Green Gaslight Co. 150 Kv. America Assur. Co. 62 Wash. 73, 36
732, 43 L.R.A.(N.S.) 1128n, 150 S. L.R.A.(N.S.) 1155n, 113 Pac. 259.
W. 994; Spring Garden Ins. Co. v. Wisconsin. — French v. Fidelity &
Imperial Tobacco Co. 132 Kv. 7, 136 Casualty Co. 135 Wis. 259, 17 L.R.A.
Am. St. Rep. 164, 20 L.R.A. (N.S.) (N.S.) 1011. 115 N. W. 869.
277, 38 Ins. L. J. 446, 116 S, W. 234. England.— ^ohert&on v. French, 4
Maryland. — xliltna Indemnity Co. East L35, 14 Eng. Rul. Cas. 1, per
V. Waters, 110 Md. 673, 73 Atl. 712 Lord Ellenborough.
(contract insurance); McEvov v. ^^ 'j^j-jgy y North American Fire
Security Fire Ins. Co. 110 Md." 275, Ins. Co. "25 Wend. (N. Y.) 376.
554
CONSTRUCTION OF POLICY § 209
surance requiring the certificate of a magistrate as to the character
of the assured and the amount of the loss is to be construed as Uber-
ally as ordinary conlracts,^^ though a policy of insurance may be
avoided by representations and concealments, which would not be
allowed to aflect the force of any other contract, if they materially
afl'ect the risk, yet with regard to its other incidents, it is subject
to the same rules of construction as other contracts. Thus, it is
no defense to an action on a premium note that false representations
were made when such representations were plainly contradictory to
the terms of the note itself.^*
§ 209. Construction: intention of parties governs. — The cases
are numerous which hold that the first object of construction is to
ascertain the intention or meaning of the parties, and to interpret
the contract accordingly." It is said by Denman, C. J.,^^ that the
Examine IMcEvoy v. Security Fire Maryland. — Maryland Ins. Co. v.
Ins. Co. of Biiltimore, 110 Md. 275, Bossiere, 9 Gill & J. {"Sid.) 121;
73 Atl. 157, 38 Ins. L. J. 895, 132 Patapsco Iny. Co. v. Bi.scoe, 7 Gill &
Am. St. Rep. 428, 22 L.R.A.(N.S.) J. (Md.) 293, 28 Am. Dec. 219.
964. See §§ 220-222 herein. New Hampshire. — Ander.«on v.
13 Tiirley v. North American Fire Mina Life Ins. Co. 75 N. H. 375, 74
Ins. Co. 25 Wend. (N. Y.) 375. Atl. ,1051, 28 L.R.A.(N.S.) 730 (an-
" Farmers' ^Mutual Fire Ins. Co. nolated on liability for indenniity
V. ]\Iarshall, 29 Vt. 23. aijainst total disability which results
15 Emeris'on on Ins. (Meredith's ed. from an injury for which an inde-
1850) c. ii. see. 7, p. 49. "The instru- pendent indemnity is provided);
ment avails nothing beyond the in- John.-^un v. .Maryland Casualty Co.
teutiou of the parties': " Id. c. i. 73 N. H. 259, 11 Am. St. Rep. GOO,
see. 5, \^. 17. 60 Atl. 1009.
See also the followina: cases: Neic York. — Schumacher v. Great
United States. — ^Mau'^er v. Holvoke F^a-stern Casualty & Indemnity Co.
Ins. Co. 1 Holmes (U.S. C. C.) 287, 197 N. Y. 58, 27 L.R.A.(N.S.) 480,
289, Fed. Cas. No. 9,305. and note, 90 N. E. 3.53, 39 Iiu'^. L. J.
J. r/.;aHsa.s.— Fidelity »& Casualty Co. 428 (intent and purpose of separate
V. Meyer, 106 Ark. 9i, 152 S. W."^ 995, independent parapTaph c^overns) ;
44L.R.A.(N.S.) 493. Paul v. Travelers' Ins. Co. 112 N. Y.
California.— Rauk'in v. Amazon 472, 8 xVm. St. Rep. 756, 3 L.R.A.
Ins. Co. 89 Cal. 203, 23 Am. St. 443, 20 N. E. 347; ^larco v. Liver-
Kep. 460, 26 Pac 872; WelLs, Fargo pool & London Ins. Co. 35 N. Y. 664;
Co. v. Pacitic Ins. Co. 44 Cal. 397, Ripley v. iEtna Ins. Co. 30 N. Y.
406. 136, 86 Am. Dec. 362.
Colorado. — INIessenger v. German- North Carolina. — Livingston Groc-
American Ins. Co. 47 Colo. 448, 107 cry Co. v. Philadelphia Casualty Co.
Pac. 643 ; German-American Ins. Co. 157 N. Car. 116, 72 S. E. 870;
V. Messenger, 25 Colo. App. 153, 136 Henderson Lighting & Power Co. v.
Pac. 478.^ ]\!arvland Casualty Co. 153 N. Car.
Georgia.— North British & Mercan- 275," 30 L.R.A.(N.S.) 1105, 69 S. E.
tile Ins. Co. v. Tye, 1 Ga. App. 380, 224; Bray y. Virginia Fire & IMarine
58 S. E. 110. Ins. Co. 'l39 N. Car. 390, 51 S. E.
Maine. — Blinn y. Dresden IMutual 922.
Fire Ins. Co. 85 Me. 389, 27 Atl. 263. 0/i/o.— Rankin v. United States
555
§ 209
JOYCE ON INSURANCE
question is "not what was the intention of the parties, but what is
the meaning of the words they have used." ^"^ In this ease the parties
had failed, by apt and proper words, to express their intention, and
the contract was construed in accordance with the meaning of the
terms employed. In connection with this case we suggest that, if
the words used are clear and precise, it is not an unreasonable pre-
sumption that the parties intended that meaning which the words
used fairly express, even though the parties may have actually in-
tended otherwise, and if the meaning of the words is obscure, it is
but just that other aids should be resorted to to ascertain what mean-
ing the parties intended to convey by the words they have used.^'
The general rule is, that the intent is to be obtained first from the
language of the entire policy in connection with the risk or subject
matter.^^
Fidelity & Guaranty Co. 86 Ohio St. him . . . ; the just construction
267, 94 N. E. 314; Travelei*s' Ins. Co. of an instrument should tend only to
V. iMvers, 62 Ohio St. 529, 49 L.R.A. discover the meaning of its author or
760, 57 N. E. 458, 29 Ins. L. J. 894. authors" : Emerig-on on Insurance
Oregon. — Mutual Benefit Lite Ins. (Meredith's ed. 1850) c. II. see. 7,
Co. V. Cummings, 66 Oreg. 272, 133 p. 49. This learned writer also de-
Pae. 1169 ; Weidert v. State Ins. Co. clares that "the Avords of the contract
19 Oreg. 261, 20 Am. St. Rep. 109, are to be taken together with the in-
24 Pac. 242. tention of the parties. Verba con-
Washington. — Port Blakely MUl traetus assecurationes et mentem con-
Co. V. Springfield Fire & Marine Ins. trahentium esse attendenda," Id. c. i.
Co. 59 Wash. 501, 140 Am. St. Rep. sec. 5, p. 17.
863, 28 L.R.A. (N.S.) 596 and note, ^^ Colorado.— Messenger v. Ger-
an effect of temporary condition man-American Ins. Co. 47 Colo. 448,
which ceased before loss, under gen- ]07 Pac. 643; German-American Ins.
eral provision against increase of Co. v. Messenger, 25 Colo. App. 153,
risk, or specific provision against cer- 3 36 Pac. 478 ; Goodrich v. Treat, 3
tain conditions. 110 Pac. 36. Colo. 408.
England. — Parkhurst v. Smith, loica. — McCluer v. Girard Fire &
Willes, 332, per Willis, C. .1. j\rarine Ins. Co. 43 Iowa, 349, 22 Am.
See citations under third next fol- Rep. 249.
lowing note, also 17 Earl of Hals- Kentucky. — Spring Garden Ins.
bury's Laws of England, pp. 342 Co. v. Imperial Tobacco Co. 132 Kv.
(marine) 527 (fire). 7, 136 Am. St. Rep. 164, 20 L.R.A.
i6Rickman v. Carstars, 5 Barn. & (N.S.) 177, 116 S. W. 234, 38 Ins.
Adol. 651, 663. L. J. 277.
^"^ See, also, Holmes v. Charlestown Maine. — Blinn v. Dresden Mutual
Mutual Fire Ins. Co. 10 Met. (51 Fire Ins. Co. 85 Me. 389, 27 Atl. 263;
Milss.) 211; 43 Am. Dec. 428; J. I. INloore v. Protection Ins. Co. 29 Me.
Kellv Co. V. St. Paul Fire & :^Iarine 97, 48 Am. Dec. 514.
Ins. "Co. 56 Fla. 456. 47 So. 742, 38 New TorA-.— Foot v. ^I^tna Life
Ins. L. J. 215, 236. Ins. Co. 61 N. Y. 571 ; Savage v.
^^ Emerigon says: "If the partv Howard Ins. Co. 44 How. Pr. (N.
who could and should have explained Y.) 40. 51, 52 N. Y. 502, 504, 11 Am.
himself clearly and precisely has not Rep. 741.
done so, it is so much the worse for North Carolina — Lexington Groc-
556
II
CONSTRUCTION OF POLICY § 209
Policies of insurance are to be considered with reference to the
intentions of the parties, to be ascertained from the terms and con-
ditions placed therein.^" If the language used by the parties in
writing, the contract is plain and susceptible of but one meaning,
and the transaction is free from fraud or mistake, that language will
control ; ^ but if the language is ambiguous and obscure, and does
not in itself discover the intent, then resort may be had to usage or
to the surrounding circumstances existing at the time the contract
was made.^ And the rule applies to mutual benefit certificates.^
Again, a policy should be given effect according to the sense in
which the parties mutually understood it when it was made,* and
such mutual intention controls as it existed at the time of contract-
ing so far as it may be ascertained * and is lawful.^ And such mu-
ery Co. v. Philadelphia Casualty Co. Indiana. — Northern Assur. Co. of
157 N. C. 116, 72 S. E. 870. London v. Carpenter, 52 Tnd. App.
O/i/o.— Gorman Fire Ins. Co. v. 432, 94 N. E. 779, 40 Ins. L. J. 1218.
Roost, 55 Oliio St. 581, 60 Am. St. Maine. — Bickford v. u5]tna Ins. Co.
Rep. 711, 36 L.R.A. 236, 45 N. E. 101 Me. 124, 63 Atl. 552.
1097. Michigan. — Hoose v. Prescott In.s.
Oregon.— Weidert v. State Ins. Co. Co. 84 Mich. 309, 11 L.R.A. 340, 47
19 Or. 261, 19 Ins. L. J. 740, 24 Pae. N. W. 587.
242. . Missouri. — Renshaw v. Missouri
Pennsylvania. — Snyder v. Groff, 8 State Mutual Fire & IVIarine Ins. Co.
Pa. Dist. R. 291, 56 Le,?. Intel. 237. 103 :\Io. 595, 23 Am. St. Rep. 904, 15
Tea^s.— Roval Ins. Co. v. Texas & S. W. 945 ; Pietri v. Sequent, 96 Mo.
G. R. Co. 53 Tex. Civ. App. 154, 115 App. 258, 69 S. W. 1055.
S. W. 117. New Hampshire. — Andei'son v.
Wisconsin. — French v. Fidelity & ^^i^tna Life Ins. Co. 75 N. H. 375, 74
Casualty Co. 135 Wis. 259, 17 L.R.A. Atl. 1051, 28 L.R.A. (N.S.) 730n.
(N.S.) 1011, 115 N. W. 869. Oklahoma.— Capitai Fire Ins. Co.
See §§ 205, 210 herein. v. Carroll, 26 Okla. 286, 109 Pac. 535,
20 Continental Ins. Co. v. Kyle, 124 39 Ins. L. J. 1258, 1264.
Ind. 132, 19 Am. St. Rep. 77, 9 See §§ 205, 210 herein.
L.R.A. 81, 24 N. E. 727. The intention of the parlies must
^ Warren y. Postal Life Ins. Co. primarily be sought in the contract
148 N. Y. Supp. 1024, 163 App. Div. itself even though extraneous evi-
638. dence is permissible. Czerweny v.
2 Savage y. Howard Ins. Co. 44 National Fire Ins. Co. 139 N.' Y.
How. Pr. (N. Y.) 40, 51, 52 N. Y. Snpp. 345.
502, 504, 11 Am. Rep. 741; Marco v. 3 Mullen y. Reed. 64 Conn. 240, 42
^u"r?7\ ^"^-m^"^- "i'' ^- ^T. ^^^,' Am. St. Rep. 174, 24 L.R.A. 664, 29
Philadelphia Tool Co v. Bri hsh ^^j ^^g j^^^-^j ^. ^,j^^^^^ ^.^^^_
American Assur. Co. 132 Pa. St. 236, „ n \ ■ ko rp n- a
24; 25 Week. Not. Cas. 370, 19 Atl! ?lf" ^^V^™w o'n iT'.init'^^-
77, 19 Am. St. Rep. 596. ^^^' ^^^ ^- ^- ^^^- ^^^ § ^07 here-
See also the following cases: ^'^4,r ^ , t^ •/- -ir it/.
Co/oraf?o.— Messenger v. German- McCarthy y. Pacific Mutual Life
American Ins. Co. 47 Colo. 448, 107 l»s. Co. 178 111. App. 502.
Pac. 648; German American Ins. Co. ^ McCaffrey v. Knights & Ladies of
y. Messenger, 25 Colo. App. 153, 136 Columbia, 213 Pa. 609, 63 Atl. 189;
Pac. 478. Miller v. St. Paul Fire & Marine Ins.
557
§ 209
JOYCE ON INSURANCE
tual intention is to be deduced, if possible, from the language of
the contract alone.' And it governs if it can be reasonably deduced
from the terms of the contract.* And it is held that in the absence
of a plea and showing of fraud or mistake the intention of the par-
ties must be gathered not from what they said or did or thought
they intended but from the contract itself.^
This intent should not be contrary to legal principles or rules of
law,^° and it should be looked to rather than to any grammatical
accuracy in the use of language.^^ and is rather to be regarded than
the strict literal sense of the words. ^^ Where the language evidences
that the assured intended to do or omit an act material to the risk,
it will be so construed, and the assured must reserve the right to
change his intention by explicit language.^^ Mr. Parsons ^* in-
quires, Which intent governs where there is reason to believe that
one of the parties intended one thing and the other another thing?
It would seem, however, that the intent ought to be a concurrent
one, that is, not the intent alone of either the insurer or insured,
but one upon which the minds of the parties met.^* So it is said
that there is no principle of law 'Svhich allows the understanding
of one of the pai'ties to determine the meaning of the contract."^*
Co. 26 S. Dak. 454, 128 N. W. 609, lev v. Nashville Ins. Co. 3 La. Ann.
40 Ins. L. J. 80, Civ. Code. sec. 1245. 708, 48 Am. Dec. 465.
6 Miller V. St. Paul Fire & IMarine ^^ Qj-oss v. Sbutliffe, 2 Bay (S. C.)
Ins. Co. 26 S. Dak. 454, 128 N. W. 220, 1 Am. Dec. 645; Evre v. Marine
()09, 40 Ins. L. J. 80, see. 1245 Civ. Ins. Co. 6 Whart. (Pa.) 249, 254.
Code. ^^ Bilbrough v. Metropolis Ins.
'Sehroeder v. Imperial Fire Ins.. Co. 5 Duer (N. Y.) 587.
Co. 132 Cal. 18, 84 Am. St. Rep. 17, 1*1 Parsons on Ins. (ed. 1868) 75.
63 Pac. 1074; Miller v. St. Paul Fire ^^ See 1 Duer on Ins. (ed. 1845)
& Marine Ins. Co. 26 S. Dak. 454, 128 159, 160; Holmes v. Charlestown Mut.
N. W. 609, 40 Ins. L. J. 80, Civ. Fire Ins. Co. 10 Met. (51 Mass.)
Code, sees. 1247, 1248. 211, 216, 43 Am. Dec. 428, where
8 MeEvoy v. Security Fire Ins. Co. the court refused to apply insurance
of Baltimore, 110 Md. 275, 132 Am. to certain chattels, althoug-h it ap-
St. Rep. 428n. 22 L.R.A.(N.S.) 964n, peared that the insured intended to
38 Ins. L. J. 895. cover them.
■ ' Prussian National In.s. Co. v. ^^ Monts^omery v. Firemen's Ins.
Ten-ell, 142 Ky. 732, 135 S. W. 416, Co. 16 B.^IMon. (Ky.) 427) 441, per
40 Ins. L. J. 944. Mai-shall, C. J.; Stone v. Granite
i» Patapsco Ins. Co. v. Biscoe. 7 State Fire Ins. Co. 69 N. H. 438, 45
Gill & J. (Md.) 293, 28 Am. Dec. 219; Atl. 235, 29 Ins. L. J. 250. See
Parkhurst v. Smith, Willes, 327, per Equitable Loan & Security Co. v.
Wille-s, C. J. See as to general rule Waring, 117 Ga. 599, 62 L.R.A. 93,
in other contracts, Equitable Loan & 44 S. E. 320; Supreme Council
Security Co. v. Waring, 117 Ga. 599, Catholic Benevolent Legion y. Grove,
62 L.R.A. 93, 44 S. E.' 320. 176 Ind. 356. 36 L.R.A.(N.S.) 913,
11 Palmer y. Warren Ins. Co. 1 90 N. E, 1059 (mutual benefit eertiti-
Story (U. S. C. C.) 360, 365, Fed. cate).
Cas. No. 10,698, per Story, J. ; Brad-
558
I
CONSTRUCTION OF POLICY § 209a
But this may be qualified, as where one party acquiesces in such un-
derstanding and complies with the other's demands based thereon. ^"^
And a policy should also be interpreted as the assured understood
it and the company intended he should understand it, if all parts
of the contract, taken together, admit of such construction.^^ But
the construction to be given to an insurance policy will not be con-
trolled by the fact that in correspondence relating to the loss the
insured apparently sought to bring it within the policy as interpret-
ed by the insurer. ^^
But when a person accepts insurance upon terms so written in the
policy by the insurer, either intentionallj'^ or otherwise, as to be
calculated to deceive, and in such ambi.guous language that it is
possible to construe them in more than one way, a construction in
favor of the understanding of the insured at the time the policy was
taken should be sustained.^"
§ 209a. Same subject: cases generally. — If the applicant is a
foreigner, with an imperfect knowledge of the language, that cir-
cumstance should be considered in determining the meaning of the
words he has used.^
If all the conditions of fact expressly provided for have failed and
the contract is silent as to anything further, regard must be had to
the fundamental intent and effect of the contract. And where a
primary intent exists the secondary question may depend upon the
circumstances, such as who is the beneficiary.^
The intention of the parties procuring a life insurance determines
its character. Hence, if one should take out such a policy to him-
self, and at once assign it to a person having no insurable interest
in his life, the courts would unhesitatingly declare in accordance
with the facts, reading the policy and the assignment together, as
forming part of one transaction, for the purpose of frustrating a
wagering policy.^
Adjudications, construing the same clause, made prior to the is-
suance of the policy by the courts of last resort in several states will
be presumed to have been the construction intended to be adopted
" Mutual Reserve Fund Life Assoc. Assur. .Co. 106 Mich. 47, 30 L.R.A.
V. Tavlor, 99 Va. 208, 3 Va. Sup. Ct. 636, 63 N. W. 899.
R. IHl, 37 S E. 854. 20 jq^pHi^ v_ Western Life Indemni-
18 EMv V. Phoenix Mut. Life Ins. tv Co. 207 N. Y. 300, 100 N. E. 1119,
Co. 65 N. H. 27, 23 Am. St. Rep. 17, niVg 129 N. Y. Supp. 1126, 145 App.
18 Atl. 89. Div. 908.
As to construction placed upon ^ Knickerbocker Life Ins. Co. v,
contract bv the parties themselves. Trefz, 104 U. S. 197, 26 L. ed. 708.
See Missouri State Life Ins. Co. v. 2 Smitli v. Metroiiolitan I>ife ]ns.
Hill, 109 Avk. 17,159 S.W. 31; also Co. 222 Pa. 226, 20 L.U.A.(N.S.)
§ 205 herein. 928. 123 Am. St. Rep. 799, 71 Atl. 11.
13 Jackson v. British American ' Steinbaek v. Diepenbrock, 158 N.
559
§§ 209b, 209c
JOYCE ON INSURANCE
by the parties, otherwise the language of the policy should have
been modified to make the contrary intent clear.'*
§ 209b. Same subject: construction of warranties. — The inten-
tion of the parties must control in the construction of the warranties
contained in a policy of insurance, as the same is shown by the sit-
uation of the parties, the condition of the thing insured, and what
was said or done at the time the insurance was eftected.^ But it is
held that in contracts of insurance the rules of construction require
that reference should be had to the real intention of the "parties,
except in cases relating to warranties; also that the whole contract
be considered, and when one clause stands with others, its sense
may be gathered from those which immediately precede and follow
it.«
§ 209c. Same subject: application, proposal, policy, etc. — In ca.se
of ambiguity the application, policy and premium note may be con-
sidered together to ascertain the meaning.' And the application as
well as the terms of the policy itself and facts known to the insur-
er's agent may be considered in ascertaining the intent of the pai'-
ties.' But a stipulation in the policy may be paramount to one in
the application.^ Although in case of conflict between the provi-
sions of a policy and statements contained in the application the
former, it is held, controls,^" still where the proposal is "considered
as incorporated" in the policy, the court will, on construction of tbe
two documents read together, give effect to the proposal as overrid-
ing the policy where they differ, for where a party receives a printed
form of proposal, it is reasonable to assume that he reads and relies
upon it and that he will receive in exchange for the form requn-ed a
policy which such party is entitled to assume, and does assume in
most cases, without careful reading of the document, to accord with
the proposal form.^^ But questions and answers in the application
Y. 24, 70 Am. St. Rep. 424, 44 L.R.A,
417, 52 N. E. 662.
* Fidelity & Casualty Co. v. Lowen-
stein, 97 Fed. 17, 38 C. C. A. 29, 46
L.R.A. 450, 29 Ins. L. J. Ill, aff'g
Lowenstein y. Fidelity & Casualty
Co. 88 Fed. 474, 28 Ins. L. J. 52.
^ House v. Prescott Ins. Co. 84
Mich. 309, 11 L.R.A. 340, 47 N. W,
587. See § 1950 herein.
^ Straus V. Imperial Fire Ins. Co.
94 Mo. 182, 4 Am. St. Rep. 368, 6
S. W. 698.
' Kimbro v. Continental Ins. Co
101 Tenn. 245, 47 S. W. 413.
8 Merchants' Mutual Fire Ins. Co.
560
V. Harris, 51 Colo. 95, 116 Pac. 143,
40 Ins. L. J. 1733.
9 ]\Iutual Life Ins. Co. v. Hill, 193
U. S. 551, 24 Sup. Ct. 538, 48 L. ed.
788, rev'g 118 Fed. 708, 55 C. C. A.
536.
1° Goodwin y. Proyident Sayings
Life Assur. Assoc. 97 Iowa, 226, 59
Am. St. Rep. 411, 32 L.R.A. 473, 66
N. W. 157. See § 1935 herein.
" Bradley & Essex & Suffolk Acci-
dent Indemnity Soc, In re, 81 L. J. K.
B. 523, 530, [1912] 1 K. B. 415, 165
L. T. 919, 28 T. L. R. 175, [1912] W.
C. Rep. 6, per Faxwell, L. J., applied
in this case to a policy taken out, un-
II
CONSTRUCTION OF POLICY
§§ 209d, 210
should be construed together to determine the meaning.^^ Again,
compHcated and ambiguous conditions and quahfications of appli-
cations and policies may involve the construction of the terms ac-
tually employed, so as to effectuate their purpose to protect both
insurer and insured from fraud. ^^
§ 209d. Contemporaneous agreements. — Where two contracts
though separate in furm are both applied for and agreed upon at
the same time as one transaction they must be considered together
for the purpose of determining the character of the transaction and
the intention of the parties, and both instruments should be given
effect when reasonably possible.^*
§ 210. Construction: reference must be had to nature of risk
and subject-matter. — The language of a policy must be construed
with reference to the subject matter and the nature of the property
to which it is applied, and with a view to the objects and intentions
of the parties as the same may be gathered from the whole instru-
ment.^* And the existing law relating to the subject-matter must
der the workmen's compensation 95 Miun. 133, 5 Amer. & Eng. Ann.
act, 1906, of England, against aeci- Cas. 148, 103 N. W. 902.
dents to employees. Missouri. — Jennings v. Todd, 118
12 Coliins V.' Catholic Order of Mo. 296, 40 Am. St. Rep. 373, 24 S.
Foresters, 43 Ind. App. 549, 88 N. W. 148.
E. 87. See § 222 herein. • ^'ew YorJc. — Palmer v. Palmer, 150
13 Rupert v. Snpreme Court of N. Y. 139, 55 Am. St. Rep. 653, 44
United Order of Foresters, 94 Minn. N. E. 966.
293, 102 N. W. 715, 34 Ins. L. J. 324. Oregon.— BrndiMdt v. Cooke, 27
i*Urwan v. Northwestern National Oreg. 194, 50 Am. St. Rep. 701. 40
Life ins. Co. 125 Wis. 349, 103 N. Pac. 1; Weber v. Rothschild, 15 Oreg.
W. 1102, 34 Ins. L. J. 727; Farmers' 385, 3 Am. St. Rep. 162, 15 Pac.
Alliance Ins. Co. v. Atchison Topeka 650.
& Santa Fe Ry. Co. (Same v. Hanks) Fir/j'/wia.— Portsmouth Cotton Oil
83 Kan. 96, ilO Pac. 99. Refining Co. v. Oliver Refining Co.
In support of the general rule, see 109 Va. 513, 132 Am. St. Rep. 924,
also the following cases : G4 S. E. ;)6.
California.— Geiz Bros. & Co. v. Wisconsin.— T\\ov^ v. Mindeman,
Federal Salt Co. 147 Cal. 115, 109 ^-^ ^X'''; \"^?'. ^^V^t^-J*^-,?^^'- ^^^''^'
Am. St. Rep. 114, 81 Pac. 416; ^8 f^-.V" l^G, 101 N W 41..
Downing v. Rademacher, 133 Cal. p'^^^'^V^fV'?'! f' ^n
220, 85 Am. St. Rep. 160, 81 Pac. gjV n r^ i ' n ' \ r i^
.,„' ^ ' 424; De Grarf v. Queen Ins. Co. 38
,],. . p, . rn , . Q • Minn. 501, 8 Am. St. Rep. 685, 38
7«mot5.— Chicago Trust & Savings ^r_ ^y. 696: Ripley v. iEtna Ins. Co.
Bank v. Chicago Title & Trust Co. 30 n. Y. 136, 86 Am. Dee. 362. See
190 111. 404, 83 Am. St. Rep. 138, 60 17 ^^^1 of Ilalsbury's Laws of Eng-
N. E. 586. Innd, p.- 342.
Michigan. — Sutton v. Beckwith, 68 See also the following cases :
Midi. 303, 13 Am. St. Rep. 344, 36 Umted Slates.— 2FAnix. Ins. Co. v.
N. W. 79. Boon, 95 U. S. 117, 24 L. ed. 395
Minnesota. — Myrick v. Purcell, (considered in note to § 211 herein)
Joyce Ins. Vol. 1—36. 561
§ 210 JOYCE ON INSURANCE
be presumed to have been considered by the parties. ^^ An accident
policy must be construed with reference to the subject to which it
is applied," and the general purpose and situation of the parties.^*
The subject-matter, the risk and the various provisions of an
automobile accident policy should be construed together to ascer-
tain the controlling thought as to indemnity, and the thing con-
tracted for.^^
In case of a policy upon livestock it has been said that ''such
policies must be presumed to have been made with reference
to the purposes for which such property is ordinarily used, as
well as the manner in which it is usually kept.^° It may be add-
ed as within this rule that the terms and conditions of a policy
should be construed, if possible, so as to give them a meaning rea-
sonably applical)le to the kind of insurance upon the particular
species of property insured, having in view the purposes for which
it is ordinarily used, and the manner in which it is usually kept.^
So the known cliaracter of insured's business must be considered,
as where a policy is issued to a railroad transfer company engaged
in handling foreign cars or cars of other railroads, leased and for
which assured was liable.'^ So Avhere the insurance is against loss
from accidental damage to or destruction of property except by fire
CalifornM.—Ranlet v. Northwest- L. J. 419, per Craig, J.; Rockford
ern National Ins. Co. 157 Cal. 213, Ins. Co. v. Nelson, 65 111. 420.
107 Pac. 292, 39 Ins. L. J. 742. ^^ Anderson v. ^l^tna Life Ins. Co.
CoZojwFo.— Messenger v. German- 75 N. H. 375, 28 L.R.A.(N.S.) 730n,
American Ins. Co. 47 Colo. 448, 107 74 Atl. 1051.
Pac. 642; German-American Ins. Co. ^^ Patterson v. Standard Accident
V. Messenger, 25 Colo. App. 153, 136 Ins. Co. 178 j\Iich. 288, 144 N. W.
Pac. 478. 491, 51 L.R.A.(N.S.) 583n (on in-
Minnesota. — Frost's Detroit Lum- surance covering automobiles, or in-
ber & Wooden Ware Works v. Mil- demnifying against injury, or lia-
ler's & Manufacturers Mutual Ins. bility for injury caused thereby, see
Co. 37 Minn. 300, 5 Am. St. Rep. notes in 44 L.R.A.(N.S.) 70; 51
346, 34 N. W. 35. KR.A.(N.S.) 583; and L.R.A.1915E,
Missouri. — Renshaw v. Missouri "^'^J'. . __ „ , o. -r. i -n-
State Mutual Fire & Marine Ins. Co. ^ ^o C^^mg Holbrook v. St Paul Fire
103 Mo. 595, 23 Am. St. Rep. 904, 15 ^ ^.^Yi'"' S'' i, n i. !« AU
Q ^v QAc Bovight V. Sprinsrneld lire & Ma-
ai • r^ 1 T r. rr P line Insurauce Co. 34 Minn. 352, 25
Texas.— Royal Ins. Co, v. lexas & ^ ^y ygg
G. Ry. Co. 53 Tex. Civ. App. 154, On anmjal insurance see note in 44
715S. W. 117. L.R.A.(N.S.) 569.
16 Brooks v. Metropolitan Life Ins. i j)^ CTrnfl v. Queen Ins. Co. 38
Co. 70 N. J. L. 36, 56 Atl. 168. See Minn. 501. 8 Am. St. Rep. 685, 38
§§ 194, 194a herein. N. W. 696, per Mitchell, J.
" Ilealev v. INIutual Accident Assn. 2 ]>iienix Ins. Co. v. Belt Rv. Co.
133 111. 556, 9 L.R.A. .371, 25 N. E. 82 111. App. 265, afi"d 182 lU. 33, 54
52, 23 Am. St. Rep. 637, 31 Cent. N. E. 1046.
562
CONSTRUCTION OF POLICY § 210
or liglitiiing, the character of the property, such as a mill, etc., and
tliat which is obvious' in regard to it including the natural perils to
which it is exposed, and wliicli tlie insurer is presumed to know,
will all be considered.' 80 the evident objects to be accomplished
by the insurance, the nature of the property or business, the con-
ditions, uses, and methods rea.sonably applicable in view thereof and
of which the insurer will be presumed to have knowledge, are all
important factors in construing the contract.'* And not only the
evident objects of the contract should be considered but reference
must also be had to the benefits to be secured and the perils or risks
sought to be avoided.^ Again, in considering the prohibitions and
conditions in a policy of insurance, the parties must be presumed
to have intended, the one to insure, and the other to obtain insur-
ance on, the subject matter of insurance as it necessarily was at the
time, and must continue to be during the life of the policy.^ Con-
struction should also be liberal, having in view in the case of marine
policies, the nature of the voyage, and the intent of the parties.'
And the risks excluded as well as those included are factors in con-
struing a policy on goods insured against loss by fire, derailment
of trains and perils of the sea.^ So a provision in the policy against
loss by fire avoiding the policy if the property becomes encumbered
has been held not to include encumbrance by judgment, although
within the terms used.^ And in determining whether a bond to be-
come effective as a lien was a "chattel mortgage" encumbrance, the
circumstances surrounding the execution of the instrument, the
situation of the parties to it and what was done under it, and also
the general object or purpose of the entire insurance contract and
the lawful conditions prescribed were considered and it was deter-
mined that the fact that the instrument was in the usual form and
was called a ''chattel mortgage" was not conclusive." Again, the
^ Hey V. Guarantors' Liability In- ^ Fraim v. National Fire Ins. Co.
demnity Co. 181 Pa. 2J0, 49 ^Vkiy. N. 170 Pa. St. 151, 50 Am. St. Rep.
C. 423, 28 Pitts. L. J. N. S. 21, 37 753, 32 Atl. 613.
Atl. 402, 26 Ins. L. .J. 1012, 59 Am. ' Colunibinn tiis. Co. v. Catlett, 12
St. Rep. 644. Wheat. (25 U. S.) 383, 386, 6 L. ed.
Underwriter presumed to know 6()4, per Story, J.
causes whicli occasion luitural perils; ^ Stone v. Insurance Co. of Norlh
concealment, see § 1806 herein. America, 56 Wash. 427, 105 Pac. 856.
*Kaufi"man Bros. v. Western Ins. ^ Haley v. Homestead Fire Ins.
Co. 21 Lancaster Law Rev. 2.52; Co. 80 N. Y. 21, 36 Am. Rep. 570.
Kauft'man Bros. v. Standard Fire Ins. " Raulet v. Northwestern National
Co. 21 Lancaster Law Rev. 249. Ins. Co. 157 CaL 213, 107 Pac. 292,
5 Port Bhikelv Mill Co. v. Spring'- 39 Ins. L. J. 742.
field Fire & Marine Ins. Co. 59 Wash.
501, 140 Am. St. Rep. 863, 28 L.R.A.
(N.S.) 59.3n,110 Pac. 36.
563
§ 211
JOYCE ON INSURANCE
court declares in a New York case that ''this policy, Hke any other
contract between parties, is to be construed not merely by the letter,
but by the spirit. We must read it in connection with the whole
subject matter to which it relates, and give to language its ordinary
and natural meaning. If, then, the intention of the parties becomes
manifest, such intention must prevail." ^^
§ 211. Construction must be reasonable. — The construction of
policies of insurance must not be that which would lead to an ab-
surdity, but must be reasonable with reference to the risk and sub-
ject-matter, and purposes of the entire contract,^^ so as not to defeat
the intention of parties,^^ and if one interpretation of a contract, of
insurance capable of two interpretations would lead to an absurd
" Paul V. Travelers' Ins. Co. 112 39 L.R.A. 433, 61 Am. St. Rep. G27.
N. Y. 472, 477, 3 L.R.A. 443, 8 Am. 48 N. E. 751, 27 Ins. L. J. 193 ; Tiir-
.St. Rep. 758, 761, 20 N. E. 347.
^^ California. — Raulet v. North-
western National Ins. Co. 157 Cal.
213, 107 Pac. 292, 39 Ins. L. J. 742.
Colorado. — Messenger v. German-
American Ins. Co. 47 Colo. 448, 107
lev V. North America Fire Ins. Co.
25 Wend. (N. Y.) 374.
Ohio. — Travelers' Ins. Co. v. Mvers,
62 Ohio St. 529. 49 L.R.A. 760, 57 N.
E. 458.
Pennsylvania. — Eyre v. Marine
Pac. 643; Barclay v. London Guar- Ins. Co. 5 Watts & S. (Pa.) 117.
antee & Accident Co. Ltd. 46 Colo.
558, 105 Pac. 865.
Indiana. — Indiana Life EndoAv-
ment Co. v. Reed, 54 Ind. App. 450,
103 N. E. 77.
Tennessee. — Insurance Co. v. Ben-
nett, 90 Tenn. 256, 25 Am. St. Rep.
085, 16 S. W. 723.
Vermont. — Crosbv v. Vermont
Accident Ins. Co. 84 Vt. 510, 80 Atl.
Mariiland.—Minii Indemnitv Co. 817, 40 Ins. L. J. 2036; Duran v
V. Waters, 110 Md. 673, 73 All. 712. Standard Life & Accident Ins. Co. 63
Missouri. — Tesson v. Atlantic Yt. 43/, 25 Am. St. Rep. 773, 13
:\tutual Ins. Co. 40 Mo. 33, 93 Am. L.R.A. 637, 22 Atl. 530.
Dec. 293; Miller v. Missouri State Washington. — Hockins: v. British
Life Ins. Co. 168 Mo. App! 330, 153 America Assur. Co. 62 Wash. 73, 36
S. W. 1080; Banta V. Continental L.R.A. (N.S.) 1155 , note, 113 Pac.
Casi;alty Co. 134 Mo. App. 222, 113 259.
S, W. 1140. Policies of insurance must receive
Nehrasla. — Woodmen's Accident a reasonable interpretation, conso-
Assoc. V. Byers (Pratt.) 62 Neb. 673, nant witli the apparent object and
55 L.R.A. 291n, 89 Am. St. Rep. 777, plain intent of the parties : and, to
87 N. W. 546, 31 Ins. L. J. 183; nnden-^tand them as the parties un-
Sprinofield Fire & Marine Ins. Co. derstood tliem, the nature of the con-
V. McLimans, 28 Neb. 846, 45 N. W. tract, the objects to be attained, and
171. all the circumstances must be con-
New Hampshire. — Anderson v. sidered. ^Etua Ins. Co. v. Boon, 95
.^tna Life Ins. Co. 75 N. H. 375, 28 U. S. 117, 24 L. ed. 395, cited in Kel-
L.R.A.(N.S.) 730n, 74 Atl. 1051. ley v. Mutual Life Ins. Co. 75 Fed.
Netv Jersey. — Melick v. Metro- 639.
politan Life Ins. Co. 84 N. J. L. 437, " Travelers Ins. Co. v. Myers, 62
87 Atl. 75. Ohio St. 529, 49 L.R.A. 760, .57 N.
Neiv YorJx. — Matthews v. Ameri- E. 458; West v. Citizens' Ins. Co.
can Central Ins. Co. 154 N. Y. 449, 27 Ohio St. 1, 22 Am. Rep. 294.
564
CONSTRUCTION OF POLICY
§ 212
conclusion, looking to the other provisions of the contract and its
general scope and object, such interpretation must be abandoned and
that adopted which will be more consistent with reason and prob-
ability.^* And stipulations as to what insured must do after loss or
which relate merely to the procedure after loss are to be reasonably
and not rigidly construed.^^ And when a reasonable construction
can be had without recourse to extrinsic evidence, such evidence is
inadmissible.^^
§ 212. Contract should be given effect if possible. — The whole
policy with all its provisions, words and parts should be construed
together as one entire contract,^"" and such meaning should be given
thereto as to carry out and effectuate to the fullest extent the inten-
tion of the parties; no portion should receive such a construction
as will defeat the obvious intent,^^ and the construction should be
liberal rather than critical or technical/^ for technical constructions
14 L'Engle v. Scottish Union & Na- Co. 16 Or. 283, 18 Pae. 466, Cases
tional Fire Ins. Co. 48 Fla. 82, 111 under §§ 185-188 herein.
Am. St. Rep. 70, 37 So. 462, 67 18 Crane v. City Ins. Co. 3 Fed.
L.R.A. 581. 558; McEvoy v. Security Fire Ins.
15 Paltrovitch v. Plioeiiix Ins. Co. Co. 110 Md. 275, 132 Am. St. Rep.
143 N. Y. 73, 25 L.R.A. 198. 37 N. E. 428 note, 22 L.R.A.(N.S.) 964 note,
639; Will & Banmer Co. v. Rochester 73 Atl. 157, 38 Ins. L. J. 895; Cap-
German Ins. Co. 125 N. Y. Supp. ital Fire Ins. Co. v. Carioll, 26 Okla.
606, 140 App. Div. 691. 286, 109 Pae. 535.
1^ Baltimore Fire Ins. Co. v. Lo- ^^ United States. — Palmer v. War-
ney, 20 Md. 20, 36. ren Ins. Co. 1 Story (U. S. C. C.)
1' United States. — Employers Lia- 360, 365, per Story, J. ; Crane v. City
bility Assur. Corp. Ltd. of London Ins. Co. 3 Fed. 558.
V. Morrow, 143 Fed. 750, 74 C. C. A. Alabama. — Alabama Gold Life
640. Ins. Co. v. Johnston, 80 Ala. 467,
Florida.— UEngle v. Scottish 2 So. 125, 60 Am. Rep. 112.
Union & National Ins. Co. 48 Fla. 82, Georgia. — Royal Union Life Ins.
67 L.R.A. 581, 111 Am. St. Rep. 70, Co. v. McLcndon, 4 Ga. 620, 62 So.
37 So. 462. 101.
Georgia. — Royal Union Life Ins. Maryland. — Ri^rgin v. Patapsco
Co. V. MeLendoii, 4 Ga. App. 620, 62 Ins. Co. 7 Har. & J. (Md.) 279, 16
S. E. 101. Am. Dec. 302; Alleore v. iNfaryland
K ent itch f.— Spring Garden Ins. Ins. Co. 2 Gill & J^ (Md.) 136, 20
Co. V. Imperial Tobacco Co. 132 Ky. Am. Dec. 424.
7, 20 L.R.A. (N.S.) 277, 136 Am. St. Neic Yor/.-.— Sersrent v. Liverpool
Rep. 164, 116 S. W. 234, 38 Ins. L. J. & London & Globe Ins. Co. 155 N. Y.
446. 349, 49 N. E. 935, 28 Ins. L. J. 59,
Mifffioiiri. — Stran.s v. Imperial Fire rev'g- 85 Hun, 31, 32 N. Y. Supp.
Ins. Co. 94 Mo. 182. 4 Am. St. Rep. 594; Matthews v. American Central
368, 6 S. W. 698. Ins. Co. 154 N. Y. 449, 39 L.R.A.
07mo.— German Fire Ins. Co. v. 433, 61 Am. St. Rep. 627, 48 N. E.
Roost, 55 Ohio St. 581, 36 L.R.A. 751, 27 Ins. L. J. 193; Paul v. Trav-
236, 45 N. E. 1097. elers Ins. Co. 112 N. Y. 472, 479, 8
Orer/on.— Chrisman v. State Ins. Am. St. Rep. 758, 762.
565
§ 212
JOYCE ON INSURANCE
are not favored.^" The contract should be given effect if possible,
rather than made void, for only a stern legal necessity will warrant
a constiiietion that would nullify the policy ^ or defeat a recovery if
the contract is susceptible of a meaning which will permit one, and
this also applies to a benefit certificate.^ Doubtful clauses should
not be considered separately, and discrepancies must, if possible, l)e
reconciled. Resort may be had to otlier [)arts to ascertain the mean-
ing and intent of the parties.^ And in case of repugnant clauses the
evident purpose of the parties to the contract should not be defeated
South Dakota. — McNamara v. Da- Citv Ins. Co. 43 N. J. L. (14 Vroom)
kota Fire & ]\Iarine Ins. Co. 1 S. 300, 39 Am. Rep. ."384, 586.
Dak. 342, 47 N. W. 288. New YorA-.— Darrow v. Faniih-
2P Miller V. Mutual Benefit Life Fund Society, 116 N. Y. 537, 15 Am.
Ins. Co. 31 Iowa, 226, 7 Am. Rep. 122, St. Rep. 430, 6 L.R.A. 495, 22 N.
per the Court; Union Mutual Ins. Co. E. 1093; Baley v. Homestead Fire
V. Wilkinson, 13 Wall. (80 U. S.) 222, Ins. Co. 80 N. Y. 21, 36 Am. Rep.
20 L. ed. 617; Sergent v. Liverpool 570.
& London & Globe Ins, Co. 155 N. Pennsylvania. — Burkhard v. Trav-
Y. 349, 49 N. E. 935, 28 Ins. L. J. elers' Ins. Co. 102 Pa. St. 262, 48
59, rev'g- 85 Hun, 31, 32 N. Y. Supp. Am. Rep. 205; Evans v. Phrenix
594; Porter v. Casualty Co. of Amer- Mut. Relief Assur. (Pa. 1892), 49
ca, 70 Misc. 246, 126 N. Y. Supp. Leg. Intell. 15, 9 Lancaster Law
669. Rev. 59; Stacey v. Franklin Fire Ins.
. ^ Indiana.— M{n& Life Ins. Co. v. Co. 2 Watts & S. (Pa.) 506.
Fitzgerald, 165 Ind. 317, 112 Am. Washington.— Vori Blakely Mill
St. Rep. 232, 1 L.R.A. (N.S.) 422 Co. v. Springfield Fire & Marine Ins.
note, 6 Am. & Eng. Ann. Cas. 551, Co. 59 Wash. 501, 140 Am. St. Rep.
75 N. E. 262; Indiana Life Endow- 863, 28 L.R.A. (N.S.) 593 note, 110
ment Co. v. Reed, 54 Ind. App. 450, Pa<^. 36; McNamara v. Dakota Fire
103 N. E. 77; Franklin Life Ins. Co. ^ Marine Ins. Co. 1 S. Dak. 342, 47
V Wallace 93 Ind 7 ^- ^- -^^ ' Brink v. Merchants' &
" Kentucky.— ^Y^rm^ Ins. Co. v. Im'- Mechanics' Tns.^Co. 49 Vt. 442.
perial Tobacco Co. 132 Ky. 7, 136 " ' " " '""
2 Brotherhood of Locomotive Fire-
A Of- r> 1^1 ' on T T?' A /■XT a ^ "ic^^ & Enginemen v. Aday, 97 Ark.
Am. St. Rep. 164, 20 L.R.A. (N.S.) ,.,- o. t t? \ /xr c \ lor io/i o w
077 11R ci w OQ4 qa Tn« T T ^2.', 34 L.R.A. (N.S.) 126, 134 S. W.
2^7, 116 b. W. ..34, o8 Ins. L. J. ^^s, 40 Ins. L. J. 737. See §§ 207,
'^''1 2'^2 herein
yinryUnd.— fh^mK Ins Co. y. z\ ^^^^^ ^^ Insurance (ed. 1845)
Tomlinson, 12o Md 84, 21 Am. St. ^^^ ^^^ -^q "Indeterminate form.s
Rep. 203, 211 ; McEvoy v. Security ^f expression ... are to be un-
Fire Ins. Co. 110 Md. 275, 132 Am. derstood in a sense subservient to
St. Rep. 428 note, 22 L.R.A. (N.S.) the general purposes of the con-
964 note, 73 Atl. 157, 38 Ins. L. J. tract.^' Hoffman v. iEtna Fire Ins.
895. Co. 32 N. Y. 413, 88 Am. Dec. 337;
Missouri. — Mitchell v, German Cutler v. Roval Ins. Co. 70 Conn.
Commercial Accident Co. 179 Mo. 566, 41 L.R.A. 159, 40 Atl. 529;
App. 1, 161 S. W. 32; Roseberry v, Crosby v. Vermont Accident Ins. Co.
American Benevolent Assoc. 142 Mo. 84 Vt". 510, 80 Atl. 817, 40 Ins. L. J.
App. 552, 121 S. W. 785. 2036 (should be interpreted by con-
Nexo Jersey. — Carson v. Jersey text).
"566
CONSTRUCTION OF POLICY § 213
by construction.'* And clauses should not he construed as repug-
nant unless irreconcilable with any reasonable interpretation which
incorporates them as forming a harmonious plan for insurance of
the nature contemplated by the parties; and the construction must,
if possible, give force and effect to each clause.^ The premium may
be resorted to to discover the amount intended to be insured,^ for
the intent is to be gathered from the surrounding clauses and from
all parts of the instrument, and the words should be taken in that
sense to which the appai'ent object and intention of the parties limit
them.'
Where a policy agreed to indemnify a contractor against loss from
liability for damages on account of bodily injuries, fatal or other-
wise, accidentally suffered to any employee or employees and an
agreement attached to the. policy extended it to cover the liability
of assured to the public only for personal injuries, only caused by
assured or his workmen the two clauses must be construed together
as an agreement to indemnify the assured against loss from liability
for damages on account of accidental injuries to employees and in-
juries to the public caused by assured or their employees.*
§ 213. Construction: rejection of words and clauses. — Every
word and every sentence should be given effect, and no part be in-
effectual or rejected as superflnous, in order that the whole contract
may stand together,^ no provision is to be wholly disregarded be-
cause it is inconsistent with other provisions, unless no other rea-
sonable construction is possible; i° and' if the words are susceptible
of a rational and intelligible meaning which is consistent with the
object and pmposes evidenced by the entire policy, no part should
be rejected as inoperative,^^ so it is said in an Iowa case: ''While
we are authorized to construe the policy we are not at liberty to
strike out absolutely a carefully inserted and detailed provision
thereof." ^^ Again, if it can be avoided, no clause should be de-
* Employer's Liability Ins. Corp. Hudson River Ins. Co. 15 How. Pr.
Ltd. of London v. Morrow, 143 Fed. (N. Y.) 288. ■
750, 74 C. C. A. 640. * Creem v. Fidelity & Casualty Co.
^ Ferguson v. Union IVIutual Life 12G N. Y. Supp. ^.l.j, 141 App. Div.
Ins. Co. 187 Mass. 8, 72 N. E. 358, 493.
34 Ins L J. 53, 54. ^ Chrisman v. State Ins. Co. 16 Or.
6 Port v. Phoenix Ins. Co. 10 Johns. 284, 18 Pac. 466.
(N. Y ) 79, 84. ^° German Fire Ins. Co. v. Roost,
'Paul V. Travelers' In.'^. Co. 112 N. 55 Ohio St. 581, 60 Am. St. Rep. 711,
Y. 472, 479, 8 Am. St. Rep. 758, 762, 36 L.K.A. 236, 45 N. E. 1097, 26 Ins.
per the Court, citing Yeaton v. Fry, L. J. 699.
5 Cranch (9 U. S.) 335, 3 L. ed. 117; " Stetliner v. Granite Ins. Co. 5
Hotfraan v. ^tna Fire Ins. Co. 32 N. Duer (N. Y.) 594, 597.
Y. 405, 88 Am. Dec. 337; Wliite v. ^^ pai,mg & gons Co. v. German
56
§ 214
JOYCE ON INSURANCE
clared nugatory,^^ for a construction should be given that will carry
into effect, if possible, all the provisions of the policy,^* and each
elause.^^ Again, the policy should also be interpreted by the con-
text, so as, if possible, to give a sensible meaning and effect to all
its provisions ; and so as to avoid rendering portions of it contradic-
tory and inoperative, by giving effect to some clauses to the exclu-
sion of others.-'^ But although clauses apparently repugnant must
be reconciled if it can be done by any reasonable construction, yet
a proviso utterly repugnant to the body of the contract and irrecon-
cilable with it will be rejected.^'''
Where printed and written portions of the policy are contradic-
tory, the printed will be rejected.^* And the last of two repugnant
irreconcilable clauses will be rejected and the first will stand, espe-
cially so where a different construction would defeat the evident pur-
pose of the contract.^^ AVords in the policy will not be so construed
as to lead to unreasonable results.^" Portions of the description
which are false will be disregarded if enough remains to identify
the property.'^
§ 214. General and special clauses. — The general clauses, says
Emerigon, are to be interpreted, generally, as they are written.^
Fire Ins. Co. 153 Iowa, 168, 132 N. " Heruandez v. Sun Mut. Ins. Co.
W. 870, 40 Ind. L. J. 2133, 2138, 6 Blatchf. (U. S. C. C.) 317, Fed.
quoting from Insurance Co. v. Ayers, Cas. No. 6415. See § 223 herein.
88 Tenn. 728, 13 S. W. 1000. On typewritten matter as written
^^ Mutual Life Ins. Co. v. New, 125 or as printed matter within rule that
La. 41, 27 L.R.A.(N.S.) 431, 130 Am. written shall prevail over printed
St. R^p. 326, 51 So. 61, Civ. Code provisions in case of conflict, see note
Art. 1951. See as to general prin- in L.R.A.1915D, 1084.
ciple. State (ex rel. Davis) v. Mor- ^^ Employer's Liability Ins. Corp.
tensen, 69 Neb. 376, 5 Am. & Eng. Ltd. of London v. Morrow, 143 Fed.
Ann. Cas. 291, 95 N. W. 831. 750, 74 C. C. A. 640; Bean v. yEtna
1* Springfield Fire & Marine Ins. Life Ins. Co. Ill Tenn. 186, 78 S.
Co. V. Mciimans, 28 Neb. 846, 45 N. W. 104; Wisconsin Marine & Fire
W. 171; Spring Garden Ins. Co. v. Ins. Co. Bank v. Wilkin, 95 Wis. Ill,
Imperial Tobacco Co. 132 Ky. 7, 136 60 Am. St. Rep. 86, 69 N. W. 354.
Am. St. Rep. 164, 20 L.R.A.(N.S.) See also as to general rule Vickers
277, 116 S. W. 234, ' 38 Ins. L. J. v. Electrozone Commercial Co. 67 N.
446. J. L. 665, 52 Atl. 467 ; Brady v. Caro-
ls Ferguson v. Union Mutual Life lina Steel Bridge & Construction Co.
Ins. Co. 187 Mass. S, 72 N. E. 358, 34 76 S. Car. 297,^56 S. E. 964.
Ins. L. J. 53, 54, considered under ^° Ogden v. Columbia Ins. Co. 10
§ 212 herein. Johns.' (N. Y.) 273.
^^ Crosby v. Vermont Accident Ins. ^ Hatch v. New Zealand Ins. Co. 67
Co. 84 Vt. 510, 80 Atl. 817, 40 Ins. Cal. 122, 7 Pac. 411.
L. J. 2036. 2 "The contracting parties are to
^"^ Jones V. Pennsylvania Casualty impute to themselves the inconven-
Co. 140 N. Car. 262, 111 Am. St. ienee of not having affixed anv in-
Rep. 843, 52 S. E. 578, 5 L.R.A. structions. These rules are taught
(N.S.) 932 note. us by all our doctors." Emerigon on
568
CONSTRUCTION OF POLICY § 214a
But general words, says Lord Bacon,^ "not express and precise, shall
be restrained unto the fitness of the matter and the person," and
general words may be aptly restrained according to the subject-mat-
ter or person to which they relate.* If both clauses are general one
does not control the other.^ But it is also held in construing a like
clause (incontestable) that it controls.^ A special clause in a policy
which creates an exception to a general clause governs the latter,'^
and a special stipulation in a certificate will control a general stip-
ulation therein.^ So the meaning of general words, phrases and stip-
ulations will be restricted when it is evident from the special or par-
ticular provisions of the contract that they were not intended to
have the broad signification of which they are fairly susceptible.^
But a special provision will override a general provision only where
the two are irreconcilable and cannot stand together, for if both
can be given reasonable effect they will be retained.^" The clauses
are to be taken literally when clear in themselves,^^ but the literal
application of words may be controlled by other pai'ts of the pol-
icy. ^^
§ 214a. General provisions not referred to in separate, independ-
ent paragraph nor limited by prior clause: accident policy. — If a
clause in an accident policy is not expressly connected by words of
limitation with those which precede it, but is a separate, independ-
ent paragraph and does not include words in any way expressly or
impliedly relating to the prior general provisions, it has been in-
Insurance (Meredith's ed. 1850) 48, ''Bowman v. Pacific Ins. Co. 27
49. Mo. 152; Mitchell Furniture Co. v.
"The general clauses are to be con- Imperial Fire Ins. Co. 17 Mo. App.
strued as they are written, and be- 627. See 17 Earl of Halsbury's
cause it depends on the parties either Laws of England, p. 528.
not to stipulate them or to modify Exception of loss from specified
them." Emerigon on Insurance, cause followed by qualifying clause,
(Meredith's ed, 1850) e. xii. sec. 45, see § 2(J75 herein.
p. 513. ^ Northwestern Mutual Ins. Co. v.
3p>acon's.Law Max. Reg. 10. Hazelett, 105 Ind. 212, 55 Am. Rep.
* Sawver v. Dodge County Mutual 192, 4 N. E. 582.
Ins. Co."^37 Wis. 503. ^ Sun Insurance Office v. Varble,
5 Mutual Life Ins. Co. v. New, 125 103 Ky. 758, 41 L.R.A. 792, 27 Ins.
La. 41, 136 Am. St. Rep. 926, 27 L. J. 798, 46 S. W. 486.
L.R.A.(N.S.) 431, 51 So. 61 (ineon- i° German Fire Ins. Co. v. Roost,
testable clause). 55 Ohio St. 581, 36 L.R.A. 236, 60
« MassacJiusetts Benefit Life Assoc, Am. St. Rep. 711, 45 N. E. 1097, 26
V. Robinson, 104 Ga. 256, 42 L.R.A. Ins. L. J. 699.
261 30 S. E. 910 27 Ins. L. J. 1023. ^^ "In contractu assecurationls in-
See' also Goodwin v. Provident Sav- spiei debit in tantum, quod cortum
ings Life Assur. Soc. 97 Iowa, 226, 32 est inter contrahentes." Emerigon
L.R.A. 473 66 N. W. 157. This on Insurance (Meredith's ed. 1850) c.
question of' ineontestabie clauses is, ii. see. 7, p. 49; c. i. sec. 2, p. 16.
however, considered elsewhere herein. ^^ Grant v. Delacour, 1 Taunt. 466.
569
§§ 215, 216 JOYCE ON INSURANCE
dependently construed a^ embracing loss of life from causes specified
therein, though not within the prior statement covering loss from
general and sj)ecified injuries.^^
§ 215. Construction will be given to uphold the law. — When a
law is susceptible of two constructions, the one which will give effect
to the law, rather than the one which would render the law uncon-
stitutional, must be adopted.^* So it is declared that the law does
not presume that the parties to a contract intend by it to accom-
plish an illegal object; but it rather presumes that they intended
to accomplish a legal purpose.^* And it is held that a statute con-
trols where the terms of the policy conflict therewith. ^^
§ 216. Words are to be construed in ordinary and popular sense. —
Words are to be construed in their plain, ordinary, usual, and pop-
ular sense, unless they have been given a contrary, legal construc-
tion, or have acquired a distinct commercial meaning by usage, or
are peculiar to some art, trade, or science, and have thereby acquired
a technical meaning, or unless it is apparent from the context that
a distinct and particular meaning was intended; " and this applies
" Schumacher v. Great Eastern C. C. A. 566, s. c. 203 U. S. 592, 51
Casualty & Indemnity Co. 197 N. Y. L. ed. 331, 27 Sup. Ct. 780 ; Dela-
58, 27 L.R.A.(N.S.) 480 (annotated ware Ins. Co. v. Green, 120 Fed. 916,
on whether general requirement as to 921, 57 C. C. A. 188, 193, 61 L.K.A.
external, violent, and accidental 137, 140; Liverpool & London^ &
means applies to a separate provision Globe Ins. Co. v. Kearney, 94 Fed.
as to liability in ease of death or in- 314, 319, 36 C. C. A. 265, 2/0; Mc-
iurv from certain specified causes) Glother v. Provident Mutual Acci-
!)0 N. E. 353, 39 Ins. L. J. 428 note, dent Co. 89 Fed. 685, 689, ;;2 C. C.
1* New Orleans v. Salamander Co. A. 318, 322, 60 U. S. App. 705 ; Fred.
25 La Ann 650. J. Kiesel v. Sun Ins. Ottice, 88 Fed.
15 Pa^e V. Metropolitan Life Ins. 243, 60 U. S. App. 10, 31 C. C. A.
Co. 98 Ark. 340, 135 S. W. 911, 40 518, s. c. 171 U. S. 688, 43 L. ed.
Ins. L. J. 1144, per Hart, J. 1170, 19 Sup. Ct. 885.
16 Fletcher v. New York Life Ins. Arkansas. — IMonons'ahela Ins. Co.
Co. 4 McCrary (U. S. C. C.) 440, 13 v. Batson, 111 Ark. 144, 163 S. W.
Fed. 526, 528 ; Wall v. Equitable Life 512.
Assur. Soc. 32 Fed. 273, aff'd 140 District of Columbia.— MitdieW v.
U. S. 226, 35 L. ed. 497, 11 Sup. Ct. Potomac Ins. Co. 16 App. D. C. 270.
822; Marsden v. Hotel Owners' Ins. Georgia. — Melson v. Phenix Ins.
Co. 85 Iowa, 584, 52 N. W. 509; Tay- Co. 97 Ga. 722, 727, 25 S. E. 189:
lor V. Merchants' & Bankers Ins. Co. Hartford Fire Ins. Co. v. Wimbish,
83 Iowa, 402, 49 N. W. 994; Fideli- 12 Ga. App. 712, 78 S. E. 265.
tv ^lutual Life Assn. v. Fichlin, 74 Illinois. — Peoria Marine & Fire
Md. 172, 23 Atl. 197. But see §§ 194, Ins. Co. v. Whitehill, 25 111. 466.
194(jr)_194a herein. Indiana. — .^-Etna Life Ins. Co. v.
" United States.— Imperial Fire Fitzo-erald, 165 Ind. 317, 112 Am.
Ins. Co. V. Coos Countv, 151 U. S. St. Rep. 232, 6 Am. & Eng. Ann.
452, 14 Sup. Ct. 379, 38 L. ed. 231; Cas. 551, 1 L.R.A.(N.S.) 422 note,
Maryland Ca.'^naltv Co. v. Finch, 8 75 N. E. 262.
L.R.A.(N.S.) 308,' 147 Fed. 388, 77 7ou^a.— Verse v. Jersey Plate
570
CONSTRUCTION OF POLICY
216
to the laws of a fraternal or mutual benefit society," also to an
accident ))olicy/' and to an automobile fire policy.^" The rule is in
accordance with all the authorities. So Enierigon says: ''The true
meaning of an expression in its ordinary use is the idea that people
are accustomed to attach to it." ^ And Lord Ellenborough declares
that the policy "is to be construed according to its sense and mean-
ing as collected, in the first place, from the terms used in it, which
terms are themselves to be understood in their plain, ordinary, and
popular sense, unless they have generally, in respect to the subject
matter, as by the known usage of trade or the like, acquired a pecu-
liar sense distinct from the popular sense of the same words, or un-
less the context evidently points out that they must in the particular
instance, and in order to efiectuate the immediate intention of the
parties to that contract, be understood in some other special and
peculiar sense." ^ !So Chancellor Walworth declares that '"a policy
of insurance, like any other contract, is to be construed by the pop-
ular understanding or the plain and ordinary sense of the terms
Glass Co. 119 Iowa, 555, 97 Am. St.
Rep. 330, 93 N. W. 5G9, GO L.R.A.
838.
Kansas. — Fire Ai^soeiation of
Phila. V. Taylor, 76 Kan. 392, 91
Pae. 1070.
Maine. — Rumford Falls Paper Co.
V. Fidelity & Casualty Co. 92 Me.
574, 586, 43 All. 503.
Mar>jland. — Mutual Life Ins. Co.
of N. Y. V. Murray, 111 Md. GOO, 75
Atl. 348.
Massachusetts. - — Whitniarsh v.
Conway Ins. Co. 16 Gray (82 iMass.)
359, 77 Am. Dee. 414.
Minnesota.- — Bader v. New Am-
sterdam Gas Co. 102 Minn. 186, 120
Am. St. Rep. 613, 112 N. W. 1065.
Missouri.— Renshaw v. Missouri
State Mutual Fire & Marine Ins. Co.
103 Mo. 595, 23 Am. St. Rep. 904,
153 S. W. 945; Hoover v. Morean-
tile Town Mutual Fire Ins. Co. 93
Mo. App. Ill, 118, 69 S. W. 42.
New Hampshire. — Thorp v. Aetna
Ins. Co. 75 N. H. 251, 72 Atl. 690,
38 Ins. L. J. 800; Stone v. Granite
State Fire Ins. Co. 69 N. II. 438, 45
Atl. 235, 29 Ins. L. J. 250.
New York. — DeLonguemere v.
New York Fire Ins. Co. 10 Johns.
(N. Y.) 120.
5
Effect must be given to an insur-
ance contract according to the fair
meaning of the words used. Travel-
ers' Ins. Co. V. McConkey, 127 U. S.
661, 8 Sup. Cf. 1360. Cited in Mutu-
al Life Ins. Co. v. Kellv, 32 L. ed.
308, 114 Fed. 268, 281, 52 C. C. A.
154, 164.
Language is to be given its usual
and ordinary meaning where there is
nothing to indicate a contrary intent.
McCartliv V. Pacitic Mutual Life Ins.
Co. 178 111. App. 502.
iSMund V. Reliaume, 51 Colo. 129,
Ann. Cas. 1913A, 1243, 117 Pac. 159;
Beile v. Travelers' Protective As.soc.
of America, 155 i\Io. App. 629, 135
S. W. 497. See § 381 herein.
1^ Houlihan v. Preferred Accident
Ins. Co. 196 N. Y. 337, 25 L.R.A.
(N. S.) 1261, 89 N. E. 927.
20 Preston v. Aetna Ins. Co. 193 N.
Y: 142, 19 L.R.A.(N.S.) 133, 85 N.
E. 1006.
^ Emerigon on Insurance (Mere-
dith's ed. 1850) c. ii. sec. 7, p. 50.
And tliis presumption cannot be over-
come but by a stronger presumption
contra. Id.
2 Roliertson v. French, 4 East, 135,
14 Eng. Rul. Cas. 1, per Lord Ellen-
borough.
71
§ 217 JOYCE ON INSURANCE
employed, unless those terms have received a legal construction or
have acquired a technical meaning in reference to the subject matter
of the contract." ^ So answers to questions must be taken in the
popular sense of the language used,* and the Avords "jewelry and
clothing, being stock in trade," will be construed in their ordinary
and popular sense, and as not including musical and surgical in-
struments, etc., in the absence of evidence that a particular meaninf^
has attached to the words by usage.*
But the settled construction given by the commercial world to
stipulations in an insurance policy, will, though differing from the
natural import of the words, be sanctioned by the courts.^
§ 217. Construction: technical, etc., words. — Where a word has
acquired by usage in trade or commerce a meaning peculiar there-
to, or is a w^ord of technical "^ application, as where used in some art,
trade, or science, or where it appears from the context that words
are used in a particular sense to compass the intent of the parties,
such meaning may be shown by proper evidence, and the exact tech-
nical and commercial meaning or particular meaning will govern ; *
and "technical terms or terms proper to the arts and sciences are
ordinarily to be understood according to the detinition given them
by masters in the art." ^ So Avhere technical terms have a well recog-
nized legal meaning they should be understood in their technical
and legal sense, where there is no context in the contract nor any
statute or provision in the charter of the insurer to indicate that
such words are used in a broader sense." Illustrations under this
^Dow V. Wliitten, 8 Wend. (N. ^ Whitmarsh v. Conwav Ins. Co.
Y.) 160, 167, per Chancellor Wal- 16 Gray (82 Mass.) 359, 77 Am.
worth. (See criticism 1 Duer on In- Dee. 414; Rose v. Franklin Life Ins.
suranee [ed. 1845] 229, et seq.) See Co. 153 Mo. App. 90, 132 S. W. 013,
also 17 Earl of Halsburv's Laws of 40 Ins. L. J. 180; Fowler v. iEtna
Enirland, pp. 342. et seq. "527. Fire Ins. Co. 7 Wend. (N. Y.) 270;
* Ripley v. ^Etna Ins. Co. 30 N. Y. Hone v. Mutual Safety Ins. Co. 1
136, 86 Am. Dec. 362. Sand. (N. Y.) 137, 2 N. Y. (2
SRafel V. Nashville Marine & Fire Comst.) 235, per Sandford, J.; Rob-
Ins. Co. 7 La. Ann. 244. ertson v. Money, 1 Ry. & M. 75; 1
^Maryland Ins. Co. v. Woods, 6 Phillips on Insurance (3d ed.) sec.
Cranc-h "(10 U. S.) 29, 3 L. ed. 143, 143, et seq.; Bacon's Benefit Societies
cited in General Mutual Ins. Co. v. and Life Insurance (1st ed.) sees.
Sherwood, 14 How. (55 U. S.) 352, 256, 264; 17 Earl of Halsbury's Laws
362, 14 L. ed. 452, 456 ; Ocean Steam- of England p. 342, et seq.
ship Co. V. 2¥^\r\a. Ins. Co. 121 Fed. ^ Emigeron on Insurance (Mere-
882, 884; Hernandez v. Sun Mutual dilli's ed. 1850) c. ii. see. 7, p. 50.
Ins. Co. 6 Blatchf. (C. C.) 317, 325, 1° Pa^e v. Metropolitan Life Ins.
Fed. Cas. No. 6,415; Pride v. Provi- Co. 98 Ark. 340, 135 S. W. 911. 40
dence-Washington Ins. Co. 6 Pa. Ins. L. J. 1144 (''leffal repre.senta-
Dist. R. 227, 231. lives.") See §§ 786,^793 herein.
■^ See §§ 246-255 herein.
572
. COXSTRUCTIOX OF POLICY
§§ 218, 219
rule will be found throughout this work under the several heads to
which they properly belong.
§ 218. Addition of words by construction. — In the case of Davis
V. Boardman ^^ the words ''or either of them" were inserted by con-
struction after the word "cargo" in the clause "should this vessel
and cargo be insured in England in time to attach," etc., the court
saying that it was not unusual "to find 'and' used for 'or' and 'or'
for 'and.' " ^^ But in a California case it is held that the court could
not interpolate the word ■"intentionally" before a clause in an acci-
dent policy and so extend the insurers liability.^'
§ 219. Courts cannot extend or enlarge by construction. — If the
terms of the contract are express, "the court cannot extend or enlarge
the contract by implication so as to embrace an object distinct from
that originally contemplated.^^ In insurance contracts the insurer
undertakes to guarantee the insured against loss or damage upon the
exact terms and conditions specified in the agreement, and upon no
other, and therefore, courts cannot change the contract nor make
a new one for the parties. It is their duty to enforce and carry out
the one already made " and nothing ought to be imported into the
contract by construction contrary to its express terms. -^^ So a benefit
certificate payable to certain children cannot be enlarged by con-
struction so as to include a posthumous child by a second marriage
" 12 Mass. 80.
^^ See United Life Fire & Marine
Ins. Co. V. Foote, 22 Ohio St. 340,
10 Am. Rep. 735. The words "by
tire" were added by construction.
Contra. Commercial Insurance Co. v.
Robinson, 64 111. 26.3, 16 Am. Rep.
557.
13 Blunt V. Fidelity & Casualty Co.
145 Cal. 268, 104 Am. St. Rep. 34,
78 Pae. 729, 67 L.R.A. 793.
1* "It is never allowed to stretch
the contract from one case to an-
other, nor to make it embrace an ob-
ject really distinct from that orioi-
nally contemplated." Emorigon on
Insurance (Meredith's ed. 1850) c. i.
sec. 7, p. 16; Waxahachie Baidc v.
Lanca.sliire Ins. Co. 62 Tex. 461.
i^Glendale Woolen Mfo-. Co. v.
Protection Ins. Co. 21 Conn. 19, 30,
31, 54 Am. Dec. 309, per Ellswortli,
J. See Blunt v. Fidelitv & Casualtv
Co. 145 Cal. 268, 104 Am. St. Rep.
34, 67 L.R.A. 793, 78 Pac. 729.
Construction must not make a new
contract for the parties. Schuerman
V. Dwelling-House Ins. Co. 161 111.
437, 52 Am. St. Rep. 377, 43 N. E.
1093.
A polie^v, and the conditions there-
in, fix the relation between the par-
ties thereto and furnish the measure
of their respective rights and liabili-
ties. Courts cannot go outside of
such agreement of tlie ])arties to de-
termine their mutual or reciprocal
obligations. Dover Glass Co. v.
American Fire Ins. Co. 1 Marv.
(Del.) 32, 65 Am. St. Rep. 264.
When a contract of insurance is
unambio'uous in its terms, it will be
ent'oiced, for courts will not con-
strue plain language so as to make
a contract to endirace tliat wliich it
wa.s intended not to include. British
America Assurance Co. v. IMiller, 91
Tex. 414, 66 Am. St. Rep. 901, 39
L.R.A. 545, 44 S. W. 60.
iMIutual Life Ins. Co. of X. Y.
V. Murrav, 111 :\rd. 600, 75 Atl. 348.
373
§ 220 JOYCE ON INSURANCE
contracted after tlie insured became a member of the society,^"' nor
will conditions limiting the iusm-er's liability be extended to include
cases not reasonably and clearly within the words," nor will a con-
struction be given which would enlarge or diminish the risk to an
unreasonable extent,^^ nor can the court apply the insurance to chat-
tels not insured, even though the policy holder intended to insure
them. 2"
§ 220. Forfeitures and exceptions not favored by construction. —
"Where the intent of conditions or stipulations involving disabilities
or forfeitures is doubtful, they should be construed against the party
for whose benefit they were imposed, and forfeitures should, if pos-
sible, be avoided, and the contract sustained; ^ for the right to in-
" Spry V. AVilliams, 82 Iowa, 61, Michael, 167 Ind. 659, 74 N. E. 964,
47 N. W. 890, 10 L.R.A. 863. 79 N. E. 905, 8 L.R.A.(N.S.) 708;
18 Rann v. Home Ins. Co. 59 N. Y. Metropolitan Life Ins. Co. v. John-
387. son. 49 Ind. App. 233, 94 N. E. 785;
19 Evre V. Marine Ins. Co. 6 Whart. Northern Assnr. Co. v. Carpenter,
(Pa.) "247. 52 Ind. App. 432, 94 N. E. 779, 40
20 Holmes V. Charlestown Mutual In|;L. J 1218 ., t.
Fire Ins. Co. 10 Met. (51 Mass.) 211, ^ Ae»«MC%.-Mutual Benefit Life
43 Am. Dec. 428. ?'\i^°on " ^r''' .^^ ''• n \ ]
1 XT • 1 r,. . TT i. -n r S. W. 20. See American Central
'■Inited States. — Yeaton v. rrv, 5 -r,,^ ^^ „ Ti^o,.o,Mn i« tz^t T Ttan
/-. 1 /n T^ o \ oor^ o T 1 ITT l^s. Co. V. Meaverin, is Jvy. Lt. tiep.
Cranch (9 L. S.) 335, 3 L. ed. 11^; jgg r^-^ q. ^y (^22
Cotton v. FideUty & Casualty Co. 41 jfi,:i,i^n.^L^^-pool London &
^^^- ^^^- Globe Ins. Co. v. Verdier, 33 Mich.
Alabama.— Qneen Ins. Co. v. 133, 35 Mich. 395.
Young, 86 Ala. 424, 11 Am. St. Rep. Minnesota.-'BTids:es v. National
51, 5 So. 116; Burnett v. Eufaula Union, 73 Minn. 486, 77 N. W. 411,
Ins. Co. 46 Ala. 11, 7 Am. Rep. 581; ^vV 76 N. W. 270, 409.
Alabama Gold Life Ins. Co. v. Johns- Xebra.ska. —Haas v. Mutual Life
ton, 80 Ala. 467, 2 So. 125, 128, per ^^g Qq §4 Neb. 682, 26 L.R.A.
the Court, 60 Am. Rep. 112. (X.S.) 747 (annotated on effect of
Arkansas. — Maloney v. INIarvland failure to pay periodical premium on
Casualty Co. 113 Ark. 174, 167 S. jmlicy of life insurance to terminate
W. 845; Arkansa.s Fire Ins. Co. v. the same, in the absence of a provi-
WiLson, 67 Ark. 533, 48 L.R.A. 510, sion for i'orfeiture) 121 N. W. 996.
77 Am. St. Rep. 129, 55 S. AY. 933. New Jersey.— Snvdev v. Dwcllina:-
Georr/w.—New York Life Ins. Co. House Ins. Co. 59 N. J. L. 544, 56
V. Babcock, 104 Ga. 67, 42 L.R.A. Am. St. Rep. 625, 37 Atl. 1022.
88, 69 Am. St. Rep. 134, 30 S. E. Neiv TorA:.— Paul v. Travelers'
273; Clav v. Plioenix Ins. Co. 97 Ga. Ins. Co. 112 N. Y. 472, 8 Am. St.
44. 25 S.' E. 417. Rep. 756, 3 L.R.A. 443, 20 N. E.
Illinois. — Commercial Union Assur. 347 (conditions construed strictly
Co. V. Scammon. 126 111. 355. 9 Am. against those for whose benefit they
St. Rep. 607, 18 N. E. 562; Wil- are reserved) ; Livingston v. Stickless,
liamson v. Warfield, Pratt, Howell 7 Hill (N. Y.) 2.53; Fitzpatrick v.
Co. 130 111. App. 168; Crete Farm- Kuiehts of Columbus, 128 N. Y.
ers' Alutual Twp. Ins. Co. v. Miller, Supp. 366, 143 App. Div. 540; Haves
70 111. App. 599. V. New York Life Ins. Co. 68 Misc.
Indianu.— Glens Falls Ins. Co. v. 558, 124 N. Y. Supp. 792.
574
CONSTRUCTION OF POLICY
§ 220
sist upon forfeitures is stricti juris, and courts will not favor forfei-
tures b}' literal intendments and enlarged conslructions,^ nor will
they declare forfeitures by implication,^ as they ai-e not favored in
Pennsylvania. — Evans v. Phoenix
Mut. Assn. (Pa. 1892), 49 Leg. In-
tcll. 15.
South Dakota. — Bolte & Janseu v.
Equitable Fire Assoc. 23 S. Dak. 240,
121 N. W. 773, 38 Jns. L. J. 386;
McNamara v. Dakota Fire & Marine
Ins. Co. 1 S. Dak. 342, 47 N. W.
288.
'Texas. — Home Mutual Ins. Co. v.
Tompkies, & Co. 30 Tex. Civ. App.
404, 71 S. W. 812.
Virginia. — Mutual Ins. Soe. v.
Scottish Union & :\Iutual Ins. Co. 84
Va. lie, 10 Am. St. Rep. 119, 4 S.
E. 178.
Wisconsin. — Siemers v. Meeme
Mutual Home Protection Ins. Co.
143 Wis. 114, 126 N. W. 669 ; French
V. Fidelitv & Casualtv Co. 135 Wis.
2.59, 17 L.R.A.(N.S.j 1011, 115 N.
W. 869.
Con.struction of policy is strictly
against insurer and must always be
in favor of upholding the contract,
and no construction working a for-
feiture will be given if any other is
permissible from the language used.
Darrow v. Family Fund Soe. 116 N.
Y. 537, 15 Am. St. Rep. 430, 6 L.R.A.
495, 22 N. E. 1093.
That construction of an insurance
contract should be adopted which
will prevent a forfeiture, where it is
susceptible of two constructions, one
of which will work a forfeiture and
the other will not. Ilihner v. West-
ern Travelers' Accident Assoc. 86
Neb. 285, 27 L.R.A. 319, 125 N. W.
535; ITamann v., Nebraska Under-
writers Ins. Co. 82 Neb. 429, 118 N.
W. 65.
^ Aurora Fire Ins. Co. v. Eddy, 55
111. 213.
See also the followng cases :
Georgia. — ("lav v. I^im'nix Ins. Co.
97 Ga.'44, 25 S'. E. 417.
Illinois. — Hardest y v. Forest City
Ins. Co. 77 111. App." 413, ali'd Forest
5
Citv Ins. Co. V. Hardesty, 182 Dl.
39,^55 N. E. 139.
Indiana. — Metropolitan Life Ins.
Co. V. Johnson, 49 Ind. App. 233, 94
N. E. 785; Iowa Life Ins. Co. v.
Ilauchton, 46 Ind. App. 467, 87 N.
E. 702.
Kansas. — Home Ins. Co. v. Fever-
abend, 7 Kan. App. 231, 52 Pac.
899.
Louisiaim-. — Fitzpatrick v. Mutual
Benevolent Life Ins. Co. 25 La. Ann.
443.
Nehra.sla.- — Haa.s v. INIutual Life
Ins. Co. 84 Neb. 682, 26 L.R.A. (N.S.)
747 note, 121 N. W. 996 ; Hamanu v.
Nebra-^ka Undenvriters' Ins. Co. 82
Neb. 429, 118 N. W. 65; Connecti-
cut Fire Ins. Co. v. Jearv. 60 Neb.
338, 51 L.R.A. 698 note, '83 N. W.
78.
New York.—lj. Black & Co. v.
London Guarantee & Accident Co.
144 N. Y. Supp. 424, 159 App. Div.
186.
South Dakota.— Eolie, & Jansen v.
Equitable Fire Assoc. 23 S. Dak. 240,
121 N. W. 773, 38 -Ins. L. J. 886.
Tennessee. — McNutt v. Virginia
Fire & Marine Ins. Co. — Tcnn. Ch.
— , 45 S. W. 61.
Texas. — Mutual Life Ins. Co. v.
Ford, — Tex. Civ. App. — , 130 S.
W. 769.
Virginia. — Georgia Home Ins. Co.
v. Bartlett, 91 Ya. 305, 30 Am. St.
Rep. 832, 21 S. E. 476.
Wisconsin. — Paget v. United States
Casualty Co. 158 Wis. 278, 148 N.
W. 878.
2 Connecticut Fire Ins. Co. v. Colo-
I'ado Leasing, Mining & Milling Co.
50 Colo. 424, 116 Pac. 154, 40 Ins.
L. J. 1717.
Courts have always limited pro-
visions for forfeiture strictly to the
exact import of the words used and
there is equally strong reason, where
the literal meaning of such a pro-
75
§ 220 JOYCE ON INSURANCE
the law.* And especially are forfeitures not favored in the law
vision is broader than its reason, for
restricting- its operation to the mis-
fhief sought to be guarded against.
Where the reason and the letter of a
flause do not coincide, it is the uni-
versal rule of construction to limit
the latter by the former. Henton v.
Farmers' & Merchants' Ins. Co. 1
Neb. (unoffie.) 425, 95 N. W. 670,
32 Ins. L. J. 838, per Pound, C.
^Alabama. — Queen Ins. Co. v.
Young, 86 Ala. 424, 11 Am. St. Rep.
51, 5 So. 116.
California. — Welch v. British
American Assur. Co. 148 Cal. 223,
113 Am. St. Rep. 223, 82 Pac. 964.
Colorado. — Connecticut Fire Ins.
Co. V. Colorado, Leasing ^Mining &
Milling Co. 50 Colo. 424, 116 Pac.
154, 40 Ins. L. J. 1717.
Indiana. — American Central Life
Ins. Co. V. Rosenstein, 46 Ind. App.
537, 92 N. E. 380.
Missouri. — IMathews v. Modern
Woodmen of America, 236 Mo. 326,
139 S. W. 151; Rosebeny v. Ameri-
can Benevolent Assoc. 142 Mo. App.
552, 121 S. W. 785.
Nehra^ska. — Ilamann v. Nebraska
Undei-writers' Ins. Co. 82 Neb. 429,
118 N. W. 65; Henton v. Farmers' &
Merchants' Ins. Co. 1 Neb. (UnofiBc.)
425, 95 N. W. 670, 32 Ins. L. J. 838 ;
Connecticut Fire Ins. Co. v. Jearv,
60 Neb. 338, 51 L.R.A. 698, 83 N.
W. 78; Farmers' & Merchants' Ins.
Co. V. Newman, 58 Neb. 504, 78 N.
W. 933.
Neiv Jersey. — Melick v. Metropoli-
tan Life Ins." Co. 84 N. J. L. 437, 87
Atl. 75; Hampton v. Hartford Fire
Ins. Co. 65 N. J. L. 265, 52 L.R.A.
344, 47 Atl. 433, 30 Ins. L. J. 141.
Texas. — Western Assur. Co. v.
Hillver-Deutsch-Jarratt Co. — Tex.
Civ.' App. — , 167 S. W. 816; Hart-
ford Fire Ins. Co. v. Walker, —
Tex. Civ. App. — , 153 S. \Y. 398;
Mutual Life Ins. Co. v. Ford, —
Tex. Civ. App. — , 130 S. W. 769;
Norwich L^nion Fire Ins. Soc, v.
5
Cheanev Bros. — Tex. Civ. App. — ,
]28 S.V. 1163.
r/r^?»/a.— Stratton v. New York
Life Ins. Co. 115 Va. 257, 78 S. E.
636.
Forfeitures do not readily find fav-
or in the law, and courts are reluc-
tant to declare and enforce them if,
by reaiionable interpretation, it can
be avoided. Coleman v. New Orleans
Ins. Co. 49 Oliio St. 310, 16 L.R.A.
174, 34 Am. St. Rep. 565, 31 N. E.
279.
Since forfeitures are not favored
in the law, courts should be liberal in
construing- the transaction, so as to
avoid a forfeiture. Knickerbocker
Life Ins. Co. v. Norton, 96 U. S.
234, 24 L. ed. 689.
Cited in United States. — New York
Life Ins. Co. v. Eggleston, 96 U. S.
572, 577, 24 L. ed. 841, 843 ; Foley v.
Grand Hotel Co. 121 Fed. 509, 512,
57 C. C. A. 629, 632; Mutual Re-
serve Fund Life Assoc, v. Cleveland
Woolen Mills, 82 Fed. 508, 516, 27
C. C. A. 212, 220, 54 U. S. App.
290; Mc.Master v. New York Life
Ins. Co. 78 Fed. 36'; Small v. West-
chester Fire Ins. Co. 51 Fed. 791;
Pendleton v. Knickerbocker Life Ins.
Co. 7 Fed. 173; Seamens v. North-
western Mutual Life Ins. Co. 1 Mc-
Crary, 511, 3 Fed. 327.
Arkansas. — Little Rock Granite
Co. v. Shall, 59 Ark. 405, 409, 27 S.
W. 562.
Illinois. — Railway Passenger &
Freight Conductors Mutual Aid &
Benefit Assoc, v. Tucker, 157 111. 194,
200, 46 Am. St. Rep. 796, 42 N. E.
398.
Indiana. — Germania Fire Ins. Co.
v. Pitcher, 160 Ind. 392, 395, 64 N.
E. 921, 32 Ins. L. J. 69, 71; Peele
V. Provident Fund Soc. 147 Ind. 543,
553, 44 N. E. 661.
lotva. — Hollis V. State Ins. Co. 65
Iowa, 454, 459, 21 N. AY. 774.
Louisiana. — Maclin v. New Eng-
76
CONSTRUCTION OF POLICY
§ 220
where they are induced by the conduct of the agent representing
the insurer.^
In a Delaware decision the rule stated is that conditions of for-
feiture in a policy are not favored, and these and like conditions
are always construed strictly, so that a party cUiiniing a forfeiture
by reason of a violation thereof is not permitted to deprive the other
party of the benefits of the right of indemnity for which he con-
tracted if there is any doubt or uncertainty as to the terms of such
conditions, the extent of their application, or the acts which con-
stitute the alleged breach.^ So it is held in a Federal Supreme Court
case that on the question purely of forfeiture the rule is that if a
p'olicy contains provisions that are inconsistent, or which is so
framed as to be fairly open to construction, the view should be adopt-
ed, if possible, which will sustain rather than forfeit the contract.'
land Mutual Life Ins. Co. 33 La. Car. 315, 70 Am. St. Rep. 592, 32
Ann. 803. S. E. 728.
Missouri. — McMahon v. Supreme ^ Dover Glass Co. v. American
Tent Knights of ^laooabees ot the Fire Ins. Co. 1 Marv. (Del.) 32, 65
World, 151 Mo. 522, 542, 52 S. W. Am. St. Rep. 264.
384; Fink v. Lancashire Ins. Co. 66 Forfeitures are not favored; and
Mo. App. 515. in contracts of insurance a eonstruc-
New Hampshire. — Appletoii v. tion resulting' in a loss of the indem-
Phenix Mutual Life Ins. Co. 59 N. H. nity for which the insured has con-
541, 545, 47 Am. Rep. 220. tracted will not be adopted, except
New York. — Kiernan v. Dutchess to give effect to the obvious inten-
County Mutual Ins. Co. 150 N. Y. tion of the parties, and the plain re-
190, 194, 44 N. E. 698; Toplitz v. quirements of the contract. Wood-
Bauer, 55 N. Y. Supp. 29, 34 App. men's Accident Assoc, v. Byers
Div. 526, 533. (Pratt) 62 Neb. 673, 89 Am. St. Rep.
South Carolina.— VsiX^on v. Com- 777, 55 L.R.A. 291, 87 N. W. 546, 31
raercial Union Assur. Co. 51 S. Car. Ins. L. J. 183; Mellen v. United States
540, 547, 64 Am. St. Rep. 700, 29 S. Health & Accident Ins. Co. 83 Vt.
E. 24.5. 242, 75 Atl. 273.
South Dakota. — Enos v. St. Paul ' United States. — ]y[cMaster v.
Fire & Marine Ins. Co. 4 S. Dak. 639, New York Life Ins. Co. 183 U. S.
656, 46 Am. St. Rep. 796, 57 N. W. 25, 46 L. ed. 64, 22 Sup. Ct. 10, 31
919. Ins. L. J. 555, cited in Hunt v.
Tennessee. — American Central Ins. Springfield Fire & IMarine Ins. Co.
Co. v. McCrea, 8 Lea. 513, 526, 41 196 U. S. 47, 49. 49 L. ed. 382, 25
Am. Rep. 647. Sup. Ct. 179; Lefler v. New York
Tcra*.— Mullen v. Mutual Life Life Ins. Co. 143 Fed. 814, 819, 74
Ins. Co. 89 Tex. 259, 202, 34 S. W. C. C. A. 488, 493; Atlas Reduction
605. Co. V. New Zedand Ins. Co. 9
F/rr7m?«.— Ea.slev v. Valley Mutu- L.R.A. (N.S.) 433, 138 Fed. 497, 512,
al Life AS.SOC. 91 Va. 161, 169, 21 S. 71 C. C. A. 21, 36; Mutual Reserve
E. 235. Life Ins. Co. of N. Y. v. Dobler,
5 Eagle Fire Ins. Co. v. Lewallen, 137 Fed. 550, 554, 70 C. C. A. 134,
56 Fla. 246, 47 So. 947, .38 Ins. L. 138.
J. 320, 343. See also Kendrick v. Florida. — L'Engle v. Scottish
Mutual Benefit Life Ins. Co. 124 N. Union & National Fire Ins. Co. 48
Joyce Ins. Vol. I. — 37. 577
220
JOYCE ON INSURANCE
And it is declared in a New Jersey case that: "The court will never
seek for a construction of a forfeiture clause in a policy which will
sustain it, if one which will defeat it is reasonably deducible from
the terms or words used to express it." ' But the court cannot go
beyond a fair construction of language of the contract in order to
avoid a forfeiture.^
And it is also decided that insurance policies should not be con-
strued to work a forfeiture of either party's rights, or to defeat the
object of the contract unless it plainly appears that such was the
intention of both contracting parties, and that the effect of
the language was well understood by them when the contract was
entered into.^°
It is also held that as a forfeiture is not favored, it will not be en-
forced unless specifically and definitely provided for in the contract ;
and waiver thereof will be treated as unconditional, unless it clear-
ly appears that it was otherwise understood by the parties.^^ And
the courts, not favoring forfeitures, are usually inclined to take hold
of any circumstances which indicate an election to waive a forfei-
ture.^^ It is also declared that where a waiver prevents a forfeiture,
the law ordinarily permits a liberal construction to be placed on the
acts of the party waiving with the view of bringing about a waiver
of such forfeiture. ^^
Fla. 82, 92, 67 L.R.A. 581, 586, lU
Am. St. Rep. 70, 77, 37 So. 462.
Indiana. — Northern Assur. Co. v.
Carpenter, 52 Ind. App. 432, 94 N.
E. 779, 40 Ins. L. J. 1218, 1221.
Nebraska. — German Ins. Co. v.
Shader, 68 Neb. 1, 9, 60 L.R.A. 918,
922, 93 N. W. 972.
Oregon. — Stinchcombe v. New
York Life Ins. Co. 46 Oreg. 316, 80
Pae. 213.
8 Hampton v. Hartford Fire Ins.
Co. 65 N. J. L. 265, 52 L.R.A. 344,
47 Atl. 433, per Fort, J. Quoted in
Johnson v. Grand Lodge Ancient
Order United Workmen, Si N. J. L.
511, 79 Atl. 333, 40 Ins. L. J. 924.
^ Behling v. Northwestern Nation-
al Life Ins. Co. 117 Wis. 24, 93 N.
W. 800; Globe & Rutgers Fire Ins.
Co. of N. Y. V. David Moffatt Co.
154 Fed. 13, 83 C. C. A. 91.
^^ Port Blakely Mill Co. v. Spring-
field Fire & Marine Ins. Co. 59
Wash. 501, 140 Am! St. Rep. 863, 28
L.R.A.(N.S.) 596n, 110 Pac. 36, 56
578
Wash. 681, 28 LJl.A. (N.S.) 593,
106 Pac. 194.
^^ Murray v. Home Benefit Life
Assoc. 90 Cal. 402, 25 Am. St. Rep.
133; Roseberry v. American Benovel-
ent Assoc. 142 Mo. App. 552, 121 S.
W. 785. Compare Brignae v.
Pacific Mutual Life Ins. Co. 112 La.
574, 36 So. 595, 66 L.R.A. 322;
Smoot V. Bankers Life Assoc. 138
Mo. App. 438, 120 S. W. 719.
^2 Queen Ins. Co. v. Young, 86
Ala. 424, 11 Am. St, Rep. 51, 5 So.
116, quoted from in Gennania Fire
Ins. Co. V. Pitcher, 160 Ind. 392, 64
N. E. 921, 34 Ins. L. J. 69; Arnold
V. Empire Mutual Annuity & Life
Ins. Co. 3 Ga. App. 685, '60 S. E.
470; American Central Life Ins.
Co. V. Rosenstein, 45 Ind. App. 537,
92 N. E. 380; Montano v. Missanel-
lese Society of Mutual Aid, 72 Misc.
515, 130 N. Y. Supp. 455.
13 Loftis V. Pacific Mutual Life Ins.
Co. 38 Utah, 532, 114 Pac. 134, 40
Ins. L. J. 1048, 1058, per Friek, C. J.
CONSTRUCTION OF POLICY § 220
Provisos and exceptions are to be strictly construed against the
insurer.^* So exceptions of certain specified risks are construed
strictly against the insurer, ^^
Words of limitation in the nature of an exception will be con-
strued against the party preferring them,^^ and a prohibition against
^'^ California. — Pacific Heating & U. S. App. 214; Koons v. La Fou-
Ventilating Co. v, Williamsburgh ciere Compagnie D'Assuranees, 71
City Fire Ins. Co. 158 Cal. 367, 111 Fed. 978, 983; Northwest Trans-
Pac. 4, 39 Ins. L. J. 1706; Pacific portation Co. v. Boston Marine Ins.
Union Club v. Commercial Union Co. 41 Fed. 793, 801; Pearl, The»
Assur. Co. 12 Cal, App. 503, 107 Fed. Cas, No. 10,874; Palmer v,
Pac. 728. Warren Ins. Co. 1 Story, 360, 364,
Colorado. — Travelers Ins. Co. v. Fed. Cas. No. 10,698; Hernandez v.
Murray, 16 Colo. 296, 25 Am. St. Sun Mutual Ins. Co. 6 Blatchf. 317,
Rep. 267, 25 Pac. 74. 325, Fed. Cas. No. 6,415.
Georgia. — Thornton v. Travelers' Indiwna. — Grant v. Lexington Fire
Ins. Co. 116 Ga. 121, 94 Am. St. Life & Marine Ins. Co. 5 Ind. 23, 61
Rep. 99, 42 S. E. 287; Empire Life Am. Dee. 74,
Ins. Co. V. Einstein, 12 Ga. App. Missouri. — Laker v. Roval Fra-
380, 77 S. E. 209. temity Union, 95 Mo. App. 353, 368.
Kentucky. — Farmers' Mutual Equity New York. — Paul v. Travelers' Ins.
Ins. Soc. V. Smith, 158 Ky. 459, Co. 112 N. Y.. 472, 479, 3 L.R.A. 443,
L.R.A.1915B, 844, 165 S. W. 675. 446, 8 Am. St. Rep. 758, 20 N. E.
Pennsylvania. — Montgomery v. 347 ; Hoffman v. ^-Etna Fire Ins. Co.
Southern Mutual Ins. Co. 242 Pa. 86, 32 N. Y. 405, 414, 88 Am. Dec. 337;
51 L.RA.(N.S.) 518, 86 Atl. 924. Hood v. Manhattan Fire Ins. Co. 11
Vermont. — Duran v. Standard N. Y. 532, 541; Wright v. Williams,
Life & Accident Ins. Co. 63 Vt. 437, 20 Hun, 320, 323.
25 Am. St. Rep. 773, 13 L.R.A. 637, O/wo.— Webster v. Dwelling House
22 Atl. 530. Ins. Co. 53 Ohio St. 558, 564,
Frr,7n?/fl.— Fidelity & Casualty Co. 30 L.R.A. 719, 720, 53 Am. St. Rep.
V. Chambers, 93 Va. 138, 40 L.R.A. 658, 42 N. E. 546.
432, 24 S. E. 896. Terras.— Warren v. Springfield
West Virginia. — Beard v. In- Fire & Marine Ins. Co. 13 Tex. Civ.
demnity Ins. Co. 65 W. Va. 283, 64 App. 466, 469, 35 S. W. 810.
S. E. 119. Virginia. — United States Mutual
An exception of uncertain import Accident Assoc, v. Newman, 84 Va.
must be construed most strongly 52, 59, 3 S. E. 805.
against the insurer. Furry v. Gen- Wisconsin. — Wakefield v. Orient
eral Accident Assoc. 80 Vt. 526, 130 Ins. Co. 50 Wis. 532, 536, 7 N. W.
Am. St. Rep. 1012, 15 L.R.A. (N.S.) 647; Blumer v. Phoenix Ins. Co. 45
206 (annotated on scope and eti'ect Wis. 633, 641.
of provisions in policies of insurance ^® Schroeder v. Stock & Mut. Ins.
forbidding use of intoxicating liquor) Co. 46 Mo. 174; Bullen v. Denning,
68 Atl. 655. 5 Bam. & C. 842 ; Palmer v. Warren
i^Yeaton v. Fry, 5 Cranch (9 U. Ins. Co. 1 Story (C. C.) 360, Fed.
S.) 335, 3 L. ed. 117, cited in Unit- Cas. No. 10,698, per Story, J.; Don-
ed States Ocean Steamship Co. v. nel v. Columbian Ins. Co. 2 Sum (C.
.Etna Ins. Co. 121 Fed. 882, 884; C.) 366, 380, 381, Fed. Cas. No. 3987;
Canton Ins. Office v. Woodside, 90 Earl of Cardigan v. Armitage, 2
Fed. 301, 305, 33 C. C. A. 63, 68, 61 Barn. & C. 197.
579
§ 220a JOYCE ON INSURANCE
the transfer of a policy will be construed strictly.^'' So conditions
in a policy of insurance which create restrictions on the remedy of
the insured thereon, as that he shall sue within a certain time, are
to be strictly construed. ^^
The rule, however, which calls for a strict construction against
the insurer so as to avoid a forfeiture where there are words of ex-
ception or limitation in a policy is qualified by the rule that effect
nmst be given to language which has a plain meaning and is not
inconsistent with other clauses or provisions of the contract. ^^ And
an exception containing a plain, simple and unambiguous provision
pointing clearly to a just and practicable criterion is not to be so
construed as to deprive the insurer of the protection for which it
stipulates.^"
§ 220a. Same subject: benefit certificates. — The rule of strict
construction against the insurer of conditions for forfeiture and
that forfeitures are not favored in law applies also to benefit certifi-
cates.^ So forfeitures in beneficiary certificates dealing with prop-
erty rights are not favored, and constructions of written instruments
of that character against such result will be preferred, if the instru-
ment will bear it, rather than the adoption of an interpretation
giving the opposite effect. A destructive result should not be adopt-
ed, wliere it is possible otherwise to glean from the order's own
terms, preferred in avoidance of it, and where its by-laws may rea-
" Griffey v. New York Cent. Ins. Barton, 46 Ind. App. 160, 92 N. E.
Co. oO Hun (N. Y.) 299, 100 N. Y. 64; Supreme Tent Knights of Macca-
417, 53 Am. Kep. 202, 3 N. E. 309. bees of the Wortd v. Etliridge, 43
"State Ins. Co. v. Maael^ens, 38 Ind. App. 475, 87 N. E. 1049; Gun-
N. J. L. 564. ther v. New Orleans Cotton Ex-
^3 Gilchrist Transportation Co. v. chano-e Mutual Aid Assoc. 40 La.
Phoenix Ins. Co. 170 Fed. 279, 95 Ann. 776, 2 L.R.A. 118, 8 Am. St.
C. C. A. 475. See Globe & Rutgers Rep. 554, 5 So. 65; Mathews v.
Fire Ins. Co. of N. Y. v. David Modern Woodmen of America, 236
Moffat Co. 154 Fed. 13, 83 C. C. A. Mo. 326, 139 S. W. 151; Burchard
91; Rye v. New York Life Ins. Co. v. Western Commercial Travelers'
88 Neb. 707, 130 N. W. 434, 40 Ins. Assoc. 139 Mo. App. 606, 123 S. W.
L. J. 910 (contract to be enforced as 973; Montano v. Missanellese So-
made). Examine Travelers' Ins. Co. ciety of Mutual Aid, 72 Misc. 515,
v. Thornton, 119 Ga. 455, 46 S. E. 130' N. Y. Supp. 4.55; Fitzpatrick
678. v. Knights of Columbus, 128 N. Y.
Contract to be enforced as made, Supp. 366, 143 App. Div. 540;
see § 205 herein. Woodmen of the World v. Gilliland,
20 Furrv v. General Accident Ins. 11 Okla. 384, 67 Pac. 485 ; Haywood
Co. 80 Vt. 526, 15 L.R.A. (N.S.) v. Grand Lodge of Texas Knights
206n, 130 Am. St. Rep. 1012, 68 Atl. of Pvtliias, — Tex. Civ. App. — , 138
655. S. W. 1194; Daniel v. Modem Wood-
^ Brotherhood of Painters, Deco- men of America, 53 Tex. Civ. App.
rators & Paperhangers of America v. 570, 118 S. W. 211.
580
CONSTRUCTION OF POLICY
§§ 220b, 221
sonably be read so as to preserve property rights.^ But where on
the back of tlie certificate and made a part thereof, and in fine type
under the head of "Privileges and Requirements," and not found
under a separate paragraph but put between matters entirely foreign
to it, are restrictions or limitations of liability which are inconsistent
with the terms of the contract appearing on the face of the policy,
and with the application, constitution and by-laws which are made
a part of the contract the latter prevail over the said limitations.'
§ 220b. Same subject: guaranty or fidelity insurance: employ-
ers' liability policy. — The rule that construction will Ijc most
strongly against forfeiture of the indemnity applies to a fidelity in-
surance bond when it is capable of two constructions and is essen-
tially an insurance contract.* An employers liability or indemnity
policy is also within the rule.*
§ 221. Construction should be liberal in favor of assured and
for benefit of trade. — It has long been determined with an almost
unwavering unanimity that insurance contracts, when suscejitible
of more than one interpretation, shall be construed in favor of the
5Lssured. This rule is imperative and undoubted, since to hold
otherwise, without an absolute necessity therefor, would tend to sub-
vert the very object and purposes of insurance, which is that of in-
demnity to the assured in case of loss, or the payment of money on
the happening of a contingency, and this indenmity should be ef-
fectuated rather than defeated.^ And this is true of certificates in
^ Johnson v. Grand Lodge Ancient
Order United Workmen, 81 N. J. L.
511, 79 Atl. 333, 40 Ins. L. J. 924.
' Hall v. Royal Fraternal X^nion,
130 Ga. 820, 61 So. 977.
«Bank of Tarboro v. Fidelity &
Deposit Co. 128 N. Car. 36(), 38 S.
E. 908, 83 Am. St. Rep. 682 ; United
American Fire Ins. Co. v. American
Bonding Co. 146 Wis. 573, 40 L.R.A.
(N.S.) 661, 131 N. W. 994, 40 Ins.
.L. J. 1805. See § 206c herein.
* Home Mixture Guano Co. v.
Ocean Accident & Guaranty Corp.
Ltd. (U. S. C. C.) 176 Fed. 600.
* Vniled Stales. — Ilapan v. Scot-
tish Union & National ln.>^. Co. 186
U. S. 423, 46 L. ed. 1229, 22 Sup.
Ct. 862; Liverpool & London &
Globe Ins. Co. v. Kearney, ]80 U. S.
132, 45 L. ed. 460, 21 Sup. Ct. 326,
case aOirms 94 Fed. 314, 36 CCA.
265; London Assnr. Co. v. Com-
panliia de Moagens do Barreiro, 167
581
U. S. 149, 42 L. ed. 113, 17 Sup. Ct.
785; Imperial Fire Ins. Co. v. Coos
County, 151 U. S. 452, 28 L. ed. 231,
14 Sup. Ct. 379; Tliompson v. Phenix
Ins. Co. 136 U. S. 287, 34 L. ed. 408,
10 Sup. Ct. 1019; Travelers' Ins. Co.
\. McConkey, 127 U. S. 661, 32 L.
ed. 308, 8 Sup. Ct. 1360; :\Ioulor v.
American Life Ins. Co. Ill U. S. 335,
28 L. ed. 447, 4 Sup. Ct. 466; Grace
V. American (\'ntral Ins. Co. 109 U.
S. 278, 27 L. ed. 932, 3 Sup. Ct. 207;
Phfpnix Ins. Co. v. Slausjhter, 12
Wall. (79 U. S.) 404, 20 L. ed. 444;
O'Brien v. North River Ins. Co. of
N. Y. 212 Fed. 102, — CCA.—;
Maryland Casualty Co. v. Finch, 8
L.R.A.(N.S.) 308, 147 Fed. 388, 77
C C A. 566, s. c. 203 U. S. 592,
51 L. ed. 331, 27 Sup. Ct. 780;
McClain v. Providence Savings Life
Assur. Co. 110 Fed. 80, 49 C. C A.
31, s. c. 184 U. S. 699, 46 L. ed.
765, 23 Sup. Ct. 938; American
§ 221 JOYCE ON INSURANCE
Steamsliip Co. Ltd. v. Indemnity Ltd. 46 Colo. 558, 105 Pac. 865;
Mutual Marine Ins. Co. Ltd. (U. S. German Ins. Co. v. llaydeii, 21 Colo.
D. C.) 108 Fed. 421, aff'd 118 Fed. 124, 52 Am. St. Rep." 206, 40 Pac.
1014, 56 C. C. A. 56; Cannon Ins. 453; Travelers' Ins. Co. v. Murray,
Office, Ltd. V. Woodside, 90 Fed. 301, 16 Colo. 296, 25 Am. St. Rep. 267,
33 C. C. A. 63, 61 U. S. App. 214, 25 Pac. 74; Lampkin v. Travelers'
28 Ins. L. J. 269; Kiesel v. Sun In- Ins. Co. 11 Colo. App. 249, 52 Pac.
surance Office of London, 88 Fed. 1040; Strauss v. Phenix Ins. Co. 9
243, 60 U. S. App. 10, 31 C. C. A. Colo. App. 386, 48 Pac. 822.
518, s. c. 171 U. S. 688, 43 L. ed. District of Columbia.— ^SUys v.
1170, 19 Sup. Ct. 885. See Guaran- New Amsterdam Casualty Cu. 40
tee Co. V. Mechanics' Savings Bank App. D. C. 249, 46 L.R.A.(N.S.)
& Trust Co. 80 Fed. 766, 47 U. S. 1108.
App. 91, 26 C. C. A. 146, 82 Fed. Florida.— UEngle v. Scottish
545, 27 C. C. A. 373, s. c. 173 U. S. Union & National Ins. Co. 48 Fla.
585, 43 L. ed. 818, 19 Sup. Ct. 551. 82, 92, 67 L.R..A._581, 586, 111 Am.
Alabama. — Pennsylvania Fire Ins. St. Rep. 70, 7/, 3i So. 462.
Co. V. Draper, 187 Ala. 103, 65 So. Georgia. — McEachern v. New York
923; Queen Ins. Co. v. Young, 86 Life Ins. Co. 15 Ga. App. 222, 82
Ala. 424, 11 Am. St. Rep. 51, 5 So. S. E. 820; Mutual Life Ins. Co. v.
116; Alabama Gold Life Ins. Co. v. Burden, 9 Ga. App. 797, 72 S. E.
Johnson, 80 Ala. 467, 2 So. 128, per 295; North American Accident Ins.
the Court, 60 Am. Rep. 112. Co. v. Watson, 6 Ga. App. 193, 64
Arkansas. — Malonev v. Maryland S. E. 693; Arnold v. Empire Mutual
Casualty Co. 113 Ark. 174; 167 S. Annuity & Life Ins. Co. 3 Ga. App.
W. 845; Monongahela Ins. Co. v. 685, 60 So. 470; jMissouri State Life
Batson, 111 Ark. 144, 163 S. W. 512. Ins. Co. v. Lovelace, 1 Ga. App.
California.— AnAeTsow v. Mutual 446, 58 S. E. 93.
Life Ins. Co. of N. Y. 164 Cal. 712, ////^ois.— Monahan v. Fidelity
130 Pac. 720; Pacific Heating & Life Ins. Co. 242 111. 488, 134 Am.
Ventilating Co. v. Williamsburg Citv St. Rep. 337, 90 N. E. 213; Peterson
Fire Ins. Co. of Brooklvn, 158 Cal v. Manhattan Life Ins. Co. 244 111.
367, 111 Pac. 4, 39 Ins. L. J. 1706: 329, 91 N. E. 466; State. National
Pacific Union Club v. Commercial Bank of Sprinsfield v. United States
Union Assur. Co. 12 Cal. App. 503, Life Ins. Co. 238 111. 148, 87 N. E.
107 Pac. 728; Raulet v. Northwest- 396; Forest City Ins. Co. v. Hard-
ern National Ins. Co. 157 Cal. 213, estv, 182 111. 39, 55 N. E. 139, 74
107 Pac. 292, 39 Ins. L. J. 742; Am. St. Rep. 161, aff'g Hardesty v.
Welch V. British American Ins. Co. Forest Citv Ins. Co. 77 111. App.
148 Cal. 223, 113 Am. St. Rep. 223, 413; Sehuermann v. Dwelling-House
82 Pac. 964: Berliner v. Traveler.s' Ins. Co. 161 lU. 437, 52 Am. St.
Ins. Co. 121 Cal. 458, 41 L.R.A. Rep. 377, 43 N. E. 1093; Healev v.
467, 66 Am. St. Rep. 49, 53 Pac. Mutual Ace. Assn. 133 111. 556, 561,
918; National Bank v. Union Ins. 25 N. E. 52, 23 Am. St. Rep. 637,
Co. 88 Cal. 497, 22 Am. St. Rep. 324, 638, 9 L.R.A. 371: Western Tube Co.
26 Pac. 509; Wells, Fargo Co. v. v. .^tna Indemnitv Co. 181 111.
Pacific Ins. Co. 44 Cal. 397; Brickell App. 502; Coen v. Denver Township
V. Atlas Ins. Co. Ltd. 10 Cal. App. Mutual Fire Ins. Co. 155 111. App.
17, 101 Pac. 16. 332; Provident Savings Life Assur.
Colorado. — Connecticut Fire Ins. Soc. v. Marshall, 125 111. App. 101;
Co. V. Colorado Leasing, Mining & Smitli v. Bankers' Life Assoc. 123
Milling Co. 50 Colo. 424, 116 Pac. HI. App. 392; Szymkus v. Eureka
154, 40 Ins. L. J. 1717 ; Barclay v. Fire & IMarine Ins. Co. 114 111. App.
London Guarantee & Accident Co. 401; Northwestern Life Assur. Co.
582
CONSTRUCTION OF POLICY
§ 221
V Schulz, 94 111. App. 156; Niagara Glinchey v. Fidelity & Casualty Co.
Fire Ins. Co. v. D. Heenan & Co. 81 80 Me. 251, 14 Atl. 13, 6 Am. St.
111. App. 678; Getman v. Guardian Rep. 190.
Fire Ins. Co. 46 111. App. 489. Mwyland. — McEvoy v. Security
Indiana. — American Surety Co. Fire Ins. Co. 110 Md. 275, 22 L.R.A.
of N. Y. V. Pan-boi-n, 182 Ind. 116, (N.S.) 942n, 132 Am. St. Rep. 428n,
105 N. E, 769 ; Northwestern Mutual 73 Atl. 157, 38 Ins. L. J. 895.
Life Ins. Co. v. Hazelett, 105 Ind. Massachusetts.— EWioii v. Hamil-
212, 55 Am. Rep. 192, 4 N. E. 582; ton Ins. Co. 13 Gray (79 Mass.) 139.
Grant v. Lexington Fire, Life & Ma- Michigan.— Turner v. Fidelity &
rine Ins. Co. 5 Ind. 23, 61 Am. Dec. Casualty Ins. Co. of N. Y. 112 Mich.
74: Indiana Life Endowment Co. v. 425, 38 L.R.A. 529, 67 Am. St. Rep.
Reed, 54 Ind. App. 450, 103 N. E. 426, 70 N. W. 898 ; Utter v. Travel-
77; Ohio Farmers Ins. Co. v. Glaze, ei-s' Ins. Co. 65 Mich. 545, 8 Am. St.
55 Ind. App. 147, 101 N. E. 734; Rep. 913, 32 N. W. 812.
Metropolitan Life Ins. Co. v. John- Minnesota. — Zeitler v. National
son, 49 Ind. App. 233, 94 N. E. 785; Casualty Co. 124 Minn. 478, 145 N.
Iowa Life Ins. Co. v. Haughton, 46 W. 395; Minneapolis Threshing Ma-
Ind. App. 467, 87 N. E. 762. See chine Co. v. Firemen's Ins. Co. 57
also Germania Fire Ins. Co. v. Deck- Minn. 35, 23 L.R.A. 576, 47 Am. .St.
hard, 3 Ind. App. 361, 28 N. E. 868. Rep. 572, 58 N. W. 819 ; Pettit v.
Iowa.— Allen v. Travelers' Pro- State Ins. Co. 41 Minn. 299, 43 N.
tective Assoc, of America, 163 Iowa, W. 378; DeGraff v. Queen Ins. Co.
217, 48 L.R.A. (N.S.) 600, 143 N. 38 Minn. 501, 38 N. W. 696, 8 Am.
W. 574; Lavton v. Interstate Busi- St.- Rep. 685.
ness Mens Assoc. 158 Iowa, 356, 139 Mississippi. — Shivers v. Fanners
N W. 463; Krell v. Chickasaw Mutual Fire Ins. Co. 99 Miss. 744,
Farmers Mutual Fire Ins. Co. 127 55 So. 965, 40 Ins. L. J. 1706, 1708.
Iowa, 748, 104 N. W. 364; Vorse v. Missouri. — Wertbeimer - Swarts
.Jersey Plate Glass Ins. Co. 119 Iowa, Shoe Co. v. United States Casualty
55, 60 L.R.A. 838, 97 Am. St. Rep. Co. 172 Mo. 135, 61 L.R.A. 766, 95
330, 93 N. W. 569. Am. St. Rep. 500, 72 S. W. 635;
Kansas.— Fire Association of Renshaw v. Missouri State Mutual
Phila. V. Taylor, 76 Kan. 392, 91 j^i^.^ ^ Marine Ins. Co. 103 Mo. 595,
Pac. 1070. 23 Am. St. Rep. 904, 15 S. W. 945;
JfCT?^MC%.— Pacific Mutual Lite ^enturv Realty Co. v. Frankfort
?'\?^;-^^.^'?i^' H; V 1 Marine Accident & Plate Glass Ins.
S. W 1136; Jef rson^v. ^'^J^ ^ork ^^^ ^^^ App. -144, 161 S. W. 624,
ili' ^^'\ ?.?• ^f ?^- ^f; If %Z- 630, 631; Mitchell v. German Com-
780; Fidelity & Casualty Co. ot JN. ' • , » -i x. /-. t r-n tvt a
Y. ;. Hart,"l42 Kv. 25, 133 S. W. TiTi c w o'f P' u^ ' \ ^ f/^'
996: ^tna Life Ins. Co. v. Bethal, 1' 1^1 ^ W o2; Stark v^ John Han-
140 Ky. 609, 131 S. W. 523; Spring cock Mutual Life Ins. Co. 1^6 Mo.
Garden Ins. Co. v. Imperial Tobacco App. 574, 159 S. W. 7o8; Stix v.
Co. 132 Ky. 7, 136 Am. St. Rep. 164, Travelei-s' Indemnity Co. of Hfd. 17o
116 S. W.*234, 20 L.R.A.(N.S.) 277, Mo. App. 1y1, 157 S. W. 870; Rose-
38 Ins L. J. 446; Mutual Benefit berry, v. American Benevolent Assoc.
Life Ins. Co. v. Dunn, 106 Ky. 591, 142 Mo. App. 552, 121 S. W. 785;
51 S. W. 20. Cunningham v. U;iion Casualty &
Louisiana.— Mntnal Life Ins. Co. Surety Co. 82 Mo. App. 607.
V. New, 125 La. 41, 27 L.R.A. (N.S.) MoH/cr»«.— McAuley v. Ca.sualtv
431. 136 Am. St. Rep. 326, 51 So. 61
Maine. — Bickford v. ^tna Ins
Co. 101 Me. 124, 63 Atl. 552; Mc-
Co. of America, 39 Mont. 185, 102
Pac. 586.
Nebraska. — Haas v. Mutual Life
583
§ 221 JOYCE ON INSURANCE
Ins. Co. 84 Neb. 682, 121 N. W. 996, Co. of North Ameriea, 25 Okla. 92,
26 L.R.A.(N.S.) 747n. 138 Am. St. Rep. 906, 105 Pac. 354.
New Jersey. — Bohle.s v. Prudential Oregon. — Stinchcombe v. New
Ins. Co. of Amerit-a, 84 N. J. L. 315, York Life Ins. Co. 46 Oreg. 316, 80
86 Atl. 438, aft'g 83 N. J. L. 240, 83 Pac. 213.
Atl. 904; Brooks v. Metropolitan Pennsylvania. — Central Market
Life Ins. Co. 70 N. J. L. 36, 56 Atl. Street Co. v. North British & Mer-
168; Snyder v. Dwelling-House Ins. cantile Ins. Co. 245 Pa. 272, 91 Atl.
Co. 59 N. J. L. 544, 56 Am. St. Rep. 662; Francis v. Prudential Ins. Co.
625, 37 Atl. 1022. of America, 243 Pa. 380, 90 Atl. 205;
New York. — Michael v. Prussian Binsell v. Royal Ins. Co. 240 Pa. 412,
National Ins. Co. 171 N. Y. 25, 63 N. 87 Atl. 955; Western & Atlantic
E. 810; Kratzenstein v. Western Pipe Lines v. Home Ins. Co. 145 Pa.
Assur. Co. 116 N. Y. 54, 22 N. E. St. 346, 27 Am. St. Rep. 703, 22
221, 5 L.R.A. 799; Paul v. Travel- Atl. 665, 21 Ins. L. J. 24, 48 Leg.
ers Ins. Co. 112 N. Y. 472, 3 L.R.A. Intell. 440; Philadelphia Tool Co. v.
443, 8 Am. St. Rep. 756, 20 N. E. British American Assur. Co. 132 Pa.
347 ; Foot v. ^tna Fire Ins. Co. 61 St. 236, 19 Am. St. Rep. 596, 19 Atl.
N. Y. 571, aff'g 4 Daly (N. Y.) 285; 77; Teutonia Fire Ins. Co. v. Mund,
Hoffman v. .^tna Fire Ins. Co. 32 102 Pa. St. 89; Franklin Fire Ins.
N. ■ Y. 405, 88 Am. Dec. 337, 339 ; Co. v. Brock, 57 Pa. St. 74.
Hood V. Manhattan Fire Ins. Co. 11 South Carolina. — Henderson v.
N. Y. (1 Kern.) 532, per Parker, J.; Abbeville & Greenwood Mutual In.s.
Rocker v. Great Western Ins. Co. 4 Assoc. 96 S. Car. 430, 81 S. E. 171;
Abb. App. Dec. 76 : Marvin v. Stone, Bennettsville & Cheraw Rv. Co. v.
2 Cow. (N. Y.) 781, 806; Gallagher Glens Falls Ins. Co. 96 S.' Car. 44,
V. Fidelity & Casualty Co. of N. Y. 79 S. E. 717; Rawl v. American Cen-
163 App. Div. 556, 148 N. Y. Supp. tral Ins. Co. 94 S. Car. 299, 45
1016; Darling v. Protective Assur. L.R.A. (N.S.) 463n, 77 S. E. 1037.
Soe. 71 Misc. 113, 127 N. Y. Supp. ^Quth Dakota.— Farmers' & Mer-
486 ; Porter v. Casualty Co. of chants' State Bank of Verdon v. Unit-
America, 126 N. Y. Supp. 669, 70 ed States Fidelity & Guaranty Co. 28
Misc. 246; Lite v. Firemens' Ins. Co. g. Dak. 315, 138 N. W. 247, 36
104 N. Y. Supp. 434, 119 App. Div. L.R.A. (N.S.) 1152; Bolte y. Equita-
410. ble Fire Assoc. 23 S. Dak. 240, 121
North Carolina.— KmoU v. In- n. W. 773, 38 Ins. L. J. 886.
!J^,Tlt>^/'^'^ -l"f- ?""- ^'''^- ^^l Tennessee.-Vaci^it Mutual Life
IM, 6/ S. E ;374; Jones v. Pennsyl- j^^ ^^ ^. cf^ib^.^iti ii5 Tenn. 471,
vama Casualty Co. 140 N. Car. 262, ^^., ^ g ^ gg^ g^ g ^ .3^4
V\ ^""a- ^^- J^f'^Q.^^' S^ ^- ^- v-^' T^xa*^-Indiana & 0. Live Stock
5 L.RA.(N.S) 932n; Bray y Vir- j^^ ^.^ ^ Keiningham (1913) -
ginia lire & Marine Ins. Co. 139 N. r^^^ ^-^^ ^ _ -^^^ g ^^. 334
Car 390 51 S. E 922; Kfndnck v. j^^^.^, j^^^ ^^^ ^ ^^^^^^ ^ ^ ^ Co.
Mutual Benefit Lifc^Ins^ Co. 124 N 53-^^^. ^iv. App. 154,115 S. W. 117.
Car. 31o, /O Am. St. Rep. o92, 32 o j j
S. E. 728. Compare Powell v. North Vermont.— Buran v. Standard
State Mutual Life Ins. Co. 153 N. Life & Accident Ins. Co. 63 Vt. 43^,
Car. 124, 09 S. E. 12. " 13 L.R.A. 637, 25 Am. St. Rep. 773,
Oklahoma. — Standard Accident -~ ■^^^- '"^'^O.
Ins. Co. v. Hite, "37 Okla. 305, 132 Firr/jw/fl.— Fidelity & Casualty
Pac. 333. 46 L.R.A. (N.S.) 986; Co. v. Chambers, 93 Va. 138. 40
Capital Fire Ins. Co. v. Carroll, 26 L.R.A. 432n, 24 S. E. 896; Georgia
Okla. 286, 109 Pac. 535, 39 Ins. L. Home Ins. Co. v. Bartlett, 91 Va.
J. 1258, 1264; Taylor v. Insurance 305, 50'Am. St. Rep. 832, 21 S. E.
584
CONSTRUCTION OF POLICY § 221
mutual benefit etc., societies or associations.' So the questions and
476; Mutual Assurance Soc. v. Scot-
tish Union & National In.s. Co. 84 Va.
language
116, 10 Am. St. Rep. 119, 4 S. E.
ifs.
Washington. — Montana Stables v.
Union Assur. Soc. of London, 53
Wash. 274, 101 Pac. 882.
West Virginia. — Tucker v. Coloni-
al Fire Ins. Co. 58 W. Va. 30, 51
S. E. 86: Logan v. Provident Sav-
ings Life Assur. Soc. 57 W. Va. 384,
50 S. E. 529; Cleavenger v. Franklin
Fire Ins. Co. 47 W. Va. 595, 35 S. E.
998, 29 Ins. L. J. 528, 540.
M'isconsin. — Kresge v. Maryland
Ca.sualty Co. 154 Wis. 627, 143 N. W.
668 ; Andrews v. United States Casu-
alty Co. 154 Wis. 82, 142 N. W. 487;
Siemers v. Meeme Mutual Home
Protection Ins. Co. 143 Wis. 114, 126
N. W. 669; Patterson v. Natural
Premium Mutual Life Ins. Co. 100
Wis. 118, 42 L.R.A. 253, 69 Am. St.
Rep. 899, 75 N. W. 980.
England. — Doe v. Dixon, 9 East,
15.
"It is an accepted canon of inter-
pretation that if there is any uncer-
tainty as to whether given words
were used in an enlarged or restrict-
ed sense, that construction should be
adopted which is most beiiehcial to
the covenantee." Pa.ul v. Travelers'
Ins. Co. 112 N. Y. 472, 479, 20 N. E.
347, 3 L.R.A. 443, 8 Am. St. Rep.
758, 762.
Insurance policies must be liberal-
ly construed in favor of the assured,
so as not to defeat, without a plai-n
Jieee&sity, his claim for indemnity,
and where words used may, without
violence, be given two interpreta-
tions, that which will sustain the
claim and cover the loss should be
adopted. Goodwin v. Provident Sav-
ings Life Assn. 97 Iowa, 226, 59 Am.
St. Rep. 411, 32 L.R.A. 473, 66 N.
W. 157; American Accident Co. v.
Reigert, 94 Kv. 547, 21 L.R.A. 651,
42 Am. St. Rep. 374, 23 S. W. 191.
If there is doubt or uncertainty as
to the meaning of terms employed in
a policy of insurance, the
must be liberally construed in favor
of the insured, so as not to defeat,
without a plain necessity, his claim
to indemnity, which, m effecting the
insurance it was his object to secure.
Travelers' Ins. Co. v. Dunlap, 160
111. 642, 52 Am. St. Rep. 355, 43 N.
E. 765.
When an injury approximately
proceeds from a cause whicli falls
within the limits of a policy accord-
ing to the ordinary interpretation of
the force of words, that interpre-
tation is to be preferred, rather than
one which defeats the protection of
the assured in a large class of cases.
.Etna Life Ins. Co. v. Fitzgerald,
165 Ind. 317, 112 Am. St. Rep. 232,
1 L.R.A. (N.S.) 422n, 6 Amer. & Eng.
Ann. Cas. 551, 75 N. E. 262.
A liberal construction of an insur-
ance policy, if it is a reasonable one
and will prevent injustice, should be
adopted when a literal construction
would lead to manifest injustice.
Matthews v. American Central Ins.
Co. 154 N. Y. 449, 39 L.R.A. 433, 61
Am. St. Rep. 627, 48 N. E. 751, 27
Ins. L. J. 193. Case modifies 41 N.
Y. Supp. 304, 9 Ap]). Div. 339.
"^ California. — O'Connor v. Grand
Lodge Ancient Order United Work-
men of Cal. 146 Cal. 484, 80 Pac.
688.
Georgia. — Hall v. Royal Fraternal
Union, 130 Ga. 820, 61 S. E. 977;
Warwick v. Supreme Conclave K, of
D. 107 Ga. 115, 32 S. E. 951.
Ulinnis--\\o\i\\ Circle v. Acliter-
rath, 204 111. 549, 98 Am. St. Rep.
224, 68 N. E. 492, 63 L.R.A. 452;
Semour v. Mutual Protective League,
155 111. App. 21; Marren v. North
American Union, 145 111. Apj). 375;
Mutual Protective League v. McKee,
122 111. App. 376, aff'd 223 111. 364,
79 N. E. 25; Supreme Lodge, Order
of Mutual Protectio)! v. Meister, 105
111. App. 471, aff'd 68 N. E. 454.
Indiana. — Supreme Lodge Knights
of Honor v. Abbott, 82 Ind. 1, 6;
585
§ 221 JOYCE ON INSURANCE
answers in an application, which is attached to the certificate and
expressly made a part of the contract, are to be construed most
strongly against insurer.^ Since indemnity is the ultimate object
of insurance,^ the construction should also be in favor of indemnity
and likewise for the benefit of trade ; ^° for in case of doubtful con-
Brotherhood of Painters, Decorators 35 Ins. L. J. 582; Keatley v. Grand
& Paperhangers of America v. Bar- Fraternity, 2 Boyee's (25 Del.) 267,
ton, 45 Ind. App. 160, 92 N. E. 64; 78 Atl. 874. See Sargent v. Modern
Supreme Tent Knights of the Macca- Brotherhood of America, 148 Iowa,
bees of the World v. Ethridge, 43 600, 127 N. W. 52.
Ind. App. 475, 87 N. E. 1049. ^ Manger v. Holyoke Fire Ins. Co.
Iowa.— Binder v. National Ma- 1 Holmes (U. S. C. C.) 287, Fed.
sonic Accident Assoc. 127 Iowa, 25, Cas. No. 9305; Fire Association of
102 N. W. 190; Peterson v. Modern Philadelphia v. Taylor, 76 Kan. 392,
Brotherhood of America, 125 Iowa. 91 Pac. 1070.
562, 67 L.R.A. 631, 101 N. W. 289; 1° Dow v. Hope Ins. Co. HaU (N.
Matthes v. Imperial Accident Assoc. Y.) 166, 174.
110 Iowa, 222, 81 N. W. 484, 29 Ins. See also the following eases :
L. J. 622. Colorado. — .Jennings v. Brother-
Kentucky. — Metropolitan Plate hood Accident Co. 44 Colo. 130, 130
Glass & Casualty Ins. Co. v. Howes, Am. St. Rep. 109, 96 Pac. 982.
150 Ky. 52, 42 L.R.A.(N.S.) 700n, Florida.— V Angle v. Scottish
149 S. W. 1110. Union & National Ins. Co. 48 Fla.
Missouri. — Mathews v. Modern 82, 67 L.R.A. 581, 111 Am. St. Rep.
Woodmen of America, 236 Mo. 326, 70, 37 So. 462.
139 S. W. 151; Beile v. Travelers' /ZZ/no/s.— Forest City Ins. Co. v.
Protective Assoc, of America, 155 Hardesty, 182 111. 39, 74 Am. St.
Mo. App. 629, 135 S. W. 497. Rep. 161, 55 N. E. 139, aff'g
Nebraska. — Soehner v. Grand Hardesty v. Forest City Ins. Co. 77
Lodge of Order of Sons of Herman, 111. App. 413; Schroeder v. Trade
74 Neb. 399, 104 N. W. 871. Ins. Co. 109 111. 157; Zeigler v. Clin-
New York. — Fitzpatrick v. Knights ton Mutual Fire Ins. Co. 84 111. App.
of Columbus, 128 N. Y. Supp. 366, 442; Railway OfHcials & Employee's
143 App. Div. 540. Accident Assoc, v. Coady, 80 111.
North Dakota. — Clemens v. Royal App. 563.
Neighbors of America, 14 N. Dak. Iowa. — McCluer v. Girard Fire &
116, 103 N. W. 402. Marine Ins. Co. 43 Iowa, 349, 22 Am.
Oklahoma. — AYoodmen of the Rep. 249.
World V. Gilliland, 11 Okla. 384. 67 Kansas. — Fire Association of
Pac. 485. ' Philadelphia v. Tavlor, 76 Kan. 392.
Texas.— Roth v. Travelers' Pro- 91 Pac. 1070.
tective Assoc. 102 Tex. 241, 132 Am. Kentucky. — Spring Garden Ins.
St. Rep. 871. 115 S. W. 31 ; Hay- Co. v. Imperial Tobacco Co. 132 Kv.
wood V. Grand Lodge of Texas 7, 20 L.R.A. (N.S.) 277, 116 S. W.
Knights - of Pvthias, — Tex. Civ. 234. 38 Ins. L. J. 446.
App. — , 138 S. W. 1194; Daniel v. Nebraska.— Plv^nix Ins. Co. v.
Modern Woodmen of America, 53 Barnd, 10 Neb. 89, 20 N. W. 105.
Tex. Civ. App. 570, 118 S. W. 211. Pennsylvania. — Grandin v. Roch-
Vermont. — Brock v. Brotherhood ester Ins. Co. 107 Pa. St. 26; Teu-
Accident Co. 75 Vt. 249, 54 Atl. 176. tonia Ins. Co. v. Mund, 102 Pa. St.
^ Modem Woodmen of America v. 89.
Wilson, 76 Neb. 344, 107 N. W. 568,
586
CONSTRUCTION OF POLICY
§ 221
struction insurance is held to be a contract uberrimae fidei.^^ And
every presumption in favor of good faith will be indulged in in con-
struing policy clauses.^^ So it is held that policies of insurance cre-
ate reciprocal rights and obligations which require the utmost good
faith in both parties/^ and "the strictum jus or apex juris is not to
be laid hold on.'"' ^* The fact that contracts were drawn up gener-
ally in a loose and inartificial manner gave a reason for the rule
that policies are to be construed liberally.^^ It was early stated,
however, by Emerigon, in considering whether the contract was one
stricti juris or bonae fidei,^^ that "so far as the nature of the contract
will allow, the chance of the insurer and of the insured must be the
same," and the courts frequently show a disposition to somewhat
modify the rule of liberal construction,^'' and to do in these con-
tracts, OS in others, equal justice between the parties as far as the
nature of the contract renders it possible.^^ There are numerous
cases, however, where a rule which contemplates less than a liberal
Vermont. — Brink v. Merchants' &
Mechanics Ins. Co. 49 Vt. 442.
West Virginia. — Miller v. Citizens
Fire, Marine & Life Ins. Co. 12 W.
Va. 116, 29 Am. Rep. 452.
England. — Pelly v. Royal Exch.
Assur. Co. 1 Burr. 341, 349, 14 Eng-.
Rul. Cas. 30; Bond v. Gonzales, 2
Salk. 445, per Lee, C. J.
^^ Coram v. Sweeting, 2 Saund.
550, note; Wolff v. Horncastle, 1
Bos. & P. 316, 322, 13 Eng. Rul. Cas.
2(j5. ''Iste contractus assecurationi
est bonaa fidei . . . et practican-
dus non est cum juris apicibus et
rigoribns" : Eraerigon on Insurance,
(Meredith's ed. 1850) c. i. sec. 5, p.
17, citing Casaregis, disc. 1, n. 2.
^2 Northern Assur. Co. v. Carpen-
ter, 52 Ind. App. 432, 94 N. E. 779,
40 Ins. L. J. 1218.
^3 Natchez Ins. Co. v. Stanton, 2
Smedes & M. (Miss.) 340, 375, 41
Am. Dec. 592.
"Pelly V. Roval Exch. Assur. Co.
1 Burr. "341, 349, 14 Eng. Rul. Cas.
30, per Lord Mansfield, adopting
opinion of Lee, C. J.
15 ''Policies of insurance are gen-
erally drawn up in loose and inarti-
ficial language, and indeed in the
language of common life, and there-
fore are always construed liberal -
58
ly : " Palmer v. Warren Ins. Co. 1
Storv (C. C.) 360, 365, Fed. Cas. No.
10,658.
^^ Emerigon on Insurance (Mere-
dith's ed. 1850) c. i. sec. 5, p. 18.
^^ See § 221 herein. See McEvory
V. Security Fii-e Ins. Co. 110 Md.
275, 22 L.R.A.(N.S.) 942n, 132 Am.
St. Rep. 428n, 73 Atl. 157, 38 Ins.
L. J. 895, 898, per Pearce, J., who
declares that in Maryland the rigor
of the prevailing rule to construe
all insurance policies strictly against
the company has been relaxed to a
certain extent.
18 Phoenix Ins. Co. v. Slaughter, 12
Wall. (79 U. S.) 404; Merchants'
Ins. Co. V. Davenport, 17 Gratt.
(Va.) 138, "We should, however,
have great doubts whether this rule
of liberal construction has been in-
variably followed. It has certainly
been modified and restrained in
recent cases by a disposition to treat
these contracts like all other con-
tract, in such a way as shall do equal
justice to all interested." 1 Parsons
on iNIai-ine Insurance, ed. 1868, 67, 68,
citing several cases criticising Mr.
Oner's statement (1 Duer on Insur-
ance [ed. 1845] 212) that a liberal
construction had been invariably fol-
lowed.
§ 221a JOYCE ON INSURANCE
construction in favor of tlie iiiniired and of indemnit}^ would result
in gross injustice to the insured. ^^
Although a construction as favorable to the insured as reasonably
may be, must be given to a policy of insurance, still it should be
onh^ a natural and logical construction, not a strained or sophistical
one.^" And the rule that all ambiguities, obscurities, and uncer-
tainties in a jtolicy of fire insurance are to be resolved most favor-
ably to the assured has no application whatever to plain language
used in such connection as to leave no room to say reasonably that
the parties might have intended either of two meanings.^ .
§ 221a. Same subject. — That part of a policy which relates to
preliminary proofs of loss should be construed liberally in favor of
assured.^ And in construing conditions of a policy, to be complied
with subsequent to an event resulting in loss or injury for which
indemnity is claimed, with respect to the giving of notice of the loss
or injury, and preliminary proofs thereof, a more liberal construc-
tion will be given in favor of the beneficiary than when the condi-
tions are to be complied with prior to loss or injury, for the pur-
pose of continuing the policy in force and effect.^ So it is declared
that it is well settled that when liability has become fixed by the
capital fact of loss within the range of the responsibility assumed in
the contract, courts are reluctant to deprive assured of the benefit of
that liability by any narrow or technical construction of the condi-
^9 See § 248 herein ; Anderson v. Am. St. Rep. 206, 40 Pao. 453 ; Union
Eitzgerald, 4 H. L. Cas. 484, 507; Life Ins. Co. v. Jameson, 31 Ind.
17 Jur. 995, 24 Eng. L. & E. 1, per App. 28, 67 N. E. 199; Dahms &
Lord St. Leonards. "Many early ad- Sons Co. v. German Fire Ins. Co. 153
judications may be found, and not a Iowa, 168, 132 N. W. 870, 40 Ins. L.
few recent ones also, in which con- J. 2133, 2138.
tracts of insurance, and especially of The rule that an insurance policy
life insurance, have been construed in is to be construed in favor of the in-
such a manner as to operate with sured does not a]3iilv when there is
great harshness and injustice to poli- no ambiguity in the policy, no in-
ey holders." Alabama Gold Life consistent or conflicting })rovisionR,
Ins. Co. V. Johnson, 80 Ala. 467, .59 and nothing requiring construction
Am. Rep. 816, 2 So. 125. And see or interpretation. Holmes v. Phenix
remarks on this point in Bacon's Ins. Co. 39 C. C. A. 45, 98 Fed. 240,
Benefit Societies and Life Insurance, 47 L.R.A. 308.
(1st ed.) sec. 192. 2 i^^a^.j-ell v. Farmers' & Merchants
20Bader v. New Amsterdam Ca.su- Ins. Co. 84 Ntb. 72, 120 N. W. 929,
alty Co. 102 Minn. 186, 120 Am. St. 38 Ins. L. J. 685; Dakiii v. Queen
Rep. 613, 112 N. W. 1065. City Fire Ins. Co. 59 Greg. 269, 117
1 Thurston v. Barnett & Beaver Pac. 419, 40 Ins. L. J. 1892. See §
Dam Farmers' IMutual Fire Ins. Co. 3275.
98 Wis. 470, 41 L.R.A. 316, 74 N. W. 3 W.oodmeiis Accident Assoc, v.
131 ; Brickell v. Atlas A.ssur. Co. Ltd. Byers (Pratt) 62 Neb. 673, 55 L.R.A.
10 Cal. App. 17, 101 Pac. 16 ; German 291, 87 N. W. 546.
Ins. Co. V. Havden, 21 Colo. 124, 52
588
CONSTRUCTION OF POLICY
§ 221b
tions and stipulations which prescribe the formal requisites by
means of which this accrued right is to be made available for his
indemnitication.* And this applies to formalities for ascertaining
or adjusting a marine loss.^ So a demand in writing for appraisers
will when ambiguous be construed strongly against the insurer.^
§ 221b. Same subject: kinds of insurance to which rule appli-
cable.^'' — The rule above given that construction should be liberal
in favor of assured when the contract is reasonably susceptible of
two constructions applies to accident policies; ' automobile policies; *
employers liability or indemnity insurance contracts;^ tornado in-
surance against loss of live stock ; ^° fidelity or guaranty insurance ;
11
* Serg'ent v. London & Liverpool &
Globe Ins. Co. 155 N. Y. 349, 49 N.
E. 935, 28 Ins. L. .1. 59, ease revers-
es 85 Hun, 31, 32 N. Y. Supp. 594.
5 Porter v. Traders Ins. Co. 164
N. Y. 504, 52 L.R.A. 424, 58 N. E.
641, 53 N. Y. Supp. 1112.
® Grand Rapids Fire Ins. Co. v.
Finn, 60 Ohio St. 513, 42 Oliio L. ,1.
213, 42 Wkly. L. Bull. 213, 71 Am.
St. Rep. 736, 54 N. W. 545, 50 L.R.A.
555.
fia See also §§ 206c, 222a herein.
' United States. — Sudduth v. Trav-
elers Ins. Co. (U. S. C. C.) 106 Fed.
822.
Georgia. — Thornton v. Travelers'
Ins. Co. 116 Ga. 121, 94 Am. St. Rep.
99, 42 S. E. 287.
Illinois. — National Ma.sonie Acci-
dent Assoc, v. Gced, 95 111. App. 43.
North Carolina. — Rayburn v.
Pennsylvania Casualty Co. 138 N.
Car. 379, 107 Am. St. Rep. 548, 50
S. E. 762.
Pennsjilvania. — Gavnia v. United
States Health & Accident Ins. Co.
63 Leg. Intell. 288, 15 Dist. Rep.
432.
West Virginia. — Beard v. Indemni-
ty Co. 65 W. Va. 283, 64 S. E. 119.
Wisconsin. — French y. Fidelity &
Casualty Co. 135 Wis. 259, 17 L.R.A.
(N.S.) "lOll, 115 N. W. 869.
An accident policy should be in-
terpreted so as to e.Ktend its protec-
tion over as wide a field of acciden-
tal injury as is consistent with its
language, but it.s natural meaning
must not be violated. Banta v. Con-
589
tinental Casualty Co. 134 Mo. App.
222, 113 S. W. 1140, 39 Ins. L. J.
243. See Beile v. Travelers Pro-
tective Assoc, of America, 155 Mo.
App. 629, 135 S. W. 497, 40 Ins. L.
.1. 1028, 1037 (accident policy issued
by mutual benefit society) ; Moest v.
Continental Casualty Co. 104 N. Y.
Supp. 553, 55 Misc. 128.
^ Dougherty v. Insurance Co. of
North America, 38 Pa. Colinty Ct.
Rep. 119.
^ Home Mixture Guano Co. v.
Ocean Accident & Guarantee Co. Ltd.
of London, 176 Fed. 600; United
Zinc Cos. V. General Accident Assur.
Corp. Ltd. of Perth, 144 Mo. App.
3a0, 128 S. W. 836, 39 Ins. L. J.
1177; Mears Mining Co. y. Maryland
Casualty Co. 162 Mo. App. 178, 191,
144 S. W. 883; Henderson Ligliting
& Power Co. v. Maryland Casualty
Co. 153 N. Car. 275, 30 L.R.A. (N.S.')
1105 note, 69 S. E. 234; Fenton v.
Fidelity & Casualty Co. 36 Oreg.
283, 48 L.R.A. 770, 56 Pac. 1006.
See § 220b herein.
^° Jordan v. Iowa Mutual Tornado
Ins. Co. of Des Moines, 151 Iowa, 73,
Ann. Cas. 1913A, 266, 130 N. W.
177.
^^ United States. — American Sure-
ty Co. V. Pauly, 170 U. S. 133, 42 L.
cd. 977, 18 Sup. Ct. 552.
Arkansas. — Title Guaranty & Sure-
tv Co. v. Bank of Fulton,' 89 Ark.
471, 33 L.R.A. (N.S.) 676, 117 S.
W. 537, 38 Ins. L. J. 722; American
Bonding Co. v. Morrow, 80 Ark. 49,
117 Am. St. R«p. 72, — S. W. — .
§ 222 JOYCE ON IXSUKANCE
contract guaranty insurance; ^^ and a Lloyds policy. ^^
A contract indemnifying a merchant against a credit loss should
also be construed most strongly against the insurer. Ambiguities
should be reconciled if possible by gathering the intent of the par-
ties to the whole instrument and if the particular clause requiring
interpretation cannot be thus brought into harmony with the rest
of the contract touching the precise loss which the policy covers,
that meaning is to be given to it which is most favorable to in-
sured.^*
§ 222. Same subject : the rule contra proferentem. — It is a settled
rule of construction that in cases of doubt policies of assurance
shall be construed strictly against the insurer in accordance with
the rule "verba fortius accipiuntur contra proferentem." So of two
interpretations equally reasonable that construction most favorable
to the assured must be adopted, for the language is that of the in-
surers/^ and if the terms of the policy are such that reasonable and
Colorado.— Amei'idaxi. Bonding & ing Co. of Bait. 112 Minn. 288, 33
Trust Co. of Bait. v. Burke, 36 Colo. L.R.A.(N.S.) 513 and note, 128 N.
99, 55 Pac. 692, 35 Ins. L. J. 642. W. 12, 40 Ins. L. J. 137.
Georgia. — See Moorefield v. Fideli- ^^ Imperial Shale Brick Co. v. Jew-
ty Mutual Life Ins. Co. 135 Ga. 186, ett, 169 N. Y. 143, 62 N. E. 167.
69 S. E. 119. ^^ Lexington Grocery Co. v. Phila-
IntZiaH a.— American Surety Co. of delphia Casualty Co. 157 N. Car. 116,
N. Y. V. Pangburn, 180 Ind. 116, 105 72 S. E. 870, citing Mercantile Cred-
N. E. 768. it Guarantee Co. of N. Y. v. Wood,
Kentucky.— Cham\)\on Ice Manu- 68 Fed. 529, 15 C. C. A. 563. See
facturing & Cold Storage Co. v. also Mercantile Credit & Guaranty
American Bonding & Trust Co. 115 Co. v. Littleford Bros. (Ohio) 18
Ky. 863, 103 Am. St. Rep. 356, 75 Cir. Ct. Rep. (42 Wkly. L. Bull.)
S. W. 197. 889. Compare Philadelphia Casual-
Missouri. — Long Bros. Grocery Co. ty Co. v. Cannon & Byers MiUinery
V. United States Fidelity & Guaranty Co. 133 Ky. 745, 118 S. W. 1004.
Co. 130 Mo. App. 421, 110 S. W. 29. ^^ Vnited States.— Royal Ins. Co. v.
North Carolina.— Bank of Tarboro Martin, 192 U. S. 149, 48 L. ed. 385,
V. Fidelity & Deposit Co. 126 N. Car. 24 Sup. Ct. 347. (If such inter-
366, 83 Am. St. Rep. 682, 38 S. E. pretation is not inconsistent with
908. the words used. Cited in Lefler v.
Tennessee. — Hunter v. United New York Life Ins. Co. 143 Fed. 814,
States Fidelity & Guaranty Co. 129 819, 74 C. C. A. 488, 493 ; Atlas Re-
Tenn. 572, 167 S. W. 692. duction Co. v. New Zealand Ins. Co.
Texas.— Qvimn v. Zuber, 52 Tex. 9 L.R.A.(N.S.) 433, 138 Fed. 497,
Civ. App. 288, 113 S. W. 961. 512, 71 C. C. A. 21, 36) ; Accident
Washington. — Remington v. Fidel- Ins. Co. v. Crandal, 120 U. S. 527,
ity & Deposit Co. of Md. 27 Wash. 30 L. ed. 740, 7 Sup. Ct. 685; Grace
429, 67 Pac. 989. v. American Central Ins. Co. 109 U.
Wisconsin. — Vnited American S. 278, 27 L. ed. 932, 3 Sup. Ct. 207;
Fire Ins. Co. v. American Bonding Phcenix Ins. Co. v. Slaughter, 12
Co. of Bait. 146 Wis. 57.3, 40 L.R.A. Wall. (79 U. S.) 404, 20 L. ed. 444;
(N.S.) 661, 131 N. W. 994. Orient Mutual Ins. Co. v. Wright, 1
i2Hormel & Co. v. American Bond- Wall. (68 U. S.) 456, 17 L. ed. 505;
590
CONSTRUCTION OF POLICY § 222
intelligent men would honestly differ as to its meaning, it will be
Palatine Ins. Co. v. Ewing, 92 Fed. Fire Ins. Co. 110 Md. 275, 132 Am.
Ill, 114, 34 C. C. A. 236, 239; Fi- St. Rep. 428 note, 22 L.R.A.(N.S.)
delity Mutual Life Ins. Co. v. Miller, 942, note, 73 Atl. 157, 38 Ins. L. J.
92 Fed. 63, 73, 34 C. C. A. 211, 220, 895, 898.
63 U. S. App. 717 ; McMaster v. New Louisiana. — Weil v. New York
York Life Ins. Co. (U. S. C. C.) 90 Life Ins. Co. 47 La. Ann. 1416, 17
Fed. 40, 28 Ins. L. J. 960, 99 Fed. So. 853.
856, 878, 40 C. C. A. 119, 131 s. c. Minnesota.— Olson, v. St. Paul Fire
183 U. S. 25, 46 L. ed. 64, 22 Sup. & Marine Ins. Co. 35 Minn. 432, 29
Ct. 10, 31 Ins. L. J. 555; Liverpool N. W. 125, 59 Am. St. Rep. 333;
London & Globe Ins. Co. v. McNeill, Broadwater v. Lion Fire Ins. Co. 34
89 Fed. 131, 137, 32 C. C. A. 173, Minn. 466, 26 N. W. 455; Chandler
180, 59 U. S. App. 499; Wallace v. v. St. Paul Fire & Marine Ins. Co.
German American Ins. Co. 41 Fed. 21 Minn. 85, 18 Am. Rep. 385.
742; Teutonia Ins. Co. v. Boylston Mississippi. — Shivers v. Farmers
Mut. Ins. Co. 20 Fed. 148; Catlin v. Mutual Fii-e Ins. Co. 99 Miss. 744,
Springfield Ins. Co. 1 Sum. (C. C.) 55 So. 965, 40 Ins. L. J. 1706.
440. Missouri. — Burnett v. American
BelcAoare. — Continental Ins. Co. v. Casualty Ins. Co. 63 Mo. App. 343.
Rosenberg, 7 Penn. (Del.) 174, 74 Nebraska. — Connecticut Fire Ins.
Atl. 1073, 39 Ins. L. J. 392. Co. v. Jeary, 60 Neb. 338, 51 L.R.A.
Georgia.— Mutual Life Ins. Co. v. 698, 83 N. W. 78.
Durden, 9 Ga. App. 797, 72 S. E. New York. — Matthews v. American
295. See Royal Union Life Ins. Co. Central Ins. Co. 154 N. Y. 449, 39
V. McLendon, 4 Ga. App. 620, 62 S. L.R.A. 443, 61 Am. St. Rep. 627, 48
E. 101. N. E. 751, 27 Ins. L. J. 193, 195,
Illinois. — Healey v. Mutual Aeci- per Van, J.; Darrow v. Family Fund
dent Assoc. 133 111. 556, 9 L.R.A. Soc. 116 N. Y. 537, 27 N. Y. 474, 15
371, 23 Am. St. Rep. 637, 25 N. E. Am. St. Rep. 430, 6 L.R.A. 495, 22
52; American Cent. Ins. Co. v. Roth- N. E. 1093; Paul v. Travelers' Ins.
child, 82 111. 166 ; Travelers' Preferred Co. 112 N. Y. 479, 8 Am. St. Rep.
Aeci. Ins. v. Kelsey, 46 lU. App. 758, 762, 3 L.R.A. 443, 20 N. E. 347 ;
371. Allen v. St. Louis Ins. Co. 85 N. Y.
Indiana. — Hay v. Meridian Life & 473; Foot v. ^tna Life Ins. Co. 61
Trust Co. 57 Ind. App. 536, 101 N. N. Y. 571, 575, 4 Daly, 285; Hoffman
E. 651, 105 N. E. 919 ; Northern v. iEtna Ins. Co. 32 N. Y. 405, 88 Am.
Assurance Co. of London v. Car- Dec. 337; Christy v. American Tem-
penter. 52 Ind. App. 432, 94 N. E. perance Life Ins. Assoc. 68 Misc.
779, 40 Ins. L. J. 1218, 1222. 178, 123 N. Y. Supp. 740.
Kansas. — Citizens State Bank of North Carolina. — Higson v. North
Chautauqua v. Shawnee Fire Ins. Co. River Ins. Co. 152 N. Car. 206, 67
91 Kan. 18, 49 L.R.A. (N.S.) 972, S. E. 509.
137 Pac. 78. Ohio. — Farmers National Bank v.
Kentucky. — Montgomery v. Fire- Delaware Ins. Co. 83 Ohio St. 309,
men's Ins. Co. 16 B. Mon.'(Ky.) 427. 94 N. E. 834, 40 Ins. L. J. 1248, 1258.
Maine. — Wright v. Fraternities Pennsylvania. — Philadelphia Tool
Health & Accident Assoc. 107 Me. Co. v. Britisli American Assur. Co.
418, 32 L.R.A. (N.S.) 461, 78 Atl. 132 Pa. St. 236, 19 Am. St. Rep.
475, 40 Ins. L. J. 551, 553, 554; Bart- 596, 25 Week. Not. Cas. 370; White
lett V.' Union Insurance Co. 46 Me. v. Smith, 33 Pa. St. 186, 75 Am. Dec.
500. 589 ; Westem Co. v. Cropper, 32 Pa.
Maryland. — McEvoy v. Security St. 351, 75 Am. Dec. 561; Alemania
591
§ 222 JOYCE ON INSURANCE
construed against the insurer; ^^ and this is so of equivocal expres-
sions which would narrow the range of the insurer's obligations,"
and the rule ai)pHes to clauses restrictive of the company's liability
in an accident policy/* and to accident policies generally,^^ and to
exceptions,^" and to conditions and provisions whicli would narrow
the range and limit the force of the principal obligation or lessen
the indemnity.^ And where a clause in a policy of reinsurance
provided: "This insurance to be on the excess which the T. In-
surance Company may have on all their policies on cotton, sugar,
and molasses and cotton seed, issued at their office in New Orleans,
or at their Shreveport agency, as follows, viz., on the excess of ten
thousand dollars on boats from places on the Mississippi river, but
said excess not to exceed five thousand dollars by any one boat," it
was decided that the words "on boats" indicated that more than
Fire Ins. Co. v. Pittsburg Exposi- solved against liim. No word in the
tiou Soc. — Pa. — , 11 Atl. 572, 4 policy should be disregarded, no am-
Pa. (L. ed.) 718, 10 Cent. R«p. 292; biguity sliould be resolved in favor
Primrose v. Casualty Cos. of Ameri- of the company. New York & Porto
ca, 67 Leg. Intell. 308, 37 Pa. Co. Ct. Rico Steamship Co. v. Aetna Ins. Co.
Rep. 441. (U. S. D. C.) 192 Fed. 212.
Texas. — Dorroh-Kellv Mercantile ^® Kratzenstein v. Western Assur.
Co. V. Orient Lns. Co. "l04 Tex. 199, Co. ll(j N. Y. 54, 26 N. Y. 453, 456,
335 S. W. 1165, 40 Ins. L. J. 1211, 5 L.R.A. 799, 22 N. E. 221.
1214; Mutual Life Ins. Co. v. Ford, ^'''Commercial Ins. Co. v. Robin-
— Tex. Civ. Api). ^, 130 S. W. 769; son, 64 111. 265, 16 Am. I^e]). 557.
London & Lancaster Fire Ins. Co. v. ^^ United States Mut. Acci. Assn.
Davis, 37 Tex. Civ. App. 348, 84 v. Newman, 84 Va. 52, 3 S. E. 805.
S. W. 260. i^Burkheiser v. Mutual Accident
Rhode Island.— Wilson v. Conway Assoc. 61 Fed. 816, 10 C. C. A. 94,
Fire Ins. Co. 4 R. I. 141. 18 U. S. App. 704, 26 L.R.A. 112;
Vermont. — Brink v. Merchants' & Fidelity & Casualty Co. v. Mever,
Mechanics Ins. Co. 49 Vt. 442. 106 Ark. 91, 44 L.R.A. (N.S.) 493,
Ffr^rm/a..— Stratton's Admr. v. 152 S. W. 995; In'histrial Mutual
New York Life Ins. Co. 115 Va. 257, Indemnity Co. v. Hawkins, 94 Ark.
78 S. E. 636. 417, 29 L.R.A.(N.S.) 635, 127 S. W.
Washington. — Burbank v. Pioneer 457; Wilkinson v. Aetna Life Ins.
Mutual Ins. Assoc. 60 Wash. 253, 110 Co. 240 111. 205, 25 L.R.A.(N.S.)
Pac. 1005, Ann. Cas. 1912B, 762; 1256, 88 N. E. 550; Schumacher v.
Port Blakely Mill Co. v. Springfield Great Eastern Casualty & Indemnity
Fire & Marine Ins. Co. 59 Wa^h". 501, Co. 197 N. Y. 58, 27 L.R.A.(N.S.)
28 L.R.A. (N.S.) 596 note, 140 Am. 480 note, 90 N. E. 353, 39 Ins. L. J.
St. Rep. 863, 110 Pac. 36. 428, 432. See § 221b herein.
West Virginia. — Bryan v. Peabody 2° Grant v. Lexington Fire, Life &
Ins. Co. 8 W. Va. 605. ' Marine Ins. Co. 5 'ind. 23, 61 Am.
England. — Fowkes y. Manchester Dec. 74. See § 220 herein.
& London Life Assur. & Loan Assoc, ^ Hoffman v. ^Fltna Fire Ins. Co.
3 Best & S. 917. 32 N. Y. 405, 88 Am. Dec. 337; Au-
The policy being prepared by the rora Fii'e Ins. Co. v. Eddy, 49 111.
underwriter under the canon contra 106.
proferentum, any ambiguity is re-
592
CONSTRUCTION OF POLICY § 222
the freiftht was included.^ So the clause in a policy requiring no-
tice of loss and a particular account of the same will be construed
liberally against the insurer.^ But it is said by Lord Bacon * that
"this rule contra proferentem is the last to be resorted to, and is
never to be relied upon, but where all other rules of exposition
fail ; " and it is held in a New York case ^ that the rule that an
insurance contract is to be construed most strongly against the in-
surer is to be resorted to only where the language or some of the
terms of the contract remain of doubtful import after the use of
such other helps in construction as are proper. Story, J., recog-
nizes the rule in Palmer v. Warren Insurance Company,^ where
he holds that a clause in the nature of an exception, if supposed to
be ambiguous, must be construed most strongly against the insurer.
So Lord Lyndhurst, in Blackett v. Royal Exchange Assurance
Company,'^ says : "The rule of construction as to exceptions is that
they are to be taken most strongly against the party for whose
benefit they are introduced. The words in which they are ex-
pressed are considered as his words; and if he do not use Avords
clearly to express his meaning, he is the person who ought to be
the sufferer." Mr. Duer ^ distinguishes in the application of this
rule between words introduced "for the benefit of the insurers" and
the "words of the insurer," and says: "If the words of a clause are
to be construed strictly against the pai'ty for whose benefit it is in-
troduced, the main provisions of the policy must be construed
strictly against the assured . . . and his indemnitv reduced
to the narrowest possible limits." ^ In another case, Story, J.,^"
speaks of this rule as "a mere technical rule of construction." But
that this expression should be regarded as obiter accords clearly
with the opinion of Mr. Duer.^^ Mr. Parsons ^^ thinks that the
rule contra proferentem has been "preased quite too far in favor
of the insured," since insurance contracts are the result of nego-
tiations and an agreement, and that "it is difficult to see how the
words can be regarded as any more the words of the insurer than
2 Teutonia Ins. Co. v. Boylston ' 2 Crorap. & J. 244, 250, 14 Eng.
Mut. Ins. Co. 20 Fed. 148. Rnl. Cas. 179.
^ McLaughlin V. Washington Coun- *1 Duer on Ins. (ed. 1845) 214.
ly Mut. Ins. Co. 23 Wend. (N. Y.) See also Id. 209-11.
524; Barker v. Phoenix Ins. Co. 8 ^Citing Yoaton v. Fry, 5 Cranch
Johns. (N. Y.) 307, 5 Am. Dec. 339. (9 U. S.) 335, 3 L. ed. 117.
See § 221a herein. i° Donnell v. Columbia Ins. Co. 2
* Bacon's Max. Reg. 3. Sum. (C. C.) 3G6, 381, Fed. Cas. No.
^ Foot V. ^tna Life Ins. Co. 61 N. 3,987.
Y. 571. 11 1 Duer on Ins. (ed. 1845) 214.
^1 Story (C. C.) 360, Fed. Cas. ^^ 1 Parsons on Ins. (ed. 1868) 69
No. 10,698. etseq.
Joyce Ins. Vol. I.— -38. 593
§ 222 JOYCE ON INSURANCE
of the assured." Considered from a strictly legal standpoint this
is true, for the contract of insurance, when consummated, is sup-
posed to be one upon the terms of which the minds of the parties
have met or concurred, and the insured is on general principles
presumed to know the contents of a policy which he has accepted,
and should therefore be bound by its terms.^^ But an examination
of the cases discovers that the rule of construction against the in-
surer obtains, because the applications and policies are framed by
insurers in their interest, and the insured is in a measure bound
to accept them. The terms of these contracts are seldom, if ever,
the result of negotiations in the same sense that other contracts
are. Very strong t^rms have been used at various times against
the practice of many insurance companies to issue applications and
policies which "are illegible and unintelligible to the generality of
mankind," ^* and the abuses which have arisen in consequence and
the injustice resulting to the insured have been the occasion for
legislative interposition in many states, and a rule of liberal inter-
pretation in favor of indemnity and the assured and against the
insurer has been followed as far as possible. Thus it is said by
the court in Brink v. Merchants' & Mechanics' Insurance Com-
pany ^* that "it is a fundamental rule in the law of insurance that
the policy shall be construed most strongly against the insurer and
liberally in favor of the insured. . . . They use their own
language, and surround and barricade their liability under it with
such defenses as they choose to adopt. . . . There is obvious
reason for the rule of liberal construction in favor of the man
whose legal rights are to be extracted from such a labyrinth of
mysticism." And in an Iowa case ^^ the court declares: "It is quit«
time that the technical constructions which have pertained, with
reference to contracts of this kind blocking the pathway to justice
and leading to decisions opposed to the general sense of mankind,
should be abandoned." To the same effect, although expressed in
much stronger terms, are the words of Doe, C. J., in Rockingham
13 Moore v. State Ins. Co. 72 Iowa, Carpenter, 52 Ind. App. 432, 94 N. E.
414, 34 N. W. 183 ; Brown v. Massa- 779, 40 Ins. L. J. 1218, 1222, quoting
chusetts Mut. Life Ins. Co. 59 N. H. from Glens Falls Ins. Co. v. Michael,
298, 47 Am. Rep. 205; Hawkins v. 167 Ind. 659, 8 L.R.A.(N.S.) 708, 74
Rockfort Ins. Co. 70 Wis. 1, 35 N. W. N. E. 964, 79 N. E. 905, see also
34, per Cassody, J.; Herbst v. Lowe, Wright v. Fraternities Health & Ac-
OS Wis. 321, 26 N. W. 751 ; Morrison cident Assoc. 107 Me. 418, 32 L.R.A.
V. Phelps, 44 Wis. 410. (N.S.) 461, 78 Atl. 475, 40 Ins. L. J.
1* De Lancey v. Rockingham Mut. 551, 554, per King, J.
Fire Ins. Co. 52 N. H. 581, per Doe, i^ 49 yt. 457.
C. J. See opinion of Adams, J. iri ^^ Miller v. Mutual Benefit Life Ins.
Northern Assurance Co. of London V. Co. 31 Iowa, 226; 7 Am. Rep. 122.
594
CONSTRUCTION OF POLICY § 222a
V. Mutual Fire Iiisunuice Company," who refers to the policies
prepared by the companies and to the numerous conditions against
forfeiture, and says; ''These provisions were of such bulk and
character that they would not be understood by men in general,
even if subjected to a careful and laborious study." ^^ So in the
case of warranties, which we shall consider hereafter,^^ the courts
will not favor them by construction ; ^" and in this connection it
is said by the court in another case ^ that "the rapid gTowth of the
business of life insurance in the past quarter of a century, with the
tendency of insurers to exact incretisingiy rigid and technical con-
structions, and the evils resulting from an abuse of the whole sys-
tem, justify, if they do not necessitate, a departure from the rigid-
ity of our earlier jurisprudence on this subject of wai'ranties." And
in the same case the court also declares that "all the conditions of
the contract and the obligations imposed"' will be construed "liber-
ally in favor of the assured and against the insurer."
§ 222a. Same subject.^" — The rule contra proferentem, above
given, applies to a life policy renewal receipt and a printed clause
on the back thereof written on forms prepared by the insurer.'^ The
rule also applies to answers in an application to questions prepared
by insurer ; ^ a policy providing for payment of a weekly indem-
nity;* a burglary insurance contract;* employers liability or
indemnity insurance contracts;® fidelity or guaranty insur-
" 52 N. H. 581, 587. Jn^. Co. 116 N. Y. Supp. 617. See
^^ And see also Kausal v. Minneso- § 221 herein,
la Farmeis' Mut. Fire Ins. Assn. 31 * Porter v. Casualty Co. of Amori-
Minn. 17, 21, 47 Am. Rep. 776, 16 N. ca, 126 N. Y. Supp"^. 669, 70 Misc.
W. 430. 246.
^^ See c. 45, §§ 1942 et seq. herein. *Ro.senthal v. American Bonding
See also § 20nb herein. Co. of Bait. 124 N. Y. Supp. !)05,
^^ Vivar v. Supreme Lodge Knights ea.se rev'd 128 N. Y. Supp. 553, 143
of Pythias, 52 N. J. L. 455, 20 AtL 36. App. Div. 362, which was rev'd 207
Examine McClain v. Provident Sav- N. Y. 1()2, 100 N. E. 716.
ings Life Assur. Soc. 110 Fed. 80, 49 ® London Guarantee & Accident
C. C. A. 31, s. c. 184 U. S. 699, 46 Ins. Co. v. Morris, 156 111. App.
L. ed. 765, 23 Sup. Ct. 938; O'Con- 533; Fairbanks Canning Co. v. Lon-
nor v. Grand Lodge Ancient Order don Guarajitv & Accident Co. 154
United Workmen, 146 Cal. 484, 80 Mo. App. 327, 133 S. W. 664, 40
Pac. 688. ]ns. L. J. 583, 585, 586. The court,
^Alabama Gold Life Ins. Co. v. per Ellison, J., said: "The eon-
Johnson, 80 Ala. 467, 472, 60 Am. tract, . . . i? not alone wiUi
Rep. 112, 2 So. 128. Nelson Morris & Co., but is with
^^ See also §§ 206c, 220b, 221b others mentioned in the schedule, in
herein. which plaintiff's name is found.
^^^]tna Life Ins. Co. v. Smith, 88 Plaintiff is tliercbv named as one of
Fed. 440, 31 C. C. A. 575, 28 Ins. L. the contracting parties. But even if
J. 36. it should be conceded that there was
^ Diamond v. Metropolitan Life some ambiguity as to whether plain-
^ 595
§§ 222b, 222c JOYCE OX INSURANCE
ance,"^ and ceilificates in mutual benefit, etc., societies or associa-
tions.^
§ 222b. Same subject: employers' liability policy. — The rule
that the insurer is responsible for the language used in the policy,
and that the meaning most favorable to insured must be accepted
applies to an employers' liability policy.^
§ 222c. Same subject: accident policy under workmen's com-
pensation act. — Where a policy is taken out, under the Workmen's
Compensation Act of England of 1906, against accidents to em-
ployees, it ought, in case of ambiguity, to be construed against the
society issuing the policy and in favor of the claimant. Condi-
tions precedent to the "insurers liability to pay should be made
especially clear both in the proposal form and in the policy based
thereon, for such conditions have the same effect as forfeiture
clauses, and may inflict loss and injury to assured and those claim-
ing under him out of all proportion to any damage that could pos-
sibly accrue to the company from nonobservance or nonperform-
ance of the conditions. It is therefore established that the doctrine
that policies are to be construed contra proferentes applies strongly
to the insurer.^"
tiff was contracted with direct, or Ins. Co. v. American Bonding Co.
only through Nelson Morris & Co. 146 Wis. 573, 131 N. W. 994, 40
we, under a familiar rule of construe- Ins. L. J. 1805, 1811, 40 L.R.A.
tion of contract, should resolve the (N.S.) 661 note,
doubt against the defendant for the ^ Brotherhood of Locomotive Fire-
reason that it prepared the policy men & Enginemen v. Aday, 97 Ark.
and selected the words used to ex- 425, 34 L.R.A. (N.S.) 126, 134 S. W.
press its meaning." 928, 40 Ins. L. J. 737 ; Graves v.
' United Stales. — American Surety Knights of the Maccabees of the
Co. V. Pauly, 170 U. S. 133, 160 (2 World. 112 N. Y. Supp. 948, 128
cases) 42 L. ed. 977, 18 Sup. Ct. App. Div. 660, case rev'd 199 N. Y.
552, construction against surety com- 397, 92 N. E. 792, although the gen-
pany when capable of two construe- eral rule was not denied, it was held
tions, since bond prepared by insur- not applicable. See §§ 207, 221
ance company: law well .'Settled, herein.
cited in United States Fidelity & ^ Gary Brick Co. v. Fidelity & Cas-
Guarantv Co. v. First National Bank, ualty Go. of N. Y. 147 N. Y. Supp.
233 111. 475, 84 N. E. 670) ; Guaran- 414, 162 App. Div. 873.
tee Co. of North America v. INIer- ^^ Bradley & E.ssex & Suffolk Acci-
chants Savings Bank & Trust Go. 80 dent Indemnitv Soc. In re, 81 L. J.
Fed. 766, 26 C. C. A. 146. K. B. 523, 530, [1912] 1 K. B. 415,
(?eor(7««.— Moorefield v. Fidelity 165 L. T. 919, 28 T. L. R. 175, [1912]
Mutual" Life Ins. Go. 135 Ga. 186, W. G. Rep. 6, per Farwell L. J. pro-
69 S. E. 119. viso here was for keeping wages book.
Missouri. — Roark v. City Trust In this case it was said: "It is the
Safe Deposit & Suretv Co. 130 Mo. nniversal practice for the companies
App. 401, 110 S. W. i. to prepare both the forms of pro-
Texas. —GviiVm v. Zuber, 52 Tex. posal and the form of policy. Both
Civ. App. 288, 113 S. W. 901. are issued by them on printed forms
Wisconsin.— United American Fire kept ready for use. It is their duty
596
CONSTRUCTION OF POLICY §§ 222<3, 222e
§ 222d. Same subject: reinsurance, — The rule that all doubts are
to be resolved liberally in favor of insured since the insurer pre-
pared the policy applies to a reinsurance contract." In a peculiar
case of reinsurance decided in New York the terms of insurance,
including the description of the risk, were wholly prepared by the
original insurer and the policy was issued by the reinsurer, without
seeing the original policies, in the exact language which the rein-
sured had so used, and it was held that the responsibility for any
ambiguity should be borne by the reinsured, and that the rule that
as insurance policies are unilateral contracts prepared by the in-
surers they are responsible for any ambiguity in the language used,
all doubt is resolved against them because they created it, applied
with the same force to the reinsurance contract. ^^
§ 222e. Rule as to standard policy.^'^^ — Tlj^ rule that doubtful
terms are to receive a construction favorable to the insured has
not been changed by the adoption of a standard form for a
fire insurance policy.'^^ And this rule has apparently been im-
pliedly conceded tn numerous decisions involving the constmc-
tion of standard policies. In a New York case it is said, and
so held, that "the policy, though of the stimdard form was pre-
pared by insurers, who are presumed to have had their own interests
primarily in view; and hence, when the meaning is doubtful, it
should be construed most favorably to insured who had nothing
to do with the preparation thereof." ^* But under a New Jerse}'^
to make the policy accord with and strongly to the company. Ethering-
not exceed the proposal, and to ex- ton & Lancashire & Yorkshire Acci-
press both in clear and nnambiguous dent Insurance Co., In re, [1900] 78
terms, lest— as Lord Justice Fletcher L. .J. K. B. (584, [1909] 1 K. B. 591."
Moulton, quoting Lord St. Leonards, u rederal Life Ins. Co. v. Kerr,
says m Joell v. Law Union & Crown 173 Ind. 613, 89 N. E. 398, 91 N. E.
Insurance Co., [1908] 77 L. J. K. B. 230, atfg (1908) — Ind. App. — ,
1108, 1120, [1908] 2 K. B. 803, 886, 85 N. E. 796, 82 N. E. 943.
-provisions should be intro.luced 12 Lo,^,!^^ Assurance Corp. v.
into policies which Sinless they are Thompson, 170 N. Y. 94, 62 N. E.
fully explained to the parties, will ^yg^^ 3^ j^^^ l. J. 351.
Jeacl a vast number or persons to sup- lo o i e
pose that they have made a provision '^^^ ''^'^^ § -^^'''^ ^^i'^^"-
lor their families by an insurance on ^^ Gazzam v. German Union Fire
their lives, and by' payment of per- Tns. Co. 155 N. C. 330, Ann. Cas.
haps a A'ery consideralile portion of 19L3E, 282 note, 71 S. E. 434. See
their income, when in point of fact T)ahms & Sons Co. v. German Fire
from the very commencement, the ^^^- Co. 153 Iowa, 168, 132 N. W.
policy was not worth the paper upon ^''^^ 40 Ins. L. J. 2133, 2138, point
which it was written.' . . . Ac- [2]-
cordingly it has been established that ^^ Matthews v. American Central
the doctrine that policies are to be Ins. Co. 154 N. Y. 449, 39 L.K.A.
construed contra proferentes applies 433, 61 Am. St. Rep. 627, 48 N E
597
§ 223 JOYCE ON INSUKAXCE
decision wlien a policy of fire insurance, is written in a standard
form approved by governmental authority, the maxim verba
chartarum fortius accipiuntur contra profcrentum, hm no special
applicability.^^ In a Wisconsin case it is held that although it has
l>een ruled many times that policies of insurance are to be liberally
construed in fa\or of the insured because the insurer has prepared
the contract still the reason for such construction would seem not
to apply in case of a contract prescribed by statute, at least so far
as the statute covered such details.^^ But the court, per Timlin, J.,
qualifies this holding to this extent: "But another and more funda-
mental rule of construction, applying alike to statutes and con-
tracts, is that the waiting must in cases of ambiguity be considered
valid and efficient to work out the ascertained object of the writer;
i. e., in favor of indemnity to the insured rather than useless or
nugatory. . , . But this does not mean that clear expressiK)ns
should be distorted, or that language should not be given its or-
dinary meaning.""
§ 223. The written controls the printed part of policy. — Insurance
policies are reduced to a j^rinted form, conforming to a prescribed
formula, since many, if not most, of the clauses have obtained a
settled judicial construction,^''^ and because they embrace general
provisions applicable not only to one case, but to most cases of a
certain class, and these printed forms contain blanks in which may
be written such covenants and specific provisions as are agreed upon,
which are consistent with the nature of the contract and the prin-
oiijles which govern it, and with such statutory requirements as
may exist; ^^ these specific written agreements become, therefore,
the immediate and chosen language of the parties themselves,^*
751, 27 Ins. L. J. 193, 195, per Van, ^8 Harper v. New York Citv Ins.
J., case modifies 41 X. Y. Supp. 301, Co. 22 N. Y. 441, per Selden, .7. "In
9 App. Div. 339. most maritime places they have
^^ Mifk v. Royal Exchange Assur. printed forms of policies of insur-
87 N. J. L. 607, (1914) 52 L.R.A. ance, in the blanks of which are writ-
(N. S.) 1074, 91 Atl. 102. Citing ten the special covenants on which
Nelson v. Traders Ins. Co. 181 N. Y. the parties choose to agree." Emeri-
472, 74 N. E. 421. gon on Insur. (Meredith's ed. 1850)
^^ Rosenthal v. Tn.«:urance Co. of 32, c. ii. see. 3; 1 Diier on Insnr. (ed.
North America, 158 Wis. 550, L.R.A. 1845) G4, sees. 6, 7. "The printed
1915B, 361, 149 N. W. 155. words are a general formula, adapted
^' The greater part of the printed equally to tlieir case and that of all
language of policies of assurance, be- other contracting partie.s upon simi-
ing invariable and uniform, has ac- lar occasions and subjects." Robert-
quired from use and practice a son v. French, 4 East, 136, 14 Eng.
known and definite meaning. Rob- Rul. Cas. 1, per Lord Ellenborough.
ertson v. French, 4 East, 136, 14 ^* "The written words are the iiii-
Eng. Rul. Cas. 1, per Lord Ellen- mediate language and terms selected
borough. bv the parties themselves for the ex-
598'
CONSTRUCTION OF POLICY § 223
and for this reason it is said that they are to be more strictly con-
strued tlian the printed ones.^° These written clauses should be
construed togetlier with the printed ones, and reconciled with them,
if possible, in case of apparent contradiction, so as to give effect to
every part of the contract,^ and if there is no contradiction between
the two, the printed clauses will be given the full effect of their
terms.^ But if the printed and written clauses are repugnant to
each other, and cannot be reconciled, then inasmuch as the parties
have stipulated in writing, this express adoption of a chosen form
of words to convey their meaning will control, and upon this point
that the written clauses will be given effect over the printed ones,
the decisions are unanimous.'
pression of their meanin?-" Robert- Sun Mut. Ins. Co. 6 Blatchf. (C. C.)
son v. French, 4 East, 136, 14 Eng. 317, Fed. ('as. No. 6,41.').
Rul. Cas. 1, per Lord Ellenborougli. Alabanm. — Tubb v. Liverpool &
2°1 Amould on Ins. (Perkins' ed, London & Globe In.^. Co. 106 Ala.
81) sec. 47 rule vi. 651, 17 So. 61").
^ Goss V. Citizens' Ins. Co. 18 La. Arkansas. — Phoenix Ins. Co. v.
Ann. 97, 101; Howes v. Union Ins. Flemino-, 65 Ark. rA, 39 L.R.A. 789,
Co. 16 La. Ann. 235; Goieoechea v. 44 S. W. 464, 27 Ins. L. J. 584.
Louisiana Ins. Co. 6 Mart. N. S. California. — Yoch v. Home Mutu-
(La.) 51, 17 Am. Dee. 175; Stokes al Ins. Co. Ill Cal. 503, 34 L.R.A.
V. Cox, 1 Hurl. & N. 533 ; 2 Parsons 857, 44 Pac. 189.
on Contracts (5th ed) 516. Georgia. — Maril v. Connecticut
2 "Bat Avhere tliere is no contra- Fire Ins. Co. 95 Ga. 604, 30 L.R.A.
diction between the two (written and 835, 28 S. E. 463.
printed clauses), the printed clauses . Louisiana. — Goieoechea v. Louis-
must stand and have the full effect of iana State Ins. Co. 6 Mart. N. S.
their terms, because they have been (La.) 51, 55, 17 Am. Dec. 175, per
adopted by the parties." Emeri^on Porter.
on Ins. (Meredith's ed.) 33, c. ii. sec. Maryland. — Fire Ins. Assoc, v.
3. See Mumford v. Hallett, 1 Johns Merchants & Miners Traiisp. Co. 66
(N. Y.) 433. Md. 339, 59 Am. Rep. 332, 7 Atl.
^United States.— Thomas v. Ta^- 905; Shertzer v. Mutual Fire Ins.
£rart, 209 U. S. 385, 52 L. ed. 845, Co. 46 Md. 506; Frederick County
28 Sup. Ct. 519; Hainan v. Scotti.sh Mut. Fire Ins. Co. v. Doford, 38 Md.
Union & National Ins. Co. 98 Fed. 404.
129, 29 Ins. L. J. 666, rev'd 102 Fed. Massachusetts. — Whitmarsh v.
919, 920, 43 C. C. A. 55, which is Conwav Fire Ins. Co. 16 Gray
rev'd 186 U. S. 423, 46 L. ed. 1229, (82 Mass.) 359, 77 Am. Rep. 414.
22 Sup. Ct. 862; Canton Ins. Oflice Michirjan. — Minnock v. Eureka
Ltd. V. Woodside, 90 Fed. 301, 33 Fire & Marine Ins. Co. 90 Mich. 236,
C. C. A. 63, 61 U. S. App. 214, 28 51 N. W. 367; Niagara Ins. Co: v.
Ins. L. J. 269; Gunther v. Liverpool, DeGraff, 12 Mich. 124. Compare
London & Globe Ins. Co. 34 Fed. 501, Vandervolgen v. Manchester Fire
atf'd 134 U. S. 110, 33 L. ed. 857, 10 Assur. Co. 123 Mich. 291, 82 N. W.
Sup. Ct. 448; Plinskly v. Germania 46, 29 Ins. L. J. 639.
Ins. Co. 32 Fed. 47; Coster v. Phoe- Minnesota. — Russell v. ]V[auufac-
nix Ins. Co. 2 Wash. (C. C.) 51, turers' & Buildei-s Fire Ins. Assn. 50
Fed. Cas. No. 3,264; Hernandez v.
599
§ 224
JOYCE ON INSURANCE
J
The rule, however, that written parts control the printed parts,
in case of inconsistent stipulations, is subject to the rule that words
of exceptions if doubtful are to be construed most strongly against
the party for whose benefit they are intended and in favor of in-
demnity.*
§ 224. Same subject: cases. — A special indorsement exempting
from liability for partial loss controls,^ but where the language of
the printed form provided that the policy should be controlled by
indorsements of special risks, and the written part omitted the
word ''carriage" contained in the printed part, such omission was
held not to limit the policy.^ Where the terms of limitation and
description of the risk are written in, such clauses will control
printed clauses which should have been stricken out, but which are
left in, according to the usual custom.' And the phrase "against
actual total loss only," written across the margin of a policy, will
control the printed language therein.* So a written memorandum
as to the manner of settling losses controls.^ So where the risk as-
Miun. 409, 52 N. W: 906; Phcenis
Ins. Co. V. Taylor, 5 Minn. 492.
Missouri. — Archer v. Merchants' &
Manufacturers' Ins. Co. 43 :\Io. 434:
Burnham v. Roval Ins. Co. 79 Mo.
App. 394, 1 mJ. App. Rep. 308, 27
Ins. L. J. 928.
New York. — Hall v. Insurance Co.
of North America, 58 N. Y. 292, 17
Am. Rep. 255; Reynolds v. Com-
merce Ins. Co. 47 N. Y. 597; Bene-
dict V. Ocean Fire Ins. Co. 31 N. Y.
389; Harper v. Albany IMut. Fire
Ins. Co. 17 N. Y. 194: Bargett v.
Orient Mut. Ins. Co. 3 Bosw. (N.
Y.) 385; Nielson v. Commercial Ins.
Co. 3 Duer (N. Y.) 455.
North Carolina. — Johnston v. Nia-
gara Fire Ins. Co. 118 N. Car. 643,
24 S. E. 424.
Ohio. — Farmers National Bank v.
Delaware Ins. Co. 83 Ohio St. 309,
04 N. E. 834, 40 Ins. L. J. 1248,
1254, 56 Ohio Law Bull. 99.
Pennsylvania. — West Branch Lum-
berman's Exchange v. American Cen-
tral Ins. Co. 183 Pa. 366, 42 Wklv.
N. C. 6, 38 Atl. 1081, 27 Ins. L. J.
305; Haws v. St. Paul Fire & Ma-
rine Ins. Co. 130 Pa. 113. 2 L.R.A.
52, 15 Atl. 915, 18 Atl. 621.
Vermont. — Mascott v. First Na-
600
tional Fire Ins. Co. 69 Vt. 116, 37
Atl. 255; ]\fa.scott v. Granite State
Fire Ins. Co. 68 Vt. 253, 35 Atl. 75.
Engkind. — Bell v. Hobson, 16 East,
240; Robeiison v. French, 4 Ea.st,
130, 14 Eug. Rul. Cas. 1.
"It is permitted to derogate from
the printed clauses, and one is judged
to derogate from them from the fact
alone that the written clauses are re-
pugnant to them.'' Emerigon on
Ins. (Meredith's ed. 1850) 33, c. ii.
sec. 3. See 3 Kent's Commentaries
(6th ed. 26) 17 Eari of Halsbury's
Laws of England, pp. 342, 527, see
§ 2671 herein.
* Canton Insurance Office Ltd. v.
Woodside, 90 Fed. 301, 33 C. C. A.
63, 61 U. S. App. 214, 28 Ins. L. J.
269, 275. See § 220 herein.
5 Chadsey v. Guion, 97 N. Y. 333.
^ Kratzenstein v. Western As.sur.
Co. 116 N. Y. 54, 22 N. E. 221, 5
L.R.A. 799, revei-sing 21 Jones & S.
(53 N. Y. Sup. Ct.) 505.
' Dudgeon v. Pembrook, 2 L. R.
App. C. 284, 14 Eng. Rul. Cas. 105.
* Burt V. Brewers' & Malsters' Ins.
Co. 9 Hun (16 N. Y. Sup. Ct.) 383.
^ Husg V. Augusta Ins. & Bank-
ing Co.^ Taney (C. C.) 159, Fed. Cas.
No. 6,838.
CONSTRUCTION OF POLICY § 225
sumed by the written agreement is irreconcilable with the printed
terms, the former governs.^" And the written words "port risk in
the port of New York" control the printed part, and limit and
define the risk." And the insurance will not be limited to the
interest of the insured, a carrier, where other and written parts dis-
cover a contrary intention. ^^ ^he written portion of a fire insur-
ance policy insuring benzine as part of a stock of merchandise over-
rides the printed portion of the policy forbidding it to be kept.^^
A written special description of the subject-matter must control the
printed clauses whenever they are inconsistent, and if the written
portion covers property to be used in a particular business, the keep-
ing of an article necessarily used in such business does not avoid
the policy, although it is expressly prohibited in the printed condi-
tions, especially so where the protection of an established and cur-
rent business, expressly permitted in the written portion of the con-
tract, is really the object of the insurance.^* A receipt for part
payment of the premium on an insurance policy, which is wholly
in writing, must control the printed terms of an application which
conflict with it, when the delivery of the application and the giving
of the receipt are to be regarded as contemporaneous acts.^* Other
cases illustrating this proposition are noted elsewhere.^^
§ 225. Construction: lex loci contractus. — Although there are
conflicting decisions, yet the general rule is that contracts of in-
surance are governed, in matters of construction affecting their
validity and the rights of the parties, by the law and usages of the
place where the contract is made," unless it appears that the parties
1° Nicolet V. Insurance Co. 3 La. ^^ See cases under § 223. See
36G, 23 Am. Dec. 4.i8. chapters 45, 49, 50, 53, 58, lierein.
" Nelson v. Sun i\lut. Ins. Co. 71 ^"^ Mutual Life Ins. Co. v. Hill, 103
N. Y. 453. U. S. 551, 48 L. ed. 788, 24 Sup. Ct.
12 Fire Ins. Assn. v. IMerchants' & 538, s. c. (mem.) 188 U. S. 742, 47
Miners' Tran.sp. Co. 06 Md. 339, 7 L. ed. 678, 23 Sup. Ct. 856, s. c. 118
Atl. 905. Fed. 708, 55 C. C. A. 536; Mutual
13 Phoenix Ins. Co. v. Flemming, 65 Life Ins. Co. v. Cohen, 179 U. S.
Ark. 54, 67 Am. St. Rep. 900, 39 262, 45 L. ed. 181, 21 Sup. Ct. 106,
L.R.A. 789, 44 S. W. 464, 27 Ins. L. s. c. 38 C. C. A. 696. See Mutual
J. 584. Compare Vandervolgen v. Life Ins. Co. v. Hill, 178 U. S. 347,
Manchei^ter Fire Assur. Co. 123 20 Sup. Ct. 914, 44 L. ed. 1097, rev'g
Mich. 291, 82 N. W. 46, 29 Ins. L. J. 97 Fed. 263, 28 C. C. A. 159, 49
639. L.R.A. 127) ; Mutual Life Ins. Co.
1* Faust V. American Fire Ins. v. Phinnev, 178 U. S. 327, 44 L. ed.
Co. 91 Wis. 158, 30 L.R.A. 783, 64 1088, 20 Sup. Ct. 327; Liverpool &
N. W. 883, 51 Am. St. Rep. 876. Great Western Steam Co. v. Plienix
15 Cole V. Union Central Life Ins. Ins. Co. 129 U. S. 397, 32 L. ed. 788,
Co. 22 Wash. 26, 47 L.R.A. 201, 60 9 Sup. Ct. 469; Roval Union Mutual
Pac. 68. Life Ins. Co. v. Wynn (U. S. C. C.)
601
§ 225 JOYCE ON INSURANCE
had the law of another place in contemplation, or had so expressly
ytipulated/^ in which case the law of the state agreed upon as
governing controls the nature, validity, interpretation, and efi'ect
177 Fed. 289, aff'd (mem.) 185 Fed. Assoc, v. Harris, 94 Tex. 25, 57 S.
1007, 107 C. C. A. 664; Cudahy W. 635, 86 Am. St. Rep. 813.
Packing- Co. v. New Amsterdam But see Griswold v. Union Ins.
Casualty Co. (U. S. C. C.) 132 Fed. Co. 3 Blatelif. (C. C.) 231, Fed. Cas.
623 ; Carrollton Furniture Manu- No. 5,840. On where contract of in-
faeturing Co. v. American Credit In- surauce is deemed to have been made,
demnity Co. 115 Fed. 77, aff'd 124 gee notes in 63 L.R.A. SU,
*^7 C C A* 404'! ' ' cution, the interpretation and the
" Arkanscui~Vrl.rMm Life Ins. Co. ^^lidity of a contract are determined
V. Galligan, 71 Ark. 295, 100 Am. St. ^^ ^^'^ ^^^ «Vlf ^^"""^f. "^^^""^ ^^^
Rep 79 73 S W 10'' contract is made. Scudder v. Union
Connecticut.— ilxxWln v. Reed, 64 National Bank, 91 U. S. 406, 23 L.
Conn. 240, 24 L.R.A. 664, 42 Am. ^^- -^^' «^*^'^^ ^" Thompson v.
St. Rep. 174, 29 Atl. 478. Traders' Ins". Co. 169 .Mo. 12, 68 S.
Georgia. — Massachusetts Benefit ^^- ^^^^ 31 Ins. L. J. 823, 831.
Life Assoc, v. Robinson, 104 Ga. 256, ^^ Mutual Life Ins. Co. v. Hill, 193
42 L.R.A. 261, 30 S. E. 918. U. S. 551, 48 L. ed. 788, 24 Sup. Ct.
Zoit^a.— Summitt v. United States -^88, s. c. (mem.) 188 U. S. 742, 47
Life Ins. Co. 123 Iowa, 681. 99 N. L- t'd. 678, 23 Sup. Ct. 856, s. c.
W. 563, 33 Ins. L. J. 620; Belknap 118 Fed. 708, 55 C. C. A. 536; Neder-
v. Johnson, 114 Iowa, 265, 86 N. W. land Life Ins. Co. Ltd. v. Meinert,
267. 127 Fed. 651, 62 C. C. A. 37,
Kentucki/.- — Clarev v. Union Cen- certiorari granted 194 U. S. 633, 48
tral Life ins. Co. 143 Ky. 540, 33 L. ed. 1159, 24 Sup. Ct. 861, rev'd
L.R.A. N. S. 881, 136 8. W. 1014, on another point, 199 U. S. 171, 50
40 Ins. L. J. 1403, 1405. L. ed. 139, 26 Sup. Ct. 15; Liver-
Maine. — Bailey v. Hope Ins. Co. pool & Great Western Steam Co. v.
56 Me. 474. Phenix Ins. Co. 129 U. S. 397, 32
M?"sso»n'.— Thompson v. Traders' L. ed. 788, 9 Sup. Ct. 469; Eagle v,
Ins. Co. of Chicago, 169 Mo. 12, 68 New York Life Ins. Co. 48 lud. App.
S. W. 889. 284, 91 N. E. 814; Born v. Home Ins.
New Hampshire.— Seeley v. Man- Co. 120 Iowa, 299, 94 N. W. 849, 32
hattan Life Jns. Co. 72 N. H. 49, 55 Ins. L. J. 737 (unless it be shown
Atl. 425, 32 Ins. L. J. 972; Peny v. that it was the intention of the
Dwelling House Ins. Co. 67 N. H. parties that it should be performed
291, 68 Am. St. Rep. 668, 33 Atl. at some other place it will ordi-
731. narily be governed by the law of the
New York. — Boston Manufactur- place where it was executed) ; Bel-
ers' j\rutual Fire Ins. Co. 41 Misc. knap v. Johnson, 114 Iowa, 265, 86
479, 85 N. Y. Snpp. 44. N. W. 267; Johnson v. New York
Tennessee. — Roberts v. Winton, Life Ins. Co. 109 Iowa, 708, 50
100 Tenn. 484, 41 L.B.A. 275, 45 S. L.R.A. 99, 78 N. W. 905: Fidelity
W. 673. Mutual Life Assoc, v.' Harris, 94
Texas.— Fidelity Mutual Life Tex. 25, 86 Am. St. Rep. 813, 57 S.
602
CONSTRUCTION OF POLICY § 225
of the coiitracl.^^ The place where the contract is made is that
where the linal act is performed which is necessary to its completion
and to make it binding upon both parties, for if anything remains
to be and is done in another state to give validity to the policy, that
state is the place of contract.^"
Other cases hold, however, that generally the rights of parties
are governed by the laws of the place where the contract is to be
performed, and not where made, since it will be presumed that
the contract was entered into with reference to the laws of the
W. 635; Union Central Life Ins. Co. Fh-e Ins. Co. 45 W. Va. 237, 31 S.
V. Pollard, 94 Va. 146, 26 8. E. 421, E. 969, 28 Ins. L. J. 125.
64 Am. St. Rep. 715, 36 L.R.A. 271. See Bliss on Life Ins. (ed. 1872)
As to stipulations and illustrative sees. 370-73; 1 Parson.s on Ins. (ed.
cases, see § 231d herein. 1868) 132-35; 1 Duer on Ins. (ed.
19 Union Central Life Ins. Co. v. 1845) 262. "For that which is of the
Pollard, 94 Va. 146, 26 S. E. 421, 64 substance of the decision reference
Am. St. Rep. 715, 36 L.R.A. 271. must be had, as a general rule, to the
2° United Stales. — Equitable Life laws of the place where the contract
Assurance Soc. v. Clements, 140 U. was made. Ex consuetudine ejus
S. 226, 35 L. ed. 497, 11 Sup. Ct. regionis in qua negotium gostuui
822; Cox V. United States, 6 Pet. (31 est:'' Elmerigon on Ins. (Meredith's
U. S.) 172, 8 L. ed. 359; Globe & ed. 1850) 98: "A foreigner who
Rutgers Fire Ins. Co. of N. Y. v. contracts within the territory of any
"David Moffat Co. 154 Fed. 13, 83 C. state is bound as a subject, for the
C. A. 91; Northwestern Mut. Life time being, of that state to submit
Ins. Co. V. Elliott, 7 Saw. (C. C.) himself to the laws of the country,
17, 5 Fed. 225. . . . and reciprocally he is en-
Illinois. — Burchard v. Dunbar, 82 titled to invoke the laws and privi-
111. 450, 25 Am. Rep. 334. leges of this .same country in the mat-
loma. — Pomeroy v. Manhattan ter of any contracts he may have
Life Ins. Co. 40 111. 398; Born v. entered into tliere. It is the same
Home Ins. Co. 120 Iowa, 299, 94 N. witli in.surauces made in France, for
W. 849, 32 Ins. L. J. 737 (the place account of a foreigner, for every-
where the agreement is finally con- thing connected with tlie decision of
summated becomes the place of con- the .substantial right of the case de-
tract), pends on the laws of the place of the
Kentuckjf. — Ford v. Buckeye State contract. . . . But for decision
Ins. Co. 6 Bush (Ky.) 133, 99 Am. of tiie substance of the cau.se, re-
Dec. 663. course must be had to the laws of the
Massachusetts. — Heebner v. Eagle place of contract:" Id. lOL See
Ins. Co. 10 Gray (76 Mass.) 131; note, 99 Am. Dec. 671; Bacon's
Kennebec V. Augusta Ins. Co. 6 Gray Benefit Societies and Life Ins. (ed.
(72 Mass.) 208. 1888) see. 175; Richards on Ins. (ed.
New Jersey. — Northampton IVFutual 1892) p. 54, sec. 44; 1 May on Ins.
Live Stock Ins. Co. v. Tuttle, 40 N. (Parsons' ed.) sees. 66, 66a.. "The
J. L. 476. law of the country where the con-
New York. — Western v. Genesee tract arose must govern the con-
Mutual Ins. Co. 12 N. Y. (2 Kern.) tract:" Male v. Roberts, 3 Esp. I(i3,
258. per Lord Eldon: "The law of the
Wisconsin. — Galloway v. Standard place where the contract is made is
603
§ 235 JOYCE ON INSURANCE
latter.* So it is held in Massachusetts that the place of perform-
ance will ordinarily be deemed to be the place of contract unless the
parties intend otherwise.^ Unless there is something ''in the cir-
cumstances to show that the parties had specially in view the law
of the place where the contract is made, this law will govern, al-
though the contract is to be performed elsewhere." ' In constru-
ing contracts, made and to be performed in another state, the law
of the state where the contract is made and to be performed con-
trols ; but this law, like any other fact, must be proven.*
to govern as the nature, validity, the laAvs of Texa.s, the lesral effect of
and construction of such contract :'' the contract must be determined ae-
Eeimsdyk v. Kane, 1 Gall. (U. S. cording to the law of the state of
C. C.) 374, Fed. Cas. No. 16,871, per Missouri." Seiders v. Merchants'
Story, J. "A contract must be gov- Life Assoc, of the U. S. 93 Tex. 194,
erned by the law of the country 54 S. W. 753, "29 Ins. L. J. 97, per
where it is made:" May on Ins. Brown, J., rev'g — Tex. Civ. App.
(Parsons' ed.) 66a. — , 51 S. W. 547. See also Metro-
^ Hyde v. Goodnow, 3 N. Y. (3 politan Life Ins. Co. v. Bradley, —
Com-st.) 266, per the Court. Tex. Civ. App. — , 79 S. W. 367.
Matters connected with the per- ^ Ruse v. Mutual Benefit Life Ins.
formance of a contract "are regu- Co. 26 Barb. (N. Y.) 556, 23 N. Y.
lated by the law prevailing at the 516, 521, 24 N. Y. 653. Same policy
place of performance." Scudder v. was basis of action in Mutual Benefit
Union National Bank, 91 U. S. 406, Life Ins. Co. v. Ruse, 8 Ga. 534. ,
23 L. ed. 245, quoted in Thompson * Clarev v. Union Centi'al Life Ins.
v. Traders' Ins. Co. 169 Mo. 12, 68 Co. 143 ^Kv. 540, 33 L.R.A.(N.S.)
S. W. 889. 31 Ins. L. J. 823, 831. 881, 136 S. W. 1014, 40 Ins. L. J.
2 Bottouilev V. ISfetropolitan Life 1403. The court, per Lassing, J,,
Ins. Co. 170 Mass. 274, 49 N. E. 438, said: "In Ford v. Buckeye State
27 Ins. L. J. 557, citing London Ins. Co. 6 Bush (Ky.) 133, 99 Am.
Assurance v. Companhia De j\Ioagens Dec. 663, this court held that where
De BaiTeiro, 167 U. S. 149, 17 Sup. a conti-act, made in Indiana, was not
Ct. 785, 42 L. ed. 113; Coghlan v. enforceable under the laws of that
South Carolina R. Co. 142 U. S. 101, state it would not be enforced in
12 Sup. Ct. 150, 36 L. ed. 951: Hall this state. And in Jameson v.
v. Cordell, 142 U. S. 116, 12 Sup. Ct. Gregory's Ex'r 4 Mete. (Ky.) 363,
154, 35 L. ed. 956 ; Dicey's Conflict of it was held that the legality of a
Laws, 568, 572; Story's Conflict of contract must be decided by the
Laws, sec. 280. laws of the state in which it was
"Conceding that the contract of made. In Archer v. National Ins.
insurance was made in Texas, it is Co. 2 Bush (Ky.) 226, it was held
made payable at the home office in that the validity and legality of a
the state of Missouri and all premi- contract executed in Indiana must
ums are likewise made payable there, be determined by the laws of that
It does not provide for any act to be state. In Young v. Han-is, 14 B.
done elsewhere by the company. A Mon. (Ky.) 556, 61 Am. Dee. 170,
tender of the money at the home this court, through Chief Justice
office would have been valid. Unless Marshall, said: 'The general princi-
there be something in the circi;m- pie determining the law by which a
stances which indicate that the contract is to be construed is that,
parties contracted with reference to unless the place appointed for its
604
CONSTRUCTION OF POLICY
§ 226
It has also been held that the legal construction and effect of a
policy of insurance made by a company incorporated in a sister
state are governed by the law of that state,^ and that the law of
the place where a mutual benefit association is formed and does
business determines the liability of members.^ So it is- held in a
mutual benefit association case that the contract is governed by the
statutes of the state of the domicil of the corporation.' And it is
also held that the contracts of a corporation, though made without
the state by which it was created, are controlled by the laws of the
state in which created.^
§ 226. Same subject: cases. — Under a "Wisconsin statute^ a pro-
\dsion that the omission to attach to or indorse upon an insurance
policy "a true copy'" of the application of the assured shall preclude
the insurance company from afterward relying thereon, applies to
a foreign corporation insuring property situated in the state, though
the contract of insurance is made without the state.^°
A policy issued within the state by the agent of a foreign insur-
ance company, not naming the place of payment of loss, is payable
within the state. ^^ The contract is governed also by the laws of the
state where the agent having the power to make the contract acts.^^
payment be different from that in
which it is made, it is to be governed
by the law of the place where it is
made, which i.s the lex loci con-
tractus.' In Western Union Tele-
graph Co. V. Eubanks & Russell, 100
Kv. 591, 38 S. W. 1068, 36 L.R.A.
711, 66 Am. St. Rep. 361, 18 Ky.
L. Rep. 995, it is said that 'the gen-
eral rule is that the laws of the place
where the contract is to be pei"-
formed governs, subject, of course,
to the rule that a contract which is
void by the law of the place where
made is void everywhere.' And in
Hyatt V. Bank of Kentucky, 8 Bush
(Ky.) 193, it was held, where a note
was executed in Louisiana, that as be-
tween the maker of the note and
the payee, its legal effect must be de-
termined by the law of that state."
See also Napier v. Bankers' Life
Ins. Co. 100 N. Y. Supp. 1072, 51
Misc. 283; Peckham, In re, 29 R. T.
250, 132 Am. St. Rep. 813, 69 Atl.
1002; National Trust Co. v. Hughes,
14 Manitoba R. 41.
^ St. John V. American Mut. Life
Ins. Co. 2 Duer (N. Y.) 419, 13 N.
Y. 31, 64 Am. Dec. 529. See note
104 Am. St. Rep. 483-484.
6 Cutler V. Thomas, 25 Vt. 73.
See Knights of Honor v. Nairn, 60
Mich. 44, 26 N. W. 826.
■^ In re Globe Mut. Benefit Assn.
63 Hun (N. Y.) 264, 43 N. Y. 756,
17 N. Y. Supp. 852.
8 Fidelity Mut. Life Assn. v. Fick-
lin, 74 Md. 172, 20 Ins. L. J. 534,
21 Atl. 680.
On conflict of laws as to contracts
of insurance, see notes in 63 L.R.A.
833; 23 L.R.A. (N.S.) 968; and 52
L.R.A. (N.S.) 279. On laws or judg-
ments of courts of state in which in-
surance company is incorporated as
bindinsi- in other states, see note in
L.R.A.'l916A, 770.
9 Wis. Rev. Stat. sec. 1945a.
10 Stanhilber v. Mut. Mill Ins. Co.
76 Wis. 285, 45 N. W. 221.
"Moshassuck Felt ^Mill v. Bland-
ing, 17 R. 1. 95, 20 Ins. L. J. 475, 21
Atl. 538.
12 Albion Life Ins. Co. v. :Mills
(Aop. Cas.). 3 Wils. & S. 218, 233.
605
§ 226 JOYCE ON INSURANCE
So where an insurance company, organized under the laws of
A^ermont, was transacting business in the state of New York, and
had a general agent in the city of New York, to whom a person
acting as agent for a resident of New Jersey made application for
insurance, and a policy was is.«ued in pursuance of such applica-
tion by the general agent in New York, it was held that the contract
was executed in New York and subject to the laws of that state as
to forfeiture for nonpayment of preniiums.^^ The law of the place
where the premium note is made and given to the agent governs
its construction.^* But it is not necessary that a foreign insurance
company issuing policies, duly signed by their president and secre-
tary and accepted by the insured in the state of Massachusetts,
where the premium note is given, should have a general agent
within that state, in compliance with its general statutes, in order
to have the policy interpreted according to the laws of that state,^*
and it is held that where a state law requires an agent to be ap-
pointed therein on whom process can be served, the contracts made
by the agent are to be governed by the law of the state where the
agent acts.^®
The Massachusetts statute relating to the forfeiture of life policies
applies to foreign insurance companies doing business in Massa-
chusetts, Avithout regard to the question whether the contract of
insurance is made there or in the state where the company is in-
corporated.^''^ It is decided in a Michigan case that the ''circum-
stance that the liability to pay is made to depend" iipon a risk upon
real property there does not make the contract a ]\Iichigan contract,
or in any legal sense make that ''state the place of performance by
the insurance company, and the further circumstances that the
contractee was a Michigan corporation did not impress upon the
contract the quality of locality so as to cause" the laws of JNIichigan,
as to business done there by agents of foreign companies, to affect
it in point of law.^^ An open policy of insurance containing all the
conditions governing the shipment of such goods as ai'e specially
insured under the policy, and reserving to the insurer the right of
accepting or rejecting each special subject of insurance, will, it is
held, be considered as a contract made at the domicil of the com-
13 Hicks V. National Life Ins. Co. ^"^ Holmes v. Charter Oak Life Ins.
60 Fed. 690, 9 C. C. A. 215. Co. 131 Mass. 64.
1* Thornton v. Western Reserve " Clay Fire & Marine Ins. Co. v.
Farmers' Ins. Co. 31 Pa. St. 529. Huron Salt & Lumber Mfg. Co. 31
1* Thwing V. Great Western Ins. Mich. 316.
Co. Ill ]\Ia.ss. 93. Lex loci; situation of insured
16 Manhattan Life Ins. Co. v. property. See § 231a herein.
Warwick, 20 Gratt. (Va.) 614.
606
CONSTRUCTION OF POLICY § 226
pany.^^ And where business is transacted in a state by a foreign
insurance company without any provision in its policies that the
laws of the state of its incorporation shall govern, the contract is not
subject to the provisions of the foreign state statut€;^°
Where the policy was issued and dated in Maine, the laws of that
state were held to govern its construction, though the policy was
sent to another state. ^ And where an application was made in
Minnesota, forwarded to New York, issued and delivered in the
former state, and insured died in Iowa it was held that it should
be construed and enforced as a Minnesota contract.^ Where an
accident policy sued on was applied for by insured in Ohio and
issued by an Illinois company and insured sustained an accident in
Kentucky, it was held that the contract sued on, not being a Ken-
tucky contract, was not affected by the provisions of its statutes.^
Policies executed in Ontario are Ontario contracts.* In another
case where the contract was held to have been made in Glasgow, the
agent there accepted the risk, and delivered the insured a memo-
randum stating the sum and the property insured, and promised
that the policy would be made out in London and delivered to the
insured or to his order.^
A policy issued in a state by a foreign corporation is governed
by the law of that state.^
Where the contract was to be performed in New Jersey, it was'
held that the statute of limitations operating as a bar there would
control in another state.' A marine insurance policy is held to
be governed by the law of the place of performance, and if such a
contract is made payable at a certain place, it is governed by the
law of that place.' And although the application for life insur-
ance was made in person by a citizen of Ma.ssachusetts to the insurer
at its home oflice in New York, yet where the company forwarded
its bond policies to the applicant in Massachusetts for his approval
" State V. Williams, 46 La. Ann. ^ Pattison v. Mills, 2 Bligh, N. S.
922, 15 So. 2flU, 23 Ins. L. J. 508. 510, 1 Dow. & C. 342.
2° Rye v. New York Life Ins. Co. ^ Wliiltaker v. Mutual Life Ins Co.
88 Neb. 707, 130 N. W. 434, 40 Ins. 133 Mo. App. 664, 114 S. W. 53;
L. J 910 Roberts v. Winton, 100 Tenn. 484, 41
1 Bailey v. Hope Ins. Co. 56 Me. L.R.A. 275, 45 S. W. 673.
474. ' Spratley v. .Mutual Benefit Life
2Rauen v. Prudential Ins. Co. of Ins. Co. 11 Busb (Ky.) 443, 7 Chi.
America, 129 Iowa, 725, 106 N. W. Lesr. News, 51.
198, 35 Ins. L. J. 288. « Progresso Steamship Co. v. St.
^ Pritcliett V. Continental Casu- Paul Fire & Marine Ins. Co. 146 Cal.
altv Co. 117 Kv. 923, 25 Ky. L. Rep. 279, 79 Pac. 967.
2064, 80 S. W. 181.
* Clarke v. Union Fire Ins. Co. 6
Ont. Rep. 223.
607
§ 226 JOYCE ON INSURANCE
and acceptance leaving the final acts of approval, acceptance and
payment to be performed in Massachusetts the contract was com-
pleted in and was a Massachusetts contract.^ Under an Arkansas
decision a policy of life insurance, by its terms to be performed in
another state, is governed by the statute of that state providing that
no misrepresentation made in obtaining or securing a policy of life
insurance shall be deemed material, or render the policy void, un-
less the matter misrepresented shall have actually contributed to
the contingency or event on which the policy is to become due and
payable.^" Under the statutes of Massachusetts a provision that no
misrepresentation made in the negotiation of a contract of insur-
ance, by the insured, shall be deemed material or defeat the policy,
unless made with the actual intent to deceive, or unless the matter
represented or warranted increased the risk, applies to a policy
written in Massachusetts by a Massachusetts company and sued up-
on in the courts of Rhode Island.^^ Where the insurer was created
by the laws of Pennsylvania it was held that its contracts were to
be construed by the laws of that state which governed its enforce-
ment, the contract having been there signed by the company's of-
ficers and the promise being to pay after acceptance of due and sat-
isfactory proof of loss at its office there.^^ And where a certificate
is executed, issued and payable at the home office of the associa-
tion that is the place of contract even though issued to a ra«ident
of another state who continued to reside there until his death. ^^
If a policy insuring mail packages during their transportation
through specified countries is issued to a bank located in a country
not specified in the policy, but the transportation by mail is initiat-
ed in one of such countries, the portion of the contract prescribing
the manner of packing and sealing the property is governed by the
law of the country where the bank is located. The application for
the policy was mailed from such foreign country to which the exe-
cuted policy was mailed, said bank being there located and the
policy was construed as contemplating such place of business as
the place of the preparation of the mail packages.^*
9 Provident Saviiiii-- Life Assur. ^^ Fidelity Mutual Life Ins. Co.
8oe. of N. Y. V. Hadlev, 102 Fed. v. MeDaniel, 25 Ind. App. 608, 57
856, 43 C. C. A. 25, 29 Ins. L. J. N. E. 645.
998, certiorari denied 179 U. S. 686, 13 Burns v. Bums, 95 N. Y. Supp.
45 L. ed. 386, 21 Sup. Ct. 919. 797, 109 App. Div. 98.
1° Franklin Life Ins. Co. v. Galli- i* Banco de Sonera v. Bankers
ean. 71 Ark. 295, 100 Am. Dec. 73, Mutual Casualty Co. 124 Iowa, 576,
73 S. W. 102. • 104 Am. St. Rep. 367, 95 N. W. 232.
^^ Leonard v. State Mutual Life
Assur. Co. 27 R. I. 121, 114 Am. St.
Rep. 30, 61 Atl. 52.
608
COXSTRUCTIOX OF POLICY §§ 227, 228
§ 227. Same subject: exceptions to the rule. — An exception to the
rule that the contract of insurance is governed by the law of the
place where made exists in case the usage of trade in one state af-
fects the construction of a policy made in another.^^ So the ques-
tion of seaworthiness is determined by the usage or custom of ix)rt
where the vessel belongs, rather than that of the place where the
contract is made,^^ and if the usages of such port are adopted by the
policy, they control its construction ; ^^ but rights of parties under
a contract of affreightment are governed by the law of the place
where the contract is made, and not by that of the place of the
ship's flag.^*
§ 228. Same subject: mutual benefit, etc., societies. — Tn case of
mutual benefit societies it is held that the right to designate a bene-
ficiary is governed by the law of the place of contract giving such
power, ^^ and in another case the application was made in Michigan,
and the by-laws provided that it must be approved in Indiana, and
that the membership fee should be paid before the contract became
binding, and the certificate also provided that the contract should
be considered made in Indiana, and should be governed by its laws,
and it was held that the laws of that state controlled.^" So the state
where the certificate is accepted by the insured, where such accept-
ance is dated, and where insured resides is the place of contract,
even though the certificate is signed by the association's officers in
another state.^ And a certificate is to be governed by the law of
the place where the contract is consummated, as where it is issued
in one state to a resident of another state and is not to be binding
until acceptance by insured and the acceptance is executed in the
state of residence of the insured.^ And a contract of insurance in
a benefit association should be construed and interpreted according
to the laws of the state where the contract was made and w^as to
be performed.^ So where a policy of insurance, issued by a bene-
^^ See 1 Duer 'on Ins. (ed. 1845) Supreme Knights of Honor v. Nairn,
262, 263. 60 Mich. 44, 26 N. W. 826.
16 The Titania, 19 Fed. 101 ; Tid- 20 Yoorhees v. People's Mut. Bene-
marsh v. Washington Fire & Marine fit Soc. 91 Mich. 469, 51 N. W. 1109.
Ins. Co. 4 Mason (C. C.) 439, 442 ^ Mever v. Supreme Lodge
Fed. Cas. No. 14,024. ■ Knights of Pythias, 178 N. Y. 63,
"Union Bank v. Union Ins. Co. 64 L.R.A. 839, 70 N. E. 111.
Dud. (S. C.) 171. 2 Mover V. Supremo Lodge Knights
18 China Mut. Ins. Co. v. Force, of Pvthia.s, 178 N. Y. 63,^64 L.H.A.
142 N. Y. 90, 58 N. Y. St. R. 400, 40 840, 70 N. E. Ill, .33 Ins. L. .1. 446,
Am. St. Rep. 570, citing Dyke v. aff'd Supremo Lodge Knights of
Erie R. R. Co. 45 N. Y. 113; Faulk- Pytliias, 198 U. S. 508, 49 L. ed.
ner v. Hart, 82 N. Y. 413. li46, 25 Sup. Ct. 754.
1" American Legion of Honor v. ^ Mullen v. Reed, 64 Conn. 240, 42
Perry, 140 Mass. 580, 5 N. E. 634; Am. St. Rep. 174, 24 L.R.A. 664, 29
Joyce Ins. Vol. I.— 39. 609
§ 229 JOYCE ON INSURANCE
fit society chartered in one state, is delivered to the insured by tlie
society's agent in another state, and the assessments and duas are to
be paid to it, and the claim of the beneficiary is to be paid by such
agent, the contract is made and to be performed in the latter state,
and the rights of the parties are to be determined by the law of
such state.* If at the time of making the application and the is-
suance and delivery of the certificate the association and insured
were both residents of the same state that state's laws govern the
contract.* So the laws of the state where the certificate was execut-
ed and which was the then place of residence of insured and the
domicil of insurer govern the contract.^ And if the contract is
made, is to be performed, and is actually performed in a certain
state the laws of that state govern.' Altliough a benefit a.ssociation
is organized under the laws of a certain state still if the subordinate
lodge of another state accepts a member there, and all the formali-
ties of an application, examination, payment of dues and assess-
ments are there performed, the contract is governed by the laws of
such state.* It is decided that the laws bf the home state of a
foreign fraternal benefit association may be looked to to determine
the efi^ect of its contracts.^ And a stipulation making the insurer's
home office its place of contract is obligatory unless the agreement
conflicts with the law of the state where made or impairs the obli-
gations of a contract.^" If an association is transacting business,
within the intent of a statute, in a state, and solicits members and
issues policies therein its laws govern contracts so made whether
or not it has applied' for the privilege of doing business there as re-
quired by statute.^^
§ 229. When place where policy is countersigned is place of con-
tract. — AVhere the policy is not to be valid till countersigned by the
agent, it will be construed according to the law of the place where
\tl. 478. See also McCue v. Nortb- ^ Franklin Life Ins. Co. v. Morrell,
western Mutual Life Ins. Co. 167 84 Ark. 511, 106 S. W. 680.
Fed. 435, 92 C. C. A. 71, s. c. 181 ' Kavaiiaugh v. Supreme Council
Fed. 1022; Expressman's Mutual of Roval League, 158 Mo. App. 2.34,
Benefit Assoc, v. Hurlock, 91 Md. 138 S. W. 359.
585, 80 Am. St. Rep. 470, 46 Atl. * Coverdale v. Royal Arcanum,
937, 29 Ins. L. J. 934; see Green v. 193 111. 91, 61 N. E. 915.
Supreme Council of Roval Arcanum, ^ Vallerov v. Knights of Columbus,
124 N. Y. Supp. 398, rev'd 129 N. Y. 135 31o. App. 574, 116 S. W. 1130.
Supp. 791, 144 App. Div. 76. ^° Polk v. Mutual Reserve Fund
* Expressman's Mut. Ben. Assn. v. Life Asso. 137 Fed. 273, s. c. 165
Hurlock, 91 Md. 585, 80 Am. St. Fed. 1006.
Rep. 470, 46 Atl. 957. ^^ Corley v. Travelers' Protective
5 Roberts v. Modern Woodmen of Assoc. 105 Fed. 854, 46 C. C. A.
America, 133 Mo. App. 207, 113 S. 278.
W. 726.
610
CONSTRUCTION OF POLICY
230
such act is performed and tlie policy delivered,^^ although the pol-
icy is dated in another state and signed by the president and sec-
retary there." A Canadian insurance company with a branch
oflfice at Baltimore insured a resident of Washington, D. C. The
policy provided tjiat it was not to be valid until countersigned by
the authorized agent at Washington, D. C. The agent there coun-
tersigned and deUvered the policy, and it wa.« signed by the agent
at Baltimore, at which place it also purported to be dated and to
be signed by two directors of the company and by the attorney, and
to bear the company's seal. It was held that this was not a Mary-
land contract.^*
§ 230. When place of delivery is place of contract. — Although the
contract is made and dated in one state, but is to be binding only on
delivery, the laws of the state where the insured is a resident and
where it is delivered to him, govern the contract.^^ And, as a gen-
eral rule, the delivery of the policy to the insured in the state in
which he resides, and the payment by him of his first premium in
that state, renders the contract subject to the laws of such state.^^
• 12 United States. — Northwestern
Mutual Life Ins. Co. v. Elliott. 9
Saw. (C. C.) 17, 23 Fed. 462. See
Smith V. Mutual Life Ins. Co. 5 Fed.
582.
California. — Curtiss v. ^T:C(iia Life
Ins. Co. 90 Cal. 245, 25 Am. St. Rep.
114, 27 Pac. 211.
Illinois. — Pomerov v. Manhattan
Life Ins. Co 40 111" 398; Moore v.
Charter Oak Life Ins. Co. 8 Ins. L.
J. 78.
Keiitucliy. — St. Louis IMutual Life
Ins. Co. V. Kennedy, 6 Bush (Ky.)
450.
Louisiana. — Hardie v. St. Louis
Mutual Life Ins. Co. 20 La. Ann.
242.
Nebraska. — See Antes v. State Ins.
Co. 61 Neb. 55, 84 N. W. 412. .
Pennst/lvanift. — Hardiinan v. Fire
Assofialion of Phila. 212 Pa. 383, 61
Atl. 990.
South Carolina. — Curnow v. Phoe-
nix Ins. Co. 37 S. C. 400, 34 Am. St.
Rep. 766, 16 S. E. 132.
West Virginia. — S. M. Smith Ins.
Aj!:enev v. Ilaniilton Fire Ins. Co. 69
W. Va. 129, 71 S. E. 194; Galloway
V. Standard Fire Ins. Co. 45 W. Va.
237, 31 S. E. 969, 28 Ins. L. J. 126.
Wisconsin. — In re Breituno's Es-
tate, 78 Wis. 33, 46 N. W. 891.
" Daniels v. Hudson River Fire
Ins. Co. 12 Cush. (66 Mass.) 422, 59
Am. Dec. 192; Heebner v. Easle Ins.
Co. 10 Gray (76 Mass.) 131, 69 Am.
Dec. 308. See Friedland v. Common-
wealth Fire Ins. Co. 143 App. Div.
570, 128 N. Y. Supp. 705.
1* Cromwell v. Roval Canadian
Ins. Co. 49 Md. 366,^33 Am. Rep.
258.
^^ Knights Templars' & Masons'
Life Indemnity Co. v. Berry, 50 Fed.
511,
353;
1 C. C. A. 561, 4 U. S. App.
Wall v. Equitable Assurance
Soc. 32 Fed. 273, afTd 140 U. S. 226,
35 L. ed. 497, 11 Sup. Ct. 822;
Meagher v. .^tna Ins. Co. 20 U. C.
Q. B. 607; Hvde v. Goodnow, 3
(^omst. (N. Y.) 2()6. See Watt v.
Gideon, 8 Pa. Dist. Ct. Rep. 395.
As to contract stipulations vary-
ing rule as to place of delivery
being place of contract, see § 231d
herein.
1^ Equitable Life Assur. Soc. v.
Winning, 7 C. C. App. (U. S.) 359,
58 Fed. 541, 23 Ins. L. J. 81 : Reliance
Mut. Ins. Co. V. Sawyer, 160 Mass.
414, 36 N. E. 59. See also Fidelity
Gil
§ 230
JOYCE ON INSURANCE
So a policy which is not to take effect until it is delivered, after
payment of the first premium, is a contract of the state where de-
livery takes place, and to be governed by its laws; and it is imma-
terial that premiums are to be paid and the policy liquidated at the
office of the insurer in another state.^''' And the rule applies where
it is sent to the agent in anotlier state to be there delivered on re-
ceipt of the premium. ^^ So where an application for insurance is
made in one state to an agent therein, and forwarded by him to
the insurer in another state, where the policy is executed, and sent
to such agent and by him delivered to the insured in the former
state, the contract must be regarded as made in the state where de-
livered, and as subject to its laws.^^ Where by the express terms of
the charter of an insurance company a contract of life insurance
does not become binding until delivery to assured, and the applica-
tion is made and the policy delivered to the resident agent of the
company in Missouri, it is incepted and completed in that state.
and is to be construed by the laws thereof, even though issued by a
corporation in Illinois.^" If an application for a life insurance pol-
icy in favor of a named beneficiary is made in one state to the dulv
authorized agent of the company located there, who forwards it to
the home office in another state, where it is accepted, but the policy
returned contains additional beneficiaries, and was not to be deliv-
ered until the first premium was paid, the contract of insurance was
not made until the policy as clianged was delivered to the applicant
and the premiums paid, and it is deemed a contract made in the
former state, and the rights of the parties are to be determined by
the law of such state. ^ So the state where the application and
medical examination are made, the premium paid and policy de-
Mutnal Life Ins. Co. v. Jefferds, 53
L.R.A. 193, 107 Fed. 402, 46 C. C. A.
377; Harriiiolon v. Home Life Ins.
Co. 128 Cal.^531, aS Pac. 180: ]\Lu-
tual Life Ins. Co. v. Mullen, 107 Md.
4:)7, 69 Atl. 385; Ilorton v. New York
Life Ins. Co. 151 .Mo. 607, 52 S. W.
356, 28 Ins. L. J. 816.
^'^ INIetropolitan Life Ins. Co. v.
Bradlev, 98 Tex. 230, 08 L.R.A. 509,
82 S. W. 1031.
i^McElrov V. Metropolitan Life
Ins. Co. 84 Neb. 866, 23 L.R.A.
(N.S.) 968, 122 N. W. 27; Antes v.
State Ins. Co. 61 Neb. 55, 84 N. W.
412; Ford v. Buckeve State Ins.
Co. 6 Bush (Ky.) 133, 99 Am. Dec.
663; Tiiwinq- v. Great Western Ins.
Co. Ill jMass. 93; In re Breitung's
612
Estate, 78 Wis. 33, 46 N. W. 891.
See also Greveni"' v. Wa.shington
Life Ins. Co. 112^La. 879, 104 Am.
St. Rep. 474, 36 So. 790.
19 PeiTv v. Dwelling House Ins.
Co. 67 N. H. 291, 68 ^Am. St. Rep.
668, 33 Atl. 731.
^^ Knights Templars & IMasons'
Life Indemnity Co. v. Berrv, 50 Fed.
511, 1 C. C. A. 561, 4 ^3. S. App.
353, affirming 46 Fed. 4;]9 ; Mutual
Benefit Life Ins. Co. v. Robison, 54
Fed. 580, 584; Hieks v. National
Life Lis. Co. 60 Fed. 690, 9 C. C. A.
(U. S.) 215.
^ Millard v. Bravton, 177 Mass.
533, 83 Am. St. Rep. 294, 52 L.R.A.
117, 59 N. E. 436.
CONSTRUCTION OF POLICY § 231
livered is the place of contract.^ If. however, the first payment of
premium is forwarded with the application for insurance, a pro-
vision in the policy that it "shall not be binding until delivery dur-
ing the lifetime and good health of the applicant, and until the first
payment due thereon has been paid,"' does not suspend the contract
until delivered to the insured and make th§ place of delivery that
of the contract, especially when the policy is forwarded to the agent
for unconditional delivery.^ But delivery does not necessarily de-
termine the place of contract since a claim thereunder, under a
policy of indenmity insurance, may be governed by the law of an-
other state where the policy is signed and is payable.'* And where
the policy is issued in a certain state and the premiums and the
amount to be paid under the policy are there payable it is a con-
tract of that state even though the delivery is made in another
state.^ Again, where the agent in Edinburgh received a policy
and delivered it there, and received the premium, the policy being
executed in London, it Avas held that the laws of England gov-
erned.® So in another case the agent in Canada of an insurance
comi^any, incorporated in New York, received and forwarded to
the secretar}^ of the company in New York a proposal for insur-
ance upon property in Canada, the proposal was accepted, and the
deposit and premium note left with the secretary, who issued the
policy and sent it to the agent in Canada, by whom it was delivered
to the insured, and it was decided that it was a New York contract.'
§ 231. When place of acceptance and mailing is place of contract.
— The place of acceptance of the proposal for insurance may be-
come the place of contract, by mailing from there such acceptance,
and the law of that place will then govern the contract.^ If an
2 Kelley v. Mutual Life Ins. Co. ^ United States. — Giddings v.
109 Fed. 56, 30 Ins. L. J. 904, rev'd Northwestern Mutual Life Ins. Co.
114 Fed. 268, 52 C. C. A. 154, 31 102 F. S. 108, 26 L. ed. 92.
Ins. L. J. 497 (s. e. 114 Fed. 276), Indiana. — Swing v, IMarion Pulp
but on other points as the Iowa stat- Co. 47 Ind. App. 199, 93 N. E. 1004,
ute, which state was the place of eon- 40 Ins. L. J. 807; Equitable Life
tract, was the basis of the decision. Assur. Soc. of U. S. v. Perkins, 41
3 Fidelity ]\Iutual Life Assn. v. Ind. App. 183, 80 N. E. 682.
Harris, 94 Tex. 25, 86 Am. St. Rep. Iowa.— Twiile v. Iowa State
813, 57 S. W. 635. Traveling Men's Assoc. 132 Iowa,
*Cudahy Packing Co. v. New 652, 7 L.R.A.(N.S.) 223, 104 N. W.
Amsterdam Packing Co. (U. S. C. 1131.
C.) 132 Fed. 623. Kentucky.— Fovii v. Buckeye State
5 Equitable Life Assur. Soc. v. Ins. Co. 6 Bush. (Ky.) 133, 139, 99
Fromnihold, 75 111. App. 43. Am. Dec. 663.
® Parkeu v. Royal Exch. Assur. Co. Maine. — Bailey v. Hope Ins, Co.
18 Scot. Jur. 147. * 56 Me. 474.
' Western V. Genesee Mut. Ins. Co. Massachunetts. — Commonwealth
12 N. Y. (2 Kern.) 258. Mutual Fire Ins. Co. v. Fairbank
613
§ 231a JOYCE ON INSURANCE
application is made out by an insurer in Pennsylvania and sent by
mail to an applicant in Wisconsin, who, in that state, fills out and
signs the application and forwards it to the insurer's ofTice in
Pennsylvania, and directs a policy to issue, and the insurer there-
upon issues its policy in the latter state and mails it to the insured
in the former, who then signs the note, reciting that it is for the
balance of the first premium and is payable in Pennsylvania, the
contract of insurance is a PennsA'lvania contract.^ It is held, how-
ever, that where the application was accepted in New York and
mailed to Missouri, the law of Missouri governed the contract.^"
But in another case it was held that a policy of insurance executed
in New York by a New York corporation doing business in Mis-
souri, upon an application signed in Missouri by a resident of Mis-
souri, the application being made part of the contract, which de-
clared that it should not take effect until the first premium should
have been actually paid, etc., and which was delivered and the
first premium paid in IMissouri, was, in the absence of evidence of
the company's acceptance of the application in New York, or of its
transmission directly by mail to the insured, a Missouri contract,
and governed by the laws of that state. ^^
§ 231a. Lex loci: situation of insured property. — If a contract
with a foreign insurance company is made in another state in which
it is valid, but in direct violation of the laws of the state in which
the property is situated and in which the insured resides, it will
not be enforced in the latter state.^^ In South Ca^rolina it is de-
cided that when an insurance company having its home office in
one state issues a policy upon property situated in another state to
a resident thereof, and through its authorized agent therein, as pro-
vided by the policy, the contract of insiu-ance is deemed to have
Canning Co. 173 Mass. 161, 53 N. E. aff'd (Mem.) 134 App. Div. 995, 119
373; Commonwealtli Mutual Fire N. Y. Supp. 1127.
Ins. Co. V. Wni. Knabe & Co. Mfg. West Virginia. — Galloway v.
Co. 171 Mass. 265, 50 N. E. 516. Standard Fire his. Co. 45 W. Va.
New Jerse?/.— Nortliampton Mutu- 237, 31 S. E. 969, 28 Ins. L. J. 125.
al Life Ins. 'Co. v. Tuttle, 40 N. J. ^ Presbyterian Ministers' Fund v.
L. 476; Commercial Ins. Co. v. Hal- Thomas, 126 Wis. 281, 110 Am. St.
lock, 27 N. J. L. (3 Dutch.) 645, 72 Rep. 919, 105 N. W. 801.
Am Dec 379. ^° Wall v. Equitable Life Assur.
New rorfc.— Stone v. Penn Yan, Co. 32 Fed. 273, atFd 140 U. S. 226,
Keuka Park & Branchport Ry. 197 35 L. ed. 497, 11 Sup. Ct. 822.
N. Y. 279, 90 N. E. 843, 134 Am. ^^ Equitable Life Ins. Soc. v.
St. Rep. 879, 39 Ins. L. J. 527, aff'g Clements, 140 U. S. 226, 11 Sup. Ct.
109 N. Y. Supi). 374, 125 App. Div. 822, 38 L. ed. 497.
94; Hyde v. Goodnow, 3 N. Y. 269; ^^ g^-i^g v. Munson, 191 Pa. 582,
Hammond v. International Rv. Co. 71 Am. St. Rep. 772, 58 L.R.A. 223,
116 N. Y. Supp. 854, 63 Misc. 437, 43 Atl. 342.
614
CONSTRUCTION OF POLICY § 231b
been made in the state where the property is situated; and after
lo:« thereunder, and proof of such loss, coupled with a refusal to
pay, the insured or his assignee may bring an action to recover
on the policy in the latter state. ^^ Under an Iowa decision if an
insurance corporation organized and doing business in that state
solicits insurance in another, and tliere receives an application, and
a premium note which is dated at its home office in the former
state, to which the note and the application are sent, and from
which a policy issues, the contract is deemed to be made there, and
is controlled by the laws of said state, and not by the laws of the
state in which the property insured is situated.^* It is also held in
that state that where a policy of insurance is issued on property
in one state by a company in another state, and it does not appear
where it was delivered or payable, or where the contract was made
or the premium paid, it may be inferred that the contract was made
in either state, as readily as in the other. ^* Under a Missouri de-
cision the local law governs a policy of insurance on real property
delivered to the owner in the state where the property is situated,
although the policy was issued by a foreign corporation.^^ But it
is also held in that state that a statute imposing a penalty for vex-
atious delay in paying a loss does not relate to the remedy, but is
a matter connected with the performance of a contract and has no
application to an action on a policy brought in Missouri, where
the property insured was located and destroyed in Kansas where
the contract was made and was to be performed, and the cause of
action accrued and became complete there. ^'^ It is decided in Wis-
consin that its statutory provision conclusively establishing the
value of insured real property, when wholly destroyed, at tlie
amount of insurance written in the policy, applies to contracts made
in other states as well as in Wisconsin, where the real property is
situated in that state.^^
§ 231b. Lex loci: fidelity or guaranty insurance. — A policy insur-
ing against fraud or dishonesty of an agent amounting to embezzle-
ment or larceny is a contract of the state where it was made and de-
livered to insured, a resident thereof, and is governed by its laws
" Curnow V. Phoenix Ins. Co. 37 382, 35 L.R.A. 227, 58 Am. St. Rep.
S. C. 4()(), 34 Am. St. Rep. 706, 16 638, 38 S. W. 85, aiTM Orient Tns.
S. E. 132. Co. V. Dagg.s, 172 U. S. 557, 43 L.
1* Harden v. Hotel Owners' Ins. ed. 552, 19 Sup. Ct. 287.
Co. 85 Iowa, 584, 39 Am. St. Rep. i' Tliomp.^on v. Traders' Ins. Co.
316, 52 N. W. 509. 169 iMo. 12, 68 S. W. 889, 31 Ins. L.
^^ Pennypacker v. Capital Ins. Co. J. 823.
80 Iowa, 56, 20 Am. St. Rep. 395, 8 ^^ s,.vk v. INIillers' National Ins.
L.R.A. 236, 45 N. W. 408. Co. 7-t Wis. 67, 3 L.R.A. 523, 41 N.
*6 Daggs V. Orient Ins. Co. 136 Mo. W. 443 ; Wis. Rev. Stat. sec. 1943.
615
§ 231c JOYCE ON INSURANCE
and not by the laws of another state where the larceny was com-
mitted.-'^
§ 231c. Lex loci: contracts by unauthorized companies or agents.
— Where the secretary of an insurance company solicited and ob-
tained the application of a resident of Nebraska, in which place the
company was not authorized to transact business, and the applica-
tion and the premium note were signed, the latter made payable
at the home office, in Iowa, whence the policy issued, the contraci
was held to be governed by Iowa laws.^° Under a Texas decision
contracts of insurance upon applications taken in one state by an
agent without authority to conclude the contract or bind the com-
pany, and forwarded to the domicil of the company, and there
accepted and the policy issued, are ordinarily to be treated as hav-
ing been made at such domicil and to be performed there ; ^ and
such contracts are not invalid by reason of the unauthorized acts of
the agent in obtaining the insurance.^ It is held in Arkansas that
an application for insurance sent by mail to another state, where
they are passed upon and accepted, and in which policies are dated
and signed and then mailed to the insured, are governed by the
laws of that state, so as to be unaffected by statutes at the residence
of the insured prohibiting insurance by unauthorized foreign com-
panies.^ In a Vermont case a receiver of a mutual fire insurance
company of Massachusetts sought to recover an assessment. The
company was not authorized to do business in Vermont. The
agent had so informed the assured and stated that he should have
to act as insured's agent in the matter. The application was mailed
to the company, accepted by it, and the policy mailed to the agent
with a request to collect the premium and the policy was delivered.
It was held that the contract was a Massachusetts one and enforce-
able under Vermont laws permitting residents to insure at unau-
thorized companies' home offices.'* It is decided in Wisconsin that
the office of the insurer is the place of contract, where it, in response
to the request of a broker not its agent, mails a policy, blank appli-
^^ Matthews & Co. v. Employers' al Fire Ins. Co. v. Fairbank Can-
Liability Assurance Corp. Ltd. Ill ning Co. 173 Mass. 161, 53 N. E. 373.
N. Y. Supp. 76, 127 App. Div. 195, 2 Commonwealth Mutaal Fire Ins.
aff'd (Mem.) 195 N. Y. 593. Co. v. Fairbanks Canning Co. 173
20Mj^j,(]en V. Hotel-Owners' Ins. Mass. 161, 53 N. E. 373.
Co. 85 Iowa, 584, 39 Am. St. Rep. ^ state Mutual Fire Ins. Co. v.
316, 52 N. W. 509. See also Eureka Brinkley Stave & Heading Co. 61
Ins. Co. V. Parks, 1 Cin. S. C. R. 574; Ark. 1, 54 Am. St. Rep. 191, 29
Hvde V. Goodnow, 3 N. Y. 266. L.R.A. 712, 31 S. W. 157.
1 Fidelitv Mut. Life Assn. v. Har- ■* Baker v. Spaulding, 71 Vt. 1C9,
ris, 94 Tex. 25, 86 Am. St. Rep. 813, 42 Atl. 982.
57 S. W. 635; Commonwealth Mutu-
616
CONSTRUCTION OF POLICY § 231d
cation, and premium note to the property owner in another stat€,
for him to fill the blanks and return the application and note for
the approval of the insurer.* Under an Indiana decision a con-
tract made by an agent of a foreign company, not authorized to do
business in that state, with a resident thereof was an Indiana con-
tract and governed by its laws but the corporation had been dis-
solved and ousted from doing any further business as a corpora-
tion in its home state, although the court said that if it were a going
concern its action for assessments would have been suspended until
compliance by it with the Indiana statute governing the right of
such companies to do business.^
§ 23 Id. Lex loci: contract stipulations. — If a policy provides that
the place of contract shall be that of the state Avherein it is made
it will be construed in accordance with the laws of that state.' And
where it is stipulated that the policy shall be construed and gov-
erned by the laws of a foreign state such statutes as are applicable
will be deemed a part of the written contract, nor can such statu-
tory provisions be waived.^ So, an insurance policy which was
signed in New York and by which it is agreed that all premiums
and losses shall be paid in that state, and that it shall be construed
as having been made therein, is a contract thereof, though the as-
sured to whom it was issued resides in another state.^ And a stat-
ute for the regulation of insurance contracts, providing that no
answer in an application shall bar a recovery unless wilfully false,
fraudulently made, material, and one which induced the companv
to issue the policy, will govern a policy issued by a corporation of
that state on property in another state when it is expressly made
subject to the laws of the former state.^" And the rights of citi-
zens will be protected under the laws of the state stipulated as the
place of contract." Again, if insurance is solicited in another
* Seamans v. Knapp Stout & Co. ^ Goodwin v. Provident Savings
89 Wis. 171, 46 Am. St. Kep. 825, Life Assn. 97 Iowa, 226, 59 Am. St.
27 L.R.A. 362, 61 N. W. 757. Rep. 411, 32 L.R.A. 473, 66 N. W.
^ Swing- V. Wellington, 44 Ind. 157. See IMutual Life Ins. Co. v.
App. 455, 89 N. E. 514, 38 Ins. L. Dingley, 100 Fed. 408, 40 C. C. A.
J. 1237. 459, 49 L.R.A. 132, rev'd 184 U. S.
' Russell v. Grigsby, 168 Fed. 577, 695, 46 L. ed. 763, 22 Sup. Ct. 937.
04 C. C. A. 61, case rev'd upon ques- ^° Union Central Life Ins. Co. v.
tion of insurable interest in Grigsby Pollard, 94 Va. 146, 54 Am. St. Rep.
v. Russell, 222 U. S. 149, 56 L. ed. 715, 36 L.R.A. 271, 26 S. E. 421.
133, 32 Sup. Ct. 58, 41 Ins. L. J. 301, ^^ Missouri State Life Ins. Co. v.
36 L.R.A. (N.S.) 642. Lo, aee, 1 Ga. App. 446, 58 S. E.
8 New York Life Ins. Co. v. Or- 93.
lopp, 25 Tex. Civ. App. 284, 61 S.
W. 336.
617
§ 231d JOYCE ON INSURANCE
state by a broker, aiul the property owner there consents to
take insurance in companies acceptable to such broker, who
thereupon requests an insurance corporation of Wisconsin to
write such insurance, and it, at its office in Wisconsin fills out an
application for the insurance, and prepares a premium note to be
signed by the property owner, and transmits the note and applica-
tion to him, and at the same time fills out a policy of insurance,
all these papers being dated at the home office, and stipulating that
the contract of insurance shall be governed by the laws of Wis-
consin, and the papers are then sent to the brokers, and by them
mailed to the property owner, who, on his part, then answers the
questions contained in the contract, signs the premium note, ac-
cepts the policy, transmits the application and note and' a cash
premium to theb brokers, who in turn send them to the insurer in
Wisconsin the contract of insurance is not completed until the note
and application are accepted by the insurer, and hence must be
deemed to have been made in Wisconsin,^^ But even though it is
stipulated that the contract shall be construed according to the laws
of a certain state, the court will not take judicial knowledge of them
but they must be proved.^^ If, however, parties agree that a policy
shall be construed by the laws of a certain state it will be presumed
that they know the law of that state. ^* But under a Ma,'isachusetts
decision, if a foreign company through its resident agent issues a
policy to a resident of Massachusetts stipulating by an indorsement
on the back of the policy that it shall be construed by the laws of
another state, it is a Massachusetts contract and within a statutory
provision of that state.^^ And in Missouri an insurance policy is
governed by the law of the state in which it is actually delivered
to the insured and the premium paid hj him to the insurer's agent,
although it was issued by a foreign corporation in another state, and
expressly provides that it shall be construed according to the laws
of that state, where it also provides that it shall not be in force until
actual payment of the premium. ^^
*^ Seaman.s v. Knapp-Stout & Co. ^^ Cravens v. New York Life Ins.
89 Wis. 171, 46 Am. St. Rep. 825, Co. 148 Mo. 583, 71 Am. St. Rep.
27 L.R.A. 362, 61 N. W. 757. 628, 53 L.R.A. 305, 50 S. W. 519,
13 New Yorlv Life Ins. Co. v. affd New York Life Ins. Co. v.
Smitli, 139 Ala. 303, 35 So. 1004. Cravens, 178 U. S. 389, 44 L. ed.
1* Mutual Life Ins. Co. v. Phinney, 1116, 20 Sup. Ct. 762. See Horton
178 U. S. 327, 44 L. ed. 1088, 20 Sup. v. New York Life Ins. Co. 151 Mo.
Ct. 906, 29 Ins. L. J. 910, s. c. 76 604, 52 S. W. 356, 28 Ins. L. J. 816;
Fed. 617, 22 C. C. A. 425. Pietri v. Seguenot, 96 Mo. App. 258,
i^Dolan v. Mulnal Reserve Fund .69 S. W. 1055; Sumner v. Fidelity
Life Assoc. 173 Mass. 197, 53 N. E. Mutual Aid Assoc. 84 Mo. App. 605.
398, Rev. Stat. 1894, c. 522, sec. 73.
618
CONSTRUCTION OF POLICY § 231e
It is held that even though the application provides that the pol-
icy is to be construed by the laws of a certain state, still a statute of
such state, not specially referred to in the contract, may be limited
by an express stipulation in the policy." Under a North Carolina
decision a provision that "this contract shall be governed by, sub-
ject to and construed only according to the laws of the State of New
York, the place of this contract being expressly agreed to be the
home office of said association in the city of New York" is void so
far as its enforcement in the courts of another state is concerned.^*
If there is no contract stipulation as to the place of contract or
as to the law b}^ which the policy is to be construed then the ques-
tion is one of general and not of local law.^'
§ 231e. Lex loci; statutory provisions. — A state statute which
provides that contracts for insurance shall be deemed to have been
made in the state and subject to its laws where the application for
the policy is taken within the state is constitutional and does not
abridge the privileges or immunities of citizens.^" Under a North
Carolina decision a statute, which makes insurance contracts, the
application for which is taken there, a contract of that state, applies
to a foreign company where the application for insurance is there
taken, no matter what the form of the contract may be.^ In Mis-
sissippi a statute that "all contracts of insurance on property, lives
or interests in this state shall be deemed to be made therein" is the
law of that state, and no contract of the parties can change it. Hence
a contract of life insurance entered into between a resident of Mis-
sissippi and a corporation of another state is to be construed under
the laws of the former commonwealth.^ Although one section of i
statute provides that all life insurance contracts in the state shall be
"Mutual Life Ins. Co. v. Hill, 133, 32 Sup. Ct. 58, 36 L.R.A.(N.S.)
193 U. S. 551, 24 Sup. Ct. 538, 48 L. 642, 41 Ii.s. L. J. 301.
ed. 788, s. c. 55 C. C. A. 536, 118 ^o gt^te Life Ins. Co. of Indian-
Fed. 708. See Mutual Life Ins. Co. apolis v. Westoott. 166 Ala. 192, 52
V. Cohen, 179 U. S. 262, 45 L. ed. So. .344, Ala. Code 1907, sec. 4583.
181, 21 Sup. Ct. 106, s. c. 97 Fed. ^ Commonwealth Mutual Fire Ins.
985, 38 C. C. A. 696. See §§ 194, Co. v. Edwards, 124 N. Car. 116, 32
194a, 1324 herein. S. E. 404; Ilorton v. Home Ins. Co.
"Blackwell v. Mutual Reserve ^22 N. Car. 498, 65 Am. St. Rep.
19 Rus.sell V. Grigsby, 168 Fed. 577. Miazza, 93 Miss. 18, 136 Am. St.
94 C. C. A. 61, case rev'd upon ques- Rop. 5.34, 46 So. 817; Miss. Laws
tion of insurable interest in Grigsby 1902, p. 66, c. 59, sec. 14. See §§
V. Russell, 222 U. S. 149, 56 L. ed. 194, 194a herein.
619
§ 231f JOYCE ON INSURANCE
deemed to be made therein it should be construed with other sec-
tions as to poHcies ''issued in" the state and does not apply to a
contract made in a foreign state between a company therein and a
person residing in the first state. ^
§ 23 If. Lex loci: public policy: comity, — In a Federal supremo
court case it appeared that a New York mutual life insurance com-
pany issued and delivered in Missouri to a resident of that state a
nonforfeiting limited tontine policy providing for a specified paid
up policy in case of lapse for nonpayment of premium. It was
also stipulated that the policy should be construed according to
New York laws and that that state should be the place of contract.
The Missouri statute provided against forfeiture for nonpayment
of premium, but subject to specified rules of commutation. It was
contended that a policy of mutual life insurance was an interstate
contract, and the parties might choose its ''applicatory law," also
that contracting for New York law to the exclusion of Mis.souri
law was in no wise prejudicial to the interests of the state of Mis-
souri, or violative of its public policy. The court, per Mr. Justico
McKenna, said: "But the interests of the state must be deemed to
be expressed in its laws. The public policy of the state must be
deemed to be authoritatively declared by its courts. Their evidence
we cannot oppose b}' speculations or views of our own. Nor can
such interests and policy be changed by the contract of parties.
Against them no intention will be inferred or be permitted to be
enforced." The contract was held to be subject to Missouri laws.^
And where a contract was made in ^Massachusetts between a foreign
corporation admitted to do business therein, and a resident of that
state with a delivery of the policy and a payment of premium all
taking place therein, it is governed by the statutes of that state from
motives of public policy, notwithstanding a policy provision that
the contract should be governed by the law of a foreign state, for,
altliough, as a general principle, parties may agree to the law of a
state or country foreign to the place of contract, still this has no
application where the result would be to accomplish some evasion
of statutory provisions declaring a rule of public policy with ref-
erence to contracts made within the jurisdiction where the legis-
lation is enacted, although there are some exceptions to the rule.*
3 Johnson v. Mutual Life Tns. Co. 628, 5.3 L.R.A. 505, 50 S. W. 519.
of N. Y. 180 Mass. 407, 63 L.R.A. Ccnisidered with approval in Nation-
838. 62 N. E. 733. al :\Iutual Building- & Loan Assoc.
^New Y^irk Life Ins. Co. v. Crav- v. Brahan, 193 U. S. 635, 647-649,
ens, 178 U. S. 389, 44 L. ed. 1116. 20 48 L. ed. 829. 24 Sup. Ct. 532.
Sup. Ct. 762, 29 Ins. L. J. 876, affV 5 .^i^j.^ ,. Manhattan Life Ins. Co.
Cravens v. New York Life Ins. Co. 119 Fed, 629, aff'd 127 Fed. 281, 62
148 Mo. 583, 71 Am. St. Rep. C, C, A. ^213, certiorari denied, 194-
620
COXSTRUCTIOX OF POLICY § 231?
o
But in another case the pohey was issued by an Ohio corporation
and delivered in AVisconsin to a then resident of tlie latter state
upon an apphcation forwarded therefrom. Insured resided in Ken-
tucky at the time of his death. It was decided that it was wholly
immaterial whether the contract was to be construed and governed
by the laws of Wisconsin where it was made or by the laws of Ohio
where it was to be performed, that it must be construed by the laws
of one of those states, and that a condition barring recovery being
\alid in both states it would be recognized as valid in Kentucky,
even though contrary to its public policy.® When a contract of
life insurance is made by a Pennsylvania corporation witli a resi-
dent of Wisconsin which is forbidden \)y the laws of the latter state,
its courts will not enforce such a contract on the ground of comity.
.Hence, an action cannot be maintained in those courts on a note
given for the lirst premium of such insurance.'
§ 23 Ig. Lex loci: rights of beneficiaries or claimants. — In a
Connecticut case the words, "heirs at law," in a benelit certificate
made in Massachusetts by inhabitants of that state, must be con-
strued in another state as they would be in Massachusetts.* Under
a Massachusetts decision the rights of claimants under a life insur-
ance policy are to be determined by the law of the state in which
the applicant resided, made his application, and received the policy,
although the application was sent by an agent to the home office of
the company in another state, where it was accepted and the policy
returned to the agent, and there was a stipulation that the premiums
and the sum insured were to be paid in that state.^ In Tennessee
the law of a state in which a contract of life insurance is made by
a resident thereof will control as to the rights of his creditors and
beneficiaries, instead of the law of another state in which the bene-
ficiaries reside, or of another state in which the insurance com-
pany is located and the policy payable.^" Under a New York de-
cision the contract contained in a mutual benefit certificate, which
requires the beneficiary to sign an acceptance of its provisions, is
U. S. 633, 48 L. ed. 1159, 24 Sup. Ct. Am. St. Rep. 174, 24 L.R.A. 664, 20
857, 32 Ins. L. J. 400. Atl. 478. See §§ 783-786, 789
^ Claroy v. Union C-ntral Life 861 lierein.
Ins. Co. 143 Ky. 540, 33 L.R.A. (N. » Millard v. Bravton, 177 Mass.
S.) 881, 136 S. W. 1014, 40 Ins. L. 533, 83 Am. St. Rep. 294, 52 L.R.A.
J. 1403. 117, 59 N. E. 436.
■^Presbyterian Ministers Fund v. i° Roberts v. Winton, 100 Tenn.
Thomas, 126 Wis. 281, 110 Am. St. 484, 41 L.R.A. 275, 45 S. W. 673.
Rep. 919, 105 N. W. 801. As to creditor's rights, see §§ 858-
8 Mullen V. Reed, 64 Conn. 240, 42 861 herein.
621
§§ 231h-231j • JOYCE ON INSURANCE
made where the contract is consummated by such acceptance, and
subject to the laws there in force. ^^
§ 23 Ih. Lex loci: adjustment of claim on forfeited policy. — The
right to contract for the adjustment of a claim on an insurance
policy forfeited for nonpayment of premiums, according to the
laws of the insurer's domicil, although the insurance is upon the
life of a person residing in another state where the contract is made,
is accorded by a statute of the latter state providing for such adjust-
mc but making its provisions inapplicable to policies issued by
foreign companies authorized to do business in the state where the
laws of their domicil provide for continued insurance upon such
forfeiture. And leaving it optional with insured as to the kind of
policy he will take in the adjustment of a claim upon a policy for-
feited for nonpayment of premium does not prevent the applica-
tion of a proviso of the local statute making inapplicable its pro-
visions as to such adjustment, where the laws of the state of the
insurer's domicil, in respect to which the parties have agreed the
contract shall be construed, provide for the methods of adjustment
which the local statute requires to make its provisions inapplicable. ^^
§ 23 li. Lex loci: reinstatement, extension or revival of policy. —
Executing in one state a reinstatement of a policy made in another
state will not destroy the character of the policy as a conti'act of
the state where it was originally executed. ^^ Under a Missouri de-
cision life policies issued^by foreign companies, which do not take
effect until they are delivered to the insured and the premium col-
lected from him in the state, are subject to the statute of that state,
providing for extension of the policy for the full sum for such time
as three fourths of the net revenue Avill pay for, in case of default
after two full annual premiums have been paid, notwithstanding
provisions for forfeitures in the policies.^*
§ 23 Ij. Lex loci: policy pledged for loan: collateral note: capital
stock note. — Although a policy is a contract of one state, yet where
the policy is pledged as collateral security for a loan and the appli-
cation therefor was submitted to the home office of the insurer in
another state, the collateral note signed in the first state, but was
^'^ ]\royer v. Supreme Lodge As to reinstatement extension or
Kniaht.s ol Pvthias, 178 N. Y. 63, 64 revival of policy, see §§ 1121, 1276,
L.RiA. 830, 70 N. E. 111. 1277, 1472 herein.
12 Nichols V. Mutual Life Ins. Co. i* Cravens v. New York Life Ins.
176 ]\ro. 3.35, 62 L.K.A. 657, 75 S. Co. 148 Mo. 583, 71 Am. St. Rep.
W. 664. 62S, 53 L.R.A. 305, 50 S. W. 519.
13 Goodwin V. Provident Savings Mo. Rev. Stat. 18/9, sees. 5983, 5985.
Life Assur. Soc. 97 Iowa, 226, 59
Am. St. Rep. 411, 32 L.R.A. 473, 6<j
N. W. 157.
622
CONSTRUCTIOX OF POLICY § 232
dated in tlie latter state and made payable there and the loan was
jnc()nij)lcte until approved and accepted by insurer at its home
oflice. the collateral note is a contract of the state where it was ac-
cepted and a})i)roved. and the parties rights are to be determined
by reference thereto where the law of the foreign state in such mat-
ters is before the court, although in the absence of proof it will be
presumed to be the same as the law of the forraer.^^ \Miere a note
secured by a policy on the life of its nniker wa.< signed in one state
but wa.s sent together with the policy to the maker's wife in another
state to be endorsed by her, which was done and the papers returned
by mail, and no place of payment was fixed in the note and the
wife had no personal transactions with the payee, it was decided
that the wife's contract was that of the latter state. ^^ The validity
of a cajntal stock note, given to a mutvial fire insurance company, is
determined by the laws of the state wherein it is executed and made
payable.^'
§ 232. Lex loci: assignment. — It is held that the validity of an
a.ssignment of a policy of insurance is governed by the law of the
place of contract.^^ In this connection it may be stated that the
contract between assured and the insurer, and an assignment there-
of constitute separate distinct contracts.^^ It is also held that even
though it is stipulated that a certain state shall be the place of con-
tract, still the validity of an assignment made in another state is
governed by the laws of the latter state.^" But it is decided that
where a policy was issued under the laws of New York relating to
insurances on lives for the benefit of married women, the contract
being made in that state and assigned by the wife to secure her
husband's debt, and the assignment was executed in New York
and sent bv mail to Marvland, to a creditor there, the validitv of
the assignment must be determined by the laws of New York, the
15 Tennent V. Union Central Life 858; 23 L.R.A.(N.S.) 978; and 52
Ins. Co. 133 Mo. App. 345, 112 S. L.R.A.(N.S.) 281, on conflict of laws
W. 754. as to assignment of policy.
i« TroencUe v. Hifflevman (1908) ^^ Succession of ^Miller v. Man-
_ Kv. — , 113 S. W. 812. hattaii Life Ins. Co. 110 La. 052, 34
"Equitable Mutual Fire Ins. So. 723, 32 Ins. L. J. 865; Mau-
Corp's Receiver v. Murray, 131 Ky. liattan Life Ins. Co. v. Cohen (1911)
740, 115 S. W. 816. — Tex. Civ. App. — , L3n S. W. 51,
"Pratt v. Globe Mut. Life Ins. 40 Ins. L. J. 1685. See §§ 2304,
Co. 3 Tenn. Cas. 174, 17 S. W. 353; 2308 herein.
Succession of Miller v. Manhattan ^o K„.ssell v. Grigsbv, 168 Fed. 577,
Life Ins. Co. 110 La. 652, 34 So. 723, 94 C. C. A. 61, case rev'd Grigsby v.
32 Ins. L. J. 865; Manhattan Life Russell, 222 U. S. 149, 56 L. ed. 133,
Ins. Co. v. Cohen (1911) — Tex. ^2 Sup. Ct. 58, 36 L.R.A.(N.S.) 642,
Civ. App. — , 139 S. W. 51, 40 Ins. 41 Ins. L. 301, upon point of insur-
L. J. 1685. See notes in 63 L.R.A. able interest.
623
§ 232a JOYCE OX INSURANCE
action being brought there.^ The laws of Maryland govern the
rights of parties in that state under an assignment of a life policy
issued by a New York corporation to a citizen of Maryland on an
application made to an agent of the company in Baltimore. So
where a policy of insurance was applied for in INlaryland by a resi-
dent thereof, and the corporation issuing the policy was a resident
of another state, and an assignment was subsequently made by a
citizen of the first-named state, anv controversy afterward arising;
between the assignee and the heirs or personal representatives of the
assignor will be controlled by the laws of the state in which the
policy was applied for, and which the assignee and the representa-
tives of the assignor are residents, rather than by the laws of the
state whose corporation issued the policy.^
§ 232a. Lex loci: substituted policy. — If a substituted policy is
issued by a society of one state to a citizen of another and the
change is made at the home office of the society, the contract is
governed by the laws of the state where sucii change is made, and
is not affected by the laws of the foreign state subsequently enacted
even though the insurer has become amenable thereto.^
1 Barry v. Equitable Life Assur. 82 Fed. 508, 27 C. C. A. 212, 54 U.
Soc. 59 N. Y. 587. S. App. 290.
Assignment by ivife in State ^ Robinson v. Hurst, 78 Md. 59,
foreign to that in ivhich insurer was 20 L.R.A. 761, 44 Am. St. Rep. 266,
organized and conducted business. 26 Atl. 956.
See Mutual Reserve Fund Life ^ Belknap v. Johnson, 114 Iowa,
Assoc. V. Cleveland Woolen Mills, 265, 86 N. W. 267.
624
CHAPTER IX.
CONSTRUCTION— USAaB.
§ 237. Usage generally.
§ 238. Usage part of the common law.
§ 239. Presumption as to knowledge of usage.
§ 240. Usage must be general.
§ 241. Usage must be well established and notorious.
§ 242. Usage may be of recent origin.
§ 243. Usage must be reasonable.
§ 244. Usage must be uniform.
§ 245. Parties may by express contract include or waive usage.
§ 246. Usage admissible where contract ambiguous or obscure.
§ 247. Usage inadmissible to contradict or substantially vary the plain
terms of the policy.
§ 248. Same subject: cases and authorities.
§ 249. Whether usage controls the plain and legal import of words of
the policy.
§ 250. Same subject: opinions and cases.
§ 251. Same subject : conclusion.
§ 252. Usage cannot legalize an illegal act.
§ 253. General usage may be controlled by evidence of a different usage,
§ 254. Usage controls implied limitations.
§ 255. Usage of another similar trade or place or of another company.
§ 256. Evidence of usage: liberal construction.
§ 257. What is sufficient evidence of usage.
§ 258. Evidence of usage, when admissible : eases.
§ 259. Evidence of usage, when inadmissible: cases.
§ 237. Usage generally. — Evidence of general usage was former-
ly admitted to determine the construction of policies of insurance
for the reason that they were so loosely drawn, and because the
contract depended so greatly upon eonnnercial usage, and there
were so few adjudications or rules of positive law to aid in its in-
terpretation. So Lord Mansfield had recourse in a large measure
to the usage of merchants and commercial law in ascertaining those
principles which underlie his decisions in Ccases of insurance, and
which have now to so large an extent become of controlling force
Joyce Ins. Vol. I. — 40. 625
§ 238
JOYCE ON INSUKAXCE
in the construc-tion of insurance contracts.* JUillcr, J., in ]?roii!Li;h
V. Whitmore,* says that insurance ^'is founded on usage, and must
be governed and construed by usage,"' and Mr. Duer ^ a^sserts that
the true purpose of a usage is "to discover in order to effectuate the
intentions of the parties," and usage is received to ascertain the
sense of the parties with reference to such usage.'
§ 238. Usage part of the common law. — In England, where so
few positive laws have heen enacted, and where the first act con-
cerning insurances was not passed until 1601^* the practice of in-
suring was dependent ui3on the common law, of which the law of
merchants was considered a branch, and also upon the general prin-
ciples and usages of trade.^ It is declared in an English case ^®
that ''the custom of merchants or law of merchants is the law of
the kingdom, and is part of the common law." These customs ac-
quire the force of law, because as they must be ancient, uniform,
and reasonable, they must have been generally received, known,
and approved. ^^
* See § I., preliminary chapter. Re- man, 20 Oreg. 108, 10 L.R.A. 785, 25
marks of Lord Kenyon in Brough Pac. 366.
V. Wbitmore, 4 Tenn Rep. 208, that Distinction between custom and
Lombard St. had given a construction usage, see Byrd v. Beall, 150 Ala.
to policies of insurance, and that the 122, 124 Am. St, Rep. 60, 43 So.
practice of merchants and under- 749; Wilmington City Ry. Co. v.
writers had rendered them in- White, 6 Pen. (Del.) 363, 6(i Atl.
lelligible. 1009. Examine Kent v. Town of
^ 4 Term Rep. 210. Patterson, 141 N. Y. Supp. 932, 80
n Duer on Ins. (ed. 1845) 253. ^8^43^Eliz c 12
■^Renner v. Bank of Columbia, 9 9 See § I., preliminary chapter; 1
Wheat. (22 U. S.) oSl, 6 L. ed. 166, ]\rarshall on Ins. (ed. 1810) 21.
per the court. See Destrehan v. lo gdie v. East India Co. 2 Burr.
Louisiana Cypress Lumber Co. 45 i226 4 Eno-. Rul. Cas. 344.
La. Ann. 920, 13 So. 230, 40 Am. St. ^n McGregor v. Insurance Co. of Pa.
Rep. 265. 1 Wash. (U. S. C. C.) 39, Fed. Cas.
When custom or usage is presumed No. 8811, per Washington, J. See §
to enter into intention of parties. 1 herein. "The wliole business of in-
See London Assur. Corp. v. Thomp- surance and all the instruments by
son, 170 N. Y. 94, 62 N. E. 1066, 31 which it is carried on, and all their
Ins. L. J. 351, 354. language and provisions, rest on the
Usage as part of contract. See usage of merchants; and neariy all
Union Ins. Co. v. American Fire Ins. the law of insurance is but the usage
Co. 107 Cal. 327, 48 Am. St. Rep. of merchants, adopted and sanc-
140, 40 Pac. 431, 28 L.R.A. 692; tioned by courts." 1 Parsons on Ma-
Connelly V. Masonic Mutual Benefit rine Ins. (ed. 1868) 82. "With re-
Assoc. 58 Conn. 552, 9 L.R.A. 428, speet to usage, it is a sort of natural
20 Atl. 671, 18 Am. St. Rep. 296n; law formed out of our habits, our
Savage v. Salem Mills Co. 48 Oreg. interests, and the universal consent
1, 10 Am. & Eng. Ann. Cas. 1065, of all mankind. In all maritime mat-
85 Pac. 69; IMacCulsky v. Kloster- ters it is regarded as the surest iu-
626
CONSTRUCTION— USAGE
§ 239
§ 239. Presumption as to knowledge of usage. — ^Underwriter? are
bound to inform themselves and to know the general usages of tlie
trade in which they insure/^ for it is presumed that the custom of
merchants is known to them,^^ and the insurer and insured must
be supposed to be fully apprised and conusant of a notorious usage,
as to a course of a voyage, and to know the nature and peculiar cir-
cumstances of that branch of trade to which the policy relates, and
that whether it is recently established or not.^* The insurers are
also presumed to know the customs of the place where they do busi-
ness, and are assumed in law to know them.^^ It is also presumed
that a person dealing in a particular market has knowledge of its
customs in relation to his transactions therein. ^^ So they are pre-
sumed to be acquainted with the nature and peculiar circumstances
of the branch of trade to which the risk relates.^'^ So in a policy
terpreter of the law. ... In ques- Ga. 408, 12 S. E. 678, 22 Am. St.
lions of insurance established usages Rep. 471.
must in all eases be adhered to, and
in doubtful eases they are the saf-
est srnide one can follow." 1 Mar-
sliall on Tns. (ed. 1810) 707a.
^2 Noble V. Ken noway, 2 Doug. pt.
2, 3d ed. 513, per Lord Mansfield.
See also the following cases:
Manilnnd. — Maryland & Phoenix
Ins. Co. V. Bathhurst, 5 Gill & J.
(Md.) ITiO.
Illinois. — Union Stock Yards &
Transit Co. v. Mallory, Son & Zim-
merman Co. 157 111. 554, 48 Am. St.
Rep. 341, 41 N. E. 888; First Na-
tional Bank v. Fiske, 133 Pa. St. 241,
7 L.R.A. 209, 19 Am. St. Rep. 635,
19 Atl. 554.
Minnesota. — Baxter v. Sherman,
73 I\Iinn. 434, 72 Am. St. Rep. 631,
76 N. W. 211.
Virginia. — Bowles v. Rice, 107 Va.
New York. — London Assur. Corp.
V. Thompsdii, 170 N. Y. 94, 62 N. E. 51, 57 S. E. 575.
in()(), ;51 Ins. L. J. 351, 354; Wall v. ^3 McGregor v. Insurance Co. 1
HoM'ard Ins. Co. 14 Barb. (N. Y.) Wash. (C. C.) 39, Fed. Cas. No.
383; Cook v. Loew, 69 N. Y. Supp. 8811, per Washington, J. See, gen-
614, 31 Misc. 276. orally, Austrian v. Springer, 34 Mich.
rennsijlvania. — Norris v. Insur- 343, 34 Am. St. Rep. 350.
ance Co.' of North America, 3 Yeates i* Salvador v. Hopkins, 3 Burr.
(Pa.) 84, 2 Am. Dec. 360. 1707, 1714; Wadsworth v. Pacific
South Carolina.— Cox, Maitland & Ins. Co. 4 Wend. (N. Y.) 33.
Co. V. Charleston Fire & Marine Ins. ^^ Ilavtshorne v. Union Mutual
Co. 3 Rich, (S. C.) 331, 45 Am. Dec, Ins. Co. 36 N. Y. 172.
771. iMVilliam R. Smith & Son v.
Enplan(l—?^n]vixAov v. Hopkins, 3 Bloom, 159 Iowa, 502, 141 N. W. 32,
Burr, 1707, 1712, 1714; Vallance v. citing Cotham v. Ellis, 107 111. 413;
Dewar, 1 Camp. 503. Bailey v. Bcnsley, 87 111. 556; Long
See 1 Ducr on Tns. (ed. 1845) 196. v. Armsley Co. 43 Mo. App. 25, Jones
; As to general rule, see also: on Ev. (pocket ed.) sec. 57.
United States. — New Roads Oil- ^' Grant v. Lexington Fire Life &
mill & Manufacturing Co. v. Kline, Marine Ins. Co. 5 Ind. 23, 61 Am.
Wilson & Co. 154 Fed. 296, 83 C. C. Dec. 74. See also Capital Fire Ins.
A. 1. Co. V. Kaufman, 91 Ark. 310, 121 S.
Georgia.— B.or&n v. Strachan, 86 W. 289, 38 Ins. L. J. 1058.
'' 627
§ 239 JOYCE ON INSURANCE
on a foreign vessel the underwriter must be taken to have knowl-
edge of the common usages of trade in such country as to equip-
ment.s of vessels of that class for the voyage on which she was des-
tined. ^^ Mr. Marshall ^^ asserts that Britsh underwriters cannot be
presumed to be conusant of the usages of the particular trade under-
taken by ships of foreign nations in foreign trade, but that the
usage must have been made known to them to be binding.^" Mr.
Duer, however,^ criticises this assertion as impolitic and unsupport-
ed, but it is said by McLean, J., in Hazard's Administrator v. New
England Marine Insurance Company ,2 that "the underwriters are
presumed to know the usages of foreign ports to which insured
vessels are destined, also the usages of trade and the political con-
ditions of foreign nations." Where the usage is of such a character
tliat the presumption exists that the insurer has knowledge thereof,
the applicant is not bound to communicate such usage to him.^ But
usage in a particular place or of a particular class of persons can-
not be binding on other persons unless they are acquainted wiili
that usage and adopt it.* Under an Alabama decision, there is no
^8 Tidmarsh v. Washington Fire & back, 15 How. (56 U. S.) 539, 14 L.
Marine Ins. Co. 4 Mason (U. S. C. ed. 805; Trott v. Wood, 1 Gall. (U.
C.) 439, 442, Fed. Cas. No. 14,024, S. C. C.) 443, Fed. Cas. No. 14,190;
per Storv, J. Rogers v. Mechanics' Ins. Co. 1 Story
Implied obligations varied hij (U. S. C. C.) G03, Fed. Cas. No. 12,-
agreement or usage, see marine ins. 016..
act 1906 (6 Edw. VII. c. 41) sec. Connecticut. — Crosby v. Fitch, 12
87; Butterworth's Twentieth Cent. Conn. 422, 31 Am. Dec. 745.
Stats. (1900-1909) p. 423; Chitty's /oa'rt.— Sherwood v. Home Sav-
Stats. Eng. (1902-1907) p. 905. ings Bank, 131 Iowa, 528, 109 N. W.
19 1 Marshall on Ins. (ed. 1810) 9.
075 Louisiuna. — Herman v. Western
^^ Citing Larabie v. Wilson, Doug. Marine & Fire Ins. Co. 7 La. (13
271; digested, Id. 192, et .seq.; also La. O. S. 516) 32.5.
in 1 Duer on Ins. (ed. 1845) 243, Maine.— Lenah v. Perkins, 17 Me.
et seq. 462, 35 Am. Dec. 268.
11 Duer on Ins. (ed. 1845) 199. Maryland.— M?iSon v. Franklin
2 8 Pet. (33 U. S.) 557, 582, 8 L. In.s. Co. 12 Gill & J. (Md.) 468.
ed. 1043. Massachusetts. — Howard v. Great
3Cox, Maitland & Co. v. Charles- Western Ins. Co. 109 Mass. 384; Lee
ton Fire & Marine Ins. Co. 3 Rich, v. Dorchester Mut. Fire Ins. Co. 105
(S. C.) 331, 45 Am. Dec. 771; Dan- Mass. 298; Taylor v. ^tna Life Ins.
iels V. Hudson River Fire Ins. Co. 12 Co. 13 Gray (79 Mass.) 434.
Cush. (66 Mass.) 416, 59 Am. Dee. Neiv York.— WeWs v. Bailey, 49
192; Planche v. Fletcher, 1 Doug. N. Y. 464; Cook v. Loew, 34 Misc.
251; Kingston v. Knibbs, 1 Camp. 276, 69 N. Y. Supp. 614.
508n, per Lord Ellenborough. Ohio. — Hartford Prot. Ins. Co. v.
* Bartlett v. Pentland, 10 Barn. & Harmer, 2 Ohio St. 452, 59 Am. Dec.
C. 760, 770, per Lord Tenterden. 684.
See also the following cases: Pennsylvania. — Eyre v. Marine
United States.— Adsivas v. Otter- Ins. Co. 5 Watts & S. (Pa.) 116.
628
CONSTRUCTION— USAGE § 240
presumption of knowledge on the part of an insurer doing a gen-
eral business throughout the United States of a custom or usage
which is peculiar to a city in a state foreign to its domicil, so as to
make the custom an element of its contracts relating to property
in such city without proof that it had such knowledge.^
§ 240, Usage must be general. — Tn order that a usage should be
admitted in evidence in the construction of the terms of a policy,
it must poss&'^s certain necessary properties or essentials, one of
which is, that it should be general,^ that is, general to the whole
mercantile world,' or in regard to the trade to which it has refer-
EngJand. — Stewart v. Aberdeen, 4 /^/moj's.— Cleveland, Cincinnati,
Mees & W. 211; Gabay v. Llovd, 3 Chicago & St. Louis Rv. Co. v. .Jen-
Barn. & C. 793; Scott v. Irving, 1 kins, 174 III. 398, 62 L.R.A. 922, 51
Barn. & Adol. 605. N. E. 811, 66 Am. Rep. 296; Whipple
In general, if a custom is local, a v. Tuckei', 123 111. App. 223.
person who re.sides in a foreign land, Kentucky. — Shaw v. Tngraham-
and ha.s never been to the particular Day Lumber Co. 152 Ky- 329,
locality before, is not bound unless L.R.A.1915D, 145, 153 S. W.'231.
he has knowledge of the custom: New York. — Hatch v. Luckman,
Iloian V. Straclian, 86 Ga. 408, 22 140 N. Y. Supp. 1123, 155 App. Div.
Am. St. Rep. 471, 12 S. E. 678. 765, aff'g 118 N. Y. Supp. 689, 64
^ German American Ins. Co. v. Misc. 508.
Commercial Fire Ins. Co. 95 Ala. '1 Arnould on Marine Ins. (Per-
469, 16 L.R.A. 291, 11 So. 117. Ex- kins' ed. 1850) 71. See Id. (9th ed.
amine National Fire Ins. Co. v. Han- Hart & Simey) sees. 55 et seq., pp.
berg, 215 111. 378, 74 N. E. 377; 74 et seq., sec. 505, p. 666; sec. 507,
Traders Ins. Co. v. Dobbin.'; & Ewing, p. 668; sec. 1273, p. 1591. See gen-
114 Tenn. 227, 86 S. W. 323. Com- crally on this point, Southwe.stern
pare Capital Fire Ins. Co. v. Kauf- Freight & Cotton Press Co. v. Stan-
man, 91 Ark. 310, 121 S. W. 389, ard,^44 ]\Io. 71, 100 Am. Dec. 255;
38 Ins. L. J. 1058. Columbus Coal Ins. Co. v. Tucker,
6 See Trott v. Wood, 1 Gall. (U. S. 48 Ohio St. 41, 12 L.R.A. 577, 29
C. C.) 443, Fed. Cas. No. 14,190, per Am. St. Rep. 534, per Spear, J.
Story, J.; Stnrges v. Buckley, 32 In examining for the the first time
Conn. 20; Crosby v. Fitch, 12 Conn, any question under a policy of insur-
410, 31 Am. Dec. 745, 750, per anco, the practical construction of the
Church, J.; Leach v. Perkin.s, 17 Me. contract by nicrcliant.s and under-
462, 35 Am. Dee. 268; Lockney v. writers, not through any partial or
Police Beneficiary Assoc. 217 Pa. local usages, but by the general con-
568, 66 All. 844; Missouri Pacific R. sent of the mercantile world, is of
R. Co. v. Fagan, 72 Tex. 127, 2 gi-eat weight, though not neces.sarily
L.R.A. 75, 13 Am. St. Rep. 776; decisive. General Mutual Ins. Co. v.
Gabay v. Lloyd, 3 Barn. & C. 793; Sheiwood, 14 How. (.55 U. S.) .351,
and see case.s cited in last note. See 14 L. ed. 452. Cited in Ocean Steam-
also generally: ship Co. v. .'Etna Ins. Co. 121 Fed.
Alabama. — Bvrd v. Beall, 150 Ala. 884; Anderson v. i\lunsou, 104 Fed.
122, 124 Am. St. Rep. 60, 43 So. 749. 917; Barnstable, The, 84 Fed. 900;
Arkansas. — City Electric Street IMoores v. Louisville Underwriters,
Rd. Co. V. First National Exchange 14 Fed. 232; Pride v. Providence-
Bank, (!2 Ark. 33, 31 L.R.A. 535, 34 Washington Ins. Co. 6 Pa. Dist. R."
S. W. 89, 54 Am. St. Rep. 282. 231.
629
§ 240 JOYCE ON INSURANCE
ence. Thus^ a universal custom of a particular trade, which has
been invariably or uniformly followed for many years, is admis-
sible in evidence- to determine the actual contract.* A usage can-
not be said to be general which has obtained only in a few instances,
for such a usage cannot be regarded,^ nor can a usage be general
w^hich is known only to a few, for such limited knowledge doas not
establish a usage. ^° Mr. Duer ^^ gives much consideration to the
meaning of the word ''general" in this connection, ^^ and limits its
application to those cases in which the knowledge of the parties and
their intention to adopt the usage are inferred merely from the
fact of its existence, but says that when their knowledge or inten-
tions depend upon other direct or circumstantial evidence, their
contract may be governed by usage, local or partial, as in case of
usage between the parties or a local usage of trade practised by the
insurers. ^^ It is said by Story, J., in Rogers v. Mechanics' Insur-
ance Company ^* that "the usage or custom of a particular port in
a particular trade is not such a custom as the law contemplates to
limit or control or qualify the language of contracts of insurance.
It must be some known general usage or custom in the trade, ap-
plicable and applied to all the ports of the state where it exists, and
from its character and extent so notorious that all such contracts
of insurance in that trade must be presumed to be entered into by
the parties in reference to it as a part of the policy." But a local
or particular custom may be general in the sense that an insurance
company, by a long-continued and invariable and known course
of dealing, have established a binding usage.^^ So a usage at Lloyds
SRenner v. Bank of Columbia, 9 C.) 149, 150, Fed. Cas. 3003, per
Wheat. (22 U. S.) 581, 6 L. ed. 166: Wa-shinston, J.
.see Leac4i v. Perkins, 17 Me. 462, 3.3 . ii 1 Duer on Ins. (ed. 1845) 258,
Am. Dee. 268; Goodenow v. Tyler, < et .scq.
Mas-s. 336, 5 Am. Dec. 22 ; Cogore-shall ^^ ''Tlie word '2:eneral,"' be says,
v. American Ins. Co. 3 AVend. (N. '*is u.sed in various senses. It is used
Y. ) 283. In general, knowledge of a in reference to places as well as per-
usage need not be shown by direct sons. In tlie first sense it is opposed
evidence, but may be inferred from to 'local,' in the second to 'partial.'
circumstances or implied from its no- In another sense it embraces the
toriety. Barry v. Hannibal & St. .lo- wliole of the subjects to which it re-
seph's Rv. Co. 98 Mo. 62, 14 Am. late.s, and is ojDposed to 'special' or
St. Rep. '610, 11 S. W. 308. 'particular,' " etc. 1 Duer on Ins.
9 Cutter V. Powell, 6 Term Rep. (ed. 1845) 259, see. 55.
324, 6 Eng. Rul. Cas. 627; Crosbv ^^1 Duer on Ins. (ed. 1845) 263,
V. Fitch, 12 Conn. 422, 31 Am. Dee. see. 55.
745, 749; Kocher v. Supreme Coun- i« 1 Story (U. S. C. C.) 607, Fed.
oil Catholic Benevolent Leg'ion, 65 Cas. No. 12,016.
N. J. L. 649, 52 L.R.A. 861, 86 Am. is Baxter v. Massasoit Ins. Co. 13
St. Rep. 687, 48 Atl. 544. Allen (95 Mass.) 320; DcForest v.
lOCollings v. Hope, 3 Wash. (C. Fulton Fire Ins. Co. 1 Hall (N. Y.)
630
CONSTRUCTION— USAGE § 241
may be general and binding upon those in the habit of underwrit-
ing there.^^
§ 241. Usage must be well established and notorious. — The usage
should be well e.<tabli.<hed ; that is, so well settled tliat persons en-
gaged in a trade must be considered as contracting in reference
thereto,^'^ and it must be so well known in general among those
engaged in the business or trade to which it belongs as to be received
'&"&
as a matter of course. ^^ If it be a particular usage, it must be "of
univei-sal notoriety in the trade in which, and of the place at which,
the insurance is effected." ^^
84; Union Cent. Life Ins. Co. v. Pott- 577, 29 Am. St. Rep. 534, per Spear,
ker, 33 Ohio St. 439, 31 Am. Rep. J.
555; Helme v. Pliiladelpliia Life lu.s. Pennsijlmnia. — Loekney v. Police
Co. 61 Pa. St. 107, 100 Am. Dec. Benetleiary Assoc. 217 Pa. 568, 66
ti21. Atl. 844; Dempsey v. Dobson, 184
16 Gabay v. Lloyd, 3 Barn. & C. Pa. St. 588, 40 L.R.A. 550, 63 Am.
793. St. R«p. 809.
^"^ United States. — Trott v. Wood, 1 Texas. — Missouri Pacific R. Co.
Gall. (C. C.) 443, Fed. Ca.s. No. 14,- v. Fagan, 72 Tex. 127, 2 L.R.A. 75,
190 per Stoiy, J. 13 Am. St. Rep. 776.
Alabama. — Mobile J. & K. R. Co. Wisconsin. — Lemke v. Hage, 142
V. Bay Shore Lumber Co. 165 Ala. Wi.s. 178, 135 Am. St. Rep. 1066, 125
610, 138 Am. St. Rep. 84, 51 So. N. W. 440.
956; Byrd v. Beall, 150 Ala. 122, 124 18 Ros-ers v. Mechanics' Ins. Co. 1
Am. St. Rep. 60, 43 So. 749. g^orv (C. C.) 603, 607, 608. Fed.
Arkansas.— City Electric Street R. Cas.'^No. 12,0i6, per Story, J.; Col-
s' A^^''4* ^fr^ A '^-q^^lT s'w li^S^ '-' Hope, 3 Wash. (C. C.) 149,
Sn ^"i -A^^' II ^/'^oeo ' 150, Fed. Cas. No. 3003, per Wash-
89 54 Am. St. Rep. 282. ^ j ^^^^ ^. In.surance
Ilhnois -Clevel^nd^ Cincinnat , - ' Wa.sh. (C. C.) 39, Fed.
Chicago & St. Louis Ry. Co. V. J enk- -ijt , • , t
in.s, 174 111. 398, 62 L.R.A. 922, 51 ^^^- ^f- 8811, per W ashmgtou, J.;
N. E. 811, 66 Am. St. Rep. 296. J?"""*"" /• ^°^''"^'','^" J"'- ,^t f
7v>»/?«c/t-7/.— Rochester German Ins. Sum. (U. S. C. C.) Sn, 3/8, J^ed.
Co. V. Peaslee Gaulbert Co. 27 Kv. Cas. No. 3987, per Story, J.; Steele
L. Rep. 756, 87 S. W. 1115. v. McTyer's Admr. 31 Ala. 667, 70
.¥afwe.— Cobb v. Lime Rock Fire Am. Dec. 516, and note 523; Macy v.
& Marine Ins. Co. 58 Me. 328, per Whaling Ins. Co. 9 Mete. (50 Mass.)
Appleton, C. J. 363, per Shaw, C. J. ; Winsor v. Dil-
Marv?«w(7.— Baltimore Base Ball & laway, 4 Met,' (45 IMass.) 221, 223,
Exhibition Co. v. Pickett, 78 Md. per Shaw, C. J.; Palmer v. Black-
375, 22 L.R.A. 690, 28 Atl. 279, 44 burne, 1 Bing. 61, 14 Eng. Rul. Cas.
Am. St. Rep. 304; Blake v. Stump, 486, per Dallas, J., and Burrough, J.;
73 Md. 160, 10 L.R.A. 103, 20 Atl. Power v. Whitmore, 4 Mces. & S.
788. 141, 150; Salvador v. Hopkins, 3
Missouri. — Southwestern Freight & Burr. 1707; 1 Duer on Ins. (ed.
Cotton Press Co. v. Stanard, 44 i\Io. 1845) 265.
71, 100 Am. Dec. 255. ^^ 1 Arnould on Marine Insurance,
OMo.— Columbus Coal Ins. Co. v. Perkins' (ed. 1850) 71. See Id. (9th
Tucker, 48 Ohio St. 41, 12 L.R.A. od. Hart & Simey) sees. 55 et seq.,
631
§§ 242, 243 JOYCE ON INSURANCE
§ 242. Usage may be of recent origin. — Although it is said that
usage must be ancient,^" public, and continued,^ and although it is
held that a usage of short continuance is not entitled to any weight,^
yet it is well settled that a usage may be of recent origin.^ So in
Noble V. Kenneway * a usage existing for three years was held suf-
ficient, and Lord Mansfield declares in that case that "every un-
derwriter is presumed to be acquainted with the in-actice of the
trade he insures, whether recently established or not. If he does
not know it, he ought to inform himself. It is no matter if the
usage has been only for a year." So Mr. Arnould^ says that where
the trade is recent, it is only necessary that a usage be coextensive
therewith, and be general and well known. In a Maine case the
court ^ declares that a usage must be "certain, general, frequent,
and so ancient as to be generally known and acted upon," while in
a New York case "^ it is said that "the true test of a commercial usage
is its having existed a sufficient length of time to have become gen-
erally known, or to warrant a presumption that contracts are made
in reference to it." ^
§ 243. Usage must be reasonable. — A usage must be valid, rea-
sonable, and not one Avhich would by construction result in an ab-
surdity', for it must be assumed that an unreasonable usage or one
leading to an absurdity w^as not contemplated by the parties in ef-
fecting the contract.^ It is held that a general and notorious cus-
pp. 74 et seq. And see eases in two ^ Leach v. Perkins, 17 Me. 462, 35
preceding notes. Am. Dec. 268, per Shipley, J.
^oColhngs V. Hope, 3 Wash. (C. 'Smith v. Wright, 1 Caines (N.
C.) 149, Fed. Cas. No. 3003. See Y.) 43. Usage in this ease carried
Commonwealth v. Mayloy, 5< Pa. St. back by some witnesses as far as
291. thirty years, and it was objected that
^ See Crosby v. Fitch, 12 Conn, period wa.s too short.
422, 31 Am. Dec. 745; Sipperly v. * See Renner v. Bank of Columbia.
Steward, 50 Barb. (N. Y.) 62. 9 Wheat. (22 U. S.) 581, 6 L. ed.
^ Wall V. Ea.st River Ins. Co. 3 166, per Thompson, J. "No particu-
Duer (N. Y.) 264. lar period is i-equisite to the estab-
^ Macy V. WliaJing Ins. Co. 9 lishment of a usage." 1 Piiillips on
Mete. (50 Mass.) 363,^364, per Hub- Insurance (2d ed.) sec. 138. "It is
bard, J., citing 2 Starkie on ICvi- quite certain that where a usage is
.dence, 453. See Townsend v. Whit- recent or local, it may have sufficient
by, 5 Harr. (Del.) 55. force to affect the construction of the
*Doug. 3d ed. pt. 2, 513. Cited policy if brought home to the knowl-
also in Renner v. Bank of Columbia, edge and recognition of the parties."
9 Wheat. (22 U. S.) 581, 589, 6 L. 1 Parsons on Ins. (ed. 1868) 93.
ed. 166. 9 Collings v. Hope, 3 Wash. (U. S.
5 1 Arnould on Ins. (Perkins' ed. C. C.) 149, 150, Fed. Cas. No. 3003,
1850) 69, 70. See Id. (9th ed. Hart per Washington, J.; Mobile, Jackson
& Simey) sees. 55 et seq., pp. 74 et & Kansas City R. Co. v. Bav Sliore
seq. Lumber Co. 165 Ala. 610, 138 Am.
632
CONSTRUCTION— USAGE § 243
torn of steamboat captains at large river ports to insure their boats
and. execute premium notes therefor is reasonable and valid as
against the owners.^" But a custom of a particular port to strike off
one-third the gross freight for charges and to pay two-thirds only
to the assured in a freight policy is unreasonable,^^ and a usage
which would continue a time policy in force at the election of the
insured for an unlimited time is unreasonable. ^^ So a usage for a
master to sell without necessity is invalid." 80 a usage permitting
an intermediate voyage may be unreasonable, as in a case where
the policy gave "liberty of other port or ports," but was indorsed,
"liberty is given to deviate by going to port or ports in Europe, by
paying an equitable premium therefor." ^* A local custom that in-
surance agents may, after the termination of their agency, cancel
any policies issued through them, is unreasonable and void.^* It
St. R^p. 84, 51 So. 956; Bvrd v. Pennsiilvania. — Dcmpsey v. Doh-
Beall, 150 Ala. 122, 124 Am. St. Rep. son, 174 Pa. 122, 32 L.R.A. 761, 63
60, 43 So. 749; Leach v. Perkins, 17 Am. St. Rep. 809, 34 Atl. 459; Jor-
Me. 462, 35 Am. Dec. 268; Seccomb dan v. Meredith, 3 Yeates (Pa.) 318,
V. Provincial Ins. Co. 10 Allen (92 2 Am. Dec. 373, and note.
Mass.) 314, per Biijelow, C. J.; Macy Texas. — IMissouri Pacific R. Co. v.
V. Whaling- Ins. Co. 9 Mete. (50 Fagan, 72 Tex. 127, 2 L.R.A. 75, 13
Mass.) 363, per Shaw, J.; Bryant v. Am. St. Rep. 7/6, 9 S. W. 749.
Commonwealth Ins. Co. 6 Pick. (23 "Usage, to be valid, must be rea-
Mass.) 131; London Assurance Corp. sonable. It must not tend to increase
V. Thompson, 170 N. Y. 94, 62 N. E. extravagantly or indefinitely the
1066, 31 Ins. L. J. 351, 354; Ougier risks that the undei'writer meant to
V. Jenning, 1 Camp. 505, note. Lord assure, or to deprive the assured of
Eldon's charge to jurv- the Avhole or a large portion of the
See also Alabama. — Loval v. Wolf, indemnity on which he certainly re-
179 Ala. 505, 60 So. 298; Shaw v. lied. It must not lead to conscquen-
Ingraham-Dav Lumber Co. 152 Kv. ces that could not have been contera-
329, L.R.A.1915D, 145, 153 S. W. plated by the parties, thus repelling
231. the presumption that they meant to
Kentucky. — Kendall v. Russell, 5 adopt it as the basis of their con-
Dana (Ky.) 501, 30 Am. Dec. 696, tract." 1 Duer on Ins. (ed. 1845)
698. 268, sec. 63, lect. ii. p. 2.
Massachusetts, — Farnsworth v. ^"^ Adams v. Pittsburgh Ins. Co. 95
Hemmer, 1 Allen (83 Mass.) 494, 79 Pa. St. 348, 40 Am. Rep. 662.
Am. Dec. 756, and note, 759; Eager ^^ McGregor v. Pennsvlvania Ins.
V. Atlas Ins. Co. 14 Pick. (31 Mass.) Co. 1 Wash. (C. C.) 39, Fed. Cas. No.
141, 25 Am. Dec. 363. 8811.
New York. — Hatch v. Luckman, ^2 p]yj.g y IMarine Ins. Co. 5 Serg.
140 N. Y. Supp. 1123, 155 App. Div. & W. (Pa.) 116, 6 Whart. (Pa.) 247.
765, aff'g 118 N. Y. Supp. 689, 64 " B,.vant v. Commonwealth Ins.
^lisc. 508. Co. 6 Pick. (23 Mass.) 131.
0/»'o.— Columbus Coal Ins. Co. v. 1* Secomb v. Provincial Ins. Co.
Tucker, 48 Ohio St. 41, 12 L.R.A. 10 Allen (92 ]\Ia.ss.) 305.
577, 29 Am. St. Rep. 534, per Spear, ^5 Merchants' Ins. Co. v. Prince,
J- 50 Minn. 53, 52 N. W. 131.
633
§ 244 JOYCE ON INSURANCE
is said that a usage, to be enforced by law, "must be reasonable in
its provisions, for though usages apparently unreasonable may have
been so long continued as to have acquired the force of law, yet the
unreasonableness now apparent may have grown out of changes
occurring after the usage was established." ^^
§ 244. Usage must be uniform. — The course of trade or custom
which constitutes a usage must be uniform in its practice during
its continuance, whether the usage be recent in its origin or long
established; that is, its practice must be regular, uninterrupted,
and constant in its observance and settled, not indeterminate nor
variable in its character ; ^"^ for occasional instances, or its practice
among a few only, will not establish a usage," and as was said by
Shaw, C. J., in Macy v. Whaling Insurance Company,^' it must
also be ''convenient and adapted not only to increase facilities in
trade, but to the promoting of just dealings in the intercourse be-
tween the parties." It is said that "the course of trade must be uni-
form and general to enable it to be considered as a legal defense," 2"
but Lord Ellenborough declares, in Vallance v. Dewar.^ that "if a
usage be general, though not uniform, the underwriters are bound
to take notice of it." Mr. Duer ^ explains the word "uniform," as
iSMacv V. Whaling Ins. Co. 9 Dav Lumber Co. 152 Kv. 329,
Mete. (50 Mass.) 363, per Shaw, C. L.R.A.1915D, 145, 153 S. W. 231.
J. It is declared that by '•unreasou- Mari/land. — Baltimore Base BaH
able" is meant not that the usage it- & Exhibition Co. v. Pickett, 78 Md.
self is not reasonable, but that the 375, 22 L.R.A. 690. 28 Atl.' 279.
unreasonableness consists in suppos- 3Iissotiri. — Southwestern Freight
ing that the parties included a cer- & Cotton Press Ins. Co. v. Stanard,
tain usage in their contract. 1 Par- 44 Mo. 71, 100 Am. Dec. 255.
sons on Insurance (ed. 1868) 102, New York. — London Assurance
103. But see Ougier v. Jennings, 1 Corp. v. Thompson, 170 N. Y. 94,
Camp. 505, where Lord Eldon in- 62 N. E. 1066, 31 Ins. L. J. 391, 394;
structed the jury, "If you think the Hatch v. Luckman, 140 N. Y. Supp.
usage does exist, if you think it rea- 1123, 155 App. Div. 765, aff'g 118 N.
sonable'' then sending a ship on an Y. Supp. 689, 64 Misc. 508.
intermediate voyage might be rea- Texas. — Missouri Pacific R. R. Co.
sonable. v. Fagan, 72 Tex. 127, 2 L.R.A. 75,
" United States.— See Trott v. 13 Am. St. Rep. 776, 9 S. W. 749.
Wood, 1 Gall. (U. S. C. C.) 443, Wisconsin.— Lemke v. Hage, 142,
Fed. Cas. No. 14,190, per Storv, J.; Wis. 178, 135 Am. St. Rep. 1066,
Ceilings V. Hope, 3. Wash. fU. S. 125 N. W. 440.
C. C.) 149, Fed. Cas. No. 3003. is See §§ 2.39, 240 herein.
Alahama.—Steele v. McTver's ^^9 lletc. (50 Mass.) 363.
Admr. 31 Ala. 677, 70 Am. Dec. 516, 20 Trott v. Wood, 1 Gall. (C. C.)
and note, 523. 443, Fed. Cas. No. 14,190, per Slory,
Illinois. — Cleveland, Cincinnati, J.
Chicao-o & St. Louis Rv. Co. 174 111. 1 1 Camp. .508.
398, 02 L.R.A. 922, 51 N. E. 811, 66 ^1 Duer on Ins. (ed. 1845), 264,
Am. St. Rep. 296. sec. 58, note b.
Kentucky. — Shaw v. Ingraham-
634
•CONSTRUCTION— USAGE §§ 245, 246
used by Lord Ellenborough, to mean "universal," and says: "It
is not necessary that the usage, when it is a usage of trade, or, in
the technical application of words, to be uniform, should be uni-
versal; that is, should be followed at all times by all persons or
A-essels concerned or employed in the trade to wliich it relates, for
this would be inconsistent with the meaning which in these cases
is attributed to the word 'general.' " A usage which is uniform is
not, however, necessarily a valid one, although of long continu-
ance, as where it is a particular usage and not known to the as-
sm-ed. and where the result of its application would be unreason-
able.3
§ 245. Parties may by express contract include or waive usage. —
It is undoubtedly true that parties may by express reference in the
policy to certain valid usages adopt such usages as the standard by
which their rights under the contract may be determined, and the
contract will be construed thereby.'* It is likewise true, as we have
before stated,^ that the parties may always expressly contract so as
to waive usage.®
§ 246. Usage admissible where contract ambiguous or obscure. —
Where the terms of the contract are ambiguous or obscure or in-
deiinite, or where the words have by the usages of trade acquired a
particular meaning, or are technical or local, usage is admissible
to explain them.' The "true and appropriate oflice of a usage or
' McGregor v. Insurance Co. of gers Fire Ins. Co. of N. Y. v. David
Pa. 1 Wash. (C. C.) 39, Fed. Cas. Moffat Co. 154 Fed, 13, 83 C. C. A.
No. 8811, per Washington, J. 91; Wintlirop v. Union Ins. Co. 2
* Union Bank v. Union Ins. Co. Wa.^Ii. (U. S. C. C.) 7, Fed. Cas. No.
Dud. (S. C.) 171; Canton Ins. Of- 17,901; Hancox v. Fishing Ins. Co.
tice, Ltd. V. Woodside, 90 Fed. 301, 3 Sum. (U. S. C. C.) 132, Fed. Cas.
3-3 C. C. A. 63, 61 U. S. App. 214, No. 6,013.
28 Ins. L. J. 269. Man/land. — Allegro v. Maryland
5 See § 196 herein. Ins. Co. 6 Har. & J. (Md.) 108, 14
6 Schooner Reeside, The, 2 Sum. Am. Dec. 289.
(U. S. C. C.) 567, 570, Fed. ("us. Xo. Massachusetts. — Boruszweski v.
11, 657, per Ston-, J. See also, sren- Middlesex Mutual As.sur. Co. 186
erally, New Roads Oilmill & Manu- Mass. 589, 72 N. E. 250; ^Mooney v.
facturing Co. v. Kline, Wilson & Co. Howard Ins. Co. 138 ]\Iass. 375, 52
154 Fed. 296, 83 C. C. A. 1. See Am. Rep. 277; Murray v. Hatch, 6
marine ins. act 1906 (6 Edw. YJI. Mass. 477.
c. 4) .sec. 87;. Buttervvorth's Twen- Missouri. — Tesson v, Atlantic IVFut.
tieth Cent. Stats. (1900-1909) p. Ins. Co. 40 Mo. 33, 93 Am. Dec. 293.
423; Chittv's Stats. Eng. (1902- New YorA;.— New York Betting &
1907) p. 905. Packing Co. v. Washinston Jn.<^. Co.
Wnited States.— Vnited States v. 10 Bosw. (N. Y.) 428, 23 N. Y. Sup.
Macdaniel, 7 Pet. (32 U. S.) 1, 13, Ct. 428; Coit v. Commercial Ins. Co.
14, 8 L. ed. 587; St. Paul Fire & 7 Johns. (N. Y.) 385, 5 Am. Dec.
Marine Ins. Co. v. Balfour, 168 Fed. 282; Rankin v. American Ins. Co.
212, 93 C. C. A. 498; Globe & Rut- 1 Hall (N. Y.) 619.
635
§ :M6 JOYCE ox INSURANCE
custom," says Story, J.,^ "is to inteipret the otherwise indetermi-
iiate intentions of the parties, and to ascertain the nature and extent
of their contracts," and "courts have long allowed mercantile in-
struments to be expounded according to the custom of merchants." '
So the "contract of insurance is presumed to have been made with
reference to the usages of the place to which the contract has ref-
erence," ^° and usage may be proved by parol, although it has its
origin in law or edict of the government.^^ Evidence of local cus-
tom is admissible to supply details in oral or written contracts in
regard to which the contract itself is silent, or to explain provincial-
isms or technical terms which have acquired a known, fixed, and
definite meaning different from the ordinary import of such terms,
or where such terms, if not explained, are susceptible of more than
one reasonable construction. ^^ And, in general, evidence of usage
is admissible to apply the written contract to the subject matter
of the action, to exi^lain expressions used in a particular sense by
particular persons as to particular subjects, and to give effect to
language in a contract as it was understood by those who made it.^'
80 evidence of usage is admissible to explain the meaning of the
word "explosion" in an insurance contract.^*
Pennsi/lvauia. — Citizens' Ins. Co. ® Smith v. Wilson, 3 Bam. & Adol.
V. jMeLaughliu, 53 Pa. St. 485; Eyre 728, per Parke, J.
V. Marine Ins. Co. 5 Watts &"S. ^° Cobb v. New England Mut. Ins.
(Pa.) 116. Co. C Gray (72 Mass.) 192, 200.
Virf/inia. — Harris v. Nicholas, 5 ^^ Livingston v. Maryland Ins. Co.
Munf. (Va.) 483. 7 Cranc-h (11 U. S.) 506, 3 L. ed. 421.
England. — Wigglesworth v. Dalli- Time policies are said by Mr. Duer
son, 1 Doug. 207, 15 Eng. Rul. Cas. (1 Duer on Insurance [ed. 1845]
542. 205) to embrace all usages or none.
See 1 Arnould on Marine Ins. See note in 3 L.R.A.(N.S.) 248,
(Perkins' ed. 1850) 64; Id. (9th ed. on admissibility of evidence of cus-
Hart & Simey) sec. 67, p. 90, sec. lom to create an exception to written
1273, p. 1591. contract.
Proof of usage or custom is admis- 12 Barlow v. Lambert, 28 Ala. 704,
sible only as an aid or instrument 65 Am. Dec. 374, and note 379,
lending- to aid interpretation. Amer- 13 gj^ith v. Clews, 114 N. Y. 390,
iTV.rx "^i^^'ilw p" "n ?<^ 4 L.R.A. 392, 11 Am. St. Rep. 627,
12 Cal. App 133 10b Pac. .20, 39 31 N. E. 160; Dillon v. Continental
wi7" K ' 1 1 Casualty Co. 130 Mo. App. 502. 109
Where bv usage words have ae- o ttt on -f-> i. 1 t
quired a special and peculiar mean- ^- ^- ^^/ Destrehan v. Louisiana
ing different from their ordinary S^P^ff ,^"3"^^" ?''• 1^ ^- ^"5
meaning this may be shown. Ocean ''-"' ^"^ ^^- ^■^' ^" ^^- ^^- ^^P- -^'^'
Steamsiiip Co. v. .Etna Ins. Co. (U. Bowman v. First National Bank, 9
S. D. C.) 121 Fed. 882; Paepcke- ^as^^- 614, 43 Am. St. Rep. 8/0, 38
Leicht Lumber Co. v. Tallev, 106 Pac. 211; John O'Brien Lumber Co.
Ark. 400, 153 S. W. 833. " v. Wilkinson, 123 Wis. 272, 101 N.
8 Schooner Reeside, 2 Sum. (U. S. W. 1050.
C. C.) 567, 569, Fed. Ca.s. No. 11,657. 1* Hartford Steam Boiler Inspee-
636
I
CONSTRUCTION— USAGE
§ 247
§ 247. Usage inadmissible to contradict or substantially vary the
plain terms of the policy. — It reasonably follows the rule that par-
ties niav make such valid contracts as tliev wish, that iisaiie is in-
admissible to contradict, nullify, or substantially vary the positive
terms in which they have expressly stipulated, where the words are
clear and are of a plain and decisive character. To admit such evi-
dence for such purpose would establish the principle that courts
can, by construction, incorporate into the policy that w^hich was
never contemplated by the parties, and would allow mere presump-
tions and implications to overthrow the most formal and deliberate
declarations of the parties." It wa.s early stated by Emerigon,^®
who refers to Vattel,^''' '"that the first general rule of construction
is that it is not permitted to interpret what has no need of inter-
pretation," ^^ And "if the parties have explained themselves out
the point in a precise, special, and clear manner, all interpretation
becomes superfluous, cum in verbis nulla est ambiguita.s non debet
admitti voluntatis in quaestio; and the stipulated agreement nmst
be adhered to." ^' The words ''precise," "clear," and "special," used
by Emerigon, add much to the force of the rule, make it easier of
application, and operate more strictly to the exclusion of usage.^°
tiori & Ins, Co, v. Pabst Brewing Co,
201 Fed. (J17, 120 C. C. A, 4.3.
15 Schooner Reeside, 2 Sum. (U. S.
C. C.) 567, 570, Fed. Cas. No. 11,657,
per Story, J. See New York Ins. Co.
V. Thomas, 3 Johns, Cas. (N. Y,) 1,
per Kent, J,
1® Emerigon on Ins. (Meredith's
ed.) e, ii. see. 7, p. 49.
^'' Droit des Gen.s, liv. 3, c. 17.
1® "When an instrument is con-
ceived in clear and precise terms,
when its sense is manifest and leads
1o nothing absurd, there is no e.xcuse
for refusing the meaning it naturally
presents. To seek elsewliere- conjec-
tures to restrain or enlarge- it is to
wish to evade it." Emerigon on In-
surance (Meredith's ed.) c. ii. sec. 7,
p. 49. And he adds that when in
doubt as to the interpretation, "it
must be understood with reference to
principles of law and to the practice
of commerce."
1® Emerigon on Insurance (Mere-
dith's ed. 1850) e. xiii., sec. 7, p. 555.
"If the covenants are clear in them-
selves, and contain nothing prohibit -
63
ed by law, the judge is not allowed to
stray out of them;" that it is only
where the contract is ambiguous "that
the magistrate is authorized to form
his decision by the light which legal
equity, the common law, the nature of
the contract, and the circumstances
of the case may afford him." Emer-
igon on Insurance (Meredith's ed.
1850) c. i. sec. 5, p. 17. It will be
observed that Emerigon uses the
words "clear" and "precise." The
words "plain and decisive character"
are also used by Hubbard, J., in
Macy v. Whaling'ins. Co. 9 Met, (50
^lass.) 363. So also in 1 Arnould
on jMarine Insurance (Perkins' ed.
1850) 64a, note, who says: "Where,
liowever, the terms employed are
clear and pi'ecise in themselves," etc.
no evidence of usage is admissible.
See also 1 Parsons on Ins. (ed. 1868)
84 note.
^° See remark in 1 Parsons on In-
surance (ed. 1868) 83, 84, note 1. See
also 1 Arnould on Insurance (Per-
kins' ed. 1850) 75, rule iii. sec. 44.
§ 248
JOYCE ON INSURANCE
So Mr. Justice Harlan, in Grace v. American Central Insurance
Company ^ declares that "an express written contract embodying
in clear and positive terms the intention of the parties cannot be
varied by evidence of usage or custom," and there are numerous au-
thorities of like tenor.^
§ 248. Same subject: cases and authorities. — Evidence of usage
for vessels to go to two ports in the same island is inadmissible
where the contract is written and plain, and the usage is inconsist-
1 109 U. S. 278, 283, 3 Sup. Ct. Blancliard, 67 N. H. 268, 68 Am. St.
207, 27 L. ed. 932. Rep. 664, 36 Atl. 556.
^United States. — Winthrop v. -^^ew York. — Hopper v. Sage, 112
Union Mut. Ins. Co. 2 Wash. (C. C.) N- Y. 530, 8 Am. St. R«p. 77i; 20 N.
7, Fed. Cas. No. 17,901; McGresror E. 3o0j Hone y. Mutual Safety Ins.
V. Pennsyhania Ins. Co. 1 Wash. (U.
S'. C. C.) 39, 42, Fed. Cas. No. 8,811.
See Delaware Ins. Co. of Phila. v.
S. S. White Dental Manufacturing
Co. 109 Fed. 334, 48 C. C. A. 382,
Co. 1 Sand. (N. Y.) 137, 2 N. Y. (2
Comst.) 235; St. Nicholas Ins. Co. v.
Mercantile Mut. Ins. Co. 5 Bosw. (N.
Y.) 238; Baro-ett v. Orient Ins. Co.
3 Bosw. (N. Y.) 385.
on T T T nr-i ^- • i • j Texcis. — Henry v. Green Ins. Co.
30 ins. L. J. 961, eertioi'ari denied, ^f Aw,„.v„ rr„„ n- a
TQQ TT c r-f.f. AC T 1 Qop oo c *^^ America, — Tex. Civ. App. — ,
183 U. S. /OO, 46 L. ed. 390, 22 Sup. 203 S W 836
Ct. 936, s. e. 105 Fed. 642 Wri/Zmi-Mutual Assur. Soc. v.
^ia&«.m«.— Byrd v. Beall, loO Ala. Scottish Union & National Ins. Co.
122, 124 Am. St. Rep. 60, 43 So. 84 Va. 116, 4 S. E. 175, 10 Am. St.
749; Smith v. Mobile Nav. & Mutual Rep. 819.
]ns. Co. 30 Ala. 167. ^Vhconsin. — Vogt v. Schienebeck,
^?7.a)«sff.s.— Paepeke-Leicht Lum- 122 Wis. 491, 106 Am. St. Rep. 989,
her Co. v. Talley, 106 Ark. 400, 153 100 N. W. 820, 67 L.R.A. 756.
S. W. 833. Englana.—^'&W v. Janson, 4 El. &
Connecticttt. — Wiggin v. Federal B. 500, 508, per Campbell, C. J.;
Stock & Grain Co. 77 Conn. 507, 59 Crofts v. Marshall, 7 Car. & P. 597,
Atl. 607. 607, per Lord Denman ; 1 Arnould on
Delaimre. — Lattomus v. Farmers' Insurance (Perkins' ed. 1850) 78
Mut. Fire Ins. Co. 3 Houst. (Del.) rule iv. ; 1 Parsons on Insurance [ed.
254. 1808] 85, et seq. Mr. Duer (1 Duer
Illinois. — Delaware & Hudson Ca- on Insurance [ed. 1845] 269) says,
nal Co. V. ^Mitchell, 113 111. App. 429, that usage must be consistent with
aff'd 2n 111. 329, 71 N. E. 1026; II- the terms of the policy, and is never
linois Mason's Benevolent Soc. v. admissible to contradict its terms or
Baldwin, 86 111. 479. to nullify or expunge them. "Usage
Iowa. — Duncan v. Green, 43 Iowa, may be admissible to explain what
679. is doubtful. It is never admis.^ible to
Minnesota. — Northwestern Fire & contradict what is plain." Blackett
Marine Ins. Co. v. Connecticut Fire v. Rov'al Exch. Assur. Co. 2 Cromp.
Ins. Co. 105 Minn. 483, 117 N. W. & J. " 244, 14 Eng. Rul. Cas. 179.
825. "Where the terms of a contract are
Missonri. — Dillon v. Continental ])lain, usage can have little effect up-
Casualty Co. 130 Mo. App. 502, 109 on the construction to be placed up-
S. W. 89. on it." Boldero v. East India Co. 26
New Hampshire. — Cummings v. Beav, 316.
638
CONSTRUCTION— USAGE § 249
ent with and repugnant to the contract.^ So usage is held inadmis-
sible to qualify an express stipulation as to keeping a watch nights
by showing that certain rights were excepted by custom,* nor can
the practice of an insurance company to surrender the notes of its
members and cancel their policies on the happening and payment
of losses be shown to contradict or vary the terms of the policy or
note.* And usage will not permit a deviation contrary to the terms
of a policy expressly giving liberty to touch at a particular port,^
nor can evidence be received against the plain language of the pol-
icy of a custom that a marine policy on goods shipped from New
Orleans to Mobile covers the overland transportation of the goods by
railroad.' And where the policy provides in express terms that the
company shall pay the amount of loss without any deduction, a
custom or usage of the company which would vary or limit such
express agreement is inadmissible.' So a local custom among in-
surers to pay only a certain proportion of the loss is inadmissible
to vary or control the plain terms of the contract or to reduce the
amount of recovery.^ It is also held that where the contract is sus-
ceptible of a reasonable construction on its face, custom or usage is
inadmissible to vary its language, although the instrument be an
open or running policy and the contested clauses are scattered over
the document.^" Where the policy was drawn in accordance with
the terms, and the proposal provided for insurance ''on the char-
ter of the barque 'Maria Henry,' Liverpool to port in Cuba, and
thence to port of advice and discharge in Europe," evidence was
lield inadmissible to show a usage for vessels so chartered to go to
two ports in Cuba." So the conditions and agreements in a policy
of life insurance form the contract between the partie,"^. and will not
be varied or controlled by the subsequent course of dealing between
them, in the absence of fraud or bad faith.^^
§ 249. Whether usage controls the plain legal import of words of
the policy. — It is said that usage must be consistent with the rules
3 Hearne v. Marine Ins. Co. 20 ^ Swamscot M. Co. v. Partridge, 5
Wall. (87 U. S.) 488, 22 L. ed. 395. Fost. (25 N. H.) 3G9.
* Ripley v. ^Etna F. Ins. Co. 30 N. ^ IMutual Safety In.'?. Co. v. Hone,
Y. 136, 86 Am. Dec. 362, and note 2 N. Y. (2 Comst.) 235.
371_ ^"Orient ]\lutual Ins. Co. v.
5 New Hampshire Mntual Fire Ins. Wright, 1 Wall. (68 U. S.) 456, 17
Co. V. Rand, 4 Fost. (24 N. 11.) 428. L. ed. 505.
See Mntnal Assur. Soc. v. Scottish " Hearn v. New England IMut. M.
Union & National Ins. Co. 84 Va. Ins. Co. 4 Cliff. (C. C.) 200, Fed.
116, 17 Ins. L. .T. 570, 4 S. E. 178. Cas. No. 6,302.
6 Elliott V. Wilson, 4 Brown Pari. ^^ Union Central Life Ins. Co. v.
C. 470. Bnxer, 62 Ohio St. 385, 49 L.R.A.
7 Smith V. Mobile Nav. & Mutual 737, 57 N. E. 66.
Co. 30 Ala. 167.
639
§ 249
JOYCE ON INSURANCE
of law, but exactly what is meant by "consistent" is much contro-
verted.^^ If usage is admissible to control the plain and legal im-
port of the words of the policy, the rule given in the last section
would be too limited in its application.^* It is held that usage can
only be resorted to where the law is unsettled. Chancellor Wal-
worth " declares that "if the terms employed have received a settled
legal construction, that must govern, and no evidence of a particu-
lar custom or usage in opposition to such legal construction can be
received." ^^ So Sandford, J., declares: " "We find it clearly settled
that a general usage, the effect of which is to control rules of law,
is inadmissible, so of one which contradicts a settled rule of com-
mercial law." ^^ Mr. Arnould ^^ says parol evidence "will never be
admitted to set aside or control its (the policy's) plain and unam-
biguous terms." ^" But the same author, however,^ also declares that
usage is admissible to explain the meaning or words which are am-
biguous in themselves, or made so by proof of extrinsic circumstances.
Mr. Marshall says '^ that "usage is only to be consulted where the
law is doubtful. Where the law is clear it must prevail." ^ He also
asserts * that "the usage of trade often controls the general construc-
tion of the policy." In Homer v. Dorr,* it is declared that the
^^ Usage must be consistent "with between law properly so called and
the rules of law. This rule, however, the mere result of decisions, as to
is to be explained and limited, since the meanings of words. Usages con-
a usage inconsistent with an estab- tinually vary, and do certainly
lished rule of commercial law may change from time to time."
be allowed to prevail, and a definite ^'^ Hone v. Mutual Safety Ins. Co.
rule of law is frequently set aside, 1 Sand. (N. Y.) 149.
although plainly applicable, and ev- ^^ See this case as to the general
ery rule of law which the parties rule of construction, also as to usage
may by stipulation vary or prevent and how far usage is admissible; and
is subject to a valid i;sage. 1 Duer same case, 2 N. Y. (2 Comst. ) 235.
on Ins. (ed. ISI-j) 271 et seq. This ^^1 Arnould on Ins. (Perkins* ed.
means only that the usage must be 1850) 78, see. 45, rule iv. ; Id. (9th
consistent with the rules of law, in ed. Hart & Simey) sees. 67, 71, pp.
(he same sense that the policy itself 90, 95.
is a prohibited usage cannot be made ^° This rule is criticised as too
valid, no matter how long practised, broad; 1 Parsons on Ins. (ed. 1868)
^* Winthrop v. Union Ins. Co. 2 83, note.
Wash. (U. S. C. C.) 7, Fed. Cas. No. ^1 Arnould on Ins. (Perkins' ed.
17,901.
15 Dow V. Whitten, 8 Wend. (N.
Y.) 108.
i«In 1 Duer on Ins. (ed. 1845)
1850) 75, sec. 44, rule iii.
2 1 Marshall on Ins. (ed. 1810)
707a.
^ Criticised in 1 Duer on Ins. (ed.
229, it is said that this rule is true 1845) 235.
only in a verv limited sense. In 1 *2 Marshall on Ins. (ed. 1810)
Parsons on Ins. (ed. 1868) 98, it is 727.
said: "We apprehend that in thi*! * ^q Mass. 26, 28. This decision is
remark a distinction is lost sight of said to be erroneous, and irreconeila-
640
COXSTRUCTIOX— USAGE § 249
"usage of no class of citizens can be sustained in opposition to prin-
ciples of law." So it is said in Bargett v. Orient Insurance Com-
pany ^ that "no usage can exist or be proved by which the liabilities
of parties to a written contract will be greater or less than the writ-
ten law of the state has adjudged it to be." Mr. Parsons' says:
"No usage can be relied vipon which opposes either a rule or prin-
ciple of law. ... If terms have received by definite adjudica-
tion a fixed and definite meaning, no usage will be permitted to
show that the parties had another meaning," but he also asserts, in
an earlier part of his work,^ that it must not be understood "that
where words are unambiguous, and have as commonly used a plain
and certain meaning, usage is never permitted to control or vary its
meaning," and that it is certain "that the natural and ordinary
meaning of the words, as that may be determined by common use,
may be controlled by evidence of usage." Mr. Wood ^ states the
rule as follows: "If the words written in the policy have received
a judicial construction, and also a peculiar commercial construc-
tion by usage variant with such judicial construction, the judicial
construction is to control, but if no judicial construction has been
given to them, and by usage they have acquired any meaning var-
iant from that in which they are ordinarily used, such meaning by
usage may be shown, unless from the whole instrument it was evi-
dent they were used in their ordinary sense." Emerigon ^" says:
"In most cases it is very probable that words have been used in their
ordinary sense; that always implies a very strong presumption
which cannot be overcome but by a contrary presumption still
stronger ; " and he adds ^^ that inasmuch as insurance is a contract
bona fides, "the subtleties of law are to be made to jdeld to that of
equity, which is the soul of commerce. . . . The clauses of the
contract are to be interpreted according to the style, the customs,
and usages of the place where the insurance has been made, though
the inclination of the common law might appear different." It is
also declared in Long v. Allen ^^ that evidence of usage might be
received to explain or control the policy. Mr. Pliillips ^^ says this
ble with Long v. Allen, 4 Doug. 27fi, »! Parsons on Ins. (ed. 18G8) 83.
14 Eng. Rul. Cas. 517, in 1 Duer on ^1 Wood on Fire Ins. (2d cd.)
Ins. (ed. 1845) 246, 247. It is 14.'?.
also said of Homer v. Dorr, "that ^° Emerigon on Ins. (IMeredith'*
this decision has never been acted ed. 1850) c. ii., see. 7, p, 50.
upon," in note attached to the case. ^^ Id. c. i., .sec. 5, p. 17.
See also 1 Parsons on Ins. (ed. ^^ 4 Dong. 276, 14 Eng. Rul. Cas.
1868) m, note :J. 517, i)er Bullor. J., and note.
63 Bosw. (N. Y.) 397. "1 Phillips on Ins. (3d ed.) 86.
'1 Parsons on Ins. (ed. 1868) 97,
98.
Joyce Ins. Vol. I.— 41. G41
§ 249 JOYCE OX INSURANCE
"is true if 'to control' means to interpret the policy, and give a
meaning to it ditierent from that imputed by the language in its
ordinary acceptation, but that the use of the word in this connec-
tion is likely to convey an erroneous meaning," and that ''evidence
of usage cannot be admitted to control what is written in contrast
with explaining it.'' The words of Buller, J., are, we apprehend,
made clearer if considered in connection with those used by him in
Brough v. Whitmore," where he declares that he 'Svould not, on
account of any usage to the contrary among underwriters, overturn
a solemn determination of this court." Although in Long v.
Allen " Lord Mansfield said "The law" is clear that where the risk
has never commenced the premium shall be returned," but it was
held, nevertheless, tliat a usage that in certain cases the premium
should be returned, deducting a per centum, would control. i\Ir.
Duer^® says the distinction made by Buller, J., is perfectly accur-
ate, since where the words are ambiguous, usage "explains" them,
"but where they convey a definite meaning that the court would be
bound to adopt, or their construction has been settled by law, the
usage controls them, and in these cases it does set aside what . . .
was the plain intention of the parties, but in controlling, the usage
does not contradict the words — it merely varies by restraining or
enlarging their application." He also lays down the proposition
that while usage may modify or control the policy, yet it must be
consistent with its terms, and is inadmissible to contradict its ex-
press words ;^'^ and finally he declares that "in the only cases in
which the evidence has been admitted to supersede a rule of law
the usage was solely derived from a use and practice between the
assurers and the assured, and they contain no intimation that when
the usage is of a difl'erent character the evidence could be justly re-
ceived." ^*
1*4 Term Rep. 210. "It has been seriously doubted by
15 4 Doug. 276, 14 Eng. Rul. Cas. eminent judges whether a usage not
517. adopted nor refen-ed to in the policy
1^ 1 Duer on Ins. (ed. 1845) 245. ought ever to be permitted to con-
"1 Duer on Ins. (ed. 1845) 186, trol its operation. . . . Yet the
269. 270. propriety of receiving the evidence,
1^1 Duer on In.s. (ed. 1845) 275, when subject to its just limitations,
citing Renner v. Bank of Columbia, is readily conceded:" Duer on Ins.
9 Wheat. (22 U. S.) 581, 592, 6 (ed. 184o) 378. sec. 29, citing Lord
L. ed. 166 ; Halsey v. Brown, 3 Day Holt in Letliiellier's case, 2 Salk.
(Conn.) 46; Lennox & Kennebeck 443; Lord p]ldon, in Anderson v.
Bank v. Paige. 9 Ma.s.s. 158; Frith Pitcher, 2 Bos. & P. 164, 168; Story
V. Barker, 2 John.s. (N. Y.) 328; J., in Schooner Reeside, 2 Sum. (U.
citing Edie v. East India Co. 2 Burr. S. C. C.) 567, Fed. Cas. No. 11657,
12, 16, 4 Ens'. Rul. Cas. 344: Stew- and in Palmer v. Warren Ins. Co. 1
art V. Aberdeen, 4 Mees. & W. 228. Story (C. C.) 360, Fed. Cas. No.
642
CONSTRUCTION— USAGE
§ 250
§ 250. Same subject: opinions and cases. — It is held that general
usage operating as a general rule of law may be pleaded against a
contract plain and unambiguous in its terms.^^ So it is said:
''Evidence is admissible to show that the contract, notwithstand-
ing the common meaning of the language ui^ed, was in fact made
in reference to the usage in the trade to which the contract re-
lates." ^^ Language substantially to the same effect is used in an-
other case, where it is said that usage may be "admitted to vary
and control the language used in the policy, and to give a construc-
tion different from that which it otherwise would have received or
did receive." ^ A general and established rule of law may be set
aside even by a particular and local usage, as in case of a usage at
Lloyds, proven to have been known to underwriters. This is so
decided in Stewai^t v. Aberdeen.^ So a rule of law may be con-
trolled by a particular usage between the parties known to them
and the basis of contracting.^ So a usage at Lloyds as to adjust-
10698. "A usage in the mterpreta- their own contract, the parties them-
tion of the policy is the substitute for selves were competent to cliange. If
a judicial decision, and that which this position be correct, the propriety-
supersedes a rule of law has itself of the decision of the supreme court
the force of law in the eases to Avhich of New York, in Frith v. Barker, 2
Johns. (N. Y.) 328, seems very ques-
tionable: " 1 Doer on Ins. (ed. 1845)
303. It Avas held in the decision
referred to that usage is inad-
it applies:'' 1 Duer on Ins. (ed.
1845) 261. "Upon an examination
of the decisions, it will appear that in
a large majority of the cases the
effect of the usage as proved was to missible to change a settled rule
set aside a construction, or super- of commercial law. "Now, the rule
sede a rule that the court must other- in question is certainly one that the
wise of necessity have followed; parties may change by an express
. . . the usage, therefore, over- stipulation:" 1 Duer on Ins. (ed.
rules and sets aside a plain and set- 1845) 303.
tied construction:" Id. 256. "A ^^ Lattonous v. Farmers' "Mut.
usage sufficiently and clearly proved Fire Ins. Co. 3 Houst. (Del.) 254.
has a controlling effect to vary the In this case the text was the argu-
plain import or settled construction
of the words of the policy, or to
prevent the application of an estab-
lished rule of law by which tjie
rights of the parties under their
contract would otherwise be de-
termined: " 1 Duer on Ins. (ed.
1845) 257, citing Preston v. Green-
wood Ins. Co. 4 Doug. 28, per Lord
Mansfield. "Usage is always consid-
ered in policies of insurance, even
when no dil'licidty arises on the words
themselves." Tlie test is, "Avliether
the rule of law that the usage super-
sedes is one that, in its application to
643
ment of counsel for jilaintitT on de-
muiTer, which demurrer was sus-
tained, but no opinion given.
20 Macy v. Whaling Ins. Co. 9 Met.
(50 Mass.) 363, per Tlubliard. J.
^ Eyre v. Marine Ins. Co. 5 Watts
& S."(Pa.) ]]6, 122, per Sergeant,
J. See s. c. 6 Whart. (Pa.^) 249. Mr.
Duer (1 Duer on Ins. [ed. 1845]
296) says this "language involves
the not infrequent error of confound-
ing a usage of trade and a iisage in
the interpretation of the policy."
24 Mees. & W. 211.
^ Renner v. Bank of Columbia, 9
§ 250 JOYCE ON INSURANCE
nient has been admitted, although contrary to the principle of in-
demnity, which governs marine insurance.'* So a custom of adjust-
ing partial losses may be shown, and must govern the general law
regulating the assessment of damages under such policies.^ "It is
a principle that the general common law may be, and in many in-
stances is, controlled by special custom, so the general commercial
law may by the same reason be controlled by a special local
usage so far as that usage extends." * So it is said in an Ohio case '
that ''if it be assumed that the custom is a general one, tlien it is
part of the common law itself, and there would be presented an in-
stance of two rules of law equally binding, and yet wholly incon-
sistent the one with the other," although the point decided in this
last case was that a usage which is not according to law, though
universal, cannot be set up to control the law. Mr. Lawson says:
"It was no objection to a common-law. custom that it was contrary
to the common law of the land. ... In general, too, evidence
of a usage of trade is not inadmissible, because it is contrary to the
principles of law governing such cases, for it is obvious that if proof
of a usage could be rejected because it established something ditl'er-
ent from the law, no custom would ever be proved, because if it
were not different it would be a part of the law," * and he adds: ^
"This being so plain, it is somewhat startling to find a large number
of cases in the reports in which the principle is broadly laid down
that a usage or custom in opposition to an established rule of law
is void and of no eft'ect," and, noting the cases, he asserts that the
meaning of the various expressions used is this: "That a custom
or usage which changes what would otherwise be the situation of
the parties, or alters to any extent their rights according to the
rules of law applicable to such cases, is invalid and ineffectual," and
in a subsequent .section he notes a large number of cases in insur-
ances where usages in conflict with established rules of law have
been controlled by evidence of different customs.^" As opposed to
Wheat. (22 U. S.) 5S1, 582, 6 L. ed. Wasli. (C. C.) 391, and Trott \.
I(i0, per Tliompsou, J., an exliaustive Wood, 1 Gall. 44:3, Fed. Cas. No.
opinion. 14190, are cited as supi^orting bis
* Palmer V. Blackburn, 1 Bins:. 61. proposition. See cases cited in 1
5 Fulton Ins. Co. v. Milner, 23 Parsons ou Ins. (ed. 1868) 83, 84,
Ala. 420. and notes.
^ Halsey v. Brown, 3 Day (Conn.) '' Columbus & Hocking Coal & Iron
346. See also cases considered at Ins. Co. v. Tucker, 48 Oliio St. 41,
length by Mr. Duer in support of his 29 Am. St. Rep. 528, 534, 12 L.R.A.
proposition cited under §§ 249 and 577. 26 N. E. 630, per Spear, J.
250 herein, and also cited under ^ Lawson on Usages and Customs
"Proofs and Illustrations," 291 et (ed. 1881) 465, sec. 225.
seq. See also Id. 294, where Mc- ^ Id. sec. 226.
Gregor v. Insurance Co. of Pa. 1 ^° Id. sec. 233, and see Id. sec. 234.
644
CONSTRUCTION— USAGE
§ 250
the above cases and opinions there are numerous decisions which
sustain the general proposition that usage is admissible to control
a rule of law, or the plain and legal import of the words used in a
policy of insurance." So where the term of a lease is fixed by
statute, evidence of usage to control its operation has been held
inadmissible.^^ So usage to give notice of increa-se of risk is in-
" Winthrop v. Union Ins. Co. 2
Wash. (C. C.) 7, Fed. Cas. No.
17901 ; Rankin v. American Ins. Co.
1 Hall (N. Y.) 619, 682. Mr. Duer
(1 Duer on Ins. [ed. 1845] 231)
says of this ease: "It was certainly
no objection that the usage would
have varied the construction of the
policy," and that it would not have
rendered a single word of it in-
operative, but have only qualified its
terms conditional upon usage; Lat-
tonous V. Fanners' ]\Iut. Fire Ins.
Co. 3 Houst. (Del.) 254; Warren v.
Franklin Ins. Co. 104 Mass. 521
(held custom of particular port
could not vary rule of law as to dam-
ages). Usage "cannot be allowed to
control the settled and acknowledged
law of the state : " Higgins v. Moore,
34 N. Y. 425 (usage in this ease not
a. general usage); Mobile ^Marine,
Dock & Mutual Ins. Co. v. Mc:\Iillan,
27 Ala. 77; St. Nicholas Ins. Co. v.
Mercantile Ins. Co. 5 Bosw. (N. Y.)
238, 246. Evidence of local custom is
inadmissible to contravene any ex-
press contract or provision of law :
Barlow v. Lambert, 28 Ala. 704, 75
Am. Dec. 374. "We think it clearly
settled by the decided weight of au-
thority that a general usage, the
effect of which is to control a rule of
law, is inadmis.'^ible:'' Boon & Co. v.
Steamboat Belfast, 40 Ala. 184, 88
Am. Dee. 761 (in this case proof
was held inadmissible of a custom
by which all carriers navigating the
river were relieved from liability for
losses occasioned by armed bodies of
men without fault or negligence of
the carrier). See also Boardman v.
Spooner, 13 Allen (95 Mass.) 353,
90 Am. Dec. 196; Dickinson v. Gay,
7 Allen (89 Mass.) 29, 83 Am. Dec.
656; Cranwell v. Ship Fosdick, 15
645
La. Ann. 436, 77 Am. Dec. 190;
Cox V. Riley, 4 Ind. 368, 58 Am.
Dec. 633, and note 638; Southwest-
ern Freight & Cotton Press Co. v.
Stanard, 44 Mo. 71, 100 Am. Dec.
255. Hopper v. Sage, 112 N. Y.
530. 8 Am. St. Rep. 771. A person
cannot establish a usage or custom
which in his own interest contra-
venes an established rule of com-
mercial law: Jackson v. Bank, 92
Tenn. 154, 36 Am. St. Rep. 81.
That local usage to overthrow an
established rule of law is inadmissi-
ble, see Merchants' Ins. Co. v. Prince,
50 Minn. 56, 57, 52 N. W. 131, per
GiltiUan, C. J. See Seccomb v.
Provincial Ins. Co. 10 Allen (92
Mass.) 312-14, per Bigelow, C. J.,
v,'here it is said that usag'e is inad-
missible to vary or control the writ-
ten words, and give them a different
construction than that given them by
.<-ettled judicial determinations, but
that it is admissible to show the
.sense in which particular words or
phrases are used, and to show that
as applied to the subject-matter the
language of the instruments was
nndor.'^t^ood by the parties to have a
special and peculiar meaning, differ-
ing from that which might ordinarily
be attributed to it, and that this is
especially true of policies of assur-
ance. And see Lawson's Usages and
Customs, ed. 1881, 465, sees. 226,
234, and eases collected; and articles
of Jno D. Lawson, 6 S. Rev. N. S.
845, 7 Id. 1; Eaton v. Smith, 20
l^ick. (37 Mass.) 150; East Birming-
ham Land Co. v. Dennis, 85 Ala.
565. 2 L.R.A. 836, 5 So. 317, 7 Am.
St. Rep. 73.
12 Jackson v. Billing, 22 La. Ann.
378.
§ 251 JOYCE ON mSUKANCE
admissible to control the legal effect of the policy; " nor can a local
custom to deduct one-third new for old from the gross amount of
the expenses and repairs, without first deducting the proceeds of the
old materials, control a general principle of law requiring sucli
deduction of the proceeds of the old materials. ^^ Evidence is ad-
missible of usage of words in peculiar senses in an application for
insurance where, although such words severally and as first read
seem plain, an ambiguity becomes apparent when they are applied
to the subject-matter,^^ and when words are used in policies having
a limited meaning in the trade, botli parties must be assumed to
have understood it in the sense in which the trade usually under-
stood it.^® So if any of the terms used in a policy have by the
known usage of trade, or by use and practice as between insurer
and insured acquired an appropriate sense, they are to be construed
accordingly.^''
§ 251. Same subject: conclusion. — We believe that Mr. Duer's
position is not irreconcilable with the law as generally stated by the
courts and text-writers, and is entitled to consideration. Certain-
ly, if the parties could incorporate by express terms in their con-
tract a usage which would have controlled the plain and ordinary
meaning of words used in the policy, then may not a known usage,
with reference to which the parties expressly contracted, have a like
effect? We apprehend, however, that whatever distinction exists
between the statement of Mr. Duer and those of Emerigon and the
others above considered, is more apparent than real. Mr. Duer
says that usage must be consistent with the rules of law. His illus-
trations are those of a particular usage known to the parties, with
express reference to which the contract was made, and which be-
came thereby a part thereof. He asserts that usage does control
words that convey a definite meaning, which the court would other-
wise be bound to adopt, or where their construction has been settled
by law,^^ and does set aside what, judging from the terms of the
policy or the rules of law, was the plain intention of the parties,
"but," he adds, "in controlling, the usage does not contradict the
^vords — it merely varies by restraining or enlarging their applica-
tion," and that usage "can never be admitted to nullify or expunge"
"Stebbins v. Globe Ins. Co. 2 Hall Barb. (N. Y.) 383; A.stor v. Union
(N. Y.) 632, 674. Ins. Co. 7 Cow. (N. Y.) 202.
1* Eao-er v. Atlas Ins. Co. 14 Pick. ^' Coit v. Commercial Ins. Co. 7
(31 IMals.) 141, 25 Am. Dec. 363. Johns. (N. Y.) 385, 5 Am. Dec. 282.
15 Daniels v, Hudson River Fire See also as to evidence of usage to
Ins. Co. 12 Cush. (66 Mass.) 429, 59 control forfeiture for nonpayment of
Am Dec 192. premium, chapter on Premiums.
16 Wall V. Howard Ins. Co. 14 ^^1 Duer on Ins. (ed. 1845) 245.
646
CONSTRUCTION— USAGE §§ 252, 253
the plain words of a contract." The use of the word "control,"
in this sen^e, does not seem irreconcilable with the conclusion of
eminent and learned judges and text-writers. We deduce, there-
fore, from the authorities that the presumption is that words have
been used in their ordinary sense, and if words are of such a plain
and decisive character that a reference to the subject-matter and
context shows the evident intent of the parties to be in accordance
with this presumption, then usage is inadmissible to vary or con-
trol the plain and legal import of words. This presumption, that
words have been used in their ordinary sense, may be overcome by
a contrary presumption still stronger: thus, if words apparently
plain and unambiguous are shown to be ambiguous in fact, then
evidence of usage to control their meaning is admissible. A settled
judicial construction governs a commercial construction by usage,
variant therewith, so far certainly, as the rights of parties are de-
pendent upon settled rules of law, and the contract is made clearly
with reference thereto. But custom or usage may undoubtedly
affect and control what before was law, especially in insurance cases
where the custom is of such a character that the parties may rea-
sonably be assumed to have been fully cognizant thereof, and to
have contracted in reference thereto. Where plain words have ac-
quired by usage a meaning different from that in which they are
ordinarily used, evidence of such usage is admissible, unless it is
clearly evident from the subject-matter and context that the or-
dinary meaning was intended, and usage can never be admitted to
nullify or expunge the plain words of the contract.^"
§ 252. Usage cannot legalize an illegal act. — It is held that a par-
ticular usage and custom by which owners of insured property were
permitted to purchase the property at sales for the benefit of the
insurers, cannot have the effect of legalizing a sale wliich by the
general law is unlawful and void.^ And prior errors of the insurer
in paying similar claims not within the terms of the policy do not
constitute a custom of the trade in the communit3^^*
§ 253. General usage may be controlled by evidence of a different
usage. — A general usage may be controlled by evidence of another
and different usage. Thus, a custom for a ship to pursue a certain
" Id. 270. ^* Sleet v. Farmers Mutual Fire
^^ As to usage in foreign trade, see Ins. Co. (1908) — Ky. — , 19 L.R.A.
Livingston v. Maryland Ins, Co. 7 (N.S.) 421 (and note as to custom
Cranch (11 U. S.) 506, 3 L. ed. 421. to pay certain classes of losses as ai'-
^ Robertson v. Western Marine & fecting liability of company for sucb
Fire Ins. Co. 19 La. 0. S. (10 La. a loss not covered by policy) 113 S.
143) 227, 36 Am. Dec. 673. See W. 515.
Brv'ant v, Connecticut Tns. Co, 6
Pick. (23 Mass.) 131, 144.
647
§§ 254, 255 JOYCE ON INSURANCE
course which is the safest, most usual, and expeditious in the course
of the voyage insured may be controlled by evidence that it is usual
and customary for one boat on a voyage to stop and aid another
boat in distress.^ So it is held that a commercial usage of long
standing, such as that of adding the premiums to the invoice value,
in cases of insurance, may be modified and controlled by a local
usage clearly proven and shown to be known to the other party .^
§ 254. Usage controls implied limitations. — ''The usage, and or-
dinary incidents of a risk should override any implied limitations,
either as to the place or conduct of the risk." *
§ 255. Usage of another similar trade or place or of another com-
pany. — Evidence of usage in another similar trade was held by Lord
Mansfield admissible, on the question whether a recently estab-
lished usage existed.^ Usage of a particular place, as of London,
may be shown by proof of usage there and elsewhere.^ But where
the vessel was insured at New York, but belonged to New Bedford,
where the owners resided, a local usage of the last-named place, by
which taking sea elephants is not within the scope of "whaling voy-
age," is inadmissible, although a uniform usage of insurers to in-
sert a permission for vessels insured on a whaling voyage to take sea
elephants on payment of an additional premium is inadmissible to
establish such local usage.' It is held that usage of the custom of
other like establishments to keep a watch may be shown to explain
the term "keeping a watch." * Where the contract is made with
reference to local usages, usages of other places are not binding, for
such usage cannot be considered as entering into the consideration
of the parties,^ and a usage of marine underwriters of Boston to
except barratry of the master from the risks assumed, Avhen the
assured is her owner, will not import such an exception by impli-
cation in a policy underwritten at Gloucester.^" So a policy of in-
surance against fire upon a vessel building in the port of Baltimore,
and for a specified period, is not controlled in its operation by proof
2 Walsh V. Homer, 10 Mo. 6; « Milhvard v. Hibbort, 3 Q. B. 120,
Gould V. Oliver, 2 Scott N. R. 241, 2 Gale & D. 142, 24 Eng. Rul. Cas.
252, 5 Scott, 445, 4 Bing. N. C. 134, 473.
14 Eng. Rul. Cas. 400. ' Chdd v. Sun Mut. Ins. Co. 3
3 Merchants' Mut. Ins. Co. v. Wd- Sand. (N. Y.) 26.
son, 2 Md. 217. ^ Broeker v. People's Mut. Ins. Co.
*1 Wood on Fire Insurance (2d S Cush. (62 Mass.) 79.
ed.) 116. Tlie author here changes ^ Mason v. Franklm Fire Ins. Co.
the rule from that given in a former 12 Gdl & J. (Md.) 468; Chdd v. Sun
edition with reference to cases where Mut. Ins. Co. 3 Sand. (N. Y.) 26.
the words "contained in" are used in ^° Parkhurst v. Gloucester Fishing
policies describing the risk. Ins. Co. 100 Mass. 301, 1 Am. Rep.
5 Noble V. Keunoway, 2 Doug. (3d 105, 97 Am. Dec. 100.
ed.) 510, per Lord Mansfield.
648
CONSTRUCTION— USAGE § 256
of usage in other parts of the Union ; " and a usage of towing boats
by steamers on the Mississippi cannot affect a contract of insur-
ance made at Natchez, unless shown to be so general and well-
known that it is fair to presume the parties contracted with refer-
ence to it.^2 A clause in a policy of marine insurance providing
that all matters of adjustment and settlement of losses shall be sub-
ject to the rules and regulations of the ports of New York, refers
only to the manner of making the adjustment when a liability is
admitted, and cannot decide the question of the existence of any
liability by the usage of such ports when the insurance is made
elsewhere.^^ So the constructive total loss of a whaling ship at a
port where whaling outfits are bought and sold, and where the out-
fits are in safety, is not a constructive total loss of the outfits; and
evidence of a usage to regard it as such at the port from which the
ship sailed is inadmissible.^* And usage of the company in mat-
ters of insurance is inadmissible to bind another company." Such
evidence should be limited to the custom and usage of the com-
pany directly concerned. So the practice of other insurance agents
in the same town is inadmissible to establish a custom that proofs
of loss are not required.^^ But it is held, however, that the phrase
''fire by lightning" may be shown, by evidence of the practice of
other companies, to mean that the company is not liable where
there is no burning. ^''^
§ 256. Evidence of usage: liberal construction. — Much stress has
been placed upon the statements made by the courts in many of the
early insurance cases, looking toward a liberal construction of pol-
icies in reference to usage. Thus, it is said in Long v. Allen, ^^ that
"in mercantile cases from Lord Holt's time, and in policies of in-
surance in particular, a great latitude of construction as to usage has
been admitted. By usage, places come within the policy that are
not within the words." This idea, however, arose in a great mea-
sure from the clumsiness of the instrument,^^ and because insur-
ance is based upon mercantile law and the customs of merchants,
" Mason v. Franl^lin Fire Ins. Co. ^^ Phoenix Ins. Co. v. Hunger, 49
12 Gill & J. (Md.) 4G8. Kan. 178, 30 Pac. 120.
^2 Natchez Ins. Co. v. Stanton, 2 " Babcoc-k v. Montgomery Co.
Smedes & M. (Miss.) 340, 41 Am. Mut. Ins. Co. 6 Barb. (N. Y.) 637, 4
Dec. 592. Corast. (N. Y.) 326.
13 Hazleton v. Manhattan Fire Ins. " 4 Doug. 276, per Buffer, J. See
Co. 11 Biss. (U. S. C. C.) 210, 12 afso Coggeshaft v. American Ins.
Fed. 159. Co. 3 Wend. (N. Y.) 283.
1* Taber v. China Mut. Ins. Co. 131 ^^ Gordon v. Little, 8 Serg. & R.
Mass. 239. (Pa.) 562, 11 Am. Dec. 632, per
15 Reynofds v. Continentaf Ins. Co. Gibson, J.
36 Micii. 131; American Ins. Co. v.
Neiberger, 74 Mo. 167.
649
§ 257 JOYCE OX INSUKxVNCE
and that down to Lord Mansfield's time there had been few adjudi-
cations on questions in insurance law and the custom of merchants,
usage was necessary to be resorted to for interpretation ; ^^ but
Story, J.,^ says that usage, though in former times freely resorted
to,2 ''is now subjected by our courts to more exact and well-defined
restrictions . . . and it should therefore ... be admit-
ted with a cautious reluctance and scrupulous jealousy." ^
§ 257, What is sufficient evidence of usage. — The court deter-
mines the admissibility of evidenoe of usage, and it will, as we have
seen, be cautious in this respect, and the evidence thereof ought to
be clear and satisfactory to the jury.* The question is, did the
usage claimed exist, and this must he established by instances known
to the witnesses, coupled with evidence of its duration and that it
is uniform,* and a few or occasional instanoes are insufficient to es-
tablish a usage.^ So of a single witness or individual,' and wit-
20 See Smith v. Wilson, 3 Barn. & 259 ; Durrell v. Bederly, 1 Holt N.
Adol. 728, per Parke, J. P. 283, per Gibbs, J.; Syers v.
^In Rooers v. Mechanics' Ins. Co. Bridge, 2 Doug. 52/, 530, per Lord
1 Story (U. S. C. C.) 607, Fed. Cas. Man.^field; Salisbury v. Townson, 1
No. 12016. Burr. 341; Millars Ins. 418.
2 As a rule it was, but examine ^ United States. — Trott v. Wood,
Ander-son v. Pitcher, 2 Bos. & P. 164, 1 Gall. (U. S. C. C.) 443, Fed. Cas.
168, per Lord Eldon; Lethiellier's No. 14,190.
case, 2 Salk. 443, per Lord Holt. Connecticut.— Crosby v. Fitch, 12
3 See also Palmer v. Warren Ins. Conn. 422, 31 Am. Dec. 745.
Co. 1 Story (U. S. C. C.) 360, Fed. Z)«^ofa.— Clevenger v. Mutual Life
Cas No. 10698; Schooner Reeside, 2 Ins. Co. 2 Dak. 114.
Sum. (U. S. C. C.) 567, Fed. Cas. Lonisiana.— Herman v. Western
No 11,657, per Story, J. Fire & :\Iarine Ins. Co. 13 La. 0. S.
4 See Bentaloe v. Pratt, Wall. Sr. (7 La. N. S. 325) 516.
(U S C C.) 58, Fed. Cas. No. 1330. Massachmetls.— Taunton Copper
See Leach v. Perkins, 17 Me. 465, 35 Co. v. Merchants' Ins. Co. 22 Pick.
Am Dec. 268; Winsor v. Dillawney, (39 Mass.) 108.
4 Mete. (45 Mass.) 221, 223; Pelly ^eu- YorA-.-Bunten v. Orient
V "Royal Exeh. Assur. Co. 1 Burr. Mutual Ins. Co. 4 Bosw. (N. Y.) 2o4.
341 349 14 Eno- Rul. Ca.s. 30; England.— Bond v. Nutt, 2 Cowp.
Lucas v' Growing, 7 Taunt. 164; 001; Cutter v. PoweU, 6 Term Rep.
Crofts V. Marshall, 7 Car. & P. 597; 320, 6 Eng. Rul. Cas. 627.
Gabav V. Lloyd, 3 Bam. & C. 793; Isolated instances are insufficient
Greenleaf oii Evidence (14tli ed.) to prove a custom, and cannot be
sec '^9''' et seq. shown to overcome or change the ex-
5 Rogers v. Mechanics' Ins. Co. 1 press provisions of a contract of in-
Story IjJ S C C.) 603, Fed. Cas. surance. Kocher v. Supreme Council
No 12016, per Storv, J.; Martin v. Catholic Benevolent Legion, 6o N.
Delaware Ins. Co. 2 Wash. (U. S. C. J. L. 649, 86 Am. St. R^p. 687, 52
C.) 254, Fed. Cas. No. 9161; Illinois L.R.A. 861, 48 Atl. 544.
Masons' Benevolent Soc. v. Baldwin, ' Parrott v. Thatcher, 9 Pick. (26
86 111. 479; Hennessv v. New York Mass.) 426; Loring v. Gurney, o
M M. Ins. Co. 1 Old. (Nov. Se.) Pick. (22 Mass.) 15.
650
CONSTRUCTION— USAGE § 258
nesses are confined to the faxit of usage, and will not be permitted to
give their opinions.^
§ 258. Evidence of usage, when admissible: cases. — The follow-
ing cases illustrate when usage is admissible: Thus, an insurer is
liable for a loss occurring within the general course of a trade, of
which he is presumed to have knowledge, as in case goods are lost
from the deck of a lighter in being transmitted from the ship at
quarantine to the customary landing place.^ And a well-known
usage of boats in the Mississippi trade to touch at intermediate ports
will cover additions to the cargo received in the usual manner at
such ports.^° So if goods are lost while in transportation from the
shore to a ship engaged in a trading voyage, the insurer is liable if
such transportation is according to usage.^^ The course of trade in
a particular place governs the construction, as where the usual
method of unloading and reshipping in a place was '•'that when
there is- no British ship there, then the goods are to be kept in store
ships," and if it is usual to stay a certain time at a port or to go
out of the way, the insurer is considered as understanding that
usage.i2 go acts done by the assured to avoid confiscation under
the laws of a foreign power are valid if warranted by the usage of
trade.^3 Thus a concealment of papers is not a breach of warranty
if, by the usage of trade, it is necessary that they should be on board
although they increase the risk of capture.^* It may be shown
that it is the custom generally to charge a higher premium for un-
occupied dwelling-houses,^^ also that it is a general custom to refuse
risks on vacant houses.^^ So usage is admissible to explain a blank,
8 Winthrop v Union Ins. Co. 2 i° Stillwell v. Home Ins. Co. 3 Dill.
Wash. (C. C.) 7, Fed. Cas. No. (CO 80, Fed. Cas. No. 13450.
17901, per Washington, J.; Rogers v. ^^ Cogge.shall v. American Ins. Co.
Mechanics' Jns. Co. 1 Story (U. S.) 3 Wend. (N. Y.) 283.
(303, Fed. Cas. No. 1201G, per Story, ^^ pgHy v. Royal Exeh. Assur. Co.
J.; A.stor v. Union Ins. Co. 7 Cow. 1 Burr. 341, 348, 349, 14 Eng-. Rul.
(N. Y.) 202; Gordon v. Little, 8 Cas. 30. See also Matthie v. Potts,
Serg. & R. (Pa.) 549, 11 Am. Dec. 3 Bos. & P. 23.
U32, 636, per Tilghman, C. J. ; Syers " Livingston v. ]\raryland Ins. Co.
V. Bridge, Doug. 512; 569; Crofts v. 7 Cranch (11 U. S.) 506, 3 L. ed.
Maishall, 7 Car. & P. 597. 421.
Story, J., in Rogers v. :\rechanics' i^ Livingston v. Maryland Ins. Co.
Ins. Co. 1 Story (C. C.) 607, Fed. 6 Cranch (10 U. S.) 274, 3 L. ed.
Cas. No. 12016, declares that "this 222, 7 Cranch (11 U. S.) 506, 3 L.
court has nothing to do with the cd. 421.
private opinions of witnesses, how- ^^ hnce v. Dorehe.ster Mut. Fire
ever respectable, which respect the Ins. Co. 105 Mass. 298, 7 Am. Rep.
proper interpretation of contracts." 522.
9 Wadsworth v. Pacific Ins. Co. 4 ^^ Kirby v. Plioenix Ins. Co. 13 Lea
Wend. (N. Y.) 33. (81 Tenn.) 340.
651
§ 258 JOYCE ON INSURANCE
as "A B on account of ." " So the nature of the subject-matter
may be such that usage is admissible to construe the contract,^^ and
in estimating the damage in case of partial loss evidence is compe-
tent of the custom of merchants in relation to the sale.^^ So where
the insurance was "from" Amsterdam, a custom for vessels of certain
tonnage to take in part of their cargo at Amsterdam and the rest at
another port is admissible.'^" So evidence of a custom for one boat
to stop and aid another in distress is competent.^ Usage of a par-
ticular trade to keep goods on board for a long time after the ship's
arrival is admissible.'^ So evidence is admissible of a particular
custom whiereby the party holding a certificate thereof kept an ac-
count of shipments made and covered by the certilicate, reporting
the same monthly to the agent.^ So usage between a principal and
his agent may determine their rights, as in case whether a lien on
the policy exists in favor of the agent.* So the commencement *
and termination of a risk may be determined by usage.^
So, evidence of a custom as to the time when a parol contract of
insurance should become operative is admissible where the parties
have agreed upon nothing in relation thereto.^* So a clearance for
a port without intending to go there may be justified by a constant
and notorious usage of the trade, as where it was the custom for
ships going with British goods to France to clear for Ostend.' So
evidence of a custom is admissible that policies executed, but not
delivered, are held for the benefit of the insured.^ So usage of
commission merchants in New York to effect, without orders from
their consignors, insurance on goods consigned to them for sale is
admissible.^ And usage to put into a certain port for bait where
the vessel was engaged in cod-fishing may be shown. ^° So a con-
tract mav be governed in certain cases bv the uniform and settled
custom of the company, with reference to conditions contained in
" Turner v. Burrows, 5 Wend. (N. ^ Kingston v. Knibbs, 1 Camp.
Y.) 541, 8 Id. 144. 508.
^^ Sayles v. Northwestern Ins. Co. ^ Grade v. Maryland Ins. Co. 8
2 Curt. (C. C.) 610, Fed. Cas. No. Craneh (12 U. S.) 75, 3 L. ed. 492.
12422, per Curtis, J. ^■^ Cleveland Oil & Paint Manufac-
^^ Stanton v. Natchez Ins. Co. 6 turine: Co. v. Norwich Union Fire Ins.
Miss. (5 How.) 744. Co. 34 Oreg. 228, 55 Pac. 435.
20Mev v. South Carolina Ins. Co. "^ Planche v. Fletcher, Doua:. 251.
3 Brev."(S. C.) 329. 8 g^xter v. Massasoit Ins. Co. 13
1 ^Yalsh V. Homer, 10 Mo. 6, 45 Allen (95 Mass.) 320.
Am. Dec. 342. ^ DeForest v. Fulton Fire Ins. Co.
2 Noble v. Kennoway, Dou?. 492. 1 Hall (N. Y.) 84.
^ Hartshorne v. Union Mutual Ins. ^° Burgess v. Equitable Life Ins.
Co. 36 N. Y. 172. Co. 126 ]\fass. 70, 30 Am. Rep. 654.
* Green v. Farmer, 4 Burr. 2214.
652
CONSTRUCTION— USAGE § 259
like policies,^^ and a usage by an incorporated benevolent society,
showing a valid practical construction by it of a by-law relating to
holding the annual meeting and election, is admissible in quo war-
ranto to determine title to office in the society. ^^ In all cases of
local or partial usage tlie insurers will be bound where it was ex-
pressly communicated to them and the contract based thereon."
80, the local usage of a place is of importance in construing the
iron safe clause, and it is proper to prove w^hat the custom of
stores is in a place or district to accommodate trade there, where
such custom is one of which the insurer is bound to take notice."*
Again, evidence of a universal custom of insurance adjusters in re-
spect to proofs of loss on a retail stock of merchandise is held
admissible. ^^''
§ 259. Evidence of usage, when inadmissible: cases. — The fol-
lowing cases illustrate when usage is inadmissible : Thus, a local cus-
tom as to the materiality of an undisclosed fact respecting the risk
is inadmissible, unless it is communicated to the insured or is of such
a character that a presumption of knowledge thereof attaclies there-
to;^* nor is evidence admissible of a usage in New York to give
the insurer notice when anything is done by the assured to increase
the risk." So the usage of a company to require particular proof
of loss does not bind the insurer where not known to him,^^ and
no law or usage requires the assured to have his house, if untenant-
ed, guarded by a keeper." So a usage in a particular mill or lo-
cality to keep a watchman over Sunday is inadmissible where the
policy is unambiguous." In estimating a loss under an open pol-
icy of marine insurance evidence of the usage of a particular port
is inadmissible to vary the rule that the damages are to be based on
the market value of the goods at the inception of the risk and not
11 Home Ins. Co. v. Favorite, 46 u.sages of Lloyds in res poet thereof,
111 20.3. see It Earl of Halsbury's Laws of
""state v. Conklin, 34 Wis. 21. Endaiul, p. .352; Canton Ins. OfTice,
"Gabay v. Llovd, 3 Biim'. 793; 1 Ltd. v. Woodside, 90 Fed. 301, 33 C.
Duer on Insurance (ed. 1845) 2(54. C. A. 63, 61 U. S. App- 214, 28 Ins.
See further as to when custom or L. J. 269.
usage is admissible, §§ 84, 120 here- "Hartford Protection Ins^ Co. v.
in, and chapters on Seaworthiness, Harmer, 2 Ohio St. 452, 59 Am.
Duration, Risk, and Premium. Dee. 684.
"a Capital Fire Ins. Co. v. Kanf- " Stebbins v. Globe Ins. Co. 2
man, 91 Ark. 310, 121 S. W. 289, Hall (N. Y.) 632.
38 Ins. L. J. 289. • ^^ Taylor v. ^T5na Life Ins. Co. 13
"t Sherlock v. German American Gray (79 Mass.) 434, per Met calf, J.
Ins. Co. 47 N. Y. Sup p. 315, 21 App. See § 258 herein.
Div. 18, case aft'd 162 N. Y. 656, 57 " I. >ve v. Merchants' Ins. Co. 6
N. E. 1124. La- A""- "61.
As' to settlement of losses and " Qi^ndale Woolen Co. v. Pro-
653
§ 259 JOYCE ON INSURANCE
on the invoice price." "Where b}' the terms of a policy a vessel
was insured ''to a port in Cuba, and at and thence to a port of ad-
vice, and discharge in Europe," and the vessel was lost in going
from the port of discharge in Cuba to another port in the same
island for reloading, it was held, in a suit on the policy for a loss,
that evidence by the assured was inadmissible to show a usage that
vessels going to Cuba might visit at two ports, one for discharge and
another for loading.^" So ''the usage or custom of a particular
port in a particular trade is not such a custom as the law con-
templates to limit or control or qualify the construction of contracts
of insurance," ^ and evidence is inadmissible of an alleged custom
of insurance companies, claimed to have been known to plain liti'.s
agent, that upon the happening of a future event, the policy should
be void, said condition not having been inserted in the policy.^
Nor is evidence admissible of a custom that when insurance is made
on goods with a particular mark, those goods, so marked, must be
on board, in order to charge the underwriter with the loss ; ' and
there is no law or usage that requires the master of a vessel to ac-
cept a general average bond in place of the cargo, after the adjust-
ment of loss has been completed.* Nor does the length of time a
vessel may wait to take in her cargo without discharging the under-
writers depend on the usage of the trade.^ And it is not compe-
tent to prove a custom that notice to a broker by the agent of the
company should operate to cancel a policy. So lield in an action
against the agent by the principal seeking recovery for a loss paid
by the company which occurred after it had directed the agent to
cancel.^ So held, also, where, notice of cancelation was given to
the local agent. '^ A particular usage of insurance companies with
respect to risks on grain in elevators does not bind the insured in
the absence of proof of knowledge on his part,* and where the in-
fection Ins. Co. 21 Conn. 19, 54 Am. S.) 573, 21 L. ed. 229; Oelrielis v.
Dec. 19; Kiplev v. .^tna Ins. Co. 30 Ford, 23 How. (64 U. S.) 49, 16
N. Y. 136, 80 Am. Dec. 362. L. ed. 534.
19 Warren V. Franklin Ins. Co. 104 ^R^aj^ ^ Gardner, 1 Wash. (C.
Mass. 518. C.) 145, Fed. Cas. No. 12,100.
20llearne v. Marine 'Ins. Co. 20 * The Water ^Yitch's Cargo, 29
Wall. (87 U. S.) 488, 22 L. ed. 395. Fed. 159.
1 Roo-ers v. Mechanics' Ins. Co. 1 * Oliver v. Maryland Ins. Co. 7
Storv ^(C. C.) 603, Fed. Cas. No. Cranch (11 U. S.) 487, 3 L. ed. 414.
12016, per Story, J. See remarks ^ pj.,,nklin Ins. Co. v. Sears, 21
hereon in 1 Phillips on Insurance (3d Fed. 290.
ed.) see. 140. * ''^ Hodge v. Security Ins. Co. 33
2Candee v. Citizens' Ins. Co. 4 Hun. (N. Y.) 583.
Fed. 143, citing Partridge v. Phoenix * Pettit v. State Ins. Co. 41 Minn.
Mutual Life Ins. Co. 15 Wall. (82 U. 299, 43 N. W. 378.
654
CONSTRUCTION— USAGE § 259
surance was upon a boat lying at a wharf in the Ohio river, evidence
is not admissible of a custom to remove such boats to the ice harbor,
some miles distant, for safety during the season of moving ice.^
Where goods claimed to have been damaged by perils of the sea
were landed on their arrival at New York, before a survev bv the
wardens of the port, a usage at that port is inadmissible to prove
the liability of the master for damages sustained by goods delivered
by him to the owner or consignee, unless there had been such sur-
vey, and a finding by the Avardens that the goods had been stowed
properly and were damaged by the perils of the sen, and that bj' a
similar usage as betw^een assurers and assured the survey so made
must be produced, in order to charge the assurer, and that the pre-
liminary proof is deemed insufficient unless the survey is exhibited
as a part of it.^° In a suit upon a policy of insurance to recover
for a loss, where there is no question as to the rates of insurance
charged and paid by the insured, evidence of the custom or usage
of insurance companies as to the rates is immaterial. ^^
Parol evidence of usage or custom, either general in the com-
munity or special between the people engaged in the particular
trade or business, is not admissible to show that an unconditional
acceptance of an order to ship goods was subject to the exigencies
of transportation and to the further condition that if the goods
could not be shipped within a reasonable time the contract was no
longer to be obligatory. ^^^ And evidence is inadmissible to show a
custom of insurers to accept applications from persons who had at-
tempted suicide."^
9 Franklin In?. Co. v. Humphrey, Mc-Neelev & Co. 52 Wash. 223. 28
65 Infl. 549, 32 Am. Rep. 78. L.R.A.(N.S.) 1007, 108 Pac. 621.
^^ Rankin v. American Ins, Co. 1 ^^^ Loni.s v. Connecticut Mutual
Hall (N. Y.) 619. Ins. Co. 68 N. Y. Supp. 683, 58 App.
" King V. Enterprise Ins. Co. 45 Div. 137, case aff' d 172 N. Y. 659, 65
Ind. 43. N. E. 1119.
"a R. J. Menz Lumber Co. v. E. J.
655
CHAPTER X.
THE POLICY— ALTERATION AND MODIFICATION.
§ 265. Material alteration without consent avoids contract.
§ 266. Immaterial alteration does not avoid contract.
§ 267. Alteration when contract is inchoate.
§ 268. Alteration by a third party.
§ 269. Alteration by the insurer.
§ 269a. Substitution of corrected policy by insurer.
§ 270. Material alteration of policy may be made by consent,
§ 271. Same subject : decisions.
§ 271a. Alteration of certiiicate of membership: consent.
§ 272. Alteration of contract by parol.
§ 273. Same su1)ject : decisions.
§ 274. Alteration with intent to obtain i*nsurer's consent.
§ 275. Same subject: decisions.
§ 276. Alteration: substitution of parties.
§ 276a. Alteration or modifieation of standard policy.
§ 265. Material alteration without consent avoids contract. — If
a completed contract of insurance is altered in any material part
without the consent of the parties thereto, such alteration makes
the entire contract void.^^ So a material and unauthorized altera-
tion of the application after the delivery of the policy of which
it is a part, and which is apparent on the face of the application
Avill preclude a defense of misrepresentations.^^'* What constitutes
12 Langhorne v. Cologan, 4 Taunt, avoids, though made innocently.
330: 1 Duer on Insurance (ed. 1845) Barton Savings Bank & Trust Co. v.
78, sec. 24, et seq.; Chitty on Con- Stephenson, 87 Vt. 433, 51 L.R.A.
tracts, 7th Am. ed. 783-85, notes; (N.S.) 346 (annotated on alteration
Fairlie V. Christie, 7 Taunt. 416; of date of note) 89 Atl. 639.
Piicenix Ins. Co. of Hartford v. Me- ^^^ Kansas Mutual Life Ins. Co. v.
Kernan, 100 Kv. 97, 18 Kv. L. Rep. Coalson, 22 Tex. Civ. App. 64, 54 S.
617, 37 S. W. 490. See in general, W. 388.
Baldwin v. Ha.skell Xational Bank, What is not a material alteration
104 Tex. 122, 133 S. W. 864, 134 S. of copy of application, see Steeley's
W. 1178, rev'g — Tex. Civ. App. — , Creditors v. Steeley, 23 Ky. L. Rep.
124 S. W. 443. 996, 64 S. W. 642.
Generally : material alteration
656
THE POLICY— ALTERATION AND MODIFICATION § 260
a uiaterinl alteration is a question of much importance. If the
words are introduced into the body of the policy and increase the
risk, they are certainly material, and in consequence nullify the
contract," and we apprehend that any alteration would be material
which would operate to so change the risk or subject matter as to
make the policy essentially variant in terms from that intended by
the parties at the time of its completion, and words which would
legally effect this result wherever written, whether on the margin
of the policy or elsewhere, constitute a material alteration, ^^ for the
necessary result of a material alteration is to substitute a new con-
tract in place of the old, which can be legally effected only with
the insurer's consent imder an original agi'eement or by subsequent
ratilication, or through a court of proper and competent jurisdic-
tion.^^
§ 266. Immaterial alteration does not avoid contract. — If the
alteration adds nothing to the contract nor detracts therefrom, and
makes it none the less the contract legally contemplated by the par-
ties at the time of its completion, the alteration is immaterial, and
while a policy of insurance is an instrument of much solemnity,
even where not under seal, its alteration in an immaterial point
does not affect its validity.^^ So if the law would imply the words
added, they do not operate to annul the contract,^''^ and where the
words ''and trade"' were inserted in the policy, they were held im-
" Forshaw v. Chabert, 3 Brod. & alteration, however made, not at all
B. 158. affecting the terms of the promise,
^*Mr. Duer (1 Duer on Ins. [ed. seems not to be within the same
1845] 81) asserts that words on the principle of deeds which from the
margin, if material, avoid the policy, alteration may not be the deeds of
See also 1 Parsons on Ins. (ed. the parties, while a similar alteration
1868) 138, note 1. See Forshaw in a written simple contract might
V. Chabert, 6 Moore, 369, 386. leave it complete evidence of the
What constitutes a material altera- same contract: " Id., per Parsons, C.
tion of contract: Generally, see J., ''When the alteration is wholly
Wicker v. Jones, 159 N. Car. 102, 74 immaterial, . . . the assent of the
S. E. 801, 40 L.R.A.(N.S.) 169, underwritei-s is wholly unimportant.
Ann. Cas. 1914B, 1083n; Barton Tiiose who assent are bound by the
Savings Bank & Trust Co. v. Steph- policy as altered; those who dissent,
enson, 87 Vt. 433, 89 Atl. 639, 51 by its original form, but the liability
L.R.A.(N.S.) 346 and note. in both classes is precisely the same,
*^ See 1 Marshall on Ins. (ed. and the distinction between the two
1810) 343. contracts, where a suit is commenced,
^® Sanderson v. McCallum, 4 consists, not in the nature and ex-
Moore, 5; Nichols v. .Johnson, 10 tent of the relief, but solely in the
Conn. 192; Sanderson v. Svmonds, form of declaring:" 1 Duer on
1 Brod. & B. 426; Pequamket Bridge Tn.s. (ed. 1845) 80. See 1 Parsons on
V. Mathes, 8 N. H. 139; Hunt v. .Marine Insurance (ed. 1868) 140.
Adams, 6 Mass. 519. ''But in a "Hunt v. Adams, 6 Mass. 519; 1
simple contract which is merely evi- Greenleaf on Evidence, sec. 567.
dence of a promise, an innnaterial
Joyce Ins. Vol. I.— 42. 657
§§ 267-269
JOYCE ON INSURANCE
material, in view of the fact that the policy as it stood before the
alteration gave by implication a power to trade.^*
§ 267. Alteration when contract is inchoate. — Where the altera-
tion is material, and is made before subscription while the contract
is in fieri, it does not vitiate the policy,^^ for when the contract is
imperfect and inchoate the assured, by preventing the inception of
the risks, may prevent it from becoming operative and in effect dis-
solve it, but in no other case can he release himself by his own
act from his own obligations.^"
§ 268. Alteration by a third party. — If the alteration be made by
a third person without the consent, co-operation, or privity of the
insured, or without his being responsible therefor, it does not in-
validate the policy.^
§ 269. Alteration by the insurer. — It is held in a Massachusetts
case ^ that an alteration of the policy by an agent of the company
who made a certain indorsement thereon, which was not agreed to
by the pai'ties and which would have operated to prevent a recovery
did not affect the contract, but that such alteration was void. And
in a Delaware case ^ it was held that the terms of the contract were
not affected by an indorsement on the policy made by the secre-
tary of an insurance company at the request of the insured, where-
by the insurance was transferred from the goods in a building to
the building itself. But when alterations are accustomed to be
made by the president or secretary, an alteration made by either is
valid.* And where an alteration is made in the terms of the policy
by a clerk of an insurance company, and he enters the same in the
record-book, sufficient notice thereof is thereby given the company.^
And a fraudulent alteration by insurer's agent may preclude de-
fenses by the insurer.^*
Again, an application which is part of the contract may be so
far severed therefrom that a material alteration in said application
" Sanderson v. Symonds, 1 Brod. ^ Kennebec Co. v. Augusta Ins.
& B. 426, 4 Moore, 42. & Banking Co. 6 Gray (72 Mass.)
19 Robinson v. Tobin, 1 Stark. 336, 204.
per Lord Ellenborough. See note m 38 L.R.A.(N.S.) 630,
20Langhorn v., Cologan, 4 Taunt, on insurance broker as agent for m-
330: 1 Duer on Ins. (ed. 1845) 82, sured in alteration of policy,
see. 27. 3 jjoffecker v. New Castle Co.
1 Langhorn v. Cologan, 4 Taunt. Mutual Ins. Co. 5 Del. 101.
330; Rees v. Overbaugh, 6 Cow. (N. * Warren v. Ocean Ins. Co. 16
Y.) 746; Jackson v. Malin, 15 Johns. Me. 439, 33 Am. Dec. 674.
(N Y.) 293, per Piatt, J.; Nicholas ^ -^lashington Ins. Co. v. Dawson,
V. Johnson, 10 Conn. 192. See also, 30 Md. 91. See § 272 herein, on
generally, Frv v. Jenkins, 173 111. alteration by parol.
App. 486; Wicker v. Jones, 159 N. ^a gwau v. Watertown Fire Ins.
Car. 102, 40 L.R.A.(N.S.) 169, Ann. Co. 96 Pa. 37.
Cas. 1914B, 1083n, 74 S. E. 801.
658
THE POLICY— ALTERATION AND MODIFICATION § 270
by the insurer or through its negligence may preclude reserved de-
fenses.*^ And a letter from insurer is held not to constitute a modi-
fication there being no request therefor by insured.^
§ 269a. Substitution of corrected policy by insurer. — An accident
insurance company has power, after the occurrence of an accident
under a policy in which the occupation of the insured was incor-
rectly described, to substitute a corrected policy therefor, and render
itself liable thereunder for such previous accident^
§ 270. Material alteration of policy may be made by consent. —
There is no doubt but that the parties may make such lawful al-
terations and modifications as they wish of contracts of insurance
which have been completed between them. Such alterations or
modifications may be made by indorsements on the policy, either
marginal, or on its back, or by inserting words in the body of the
instrument, or by a separate paper, or orally.^ And a change made
with the consent of insured's agent may be ratified by the princi-
pal's acts.^ And the contract may upon a sufficient consideration
be subsequently modified by limiting the amount recoverable.^"
But if the insurer, after issuing a policy insuring against accident,
notifies the insured of a change of classification greatly lessening the
amount of his indemnity, his a.ssent to such change is not to be con-
clusively inferred where he did not expressly a.ssent, nor forward
his policy to have it rewritten as requested, and the dues and assess-
ments paid and required to be paid were the same as before.^^
Again, if, after a contract of insurance is effected, a memorandum
is sent to the assured in effect modifying such terms, he is not
deemed to have accepted or acquiesced in this modification, because
of his silence respecting it, where it is not shown that the insurer
was influenced in his conduct by the silence of the assured."*
SI* Kansas Mutual Life Ins. Co. v. & R. (Pa.) 98; Robinson v. Tobin, 1
Coalson, 22 Tex. Civ. App. 64, 54 Stark. 336; 1 Phillips on Ins. see.
S. W. 388. 109; 1 Duer on Ins. (ed. 1845) 78,
^ Pringle Bros. v. Philadelphia sees. 24 et seq. and see cases next
Casualty Co. 138 N. Y. Supp. 330, section.
153 App. Div. 180. Consideration necessary. See Pat-
'Ford V. United States Mutual lerson v. American Ins. Co. 164
Accident Relief Co. 148 Mass. 153, Mo. App. 157,, 148 S. W. 448.
1 L.R.A. 700, 19 N. E. 169. ' Belt v. American Central Ins. Co.
8 Hoftecker v. New Castle County 1G3 N. Y. 555, 57 N. E. 1104.
Ins. Co. 4 Houst. (Del.) 306; 1° Kettelmann v. Fire Assoc, of
Mattinglv v. Springfield Fire & Phila. 79 Mo. App. 447, 2 Mo. App.
Marine Ins. Co. 26 Ky. L. Rep. Reptr. 487.
1187, 83 S. W. 577, 34 Ins. L. J. "Morse v. Fraternal Accident
136; Northrup v. Mississippi Valley Assoc. 190 Mass. 417, 112 Am. St.
Ins. Co. 47 Mo. 435, 4 Am. Rep. Rep. 337, 77 N. E. 491.
337; Bell v. Marine Ins. Co. 8 Serg. "^ Shakman v. United States
659
§§ 271-272 JOYCE ON INSURANCE
§ 271. Same subject: decisions. — Almost any change as to parties
or terms may be made by indorsement with consent.^^ So the con-
tract may be altered by a writing on the margin of the policy in-
creasing the valuation," or covering other property,^* and the ter-
mini may be changed by a proper indorsement on the policy .^^ and
an additional agreement may be made to cover certain shi]:)meiits
not covered by the original policy.^^ So a deviation from the risk
assumed in the policy may be agreed upon between the parties by
indorsement written across the policy, although it is not signed,
where it has been the practice of the company to make alterations
in the risk in this manner, and such change is recorded by the
secretary." So an indorsement may be made giving the captain
authority to act as his own pilot, without prejudice to the insur-
ance.^*
§ 271a. Alteration of certificate of membership: consent. — A cer-
tificate of membership in an insurance benefit society is a contract
which can be changed only by and with the consent of both par-
ties.^^
§ 272. Alteration of contract by parol. — It has been held that the
alteration must be of as high a nature as the contract itself, whether
made by indorsement or upon a separate paper, and that it must
be subscribed by the underwriters.^" But the authorities are now
numerous, and there is no doubt but that in the absence of a statu-
tory provision the parties may by consent alter, modify, or enlarge
the" terms of a policy of insurance by parol, for the fact that the
Credit System Co. 92 Wis. 366, 53 ^o Kaines v. Kniqhtly, Skin. 54.
Am. St. Rep. 920, 32 L.R.A. 383, 66 A contract varying a policy is as
N. W. 528. much an instrument as the policy
12 Howes V. Union Ins. Co. 16 La. itself and, therefore, can be executed
Ann. 235. only in the manner prescribed by
" Robinson v. Tobin, 1 Stark. 336. law. Head v. Providence Ins. Co. 2
i^Northnip V. Mississippi Valley Cranch (6 U. S.) 127, 2 L. ed. 229,
Ins. Co. 47 Mo. 435, 4 Am. Rep. 337. cited in Laclede Fire Brick Manu-
15 Bell v. Marine Ins. Co. 8 Serg. facturing Co. v. Hartford Steam-
& R. (Pa.) 98. Boiler Inspection Co. 60 Fed, 358,
i^Marx v. National Marine & Fire 9 C. C. A. 7, 19 U. S, App. 510;
Ins. Co. 25 La, Ann. 39. Presbyterian Mutual Assurance
17 Wan-en v. Ocean Tn.'^. Co. 16 Fund v. Allen, 106 Ind. 596, 7 N. E.
Me. 439, 33 Am. Dec. 674. See Ker- 317; Leonard v. American Ins. Co.
shaw V. Cox, 3 Esp. 246. 97 Ind. 304; Platho v. Merchants' &
18 Gulf of California Navigation & Manufacturers' Ins. Co. 38 Mo. 255j
Express Co. v. State Invest. & Ins. Hathron v. Germania Ins. Co. 55
Co. 70 Cal. 586, 12 Pac. 473. Barb. (N. Y.) 34. As to execution
19 Rus,s v. Supreme Council Amori- of policy, see §§ 178 et seq. herein.
can Legion of Honor, 110 La. 588, 98
Am. St. Rep. 469, 34 So. 697. See
§§ 377-380 herein.
660
THE POLICY— ALTERATION AND MODIFICATION § 272
contract is written does not prevent its change, enlargement, or con-
tinuance by a subsequent parol agreement.^ So the alterations may-
be made by consent without a new signature,^ but where the con-
tract is required by statute to be in writing, it cannot be shown to
have ])een altered by parol after its execution.' And where a stat-
ute requires that a contract of fire insurance, to be binding, must
be made in writing, an agreement to alter such contract must be in
wiiling.'*
Parties may stipulate that a policy may be modified only by a
writing of equal dignity and credit with the policy itself, and a
"loss-payable" indorsement may be written upon the policy in pur-
suance of a mutual and expressly declared purpose to make it,
with the indorsement, a complete and entire agreement and pre-
1 Westchester Fire Ins. Co. v. C. C. A. 645, 650, 36 U. S. App. 327 ;
Earle, 33 jVlich. 143; llaitfoid J^^ire Fireman's Fund Ins. Co. v. Norwood,
Ins. Co. V. Webster, 69 111. 392, 393; 69 Fed. 71, 75, 16 C. C. A. 136, 140,
Howell V. Knickerbocker Life Ins. 32 U. S. App. 490.
Co. 44 N. Y. 276, 3 Rob. (N. Y:) 232, 3Iassachiisetts.-~EmeTy v. Boston
19 Abb. Pr. (N. Y.) 217, 4 Am. Rep. Marine Ins. Co. 138 Mass. 398, 412.
()75. Norris v. Cl'ina Traders' Ins. Michigan. — Cobbs v. Fire Assoc.
Co. 52 Wash. 554, 100 Pac. 1025. of Phila. 68 Mich. 463, 464, 36 N.
"In the United States there is no re- W. 222.
, striction on the rio-hts of the parties Mississippi. — Home Ins. Co. v.
to alter their original contract at any Gib.^on, 72 Miss. 58, 65, 17 So. 13.
time and in any manner they may Missouri. — Burdick v. Security
deem expedient; but in I]ngland, al- Life Assoc. 77 Mo. App. 629, 635;
though certain alterations are per- Burnham v. Greenwich Ins. Co. 63
mitted to be made without the addi- Mo. App. 85, 88, 1 Mo. App. Repr.
tion of a stamp, those that seem the 616.
most material, if unstamped, are Tennessee. — Dale v. Continental
whoUy invalid : " 1 Duer on Ins. (ed. Ins. Co. 95 Tenn. 38, 49, 31 S. W.
1845) 82, see. 28; 1 Parsons on Ins. 266; American Central Ins. Co. v.
(ed. 1868) 139 note. But this state- McCrea, 8 Lea, 513, 52.5, 41 Am.
ment should be qualified in view of Rep. 647.
statutory provisions requiring the Texas. — Cohen v. Continental Fire
contract to be in writing, and per- Ins. Co. 67 Tex. 325, 328, 60 Am.
haps in case of revenue stamp acts Rep. 24, 3 S. W. 296; Missouri
and provisions of charters and by- Kansas & Texas Ry. Co. v. Cook, 8
laws of mutual companies or so- Tex. Civ. Ajop. 376, 381, 27 S. W.
cieties. 769.
Contracts of insurance may be ^ Wai-r^n v. Ocean Ins. Co. 16 Me.
altered by parol. Knickerlxx-kcr Lite 439. 33 Am. Dec. 674.
Ins. Co. "v. Norton, 96 U. S. 234, 24 3 ^litf.l,^.]l v. Universal Life Ins.
L. ed. 689. Co. 54 Ga. 289.
Cited in: United States. — ^Futual ^Lippman v. .T]lna Ins. Co. 108
Reserve Fund Life Assoc, v. Cleve- Ga. 391, 33 S. E. 897, 28 Ins. L. J.
huid Woolen Mills, 82 Fed. 508, 513, 886, 887, Ga. Civ. Code, sec. 2089.
27 C. C. A. 212, 217, 54 U. S. App. The court declared that such was the
290; London & Lancashire Fire Ins. rule by repeated adjudications in
Co. V. Slorrs, 71 Fed. 120, 125, 17 (hat state.
661
§ 273 JOYCE ON INSURANCE
elude a resort to parol evidence.^ But it is also held that the rule
that a written contract may be changed by a subsequent parol agree-
ment is not changed by the fact that the contract provides that no
subsequent agreement shall be valid unless in writing and endorsed
on the policy, for this part of the contract stands like any other
part of it.^
§ 273. Same subject: decisions. — Where before the expiration of
the policy the insured goods were removed to another story in the
same building, and the insurer, knowing such fact, issued a renew-
al receipt and received the consideration, it was held that this was
equivalent to an indorsement or assent by parol to the change of
location, and was a modification of the contract.' So it was held
that the policy might be changed by a subsequent parol agreement,
altliough the policy provided that ''the use of general terms, or
anything less than a distinct, specific agreement, clearly expressed
and indorsed on this policy, shall not be construed as a waiver of
any printed or written condition or restriction hereiij contained." ^
So the contract may be modified by a subsequent agreement that a
mill may be run all night where the policy provides otherwise,^ and
an oral agreement to extend the insurance in an open policy to ad-
ditional merchandise may be valid, notwithstanding the policy pro-
vides that it shall not be binding until countersigned at the general
office, and there is no countersigning as raspects the extension ; ^°
and notwithstanding a provision in the by-laws of an insurance
company that the president shall receive applications, fix rates, and
sign all policies, it may be inferred from evidence of the way in
which the business of the company was actually done that the secre-
'tary had authority to make a binding oral agreement to enter an
indorsement on a policy.^^ Where the loss is payable to the mort-
gagee, with a condition to be void in case of change in title or alien-
5 Atlas RediK'tion Co. v. New Zea- As to agents' powers to vary or
land Ins. Co. 9 L.R.A.(N.S.) 433, waive conditions and restrictions in,
138 Fed. 497, 71 C. C. A. 21, 34 policy, see §§ 439 et seq., 533 et aeq.
Ins. L. J. 805, aff'g 121 Fed. 929. herein. As to agents' power to alter
^ Mattinglv v. Springfield Fire & policy, see § 549 herein.
Marine Ins. Co. 26 Ky. L. Rep. 1187, » North Berwick Co. v. New Eng-
83 S. W. 577, 34 Ins. L. J. 136. land Fire & Marine Ins. Co. 52 Me.
'Ludwig V. Jersey City Ins. Co. 336.
48 N. Y. 379, 8 Am. Rep. 556. ^° Kennebec Co. v. Augusta Ins. &
8Dav V. Mechanics' & Traders' Ins. Banking Co. 6 Gray (72 Mass.) 204.
Co. 88*Mo. 325, 57 Am. Rep. 416. ^^ Emery v. Boston Marine Ins. Co.
As to right of parties to original 138 Mass. 398.
contract to vary terms thereof, see
Cowles V. United States Fidelitv &
Guaranty Co. 32 Wash. 120, 126, 98
Am. St. Rep. 838, 72 Pac. 1032.
602
THE POLICY— ALTERATION AND MODIFICATION § 274
ation, and the property is foreclosed, it may be shown that an agree-
ment was made after the sale that the policy should stand as re-
curity for the insured's interest, and that the company would make
the proper entries therefor in its books.^^ Where a policy was exe-
cuted ''upon the freight bill of a steamboat, and the boat was in-
jured in the hull so as to lose the voyage, but the insurers and in-
sured made a subsequent agreement "that the insurers would be
bound by their policies on cargo and freight bill by a transfer of the
same to another boat," it was decided that this agreement exempted
the insurers from their liability as to the first boat.^^ In another
case where there was no provision in the policy authorizing an in-
dorsement for removal of the insured property, but the property
was removed under an indorsement granting permission so to do,
it was held that no action would lie under the original policy for
the loss, and that the indorsement was a new and distinct contract
by parol, upon which an action of covenant could not be sustained.^*
So an oral agreement to pay part of the amount of the insurance
within a certain time, such amount to be received in full satisfac-
tion of a claim for loss, is valid.^^ But where an indorsement was
made giving liberty to deviate, it was held that parol evidence of
the conversation between the parties at the time the indorsement
was made was inadmissible.^^ A policy of insurance issued to an
agent insuring his principal's property cannot be modified by him
and the company by parol, so as to exclude such property, after tho
contract ha^ been ratified by the principal.^'
v§ 274. Alteration with intent to obtain insurer's consent. — Where
the insured makes an alteration on tlie policy purposing to obtain
the insurer's consent thereto, and there are several underwriters,
such alteration, if material, avoids the policy in respect to all such
underwriters as do not consent. ^^
12 Pratt V. New York Cent. Ins. Co. 123 Wis. 130, 68 L.R,A. 934, 101 N.
55 N. Y. 505, 61 Bai-b. 589, 11 Am. W. 395, 107 Am. St. Rep. 99j.
Rep 304. isj^irsljaw v. Cliabert, 3 Bred. &
i3*Field V. Citizens' Ins. Co. 11 B. 158; Campbell v. Christie, 2
Mo 50 Stark. 64; Laird v. Robertson, 4
1^ Sbertzer v. Mutual Fire Ins. Co. Brown Pari. C. 488; Fairlie v. Cbris-
46 Md. 506. See Maryland Fire Ins. tie, 7 Taunt. 410; 1 Ducr on Ins. (ed.
Co. V. Gusdorf, 43 Md. 506. 1845) 79, sec. 24 et seq. In the case
15 Millers' Ins. Co. v. Kinneard, of an alteration made without
136 111. 199, 26 N. E. 368. fraudulent intent, with the purpose
leSeccom'b v. Provincial Ins. Co. of obtaining the underwriter's con-
10 Allen (92 Mass.) 305. Compare sent, but which is not obtamed, Mr.
Norris v. China Traders' Ins. Co. 52 Parsons (1 Parsons on JMaiine Ins.
Wash. 554, 100 Pac. 1025. [ed. 18681 142) refers to Mr. Duer's
1"^ Johnston V. Charles Abresch Co. (1 Duer on Ins. [ed. ISlo] 80)
663
§§ 275, 276 JOYCE ON INSURANCE
§ 275. Same subject: decisions. — Where the date when certain
ships were warranted to sail was struck out and a later date inserted
in the memorandum, with the purpose of getting the assent of the
insurers, it was lield that an underwriter was. not bound who did
not assent,^^ and where a blank was filled out in writing with the
names and quantities of certain articles, so that the insurance might
attach specifically thereon, it was held a material alteration, and not
binding on an underwriter who did not give his assent.'"'
§ 276. Alteration: substitution of parties. — It was held in an
early Massachusetts case ^ that an indorsement on the back of a
policy, whereby another underwriter Avas substituted, was binding,
although only signed by the insurance broker, ^ and evidence is ad-
missible to show a substitution of another party in place of the
original insured, as in case of the continuation of a partnership
business by a member of the firm.^ So where C. took out a fire
polic}^, borrowed money of F., gave F. a trust deed, caused the sec-
retaiy of the company to write on the policy, "loss, if any, made
payable to F.," sold the property to G. subject to the trust deed, and
caused an entry to be made on the company's policy register at the
policy's page, "transferred to G./' and G. paid off the trust deed and
received the policy from F., it was held that thereupon F.'s interest
in the jDolicy vested in G., and that the entry in the register tended
to show that the company accepted G. as the insured in place of
C, and not of F.* And where A. obtained a policy of fire insur-
ance on his museum building and collections, and before the ex-
piration of the policy he sold the insured property to B., and the
acting secretary of the insurance company then indorsed on the
policy the words "loss, if any, payable to" B., and afterward B.
sold the museum collections, and the president of the company
statement that it avoids the policy, contracts, where the suit is eom-
and also to Mr. Phillips' opposing menced, consists not in the nature or
view that it does not. But the latter extent of the relief, but solely in the
(1 Phillips on Ins. [3d ed.] sec. 114, form of declaring."
note 1), referring to Mr. Duers criti- ^^ Fairlie v. Christie, 7 Taunt. 416,
cism of the eases relied on by him, 1 Moore, 114.
says: "1 am indebted to Mr. Duer ^o Lgjjg],Qj.j^ y_ Cologan, 4 Taunt,
for pointing out my error in stating 330.
these two eases in my former edi- ^ Merry v. Prince, 2 Mass, 176.
tions." Mr. Parsons (1 Parsons on ^ One judge dissented, and Mr.
Marino Ins, [ed. 1868] 142) also Duer (1 Duer on Ins. [ed. 1845] 145,
says: "We doubt whether any uni- 146) says "the propriety of the de-
versal rule on this subject, either in cision seems very questionable,"
the affirmative or negative, would be ^ Wood v. Eutland Mut. Fire Ins.
accurate." But Mr. Duer (1 Duer Co. 31 Vt. 552.
on Ins. [ed. 1845] 80) also declares * Griswold v. American Cent, Ins.
that "the distinction between the two Co. 70 Mo. 654.
664
THE POLICY— ALTERATION AND MODIFICATION § 276a
made an additional indorsement on the policy in the words, "this
policy is hereb}' changed to cover chairs, benches, and furnaces, in-
stead of museum collection, which is removed," an action being-
brought upon the policy it was decided that the indorsements con-
stituted valid contracts of insurance, and that the company was
liable thereon.*
§ 276a. Alteration or modification of standard policy. — If it is
intended to modify the provisions contained in the standard form
of policies of insurance either by conditions or riders attached to
the policy, such intention must be manifested by unambig-uous
words. ^
^Northrup v. Mississippi Valley Standard policy; stipulations eon-
Ins. Co. 47 Mo. 435, 4 Am. Rep. 337. tra, additions, changes, etc., see §
^ Hardy v. Lanr-aster, 166 Mass. 176b herein.
210, 55 Am. St. Rep. 395, 33 L.R.A.
241, 44 N. E. 209.
t65
CHAPTER XI.
WAR— ALIEN ENEMIES.
§ 281. Effect of war generally.
§ 282. Insurances on enemies' property formerly upheld.
§ 283. Insurances on enemies' property now illegal.
§ 284. Same subject : early decisions.
§ 285. Trading with enemy: mistake or ignorance no excuse.
• § 286. Defense of alien enemy.
§ 287. Binding force here of laws of belligerent nations.
§ 288. Alien enemies: life insurance.
§ 289. Effect of war on pre-existing valid contract.
^ 290. Same subject : loss before war.
§ 291. Same subject : that war merely suspends the contract.
§ 292. Right of citizen to bring property from enemy's country.
§ 293. War: license to trade.
§ 294. Who are alien enemies : domicil.
§ 295. Alien enemy: what constitutes domicil.
§ 296. Residence with intent to return.
§ 297. Change of domicil.
§ 298. Alien enemy: what is enemy's country.
§ 299. Alien enemy: commencement and cessation of hostilities.
§ 299a. Alien enemy: intention to subsequently wage war. '^
§ 281. Effect of war generally. — All intercourse between citizen:^
of belligerent powers which is inconsistent with a state of war is
prohibited by the law of nations. Such prohibition includes all
negotiations, commerce, or trading with the enemy ; all acts which
will increase or tend to increase its income or resources ; all acts of
voluntary submission to it or of receiving its protection ; also, all
acts concerning the transmission of money or goods, and nullifies
all contracts relating thereto. It further prohibits insurances upon
trade with or by the enemy, and upon the life or lives of aliens en-
gaged in service with the enemy; ' for the subjects of one country
' See Kershaw V. Kelsey, 100 Mass. Rapid, 8 Cranch, 12 (U. S.) 155, 3
561, 97 Am. Dee. 124, per the court; L. ed. 520; The Emulous, 1 Gall. U.
The Julia, 8 Cranch, 12 (U. S.) 181, S. (C. C.) 563, Fed. Cas. No. 4479;
3 L. ed. 528, per Story, J.; The The Hoop, 1 Rob. Adm. 196; 3 Phil-
66G
WAR— ALIEN ENEMIES
§ 281
cannot be permitted to lend their assistance to protect by insurance
the commerce or property of belligerent, alien subjects, or to do
anything detrimental to their country's interest.* The purpose of
war is to cripple the power and exhaust the resources of the enemy,
and it is inconsistent that one country should destroy its enemy's
property and repay in insurances the value of what has been so de-
stroyed, or that it should in such manner increase the resources of
the enemy or render it aid,^ and the commencement of war de-
termines, for like reasons, all trading or intercourse with the enemy
which prior thereto may have been lawful^" All individuals,
therefore, who compose the belligerent powers exist, as to each other,
in a state of utter exclusion, and ai'e public enemies.^^
lips on Evidence, *279; Ex parte
Bousmaker, 13 Ves. Jr. 71; 3 Kent's
Commentaries (5tli ed. ) 253.
See Hershey's Essentials of Inter-
national Public Law (ed. 1912), pp.
366 et seq., sees. 349, 350, and bibli-
ography on effect of war on corpora-
tions, and declaration of war and its
immediate effects. Id. pp. 370, 371.
An alien enemy may be a cor-
poration as well as an individual. 7
Moore's Dig. International Law (ed.
1906) p. 434.
^Furtado v. Rogers, 3 Bos. & P.
191, 198, 14 Eng. Rul. Cas. 125, per
Lord Alvanley.
^ "As marine insurance has for its
object the protection of commerce
and navigation, it would obviously
be inconsistent with the very purpos-
es of a maritime war to permit in-
surance on the shipping and trade of
an enemy." Arnouhl on Ins. (Per-
kins' ed."'l850) 88, •*87.
lOMcStea v. Matthews, 50 N. Y.
166, 170, per Church, C. J.; GrLs-
wold V. Waddington, 15 Johns. (N.
Y.) 57, 16 Johns. (N. Y.) 438. In
this case the effect of war upon the in-
tercourse of hostile states is exhaus-
tivelv considered. See also notes on
"Belligerent riglits," 91 Am. Dec. 279,
280; "Contracts with alien enemies
and right to sue them in our courts,"
96 Am. Dec. 624-33. Commencement
of war; declaration of, see 7 Moore's
Dig. of International Law (ed. 1906)
p. 168, see. 1106. Suspension of in-
6(i
tereourse and interruption of com-
mercial relations, see Id. p. 237, sec.
1135.
11 The Rapid, 8 Cranch (12 U. S.)
155, 160, 3 L. ed. 520, per Johnson,
J. "The citizen or native of a lios-
tile country is thus an enemy as one
of the constituents of the hostile
state or nation, and a.s such is sub-
jected to the hardships of war." 7
Moore's Dig. of International Law
(ed. 1906) p. 172, sec. 1109.
The following Federal decisions
are of importance in this connection.
In war, the belligerents and all their
citizens and subjects are enemies to
eacli other. All intercourse and com-
munication between them are unlaw-
ful. Jecker v. jMontgomery. 18 How.
(59 U. S.) 110, 15 L. ed. 311; Lamar
V. Browne, 92 U. S. 187, 23 L. ed.
650.
Cited in: United States. — Levy v.
Stewart, 11 Wall. (78 U. S.) 250. 20
L. ed. 88; Hanger v. Abbott, 6 Wall.
(73 U. S.) 535,^18 L. ed. 941; United
States V. 1,756 Shares, Fed. Cas. No.
15,960b; United States v. 1,756
Shares, Fed. Cas. No. 15,960a; United
States V. 100 Barrels of Cement, 3
Am. L. Reg. N. S. 737, Fed. Cas. No.
15,945 ; The Peterhoff , Blatchf . Prize
Cas. 497, Fed. Cas. No. 11,024; The
Hiawatha, Blatchf. Prize Cas. 14,
Fed. Cas. No. 6,451; The Edward
Barnard, Blatchf. Prize Cas. 123,
Fed. Cas. No. 4,291: Cadwell v.
Southern Exp. Co. 1 Flipp, 89, Fed.
§ 281
JOYCE ON INSURANCE
Cas. No. 2,303; The A. J. View, the citizens or subjects of one bel-
Blatchf. Prize Cas. 143, Fed. Cas. No. ligerent enemies of the government
118; The Advocate, Blatchf. Prize and of all the citizens or subjects of
Cas. 143, Fed. Cas. 940. the other applies equally to civil and
Indiana. — Perkins v. Rogers, 35 to international wars. United States
Ind. 145, 9 Am. Rep. C39. v. Cooke (The Venice) 2 Wall. (69
New York.— Cohen v. New York U. S.) 258, 17 L. ed. 866.
Mutual Ldfe Ins. Co. 50 N. Y. 617, Cited in : Thiited States.— Bnrhank
10 Am. Rep. 522. v. Conrad, 96 U. S. 301, 24 L. ed.
Tennessee. — Conley v. Burson, 1 727 ; Desmare v. United States, 93 U.
Heisk. (Tenn.) 149. S. 611, 23 L. ed. 960; Levy v. Stew-
r«>f7/»/«.— Manhattan Life Ins. art, 11 Wall (78 U. S.) 253, 20 L.
Co. V. Warwick, 20 Gratt. (Va.) 655, ed. 89; The Peterhoff (The Peterhoff
3 Am. Rep. 218. v. United States) 5 Wall. (72 U. S.)
So limited hostilities between two 60, 18 L, ed. 571; The Reform
nations, authorized by their respec- (United States v. The Reform) 3
tive governments, coiistitute a pub- Wall. (70 U. S.) 632, 18 L. ed. 110;
lie war, and the parties enemies. Ba.'j The Ambrose Light, 25 Fed. 446;
V. Tingy, 4 Dall. (4 U. S.) 37, 1 Philips v. Hatch, 1 Dill. 576, Fed.
L. ed. 731. Cited in Montoya v. Cas. No. 11,094; Kanawha Coal Co.
United States, 180 U. S. 267, 45 L.
ed. 524, 21 Sup. Ct. 358; Cush-
ing V. United States, 22 Ct. CI. 34;
V. Kanawha & O. Coal Co. 7 Blatchf.
409, Fed. Cas. No. 7,606; Brown v.
Hiatt, 1 Dill. 381, Fed. Cas. No.
Metropolitan Bank v. Van Dyck, 27 2,011; Carver v. United States, 16
N. Y. 449. Ct. CI. 384.
And citizens of a neutral country Alabama. — Scheible v. Baeho, 41
established in business in the enemy's Ala. 433.
country must be regarded as enemies, Indian-a. — Perkins v. Rogers, 35
and their propertv as enemv's prop- 3nd. 148, 9 Am. Rep. 639.
erty. The Flying Scud v. United 7o»«.— Hill v. Baker, 32 Iowa, 310,
States (The Flving Scud) 6 Wall.
(73 U. S.) 263, 18 L. ed. 755. Cited
in The Benito Estenger, 176 U. S.
571, 44 L. ed. 593, 20 Sup. Ct.
7 Am. Rep. 193.
Mississippi. — j\Iims v. Armstrong,
42 Miss. 435, 97 Am. Dec. 472.
Missotiri.—'De Jamette v. De Giv-
489; The Paquete Habana (United erville, 56 Mo. 444.
States V. The Paquete Habana) 189 New York. — Bank of New Orleans
U. S. 466, 47 L. ed. 904, 23 Sup. Ct. v. IMatthews, 49 N. Y. 15; Pepin v.
593; Lee v. Kaufman, 3 Hughes, 134, Lacjienmever, 45 N. Y. 33; Harden
Fed. Cas. No. 8,191. v. Boyce, 59 Barb. 432.
If one abandons his home, enters Tennessee. — Apperson v. Bynum,
the military lines of the enemy, and 5 Coldw. 350; Bank of Tennessee v.
is in sympathy and co-operation with Woodson, 5 Coldw. 350.
the enemy, lie is, during his stay, him- Virginia. — McVeigh v. Bank of
self an enemy, and liable to be treat- Old Dominion, 26 Gratt. 835. Bill-
ed as such as to both person and gerry v. Branch, 19 Gratt. 428, 100
propertv. Gates v. Goodloe, 101 U. Am. Dee. 679.
S. 612, 25 L. ed. 895. West Virginia. — Winternitz v. Hy-
Nor will the individual acts of land, 3 W. Va. 476.
friendship of a subject of one nation And all persons residing within
at war, toward the other nation, af- tlie territory of the revolted states,
feet his status as an enemy. The whose property may be used to in-
Benito Estenger, 176 U. S. 568, 20 crease the revenues of the hostile
Suy). Ct. 489, 44 L. ed. 592. power, are liable to be treated as ene-
Again the rule that war makes all niies, though not foreigners. Prize
608
WAR— ALIEN ENEMIES
§ 281
Cases, 2 Black (67 U. S.) 035, 17 States v. Alexander (Mrs. Aloxan-
L. ed. 459. der's Cotton) 2 Wall. (G9 U. S.) 404,
Cited in: United States.— Fov(\ v. 17 L. ed. 915.
Surget, 97 U. S. 604, 24 L. ed. 1021; Cited in: United ^^a^es.— Mitchel
United States v. Farragut, 22 Wall. v. United States, 21 Wall. (88 U. S.)
(89 U. S.) 423, 22 L. ed. 884; Miller 351, 22 L. ed. 587; Hamilton v. Dil-
V. United States (Pag-e v. United lion. 21 Wall. (88 U. S.) 96, 22 L.
States) 11 Wall. (78 U. S.) 306, 20 ed. 533; New Orleans v. New York
L. ed. 145; The Peterhott' (The Peter- Mail S. S. Co. 20 Wall. (87 U. S.)
hoti' V. United States) 5 Wall. (72 394, 22 L. ed. 358; Coppel v. Hall,
U. S.) 60, 18 Fed. 571; The Venice 7 Wall. (74 V. S.) 554, 19 L. ed.
(United States v. Cgoke) 2 Wall. (69 247; The Onachita Cotton (Withen-
U. S.) 274, 17 L. ed. 867; The Steoh- burv v. United States) 6 Wall. (73
en Hart, Blatchf. Prize Cas. 387, U. S.) 532, 18 L. ed. 939; The Peter-
Fed. Cas. No. 13,364; The Peterhotf, hofif (The Petei-holf v. United States)
Blatchf. Prize Cas. 497, Fed. Cas. No. 5 Wall. (72 U. S.) 60, 18 L. ed. 572;
n,024; Elgee v. Lovell, Woohv. 120, Goodie v. United States, 15 Ct. CI.
Fed. Cas. No. 4.344; Coolidsre v. 287; Chesapeake and Ohio R. Co. v.
Guthrie 1 Flipp, 99, Fed. Cas. No. United States, 20 Ct. CI. 66; Brown
3,185; Caldwell v. Southern Exp. Co. v. Hiatt, 1 Dill. 381, Fed. Cas. No.
1 Flipp, 89, Fed. Cas. No. 2,303 ; Sto- 2.011 ; Caldwell v. Southern Exp. Co.
vail V. United States, 26 Ct. CI. 240; 2 Flipp, 90, Fed. Cas. No. 2,303;
Carver v. United States, 16 Ct. CI. Coohdoe v. Guthrie, 1 Flipp, 99,
384 ; Enslev v. United States, 6 Ct. Fed. Cas. No. 3,185 ; El^ee v. Lovell,
CI. 290; Mills v. United States, 6 Ct. Woohv. 121, Fed. Cas^ No. 4,344;
CI. 268; United States v. 1,756 Kanawha Coal Co. v. Kanawha & O.
Shares, Fed. Cas. No. 15,960b; Unit- Coal Co. 7 Blatchf. 409, Fed. Cas.
ed States v. Cathcart, 1 Bond, 564, No. 7,606; Philips v. Hatch, 1 Dill.
Fed. Cas. No. 14,756. 576, Fed. Cas. No. 11,094 ; Planters ■
Georgia.—MnyQT v. Reed, 37 Ga. Bank v. St. John, 1 Woods, 591, Fed.
487; United States v. Athens Armo- Cas. No. 11,208; United States v.
ry, 35 Ga. 355. 1500 Bales of Cotton, Fed. Cas. No.
Missouri. — Wellman v. Wicker- 15,958 ; White v. Red Chief, 1 Woods,
man, 44 Mo. 486. 41, Fed. Cas. No. 17,556; The Ara-
New Jersey. — Mutual Benefit Life brose Light, 25 Fed. 446.
Ins. Co. V. Hillvard, 37 N. J. L. 489, Alahanm.—QcheiUe v. Bacho, 41
18 Am. Rep. 741. Ala. 433; Watson v. Stone, 40 Ala.
New York.— Bank of New Orleans 469, 91 Am.. Dec. 484.
V. Matthews, 49 N. Y. 15. Arkmisas.—Hice v. Shoak, 27 Ark.
0^(o.— Penny wit V. Foote, 27 Ohio ].38, 11 Am. Rep. 785; Latham v.
St. 628, 22 Am. Rep. 340. Clark, 25 Ark. 603 ; Taylor v. Jenk-
VirginM.—Merchani?, Ins. Co. v. ins, 24 Ark. 340, 88 Am. Dec. 773.
Edmond, 17 Gratt. 150. Georgia. — Mayer v. Reed, 37 Ga.
West Virginia. — Haymond v. Cam- 488.
den, 22 W. Va. 197; Grinnau v. Ed- Indlanft. — Perkins v. Rogers, 35
wards, 21 W. Va. 357; Ex parte Ind. 153, 9 Am. Rep. 639.
Quarrier, 2 W. Va. 572. loua.—mW v. Baker, 32 Iowa,
So all the people of each state or 310, 7 Am. Rep. 193.
district in insurrection against the Ma.'^snchusetts. — Ker.'^haw v. Kes-
LTnited States must be regarded as ley, 100 Mass. 570, 1 Am. Rep. 142,
enemies, until, by the action of the 97 Am. Dec. 124.
legislature and the executive, or oth- Mississippi. — Shackett v. Polk, 51
erwise, that relation is thoroushlv Miss. 391; Statham v. New York L.
and permanently changed. United Ins. Co. 45 Miss. 594, 7 Am. Rep.
(J69
§§ 282, 283 JOYCE ON INSURANCE
§ 282. Insurances on enemies' property formerly upheld. — Under
the early English cases insurances on the property of alien enemies
were countenanced if not directly upheld, ^^ and so eminent an au-
thority as Lord Mansfield, Avhile not distinctly affirming their
validity, defended such insurance.^' upon the ground, as is said by
Buller, J.,^* of ^'isxpedience," and for a long time neither counsel
nor court raised any objection to the legality of such contracts.^*
§ 283. Insurances on enemies' property now illegal. — Certain
acts of Parliament applicable to existing wars were passed in 1748 ^^
and 1792 ^' and these acts were followed by decisions in the Eng-
lish courts holding unequivocally that such insurances were abso-
lutely void, and it is now undisputed that insurances of enemies'
property or of any interest therein are illegal and void.^* So where
737; Durden v. Smith, 44 Miss. 553; 1 Duer on Ins, (ed. 1845) 419, see. 9,
Hill V. Bayland, 40 Miss. 631. 463, note 2.
Missouri. — DeJamette v. DeGiv- ^* Bell v. Gilson, 1 Bos. & P. 345-
erville, 56 Mo. 44^ ; Wellman v. Vick- 54.
erman, 44 Mo. 486. ^^ g^jgi-, y Parkinson, Doug. 732;
New Jersey. — Mutual Benefit Life Plantamour v. Staples, 1 Term Rep.
Ins. Co. V. Hillyard, 37 N. J. L. 489, 611, note. Emerigon says : "During
18 Am. Rep. 741; Smith v. Gaines, the course of the last war, English
38 N. J. Eq. 67. merchants insured our goods, and
New Yorfc.— Bank of New Orleans thus restored to us the value of the
V. Mathews, 49 N. Y. 15; Woods v. prizes taken from us by their own
Wilder, 43 N. Y. 168, 3 Am. Rep. cruisers. Since Frenchmen effect ed
684; Egerton v. New York & H. R. insurance in London for their own
Co. 39 N. Y. 231. account, it seemed by a parity of rea-
RJiode Island. — Hubbard v. Harn- son that the merchants of London
den Exp. Co. 10 R. I. 252. should be equally allowed to effect in-
South Carolina. — Mitchell v. The surance in France." Emerigon on
Sehamps, 13 Rich. Eq. 13. Ins. (Meredith's ed. 1850) 103.
Tennessee. — Gholson v. Blaekman, ^^ 21 Geo. II., c. 4.
4 Coldw. 595; Cummings v. Diggs, 1 i^ 33 ^eo. III., c. 27.
Heisk. 72. ^^"The Reglement of Barcelona
Texas. — Hall v. Keese, 31 Tex. (Consulat, c. 341) forbids to insure
543. tlie enemy's property, and declares
Virginia. — Small v. Lumpkin, 28 such insurances null and void. The
Gratt. 835; Newton v. Bushong, 22 Guidon de la Mer, e. 2, art. 5, con-
Gratt. 638, 12 Am. Rep. 533; Bill- tains the same prohibition, unless, as
gerry v. Branch, 19 Gratt. 406, 100 it says, there is a safe conduct and li-
Am. Dee. 679. cense to trade. This also follows
West Vircjinia. — Haymond v. Cam- from the interdiction of commerce,
den, 22 W, Va. 197; Hedges v. Price, contained in the form of declarations
2 W. Va. 218, 94 Am. Dec. 507. of war." Emerigon on Ins. (Mere-
i^IIenkle v. Royal Exeh. Ins. Co. dith's ed. 1850) 103, e. iv., sec. 9.
1 Ves. Sr. 318, 320. "By the undivided" testimony of for-
^^Planche v. Fletcher, Doug. 251; eign jurists the rule has obtained
Gist V. Mason, 1 Term Rep. 84, 88; from the earliest pei-iod that an in-
Tyson v. Gurney, 3 Term Rep. 477; surance made in a belligerent <?ountry
670
WAR— ALIEN ENEMIES § 284
the policy was on a ship from Boston to a port of discharge in
Europe, it was held, in an action on the premium note, that it was
avoided as an unlawful contract, it being shown that it was intend-
ed to make the voyage to an interdicted port of the United States
and that the voyage was so made.^^ But the principle of law which
invalidates insurance of an alien enemy's property does not apply
to insurance against seizure by a belligerent government of the
property of its own subjects.^"
§ 284. Same subject: early decisions. — The following are the
cases most frequently cited upon this subject by text-writers and
the courts. In Brandon v. Curling ^ insurance was made during
peace on goods on board a neutral ship from London. The con-
f^ignees were French subjects, residing at Bayonne. Although the
ship left port at London one day before war was declared, yet it
stopped at Gravesend for papers, and did not leave there until two
days later. The goods were seized at a port in Spain by Spanish
officers and condemned. It was held that no recovery could be had
for the loss, thus determining that a prior legal insurance on such
property is made void by war supervening between the attachment
and termination of the risk. Kellner v. Le Mesurier ^ was a case
of a foreign ship and British capture, where the insurance was held
void, since it would be repugnant to state interests for a British
subject to insure against British capture. In Potts v. Bell,^ there
was a war between Holland and Great Britain. The goods were
purchased in Holland on account of British merchants, resident in
England, and shipped on a neutral vessel. It was held that trad-
ing with the enemy without the King's license was illegal in Brit-
upon the property of the subjects Life Ins. Co. 50 N. Y. 626, 10 Am.
of an opposite belligerent is void, Rep. 535; Griswold v. Waddington,
and this rule is now sanctioned by 15 Johns. (N. Y.) 57; 10 Id. 438;
legislative or judicial adoption in Harmon v. Kingston, 3 Camp. loO,
every country of Europe." 1 Duer 152; Flindt v. Waters, 15 Ea^t, 260;
on Ins. (ed. 1845) 417, sec. 6. 3 Phillips on Evidence, *279; 3
See notes in 5 B. R. C. 4, on lia- Kent's Commentaries (5th ed.) 2o3;
bility of marine insurer for losses Ex parte Bousmakcr, 13 Ves. Jr. 71;
arising out of war, and 5 B. R. C. Potts v. Bell, 8 Term. Rep. 548, 561,
836, on validity of insurance of en- 2 Eng. Rul. Cas. 654, 13 Eng. Rul.
emy property against seizure. Ca.s. 547.
"Russell V. De Grand, 15 Mass. 20 D^ief ontein Consolidated Gold
35; The Julia, 8 Cranch (12 U. S.) Mines, Ltd. v. Janson; West Rand
181, 3 L. ed. 528, per Story, J. ; The Consolidated Gold Mines Co. Ltd. v.
Rapid, 8 Cranch (12 U. S.) 155, 3 De Rougemont (Eng Consl Ct.)
L. ed. 528; The Emulous, 1 Gall. C. [1900] 2 Q: B. Div. L. Rep. 339, 346.
C. 563, Fed. Cas. No. 4,479, per Sto- ^ 4 East, 410.
ry, J. See New York Life Ins. Co. v. ^ 4 East, 396.
Clopton, 7 Bush (Ky.) 179, 189, 3 ^S Term Rep. 548, 2 Eng. Rul.
Am. Rep. 290; Sands v. New York Cas. 654, 13 Eng. Rul. Cas. 547.
671
§§ 285, 286
JOYCE ON INSURANCE
ish subjects, and the insurance was wholly void. In Bristow v.
Towers,^ the parties were alien enemies when the policy was affect-
ed and at the commencement of the voyage. The judgment was
for defendant upon the ground that action could not be sustained
by or in favor of alien enemies. In Brandon v. Nesbit ^ the parties
were alien enemies at the inception of the voyage, and were resid-
ing in France, then at war with England. The court decided that
an alien enemy could not sustain an action. In Furtado v. Eod-
gers,^ the insurance was on a French ship during peace. The ship
was seized in a war between England and France, and was con-
demned by the British government. Suit was brought after peace
was restored, and the insurance was held not valid against British
capture. In Gamba v. Le Mesurier ' insurance was effected during
■peace on a French ship and goods. This was a case of British cap-
ture aft^r hostilities commenced between England and France, and
suit was brought after peace was restored, and the underwriter was
held not liable.
§ 285. Trading with enemy: mistake or ignorance no excuse. —
Mistake or ignorance is not a valid excuse for trading with the
enemy.*
§ 286. Defense of alien enemy. — Although the illegality of such
insurances is a valid defense,^ the defense of alien enemy is not
favored in law,^° and it is held in Hume Small & Company v. Prov-
idence and Washington Insurance Company " that although an
alien may not own a vessel under pain of forfeiture, yet if he does
own one, and insures it. and it is lost, the insurance company can-
not set up his alienage as a bar to an action for the insurance mon-
ey, and that it must be specially pleaded as a defense. It cannot
be availed of where the fact of alienage merely falls out casually
during the trial, and a plea that when a promissory note sued on
was made, the plaintiff was a citizen of Minniesota and the defend-
ant a citizen of Arkansas aiding the rebellion and public enemies
of the United States was held guod.^^
^1
* 6 Term Rep. 35.
5 6 Term Rep. 23, 2 Eng. Ral. Cas.
649. See note in 5 B. R. C. 583.
6 3 Bos. & P. 191, 198, 11 Eng. Rul.
Cas. 125.
7 ^ East 407.
8 The Compte* de Wohrohzoff, 1 C.
Rob. 206. As to trading with enemy,
see Hershey's Essentials of Interna-
tional Law (ed. 1912) pp. 366-370,
sees. 349, 350.
6
9 Griswold v. Waddington, _ 18
Johns. (N. Y.) 438, 15 Johns, oi.
1° Shepler v. Durant, 14 Com. B.
582; Society for Propagation of the
Gospel V. Wheeler, 2 Gall. (U. S. C.
C.) 105, 127, Fed. Cas. No. 13,156,
per Storv, J.
" 23 S. C. 190.
12 Rice v. Shook, 27 Ark. 137, 11
Am. Rep. 783.
72
WAR— ALIEN ENEMIES §§ 287, 288
§ 287. Binding force here of laws of belligerent nations. — It is
declared by an eminent jurist that the prize law of the British em-
pire became our prize law after our separation so far as adapted to
us ; " and it is also said that the general doctrines applicable to sub-
jects of bellioerent nations were applicable to the Civil War here
between the North and the South so far as warranted.^*
§ 288. Alien enemies: life insurance. — Such insurances are not
only invalid in respect to maritime risks, but it is also held that the
life of an alien enemy cannot be insured by his creditor,^^ and if
the insured engages in hostilities against his country, the policy is
thereby voided. ^^ So where the insured was post-quartermaster in
the Confederate service, it was held that the policy was invalidat-
ed.^'^ In another case an insurance on the life of a person who went
below a certain parallel fixed in the policy as the limit, and served
on the staff of several Confederate generals, was held voided there-
by. The policy contained a condition that the party should not
enter military service, and the court declared that it would not im-
pose upon the party the neca^^sity of producing a commission to
prove military service, and that the moment the party connected
himself in any way with the belligerent service the policy became
void, or even when he became a member of the belligerent govern-
ment,^* and it would necessarily follow that death in battle in the
enemy's service would have like effect. ^^ It is said by the court in
the case of New York Life Insurance Company v. Clopton ^° that
in case of a neutral, even though his domicil would make him a
technical enemy, the hostility does not subject his life, like his
estate, to peril, and no belligerent right is affected by the continued
validity of a life insurance, and that neither authorit}' nor prin-
ciple would avoid the policy ; ^ and that a policy insuring property
^3 Thirty Hogsheads Sugar v. ^^ Hamilton v. Mutual Life Ins.
Bovle, 9 Cranch (L3 U. S.) 191, 198, Co. 9 Blatehf. (C. C.) 234, 249,
3 L. ed. 701, per Marshall, C. J. Ecd. Cas. No. 17,297 ; Sands v. New
"Prize Cases, 2 Black (67 U. S.) York Life Ins. Co. 50 N. Y. 62G,
635, 17 L. ed. 459. See § I., pre- 635, 10 Am. Rep. 535.
liminary chapter, generally, as to how i' Drillard v. Manhattan Life Ins.
far binding are the decisions of other Co. 44 Ga. 119, 9 Am. Rep. 164.
countries. ^* Mitchell v. Mutual Life Ins. Co.
As to contraband of war, the Dee- of N. Y. (Md.) cited in Bliss on
laration of London, the British Proc- Life Ins. 699.
lamation, or Declaration of Aug. ^^ Bliss on Life Ins. (ed. 1872) see.
1914, etc., during the great war, the 407, citing Ex parte Lee, 13 Ves. Jr.
effect thereof: This subject is here- 64.
inafter fully considered. 20 - g^gh (Ky.) 179, 188, 3 Am.
15 See Sands v. New York Life Ins. Rep. 290.
Co. 50 N. Y. 626, 635, 10 Am. Rep. ^ Citing Keir v. Andrade, 6 Taunt.
535. See note, ''Civil war, effect of 498, 504.
upon" life insurance, 9 Am. Rep. 169.
Joyce Ins. Vol. I.— 43. 673
§ 289
JOYCE ON INSURANCE
exempted by law from belligerent power would not be avoided, but
that a policy insuring the life of an actual enemy of the govern-
ment would be invalid. The court also said that it would be "a
grave question whether the implied condition as to perils of the
war should be extended beyond the belligerent right of capture or
destruction by the government of the insurer, and to that extent
only we may admit that the continuation of the policy during war
would be illegal and its pre-existing obligation become avoided."
§ 289. Effect of war on pre-existing valid contract. — The effect
of war between the countries of the assured and insured upon a
pre-existing valid contract is a question upon which there is a de-
cided conflict of authority. It is held in England that in such
cases, if loss happens during the war, this discharges the insurer
from all liability therefor, but that the contract is not thereby made
totally void, and a liability exists, capable of enforcement, when
peace ensues, for losses on such contract arising before the war.^
So Lord Ellenborough ^ declai'es that policies of this kind must be
considered to have incorporated therein, as a part thereof, a pro-
vision that ''this insurance shall not extend to cover any loss hap-
pening during the existence of hostilities between the respective
countries of the assured and assurer," and that during the contin-
uance of the war such contracts are illegal and void.'* It is declared
by Washington, J., in Gray v. Sims,^ that "if the contract be legal
when it is made, and the performance of it is rendered illegal by
a subsequent law, the parties are both discharged from its obliga-
tions. The insured loses his indemnity and the insurer his pre-
miums." ^ While in Furtado v. Rodgers'^ it was said that since
the contract was legal in its inception, there should be no return
of the premium. In the case of New York Life Insurance Com-
pany V. Clopton * the court argues that "both principle and policy
would have dissolved a contract made before the war for 'continu-
ing performance,' such as partnership or affreightment," and that
"insurance is a contract sui generis, governed by a peculiar and
2Flindt V. Waters, 15 East, 260,
265, per Lord Ellenborough; 1 Duer
on Ins. (ed. 1845), 444, see. 45. See
11 Am. Law Rev. 221; Hersh-
ey's Essentials of International Pub-
lie Law (ed. 1912) pp. 3ti8, 369, sec.
350.
^Brandon v. Curling, 4 Ea.st, 410.
* See Furtado v. Rodgers, 3 Bos.
& P. 191; 14 Eng. Rul. Cas. 125;
Gamba v. Le Mesurier, 4 East, 407.
The facts to the cases cited in this
67
and the last note are briefly noticed
in § 284 herein.
53 Wash. (C. C.) 276, Fed. Cas.
No. 5729.
^ See Leathers v. Commercial Ins.
Co. 2 Bush (Ky.) 296, 92 Am. Dec.
483.
'3 Bos. & P. 191, 14 Eng. Rul.
Cas. 125, per Lord AJvanley.
87 Bush (Ky.) 179, 3 Am. Rep.
290.
WAR— ALIEN ENEMIES §§ 290, 291
rather arbitrary code of the modern common law. ... Its char-
acter, however, is so far matured and established as to distinguish
it essentially from ordinary commercial contracts, and especially
in the effect of war, on its pre-existing validity, which the wai", as
a general rule, destroys, whether the contract belongs to the cate-
gory of 'continuing performance' or not." And it is held in a
Virginia case^ that assessments by a mutual assurance society,
chartered under the laws of Virginia and located within the en-
emy's lines during the Civil AVar to pay for losses incurred during
the war, can create no liability upon property insured in the com-
pany located in loyal territory.
§ 290. Same subject : loss before war. — If a contract of insurance
is otherwise valid, it would seem that war merely suspends the right
of action where the loss and the right to a remedy accrues before
the commencement of the war.^°
§ 291. Same subject: that war merely suspends the contract. —
Mr. Duer,^^ after an exhaustive review of the cases, says: ''There
are doubtless many contracts of which a war suspends the existence
without dissolving the obligation. The distinction is probably this :
a vested right under a subsisting contract is not effected by a sub-
sequent war, but where the contract is executory, and would have
been illegal if made in time of war, it becomes so from the time
that hostilities commence, as to all acts to be performed by either
party during the war." Mr. Arnould ^^ declares that if the policy
be effected before and the loss occurs after hostilities, the assured
cannot sue upon it, even after the return of peace,^^ but where ilie
loss occurs before war commences, the right to sue is only suspend-
ed.^* So it has been declared to be a "well known rule of law, that
where the contract of indemnity and the loss are before the com-
mencement of hostilities, the declaration of war only suspends the
remedy while the war lasts." ^^ Both Mr. May and Mr. Parsons ^^
adopt the language of the court in New York Life Insurance Com-
8 Mutual Assur. Soe. v. Berkeley 1887) 135; Id. (9th ed. Hart &
Co. 4 W. Va. 343. Siraey) see. 89, p. 125.
1° Semmes v. City Fire Ins. Co. 6 ^^ Citing Flindt v. Waters, 15 East,
Blatfhf. 445, Fed. Cas. No. 12,651, 266.
]3 Wall. (80 U. S.) 158, 20 L. ed. ^* Citing Gamba v. Le Mesurier, 4
490; Flindt v. Waters, 15 East, 266; East, 407.
Chitty on Contracts (7th Am. ed.) ^^ Driefontein Consolidated Gold
182, note. Mines, Ltd. v. Jan.son; West Rand
" 1 Duer on Ins. (ed. 1845) 478. Consolidated Gold Mines Co. Ltd. v.
See Hershey's Essentials of Interna- De Rongemont (Eng. Com'l Ct.),
tional Public Law (ed. 1912) p. 369, [19001 2 Q. B. Div. Law Rep. 339,
see. 350. 346, per Mathew, J.
1^1 Arnould on Ins. (Perkins' ed. ^^1 May on Ins. (3d ed.) sees. 39,
1850) 91, 92; 1 Id. (Madachlan's ed. 39s.
675
§ 291
JOYCE ON INSURANCE
pany v. Clopton." While Mr. Bacon ^^ relies principally upon the
doctrine of the case of New York Life Insurance Company v. Stal-
ham/^ which holds that if a policy is conditioned to be void upon
nonpayment of the annual premium, a failure to pay such pre-
mium subjects the policy to forfeiture if the assurer insists upon
the condition, even though such failure to pay be caused by the
intervention of war between territories in which the insurance com-
pany and the assured respectively reside, and which makes it un-
lawful for them to hold intercourse, but in such case the insured
is entitled to the equitable value of the policy arising under the
premiums actually paid. This equitable value is the difference
between the cost of a new policy and the present value of the pre-
miums yet to be paid on the forfeited policy when the forfeiture
occurred, and ma}' be recovered in an action at law or a suit in
equity. The average rate of mortality is the fundamental basis
of life insurance, and as this is subverted by giving to the assured
the option to revive their policies or not after they have been sus-
pended by a war (since none but the sick and dying would apply),
it would be unjust to compel a revival against the company. 2° In
Spratley v. Mutual Benefit Life Insurance Company ^ a citizen of
Virginia, who had insured his life in 1860 in a New .Jersey com-
pany, died at Petersburg, Virginia, in 1863. In 1872 his widow
presented proof of the death to the agent of the company at Louis-
ville. Kentucky, and demanded payment, and instituted suit in
1873, and it was held that notice and proof of the death should have
been made and payment demanded withirf a reasonable time after
the close of the Civil War — by January 1, 1866 — and a suit thereon,
either in Virginia or New Jersey, was barred by limitation ; that
the policy, being payal)le in New Jersey, was governed by the laws
of that state as to limitation. In Worthington v. Charter Oak Life
Insurance Comj^any ^ a policy was taken out in 1854 by a husband
upon his own life for the benefit of his wife. The ihsuring com-
pany was located in Connecticut. The insured was located in South
Carolina when the policy was effected, and continued to reside there
until his death, and the insurance wa.s made through a local agent
residing in the latter state. Premiums w^re paid to the agent until
1860, when he was withdrawn, and premiums were then remitted
to the company in Connecticut. From 1862 to 1865 no premiums
"7 Bush (Ky.) 179, 3 Am. Rep.
290. Quoted iu the text herein in
§ 289, and also in this .'section.
18 Bacon's Benefit Societies and
Life Ins. sec. 35G.
19 93 U. S. (3 Otto) 24, 23 L. ed.
789.
676
^° See also New York Life Ins,
Davis, 95 U. S. 425, 21 L. ed.
Ill Bush (Kv.) 443.
241 Conn. 372, 19 Am. Rep.
Two
point.
judges dissented upon
Co.
453.
495.
this
WAR— ALIEN ENEMIES § 291
were paid, owing to -the war and the President's proclamation for-
bidding intercourse between citizens of the loyal and confederate
states. At the close of the war the insured tendered the premiums
with interest, which were refused and liability on the policy denied
by the company. No further premiums were ever paid. In 1869
the insured died, and it was held that the company was not liable.
In Cohen v. New York Mutual Life Insurance Company ^ it was
decided that a contract of life insurance between citizens of differ-
ent states, lawful in its inception, and upon which large sums of
money have been paid for premiums, is not dissolved by war be-
tween the states. The contract remains. The remedy simply is
suspended, but revives with the return of peace. In another New
York case the court held that vested rights under subsisting con-
tracts are not affected by a subsequent war, except so far as relates
to the remedy which is suspended during its continuance, but where
the contract is executory, and would have been illegal if made in
time of war, it becomes so from the time that hostilities commence
as to all acts to be performed by either pai-ty during the war.* In
a Virginia ca^e ^ the court declares that ''if the contract is partly
executed, and rights under it have vested, and it cannot be dissolved
without the loss or forfeiture of one of the parties, and cannot be
carried into execution consistently with the duties of the parties to
their countries respectively Mdiile the war lasts, in such case it should
not be dissolved, but only suspended. But if it can be carried into
execution notwithstanding the war, without conflicting with the
obligations of allegiance of either party, it will be neither dissolved
nor suspended." In this case tlie insurance was obtained through
the agent of the company at Richmond, and the premiums subse-
quent to the first were there paid to the agent, and the premium for
1862 was tendered him, but he refused to receive it, and the in-
sured died in that year, and it was held by the supreme court of
Virginia, two judges dissenting, that the policy was not forfeited,
but that the company must pay the sum insured, less the amount
of unpaid premiums, and the court proceeded upon the theory that
the insured had become vested with a right by the payment of pre-
miums, not for a year, but for life, and that no new contract was
necessary each year, but only the annual payment of premiums.
While in the Kentucky case already referred to ^ it is said that
"where a single act, such as the payment of a debt would perform
8 50 N. Y. 610. wick, 20 Gratt. (Va.) 614, 635, 3 Am.
* Sands v. New York Life Ins. Co. Rep. 218.
(N. Y. Sup. Ct. 1871) 4 Alb. L. J. « New York Life Ins. Co. v. CIop-
11, 50 N. Y. 626, 10 Am. Rep. 535. ton, 7 Bush, 179, 184, 3 Am. Rep.
. 5 Manhattan Life Ins. Co. v. War- 290.
677
§ 291 JOYCE ON INSURANCE
a contract made before the war, a belligerent policy interdicted it,
because it might aid the enemy in the prosecution of hostilities,
consequently suspension of performance until the restoration of
peace would effectuate the whole aim of the law, without dissolving
the contract, which may be ultimately enforced in perfect consis-
tency with the principle and end of the temporary interdict. In
that class of cases it is the contract, and not the performance, that
is continuing, and a suspension of remed}-, and not a dissolution
of the contract, is all that is necessary, befitting, and just. But in
such cases as i^artnership or affreightment the performance is con-
tinuing and unremitting until the end of the contract shall have
been consummated, and, therefore, as supervening war between the
parties disables them from performing any of the incumbent duties
and defeats the object of the contract, a dissolution of the contract
is the natural and legal effect of the war."
The conclusion from these cases and opinions, and from other
cases cited hereafter, would seem to be that where a right has vested
under the contract, then a supervening war merely suspends the
remedy; but where the loss happens during the war, and under a
pre-existing valid contract of insurance, then if merely suspending
the contract or its enforcement is within the reason and policy of
the law, and would effectuate its whole aim and purpose, it will only
be suspended, and not dissolved. Such a rule would not appear to
be inconsistent with the reason of the rule, which prohibits all in-
surances of alien enemies, or their property, although it will be
noted that nearly all the decisions relating to the Civil War are
those pertaining to life risks, which from their very nature are of
longer duration than marine and fire risks. Although in many
cases these contracts of life insurance have been held to be con-
tracts from year to year and voidable for nonpayment of pre-
miums.'
' See Dillard v. Manhattan Life yard v. Mutual Benefit Life Ins. Co.
Ins. Co. 44 Ga. 119, 9 Am. Rep. 167 35 N. J. L. 415.
(that war merely suspended.) New York. — Martini v. Interna-
United States. — See also : United tional Life Assur. Soc. 53 N. Y. 339,
States V. Wilev, 11 Wall. (78 U. S.) 13 Am. Rep. 529; Sands v. New
508, 20 L. ed. 211. ^ York Life Ins. Co. 50 N. Y. 626, 10
Kentucky. — New York Life 'Ins. Am. Rep. 535, 539; Cohen v. Mutu-
Co. V. Clopton, 7 Bush (Ky.) 179, al Life Ins. Co. 50 N. Y. 610, 10 Am.
3 Am. Rep. 290. Rep. 522; Buchanan v. Curry, 19
Mississippi. — Statham v. New Johns. (N. Y.) 137, 10 Am. Dec. 200;
York Life Ins. Co. 45 Miss. 581, 7 Saltus v. United States Ins. Co. 15
Am. Rep. 737. Johns. (N. Y.) 523; Bell v. Chap-
New Jersey. — Mutual Benefit Life man, 10 Johns. (N. Y.) 183.
Ins. Co. V. Hillvard, 37 N. J. L. (8 Virginia.— Clement v. New York
Vroom.) 444, 18 Am. Rep. 741; HUl- L. Ins. Co. 76 Va. 355; Connecticut
678
WAR— ALIEN ENEMIES § 292
Again it is held in the Federal Supreme Court that "absolute
suspension of the right of the citizens of one belligerent to sue the
citizens of the other, and prohibition to exercise such right, exist
during war, by the law of nations; but the restoration of peace re-
moves the disability and opens the doors of the courts.' So where
a debt is not confiscated, the right to enforce payment revives with
the restoration of peace.^ And complainants who, before the Civil
War, had brought suit in the circuit court of the United States in
Texas, against citizens of that state, to quiet title to a tract of land,
had a right to proceed in such suit to protect their property from
seizure, invasion, or disturbance by citizens of that state, so soon as
court was opened after the cessation of hostilities, whether an ofh-
cial proclamation had been made or not.^° And a holder of a bill
of exchange might demand its payment by the drawee in New Or-
leans, and notify his indorser in Tennessee of the nonpayment, at
any time after the President's order of April 29, 1865, which "re-
moved all restrictions on commercial intercourse between these
places.^^
§ 292. Right of citizen to bring property from enemy's country. —
It is said by the supreme court of the United States that if an Amer-
ican citizen residing in an enemy's country at the breaking out of
the war has the right to withdraw his property acquired before the
war, it must be done within a reasonable time after knowledge there-
of, and with due diligence, and that a shipment made eleven
Mut. Life Ins. Co. v. Duerson, 28 sees. 406-17. "No policy of insur-
Gratt. (Va.) 630; Mutual Benefit ance issued to a citizen of the corn-
Life Ins. Co. V. Atwood, 24 Gratt. monwealth by an authorized compa-
(Va.) 497, 18 Am. Rep. 652; New ny, organized under the laws of a
York Life Ins. Co. v. Hendren, 24 foreign country, shall be invalidated
Gratt. (Va.) 536; Manhattan Life by the occurrence of hostilities be-
Ins. Co. V. Warwick, 20 Gratt. (Va.) tween such foreign country and the
614, 3 Am. Rep. 218. United States." Mass. acts 1887,
England. — See Ex parte Bousmak- c. 214, sec. 84.
er, 13 Ves. Jr. 71. » Caperton v. Bowver, 14 Wall. (81
Contra. See New York Life Ins. U. S.) 216, 20 L. ed. 882; Levy v.
Co. V. Davis, 95 U. S. 425, 24 L. ed. Stewart, 11 Wall. (78 U. S.) 244, 20
453; New York Life Ins. Co. v. Sta- L. ed. 86.
then, 93 U. S. 24, 23 L. ed. 789 ; Tait Cited in McKinzie v. Hill, 51 Mo.
V. New York Life Ins. Co. 1 Flipp. 307, 11 Am. Rep. 450.
(C. C.) 288, Fed. Cas. No. 13,726; » Han<?er v. Abbott, 6 Wall. (73
Worthington v. Charter Oak Life U. S.) 532, 18 L. ed. 939.
Ins. Co. 41 Conn. 372, 19 Am. Rep. i» Masterson v. Howard, 18 Wall.
495; Dillard v. Manhattan Life Ins. (85 U. S.) 99, 21 L. ed. 764.
Co. 4^4 Ga, 119, 9 Am. Rep. 167; Cited in Bond v. Moore, 93 U. S.
Abell V. Pennsylvania L. Ins. Co. 18 595. 23 L. ed. 983.
W. Va. 400. 11 Bond v. Moore, 93 U. S. 593, 23
See generally, as to effect of war, L. ed. 983.
Bliss on Life Insurance (ed. 1872)
679
§ 293
JOYCE ON INSURANCE
months after was too late.^^ But this right to withdraw property
was subsequently denied by the same court, with the exception
where the act is done with tlie consent of the citizen's own govern-
ment.-''
§ 293. War: license to trade. — Inasmuch as the power of Con-
gress to regulate commerce between the United States and foreign
nations and among the several states is general, and has no limita-
tions except those prescribed by the Constitution itself,^* there is
no doubt of the power of the government to authorize trading with
an enemy or the protection of enemy's property, and it may grant
privileges or licenses to trade. ^* Thus, during the Civil War the
subject was regulated by Congress, but by the act of July 16, 1861,^*
the President alone had power to license commercial intercourse
between places within the lines of military occupation by forces of
the United States and places under the control of insurgents against
it. "The sovereign may license trade, but in so far as it is done it
is a suspension of war and a return to the condition of peace. It
is said there cannot be at the same time war for arms and peace for
commerce. The sanction of the sovereign is indispensable for
trade." ^' It is held to be of itself an illegal act to sail under an
enemy's license.**
12 The St. Lawrence, 9 Cranr-h (13 " Gibbons v. Offden, 9 Wheat. (22
U. S.) 121, 3 L. ed. 676, per Story, U. S.) 1, 6 L. ed. 23.
J.; 1 Gall. (C. C.) 467, Fed. Cas. No. " gee The Schooner Rapid, 1 Gall.
12,232. See Amory v. McGregor, 15 (C. C.) 295, Fed. Cas. No. 11,576,
Johns. (N. Y.) 24. per Story, J., who says : "It must be
1' The Rapid, 1 Gall. (U. S. C. C.) considered as a settled principle of
304, 8 Craneh (12 U. S.) 155, 3 L. maritime and national law that all
ed. 520; The Mary, 8 Craneh (12 U. trade with the enemy, unless with the
S.) 388, 3 L. ed. 590, 601, 1 Gall. (C. permission of the sovereign, is in-
C.) 621, Fed. Cas. No. 9,184, per terdicted."
Story, J. ; The Alexander, 8 Craneh *^ See also act of July 2, 1864.
(12 U. S.) 169, 3 L. ed. 524. See The " Coppell v. Hall, 7 Wall. (74 U.
Ladv Jane, 1 Rob. 202; The Venus, S.) 542, 554, 19 L. ed. 244, per
8 Craneh (12 U. S.) 253, 3 L. ed. Swayne, J. See McKee v. United
553; Marshall, C. J., and Livingston, States, 8 Wall. (75 U. S.) 163, 19 L.
J., dissenting. See Walker's Inter- ed. 329; IMaddox v. United States, 15
national Law (ed. 1895) 125 et seq. Wall. (82 U. S.) 58, 21 L. ed. 61; The
"I adopt the conclusion that the Sea Lion, 5 Wall. (72 U. S.) 630, 18
property of subjects withdrawing L. ed. 618; The Ouachita Cotton, 6
themselves in good faith from a hos- Wall. (73 U. S.) 521, 18 L. ed. 935;
tile country within a reasonable time The Reform, 3 Wall. (70 U. S.) 617,
after knowledge of the war is not 18 L. ed. 389; United States v. Lane,
stamped with the illegal character of 8 Wall. (75 U. S.) 185, 19 L. ed.
trading with an enemy, but it is to 445; Butler v. Naples, 9 Wall. (176 U.
be considered, by a just exception S.) 766, 19 L. ed. 822; Mitcliell v.
from the general rule, as exempt Harmony, 13 How. (54 U. S.) 115,
from confiscation." See 1 Duer on 14 L. ed. 75; affirming 1 Blatehf.
Marine Ins. (ed. 1845) 565, sec. 11. (C. C.) 549, Fed. Cas. No. 6,082.
680
WAR— ALIEN ENEMIES
§ 294
§ 294. Who are alien enemies: domicil. — Though the term "en-
emies," when strictly construed, means public enemies/^ the ques-
tion whether a party is an alien enemy or not depends upon his
domicil, rather than upon the place of his birth ; for although one
born out of the allegiance to the government or out of the jurisdic-
tion of the United States, and not naturalized, may be an alien,^°
yet domicil is the test of an alien enemy. And if one be domiciled
in a country at war with the United States, he is an alien enemy
without reference to his place of birth. ^ And if he has resided long
enough in the enemy's country to acquire a domicil there, he is
subject to all the disabilities of an enemy with relation to his prop-
erty.'^ And where a country is part of an enemy's country, under
Concerning Hcenses to trade, see Hal- Cranch (12 U. S.) 253, 3 L. ed. 553;
leek's International Law and Laws Willeson v. Patterson, 7 Taunt. 438;
of War (ed. 1861) 675; Hall's Inter- United States v. Farragut, 22 Wall,
national Law (ed. 1880) 478, sec. (89 U. S.) 406, 22 L. ed. 879; The
190; Wheaton's International Law Schooner Edward Barnard, Blatchf.
(ed. 1863) 554, 582, 690-92; Walk- Pr. Cas. 122; The Mary and Susan, 1
er's International Law (ed. 1895) Wheat. (14 U. S.) 46; The Flying
123. Scud, 6 Wall. (73 U. S.) 263, 18 L.
18 Craig V. United States Ins. Co. ed. 755 ; Rogers v. Schooner Amado,
2 Pet. (C. C.) 410, Fed. Cas. No. Newb. Adm. 400; The Prize Cases,
3,340; The Ariadne, 2 W^heat. (15 U. 2 Black. (67 U. S.) 635, 17 L. ed.
S.) 143, 4 L. ed. 405; The Julia, 1 459; Potts v. Bell, 8 Terra Rep. 548,
Gall. (C. C.) 594, Fed. Cas. No. 2 Eng. Rul. Cas. 654, 13 Eng. Rul.
7,575; The Aurora, 8 Cranch (12 U. Cas. 547; Porter v. Freudenberg
S.) 203, 3 L. ed. 536; The Hiram, 1 [1915] 1 K. B. 857, 5 B. R. C. 548.
Wheat. (14 U.S.) 440, 4 L. ed. 131; See Note "Enemies, who are," 88
Maisonnaire v. Keating, 2 Gall. (C. Am. Dec. 779, 780; 1 Kent's Com-
C.) 325, Fed. Cas. No. 8,978; The mentaries, (13th ed.) 74, et seq.;
See Walkers International Law (ed. 573; Walker's International Law (ed.
1895) 115. 1895) 107, sec. 40; Lawrence's Prin-
" Mononga.hela Ins. Co. v. Ches- ciples of International Law (3d ed.
ter, 43 Pa. "^St. 491. See note at end 1909) pp. 318-322, sees. 176, 177.
of § 281 lierein. Civil status determined by domicil
2" See note "Who are aliens," 84 no matter what may have been ones
Am. Dec. 210-13. Enemy character: birthplace. Maxey on International
Belligerent domicil, see 7 Moore's Law (ed. 1906) p. 61. See also 7
Dig. of International Law (ed. 1906) Moore's Dig. of International Law
p. 424, sec. 1189. Domicil (I) a (ed. 1906) p. 428, see. 1189, as to
source of civil status: (II) Bellig- domicil; meaning of etc. See Her-
erent domicil. See 3 Moore's Dig. of shcv's Essentials of International
International Law (ed. 1906) sees. Law (ed. 1912) pp. 2^52-256, sees.
487, 488. See also Id. sees. 489, 491. 237-243, and bibliography on p. 273.
See note at end of § 281 lierein. ^ United States v. Cargo Schooner
iThe Venice, 2 Wall. (69 U. S.) El Telegrafo, Newb. Adm. 383; The
57, 58, 17 L. ed. 818; Sloop Charter, Frances (Gillespie's Claim) 8
2 Dall. (2 U. S.) 41; The Venus, 8 Cranch (12 U. S.) 363, 3 L. ed. 591;
681
§ 294 JOYCE ON INSURANCE
the recognized rules of war, all persons residing therein during a
war with the United States, are to be deemed enemies without re-
gard to their nationality and even citizens of the United States there
domiciled and doing business are included. So a neutral, or a cit-
izen of the United States, domiciled in an enemy's country, not
only in respect to his property, but also as to his capacity to sue, is
deemed as much an alien enemy as a person actually born under
the allegiance and residing within the dominions of the hostile na-
tion.^ A partnership between parties domiciled in Savannah and
New York was held dissolved by the Rebellion.* But it is decided
that securities held by a citizen and resident of New York prior to
the Civil War upon a resident of North Carolina, could not be ex-
tinguished durante bello, either through the agency of the courts
there or through the former agents and attorneys of such nonresi-
affirming 1 Gall. (U. S.) 614, Fed. dents of the territory under the con-
Cas. No. 5,034. Domicil distinct from trol of the party resisting that gov-
residenee; Essentials of domicil; ernment, and their property may be
Domicil of origin ; Domicil of Choice, lawfully confiscated. Page v. Unit-
see Maxey on International Law (ed. ed States (Miller v. United States)
l<JO(i) pp. 62, 63. 11 Wall. (78 U. S.) 268, 20 L. ed.
2 Juragua Iron Co. v. United 135.
States, 212 U. S. 297, 308, 53 L. Cited in Manley v. Park, 62 Kan.
ed. 520, 29 Sup. Ct. 383, in opinion 561, 64 Pac. 28; Micou v. Benjamin,
of the court, per Mr. Justice Harlan, 26 La. Ann. 721 ; State v. United
qtioting from Whitings War Powers States & C. Exp. Co. 60 N. H. 2oo;
Under the Constitution, 340, 342. Opinion of Justices, 66 N. H. 632,
See above case at end of this section. 33 Atl. 1076.
See Wheaton's International Law Persons residing in the insurrected
(5th English ed.) pp. 442 et seq. states at any time during the Civil
If a foreign war break out, a citi- War must be considered as enemies,
zen abroad should return to his conn- without regard to their personal sen-
try, without delay; if a civil war timents or dispositions. The Peter-
break out and he reside in a rebel- hoff v. United States (The Peterhoff)
lious section, he should at once return 5 Wall. (72 U. S.) 28, 18 L. ed. 56^4.
to and support the regular estab- Cited in The Benito Estenger, 176
lislied government. The Wm. Baga- U. S. 571, 44 L. ed. 593, 20 Sup. Ct.
ley V. United States (The William 489; Seheible v. Bacho, 41 Ala.
Bao-alev) 5 Wall. (72 U. S.) 377, 18 433; Perkins v. Rogers, 35 Ind. 153,
L.^ed. 583. Am. Rep. 639; Hill v. Baker, 3'2
Cited in Gates v. Goodloe, 101 U. Iowa, 310, 7 Am. Rep. 193.
S. 617, 25 L. ed. 897 ; Foster v. Unit- ■* Woods v. Wilder, 43 N. Y. 164,
ed States, 5 Ct. CI. 416; Desmare v. 3 Am. Rep. 684. See The William
United States, 10 Ct. CI. 390; Sey- Bagaley, 5 Wall. (72 U. S.) 377,379,
mour V Bailey, 66 111. 298; Hall v. 18 L. ed. 583; The Cheshire, 3 Wall.
Connecticut Mut. L. Ins. Co. 68 111. (70 U. S.) 231, 18 L. ed. 175; The
2Qi San Jose Indiano, 2 Gall. (U. S. C.
In a civil war, those are to be treat- C.) 268, Fed. Cas. No. 12,322; The
ed as enemies who, although subjects Friendschaft, 4 Wheat. (1/ U. S.l
of the lawful government, are resi- 105, 4 L. ed. 525.
682
WAR— ALIEN ENEMIES
294
dent.^ The residence of a consul or minister in a foreign country,
on account of his official duties in such capacity, does not change
his domicil,^ but if he engages in mercantile business in such for-
eign country, the trade is affected by the hostile character of the
country^ But the consul of a belligerent may, it is held, engage
as a merchant in the commerce of a neutral state where he resides ; ^
and it is declared that the character of property is determined by
the domicil of the owners.^ In regard to corporations, they are now
considered to be citizens of the state of their incorporation and
transaction of business.^" So where a foreign insurance corpora-
A firm doing business in the ene- United Ins. Co. 1 Johns. Cas. (N. Y.)
ray's territory, where the active mem- 363, 368, affirmed, Jenks v. Hallett,
her of the firm resided, must be ruled 1 Caines (N. Y.) 60; The Vigilaiitia,
by liis status, in reference to the 1 Rob. Adm. 13, 14, per Sir Wm.
property of the firm under his con- Scott.
trol in the enemy's country. The lo Lafayette Ins. Co. v. French, IS
Wm. Bagalev v. United States (The How. (59 U. S.) 404, 15 L. ed. 451;
William Bagaley) 5 Wall. (72 U. S.) Louisville C. & C. R. Co. v. Letson,
377, 18 L. ed. 583. 2 How. (43 U. S.) 497, 11 L. ed. 353.
5 Black well v. Willard, 65 N. C. g^^ -^ -^ ^^-^ ^^y ^£j.. Phillips that
555, 6 Am. Rep. 749.
6 Wheat V. Smith, 50 Ark. 266,
the national character of a corpora-
tion is that of its members: 1
167;
7 S. W. 161. See The Indian Chief pi^jm ^n Ins. (3d ed.) sec
3 Rob. Adm. 12; Arnold V United ^^^ ^^ •„ Arnould on Ins. (Per-
Ins Co. 1 Johns. Cas. (N- J.) 363; ^.^^, ^^^ g^ ^^^ 55^ ^^^^e 1, both
Bark Pioneer, Blatchf. Pr. Cas 666; ^.^. g j^^ Co. v. Board-
7 Moore's Dig. of International Law r^ ^^^^^j^ ^p U. S.) 57, 3
(ed. 1906) p. 431. Privileges and j^ ^^ gg. ^^^^ ^f United States v.
immunities of consuls generally, j^^^^^^ 5 Craneh (9 U. S.) 61, 62,
see 5 Moore's Dig. of International o t. . 00. Sor-iplv for Pronaoation
Law (ed. 1906) pp. 32 et seq. sees
702 et seq
3 L. ed. 38; Society for Propagation
of the Gospel v. Wheeler, 2 Gall. (U.
S. C. C.) 105, Fed. Cas. No. 13,156;
'The Indian Chief (Mdtons c^se) jj^^^^.j^ ^ Chicago Rock Island & Pa-
T^.K A^.. 19 o. o« M,- Phil- ,ifie Rd. Co. 6 Blatchf. (U. S. C, C.)
X, 105, Fed. Cas. No. 6,204; Minot v
3 Rob. Adm. 12, 27, 28. Mr. Phil
lips (1 PhilUps on Insurance [3d
ed.] 114; sec. 168) says
Philadelphia, Wilmington & Balti-
^^„..-„- ;--«.--, . V 1 • ir "lore Rd. Co. 2 Abb. (U. S. C. C.)
consul is not affected by his office, 323 Fed. Cas. No. 9,645. See Wood
commercial national character of a
but is determined, like that of other
persons, by his residence and the va-
rious other circumstances that con-
stitute national character as affecting
that of his property." Wheaton's In-
V. Hartford Fire Ins. Co. 13 Conn.
202, 33 Am. Dec. 395, note 399;
Shelby v. Hoffman, 7 Ohio St. 450_;
Thompson on Corporations, ed. 1895,
7 — ,v " /-J -.c^oN r-o vol. i., sec. 12; Id. vol. vi., sees.
ternational Law (ed. 1803) 5m, sec. ^421-25
1Q- TT«ill'« Tnfprnnfinnnl Law (ed. -- - •
Corporations as citizens under
19; Hall's International Law (ed.
1880) 431.
8 The Sarah Christiana, 1 Rob.
Adm. 239, per Sir Wm. Scott.
* Livingston v. Maryland Ins. Co.
7 Craneh 11 (U. S.) 506, 542, 3 L.
Federal Constitution, see notes, 60
L.R.A. 230, 14 L.R.A. 580; Joyce on
Franchises (ed. 1909) sec. 291.
Bibliography. As to effect of war
ed 421 per Story, J. ; Arnold v. on corporations, see Hershey's Essen
' 683
295
JOYCE. ON INSURANCE
tion, upon compliance with the insurance laws of New York, has
been authorized to do business there, and has established a perma-
ment general agency, and conducts its business there as a distinct
organization in the same manner as domestic corporations, it will
be regai'ded, as to the business transacted there, as domiciled and
subject to the same obligations and liabilities as domestic institu-
tions." And substantially the same ruling obtains in Ohio.'^^ So
a foreign corporation is an ''inhabitant" under the first section of
the Judiciary Act of that district in which it is engaged in lousi-
ness.^' An insurance company is also an inhabitant, for the pur-
poses of taxation, of the town w^here it has its principal place of bus-
iness." But an American corporation doing business in Cuba was,
during the war with Spain, an enemy to the United States with re-
spect of its property found and then used in Cuba, and such prop-
ert}^ could be regarded as enemy's property, liable to be seized and
confiscated by the United States in the progress of the war, subject
also under the laws of war to be destroyed whenever, in the conduct
of military operations, its destruction was necessary for the safety
of troops or to weaken the power of the enemy."*
§ 295. Alien enemy: what constitutes domicil. — What constitutes
domicil depends almost exclusively upon whether the party intends
to remain in a given country or state, either permanently or for a
definite period, or whether his abode is taken up for a temporary
purpose with the intent to return.^* Thus the intent to reside an
tials of International Law (ed. 1912)
pp. 370, 371. See 7 Moore's Dig. of
International Law (ed. 1906) p. 434,
to point that alien enemy may be a
corporation.
See note in 5 B. R. C. 333, on stat-
us of foi'poration a.s alien enemy.
^^ ^Martin v. International Life Ins.
Sec. 53 N. Y. 339, 13 Am. Rep. 529.
See note in 70 L.R.A. 693, on
constructive domestic residence of
foreign corporation.
12 New York Life Ins. Co. v. Bert,
23 Ohio St. 105.
1' Gilbert v. New Zealand Ins. Co.
49 Fed. 884, 15 L.R.A. 125.
See note in 14 L.R.A. 184, on resi-
dence of corporation for purpose of
Federal jurisdiction in state other
than that wliere created.
" City of Portland v. Union Mut.
Life Ins. Co. 79 Me. 231, 9 Atl. 613.
But see International Life Assur.
Soc. V. Commissioners Taxes, 28
G84
Barb. (N. Y.) 318. A corporation
is said not to be a citizen of the Unit-
ed States within the 14th Amend-
ment : Insurance Co. v. City of New
Orleans, 1 Woods (U. S. C. C.) 85,
Fed. Cas. No. 7,052.
"** Juragua Iron Co. v. United
States, 212 U. S. 297, 53 L. ed. 520,
29 Sup. Ct. 385, see this case near
beginning of this section. See note
in 5 B. R. C. 333.
1^ HalloAvell V. Saeo, 5 Grecnl.
(jMe.) 143; Harvard College v. Gore,
5 Pick. (22 Mass.) 372,^374. For
definition of "domicil," see note 34
Am. St. Rep. 313: Wood v. Roeder
45 Neb. 311, 63 N. W. 853; Arnold
V. United Ins. Co. 1 Johns. Cas. (N.
Y.) 366, 367, per_Kent, J.; Stoi-y's
Conflict of Laws (/th ed.) c. iii., sec.
43, p. 36. "Domicil how acquired,"
see note 34 Am. St. Rep. 314,
see note for definition of "domicil,"
59 Am. Dee. 111-15; note: terms
inhabitancy," "residence," "citizen-
WAR— ALIEN ENEMIES
§ 295
indefinite time will establish a commercial domicil.^^ And if a cit-
izen of one country goes into another and remains there, and en-
gages in trade and commerce, he becomes Ijy the law of nations a
merchant of that country and acquires a domicil there." So Brit-
ish subjects residing and trading in Portugal are to be deemed Port-
uguese subjects.^* A foreigner coming to the United States for
health, and remaining and engaging in trade, acquires a domicil
here.^^ If the domicil is acquired for mercantile purposes in the
enemy's country, the person acquiring such domicil becomes an
alien enemy,^" for the domicil in an enemy's country is, as has been
stated,^ the test of hostile status. So a businass in a hostile country
is stamped with the national character of such country.^ So if a
neutral who, having resided in the hostile country, withdraws
therefrom, or who, never having resided there, retains a business or
trading house there, the entire commerce of the house is stamped
with the hostile character of the enemy.' The intention to return
at some future period to one's native country does not destroy the
presumption of domicil, since if there be any doubt as to the time
or certainty of the return, this will not avail against the pra>^ump-
tion of hostile residence, or where the intention is fixed as of a defi-
nite and certain time at a period distantly removed, this is not suf-
ficient ; * and where the intent to permanently reside in the country
is avowed, or where it is otherwise ascertained, it makes no dili'cr-
ence how recently the residence may have been established, or that
it may have been for only a day or two.^ So the character of the
ship," 32 Am. Dee. 42/, 429. Change
of domicil, see 7 Moore'.s Dig. of In-
ternational Law (ed. 190()) p. 433,
sec. 1193; Maxey on International
Law ed. 190G) p. 67.
16 The Venus, 8 Cranch (12 U. S.)
279, 3 L. ed. 553.
1'^ The Indian Chief, 3 Rob. Adm.
12.
18 The San Jose Indiano, 2 Gall.
(U. S. C. C.) 268, 293, Fed. Cas. No.
12,322, per Story, J.; The Friend-
schatt, 3 Wheat. (16 U. S.) 52, 4 L.
ed. .322, per Mai^hall, C. J.
1^ Elbers v. Union Ins. Co. 16
Johns. (N. Y.) 128. In this case
there was a warranty in the policy
that the property was Swedish, which
the court held was not complied with.
But see on this point, Duguet y.
Rhinelander, 2 Johns, Cas. (N. Y.)
476, reversing 1 Johns. Cas. (N. Y.)
360.
See note in 9 L.R.A.(N.S.) 1159,
on change of domicil as affected by
removal for benefit of health.
snicConnell v. Hector, 3 Bo.';. &
P. 114, per Alvanle\% C. J.; Tabbs v.
Bendelack, 4 Esp. 10/ ; 1 Kent's Com-
mentaries (13th ed.) 74. See also as
to neutral engaging in enemies' com-
merce. The San .Jose Indiano, 12 Gall.
(U. S. C. C.) 268, 286, Fed. Cas. No.
12.322, per Story, J.
1 See last section and cases there-
under.
2 The Friendschaft, 4 Wheat. (17
U. S.) 105, 4 L. ed. 525.
3 The Friendschaft, 4 Wheat. (17
U. S.) 105, 107, 4 L. ed. 525; The
San .lose Indiano, 2 Gall. (C. C.)
268, Fed. Cas. No. 12,322.
4 1 Duer on Ins. (ed. 1845) 500,
sec. 9.
* Case of Mr. Whitehall, cited in
The Diana, 5 C. Rob. Adm. 60, per
685
§ 296 JOYCE ON INSURANCE
trade is immaterial where the party is domiciled bona fide in the
United States, intending to indefinitely reside here, although he
had emigrated here from a foreign countr3\^
§ 296. Residence with intent to return. — Where a person's resi-
dence in a country exists only for a special or temporary purpose,
with the intent to return within a short time to his own country,
this does not constitute such residence his domicil, nor invest the
party with a commercial character at variance with his -actual
domicile and this was held true in a case where the stay was pro-
longed sixteen months and the party intended to and did return : *
and it was so held where the party was a naturalized citizen and
liad a commercial domicil in the United States, and was detained
by business in another country over one year.^ The intent to
return, however, must have some limit, for it cannot absolutely
govern in all cases, since the time of the continuance of the resi-
dence and the attendant circumstances may make the party's
domicil that of the place where he continuously resides, although
his going to and residing in another country may have been in-
cepted in a special purpose,^" for if the residence, although originat-
ing in a special purpose, be continued for a long period. of time, it
may be reasonably assumed that the special purpose has become
affected by other purposes and designs, or that the intent of re-
turning has been indefinitely postponed. This intent, however,
depends largely upon circumstances, and is subject to some latitude
Sir Wm. 'Scott; s. c. given in 1 Duer 7 Cranch (11 U. S.) 506, 542, 3 L.
on Ins. (ed. 1845) 496, see. 3, as fol- ed. 421.
lows : "The property of a British ' See The Hannony, 2 C. Rob.
merchant, who had removed to a Adm. 324; "Wheaton's International •
Dutch island in the West Indies at Law (ed. 1863) 560; Id. (5th Eng-
a time when a war between England hsh ed.) p. 444. As to evidence gen-
and Holland was expected, at the erally to show change of domi-
breaking out of actual hostilities, was cil, see Viles v. Citj^ of Waltham,
condemned as that of an enemy, al- 157 Mass. 542, 34 Am. St. Rep. 311,
though he had resided in the island 32 N. E. 901. Change of domicil,
only a dav or two previous to its cap- see first note under § 295 herein,
itulation'to a British force, but he ^^ Sears v. City of Boston, 1 Met.
was proved to have gone there with ^ q n,, ^^^* "^' r^
the avowed design of forming a per- ^ IJ '^^-V'"^ .^''' h .h ^i'u-?'
manent establishment, and by this , B^iwn 1 Wall^^Tr rV S ' C^ C )^
design he was held to be concluded;" o'lj, ""S. CaS 'No.' 17,538; 'The
and m a note thereto he refers to re- Friendschaft, 3 Wheat. (16 U. S.)
marks or Chiet .Justice Marshall on ^^ 4 L ed 3'^''
this case in The Yenus, 8 Cranch (12 ' io gee The Harmony, 2 C. Rob.
U. S.) 288, 3 L. ed. 553. See also 1 Adm. 322, 328, per Sir Wm. Scott;
Kent's Commentaries (13th ed.) 76. Wlieaton's International Law (ed.
77. 1863) 560. Id. (5th English ed.) p.
* Livingston v. Maryland Ins. Co. 444.
686
WAR— ALIEN ENEMIES § 297
of application. Thus, residing in a country shortly before and up
to the beginning of war, with intent to return, should not be held
binding. The party should be permitted a reasonable time to dis-
close his actual intention, and disengage himself, but a continuous
residing in such country thereafter and identifying himself with
its interests and commerce, and aiding its resources by paj'^ment
of taxes, or otherwise adding to its strength as a belligerent, would
establish a domicil there, against which the original special pur-
pose ought not to avail as a defense.^^ But if a man is forcibly
restrained and his residence is involuntary, that is not his domicil. ^^
§ 297. Change of domicil. — A domicil once acquired is presumed
to continue, and is retained until another is acquired. ^^ Nor is
intent alone sufficient to constitute a change in domicil. There
must also be a consummation of the intention — an actual change in
fact, some overt act.^* And if a hostile subject gees to his native
^^ The Harmony, 2 C. Rob. Adm. New Hampshire. — Moore v. Wil-
324, per Sir Wm. Scott; Fifty-two kins, 10 N. H. 456, per Parker, C. J.
Bales of Cotton, Blatchf. Pr. Cas. England. — Sparenburgh v. Banna-
644; reversins: Id. 309; The Brig tyne, 1 Bos. & P. 163, per Eyre, C. P.
Sarah Starr, Blatchf. Pr. Cas. 6o0; ^'^ United States.— Tlhe Frances, 1
Id. 69; Schooner Gilpin, Blatchf. Pr. Gall. (U. S. C. C.) 614, Fed. Cas. No.
Cas. 661; reversing Id. 291; Wheat- 5,034, 8 Cranch (12 U. S.) 335, 3
en's International Law (ed. 1863) L. ed. 581.
560. Id. (5th English ed.) p. 444. Louisiana. — Gravillon v. Riehai'ds,
The above is also substantially the 13 La. 293, 33 Am. Dee. 563, and
opinion of Mr. Duer. 1 Duer on In- note.
suranee (ed. 1845) 489; Tabbs v. Maryland. — Ringgold v. Barlev, 5
Bendelaek, 4 Esp. 108; The St. Law- Md. 186, 59 Am. Dee. 107, and note,
rence, 9 Cranch (13 U. S.) 120, 3 L. 113.
ed. 676. Massachusetts. — Otis v. City of
12 The Ocean, 5 Rob. Adm. 84; Bo.ston, 12 Cush. (66 Mass.) 44;
Bromley v. Heseltine, 1 Camp. 77, Kilburn v. Bennett, 3 Met. (44
per Lord Ellenborough, Mass.) 199.
1^ Illinois. — Knowlton v. Knowl- Mississippi.- — Hariston v. Haris-
ton, 155 111. 158, 35 N. E. 595. ton, 27 Miss. 704, 61 Am. Dec. 530.
loiva. — State v. Adams, 45 Iowa, Missouri. — State v. Sanders, 106
99, 24 Am. Rep. 760. Mo. 88, and see note 32 Am. Dee.
Kentucky. — See Fidelity Trust & 428.
Safetv Vault Co. v. Preston, 96 Ky. Nebraska.— Wood v. Boeder, 45
277, 28 S. W. 058. Neb. 311, 63 N. W. 853.
Massachusetts. — Keilburn v. Ben- New Jersey. — Cadwallader v.
nett, 3 Met. (44 Ma&s.) 199, 201, per Howell, 3 Harr. (18 N. J. L.) 138.
Wilde, J. Arlington v. North Bridge- Pennsylraiii/i.-'PYice v. Price, 156
water, 23 Pick. (40 Mass.) 176, per Pa. St. 617, 27 Atl. 291.
Shaw, C. J. Virginia. — Brown v. Butler, 87 Va.
Mississippi. — Mayo v. Equitable 621, 13 S. E. 71.
Life Assur. Soc. 71 Miss. 590, 15 England.— The Citto, 3 Rob. Adm.
So. 791. 38.
Nebraska.— Wood v. Roeder, 45 See note in 33 L.R.A.(N.S.) 766,
Neb. 311, 63 N. W. 853. on gaining new domicil or residence
687
§ 297
JOYCE ON INSURANCE
country for a temporary or special purpose only, intending to re-
turn, this does not change his character of alien enemy.^* So if a
domicil be once acquired the party cannot be deprived of his rights
in this respect by a temporary residence in his native country. ^^
But if the intent to abandon a foreign domicil is coupled with the
fact of abandonment, as where a party leaves such domicil with
the intent not to return, the acquired national character changes,
and especially is this true in case of a return under such conditions
to one's native country, for in such case the domicil of both attaches
in transitu the instant of abandonment of the acquired foreign
domicil. ^'^ But a merchant must actually return to his native
country with intent to remain, to overcome the hostile character
arising from residence in the enemy's country, but his withdrawal
from that country must be limited to a reasonable time, or delay
must have proceeded from necessity or compulsion, and where the
withdrawal was a long time after the war had commenced, his
property was nevertheless held liable to confiscation." The right
of a naturalized citizen of this country domiciled in England to
ship his property from that country after the war has commenced
is distinctly denied in the United States courts in a case where such
an attempt was made, although without knowledge of the war,
the parties still being residents of England, the court holding that
the right of such party surprised by war in the country of his
domicil to make his election to return to his adopted country, or to
remain in the country of his domicil and have his property pro-
tected meanwhile, was not warranted by the principles of equity
or the law.^^ It seems to be settled in this country that a person
before abandoning occupation of old Wall. (72 U. S.) 28, 18 L. ed. 564;
residence by purchasing or hiring Story's Conflict of Laws [ith ed.) c.
property in new locality with inten- iii., p. 53, sec. 48. See the dissenting
tion of establishing permanent resi- opinion of Chief Justice iMarshall, in
dence there. The Venus, 8 Cranch (12 U. S.) 299,
15 See The Friendschaft, 3 Wheat. 3 L. ed. 553.
(16 U. S.) 52, 4 L. ed. 322; The Ann See note in 40 L.R.A.(N.S.) 986,
Green, 1 Gall. (U. S. C. C.) 274, Fed. on whether domicil is lost by aban-
Cas. No. 414. donment without intention of return-
1^' Wilson V. Maryat, 8 Term. Rep. ing before acquiring a new one.
31 ^ 18 The St. Lawrence, 1 Gall. (U. S.
17 The Lidian Chief, 3 Rob. Adm. C. C.) 471, 9 Cranch (13 U. S.) 120,
12, per Sir Wm. Scott; The Frances, 3 L. ed. 676; and see cases in pre-
8 Cranch (12 U. S.) 335, 3 L. ed. ceding note.
.581: The Joseph, 1 Gall. (U. S. C. i^ The Venus, 8 Cranch (12 U. S.)
C.) 614, Fed. Cas. No. 5,034; The 253, 283, 3 L. ed. 553; Chief Justice
St. Lawrence, 1 Gall. (U. S. C. C.) Marshall and Mr. Justice Livingston
467, Fed. Cas. No. 12,232. See The dissented. See Desty's Federal Cita-
Gray Jacket, 5 Wall. (72 U. S.) tions, 731, as to this case. See The
342, IS L. ed. 646; The Peterhoff, 5 Rapid, 1 Gall. (U. S. C.C.) 304,
688
WAR— ALIEX ENEMIES
§ 298
cannot be j)ern)itted to emigrate into anotlier country flagrante
bello, and thereby acquire a neutral domicil which will protect his
trade against the belligerent powers.^"
§ 298. Alien enemy: what is enemy's country. — We have seen
ihmt the national character of a country, whether it be hostile or
neutral, determines that of its inhabitants,^ and it also becomes
necessary, in order to decide wlio are alien enemies, to determine
what constitutes the enemy's country. It was said in regard to the
Civil War that the enemy's territory was that south of the line of
war. or. in otlier words, the line of demarcation claimed and held
by the. Confederate forces,^ and that ''all persons residing within
this territory whose property may be used to increase the revenue
of the hostile power are in the contest liable to be treated as enemies,
though not foreigners. They have cast off their allegiance and
made war on their government, and are none the less enemies."
In case of acquisitions made diu'ing the war, if the country is in
possession of tlie conqueror, and the government under his con-
trol, it tliereby becomes part of his domain for every commercial
and belligerent purpose;^ but if such country retains its own gov-
ernment and civil power, it will still remain neutral.* But a mere
cession by treaty is insufficient; the territory must be solemnly
delivered by the ceding power.*
per Story, J.; The Mary, 1 Gall,
(C. C.) 621, Fed. Cas. No. 9,184;
The Ladv Jane, 1 Rob. Adm. 202;
Tlie St. Lawrence, 9 Cranch (U. S.)
121, per Story, J. See remarks on
284, 348, 5 L. ed. 454, per Story, J.
But see Dug'uet v. Rhinehmder, 2
Johns. Cas. (N. Y.) 476, rever.shig 1
Johns. Cas. (N. Y.) 360; Jackson v.
New York Ins. Co. 2 Johns. Cas. (N.
the decision in 1 Duer on Insnrance, Y.) 191, overruled bv last case; 1
(ed. 1845) 503-10, sees. 12, 21; 1 Ar- Duer on Ins. (ed. 1845) 521.
nould on Insurance (Perkins' ed. ^ See also The Indian Ctief, 3
1850) 102, and note; 1 Kent's Com- Rob. Adm. 12, and cases cited tliere-
menlaries (6th ed.) 78; 1 Parsons' in; The Henriek and Maria, 4 Rob.
Marine Insurance (ed. 1868) 30, note Adm. 43, 61.
3. But see Amorv v. McGresor, 15 » prij,e c^ses, 2 Black (67 U. S.)
Johns. (N. Y.) 24, 58 Am. Dec. 205. 635, 17 L. ed. 459.
As to the right of a subject of one ^ TJiii-ty Hogsheads of Sugrar v.
country who is not domiciled but Boyle, 9 Cranch (13 U. S.) 191, 3
merely resident of a foreign country, L. ed. 701, per Marshall, C. J.
to export tiience his property after ^ Hagedorn v. Bell, 1 Mees. & S.
war breaks out, .see 1 Duer on Insur- 450. See The San Jose Judiano, 2
ance (ed. 1845) 561-66, sees. 9-11,
and notes.
^° The Dos Herraanas, 2 Wheat.
(15 U. S.) 76, 98, 4 L. ed. 189, per
Gall. (U. S. C. C.) 268, 292, Fed.
Cas. No. 12,322; The Henriek, 4 Rob.
Adm. 43, per Sir Wm. Scott.
^1 Duer on Insurance (ed. 1845)
Story, J.; 1 Kent's Commentaries, 437, sec. .■>7, citiufi Tlie Kama, 5 Rob-
(5tli ed.) 75. See The Santissima Adm, 106; The Bolleta, 1 Ed. Adm.
Trinidada, 7 Wheat. (20 U. S.) 283, 171. . - . -
Joyce Ins. Vol. I.— 44. f)89
§ 299
JOYCE ON INSURANCE
§ 299. Alien enemy: commencement and cessation of hostilities.
— ^Whether a contract of insurance is valid and in force, or whether
property is subject to condemnation on the ground of trade with
the enemy, or whether a party is an aUen enemy, depends upon
the existence of war, and necessarily the date of the commencement
and cessation of hostilities is of vital importance. It would seem,
therefore, in all reason and justice to the parties concerned, that the
intentions of the government should be plainly manifested, and
that the fact should be so public and notorious that the presumption
necessarily exists that the parties had knowledge of the existence
of war, and this should satisfactorily appear to the court. In
relation to the commencement of hostilities a formal declaration of
war would certainly seem to fix a definite time, although such
formal declaration is unnecessars^^ The War of 1812 between Great
Britain and this country was immediately commenced by us after
the act of Congress declaring a state of war, which seems to have
been deemed a formal notice, although the declaration was not
formally communicated to the British government.'^ It is held,
however, that where the declaration of war, although made, was
not known at the foreign port of shipment at the time the vessel
sailed and goods of a citizen were shipped thereon, and there was
no opportunity to countermand the order after notice of the war,
that there was no such illegality as to affect the importation,^ from
which it may fairly be implied that even though the declai^ation of
war may fix a definite time, yet the rights of parties may remain
unchanged when justifying circumstances exist. A state of war
may exist without any formal declaration of it by either party,
and this is true both of a civil and foreign war, and that a civil war
exists and may be prosecuted on the same footing as if those op-
posing the government were foreign invaders, whenever the regu-
lar course of justice is interrupted by revolt so that the courts
cannot be kept open.^ Mr. Wheaton says: ''A treaty of peace
« See 1 Duer on Ins. (ed. 1845) Cooper's American Politics, book v.
592, sec. 35. "There is no difficulty p. 110; book i., pp. 17, et seq. But
where a public declaration or mani- see Wheaton's International Law (ed.
festo precedes an actual war. The 1863) 532. Id. (5th English ed.) pp.
war then exists from the time it is 412 et seq. , „ ^ , /-.o tt
declared:" Id. » The Merrimack, 8 Cranch (12 U.
As to declaration of war and its S.) 317, 3 L. ed. 575.
immediate effects; bibliogi-aph on, see » Prize Cases, 2 Black (67 U. S.)
Hershev's Essentials of Internation- 635, 17 L. ed. 459. Cited in Ford v.
at Public Law, p. 370. Surget, 97 U. S. 613, 24 L. ed. 1024;
' The American minister was re- Swmnerton v. Columbian Ins. Co.
called in the early part of 1811. The 37 N. Y. 186, 93 Am. Dec 760 See
declaration of war was approved by The Brig Sally Magee, Blatcht. Pr.
the President on June 18, 1812. See Cas. 379, 382. See Walker s Inter-
690
WAR— ALIEN ENEMIES § 299
binds the contracting parties from the time of its signature. Hos-
tilities are to cease between them from that time, unless some other
period be provided in the treaty itself; but the treaty binds the
subjects of the belligerent nations only from the time it is notified
to them." " But in the Civil War between the North and South
there is some conflict of opinion both as to the time when the war
commenced and when it ceased. In Leather v. Commercial In-
surance Company/^ Robertson, J., giving the opinion of the court
says, referring to the proclamation of blockade of May 2, 1861:
"But that proclamation did not attempt to affect interior inter-
course and commerce between the people of the conflicting states,
and cannot be understood as having any such legal eft'ect, and so
Congress seemed to think when by the act of July 13, 1861, it au-
thorized the President to issue a proclamation interdicting all com-
mercial intercourse between the citizens of the then and thereby
recognized belligerent states. This enactment was impliedly an
authoritative recognition of the fact that insurrection had cul-
minated into war. Before that time the national government had
not acknowledged that secession had become belligerence, with all
belligerent rights and obligations resulting, according to the laws
of technical war, and this statute necessai-ily implies also that Con-
gress did not consider previous intercourse between all the states
as illegal, and consequently did not recognize such a previously
subsisting war as per se made commercial intercourse contraband
and contracts void. And history, verified by the presentment of
this note for payment in New Orleans after the second of May,
1861, shows that after the blockade there was some commercial
intercourse between the contesting states which had never been
adjudged unlawful, and will, we presume, never be so decided.
But before contracts shall be nullified by war both reason and jus-
tice require that the contracting parties should have cause to
know when they contracted that they violated the laws of an
existing war. And to give notice of the congressional recognition
of such a state of war was the sole object of requiring the Presi-
dent to proclaim the fact of recognition by the act of the 13th of
.Tuly, 1861, and that proclamation was made on the 16th of Au.sjust.
1861, and. before that time contracts and other acts of commercial
national Law (ed. 1895) 103 et seq. International Kaw and Law of War
See also references to other writers (ed. 1801) c. 34, p. 844; Walker's
at end of this chapter. ]\ranual of International Law (ed.
i»Wheaton's International Law, 1895) lo6; 1 Duer on Insurance (ed.
(ed. 1863) 884. Id (5th English 1845) 593.
ed.) pp. 412 et seq.; Hall's Interna- "2 Bush (Ky.) 296, 92 Am. Dee.
tional Law (ed. 1880) 482; Halleck's 483'.
691
§ 299 JOYCE ON INSUIiANCE
intercourse were not made illegal by the war." The Prize cases ^^
related to vessels in port or upon the high seas after the time al-
lowed by proclamation by the President for blockade, and it was
held that such proclamation of April 27 and 30, 1861, prohibited
in efi'ect all commercial relations and was of itself conclusive evi-
dence of war. The court was divided, four of the justices dissent-
inn, and holding that commercial relations did not cease till
August 16, 1861. ^^ And the court in Perkins v. liogers,^^ says
of these cases: ''The decision pronounced by the majority of the
court has been overruled by several decisions rendered, and
the opinion exjjressed by the minority of the court has since
been approved and recognized as the law." In Smith v. Char-
ter Oak life Insurance Company " a citizen of Alrginia had
his life insured in a Connecticut company. The premium had
been paid for several years until May, 1861, when they were re-
fused by the company. After the death of the assured the bene-
ficiary brought an action for damages against the company for dis-
solving the contract by its refusal to receive premiums. The action
was sustained and damages given for the value of the policy when
dissolved with interest on that amount, it being held that nonin-
tercourse between the states could not be pleaded as justifying the
18 2 Black (67 U. S.) 635, 17 L. No. 11.094; United States v. Catli-
ed. 459. ''art, 1 Bond, 564, Fed. Cas. No. li,-
13 It was also decided that when 756 ; United States v. 269J Bales of
the reo-ular course of justice is inter- Cotton, Woolw. 246, Fed. Cas. No.
rupted by revolt, rebellion, or insur- 1(),.)8;>.
rection, so that the courts of justice Arkansas. — Hawkins v. Filkins, 24
cannot be kept open, civil war exists; Ark. 308.
and hostilities may be prosecuted on Georrjki. — Bailey v. Milner, 3-5 Ga.
the same footing as if those opposing 334.
the 2'overnment were foreig-n enemies Keiitiicli/. — Martin v. Ilorton. 1
invading the land. Prize Cases, 2 Bush, 631; Corbin v. Marsh, 2 Uuv.
Black (67 U. S.) 635, 17 L. ed. 459. 209.
Cited in: United States. — Coppell Xew York. — Allen v. Bridgers. 52
v. Hall, 7 Wall. (74 U. S.) 554, 19 Barb. 604; Swinnerton v. Colunilnan
L. ed. 247; Texas v. White, 7 Wall. Ins. Co. 37 N. Y. 178, 93 Am. Dee.
(74 U. S.) 740, 19 L. ed. 242; New 560; Robin.son v. International L.
Orleans v. New York Mail S. S. Co. Assur. Soc. 42 N. Y. 62, 1 Am. Rep.
20 Wall (87 U. S.) 394, 22 L. ed. 400.
3.58; Ford V. Surget, 97 U. S. 608, 24 Penrisiihanifi.—Kneedler v. Lane,
L. ed. 1022; La Plante v. United 3 Grant, Cas. 519; Ford v. Surget. 36
States, 6 Ct. CI. 319; Bailey v. Mil- Phila. Les. Int. 29.
ner, 1 Abb. (U. S.) 265, 1 Nat. L'hode /.s7r/>^r/.--Hubbard v. Harn-
Bankr. Res. 423, Fed. Cas. No. 740; den Kx]). Co. 10 R. I. 253.
Brown v. Hiatt, 1 Dill. 380, Fed. Cas. Tennessee.— Smith v. Brazelton, 1
No. 2.011; Cuvler v. FeiTill, 1 Abb. Heisk. .54. 2 Am. Re|.. ()78.
U. S. 169, Fed. Cas. No. 3,523: Ex Te.ms.— State v. White, 25 Tex.
parte McCann. 5 Ain. L. Res'. N. S. Supji. 616.
1.58 note, Fed. Cas. No. 8.679 ; Phil- " :!5 Iiid. 124, 9 Am. Rep. 639.
lips V. Hatch, 1 Dill. 576, Fed. Cas. ^^ 64 Mo. 330.
092
WAR— ALIEN ENEMIES § 299
nonpayiDcnt on llie ground that the proclamation by the President
of August 1(>, IHGl. inade pursuant to the act of Congress of July
13, 1861, was (lie dale of prohibition of commercial intercourse,
in The Froleclor,^^ Chief Justice Chase, who delivered the opinion
of the coui't, says: ''The question in the present case is, When did
tlie Rebellion begin and end? In other words, What space of
time must be considered as exce|)ted from the operation of the stat-
ute of limitations by the war of the Rebellion? Acts of hostility
])y the insurgents occurred at periods so various and of such dif-
ferent degrees of importance, and in parts of the country so re-
mote from each other, both at the commencement and close of the
late Civil War, that it would be diflicult, if not impossible, to say on
wbat precise day it began or terminated. It is necessary, there-
fore, to refer to some public act of the political departments of the
government to fix the dates, and for obvious reasons those of the
executive department which may be, and in fact wa>s at the com-
mencement of hostilities obliged to act during the recess of Con-
gress, must be taken. The proclamation of intended blockade by
the President mav, therefore, be assumed as markine; the first of
these dates, and the proclamation that the war had closed as mark-
ing the second. But the w^ar did not begin or close at the same
time in all the states. There were two proclamations of intended
blockade, the first of the 19th of April. 1861, embracing the states
of South Carolina, Georgia, Alabama. Florida, Mississippi, Louisi-
ana, and Texas. The second of the 27th of April, 1861, embracing
the states of Virginia and North Carolina, and there were two
proclamations declaring the war had closed, one issued on the
second day of April, 1866, embracing the states of Virginia, North
Carolina, South Carolina, Georgia, Florida, Mississippi, Tennessee,
16 Freeborn v. Tlie Proteetor, 12 CI. 383; Gooeh v. United States, 1.5
Wall. (79 U. S.) 700, 20 L. ed. 463. Ct. CI. 287; Raines v. United States,
Ciled in: Vvited States.— McVA- H Ct. CI. 6ri2; Sierra v. United
rath V. United States, 102 U. S. 426, States, 9 Ct. CI. 231.
4:!8, 26 L. ed. 189. 191; Coleman v. Arlnnsas.—Yiix[\ v. Denekla, 28
Tennessee, 97 U. S. 509, 533, 24 L. ^^'J^- ''If- ^, „
ed. 1120, 1128; Lamar v. Browne, 92 ,/ f'^T'-T J .. ^'ao .^r^^r^a^''''^
U. S. 187, 193, 23 L. ed. 650, 653; ^^"^"'^^^ ^^'If. ["^- C«- ^8 JH- .60.
T> , mi m TT cj Tio iowa. — Bishop v. Knowles, 53
Raymond V. J^ho^^as, 91 U S rl2, ^ .,^., . ^^ ^^
H {f«^Vl/;«^ tfr ^-'----Aby V. Brigham, 28
V. Howard, 18 Wall. (8.) U. S.) 99, j^g j^^^ g^j
105, 21 L. ed. 764, 766; United Rhode Island.— H\^hhnrd v. Harn-
States V. Muhlenlnink, 1 Woods, den Exp. Co. 10 R. I. 253.
570, P'ed. Cas. No. 15,831; Ciririin v. F/r^/j^/a.— Isaacs v. City of Rich-
Uniled States, 25 Ct. CI. 295; Carter mond, 90 Va. 30, 38, 17 S. E. 760;
V. United States, 23 Ct. CI. 328; Portsmonth Ins. Co. v. Reynolds, 3'>
Hodges V. ITnited States, 18 Ct. CI. Gratt. 628; Walker v. Beauehler, 27
703; Carver y. United States, 16 Ct. Gratt. 524.
693
§ 299 JOYCE ON INSURANCE
•
Alabama, Louisiana, and Arkansas, and the other issued on the
20th of August, 18G6, embracing the state of Texas. In the ab-
sence of more certain criteria of equally general application, we
must take the date of these proclamations as ascertaining the com-
mencement and close of the war in the states mentioned in them."
In Portsmouth Insurance Company v. Reynolds ^"^ the policy pro-
vided against loss '"by means of any invasion, insurrection, riot, or
civil commotion, or of any military or usurped power." April 17,
1861, the ''ordinance of secession" was passed ; and April 21st, by
order of the United States, the navy-yard buildings at Portsmouth
were fired ; the fire spread to the insured buildings, which Avere de-
stroyed, and it was decided that the "ordinance" was not in force
when the buildings were fired ; that the United States government
did not become foreign to the state of Virginia by its passage, and
an action was maintainable on the policy. In McJ^tea v. Nathan,^*
Church, C. J., in his opinion, says: "It is pertinent, therefore, to
inquire whether such intercourse was permitted by the government,
and if so, up to what period. The Prize cases ^^ recognize the acts
of the President prior to the assembling of Congress as the acts
of the government, having equal effect upon this question as if
authorized by Congress. The first proclamation bears date April
15, 1861, prior to which time several of the states had passed or-
dinances of secession, several of the forts and some public property
had been seized, and Fort Sumter had been attacked. The proc-
lamation, after reciting that the laws of the United States were
obstructed by combinations too powerful to be suppressed by the
ordinary course of judicial proceedings, made a call for militia, to
the number of seventy-five thousand men, and contains this clause :
'I deem it proper to say that the first service assigned to the force
hereby called forth will probably be to repossess the forts, places,
and property which have been seized from the Union, and in every
event the utmost care will be observed, consistently with the ob-
jects aforesaid, to avoid any devastation, any destruction of, or
interference luith property, or any disturbance with peaceful citi-
zens in any part of the country.' The terms of this proclamation
repel the idea of prohibiting or restricting free business intercourse
between citizens of different sections of this country. On the con-
trary, it pledges j^rotection to property and the lawful pursuits of
peaceful citizens. It seeks only to repossess the property which had
been seized, and put down the unlawful combination to resist the
laws. The next is a proclamation of intended blockade, bearing
date April 19, 1861. The president in his proclamation, after
".32 Gratt. (Va.) 613. 19 2 Black (67 U. S.) 635, 17 L. ed.
" 50 N. Y. 166, 171. 459.
694
WAK— ALIEX ENEMIES § 299
reciting that an insurrection had broken out in several states, and
that a combination of persons threatened to grant pretended letters
of marque and reprisal, proceeds to say that Svith a view to the
same purposes before mentioned, and to the protection of the public
peace and the lives and property of quiet and orderly citizens pur-
suing their lawful avocations, initil Congress shall have assembled
and deliberated on the said unlawful proceedings, or until the
same shall have ceased,' he deems it advisable to set on foot a block-
ade of the ports of states in which the insurrection existed. Upon
the authority of the Prize cases, this was an act of war upon the
part of the government, and justifiable as a war measure based
upon the existence of a state of war. But so far as it operated as
a restriction upon trade, it was confined to the commerce of the
ports, and ostensibly in preventing the filling out of vessels to cruise
upon pretended letters of marque and reprisal, and it expressly as-
sumed to protect the lives and property of quiet and orderly citi-
zens pursuing their lawful avocations, 'until Congress shall have
assembled and deliberated.' Nothing is plainer to my mind than
the intention by this proclamation to avoid any interference with
the business relations of the citizens of this country, except so far
as the blockade would have that effect until the meeting of Con-
gress. It seems incongruous to hold that a proclamation which
expressly declares protection to citizens in their lawful avocations
should have the legal effect of invalidating all business transactions.
The next material act of the government bearing upon this question
was the act of Congress of July 13, 1861, the fifth section of which
declares that in a certain specified contingency 'it may, and shall be,
lawful for the President, by proclamation, to declare tliat the
inhabitants of such state, or any section or part thereof where such
insurrection exists, are in a state of insurrection against the United
States, and thereupon all commercial intercourse between the same
and the citizens of the rest of the United States shall cease and be
unlawful so long as such hostility shall continue.' This was the
first intimation on the part of the government of an intention to
prohibit commercial intercourse, while, as we have seen, every pre-
vious expression repelled such intention. The fair construction of
this act is to regard it both as an admission of the lawfulness of
commercial intercourse up to that time and a permission to con-
tinue it until the President should issue the proclamation. It is
urged that this act provided merely for a warning or notification to
the people that war existed so that they might know and protect
their rights, but this view is inconsistent with the terms of the
act. It authorizes an act to be done, the effect of which, if done,
is declared to be to prohibit commercial intercourse from the time
695
§ 299
JOYCE ON INSUKANCE
the act is done. It does not purport to prohibit such intercourse,
nor to declai-e a state of war the legal consequence of which would
be to prohibit it. The language of the act is utterly inconsistent
with the claim that such intercourse was then, or had been, un-
lawful. In pursuance of this act the President, on the 16th day
of August, 1861, issued his proclamation declaring certain states
in a state of insurrection, and that commercial intercourse with
the, citizens of other states was unlawful. From .that period such
intercoui'se- became unlaAvful,' and up to that period, by the im-
])lied or ex]>ress permission of the government, it was lawful. If
the war had cea.sed on the loth day of August, 1861, and the proc-
lamation of the 16th had never been issued, can there be any doubt
that the ordinary business relations of the citizens of the resj^ective
sections of the Union would have been unaffected? It may well
be that the citizens of the insurrectionary'^ states should be regarded
as public enemie^s for the purpose of enforcing the blockade, and
that -when the courts were interfered with so as to practically pre-
vent an appeal the running of the statute of limitations should be
suspended, and that these should be regarded as in consequence
of an existing state of war, but they ai*e not necessarily inconsistent
with the continuance of ordinary business relations, and certainly
not with the rights of the government to permit such continuance.
The language used by the government is capable of no other con-
struction than an intention to permit business intercourse. Such
must have been the general understanding of the people, and good
faith demands that it be maintained." In Woods v. Wilder,^" it
was held that a bill of exchange drawn by a member of a partner-
ship in Savannah on his copartners in New York, on August 23,
1861, was illegal and void, by virtue of the proclamation of Au-
gust 16, 1861.^ AVar between the United States and Spain existed
in April 21, 1898, when diplomatic relations were broken off, and
Spain, in a communication to the United States minister at Ma-
drid, accepted the resolution of Congress for intervention in Cuba
20 43 N. Y. 164, 3 Am. Rep. 684.
^ See furtlier on this question
notes on "Belligerent rights," 91
Am. Dec. 27f), 280. "Levying Avar
against United States, what is," 94
Am. Dee. 579-81; Wheaton's Inter-
national Law (ed. 1863) .114, 523,
52(5; 1 Duer on Insuiani-e (ed. 1845)
592-94, sees. 35, 36; Hall's Interna-
tional Law (ed. 1880) pt. iii. c. 1. p.
315; Hallec-k"s International Law and
696
Laws of War (ed. 1861) e. xv. p.
350; Walker's Mmma] of Inter-
national Law (ed. 1895) pp. 103, 154.
As to tlie eoinniencement and close of
the Civil AVar in the United States
and the different states, see Adger v.
Alston, 15 Wall. (82 U. S.) .5.55, 21
L. ed. 234; Laniar v. Browne, 92 U.
S. 187, 23 L. ed. 650; Batesville
Lislitnte v. Kanfniann, 18 Wall. (85
V. S.) 151, 21 L. ed. 775; Grossmeyer
WAR— ALIEN ENEMIES §§ 299a, 29i)b
m a declaration of war, although the formal decree by Spain and
the declaration of war by Congress were not made until afterwards.^
§ 299a. Alien enemy: intention to subsequently wage war. — In
an English case it appe;u'ed that gold, the property of a company
carrying on business in the Transvaal was insured with British un-
derwriters, by a policy containing a clause against capture, for
transit from mines in the Transvaal to the United Kingdom, and
during transit was seized by the Transvaal government. The pol-
icy was made, and the loss occurred, before the actual commence-
ment of hostilities between her Majesty's government and the
Transvaal. The comjjany sued on the policy, and the underwriters
defended on the ground that the plaintiffs were alien enemies, and
the loss was by arrest, restraint, or detainment of the Transvaal gov-
ernment, incidental to actual or expected hostilities against her
Majesty, and made for a purpose connected therewith, namely, to
supjily that government with funds with which to levy war on her
Majesty. It was agreed that no dilatory plea should be set up based
upon the fact that the plaintiff company was alien and could not
sue while the war lasted, but the case should be dealt with as if the
war were over. It was held that the intention of the Transvaal
government to wage war subsequently could not be treated as creat-
ing an actual state of war, and that the commencement of the war,
which took })lace a few days later, could not have the effect of niak-
ing the seizure a hostile act; and, furthermore, that the subsequent
bieaking out of war did not invalidate the contract of insurance,
and the plainlifi's were entitled to recover.'
§ 299b. Alien enemies: status of: power of government over: acts
of Congress: effect of war declaration. — In addition and as perti-
nent to what we have stated under this chapter and elsewhere upon
this subject as affecting their contract rights, especially those of
insurance, the questions of who are alien enemies, their status in
this country, the ])0wer of the government and the jurisdiction of
V. United States, 4 Ct. CI. 1; Ross 2 The Pedro, 175 U. S. 354, 20 Sup.
V. Jones, 22 Wall. (89 U. S.) 576, 22 Ct. 138, 44 L. ed. 195.
L. ed. 730. Cited in The Buena Ventura (The
Tlie rebellion was dosed in all Buena Ventura v. United States)
ea.ses wheie private rishts are affeet- 175 U. S. 387, 44 L. ed. 207, 20 Sup.
ed by the time ot it.s termination, Ct. Rep. 148.
Aus'ust 20. ]860. McElrath v. Unit- ' p^.i^.f^^^tein Consolidated Gold
ed States, 102 U. S. 426, 26 L. ed. .Alines, Ltd. v. Janson; West Rand
189; United States v. Anderson, 9 Central Gold Alines Co. Ltd. v. De
Wall, note (76 U. S.) 56, 19 L. ed. Rougemont (Eng. Com'l Ct.) [1900]
615; MeKee v. Rains, 10 Wall (77 2 Q. B. Div. L. Rep. 339, 346. Cited
U. S.) 22, 19 L. ed. 860. in Porter v. Freudenbers: (Kregling-
Cited in Lunenburg v. Shirley, 132 er v. Samuel & Rosenfeld) [1915]
Mass. 500.
697
§ 299b JOYCE ON INSUKANCE
the courts over them further appears from the following acts (Jf
Congress and Federal decisions.
The Revised Statutes of the United States provide :
(a) Removal of alien enemies. — " § 4067. Whenever there is a
declared war between the United States and any foreign nation or
government, or any invasion or predatory incursion is perpetrated,
attempted or threatened against the territory of the United States, by
any foreign nation or government, and the President makes public
proclamation of the event, all natives, citizens, denizens, or subjects
of the hostile nation or government, being males of the age of four-
teen j^eai-s and upward, who shall be within the United States, and
not actually naturalized, shall be liable to be apprehended, re-
strained, secured and removed, as alien enemies. The President is
authorized, in any such event, by his proclamation thereof, or other
public act, to direct the conduct to be observed, on the part of the
United States, toward the aliens who become so liable; the manner
and the degree of the restraint to which they shall be subject, and in
what cases, and upon what security their residence shall be permit-
ted, and to provide for the removal of those who, not being permit-
ted to reside within the United States, refuse or neglect to depart
therefrom; and to establish any other regulations which are found
necessary in the premises and for the public safety." ^^
(b) Tiyne for removal. — "§ 4068. When an alien who becomes
liable as an enemy, in the manner prescribed in the preceding sec-
tion, is not chargeable with actual hostility, or other crime against
the i3ublic safety, he shall be allowed, for the recovery disposed, and
removal of his goods and effects, and for his departure, the full
time which is or shall be stipulated by any treaty then in force
between the United States and the hostile nation or government of
which he is a native citizen, denizen, or subject; and where no such
treaty exists, or is in force, the President may ascertain and declare
1 K. B. 857, 112 L. T. N. S. 313, cisions upon the points discussed
84 L. J. K. B. N. S. 1091, 29 Can. therein) no opinion was rendered but
Cas. 189, 32 R. P. C. 109, [1915] W. exhaustive opinions of the judges ex-
N. 43, 31 T. L. R. 162, 59 Sol. J. plaining the statutes and the points
216, 5 B. R. C. 546, per Lord Read- of eonliict with the Constitution and
ing, Ch. J. See also note Id. 583. laws of the United States are re-
^^ Act Julj'^ 6, 1798, sec. 1, v. 1, p. ported. The following, however, is
577. taken from the official syllabus :
In the Passenger Cases (Smith v. "Statutes of the State of New York &
Turner; Norris v. City of Boston) 7 Massachusetts, imposing taxes upon
How. (48 U. S.) 283-573, 12 L. ed. alien passengers arriving in the ports
702 (which has been cited in eon- of those states, declared to be con-
nection with the above see. 4067, and trary to the Constitution and laws of
which has also been cited, explained, the United States and therefore null
or distinguished in numerous de- and void."
698
WAR— ALIEN ENEMIES § 299b
such reasonable time as may be consistent with the pubHc safety, and
according to the dictates of humanity and national hospitality." ^*
(c) Jurisdiction of United States courts and over alien enemies.
— " § 4069. After any such proclamation has been made, the sev-
eral courts of the United States, having criminal jurisdiction and
the several justices and judges of the courts of the United States, are
authorized, and it shall be their duty, upon complaint against any
alien enemy resident and at large within such jurisdiction or dis-
trict, to the danger of the public peace or safety, and contrary to
the tenor or intent of such proclamation, or other regulations which
the President may have established, to cause such alien to be duly
apprehended and conveyed before such court, judge, or justice; and
after a full examination and hearing on such complaint and suffi-
cient cause appearing, to order such alien to be removed out of the
territoiy of the United States, or to give sureties for his good be-
havior, or to be otherwise restrained, conformably to the procla-
mation or regulations established as aforesaid, and to imprison, or
otiierwise secure such alien, until the order which may be so made
shall be performed." ^^
(d) Duties of marshal in re/moving alien enemies. — ** § 4070.
When an alien enemy is required by the President, or by order of
any court, judge, or justice, to depart and to be removed, it shall be
the duty of the marshal of the district in which he shall be appre-
hended to provide therefor, and to execute such order in person, or
by his deputy, or other discreet person to be employed by him, by
causing a removal of such alien out of the territory of the United
States; and for such removal the marshal shall have the warrant of
the President, or of the court, judge, or justice ordering the same,
as the case may be." ^^
It is declared by ^Ir. Chief Justice ^larshall that no doubt is
entertained as to the power of the government in such cases, and
that war gives to the sovereign full right to take the persons and
^^ Act July 6, 1708, e. 66, see. 1, Alien enemy: limited li;il)ili(y cora-
vol. 1, p. 577; aet 'iuly 6, 1812, c. pany registered in England: share
130, vol. 2, p. 781. capital held by alien enemies: right
^<=Act July 6, 1798, e. 66, sec. 2, to sue, see Continctiial Tyre & Riih-
vol. 2, p. 577. l)er Co. Ltd. v. Dainder Co. (Same v.
Alien enemy: right to sue: liabilitv Thomas Tilling, Ltd.) [1915] 1 K. B.
to be sued: rigid to appear and de- 893, [1915] W. N. 441, 84 L. J. K.
fend: right of appeal, see Porter v. B. N. S. 927, 20 Com. Cas. 209, 59
Freuden'berg (Krelinger v. Samuel & Sol. J. 232, 5 B. R. C. 304 & note.
Rosenfeld) [1915] 1 K. B. 857, 112 Alien enemies as litigants.' See
L. T. N. S. 313, 84 L. J. K. B. N. S. note 5 B. R. C. 583.
1001, 20 Com. Cas. 189, 32 R. P. C. Alien enemy: right to habeas cor-
109 [1915] W. N. 43, 31 T. L. R. 162. pus, see note 5 B. K. C. 600.
59 Sol. J. 216, 5 B. R. C. 548. See §§ 289-291 herein.
699
§ 299b JOYCE ON INSURANCE
confiscate the property of the enemy wherever found. But that
"The mitigations of this rigid rule, which the humane and wise
pohcy of modern times has introduced into practice, will more or
less affect the exercise of this right, but cannot impair the right
itself. That remains undiminished, and when the sovereign au-
thority shall eh use ^® to bring it into operation, the judicial depart-
ment must give effect to its will. But until that will shall be ex-
pressed, no power of condemnation can exist in the court." This
opinion was given in 1814 in a case holding that enemy's property
found in the United States on land at the commencement of hos-
tilities cannot be confiscated without authority of the legislature
and that a declaration of war does not of itself enact a confiscation
of enemy property and that the legislature must declare its will to
confiscate property.^^
In Lockington v. Smith ,^^ decided in 1817, in an opinion de-
livered by Washington, J., there was an order made on February 23,
1813, requiring all alien enemies residing within forty miles of
tide water, forthwith to apply to the marshal of the district in whidi
they resided, for passports to retire to such placas beyond that dis-
tance from tide water as said marshal should designate. Said
marshals were at the same time instructed and required to take into
custody and convey to the place assigned to them all those to whom
the said order had reference who were engaged in commerce, and
who did not immediately conform to said order. There were also
other instructions to the marshals. It was held that the act of
Congress of July 6, 1798, conferred upon the President of the
United States all means for enforcing such orders as he might give
in relation to the execution of those powers; that the marshals were
the proper officers to execute said orders; that after the President's
establishing such regulations as he deems necessary in relation to
alien enemies it was not necessary to call in the aid of the judicial
authority on all occasions to enforce them and that the marshal
could act without such latter authority; that by the provisions of
the law Congress intended to make the judiciary auxiliaiy to the
executive in eflecting its great objects and each department was to
act independently of the other except that the former was to make
the ordinances and the latter the rule of decision.
The status of alien enemies the power of tlie government and
jurisdiction of the courts over them in this country at the present
3dAvt July 6, 1798, c. 66, sec. 3, (12 U. S.) 110, 121, 3 L. ed. 504,
vol. 1, p. 578. Storv', J., dissented.
3e^'Ciiuse:" so in opinion in official 3^'Pcter.s (U. S. C. C.) 466, Fed.
report. Cas. No. 8448.
3^ Brown v. United States, 8 Cranch
VCO
WAR— ALIEN ENEMIES § 299b
time in what has been designated as "The Great War" is also set
forth in the subjoined Proclamation of the President of the United
States.3^
3i»The Proclamation by the Prcsi- and direct lliat tlie conduct to be ob-
dent of the United States of April served on the part of the United
(i, 1917, reads: "Wherea-'5, the Con- States towai-ds all natives, citizens,
gress of the United Slates, in the denizens, or subjects of Germany, be-
exercise of the constitutional author- ing- males of the age of fourteen years
ity vested in them, have resolved, by and upwards, who shall be witiiin the
joint resolution of tlie Senate and United States and not actually nat-
itouse of Representatives, bearing ni-alized, who for the purpose of this
date this day, that the slate of war proclamation and under such sections
between the United Stales and the of tlie revised statutes are termed
Imperial German Government which alien enemies, shall be as follows:
has been thrust upon the United "All alien enemies are enjoined to
States is hereby formally declaied: preserve the ])eace towards the United
"Whereas, it is provided by Section Stales and to refrain from crime
4067 of the Revised Statutes, as fol- against the public safety, and from
lows:" (Giving here said section in violating the laws of the United
full, see above text). States and of the states and terri-
"Whereas, by sections 4068, 4069 tories thereof, and to refrain from ac-
and 4070 of the revised statutes, fur- tual hostility or giving information,
ther provision is made relative to aid or comfort to the enemies to tlie
alien enemies: United States, and to comply strictly
"Now, therefore, I, Woodrow Wil- with the regulations which are hereby
son. President of the United States or which may be from time to time
of America, do hereby proclaim to all promulgated by the President; and so
whom it may concern that a state long as they shall conduct themselves
of war exists between the United in accordance with law they shall be
States and the Imperial German Gov- undisturbed in the peaceful pursuit of
ernmenl; and I do specitically direct their lives and occupations and be ae-
all officers, civil or military, of the corded the consideration due to all
United States that they exercise vig- peaceful and law-abiding persons, ex-
ilauce and zeal in the discharge of the cept so far as restrictions may be
duties incident to such a state of necessary for their own protection
war; and I do, moreover, earnestly and for the safety of the United
appeal to all American citizens that States; and towards such alien ene-
they, in loyal devotion to their coun- mies as conduct themselves in accord-
try", dedicated from its foundation to ance with the law, all citizens of the
the jH-inciples of liberty and justice, United States are enjoined to pre-
uphold the laws of the "land and give serve the peace and to treat them with
undivided and willing support to all such friendliness as may be com-
tliose measures wiiicli may be adopted patible with loyalty and allegiance to
by the constitutional authorities in the United States,
prosecuting the war to a successful "And all alien enemies who fail to
issue and in obtaining a secure and conduct themselves as so enjoined, in
just peace; addition to all other penalties ]>re-
"And, acting under and by virtue scribed by law, shall be liable to re-
ef the authority vested in me by the straint, or to give security, or to re-
Constitution of the United States and move and depart from the United
the said sections of the revised stat- States in the manner iirescribed by
utes, I do hereby further proclaim sections 4069 and 4070 of the Re-
701
§ 299b
JOYCE ON INSURANCE
vised Statutes and as prescribed in
the regulations duly promulgated by
the President;
"And pursuant to the authority
vested in me, I hereby declare and
establish the following regulations,
which I find necessary in the premises
and for the public safety:
"(1) An alien enemy shall not have
in his possession, at any time or
place, any firearm, weapon or im-
plement of war, or component part
thereof, ammunition, maxim or other
silencei", bomb or explosive or ma-
terial used in the manufacture of ex-
plosives ;
"(2) An alien enemy shall not
have in his possession at any time
or place or use or operate any air-
craft or wireless apparatus, or any
form of signalling device, or any
form of cipher code, or any paper,
document or book written or printed
in cipher or in which there may be
invisible writing;
"(3) All property found in the
possession of an alien enemy in vio-
lation of the foregoing regulations
shall be subject to seizure by the
United States;
"(4) An alien enemy shall not ap-
proach or be found within one-half
Doile of any Federal or state fort,
camp, arsenal, aircraft station. Gov-
ernment or naval vessel, navy yard,
factory, or workshop, for the manu-
facture of munitions of war or of
any products for the use of the Armj^
or Navy;
"(5) An alien enemy shall not
write, print or publish any attack
or threats against the Government or
Congress of the United States or ei-
ther branch thereof or against the
measures or policy of the United
States or against the person or prop-
erty of any person in the military,
naval or civil service of the United
States or of the states or territories
or of the District of Columbia or of
the municipal governments therein;"
"(6) An alien enemy shall not
commit or abet any hostile acts
against the United States or give in-
70
formation, aid, or comfort to its ene-
mies;
"(7) An alien enemy shall not re-
side in or continue to reside in, to
remain in, or enter any locality which
the President may from time to time
designate by an executive order as a
prohibitive area, in which residence
by an alien enemy shall be found by
him to constitute a danger to the pub-
lie peace and safety of the United
States, except by permit from the
President and except under such limi-
tations or restrictions as the Presi-
dent may prescribe;
''(8) An alien enemy whom the
President shall have reasonable cause
to believe to be aiding or about to
aid the enemy or to be at large to
the danger of the public peace or
safety of the United States, or to
have violated or to be about to vio-
late any of these regulations, shall -
remove to any location designated by
the President by executive order, and
shall not remove therefrom without
permit, or shall depart from the
United States if so required by the
President ;
"(9) Xo alien enemy shall depart
from the United States until he shall
have received such permit as the
President shall prescribe, or except
under order of a court judge, «r
justice, under sections 4069 and 4070
of the Revised Statutes;
"(10) No alien enemy shall land
in or enter the United States except
under such restrictions and at such
places as the President may pre-
scribe ;
"(11) If necessary to prevent vio-
lation of the regulations, all alien ene-
mies will be obliged to register;
"(2) An alien enemy whom there
may be reasonable cause to believe to
be aiding or about to aid the enemy,
or who be at large to the danger of
the public i:)eace or safety, or who
violates or who attempts to violate or
of whom there is reasonable grounds
to believe that he is about to vio-
late, any regulation to be promul-
gated by the President or any crimi-
WAR— ALIEN ENEMIES
§ 299b
nal law of the United States, or of
the states or territories thereof, will
be subject to summary an-est by the
Unit.ed States Marshal, or his deputy,
or such other officers as the Presi-
dent shall designate, and to confine-
ment in such penitentifiry, prison,
jail, military camp, or other place of
detention as may be directed by the
President.
"This proclamation and the regula-
tions herein contained shall extend
and apply to all land and water, con-
tinental or insular, in any way with-
in the jurisdiction of the United
States."
703
TITLE IV.
PARTIES— AGENTS— BENEFICIARIES.
CHAPTER XII.
PARTIES TO THE CONTRACT— THE INSURED.
§ 305. Who may be parties to the contract.
§ 306. Who are not parties.
§ 306a. Parties: husband or wife.
§ 307. Parties: infants.
§ 307a. Same subject : statutes.
§ 307b. When infant bound.
§ 307c. Corporation or partnership as party insured.
i^ 307d. Municipal corporation as party insured.
§ 307e. Parties: employees under employers' liability and fidelity or guar-
anty insurance.
§ 308. When aliens may be insured.
^ 300. Relations of insurer and insured.
§ 309a. Same subject : title guaranty.
>^ 309b. Relation of insured to each other.
i:; 310. Name of assured need not be set out in policy,
y^ 311. Name: evidence admissible to show actual party in interest.
§ 305. Who may be parties to the contract. — All persons capable
of contracting may become parties to the contract of insurance.
This rule is so well settled as not to require the citation of autliorities
in its support.'*
§ 306. Who are not parties. — One whose life is insured by a
])()Iicy issued to another is not a party to the contract, and cannot
recover back money paid by himself for premiums nor avoid the
])olicy for fraud,* and a stranger to the policy who pays the pre-
^ As to insurable interest and, to contract, see Southern Home Ins.
right of parties to insure, see §§ 912 Co. v. Pntnal, 57 Fla. 199, 49 So.
et seq. herein. 922.
'•Insured" and "assured," see § 1 ^ North American Life Ins. Co. v.
Iierein. Wilson, 111 Mass. 542. See §§ 7.'),
Constitutional protection of right 869, 1148 herein.
704
11
JOYCE OX INSURAXCE §§ 306a, 307
mium thereon, without any contract with the person entitled to the
benefit of the policy, is a mere volunteer, and obtains no title there-
to nor lien on the insurance.^
§ 306a. Parties : husband or wife. — The husband is not the party
insured, although the polic-y is upon his property where the policy
wa.s taken in his wife's name, and she paid the premium, accepted
and retained the policy, and the only contract assented to by the
insurer was with her.''
And a life policy the application for which is signed by a married
woman as applicant and by her husband whose life is proposed for
insurance, when the policy recites a payment by the wife, and de-
clares that it assures the life of her husband for her sole use, agree-
ing to pay her the amount for her sole use if living, and, if not
living, then to her children or their guardian for their use, though
it does not expressly declare that the promise is made to the wife,
is a contract between insurer and the wife, though it appears that
the husband made the application, representing himself as agent
for the wife and that he paid all the premiums.'*
§ 307. Parties: infants. — It is held that an infant may enter into
a contract for insurance, which will be obligatory upon the com-
pany but voidable by the infant.* So a contract of insurance made
with an infant, is not for necessaries and is voidable at his elec-
tion, but binds the insurer.^ And a policy on the life of a minor,
payable to him, if living, at maturity, and to his executors, admin-
istrators or assigns, if he dies before maturity, together with the
notes given by him for premiums thereon, is not void, though void-
able. Nor is the minor's assignment of the policy during his mi-
nority necessarily void.^° Nor is the infant bound by his warranties
^ Loekwood v. Bishop, 51 How. Pr. * Monaghan v. Amei'ican Fire Ins.
(N. Y.) 221. See §§75, 869, 1148 Co. 53 .Alicli. 238, 18 N. W. 797. See
herein. also Gonackey v. General Accident,
' Agricultural Ins. Co. v. Fritz, 61 Fire & Life Assur. Corp. 6 Ga. App.
N. J. L. 211, 39 Atl. 910, 27 Ins. L. J. 381, 65 S. E. 53; Simpson v. Pru-
710. dential Ins. Co. 184 Mass. 348, 100
As to hu.sband's insurable interest. Am. St. Rep. 560, G3 L.R.A. 741, 68
see §§ 1048-1052 herein. N. E. 673; Imperial Life Ins. Co. v.
As to effect on wife's rights of pay- charleboi.s (Quebec, S. C.) 22
ing to husband insurance on her Canadian L. T. 417. See note 61
property, see Kautman v. State bav- . o^ p cc,
ings Bank, 151 Mich. 65, 18 L.R.A. o' ' + •" "? t t? * Ann
(N.S.) 630, 114 N. W. 863, 123 Am. ^'^ note in ,)/ L.R.A. 496, on m-
St. Rep. 259. ^"J^'.'"^ «" ^'^\f 'TZ' fi. t -.
7^ Millard V. Bravlon, 177 Mass. ^ P'l^pen v. Mutual Bonefil Life
533, 52 L.R.A. 117, 83 Am. St. Rep. Ins. Co. 130 N. Car. 23, 25, 57 L.R.A.
294; 59 N. E. 436. -^'05, 40 S. E. 822.
Wife and children as beneficiaries, ^° Union Central Life Ins. Co. v.
see §§ 804 et .seq. herein. Hdliard, 63 Ohio St. 478, 81 Am.
Jovce Ins. Vol. I.— 45 705
§ 307a PARTIES TO THE CONTRACT— THE INSURED
in a contract of life insurance." And a minor's rights, under an
insurance on his property, where the policy is issued to him by
general agents, are not affected by a rule of the insurer, and instruc-
tions to that effect to its agents, not to insure minor's property,
where neither he nor the person acting for him in procuring the
policy had notice of such rule or instructions.^^
But it is also decided that a mutual benefit society incorporated
under the laws of New York,^^ said laws being silent as to the limi-
tation of the age of members, cannot insure the lives of minors,^*
since mutuality of obligation being the fundamental principle upon
which these corporations are established under this act, and the re-
lation between the members and the society being one of contract,
an infant cannot become a member, since he is not able to con-
tract.^^ In Illinois a view contrary to that expressed in the New
York case has been taken, it being said that since there is no legal
obligation to pay the dues, and the only result of a failure to pay is
suspension from membership, an infant may, upon the perform-
ance of the conditions prescribed, become a member and be en-
titled to the benefits of a contract ^^ which provides that "no person
shall become a member who is under ten or over seventy years of
age." It has also been held that insurance against loss by fire is
not a contract for necessaries binding upon an infant.^'''
§ 307a. Same subject: statutes. — That section of the New York
Insurance Law which provides that a minor is not incompetent to
St. Rep. 644. 53 L.R.A. 462, 59 N. ^^ Chicago Mut. Life Ind. Assn. v.
E. 230, ' Hunt, 127 111. 257, 20 N. E. 56, 2
^^ O'Rourke v. John Hancock L.R.A. 549. The statute was silent
Mutual Life Ins. Co. 23 R. I. 457, 57 in this case as to the age of members,
L.R.A. 496, 50 Atl. 834, 91 Am. St. but the certilicate of association pro-
Rep. 643. vided that "no person shall become
12 Johnson v. Scottish Union & a member who is under ten or over
National Jns. Co. 93 Wis. 223, 67 N. seventy years of age." "It follows
W. 416, 26 Ins. L. J. 59. Cited in that unless the society is permitted
Link V. New York Life Ins. Co. 107 by the express provisions of the law
Minn. 33, 35, 119 S. W. 488. governing its organization to admit
13 Stilts. 1883, c. 175. infants into its membership, a con-
i*In re Globe Mut. Benefit Assn. tract between the society and a per-
43 N. Y. 756, 17 N. Y. Supp. 852, son who has not attained the age of
Van Brunt, P. J., dissenting, aff'd majority is one into which the so-
135 N. Y. 280, 17 L.R.A. 547, 32 N. ciety may not enter:" Niblack's
E. 122. Mutual Benefit Societies (ed. 1888)
15 Van Brunt, P. J., dissented from sec. 142. E.ramine Insurance of
this view, but held, upon other Minors, In re (Atty. Genl.) 5 Det. L.
grounds, that a minor could not be- N. No. 18, under Mich, acts 1887,
come a member. Infant as member act 187, sees. 16, 166.
of co-operative company, see note 17 ^'' New Hampshire Mutual Fire
L.R.A. 547. Ins. Co. v. Noyls, 32 N. H. 345.
706
PARTIES TO THE CONTRACT— THE INSURED § 307b
contract for insurance ^^ is not declai"atory of the common laAv but
is in contravention thereof. And a claim that the policy sought
to be rescinded is an endowment policy and not merely a policy of
insurance will not be sustained as it will be presumed that the legis-
lature had knowledge of the different forms of insurance commonly
in use and its failure to specify what insurance an infant might,
under the statute, be lawfully permitted to take out would indicate
that such infant might validly contract for insurance in any form
commonly used.^^ And under the above statute a person may re-
cover the amount of premiums paid by him at the infant's request
the same as he might recover for necessaries furnished. If, how-
ever, a recovery is not sought upon this theory but the suit is strict-
ly upon a written request made by the infant with such third per-
son to pay the premium and a written agreement to repay the
amount advanced, there can be no recovery without alleging and
proving the payment of the premium by such third person. 2° The
New York statute ^ which fixes the amount of insurance which a
person liable for the support of a child may take upon such child's
life, limits the total amount of such insurance and does not alone
restrict the amount by a single policy .^
Receiving infants as members of a co-operative or assessment in-
surance company organized under the New York Laws of 1883 ^ is
unlawful and may be prevented by injunction.*
§ 307b. When infant bound. — An infant may be precluded from
disaffirming his contract of life insurance by his conduct subsequent
to his attaining majority, unless there be fraud.^ And if an infant
surrenders a life policy for its cash value it binds him and his per-
is Section 55, Laws 1892, e. 690, as America, 207 N. Y. 315, 100 N. E.
am'd by Laws 1902, c. 437, makes 794, rev'g 130 N. Y. Supp. 546, 145
ail infant over fifteen years of age App. Div. 704._
competent to contract i'or insurance ^ Chapter 175.
for tlie benefit of snch minor or of * In re Globe IMutual Benefit
certain specified relatives, or to con- As.soc. 135 N. Y. 280, 17 L.R.A. 547,
tract for the surrender of such in- 32 N. E. 122.
snrance, or to give a valid discharge Insurance on life of infant. The
for any benefit accruing, or for pai/ment of premiums upon a policy
money payable under tlie contract. of insurance effected \n'wv to the chite
19 llamm v. Prudential Ins. Co. of when the Children Act, 1908, making
America, 122 N. Y. Supp. 35, 137 it an offense for a person to insure
App. Div. 504, s. c. {mein.) 138 the life of an infant which he lias
App. Div. 933, 123 N. Y. Supp. 1119. undertaken to nurse for reward, does
20 Equitable Trust Co. of N. Y. v. not constitute an offense under said
Moss, 134 N. Y. Supp. 533, 149 App. act. Glasgow Pari.sh Council v.
Div. 615, s. c. (mem.) 150 App. Martin, [1910] S. C. (J.) 102 Ct. of
Div. 905, 135 N. Y. Supp. 1110. Just.
^Consol.'Laws, c. 28, sec. 55. ^ Link v. New York Life Ins. Co.
2 Flvnn v. Prudential Ins. Co. of 107 Minn. 33, 119 S. W. 488.
707
§§ 307c-307e JOYCE ON INSURANCE
sonal representatives.^ If an infant's personal contract is fair and
reasonable and tliere is no fraud, overreaching or undue influence
b}' the other party, and l)oth parties have wholly or partially execut-
ed it, so that its benefits have been received by the infant, who has,
however, parted with what he has received and the nature of the
benefits precludes their being restored he cannot recover what he
has paid, but if the contract was fair and reasonable what the in-
fant has paid in excess of value received may be recovered.'
§ 307c. Corporation or partnership as party insured. — A manu-
facturing corporation may insure its property and so become obli-
gated upon its premium notes.' So it is decided in a Federal case
that a manufacturing company was the insured where it was plainly
so named in the policy, even though the loss was payable to another
as interest might appear.^ And it is held that any association of
individuals, whether a corporation or only a partnei-ship, may make
contracts and take out insurance on personal property owned by it.^°
§ 307d. Municipal corporation as party insured. — If the charter
of a city ^^ empowers it to exact and maintain certain public build-
ings the city acquires as incidental to the power thus granted the
right to contract for indemnity against loss of such buildings by
fire and such right can be exercised by insuring on the mutual plan,
especially so where the legislature had located such a company with-
in the city limits, and the fire insurance companies created by the
legislature prior to a certain date were generally organized upon
such plan.^^
§ 307e. Parties: employees under employers' liability and fidelity
or guaranty insurance. — It is held that an injured employee has
no rights legal or equitable or any title or interest against a liability
company in or to a policy issued by such company under an in-
^ Pippen V. Mutual Benefit Life Insured and assured, see § 1 herein.
Ins. Co. 130 N. Car. 23, 57 L.R.A. As interest may appear, see §§
505, 40 S. E. 822. 020, 2030, 3641 herein.
'Johnson v. Northwestern Mutual i° Holbrook v. St. Paul Fire &
Life Ins. Co. 56 Minn. 305, 372, 26 Marine Ins. Co. 25 Minn. 229. Co-
L.R.A. 187, 180, 59 X. W. 992, 45 partners: insurable interest. See §§
Am. St. Rep. 473. 912, 944, 945 herein. As to express,
8 St. Paul Trust Co. v. Wampach implied, or incidental powers of
Manufaoturing- Co. 50 Minn. 93, 52 corporations in general, see Joyce on
N. W. 274, luuler Laws 1881, c. 91, Actions and Defenses by and
being "an act authorizing the for- against Corporations (ed. 1910) sec.
mation of millers' and manufactur- 223.
ers' mutual insurance companies." " N. J. Pampli. L. 1806, p. 116.
Corporations as Persons, see Jovce ^^ French, Receiver, v. IVIillville
on Franchises (ed. 1909) sees. 64-^66. City, 66 N. J. L. 393, 49 All. 465,
9 American Cereal Co. v. Western aff'd (mem.) 67 N. J. L. 349, 51 Atl.
Assur. Co. (U. S. C. C.) 148 Fed. 1109.
77, 36 Ins. L. J. 134.
708
PARTIES TO THE CONTRACT— THE INSURED § 307e
demnity contract with the employer.^' So in Oregon no privity ex-
ists between insured and an employee under an employers' liability
insurance." Under a New York decision a steam boiler insurance
policy covering loss of life to employees of assured is deemed to
have been intended at most as a pecuniary indemnity to the em-
ployees' legal representatives for loss consequent upon his death. ^*
In a New Jersey case under an employers' liability insurance con-
tract, in equity the insurer becomes the principal debtor to the in-
sured employee and the assured the surety.^®
An insurance under an indemnity policy taken out by insured
for the benefit of employees will not include an employee whose
name did not appear in the schedule of names attached when the
policy was issued." So a transfer of a policy of casualty insurance
will not extend its terms to cover a class of employees that were not
included, at the time of its execution, in a policy insuring an em-
ployer against liability to its employees.^*
A guarantee company's liability to a bank is not a joint liability
with that of its cashier, where, in the bond for the cashier as such
there is no provision by which he assumes an obligation directly to
the bank for his own defalcations, especially so where the cashier
seems to have been made a party merely that he might enter into
certain obligations to the guaranty company in case of his defalca-
tion.^^ Where a fidelity bond for the indemnity of an employer
against the dishonesty of an employee who has made the applica-
tion and pays the premium and delivers the same to the employer,
and said bond contains an undertaking of the employee to the ob-
ligor that the latter shall not be bound unless the employee signs
the bond it must be so signed to be binding upon. the obligor in the
^^Kinnan v. Fidelity & Casualty ^^ Beaton Lamp Co. v. Travellers
Co. 107 111. App. 406. See Burke v. In.s. Co. 61 N. J. Eq. 59, 47 Atl. 579.
London Guarantee & Accident Co. "L"^nited Zinc Cos. v. General
93 N. Y. Supp. 6.V2, 47 .Misc. 171; Accident Ins. Corp. 125 Mo. App.
Finley v. United States Casualty Co. 41, 102 S. W. 605.
113 tenn. 592, 83 S. W. 2. See §§ On wliat employees are covered by
27a et scq. herein. indemnity policy see note in 41
On injured employee's right to L.IJ.A.(N.S.) 963.
reach fund under employer's liability ^^ i\j.^i.y]j^,^,] Casualty Co. v. Little
policv see notes in 7 L.R.A.(N.S.) Rock Rv. & Electric Co. 92 Ark. 306,
958, 48 L.R.A.(N.S.) 19. 122 S. W. 994.
" Scheuerraan v. Mathison, 74 19 Guarantee Co. of North America
Oreg. 40, 144 Pac. 1177. v. Mechanics' Savin? Bank & Trust
" Embler v. Hartford Steam Boil- Co. 80 Fed. 766, 26 C. C. A. 146,
er Inspection & Ins. Co. 158 N. Y. rev'd for want of lurisdiction in the
431, 44 L.R.A. 512, 53 N. E. 212, circuit court, 173 U. S. 582, 43 L.
aff'g 40 N. Y. Supp. 450, 8 App. Div. ed. 818, 19 Sup. Ct. 551.
186. In this case loss was payable to
assured for benefit of injured person.
709
§§ 308, 309 JOYCE ON INSURANCE
absence of waiver of such signing. And the signing by the obligor
of the bond and its delivery to the employee does not make the lat-
ter the former's agent with authority to bind the former by waiver
of the signature.^"
§ 308. When aliens may be insured. — An alien friend may enter
into and enforce a contract of insurance.-^ So an alien enemy resid-
ing here by permission of the government may sue and be sued in
our courts, and he or his agent receive payment of the debt.^ Alien
enemies residing in a hostile country may, hy treaty between the
belligerent powers, have all the rights and remedies which are en-
forceable in the courts.^ So the war itself has been held to create
by necessity a contract with an alien enemy which would be enforce-
able in time of peace,* as in case of ransom bills ; ^ and a contract
with an alien enemy before the war may be fulfilled during war by
performance or payment to an agent in the United States appointr
ed before the war.^ So if aii alien enemy have the privilege or li-
cense to trade or hold property he may be insured,' and it is held
that an enemy's license to trade is the legitimate subject of insur-
ance.*
§ 309. Relations of insurer and insured. — The relation between
the parties to a contract of insurance is that of debtor and creditor,
of one contracting party to another contracting party, but not that
of trustee and cestui que trust. It is a legal, rather than an equit-
able, relation.^ So after liability actually attaches under a policy
20 United States Fidelity & Guar- 6 Taunt. 237 (a case of a bill of ex-
anty Co. v. Ridgely, 70 Neb. 622, 97 change drawn by a British prisoner
N. W. 836. in France for his support, which was
^ Pisani v. Lawson, 6 Bing. (N. indoi-sed to an alien enemy and held
C.) 90. enforceable after the war).
2 Clark V. Morey, 10 Johns. (N. ^ United States v. Grossmayer, 9
Y.) 70; Buehankn v. Curry, 19 Wall. (76 U. S.) 72, 19 L. ed. 627;
Johns. (N. Y.) 137, 10 Am. Dec. 200. Buchanan v. Curry, 19 Johns. (N.
See United States v. Grossmayer, 9 Y.) 137, 10 Am. Dec. 200; Kershaw
Wall. (76 U. S.) 72, 19 L. ed. 627. v. Kelsey, 100 Mass. 561, 97 Am.
See note, "Contracts with alien Dec. 124, per Gray, J.
enemies and right to sue them in our ''' Kensington v. Ingiis. 8 East, 273;
courts," 96 Am. Dec. 624-33. McStea v. Matthews, 50 N. Y. 166,
On alien enemies as litigants see per Church, C. J.; Fenton v. Pear-
note in 5 B. R. C. 583. .son, 15 East, 419. See Clarke v.
3 Society for the Prop, of the Morey, 10 Johns. (N. Y.) 69.
Gosp. V. Wheeler, 2 Gall. (U. S. C. » Perkins v. New England Ins. Co.
C.) 105, 127 Fed. Cas. 13, 156, per 12 Mass. 214; Hay ward v. Blake, 12
Story, J. Mass. 176. But see 1 Duer on Insur-
^Griswold v. Waddington, 16 ance (ed. 1845) 588, 589, sec. 32.
Johns. (N. Y.) 451, per Chancellor » See Bewlev v. Equitable Life Ins.
Kent. Co. 61 How. Pr. (N. Y.) 345.
SRieorfl v. Bettenham, 3 Burr. See also the following cases:
1734; Cornu v. Blackbui-ne, Doug. Corniecticut.^-ljothvo-p v. Sted-
641. See also Antoine v. Morehead, man, 42 Conn. 583, 589.
710
PARTIES TO THE CONTRACT— THE INSURED § 3U9
of insurance, the entire relation between the parties is changed
from that of insurer and insured to that of debtor and creditor ; and
clauses in the policy which pro^dde that certain acts or omissions
of insured shall invalidate it are thereafter inoperative.^"
In mutual benefit associations the by-laws, articles of association,
and certificates of membership determine the rights of the members
and of the association, and may be enforced by the parties and bene-
ficiaries according to their respective rights as therein provided,^^
for the rights of the insured or of persons claiming insurance in
either a mutual insurance company or a mutual benefit society arise
out of and depend upon the contract between the parties, and must
be ascertained and fixed by that contract, regardless of the char-
acter of the company. ^2 So it is held in New York that the holder
of a policy in a mutual company is in no sense a partner of the
corporation, but his relation with the company is one of contract,
measured by the terms of the policy.^^ So it is held in an Indiana
case that the relation of the company to a member is a contractual
one and a distinct legal entity,^* and this has also been held as to
the relation of members of a beneficial association.^* Again, where
a party contracts for the insurance of property and pays the pre-
mium, and the loss is made payable to him, the agreement to pay the
loss is a contract with the person who pays the consideration.^® So
if by the terms of the policy the loss is made payable to a mortgagee,
the contract is one for the benefit of the mortgagee.^®* Notwith-
standing the above decisions, it is held, as we have noted elsewhere,
Z«*a«.a.— Willcutts v. Northwest- Am. St. Rep. 519. See §§ 316-319
cm Mutual Life Ins. Co. 81 Ind. herein.
300, 307. i2<^o i^pid in Block v. Valley
Kentucky. — Commonwealth v. Mutual Ins. Assn. 52 Ark. 201, 12 S.
Richardson, 29 Ky.. L. Rep. 622, 94 W. 702, 20 Am. St. Rep. 166.
S. W. 639. isUhhuan v. New York Life Ins.
Massachusetts.— Vievce v. Equita- Co. 109 N. Y. 421, 17 N. E. 363, 4
ble Life Assurance Soc. 145 Mass. 56, Am. St. Rep. 482. See §§ 316-319
1 Am. St. Rep. 433, 12 N. E. 858. heroin.
New York. — Bogardus v. New ^* Schmidt v. German Mutual Ins.
York Life Ins. Co. 101 N. Y. 328, 4 Co. 4 Ind. App. 340, 30 N. E. 939.
N. E. 522. ^5 Logsdon v. Supreme Lodge of
Ohio. — Examine State v. Standard Fraternal Union of America, 34
Life Assn. 38 Ohio St. 281. Wash. 006, 76 Pac. 292.
England. — Matthew v. Northern ^® Traders' Ins. Co. v. Pacaud, 150
Assur. Soc. L. R. 9 Ch. ,D. 80; Re 111. 245, 37 N. E. 400, 41 Am. St.
Haycock's Policy, L. R. 1 Ch. D. 611. Rep. 355. Examine Agricultural Ins.
i<> Seyk V. Miller's National Ins. Co. v. Fritz, 61 N. J. L. 211, 39 Atl.
Co. 74 Wis. 67, 3 L.R.A. 523, 41 N. 910, 27 Ins. L. J. 710.
W. 443. ^^* iMaxey v. New Hampsliire Fire
"Union Mut. Assn. v. Montgom- Ins. Co. 54 Minn. 272, 55 N. W. 1130,
ery, 70 Mich. 587, 38 N. W. 588, 14 40 Am. St. Rep. 325.
711
309
JOYCE ON INSURANCE
that in construing a life policy in a mutual benefit society the courts
will, as far as possible, hold it to be in the nature of a testament, and
treat it as a will,^'^ and an insured member in a mutual or fraternal
benefit society has no interest or property in the fund, but only the
power of appointment, which must be exercised to become opera-
tive.^8
In Massachusetts, it is decided that one who holds a policy on
the tontine plan is a creditor at the termination of the tontine period,
and not a member of the company, and is therefore entitled to an
accounting,^^ But in a New York case ^° the action was for an ac-
counting, and it was claimed "that the relation between the plain-
tift' and defendant is not one solely of contract, but that as to the.
participation in the profits of this tontine system that relation is
similar to one of trustees and cestui que trust."' The court, in de-
termining this claim, said: "We are convinced, after a careful ex-
amination of the character of the relations existing between these
parties that it cannot be said that the defendant is in any sense a
trustee of any particular fund for the plaintiff, or that it acts, as to
him and in relation to any such fund, in a fiduciary capacity. It
has been held that the holder of a policy of insurance even in a mu-
tual company, was in no sense a partner of the corporation which
issued the policy, and that the relation between the policy holder
and the company was one of contract measured by the terms of the
" Chartrand v. Brace, 16 Col. 19,
29 Pae. 152, 12 L.R.A. 209, 25 Am.
St. Rep. 235; Supreme Council
Catholic Knights of America v.
Densford, — Ky. — , 56 S. W. 172,
173. Compare Southern Mutual
Life Ins. Co. v. Durdin, 132 Ga. 495,
131 Am. St. Rep. 210, 64 S. E. 264.
See § 738 herein.
18 Rollins V. McHatton, 16 Col.
203, 25 Am. St. Rep. 260, 27 Pac.
254; Northwestern Masonic Aid
Assoc. V. Jones, 154 Pa. St. 99, 35
Am. St. Rep. 810, 26 Atl. 253 ; Cook
V. Supreme Conclave Improved
Order of Heptasophs, 202 Mass. 85,
88 N. E. 584.
1^ Pierce v. Equitable Life Assur.
Soc. 145 Mass. 56, 1 Am. St. Rep.
433, 12 N. E. 858. Examine Peters
V. Equitable Life Assur. Soc. 200
Mass. 579, 86 N. E. 885.
2'^Uhlmann v. New York Life Ins.
Co. 109 N. Y. 421, 17 N. E. 363, 27
Cent. L. J. 360, 4 Am. St. R^p. 482.
71
Quoted from and considered at
length in Equitable Life Assurance
Soc. V. Brown, 213 U. S. 25, 46-49,
53 L. ed. 682, 29 Sup. Ct. 404, upon
point that by decisions of the highest
courts of New York the society's re-
lation to its policy-holders is not
that of trustee, but that the relation
is one of contract.
Cited (in dissenting opinion) in
Langdon v. Northwestern Mutual
Life Ins. Co. 199 N. Y. 188, 205, 92
N. E. 440 (to point that under such
form of policy relation is not that
of trustee and cestui que trust but
merely of debtor and creditor). A
case of an action brought in part
to reform a policy so as to corre-
spond with a claimed special con-
tract: Burns v. Burns, 190 N. Y.
211, 82 N. E. 1107 (to point that
relation one of contract merely).
Distinguished in Thomas v. New
York & GreenAvood Lake Co. 139 N.
Y. 163, 180, 34 N. E. 877. Quoted
2
PARTIES TO THE CONTRACT— THE INSURED § 309
policy.* Upon the payment of the premiums by the various policy
holders embraced in the tontine class the money immediately be-
comes the property of the company, and no title thereto remains in
any of the policy holders. Under such a policy as this there is no
obligation on the part of the corporation to keep the premiums paid
on such policies separate and apart from its other funds. Nor is
there any obligation on its part to invast such funds in any particu-
lar way or at any particular time. The contract contemplates the
fact that the funds will be inve^^ted ; but the character of such invest-
ment is left absolutely to the discretion of the defendant, except as
it may be limited by the laws of the state. . . . The question is
distinctly up, as to what rights the plaintiff had after the expiration
of the ten-year period, the policy itself being in force: and unless
there was some relation fiduciary in its nature, the right to an ac-
counting on that ground cannot be claimed. We think the pay-
ment of a premium by the policy holders of this class of policies is
much more like that of a deposit in a bank by a depositor, as to
which it is conceded that there is no such relation as that of trustee
and cestui que trust.'^ By the very terms of this policy the amount
of the fund is necessarily uncertain. What it may be depends, not
only upon the number of policies taken out during the period, but
upon the number of policies in the class which may lapse or become
forfeited, and upon the amount of the proper expenses of the com-
pany which shall justly become chargeable to this fund. So that
the dividend which may come to the plaintiff, or any other policy
holder, depends upon numerous contingencies, and in relation to
all these matters the parties have agreed in specific terms, contained
in the policy itself, that this surplus or fund, derived as already
stated, 'shall be apportioned equitably among such policies of the
same class as shall complete their ten-year dividend period.' Here
is the extent of the obligation of the defendant — that it shall equi-
tably apportion this sum. As has been said, there is no title in the
plaintiff to any specific moneys. There is, in reality, no specific
or separate fund, as it is made up simply by a system of debits and
credits contained in the books of the company, which debits and
credits are made during the running of the tontine period. There
is no separation of the fund belonging to this system, and no legal
necessity for such separation from any other fund or property be-
from Russell v. Pittsburgh Life & Life Ins. Co. 50 N. Y. 610, 10 Am.
Trust Co. 132 App. Div. 217, 227, Rep. 522; People v. Security Life
116 N, Y. Supp. 841. See also Mr- Ins. & Annuity Co. 78 N. Y. 114, 34
Donnell v. Mutual Life Ins. Co. of N. Am. Rep. 522.
Y. 116 Nv Y. Supp. 35, 131 App. Div. « See Foley v. Hill, 2 H. L. Cas.
1.43. 32.
^ See Cohen v. New York Mutual
713
§ 309a
JOYCE ON INSURANCE
longing to defendant. The situation of the parties is that of dehtor
and creditor simply, the amount of such debt being determinable by
this equitable apportionment, which, taking the language of the
policy into consideration, necessarily means that the apportionment
is to be made by the corporation through its officers." And it was
held' that equity would not order an accounting on the principle of
trusteeship. The court also says of the Massachusetts case above
noted that it ''was decided under the peculiar wording of the stat-
ute of Massachusetts in regard to complicated accounts, and we do
not think it should be followed by the courts of this state." The
New York case is also in accord with the decision in a case in the
United States circuit court, where it is held that no trust relation-
ship, which can give equity jurisdiction, exists between the holder
of a tontine policy and an insurance company in which he is en-
titled to a share of the assets.' In later Federal decisions it is held
that the relation between the holder of a matured semi-tontine pol-
icy and the insurer is that of debtor and creditor and involves no
trust relation.* So in a Wisconsin case it is held that the nature of
the obligation of an insurance company to a holder of a tontine
dividend policy is that of debtor and creditor under the stipulations
of the agreement.^
A "participating policy" of life insurance, whereby surplus profits
of the company are shared with others holding like policies, does not
create a trust relation between the parties.^
§ 309a. Same subject: title guaranty. — A corporation organized
for the purpose, among others, of examining and guaranteeing titles
to real estate and which in all matters relating to conveyancing and
searching titles holds itself out to the public and assumes to dis-
charge the same duties as an individual conveyancer or attorney
has the same responsibilities and its duty to its employer is gov-
erned by the principles applicable to attorney and client.'
' Hunton v. Equitable Life Assur.
Soe. 45 Fed. 661.
* Everson v. Equitable Life Assur.
Co. (U. S. C. C.) 68 Fed. 258, aff'd
71 Fed. 570, 18 C. C. A. 251, which
i.s cited as "on all fours" in Grieb v.
Equitable Life Assur. Soe. (U. S.
C. C.) 189 Fed. 498, 502, aff'd 194
Fed. 1021, 114 C. C. A. 658, on opin-
ion below. See also Peters v. Equit-
able Life Assur. Soe. 200 Mass. 579,
86 N. E. 885.
^ Timlin v. Equitable Life Assur.
Soe. 141 Wis. 276, 124 N. W. 2o3,
39 Ins. L. J. 295, 301, citing Uhlman
v. New York Life Ins. Co. 109 N. Y.
421, 17 N. E. 363, 4 Am. St. Rep.
482; Gadd v. Equitable Life Assur.
Co. 97 Fed. 834.
^ Taylor v. Charter Oak Life Ins.
Co. 9 Daly (N. Y.) 489.
' Ehmer v. Title Guarantee & Trust
Co. 156 N. Y. 10, 50 N. E. 420.
Cited in Trenton Potteries Co. v.
Title Guarantee & Trust Co. 176 N.
Y. 65, 75, 68 N. E. 132 (which dis-
tinguishes between the contract of
insurance and contract of searching
in such cases) ; Glvn v. Title Guar-
antee & Trust Co. 132 App. Div. 859,
714
i
PARTIES TO THE CONTRACT— THE INSURED §§ 309b, 310
§ 309b. Relation of insured to each other. — Each policy holder
in any insurance company, whether mutual or not, has an associat-
ed relation whereby he is interested in the engagements of all, as
out of the coexistence of many risks, arises the law of average, which
underlies the whole business.^
§ 310. Name of assured need not be set out in policy. — It is not
necessary to the validity of the policy that the name of the assured
should appear therein. He may be described in other ways than
by name.^ If the interest of a person other than that of the one
named in the policy is intended to be protected, words must be used
in the contract sufhciently clear to indicate an intention to protect
interest covered.^"
A party may insure as agent or trustee, naming the actual party
in interest;" or one may insure in his own name goods lield in
trust by him, and he can recover for their entire value, holding the
excess over his own interest for the benefit of those who have in-
trusted the goods to him ; ^^ and insurance in the name of a manager
of a warehouse for account of whom it may concern, applies to the
beneht of any person who may own property therein at the time of
a loss, though such property was not therein when the policy was
issued." So an agent may insure in his own name as agent ; ^*
or a consignee may effect an insurance in his own name on account
of wiiom it concerns, loss payable to him, and, in case of loss, may
maintain an action thereon ; ^^ or the policy may be left blank and
the name filled in, or it may be made for "whom it may concern,"
or to the "estate of; " ^* and a policy on "account of ," or "for
861, 117 N. Y. Supp. 424 (upon Johns. Ca.s. (N. Y.) 329. As to
]>oint of relation of attorney and right of agent to insure, see §§ G09
client). et .seq. herein.
See ^ 27i herein. ^^ California Ins. Co. v. Union
8 New York Life Ins. Co. v. Compress Co. 133 U. S. 387, 19 Ins.
Statham, 93 U. S. 24, 23 L. ed. 789. L. J. 385, 33 L. ed. 730, 10 Sup. Ct.
Cited in Connecticut ^lutual Life 365.
Ins. Co. V. Home Ins. Co. 17 Blatchf. ^^ Morotock Ins. Co. v. Cheek, 93
(U. S. C. C.) 142, 147, Fed. Cas. No. Va. 8, 57 Am. St. Rep. 782, 24 S.
3107. E. 464.
See § 17 herein. ^* Davis v. Boardman, 12 Mass. 80;
^ Weed V. London Fire Ins. Co. Marts v. Cumberland Ins. Co. 44 N.
116 N. Y. 106, 114, 22 N. E. 231; J. L. 478.
Weed V. Hamburg-Bremen Fire Ins. ^^ Sturm v. Atlantic Mut. Ins. Co.
Co. 133 N. Y. 394, 31 N. E. 231. 63 N. Y. 77.
As to description of parties or ^^ Fire Ins. Assn. v. Merchant.*;'
their interest, see §§ 1689 et seq. Transportation Co. 66 Md. 339, 7
1" Stanley v. Fireman's Ins. Co. Atl. 905, 59 Am. Rep. 162; Turner
34 R. I. 491, 84 Atl. 601, 42 L.R.A. v. Burrows, 8 Wend. (N. Y.) 144;
(N.S.) 79. Clinton v. Hope Ins. Co. 51 Barb.
" Holmes v. United Ins. Co. 2 (N. Y.) 647, 45 N. Y. 454. But see
715
§ 311
JOYCE ON INSURANCE
/' is equivalent to a policy ''for whom it may concern." " If
property is insured "on account of whom it may concern," there is
a privity between the insurance company and the actual owner of
the property from the time of the insurance and the contract is
with him as the assured.^* If one is named by mistake it may be
cured by indorsement,^^ and in such case a recovery may be had in
the name of the real party in interest, for the indorsement may be
regarded as a new contract of insurance with him.^°
§ 311. Name: evidence admissible to show actual party in in-
terest. — If the name of the person for whose benefit the insurance
is obtained does not appear upon the face of the policy, or if a blank
is left in the policy for the name of the person on whose account the
insurance is effected, or if the designations used are applicable to
several persons, or if the description of the assured is imperfect or
ambiguous, or the policy be "to whom it may concern," evidence
aliunde may be resorted to to ascertain the meaning of the contract
and to show who are the real parties in interest.^ So in an action
upon a policy in the name of a party not the Qwner, a letter from an
owner, directing the plaintiff to obtain insurance on the vessel in
his own name, and stating the interest of the plaintiff' in the vessel
insured, is admissible in evidence for the plaintiff.^ In such cases
the risk attaches to the interest of the party actually intended to be
covered, and he may sue,^ even though such intention may have
been unknown to the insurer.* But the party intended must have
been in contemplation of the contract, or the insured must have
V. Canal Ins. Co. 10
State V. Standard Life Assn, 38 Ohio ^ Vairin
St. 281. Ohio 223.
1' Burrows v. Turner, 24 Wend. ^ Crosbv
(N. Y.) 27G, 35 Am. Dec. 622. See Bosw. (N
Turner v. Buitows, 8 Wend. (N. Y.) Hooper v. Robinson, 98 U. S. 528,
141. 25 L. ed. 219; The Sidney, 23 Fed.
18 Pacific Mail S. S. Co. v. Great 88; Newson v. Douglass, 7 Har. &
Western Ins. Co. 65 Barb. (N. Y.) J. (Md.) 417, 16 Am. Dee. 317;
V. New York Ins. Co. 5
Y.) 369, 377. See also
334.
1^ Sohns V. Rutgers Fire Ins. Co.
4 Abb. App. (N. Y.) 279.
^^ Sohns v. Rut2:ers Fire Ins. Co.
4 Abb. App. (N. Y.) 279.
1 Weed v. London Assoc. Ins. Co.
116 N. Y. 106, 114, 22 N. E. 229;
Clinton v. Hope Ins. Co. 45 N. Y.
454; Burrows v. Turner, 24 Wend.
Clinton v. Hope Ins. Co. 45 N. Y.
454; Cincinnati Ins. Co. v. Rieman,
I Disn. (Ohio) 396.
4 The Sidnev, 27 Fed. 119 (dis-
missed in 139 U. S. 331, 35 L. ed. 177,
II Sup. Ct. 620) ; Buck v. Chesa-
peake Ins. Co. 1 Pet. (26 U. S.) 151,
7 L. ed. 90; Newson v. Douglass, 7
Har. & J. (Md.) 417, 16 Am. Dec.
(N.Y.) 276, 35 Am. Dec. 622; Weed 317. See also Hurlburt v. Pacific
V. Hamburg-Bremen Fke Ins. Co. Ins. Co. 2 Sum. (U. S. C. C.) 471,
133 N. Y. 394, 31 N. E. 231; Pro- Fed. Cas. No. 6,919.
tection Ins. Co. v. Wilson, 6 Ohio
St. 553.
716
PARTIES TO THE CONTRAGT— THE INSURED § 311
subseqiienlly adopted it, for this clause does not cover any and
everybody who may chance to have an interest in the thing insured.^
And if a bailee holding the property of another, insures it against
loss or damage by fire, for the protection of his special interest there-
in and that of the owner, the fact such owner was not a party to the
contract of insurance at its inception, does not, after he has adopted
and ratified it, and after loss and notice, permit the parties and those
claiming under them, to contradict, vary, or modify the contract by
showing that it does not embody the agreement actually made.®
Where a party who has an insurable interest in a house owned by
another takes out a policy in the owner's name, and upon its loss col-
lects the insurance money as the owner's agent, he is liable to the
owner therefor without a prior demand, and cannot defend on the
ground that he intended the insurance to cover his own interest.'
Where a policy is issued by a mutual insurance company "for whom
it concerns" to one who has no interest in the property insured, the
owner of the property, by whose authority the policy was obtained,
may maintain an action, subject to any right given to the insurers
by the terms of the policy to deduct any amount due them from the
insured.* But it was held, in an Iowa case that an action at law
could not be maintained by Caroline Zimmerman upon a policy
issued to ''C, Zimmerman, where the application was referred to as a
part of the policy and was signed Conrad Zimmerman." ^ And a
policy of insurance made in the name of a particular person who is
the owner of a small proportion of the property insured cannot be
made to cover the interest of others upon parol proof that the appli-
cation for insurance was for such others, as well as for the party
named, and that this was well known to the insurers, and that it was
the intention of all the parties that the policy was to cover the inter-
est of all the owners.^" Again, an Indiana Insurance Company lo-
cated at Evansville, in said state, in order to do business in Ohio and
avoid the laws of that state prescribing the terms upon which insur-
ance companies might carry on business therein, issued to persons,
who insured with their agents, 11. & 11, in Ohio, certain slips, certi-
fying that H. & B. were insured in the property therein described
under an open policy, numbered 38, which the insurance company
^ Newson V. Douglass, 7 liar. & J. ' Looney v. Loonev, 116 Mass. 283.
(Md.) 417, 16 Am. Dee. 317; Hooper 8(-'o|,i, "y, j^Tgw England Mutual
V. Robinson, 98 U. 8. 528, 25 L. ed. .Atarine Jns. Co. 6 Gray (Mass.) 192.
219 ; Waring v. Indemnity Ins. Co. ^ Zimmerman v. P'armei-s' Ins. Co.
45 N. Y. 606. ' 76 Iowa, 352, 41 N. W. 39.
® Johnston v. Charles Abresch Co. ^° Finney v. Bedford Commercial
123 Wis. 730, 107 Am. St. Rep. 995, Jns. Co. i3 JMetc. (Mass.) 348, 41
101 N. W. 395. Am. Dec. 515.
717
311
JOYCE ON INSURANCE
had previously issued to II. & B., its own managing agent at Evans-
ville, H. & B. insured plaintiff on a cargo of salt in a barge on the
Ohio river ; they received the premium from plaintiff and delivered
to him a slip certifying that they, the agents, were insured under the
open policy, number 38. The company knew that plaintiff was the
owner of the salt, and knew everything material to the risk. The
salt was shipped by plaintiff' to S. & Co., Memphis, who was expect-
ed to make advances thereon and pay charges therefor, and S., one
of the firm, was made appointee in the slip or insurance certificate
to receive the insurance in case of loss. The salt became a total
loss by the perils insured against ; proof was made of loss, and the
plaintiff's interest therein. It was held that parol evidence was ad-
missible to show that plaintiff was the party intended to be insured,
although the contract was in writing and there was no ambiguity
on its face concerning the same; that the company was bound to
know what its agents, H. & B., knew, and could not set up the latter's
want of interest in the property, and conld not evade liability by
saying that the contract was void; that even if it should be held
void because H. & B., while acting as agents for the company, could
not insure themselves, nevertheless the writings and parol proof
showed a valid parol contract to insure plaintiff; that the action was
properly brought in plaintiff's name.^^ The court says: "In apply-
ing insurance contracts to the proper subject-matter and the part}' or
parties intended to be covered by the risk, courts have been liberal
in receiving parol testimony in favor of the assured. It is well set-
tled that when a written contract is made by an agent in his own
name, the undisclosed principal may sue upon it, and prove by parol
evidence that the contract was made for his benefit, and this may be
done although the other party had no knowledge of the agency, and
supposed he \Vas dealing with the one who was acting for himself.^^
If by mistake a policy is issued in the husband's name on his wife's
property such mistake may be shown by their testimony.^^
1^ Daniels v. Citizens' Ins. Co. 5
Fed. 425.
^^(Utinrj: Uvited Staiefi. — Thomp-
son V. Raih*oad Co. 6 Wall. 7,3 (U.
S.) 134, 137, 18 L. ed. 765; Insur-
ance Co. V. Cliase, 5 Wall. (72 U. S.)
509, 18 L. ed. 524.
loir a. — Anson v. Winnesheik Ins.
Co. 23 Iowa, 85.
Massachusetts. — Shawmitt Sugar
Refining Co. v. Hampden Ins. Co. 12
Gray (78 Mass.) 540; Huntington v.
Knox, 7 Cush. (61 Ma.ss.) 371; Rider
V. Ocean Ins. Co. 20 Pick. (37 Mass.)
259.
718
Ohio. — Protection Ins. Co. v. WU-
son, % Ohio St. 561.
England. — Arcangelo v. Thomp-
son, 2 Campb. 620.
Story on Agency, see. 61.
On the point that parol insurance
is valid, the court cites Relief Ins.
Co. V. Eggleston, 96 U. S. 572, 574,
24 L. ed. 841 ; Sanborn v. Fireman's
Ins. Co. 16 Gray (Mass.) 448, 77 Am.
Dec. 419.
^3 Fredericks v. Hanover Fire Ins.
Co. 28 Pitts. L. J. 259, 56 Leg. Intel.
47, 15 Lancaster L. Rev. 150, 7 Pa.
Dist. R. 79, under Pa. act May, 1887.
CHAPTER XIII.
PARTIES— MEMBERS OF MUTUAL INSURANCE COMPANIES,
MUTUAL BENEFIT, ETC., SOCIETIES.
§ 316. Parties: members of mutual insurance companies and mutual bene-
fit societies.
§ 317. Membership exists when contract is completed.
§ 318. Obligations and rights of members generally.
§ 318a. Same subject: title to company's property.
§ 318b. Property rights of company and members : constitutional law.
§ 319. Relations of members of mutual companies: partnership.
§ 316. Parties: members of mutual insurance companies and mu-
tual benefit societies. — Members of mutual insurance companies and
of mutual benefit societies, the legal status of which is that of in-
surance companies, sustain a dual relation, since each member is at
once tlie insured and insurer. In one aspect his relation is sub-
stantially that of a policy holder, or a party who has contracted
upon a consideration for an indemnity or for the payment of money
upon the happening of a specified contingency. He has all such
rights against the corporation or association as are defined by his
contract with it and which could validly be enforced thereunder.
In another aspect he is a member of the corporation, and becomes an
indemnilier of the other members as the corporation or association
represents to each member the aggregate of the other members. The
members have, or may have, a voice in the management of the com-
pany's affairs,^* and their corporate rights depend upon the cliarter
or articles of association, and the by-laws and rules of the organiza-
tion, as these embody the compact between the corporation or asso-
ciation and its members, and to this resort must be had for the settle-
ment of such questions as involve their duties and rights with rela-
tion to the organization.^^ A benefit society sustains a relation to
"See State v. Standard Life Assn. Rep. 1023, 7 Am. & Eng. Ann. Ca.^.
38 Ohio St. 281: Condon v. Mutual 400, 105 N. W. 1031, 35 Ins. L. J.
Reserve Assoc. 87 Md. 99, 73 Am. 334.
St. Rep. 169, 44 L.R.A. 149, 42 Atl. ^^ Ry^n v. Knights of Columbus,
944; Huber v. Martin, 127 Wis. 412, 82 Conn. 91, 72 Atl. 574; Chamber-
3 L.R.A. (N.S.) 653, 115 Am. St. lain v. Lincoln, 129 Mass. 70; Gros-
719
§ 316 JOYCE ON INSURANCE
its members other than that of a life insurance company ; the fund
raised is practically a trust fund made up of their contributions."
It is held in Massachusetts ^' that a statute providing that the con-
ditions of insurance shall be stated in the body of the policy ^^ does
not apply to the obligations of the insured as a member of the cor-
poration ; and that the contract of each member contains obligations
on the part of the cori3oration which enter into and qualify the
contract of every other member. It is necessary and equitable
that each person who gets insured in such company or society should
become subject to the same obligations toward his associates that he
requires from them toward himself. ^^
But where a company is organized upon the mutual plan, having
no capital stock, and receives, as a substitute therefor, not^s for pre-
miums in advance, the makers of such notes do not thereby become
stockholders of the corporation.^" So where a person procured a
policy of insurance for a term of years at a fixed annual premium,
and paid the first year's premium in advance, and gave a note pay-
able in instalments at the commencement of each of the years dur-
ing which the policy ran. it was decided that the assured did not
thereby become a stockholder, or liable for the debts of the com-
pany, and that when the company failed all obligation to pay the
note terminated.^ And it is held in Maine ^ that a mutual insur-
ance company has no stockholders, and its original corporators can-
not be regarded as such so as to be entitled to assets remaining after
dissolution and paying the company's liabilities. But it is declared
in a New York case that where the statute ^ provides that an insur-
ance company may sue or be sued by any of ''its members or stock-
venor v. United Soc. 118 Mass. 78; which is not incorporated. Sergeant
Commonwealtli v. Mas.sachusetts Fire v. Goldsmith Dry Goods Co. — Tex.
Ins. Co. 112 :\rass. 116, 120, per tlie Civ. App. — , 139 S. W. 1036.
Court; Phmters' Ins. Co. v. Comfort, " Blair v. Supreme Council Ameri-
50 Miss. 662, 668, per the court; can Legion of Honor, 208 Pa. 262,
Rosenberger v. Washington Mutual 101 Am. St. Rep. 934, 57 Atl. 561.
Fire Ins." Co. 87 Pa. St. 207; Diehl i' Commonwealth v. Massachusetts
V. Adams County Mutual Ins. Co. 58 Fire In.^. Co. 112 IVtass. 116.
Pa. St. 443, 98 Am. Dec. 302; Com- ^^ Mass. Stat. 1864, c. 196.
monwealth v. St. Patrick's Soe. 2 ^^ Baxter v. Chelsea Mut. Fire Ins.
Binn. (Pa.) 441, 4 Am. Dec. 452; Co. 1 Allen (Mass.) 294, 79 Am. Dec.
Farmers' Mutual Ins. Co. v. Mylin 730.
(1888) — Pa. — , 15 Atl. 710; Brad- 20 jjiU v. Nautilus Ins. Co. 4 Sand,
field V. Union Mut. Ins. Co. 9 "Week. Ch. (N. Y.) 577.
N. C. 436. ^ Farmers' & ^[erchants' Ins. Co. v.
The provisions of the application Smith, 63 111. 187.
and the policy determine the relative ^ Titcomb v. Kennebunk Mut. Fire
rights and liabilities of members of a Ins. Co. 79 Me. 315, 316, 9 Atl. 732.
mutual beneht insurance corporation ^ N. Y. Laws, 1853, c. 463, see. 107.
720
PARTIES— MEMBERS § 317
holders," the word "mem}>ers" is synonymous witli "stockholders.'" *
In another case in that state it is held that notwithstanding charter
provisions by which membership is limited to those persons holding
capital stock' notes, still all those are members of a mutual fire in-
surance company, organized under the New York Laws of 1892.^
who hold insurance in such companies.^ Under a Wisconsin de-
cision, policy holders in mutual insurance companies are, as regards
rights and remedies, stockholders therein the same as owners of
stock in a stock corporation, there being no charter provision to the
contrary.' Sometimes, however, the members of mutual insurance
companies are made stockholders by the statute of incorporation.*
Again the holders of certificates are not creditors within the me^ui-
ing of a statute relative to proceedings in equitj^ against corpora-
tions.^ As such member, the company's books are, in law, as much
his as other members; ^^ but until the act of insurance is consum-
mated he is a stranger to the organization.^^ It is held in Pennsyl-
v'ania that where one becomes a member of a mutual insurance
company, he has a right to vote for the directors, and that they are
none the less his representatives, though they are incompetent, ex-
travagant, or careless of their trust. ^^
§ 317. Membership exists when contract is completed. — A per-
son becomes a member or co-corporator of a mutual insurance com-
pany or mutual benefit society, whose legal status is that of an in-
surance company, when the contract is completed, and prior to that
time he is a stranger to the organization,^^ and this rule clearly ap-
plies where the charter expressly provid&s that a person must take
out a policy to become a member and that only holders of unex-
pired policies can be deemed to be members, for, in such case, no one
* People V. Security Life & Annui- ^ Hill v. Nautilus Ins. Co. 4 Sand,
tv Co. 78 N. Y. 114, 7 Abb. N. C. Ch. (N. Y.) 577.
(N. Y.) 198, 34 Am. Rep. 322. ^o Dielil v. Adams County Mutu-
5 Chapter 690. al Ins. Co. 58 Pa. St. 443, 98 Am.
fiRaesener v. Willard, 60 N. Y. Deo. 302.
Supp. 478, 44 App. Div. 41. " Cumbeilaud Valley Mutual Pro-
'Huber v. Martin, 127 Wis. 412, teetion Co. v. Sehell, 29 Pa. St. 31.
3 L.R.A.(N.S.) 653, 115 Am. St. See § 53 herein.
Rep. 1023. 7 Amer. & Eim'. Ann. Cas. 12 Koehler y. Beeber, 122 Pa. 291,
400, 105 N. W. 1031, 35 Ins. L. J. 23 Week. Not. Cas. 558, 16 Atl. 354.
334. ^^ See S§ 5.3-53c- herein. Commoii-
8 "All persons insuring upon the wealth y. Mutual Fire Ins. Co. 112
mutual plan in any company organ- Mass. 116. See Bruner v. Brother-
ized in accordance with the proyi- hood of American Yecmien, 136 Iowa,
sions of this act shall constitute its 612, 111 N. W. 977; Cumberlaiul
meml)ers and stockholders," etc.; and Valley ^Mutual Protection Co. v.
and iiroviding' also the extent of their Scholl. 29 Pa. St. 31.
liability. Kan. Laws, 1875, c. iii., When one is full member of mu-
secs. 5, 8. tual benefit society and not member
Joyce Ins. Vol. 1.— 46. 721
§ 317 JOYCE ON INSURANCE
can rightly be treated as a member at any time for any purpose
unless he then holds an unexpired policy ; and if there is no charter
provision on the subject membership commences only with the tak-
ing out of a policy and lasts only for the policy period.^* So, in a
case involving the question of the relative powers of agents in mu-
tual and in stock companies/^ it is held that the insured does not
become a member in a mutual company until the policy is issued
to him, and that prior to that time he stands in same relation to a
mutual company as he would to a stock company.^^ And a con-
tract with a mutual benefit society must become effective and bind-
ing prior to the member's death; otherwise no liability exists as
against the company."
But where a party had a policy on his barn, and subsequently
applied for insurance on its contents, it was decided that at the time
of the latter application he was a member.^^ Where the secretary
of the defendant company, who was its general agent for that pur-
pose, received applications of more than fifty persons for insurance
and membership in the company, accompanied by their premium
notes, etc., and plaintiff's application and premium note were so
received, and his due-bill for the ten per cent and fees required to
be paid in advance was accepted by the secretary, and the board of
directors thereupon completed the organization of the company, it
was held that the plaintiff' (like all other persons whose applica-
tion, etc., had been so received up to the time of such organization)
was a member of the company, liable to assessment for the payment
of subsequent losses of other members, and entitled to a policy up-
on the property described in his application, although the directors
had not formally approved of such application or indorsed their
approval thereon, on the day of such organization, as required by
the by-laws. ^^
solely of social class, see Supreme ive Mutvial Fire Ins. Co. 89 Pa. 464.
Council of Order of Chopcn Friends See §§ 53-53e herein.
V. Bailey, 21 Ky. L. Rep. 1G27, 55 S. " Sovereign Camp Woodmen of
W. 888. When one becomes a so- the World v. Hall, 104 Ark. 538, 148
eial member only see Asselto v. Su- S. W. 526, 41 L.R.A.(N.S.) 517.
preme Tent Knights of Maccabees of See § 104 herein.
the World, 172 Pa. St. 5, 43 Atl. 400. is Farmers' Mut. Ins. Co. v. Mylin,
1^ Huber v. Martin, 127 Wis. 412, — Pa. — , 15 Atl. Rep. 710. See
3 L.R.A.(N.S.) 653, 115 Am. St. Fuller v. Madison Mutual Ins. Co. 36
Rep. 1023, 7 Am. & Eng. Ann. Cas. Wis. 599; Tyrell v. Washburn, 6 Al-
400, 105 N. W. 103, 35 Ins. L. J. len (88 Mass.) 466.
334. See §§ 53-53e herein. ^^ Van Slyke v. Trempealeau Coun-
ts See § 393 herein. ty Farmers' ]\Iut. Ins. Co. 48 Wis.
16 Fidelity Mutual Fire Ins. Co. v. 683, 5 X. W. 236, 39 Wis. 390, 20
Lowe, 4 Neb. (unof) 159, 93 N. W. Am. Rep. 50.
749. Citing Eilenberger v. Protect-
722
I
PARTIES— MEMBERS . § 318
All persons are ipso facto members of a mutual accident com-
pany on the mutual plan where they are insured therein, and the
fact that they are trustees for their employees who may sustain in-
jury does not affect their membership.^"
§ 318. Obligations and rights of members generally. — Where one
becomes a member of such organizations as are the subject of con-
sideration herein, he becomes bound by the charter and by-laws or
articles of association and rules of the society or association.^ He
is bound, aside from the express provisions of the policy relating
to the point at issue, to take notice of the by-laws of the company.^
Nor can he, as such member, deny the validity of by-laws which he
20 Wermuth v. Minden Lumber Co. Missouri. — Bnrehard v. Western
129 La. 912, 57 So. 170. Commercial Travelers' Assoc. 139
^Alabama. — United Order of the Mo. App. 606.
Golden Cross v. Hooser, 160 Ala. Nebraska.— Swett v. Antelope
331, 49 So. 354. County Farmers' Mutual Ins. Co. 91
Arkansas. — Soverei^ Camp Neb. 5G1, 136 N. W. 347 (valid by-
Woodmen of the World v. Hall, 104 law binds).
Ark. 538, 41 L.R.A.(N.S.) 517, 148 New Yorfc.— Stanton v. Eccentric
S. W. 526. Assoc, of Firemen, No. 50 of Inter-
Cow wecf/ci<*. — Ryan v. Knisrhts of national Brotherhood of S. F. 114 N.
Columbus, 82 Conn. 91, 72 Ad. 574. Y. Supp. 480, 130 App. Div. 129
Delaware. — King v. Wynema (might be bound by by-law whether
Council No. 10, Daughters of Poca- reasonable or not),
hontas I. 0. R. M. 25 Del. (2 See §§ 53-53c, 188, 188a herein.
Boyce's) 255, 78 Atl. 845 (constitu- Member impliedly agrees to be
tion and by-laws constitute contract bound by constitution etc., by joining
in beneficial or fraternal associations, fraternal benefit association. O'Brien
By them each party is bound). v. Rittman, 176 111. App. 237.
Illinois. — Quinn'v. North Ameri- Constitution binds member of fra-
can Union, 162 111. App. 319 (fra- lernal beneficiary association when
ternal). terms of certificate make it part
Indiana. — Supreme Lodge Knights thereof. Howton v. Sovereign Camp
of Pythias y. Knight, 117 Ind. 489, Woodmen of the World, 162 Ky.
3 L.R.A. 409, 20 N. E. 479; Supreme 432, 172 S. W. 687.
Lodtre Knights of Pythias \. Gra- A member of a benefit order which
ham^ 49 Ind. App. 535, 97 N. E. 806. is in effect a mutual life insurance
loiva. — Boeck v. Modern Woodmen company is obligated by the rules of
of America, 162 Iowa, 159, 143 N. the society as well as by the general
W. 999 (by accepting certificate laAvs applicable to insurance. Home
agrees to be bound: mutual benefit Forum Mutual Benefit Order y.
society) : Walsh y. iEtna Life Ins. Jones, 5 Okla. 598, 50 Pae. 165, 27
Co. 30 Iowa, 133, 6 Am. Rep. 664; Ins. L. J. 8.
Simeral y. Dubuque Mutual Fire Ins. 2 Connecticut. — Treadway v. Ham-
Co. 18 Iowa, 319 ; Coles y. Iowa State ilton Mutual Ins. Co. 29 Conn. 68.
Mutual Ins. Co. 18 Iowa, 425. Illinois. — Benes v. Supreme Lodge
Minnesota. — Hesinger y. Home Knights & Ladies of Honor, 231 111.
Benefit Assn. 41 Minn. 516, 43 N. W. .134, 14 L.R.A.(N.S.) 540 note, 121
481; Mitchell y. Lycoming Mut. Ins. Am. St. Rep. 304, 83 N. E. 127.
Co. 51 Pa. St. 402. Mississippi. — Odd Fellows Benefit
^ 723
§ 318
JOYCE ON INSURANCE
has assented to by befoiuiiig- a nieniber, on the ground that they were
not regularly adopted,^ nor avail himself of any irregularity which
affects" the company's incorporation.* And such member is liable
for his proportionate share of the losses which may occur while he
is a member: that is, for the time during which his policy runs,
and no longer.^ In. North Dakota all persons are members of a
mutual fire insurance company organized under the laws of that
stale and each one has the same proportionate interest that every
other member possesses and is liable to the same proportionate ex-
tent,^ but he is not bound by a by-law subsequently passed which
is in conflict with the charter and to which he did not assent, unless
he has expressly agreed that by-laws may be subsequently enacted ; '
nor is he bound by the business regulations and instructions to
agents adopted by the officers of the company,^ although it is held
that as such member, the books of the company or association are
e^idenee against him to show the action of the managers.^ But
before a party becomes such a member he cannot be bound by the
acts of the company's agents,^" nor by its charter and by-laws or
articles of association and rules.^^ And one who is induced to be-
come a member by fraud of the company or its authorized agents
incurs thereby no obligations toward the company.^^ And one
who insures his property in a mutual company in a stated amount
Assoc. V. Smith, 101 Miss. 332, 58
So. 100.
Missouri. — Burchard v. Western
Commercial Travelers' Assoc. 139
Mo. App. (506; Smoot v. Banker's
Life Asso. 138 Mo. App. 438, 120
S. W. 719 (assessment co.).
OMalioma. — Home Forum Benefit
Order v. Jones, 5 Okla. 598, 50 Pac.
165, 27 Ins. L. J. 8 (member pre-
sumed to know rules of order) .
Texas. — McWilliams v. Modern
Woodmen of America, — Tex. Civ,
App. — , 142 S. W. 641.
Virginia. — Bixler v. Modern Wood-
men of America, 112 Va. 678, 38
L.R.A.(N.S.) 571 note, 72 S. E. 704.
3 Blister v. Gerwig, 122 Ind. 567,
23 N. E. 1041.
* Traders' Mut. Fire Ins. Co. v.
Stone, 9 Allen (91 Mass.) 483; Nash-
xia Fire Ins. Co. v. Moore, 55 N. H.
48; Sands v. Hill, 42 Barb. (N. Y.)
651.
nianlove v. Naw, 39 Ind. 289;
Manlove v. Bender, 39 Ind. 371, 13
Am. l^ep. 280; Stockley v. Schwerd-
teg-er, 19 Pa. Super. Ct. 289.
6 J. P. Lamb & Co. v. Merchants
National Mutual Fire Ins. Co. 18 N.
Dak. 253, 119 N. W. 1048.
'' Creat Falls Mut. Fire Ins. Co. v.
Harney, 45 N. H. 292; Northwest-
ern Benefit & Mutual Aid Assn. v.
Wanner, 24 Bradw. (Til.) 361; New
England Mut. Fire Ins. Co. v. But-
ler, 34 Me. 451. See §§ 377 et seq.
herein.
8 Walsh v. .^tna Life Ins. Co. 30
Iowa, 133, 6 Am. Rep. 664.
^Diehl V. Adams Countv IVtutnal
Ins. Co. 58 Pa. St. 443, 98 Am. Dec.
302.
10 Columbia Ins. Co. v. Cooper, 50
Pa. St. 331; Cumberland Valley Mu-
tual Protection Co. v. Schell, 29 Pa.
St. 3L
11 Eilenbersrer v. Protection In.s.
Co. 89 Pa. St. 464; Columbia Ins.
Co. V. Cooper, 50 Pa. St. 331.
12 Salmon v. Richardson, 30 Conn.
360, 79 Am. Dee. 255 ; Brown v. Don-
24
PARTIES— MEMBERS §§ 318a, 318b
for a specific premium does not become a member of the company
so as to be liable for future assessments.^^ A valid contract with
such a company or society is, however, binding on both parties,
llie insured and the company,^* In an action for an accounting
brought by a member of a fraternal benefit society against the cor-
])oration, it was declared by Prentice, J., that: ''This member-
ship brought him into a contractual relation as an assured with the
order as the insurer. Whatever the evidence of that relation might
be, and whether it is to be found, either in whole or in ]iart, in the
constitution and by-laws of the order, in a certificate of insurance
issued to the plaintifl', or in some other form, tliere came into exist-
ence upon his admission as an insurance member a contract of in-
surance of some sort, and his rights and liabilities, on the one
hand, and those of the order, on the other, were to be thenceforw^ard
governed by that contract." Upon demurrer, however, the com-
plaint was held insufiicient in that it was silent as to the terms of
the contract which of necessity determine the respective obligations
and rights of the parties.^^
§ 318a. Same subject: title to company's property. — The title
to the property of a mutual insurance corporation is in the com-
pany, but the equitable interests therein ai'e vested in the members,
the same as in case of a stock corporation. While the corporation
owns the property, the members own the corporation. And for all
except corporate purposes, the property of a mutual insurance com-
pany, the same as that of any other corporation, belongs to its mem-
bers, whether they are stockholders in the technical sense or in the
broader one which includes policy-holders in such company. ^^ So
it is held that a policy holder in a mutual life insurance company
has a quasi ownership in its assets," the fund raised is practically
a trust fund,^® and each member has the same proportionate in-
terest that every other uiemlter possesses. ^^
§ 318b. Property rights of company and members; constitutional
law. — The property of a mutual insurance conqjany and the equi-
iiell, 49 Me. 421, 77 Am. Dee. 266; 400, 105 N. W. 1031, 35 Ins. L. J.
Jones V. Dana, 24 P.arl). (N. Y.) :?05. 334.
"Mntnal Guaranty Fire In.s. Co. "Rn.^sell v. Pittsburgh Life &
(In re Assignment) v. I5arl.-er (Al- Trust Co. 62 Misc. 403, 115 N. Y.
vord V. Barker) 107 Iowa, 14:?, 70 Suiip. 950.
Am. St. Rep. 149, 77 N. W. 868. ^^ Blair v. Supreme Council Ameri-
i^New Enolaiid INIut. Fire Ins. Co. <an Leffion of Honor, 208 Pa. 262,
V. Butler, 34 Me. 451. 101 Am. St. Rep. 934, 57 Atl. 564.
iSRvan v. Knicrhts of Columbus, See §§ 341, 1273, 1287, 1288, 1455
82 Conn. 91, 72 Atl. 574. lierein.
16 1 ruber V. Martin, 127 Wis. 412, ^^ J. P. Lamb & Co. v. :\tereliants
3 L.i;.A.(N.S.) 653. 115 Am. St. Naiional ]\lutual Fire Ins. Co. 18 N.
Rep. 1023, 7 Am. & Eng. Ann. Cas. Dak. 253, 110 N. W. 1048.
725
§ 319 JOYCE ON INSURANCE
table property rights of its members are within the guaranties of a
state Constitution as regards the inhibition against laws impairing
the obligation of contracts, and the inhibition of the national Con-
stitution as regards the equal protection of the laws and depriva-
tion of property without due process of law.^°
§ 319. Relations of members of mutual companies: partnership. —
The relations of members in companies or associations, the legal
status of which is that of insurance companies, is declared in some
cases to be that of partners, in others not. In Georgia, it is held
that a mutual insurance company is governed by the general law
of partnership as to division of profit and loss, so far as its charter
does not change the rule, and in dividing profits equity will regard
the rights of all those who have contributed premiums without re-
gard to the fact whether they were members when the profits were
distributed.'^ So in Pennsylvania it is declared that persons insur-
ing in a mutual insurance company are associated in the nature of
limited or special partners.^ And under a AVisconsin decision policy
holders in mutual companies, where neither the charter of the com-
pany nor the policy provides otherwise, stand on the basis of 'a part-
nership as insurers and as such are entitled to share in profits and are
liable for losses.^ But in New Jersey it is held that the fact an insur-
ance company is mutual does not create a partnership among the
insured, so as to make a contract continuing; the insurance is be-
tween the corporation and the insured.* And under an Iowa deci-
sion while the officers or directors of a mutual insurance company
may be held individually liable for a wrong done to a person to
whom they have issued an illegal and void policy, no liability for
such wrong can be enforced against the members of the company as
partners.* A provision, however, in the charter of a stock life insur-
ance company that, after certain dividends to stockholders, the net
profits should be paid, twenty per cent to the stockholders and eighty
per cent to the policy holders, was decided not to make the policy
holders partners ; such share was not profits but simply an equitable
adjustment of premiums paid.^ But the holder of an immatured
20 Huber v, Martin, 127 Wis. 412, & Eng-. Ann. Cas. 400, 35 Ins. L. J.
3 L.R.A.(N.S.) 653, 115 Am. St. Rep. 334.
]023, 7 Am. & Eng. Ann. Cas. 400, * Mutual Benefit Life Ins. Co. v.
105 N. W. 1031, 35 Ins. L. J. 334. Hillvard, 37 N. J. L. (8 Vioom)
1 Carlton v. Southern Mut. Ins. Co. 441, 18 Am. Rep. 741.
72 Ga. 371. s j^Iutual Guaranty Fire Ins. Co.
2 Ivrugh V. Lycoming" Fire Ins. Co. (In re Assio-nment) v. Barker (Al-
77 Pa. St. 15. vord v. Barker) 107 Iowa, 143, 70
3 Huber v. Martin, 127 Wis. 412, Am. St. Rep. 149, 77 N. W. 868. See
3 L.R.A.(N.S.) 653, 115 Am. St. § 683 herein.
Rep. 1023, 105 N. W. 1031, 7 Am. « People v. Security Life Ins. &
726
PARTIES— MEMBERS § 319
life policy is entitled to share with other creditors in the assets ; he
is not a partner."^ So a policy holder is not a partner of the com-
pany.' There is no trust relation between the policy holder of
the mutual company and the company, and an action in equity will
not lie on such a theory.^ In People v. Security Life Insurance
and Annuity Company,^" (the organization was a regular insur-
ance company, incorporated with a capital), the court said: ''The
argument that they are to be treated as partners is quite ingenious,
but I think clearly unsound," and also declared that the stock
was contributed by stockholders, and not policy holders, and man-
aged by directors chosen by stockholders, and that the members
had no voice in the election of officers unless they were stockholders,
and had no voice in the management of the business. In another
case. Mutual Benefit Life Insurance Company v. Hillyard," the
court says: "The suggestion that this being a mutual company the
contract is therefore like a partnership, and dissolved, is disposed
of by what Allen, J., said in substance in Cohen v. New York
Mutual Life Insurance Company /^ that the company is a body
corporate, capable of contracting as such, and the relation is be-
tween insurer, a corporation, and insured; that the members are
not partners between themselves. The contract is the contract of
a corporation, and whatever incidental advantages appertain to a
member, that does not affect the contract in the policy." In Cohen
V. Mutual Life Insurance Company,^^ referred to in the last case,
the court, Allen, J., says: "But whatever analogies there may be
between mutual companies and ordinary partnerships, and the re-
lation of the members of the two organizations, an incorporated
company, although organized on the mutual principle, is in no
proper or legal sense a partnership. The defendant is a body poli-
tic and corporate, capable of contracting and of suing and being
sued, and the relation between the plaintiff and the corporation
is that of insured and insurer, and the rights and duties of the con-
tracting parties are to be governed and determined by the terms
of the policy by which the insurance is effected, as in other cases.
Other and incidental rights are secured to the plaintiff as a mem-
ber of the company, one of the corporators ; but this does not make
the members partners as between themselves, or affect the express
Annuity Co. 78 N. Y. 114, s. e. 7 » Taylor v. Charter Oak Life Ins.
Abb. N. C. (N. Y.) 198, 34 Am. Rep. Co. 59 How. Pr. (N. Y.) 468.
422. ^° 78 N. Y. 114, 34 Am. Rep. 522.
' People V. Security Life Ins. & " 37 N. J. L. (8 Vroom) 444, 18
Annuity Co. 78 N. Y. 114, 7 Abb. N. Am. Rep. 741.
C. (N. Y.) 198, 34 Am. Rep. 522. 12 50 N. Y. 024, 10 Am. Rep. 522.
8 Brown y. Stoerkel, 74 Mich. 209, " 50 N. Y. 624, 10 Am. Rep. 522.
276, 3 L.R.A. 530, 41 N. W. 921.
727
§ 319 JOYCE ON INSURANCE
contract of the coi-poration." In another New York case it is decided
that the holder of a policy of insurance in a mutual company is in
no sense a partner of the coi*poration ; his relation with the company
is one of contract, measured by the terms of the policy.^* In Brown
V. Stoerkel/* Morse, J., declares: "This association was in no sense
a copartnership. There Avas no business carried on by it, and noth-
ing involving a loss or profit in a business sense. It was purely a
benevolent and social organization, having also in view the protec-
tion, benefit, and welfare of its members in their vai-ious employ-
ments. It must now be considered as well settled that persons
as to their membership and rights in such societies and the funds
of the same, oy the constitution and by-laws of the association which
they adopt or subscribe to after adoption. Such an organization
may he neither a partnership nor a corporation. The articles of
agreement of such an association, whether called a 'constitution,'
'charter,' or 'by-laws.' or any other name, constitute a contract be-
tween the members, which the courts will enforce, if not immoral
or contrary to the public policy or the law of the land." In Gor-
man V. Russell.^^ the a.«sociation was unincorporated, and its pur-
pose was to provide certain benefits to its members in case of sick-
ness or death. The funds, therefore, were to be raised under its
con.stitution by the collection of an initiation fee, weekly dues,
fines, etc. Certain persons claiming membership were excluded
liave a right to enter into such associations, and to bind themselves
from the meetings of the organization, and brought a bill for its
dissolution, and an accounting of the partnership. Although no
American cas&s are cited in the opinion, the court apparently rely-
ing on the English decisions, it was decided that henevolent associ-
ations are partnerships; that voluntary organizations of this char-
acter for mutual relief in sickness or distress, provided for by funds
raised as they were here, are jiartnerships, and could be dissolved
in equity for improperly excluding a member, and l)e compelled to
account. In Atkins v. Ilunt,^^ the defendants signed articles of
association in trade, under the name of "The Farmers and Mechan-
ics' Store," by which it was provided that any stockholders might
withdraw upon giving six months' notice, and that the business of
the company should be done pursuant to a major vote of those
present. Tlie defendants subscribed a certain sum, and a by-law
provided that each member should become a partner, and it waa
i« Uhlman v. New York L. Ins. Co. ^^ 74 Mich. 269, 276, 3 L.R.A. 430,
109 N. Y. 421, 4 Am. St. Rep. 482, 41 N. W. 921.
17 N. E. 363. See also Grobc v. ^^ 14 Cal. 531.
■ Erie County iMntual Life Ins. Co. 2 \ "14 N. H. 205.
Misc. 462, 53 N. Y. Supp. 628.
728
PARTIES— MEMBERS § 319
held that the defenclants were partners in the company. This was
not a contract to form a partnership in futuro, but an actual exist-
ing association, liable as. partners, and the liability rested upon hav-
ing signed by-laws forming a present company. It is held in New
York,^^ in an action to dissolve it, that a voluntary a&sociation es-
tablished for moral, benevolent, and social objects, where there is
no power to compel the payment of dues, and where the right of
the member eea.ses on his failure to make such payment, is not a
partnership, and the court per Miller, J., says: ^'Xor are the plain-
tifl's entitled to the relief claimed upon the ground that the members
of the society were copartners. Associations of this description are
not usually partnerships. There is no power lo compel payment
of dues, and the right of the member ceases when he fails to meet
his annual subscription. This certainly is not a partnership, and
the rights of copartners as such are not fully recognized. The pur-
pose is not business, trade, or profit, but the benefit and protection
of its members as provided for in, its constitution and by-laws. In
accordance Avith well-established rules no partnership exists under
such circumstances." Another important case is that of Ash v.
Guic,^^ wherein it was decided that the members of a ^lasonic lodge
are presumptively not partners. The action was assumpsit on a
certificate of indebtedness executed by the master and wardens of
the lodge, and was directed against a large number of the members.
And the court said: "Copartnership has been defined to be a 'com-
bination by two or more persons of capital or labo'r or skill, for the
purpose of business for their common benefit.' ... It would
seem that there must be a community of interest for business pur-
poses. Hence voluntary associations or clubs for social and chari-
table purposes, and the like, are not proper partnerships, nor have
their members the jjowers and responsibilities of partners. A be-
nevolent and social society has rarely, if ever, been considered a
partnership. . . . Here there is no evidence to wan^ant an in-
ference that when a person joined the lodge he bound himself as
a partner in the business of purcliasing real estate and erecting
buildings, or as a partner, so that other members could borrow
money on his credit. The proof fails to show that the otlicers or
a committee, or any number of members, had a right to contract
debts for the building of a temple which would be valid against
every member from the mere fact that he was a member of the
lodge. But those who engaged in the enterprise are lial)le for the
debts they contracted, and all are included in such liability who
assented to the undertaking or subsequently ratified it. Those who
" Lafond v. Deems, 81 N. Y. 507, " 97 Pa. St. 493, 39 Am. Rep. 818
514.
729
§ 319 JOYCE ON INSURANCE
participated in the erection of the building, by voting for and ad-
vising it, are bound the same as the committee who had it in charge ;
and so with reference to borrowing money. A member who sub-
sequently approved the erection or borrowing could be held on the
ground of ratification of the agent's acts." In an English case ^ it
is held that the right to participate in the profits of the company
did not constitute the insured a partner with the proprietors of the
company. Mr. Parsons' definition of partnership contemplates a
division of profits as an element of partnership.'^ A right to re-
ceive a share of the profits, however, is held in New Jersey not to
be an invariable test.^ But in Babb v. Reed * it is held that an
association for purposes of mutual benevolence among its members
only is not an association for charitable uses. If not incorporated,
its members are regarded in law as partners in relation to third
persons.
1 In re English Assur. Soc. 11 ' Seaburv & Jolm.son v. Bolles, 51
Week. Rep. 681, 8 L. T. N. S. 724. N. J. L. (22 Vroom) 103, 11 L.R.A.
2 Parson.s on Partnerships (4th 136, 16 Atl. 54, and note.
ed.) sec. 1. This is also true of the ^5 Rawle (Pa.) 151, 28 Am. Dee.
definition under Deering-'s Annot. 650.
Civ. Code of California, sec. 2395.
730
I
CHAPTER XIV.
PARTIES— THE INSURER.
§ 325. Insurer defined.
§ 326. Stock insurance companies defined.
§ 327. Legislation concerning insurance companies.
§ 328. Same subject: foreign companies.
§ 328a. State regulation: insurance business as franchise.
§ 328b. State regulation : quasi public character of insurance business.
§ 329. Foreign company: retaliatory and anti-compact laws: combina-
tions to control rates.
§ 329a. Anti-compact laws : combinations to control rates continued : con-
spiracy.
§ 330. Foreign companies : what constitutes "doing business," etc.
§ 330a. Same subject.
§ 331. Foreign company estopped to avoid contract by setting up non-
compliance with statutes.
§ 332. When contracts valid although company has not complied with
statutes.
§ 332a. Same subject.
§ 332b. Same subject: insurance in foreign state of property in another
state.
§ .333. When contracts not valid where company has not complied with
statutes.
§ 333a. Same subject.
§ 333b. Same subject.
§334. Charter: corporate powers: ultra vires.
§ 334a. Same subject : power of corporation to insure life of its president.
§ 335. Forfeiture of charter.
§ 325. Insurer defined.— An insurer is the person who in a cer-
tain sense assumes the risk and undertakes to indemnify or pay a
certain sum on the happening of the specified contingency .^ Sucli
5 See 1 Phillips on Ins. (3d ed.) "The word 'underwriter' has an ac-
ggg 2. cepted and well understood meaning.
"The insurer is commonly called Borrowed fi'om the early method of
the underwriter because he subscribes obtaining marine insurance, it has
the policy." 17 Earl of Halsbury's now acquired the meaning of any
Laws of England, p. 336. one who insures another, on life or
731
§ 325
JOYCE ON INSURANCE
person may be a corporation or association or individual when not
precluded by statute. Formerly, a large proportion of the risks
were underwritten by private individual;;,^ but the business of
insuring in this country is almost exclusively in the hands of cor-
porations or associations, which are divided into either stock com-
panies and mutual companies or associations. Sometimes a
company combines both plans of insurance.''^
property in a policy of insurance."
Childs (ex rel. Smitli) v. Fireman's
In.s. Go. 66 Minn. 393, 397, 69 N. W.
141, 35 L.R.A. 99.
WJien the legislature used the term
''board of fire underwriters," the pre-
sumption is that tliey meant a board
composed exclusively of fire insur-
ance; that is of those engaged in the
bu.siness of insuring others, on prop-
erty against loss by fire. Childs (ex
rel. Smith) v. f^iremen's Ins. Co. 66
Minn. 393, 397, 35 L.R.A. 99, 69 N.
W. 141.
^ See prelim, chap. § IV. a herein;
2 Parsons on Contracts (7th ed.)
351; 10 New International Ency.
(1908) p. 685. As to individuals un-
incorporated associations Lloyds and
partnerships, see §§ 335b et seq. here-
in.
''A policy may be underwritten
by individuals or a company." Earl
(•f llalsburv's Laws of England, vol.
37, p. 339."
At common law individuals might
contract with another to indemnify
him against loss by fire and both in
England and in this country the busi-
ness was carried on bv individuals.
Barnes v. People, 168 111. 425, 429,
48 N. E. 91.
"Insurance, in its early existence,
when the nature of the risks assumed
were few, and the amount of busines.s
small, was done chiefly, if not entire-
ly, by individuals. But in more re-
cent times, it ha.s been extended un-
til it embraces almost every kind of
risk, and has grown to such ]>i-opor-
tions that it enters into every depart-
ment of business, and affects all class-
es of people and their property; and
ha.'!, in consequence, everywhere be-
73;
come the subject of legislative regula-
tion and control. Tlie several states
have enacted laws, designed to place
the business within their limits on
such substantial basis as will afford
adequate protection to the citizens,
and to their property." State v:
Ackerman, 51 Ohio St. 163, 189, 190,
37 N. E. 828, 24 L.R.A. 298, per Wil-
liams, J. Quo warranto for unlaw-
fully exercising a public franchise
brought against certain jiersons
transacting business under the name
(i\' the "Guarantee and Accident
Lloyds, New York" held that under
the revised statutes of Ohio they
should be ousted from transacting the
business of insurance within that
state.
^ The Pennsylvania act of Febru-
ary, 1S70, provided that it should be
unlawful to issue or execute any
policy of insurance or guaranty
against loss by fire or lightning, ex-
cept under authority expressly con-
ferred by a charter of incorporation.
See Arrott v. Walker, 118 Pa. St.
249, 12 Atl. 280.
Classification of insurance compa-
nies important. 5 Earl of Halsbury's
Laws of England, 616.
Mixed companies defined. Burt on
Life Ins. (1849) p. 52. Mixed com-
panies began to appear about 1848.
Subsequent to 1850 the new incorpo-
lations Avere mostly of the mixed
class. When tlie Civil War ])i'oke
out in 1861 the majority of the cora-
l)anies were mixed comiianies, but
the mutuals were considered sounder
institutions. In 1877 there were
twenty-four mixed, eleven mutual,
three propr-ietary. Pamphlet on
Progress of American Life Ins. (Re-
vieAv Pub. Co. Phila. 1877).
PARTIES— THE INSURER §§ 32G, 327
§ 326. Stock insurance companies defined. — A stock insurance
company is one which has a capital stock owned by its stockholders,
and which capital is the basis of its business, and is liable for losses
and expenses. Those insured in such companies pay premiums as
the basis of their contract with the company.' A share of stock
may be defined as a right which its owner has in the management,
protits, and ultimate assets of the corporation. A stockholder in an
insurance company has the same rights as a stockholder in any
other corporation, but he has no legal title to the property or profits
of the corporation until a dividend is declared or a division made
on the dissolution of the corporation.^
§ 327. Legislation concerning insurance companies. — In most, if
not all, the states of the Union statutes have been enacted princi-
l)ally for the protection of policy holders, prescribing certain con-
ditions upon which insurance companies, associations, or societies
may be permitted to organize or transact business within the state,
and these apply to both domestic and foreign insurance cor|)ora-
tions, associations, or societies. The statutes will only be brioliy
"Prior to 1874 the staututes of Toomey v. Supreme Lodge Knights
Missouri recognized three kinds of of Pythias, 147 Mo. 129, 136, 48 S.
insuranoe f-ompanies, — stock com- W. 936; Rev. Stat. Mo. 1909, sec.
panies, mutual companies, and stock 6896 (Rev. Stat. 1899, sec. 7853).
and mutual companies, the general ^ Commercial Fire Ins. Co. v.
nature of whicli is well understood, Board of Revenue, 99 Ala. 1, 42 Am.
but one purpose of which was to St. Rep. 17, 14 So. 490, wlien ineor-
make a profit for the promoters, and porators become a corporation before
one feature of whicli was the pay- stock subscriptions are invited, mere
ment of fixed premiums at stated agreement to subscrilx-, see \'an
times by the insured, and the pay- Schaick v. Mackin, 113 N. Y. Supp.
ment of a sum certain by the com- 408, 129 App. Div. 335.
pany to the beneliciary named in the Neir Yuri:. — Insurance Law, sec.
policy upon the death of the in- 110 (Laws 1892, p. 1974, c. 690, ]i.
sured," and prior to the act of 1887 1975, sec. 112); N. Y. Stock Corj).
assessment companies were not au- (Laws 1892, p. 1835,' c. 688, sec. 41).
thorized by the laws of Missouri. See also for definition of share of
Aloe V. Fidelitv Mutual Life Assoc, stock; three elements in rights of
164 Mo. 675, 55 S. W. 993, 29 Ins. i)ropei'ty, Carnagie Trust Co', v. Se-
L. -J. 6/9-681, per Marshall, J. curity Life Ins. Co. of America, 111
A company falls under the classi- Va. 1, 31 L.R.A.(N.S.) 1186 (anno-
fication of a "mixed company" or tated on validity of agreements to
association where it possesses some of control the voting power of corpo-
the features incident to 1)otli a "stock late stock) 21 Amer. & Eng. Ann.
company" and a "mutual company," Cas. 1287, 6S S. E. 412 (ease as to
but is neither. State v. Allev, 96 voting trust in stock and stockhold-
Miss. 720, 51 So. 467, 39 Ins. L. J. er's rights; valid trust). Capital
629. stock delined, see Cal. Stat. & Amdts.
* See Anderson's Law Diet. 558. 1907, p. 1C6. (New Art. XVI. of
State V. Willett, 171 Ind. 296, 23 Polit. Code Chap. 119, see. 634a).
L.R./.(N.S.) 197, 86 N. E. 68;
733
§ 327
JOYCE ON INSURANCE
noticed, however, in this work. The power of the state to enact
such laws is inherent, since corporations and associations within
its jurisdiction, hke natural persons, are subject to the laws which
may, in the proper exercise of its police power and within constitu-
tional limits be enacted for the regulation of the community and
the protection of citizens.^" And statutes of the above characler
should be liberally construed,^^ but they should not constitute class
legislation or discriminate between citizens of equal standing and
merit within or without the state.^^ -phe legislature has also the
same power to regulate the conduct of the agents of such corpora-
tions as it has to regulate the conduct of the corporations them-
selves,^^ and it may impose upon such agents a privilege tax or
^° United States. — German Alliance Ohio. — Robbins v. Hennessey, 86
Ins. Co. V. Hale, 219 U. S. 307, 55 Ohio St. 181, 99 N. E. 319, Ohio Rev.
L. ed. 229, 31 Sup. Ct. 246 ; John Stat. 1908, as am'd 99 Ohio Laws, p.
Hancock Mutual Life Ins. Co. v. 131.
Warren, 181 U. S. 73-75, 45 L. Fraternal order subject to state
ed. 755, 21 Sup. Ct. 535, 30 Ins. L. regulation. State v. Arlington, 151
J. 623, per Mr. Chief Justice Fuller; N. Car. 640, 73 S. E. 122; mutual
Orient Ins. Co. v. Daggs, 172 U. S. company also so subject. ^lontgom-
557, 43 L. ed. 552, 19^ Sup. Ct. 281, ery v. Harker, 9 N. Dak. 527, 84
(see this case under § 328 herein) ; N. W. 369.
McClain v. Provident Savings Life The business of insurance against
Assur. Soc. 110 Fed. 80, 49 C. C. A. loss bv fire is a proper subject for
31, s. e. 184 U. S. 699, 46 L. ed. 765, the exercise of the police power of
23 Sup. Ct. 938. the state. Commonwealth v. Vroo-
AIabama.—B.ORdley v. Purifoy, man, 164 Pa. St. 306, 25 L.R.A. 250,
107 Ala. 276, 30 L.R.A. 351, 18 So. 30 Atl. 217, 44 Am. St. Rep. 603.
220. As to police power, see Joyce on
Idaho. — Continental Life Ins. & In- Franchises (ed. 1909) see. 366, and
vestment Co. v. Ilattabaugh. 21 Ida- note p. 582; Joyce on Electric Law
ho, 285, 121 Pac. 81. ' (2d ed.) see. 215, and note.
Illinois. — People v. Hartford Life As to standai-d policy; eonstitu-
Ins. Co. 252 111. 398, 37 L.R.A. (N.S.) tional law; power of legislature and
778, 96 N. E. 1049. of commission, see § 176a herein.
11 Kentucky. -^Bell v. Louisville On fire insurance as business af-
Board of Fire Underwriters, 146 Ky. fected by public interest, see notes in
841, 143 S; W. 388. 29 L.R.A. (N.S.) 1195; L.R.A.1915C,
Mississippi. — General Accident, 1189. On power of legislature to
Fire & Life Assur. Co, v. Walker, 99 regulate life insurance rates, see note
Miss. 404, 55 So. 51, 40 Ins. L. J. in''37 L.R.A. (N.S.) 466.
1504; State v. Alley, 96 Miss. 720, "State v. Alley, 96 Miss. 720, 51
51 So. 467, 39 Ins. L. J. 629. So. 467, 39 Ins. L. J. 629.
Missouri.— State v. Stone, 118 Mo. ^2 gtate v. Stone, 118 Mo. 388, 25
388, 25 L.R.A. 243, 40 Am. St. Rep. L.R.A. 243, 40 Am. St. Rep. 388, 24
388, 24 S. W. 164; State v. Mat- S. W. 164; State (ex rel. Inter-in-
thews, 44 Mo. 523. suranee Auxiliary Co.) v. Revelle,
Ne^v rorfc.— People v. Formosa, 257 Mo. 529, 165 S. W. 1084.
131 N. Y. 478, 27 Am. St. Rep. 612, 13 People v. Formosa, 131 N. Y.
30 N. E. 492; People (ex rel. Moore) 478, 27 Am. St. Rep. 612, 30 N. E.
V. Holmes, 135 N. Y. Supp. 467, 151 492.
App. Div. 257.
734
PARTIES— THE INSURER § 327
license fee as a condition precedent to transacting business.^* These
laws are numerous; they provide for the possession of a certain
capital by insurance companies before commencing business,^*
^* Cole Insurance Commr. v. Am- Louisiana. — Statute requiring for-
erican Surety Co. 90 Miss. 782, 44 feiture of charter where "whole of
So. 871, Miss. Code 1906, sec. 3828, the capital stock" not paid for in
case of a^ent of surety company. specified time. La. Laws 1898, act
Legislature may declare void a 105, sec. 3, as am'd by act 1902, No.
contract with one who has not paid 50; State (ex rel. Guion, Atty. Genl.)
a privilege tax, and this applies to v. People's Fire Ins. Co. of New Or-
a premium note given to agent, leans, 126 La. 548, 52 So. 763. See
White v. Post, 91 Miss. 685, 45 So. also State (ex rel. People's Fire Ins.
366, under Miss, act 1898, pp. 18, Co. of New Orleans) v. Michel, 125
30, c. 5. La. 55, 51 So. 66.
Agent of assessment plan company Maryland. — Corporation created
liable for license tax. Mutual Re- by special charter requiring as con-
serve Fund and Life Assoc, v. City dition precedent that specified amount
Council of Augusta, 109 6a. 73, 35 of capital stock be subscribed for
S. E. 71, 29 Ins. L. J. 319. and a certain per cent thereof paid
Agent cannot be refused license in cash. Effect of acts of insurance
when all statutory requirements have department in recognizing corpora-
been complied with, under Oreg. tion as in existence even though con-
Laws 1911, pp. 376, 377, sees. 1-4; ditions precedent not complied with.
Guy L. Wallace & Co. v. Ferguson, Munich Re-Ins. Co. v. United Sure-
70 breg. 306, 140 Pac. 742. ty Co. 113 Md. 200, 77 Atl. 579.
Agent for domestic company does Massachusetts. — Held that Stat,
not require license in Kentucky. 1847, Mass. c. 273, sec. 2, and Rev.
Commonwealth v. Gregory, 121 Ky. Stat. c. 37, sec. 42, with regard to
356, 89 S. W. 163. payment, etc. of a certain amount of
^^ AU agents included under N. Y. capital before doing business, did not
Consol. act, see. 523, requiring pay- apply to mutual insurance compan-
ment by agent to fire department, ies. Williams v. Cheney, 3 Gray (69
Fire Department of city of New York Mass.) 215. See also Atlantic Mu-
V. Stanton, 51 N. Y. Supp. 242, 28 tual Fire Ins. Co. v. ConckHn, 6
App. Div. 334. Gray (72 Mass.) 73.
Arkansas. — As to obtaining loan Minnesota. — State v. Critchet, 37
on note to raise required capital, and Minn. 13, 32 N. W. 787; Stat« v.
use of capital stock in making pay- Truly, 37 Minn. 97, 33 N. W. 554.
ment of loan. Dodge v. State Na- Nebrashx. — In re Babcock, 21 Neb.
tional Bank, 96 Ark. 65, 131 S. W. 500, 32 N. W. 641, under Com. Stat.
65 (Kirby's Dig. Laws Ark. sec. Neb. 1885, c. 16.
4335). . New York. — People v. Manhattan
California. — People (ex rel. Mut. Fire Ins. Co. 34 N. Y. St. Rep.
Schindler) v. Flint (Cal. 1892), 28 570, 12 N. Y. Supp. 264, 58 Hun, 605
Pae. 495. under N. Y. Laws, 1853, c. 460.
Indiana. — As to corporation creat- Oregon. — American Life Accident
cd by special act, and amendment to Ins. Co. v, Ferguson, 66 Oreg. 417,
charter permitting increase of capital 134 Pac. 1029; Union Pacific Life
stock in violation of constitution. Ins. Co. v. Ferguson, 65 Oreg. 142,
Marion Trust Co. v.- Bennett, 109 43 L.R.A.(N.S.) 958, 129 Pac. 529,
Ind. 346, 124 Am. St. Rep. 228, 82 rehearing denied 130 Pae. 978.
N. E. 782. Pennsylvania. — As to company
735
327
JOYCE ON INSURANCE
for the deposit of a security fund with the state/® for giving bonds,"
for procuring a certificate or license/^ for an examination into the
incorporated by special act ; charter
held subject to constitutional amend-
ment and also to statutes creating
insurance department, and governing-
life insurance and so paid up capi-
tal a condition precedent. Union
National Life Jns. Co. In re, 58 Pitts-
burg Leg. J. 2 (opinion of Atty.
Genl.). See Pennsylvania Ins. Co.
of Pittsburg, In re, 37 l^a. Co. Ct.
Rep. 69 (opinion of Atty. Crenl.);
Provident Life & Trust Co. v. Board
of Revision of Taxes, 29 Pa. Co. Ct.
Rep. 43-L.
^® State (ex rel. Unity Industrial
Life Ins. & Sick .Ben. Assoc.) v.
Michel, 121 La. 330, 46 So. 352, 37
Ins. L. J. 58/ (industrial and sick
benelit .association) ; act 1906, no. 65,
p. 101, act 1898. no. 105, p. 132;
Employei-s Liability Assur. Co. v.
Commissioner, 64 Mich. 614, 31 N.
W. 542; :\Iich. Stat. Laws 1884, p.
279, act 237; Attorney General v.
North American Life Ins. Co. 82 N.
Y. 172, N. Y. Laws 1866, c. 576;
People V, Chapman, 5 Hun (N. Y.)
222. As to change in securities and
liability of Superintendent of Insur-
ance, see Ravmond v. Securitv Life &
Trust Ins. Co. 97 N. Y. Supp. 557,
111 App. Div. 191, rev'g 91 N. Y.
Supp. 1041, 101 App. Div. 546, rev'g
89 N. Y. Supp. 753. 44 Misc. 31;
Metropolitan Casualtv Ins. Co. of
N. Y. V. Basford, 31 S. Dak. 149, 139
N. W. 795.
Life insurance companies on co-
operative pkin excepted. When
State Treasurer not entitled to re-
tain deposits made. Illinois Life Ins.
Co. V. Tullv, 174 Fed. 355, 98 C. C.
A. 259.
When reinsurer a right to icith-
drair deposits, see Prewitt, Commr.
V. Illinois Life Ins. Co. 29 Ky. L.
Rep. 447, 93 S. W. 633, 35 Ins. L.
J. 688.
^"^ Union Central Life Ins. Co. v.
Skipper, 115 Fed. 69, 52 C. C. A.
663, Sand. & H. Ark. Dig. sec. 4124:
Kaw Life Assn. v. Lemke, 40 Kan.
661, 20 Pac. 512, under Laws Kan.
1885, c. 131. Construction of bond
filed by mutual fire insurance com-
] janies ; liability of sureties, see
Crawford v. Ozark Ins. Co. 97 Ark,
549, 134 S. W. 951, 40 Ins. L. J.
819, Laws Ark. 1905, p. 492. See al-
so United States Fidelitv & Guaranty
Co. V. Fultz, 76 Ark. 410, 89 S. W.
93.
Bonds may be required from one
applicant for license and securities
from another. State v. McMaster. 94
S. Car. 379, 382, 77 S. E. 401, 402.
^^ Roane v. Union Pacific Life Ins.
Co. 67 Oreg. 264, 135 Pac. 892,
Lord's Oreg. Laws, .sec. 4609. See
Commonwealth ]\Iulvial Fire Ins. Co.
v. Edwards, 124 N. Car. 116,- 32
S. E. 404.
Only one license can be required
from fire insurance company under
license laws acts 1898, No. 171, State
(ex rel. Hartford Fire Ins. Co.) v.
Fitzpatrick, 133 La. 115, 62 So.
494; but as am'd by acts 1906, No.
214, certain other companies com-
bining two kinds of business may
liecome liable for a second license.
State V. Marvland Ca.>^ualtv Co. 133
La. 146, 62 So. 606. Only one license
rec[uired from accident and sickness
companies. State v. Continental
Casualty Co. 134 La. 806, 64 So.
/57, act 1902, no. 50, sec. 5.
Auditor no authority to issue
certificate to society under name re-
sembling one in tise. Knigiits of
Maccabees of the World v. Searle, 75
Neb. 285, 106 N. W. 448. Cobbev's
Ann. Stat. Neb. 1903, sec. 6502. Ex-
amine People (ex rel. Traders Fire
Ins. Co.) V. Van Cleave, 183 111. 330,
47 L.R.A. 795, 55 N. E. 698; Knights
of i\Iodern Maccabees v. Martin, 33
Pa. Co. Rep. 58.
License may be refused where all
conditions of statute not complied
with. State (ex rel. Lumberman's
Accident Co.) v. Michel, 124 La. 558,
36
PARTIES— THE INSURER
327
company's affairs,^^ for furnishing information to the superintend-
ent of insurance by the eom[)anies regarding their business and
iinaneial condition,^" for publication of annual statements in daily
papers designated by the insurance commissioners,^ for making re-
ports to the comptroller,^ for returns to the insurance commis-
sioners,^ for the payment of a license tax or fee,* for the taxation of
50 So. 543, acts La. 1898, no. 105,
p. 134, sec. 2, par. 4.
Association to sell cotitracts to
covipensale employee.-' out of einploy-
ment: All companies whose object
is to transact business in Nebraska
must obtain a license in compliance
wifh the statute, act 1873, Genl. Slat.
1873 c. 33, p. 42S. which exr-epts life
insurance. State (ex rel. National
Employees Assoc.) v. Barton, 92 Neb.
66G, 139 N. W. 225.
13 Bell V. Louisville Board of Fire
Underwriters, 146 Kv. 841, 143 S. W.
388, Kv. Stat. 752; People v. State
Ins. Co. 19 Mich. 392; Re World's
Ins. Co. 40 Barb. (N. Y.) 499.
20 Stale V. Matthews, 44 Mo. 523;
Commonwealth v. ?Ioc-k A. IMut. B.
Assn. 10 l^hila. (Pa.) 554.
As to filing' certificate with county
clerk showing finan.cial condition:
Liability of president for noncom-
pliance, notwitlistanding- requirement
of another section of the statute as to
filing- statement witii state auditor,
see Welch Slave & Mercantile Co. v.
Stevenson, 92 Ark. 2(iG, 22 S. W.
1000. Kirbv's Dig. of Ark. sec. 848,
859, 4349. 'See also as to conflict of
laws requiring annual statement. Fire
Association of Pliila. v. Love, 101
Tex. 37(), 108 S. W. 810, 158 Tex.
Rev. Stat. 1895, art. 3084, subd. 7.
Tex. Laws 1907, p. 482, c. 18, .sec. 8.
As to failure to make annual re-
port: loans: forgery: false entries:
])eriurv, etc., under N. Y. Laws
1892, p. 1952, c. 090, sec. 44. See
People (ex rel. Hegeman) v. Corri-
gan, 195 N. Y. 1, 87 N. E. 7f)2, rev'g
113 N. Y. Supp. 504, 129 App. Div.
62, aff'g 129 App. Div. 75.
1 Slate (ex rel. Cowles) v. Schive-
ly, Commr. 63 Wash. 103, 114 Pac.
Joyce Ins. Vol. I. — 47. 73
901, Hem. & Bal. Code (Wash.) sec.
6119.
^ People V. National Fire Ins. Co.
27 II un (N. Y.) 188, under N. Y.
act -June 1, 1880.
^ ("(inunnnwoalth v. Germania Life
Ins. Co. 11 Phila. (Pa.) .5-53.
* .4k6a»m.— Acts 1886, 1887, p.
105, does not apply to domestic
corporations. Iloadlev v. Purifov,
107 Ala. 276, 30 L.R.A. 251, 18 So.
220.
Kentucky. — Competent for legis-
lature to classify and subdassify and
may delegate })ower to municipality
which may constitutionally impose
greater license tax on industrial than
on life insurance companies. Metro-
politan Life ins. Co. v. City of Paris,
J 38 Ky. 801, 129 S. W.' 112. See
Northwestern Mutual Life Ins. Co. v.
James, 138 Ky. 48, 127 S. W. 505,
under Ky. Stat. sec. 4226. License
tax not in lieu of ad valorem taxes;
Gernuui National Ins. Co. v. City of
Louisville, 21 Ky. L. Rep. 1179, 54
S. W. 732.
Louisiana. — La. act 101, 1886, sec.
7, is constitutional. State v. New
England Mut. Ins. Co. 43 La. Ann.
133, 8 So. 888. License tax oh in-
surance companies need not be equal
and uniform as lo all companies:
State v. Liverpool, London & Globe
ins. Co. 40 La. Ann. 463, 4 So. 504.
As to division of companies into
several classes and gra<l nation ac-
cording lo amount of jiremium re-
ceived, see State v. Liverpool, Lon-
don & Globe Ins. Co. 40 La. Ann.
463, 4 So. 504. New Orleans v.
Salamander Co. 25 La. Ann. 650.
I\Iiss-issippi. — License fees and
taxes imposed cannot l)e collected
from association unlaicfnlly conduct-
ing hnsiness. Adams v. Lumber-
§ 327 JOYCE ON INSURANCE
corporate property,* for taxation to pay expenses of fire rati/i*
man's Indemnity Exchange (1911)
— Miss. — , 55 So. 882, 40 Ins. L. J.
3819.
Nebraska. — City of Columbus v.
Hartford Ins. Co. 25 Neb. 83, 41 N.
W. 140, under Neb. Laws, 1887, c.
66. Payment to auditor illegal when
constitution requires payment to
State Treasurer. State v. Home Ins.
Co. 59 Neb. 524, 81 N. W. 443. When
unconstitutional sections of chapter
invalidates entire act. State (ex
rel. Cornell) v. Povnter, 59 Neb. 417,
81 N. W. 431. Sess. Laws 1899, e.
47, sees. 36, 37.
Pennsylvania. — -3ljtna Fire Ins.
Co. V. Reading, 5 Pa. (L. ed.) 570, 11
Cent. Rep. 858, under Pa. act 1873,
April 4th, rejiealed act May 24, 1887.
Virginia. — City may constitution-
ally impose license tax on property
which could be reached by ad valorem
tax. Scottish Union & National Ins.
Co. V. City of Winchester, 110 Va.
451, 66 So. 84.
As to conditions as to license fees
etc., see Joyce on Franchises (ed.
1909) sees. 356, 357.
Workmen's compensation act: In-
dustrial insurance law of Washing-
ton, which requires certain contri-
butions from employers, to be used
not to meet expenses of the govem-
.ment but to recompense employees
in certain industries, doas not impose
a tax under the constitutional mean-
ing of that word, although it is in
the nature of a license tax, and the
act is not uncotistitutional as creating
taxation not uniform. State (ex.
rel. Davis-Smith Co.) v. Claussen, 65
Wash. 156, 37 L.R.A.(N.S.) 466,
117 Pae. 1101.
* Power of commissioner of insur-
ance to grant license or revoke is
only ministerial, and not judicial:
Hartford Fire Ins. Co. v. Commis-
sioners, 70 Mich. 485, 38 N. W. 474.
See § 328 herein and notes.
On constitutionality of compulsory
industrial insurance, see note in 37
L.R.A.(N.S.) 466.
7
5 United States. — Taxation of en-
forceable credits or premiums due on
open accounts does not constitute
taking property without due process
of law. Orient Ins. Co. v. Board of
Assessors for Parish of Orleans, 221
U. S. 358, 55 L. ed. 769, 31 Sup. Ct.
554; Liverpool, London & Globe Ins.
Co. V. Board of Assessors for Parish
of Orleans, 221 U. S. 346, 55 L. ed.
762, act 170, La. 1898, sec. 1.
Excise tax upon entire net income
over $5,000 is valid and within power
of Congress even though certain fra-
ternal, etc. societies exempted, and
idthough the source of part of income
is non-taxable property. Flint v.
Stone Tracv Co. 220 U. S. 107, 55 L.
od. 389, 31 Sup. Ct. 342, Ann. Cas.
192B, 1312, corporation tax law, act
of Congress, Aug. 5, 1909, sec. 38,
Stat, at L. 61st Congress, pp. Ill,
112, 117, c. 6, U. S. Comp. Stat.
Supp. 1909, pp. 659, 844, 849.
Excise tax under act of Congress,
Aug. 5, 1909 (36 Stat. 112, c. 6, .sec.
38^ [Comp. Stat. 1913, sees. 6300,
6301]). Surplus not a "dividend:"
"income received:" deductions. See
Connecticut General Life Ins. Co. v.
Eaton (U. S. D. C.) 218 Fed. 188,
45 Ins. L. J. 258 (case of life, "stock"
and "mutual" company) ; Connecti-
cut Mutual Life Ins. Co. v. Eaton
(U. S. D. C.) 218 Fed. 206, 45 Ins.
L. J. 281 (case of "mutual" life com-
pany without capital stock).
Income tax provided by acts of
Congress, June 30, 1864, and July
13, 1866, on premiums, assessments,
etc., is not direct tax, but duty or
excise: Pacific Ins. Co. v. Soule, 7
Wall. (74 U. S.) 433, 19 L. ed. 95.
Capital stock invested in United
States bonds are not exempt from
taxation under laws of N. Y. 1880, c.
542; amended bv laws 1881, c. 361;
Home Ins. Co. v. New York, 119 U.
S. 129, 30 L. ed. 350, 8 Sup. Ct. 1385
(court divided). Compare Inter-
national Life Assur. Co. v. Commis-
sioners, 28 Barb. (N. Y.) 318.
38
\
PARTIES— THE INSURER
§ 327
Arkansas. — What constitutes
double taxation. But company liable
to assessment on capital even though
invested in nontaxable shares of
slock in another corporation. Dallas
County V. Home Ins. Co. 97 Ark.
254, 133 S. W. 1113. Kirby's Dig.
Ark. sec. 6902.
Georgia. — Payment of occupation
or business tax no exemption of
personal property from taxation.
Georgia Fire Ins. Co. v. Citv of
Cedartown, 134 Ga. 87, 19 Am. &
Eng. Ann. Cas. 954, 67 So. 410.
Iowa. — When surplus designated
as unassigned funds not a liability
Avliich can be deducted from taxable
credits. Chicago Life Ins. Co. v.
Board of Review, 131 Iowa, 254, 108
N. W. 305, Code Supp. 1902, sees.
1311, 1333b. Amount to which stock-
holders would be entitled, on distribu-
tion of money and credits due them
and found reserved, to pay or rein-
sure policy holders, may be deducted
from taxable property under Iowa
Code, sec. 814: Equitable Life Ins.
'Co. V. Board of Equalization, 74
Iowa, 178, 37 N. W. 141.
Kentucky. — Exemption of capital
stock and accumulated funds under
Ky. act May 8, 1886. repealed by
Ky. Const, sees. 171, 174. German
National Ins. Co. v. City of Louis-
ville, — Ky. — , 54 S. W. 732. What
classes of property of insurance com-
panies are liable to be taxed under
Kentucky Statutes authorizing tlieir
taxation by municipal corporations:
Kenton Ins. Co. v. City of Coving-
ton, 86 Ky. 213, 5 S. W. 461. Lia-
bility of company to pay losses may
not be deducted from assets or prop-
erty liable to taxation : Kenton Ins.
Co. V. City of Covington, 86 Ky.
213, 5 S. W. 461.
Louisiana.- — Notes and bills repre-
senting money loaned at interest are
"'properli/ :" City of New Orleans v.
Mechanics' & Merchants' Mutual Ins.
Co. 30 La. Ann. 876, 30 Am. Kep.
232.
Michigan. — ^Under Michigan acts
200, Pui). acts, 1891, sees. 2^ 4, raort-
7
gages held by insurance companies
upon which they pay taxes are to be
deducted from net assets: Standard
Life & Accident Co. v. Board of As-
sessors, 91 Mich. 78, 52 N. W. 17,
16 L.R.A. 59n, 95 Mich. 466, 55 N.
W. 112.
3Iississippi. — Reduction of assess-
ment on account of destruction of
property means actual loss and does
not apply where destroyed property
is fully insured. Kuhii Bros. v. War-
ren County, 98 Miss. 879, 54 So. 442.
Nebraska. — Vahie of capital stock,
how ascertained: when substantial in-
crease of schedule unconstitutional:
What is excessive and double tax-
ation of property. Bankers' Life
Ins. Co. v. Board of P^qualization, 89
Neb. 469, 131 S. W. 1034, Laws Neb.
1903c, 73. Earned premiums are
taxable as personal property under
Comp. Stat. Neb. 1885, c. 77: Stat.
1885, e. 13, see. 25; Phoenix Ins. Co.
v. City of Omaha, 23 Neb. 312, 36
N. W\ 522.
New Jersey. — What are not ''lia—
bilities'' to be deducted but ^^lia-
bilities on policies" subject to tax-
ation. Amounts apportioned to de-
ferred dividend policies. City of
Newark v. State Board of Equaliza-
tion, 81 N. J. L. 416. 79 Atl. 343, N.
J. Act May 11, 1906 (Pub. L. p.
418), N. J. L. 1907, c. 71, aff'g 77
Atl. 195. Tax is property and not a
franchise tax, under N. J. act April
11, 1886, Rev. 1156, 15 et seq. :
Merchants' Ins. Co. v. Citv of New-
ark, 54 N. J. L. 138, 23 Atl. 395.
Taxation of surplus, see State v.
Parker, 34 N. J. L. 479, 35 N. -J. L.
574.
New York. — Franchise tax: "Gross
premiums ;" reinsurance. People (ex
rel. Continental Ins. Co.) v. Miller,
177 N. Y. 515. 70 N. E. 10, atf g and
modifying 85 N. Y. Supp. 1142, 90
App. Div. 618. Reinsurance reserve
fund held part of capital and tax-
able. People V. Feitner, 65 N. Y.
Supp. 523, 31 Misc. 433, N. Y. Laws
1896, c. 908.
Pennsylvania. — State tax upon en-
39
§ 327 JOYCE ON INSURANCE
board,^ altliougli a requirement for payment of a certain sum for
pensions for disabled firemen is unconstitutional and not within the
tire amount of premiiiins received by -i'iO, 8 N. Y. 241; Sun Mut. Ins. Co.
company does vot co)iflict with Fed- v. New York, 8 N. Y. 241; as to
eral Constitution: Insurance Co. of taxation of capital of mutual com-
North America v. Commonwealth, 87 panv, see Coit v. Connecticut iMutual
Pa. St. 173, 30 Am. Rep. 332. Trust Life Ins. Co. 36 Conn. 512; Mutual
business and life insurance business Life In.s. Co. v. Jenkins, 16 N. Y.
conducted bi/ same compani/: Value 424. Mutual life insurance com|)any
of capital and assets of latter cannot is taxable in town where principal
be added to value of capital stock of place of business is for stocks, l)onds,
former. Commonwealth v. Provident and otiier securities in which its
Life & Trust Co. 3 Dauph. Co. Kep. funds and earnings have been invest-
130, 6 Lack. Leg. N. 140, 9 Pa. ed : Rev. Stat. Me. c. 6, sec. 13 ; City
Dist. R. 479. See also Provident of Portland v. Union ^Mutual Life
Life & Trust Co. v. Board of Re- Ins. Co. 79 Me. 231, 9 Atl. 013. As
vision of Taxes, 29 Pa. Co. Ct. Rep. to county mutual insurance cora-
434. Taxes to be imi/nrm; constitu- panics; exemptions and constilu-
tional law; basis of raluation of lioiuil law; organization for pecuni-
capital stock. Commonwealth v. ary profit, see Iowa JMutual Tornado
Provident Life & Trust Co. (57 Leg. Ins. Assoc, v. Gilbertson, 129 Iowa,
Intel. 221, Pa. act June 1, 1889, Pub. ()-")8, 106 N. \Y. 153, Code .sees. 1642,
L. 420, as am'd In- act June 8, 1891, 17()r), Code Supp. 1902, sec. 1333(1,
Pub. L. 229. • Rev. Stat. U. S. see. 1977 (civil
Utah. — Notes and accounts repre- rights act) U. S. Comp. Stat. 1901,
senting parts of unearned premiums ]i. 1259. Under Massachusetts act
are taxable, no dedii<lio>i from 1804, c. 208, and Stat. 1805, c. 283,
credit of future losses by fire or as to whether tax on capital stock of
cancelations. Home Fire Ins. Co. v. mutuat life insui'ance companies can-
Lynch, 19 Utah, 189, 56 Pa. 681. not be taxed on unredeemed guaran-
Wesi Virginia. — Whetlier ine(|ual- teecai)ital: Commonwealth v. Bi'rk-
ity is produced in singling out for shiie Ins. Co. 98 Mass. 25.
taxation: Franklin Ins. Co. v. State, As to taxation of English joint
5 \V. Va. 349. See Cooley on Tax- stock insurance companies, see Oliver
ation, 129. " v. London Ins. Co. 100 i\lass. 531;
Tax on gross receipts of premiums Equitable Life Assur. Soc. v. iJishop
received by companies or associa- [1900] 1 Q. B. Law Rep. 177.
tions engaged in sick or funeral bene- On taxation of corporate franchise,
fit insurance is valid. Peninsular In- see note in 57 L.R.A. 34; on tax-
du.strial Ins. Co: v. State, 01 Fla. ation of capital stock, note in 58
376, .55 So. 398. L.R.A. 513; on double taxation,
Guarantji or secnrilif companii notes in 58 L.R.A. 593, and 15 L.R.A.
liable to tax on franchise under Ky. (N.S.) })52; on corporate taxation
Stat. 1899, sec. 4077; credits on tax. as alt'ected by contract clause in Fed-
Fidelity & Casualty Co. of N. Y. v. eral Constitution, note in 60 L.R.A.
Coulter, 115 Ky. 805, 74 S. W. 1053. 33; on constitutional e(|uality in re-
i\Iutual insurance companies are lation to corporate taxation, note in
liable to taxation on amount of their 60 L.R.A. 321.
capital or accumulated premiums the ^ Fireman's Fund Ins. Co. v. Von
same as other companies: Sun Mut. Rosenbers', Commr. lO.'i Tex. 571, 132
Ins. Co. V. Mavor, 8 Barb. (N. Y.) S. W. 4(i7. See § 328 herein.
740
PARTIES— THE INSURER
§ 327
police power of the stale ' for a liinitation of tlie amount of new-
business which may be done and such provision grants no exchisive
privilege or imnmnity, or franchise although it exempts corpora-
tions doing a certain amount of industrial insurance ^ for proceed-
ings for the dissolution of insiu'ance companies,^ for obtaining the
appointment of receivers of insolvent companies,^" for instituting
proceedings for an injunction to restrain companies from continu-
ing their business, and for winding up the com})any's affairs when
a continuance of its business would be hazardous to the policy hold-
ers or the public, ^^ for jienalizing insurer connected with tariff as-
sociation, or such like thing, which fixes rates.'^^ And it is held
that the state may constitutionally regidate rates and charges of
fire insurance companies doing business within its borders. ^^ But
it is also decided that the state has no power to fix rates to be charged
by surety or fidelity companies, as their business is private and is
neither of a quasi public character nor a monopoly.^*
'^^tna Fire Ins. Co. v. Jones, 78
S. Car. 445, 13 L.R.A.(N.S.) 1147n,
125 Am. St. Hep. 818, 59 S. E. 148,
S. Car. Const, art. III. sec. 32.
On validity of law imposina; tax on
insurance companies for benefit of
foremen, see note in 13 L.R.A.(N.S.)
1147.
® Bush v. New York Life Ins. Co.
119 N. Y. Supp. 79G, 135 App. Div.
447, N. Y. Ins. Laws, sec. 96, and
Laws 1906, p. 794, c. 326, in Consol.
Laws, c. 328, not in violation of N. Y.
Const, art. 3, see. 18.
9 Kurd's Rev. Stat. 111. 1905, ch.
73, sec. 2, providing' for dissolution
is constitutional. Cullom v. Traders'
Ins. Co. 163 Fed. 45, 89_C. C. A. 295.
Act of 111. Feb. 17, 18^4, providing
for dissolution of insurance com-
panies, is constitutional: Chicago
Life Ins. Co. v. Auditor, 101 111. 82.
(^ourt of equity has power to decree
dissolution of a mutual l)pnefit so-
ciety where it violates a statute in the
conduct of its affairs; Chicago Mut.
Life Assn. v. Hunt, 127 111. 257, 2
L.R.A. 549n, 20 N. E. 55.
^° Attornev-General v. Atlantic
Mut. Ins. Co. 77 N. Y. 336; Jermaiu
v. Hendricks (N. Y. 1885), under
sec. 7, c. 902, Laws 1869. Under this
act the court mav direct receivers to
continue business: People v. At-
lantic Mut. Ins. Co. 15 Hun (N. Y.)
84, 100 N. Y. 279. Appointment of
Receiver under New York act 183(5,
does not di.ssolve corporation : Re-
ceiver of Globe Ins. Co. 6 Paige (N.
Y.) 106.
^^ Cliicago Life Ins. Co. v. Auditor,
101 111. 82, decided under lU. act
Feb. 17, 1874; Fi-y v. Charter Oak
Co. 31 Fed. 197; Repul)lic Life Ins.
Co. v. Swigert, 135 111. 150, 12
L.K.A. 328, 25 N. E. 680, flecided
under 111. Rev. Stat. 1889, c. 73, see.
103, holds that such act is not in
rioktiion of contract clauses of Fed-
eral Constitution.
^^ German Alliance Ins. Co. v.
Hale, 219 U. S. 307, 31 Sup. Ct.
246, 55 L. ed. 229, 40 Ins. L. J. 333,
Ala. Code 1896, sees. 2619, 2620, stat-
ute constitutional. See Joyce on
Monopolies (ed. 1911) sees. 370, 421.
See also § 329 lierein.
^^ (lerman Alliance Ins. Co. v.
Barnes (U. S. C. C.) 189 Fed. 769,
40 Ins. L. J. 2176, Kan. Laws 1909,
c. 152.
^* American Suretv Co. v. Shallen-
berger (U. S. C. C") 183 Fed. 636,
40 ins. L. J. 857, and note, 864, Neb.
Laws 1909, e. 27, held unconstitu-
tional.
741
§ 328 JOYCE ON INSURANCE
§ 328. Same subject: foreign companies. — The legislature has
power to prescribe the conditions upon which foreign insurance
companies shall be permitted to transact business within its terri-
tory, and effect will be given such statutes, when not unconstitu-
tional, in all the courts of the United States.^* So a state may pre-
^^ United States. — Gerniau Alii- '-state" so far as foreign insurance
ance Ins. Co. v. Hale, 219 U. S. companies are concerned. State v.
307, 55 L. ed. 229, 31 Snp. Ct. Bri.ogs, 116 Ind. 55, 18 N. E. 395.
246; Hunter v. Mutual Keserves Statute of Indiana is constitutional.
Life Assoc. 218 U. S. 573, 54 L. Blackmer v. Roval Ins. Co. 115 Ind.
cd. 11.55, ;jl Sup. Ct. 127, 30 L.R.A. 291, 17 N. E. 580; Phrenix Ins. Co. v.
(X.S.) 686, 40 Ins. L. J. 172; Swing Burdett, 112 Ind. 204, 13 N. E. 705;
V. Western Lumber Co. 205 U. S. Farmers' and Mechanics' Ins. Co. v.
275, 51 L. ed. 799, 27 Sup. Ct. Harrah, 47 Ind. 236.
497; Security Mutual Life Ins. Co. v. Kansas. — State v. Phipps, 50 Kan.
Prewitt, 202 U. S. 246, 50 L. ed. 69, 34 Am. St. Rep. 152, 18 L.R.A.
1013, 26 Sup. Ct. 619; New York 654, 31 Pac. 1097.
Life Ins. Co. v. Fletcher, 117 U. S. Michigan. — Conditions as to trans-
519, 29 L. ed. 934, 6 Sup. Ct. 837 acting business may be reasonable or
(cited in Mutual Benefit Life Ins. unreasonable. Hartford Fire Ins.
Co. V. Robinson, 54 Fed. 585; Wall Co. v. Commissioner of Insurance, 70
V. Equitable Life Assur. Soc. 32 Fed. IMicli. 485.
276) ; Paul v. Virginia, 8 Wall. (75 Mif^souri. — Cravens v. New York
U. S.) 168, 19 L. ed. 357; Lafavette Life Ins. Co. 148 Mo. 583, 53 L.R.A.
Ins. Co. V. French, 18 How. (59 U. 305, 71 Am. St. Rep. 628. 50 S. W.
S.) 404, 15 L. ed. 451; ]\Ierchant.s' 519, aff'd in New York Life Ins. Co.
Life Assoc, of U. S. v. Yoakum, 98 v. Cravens, 178 U. S. 389, 44 L. ed.
Fed. 251, 39 C. C. A. 56; Man- 1116, 20 Sup. Ct. 762; Da^gs v.
Chester Fire Ins. Co. v. HaiTiott (U. Orient Ins. Co. 136 Mo. 382. 35
S. C. C.) 91 Fed. 711; Ehrmann v. L.R.A. 227, 58 Am. St. Rep. 368, 38
Teutonia Ins. Co. 1 Fed. 471, 477. S. W. 851, aff'd in Orient Ins. Co. v.
Alabama. — Hoadlev v. Purifov, Dagg-s, 172 U. S. 557, 43 L. ed. 552,
107 Ala. 276, 30 L.R.A. 351, 18 So. 19 Sup. Ct. 281 (see next following
220; City of Montgomery v. Royal note herein).
Exchange Assur. Corp. of London, Nebraska. — State ex rel. Brecken-
5 Ala. App. 318, 59 So. 508. But ridge v. Fleming, 70 Neb. 523, 97
such acts do not prevent transacting N. W. 1063.
business not in the line of insurance. New Jersei/. — Columbian Fire Ins.
Boulware v. Davis, 90 Ala. 207, 9 Co. v. Kinyon, 37 N. J. L. 33.
L.R.A. 601, 8 So. 84. New Tork.— People (ex rel.
Arkansas. — Federal Union Ins. Co. !Moore) v. Holmes, 135 N. Y. Supp.
V. Flemister, 95 Ark. 389, 130 S. W. 467, 151 App. Div. 257.
574 (mutual company). Pennsylvariia.— hist v. Common-
Connecticut. —State v. Travelers' wealth, il8 Pa. St. 322, 12 Atl. 277.
Ins. Co. 73 Conn. 2o5, 57 L.R.A. South Carolina. — Owen v. Bankers
481, 47 Atl. 299. . Life Ins. Co. 84 S. Car. 253, 66 S.
Illinois.- — Indiana Millers Mutual E. 290; New York Life Ins. Co. v.
Fire Ins. Co. v. People, 65 111. App. Bradley, 83 S. Car. 418, 65 S. E. 433.
355. Wisconsin. — Presbvterian Minis-
7«f?m«^.— Swing v. Hill, 165 Ind. tors' Fund v. Thomals, 126 Wis. 281,
411, 75 N. E. 658. Under Indiana 110 Am. St. Rep. 919, 105 N. W. 801
statutes, District of Columbia is a (effect given when constitutional) ;
742
PARTIES— THE INSURER
§ 328
scribe the liabilities under which corporations created by its laws,
and foreign corporations, shall conduct their business within the
state in the future. Its power to impose conditions upon foreign
corporations is as extensive as the power over domestic corporations,
for that which a state may do with corporations of its own creation
it may do with foreign corporations admitted into the state. ^^ And
Fire Department v. Helfenstein, 16
Wis. 136.
See also 3 Kent's Cominentaries,
13th ed. 257, note b ; Joyce on Fraii-
<-liises (ed. 1909) sees. 351, 352; note
24 L.R.A. 298, on restrictions on bus-
iness of foreign insurance companies;
art. 13, Law Notes (Sept. 1909) ad-
dress by Hon. George W. Wicker-
sliara.
A state may impose such con-
ditions as it pleases upon the doing
of any business by foreigTi insurance
companies within the state. Allgeyer
V. Louisiana, 165 U. S. 578, 41 L.
ed. 832, 17 Sup. Ct. 427 {cited in
Eastern Building & Loan Assoc, v.
Bedford, 88 Fed. 10; Commonwealth
V. Nutting, 175 Mass. 154, 155. 78
Am. St. Rep. 483, 55 N. E. 895:
(Commonwealth Ins. Co. v. Swift, 174
Mass. 226, 229, 54 N. E. 1097; Com-
monwealth V. Roswell, 173 Mass. 119.
122, 53 N. E. 132). Domestic stat-
utes of general application control
foreign companies and their business,
(luardian Trust Co. v. Strauss, 123
N. Y. Supp. 852, 139 App. Div. 884.
An insurance company doing busi-
ness in another state is subject as to
such business to the laws of that
state. New York Life Ins. Co. v.
Fletcher, 117 U. S. 519, 29 L. ed.
934, 6 Sup. Ct. 837 (cited in Mutual
Benefit Life Ins. Co. v. Robinson, 54
Fed. 585; Wall v. Equitable Life
Assur. Soc. 32 Fed. 276). Foreign
corporation must comply with state
law notwithstanding contrary pro-
visions in its contracts. Smoot v.
Bankers' Life Assoc. 138 Mo. App.
438, 120 S. W. 719. See §§ 194 (g),
(h) herein.
A state legislature may define its
public policjf in respect of life in-
surance and impose such conditions
on the transaction of that business
within the state, a.s is deemed best.
John Hancock Mutual Life Ins. Co.
V. Wan-en, 181 U. S. 73, 45 L. ed.
755, 21 Sup. Ct. 535, 30 Ins. L. J.
623, 626, per :\Ir. Chief Justice
Fuller, case affirms 59 Ohio St. 45,
51 N. E. 546.
Rig Jit of foreign surety company
to do business under Michigan stat-
utes. See Wells v. United States
Fidelity & Guaranty Co. of Bait. 160
Mich. 213, 135 N. W. 57, Comp.
Laws, Mich. sec. 10,442, and Pul).
acts 1901, no. 206, as am'd by Pub.
acts 1903, no. 34, and Pub. acts
1907, no. 310.
Fraternal and benevolent corpora-
tion created by Congress for busi-
ness in District of Columbia, cannot
do business in state in violation of
its statutes. Layden v. Endowment
Bank, Knights of Pvthias, 128 N.
Car. 546. 39 S. E. 47, Pub. Law:5 N.
Car. 1899. c. 62, sec. 1. Providing
how foreign corporation could be-
come domestic corporation.
As to authority of foreign mutual
hail companies to do business in
state where one statute prohibits it
and a subsequent statute permits it
on certain conditions: Conflict of
laws. State (ex rel. Farmers'
:\rutual Hail Ins. Co.) v. Cooper, 18
N. Dak. 583, 120 N. W. 878.
^^ Orient Ins. Co. v. Daggs, 172 U.
S. 557, 43 L. ed. 552, 19 Sup. Ct. 281,
28 Ins. L. J. 97. alfg Daggs v.
Orient Ins. Co. 136 Mo. 382, 35
L.R.A. 227, 58 Am. St. Rep. 368, 38
S. W. 85, 26 Ins. L. J. 67.
Cited in: fruited Stales. — Davton
Coal & Iron Co. v. Barton, 183 U. S.
23, 24, 46 L. ed. 64, 22 Sup. Ct. 5;
New Yoik Life Ins. Co. v. Cravens,
178 U. S. 389, 396, 44 L. ed. 1122, 20
743
§ 328 JOYCE ON INSURANCE
the state may also prohibit foreign companies from transacting
business within its territory and enforce its prohibition by penal
enactments." It is held, however, that the power to exclude foreign
Sup. Ct. 962, 29 In.s. L. J. 876; St. Fire Assn. v. New York, 119 U. S.
Louis, Iron Mountain & St. Paul Rv. 110, 30 L. ed. 342, 7 Sup. Ct. 108;
Co. V. Paul. 173 U. S. 404, 409, 43 Dovle v. Continental Fire Ins. Co.
L. ed. 748, 19 Sup. Ct. 419 (right to 94 U. S. 537, 24 L. ed. 148.
contract not absolute but may be Illinois. — Indiana Miller.s' Mutual
fiubjeeted to the restraints demanded Fire Ins. Co. v. People, 170 111. 474,
by the safety and welfare of the 49 N. E. 364 (penalty may be re-
fctate) ; Union Central Life Ins. Co. ceived) ; Pierce v. People, 106 111. 11,
V. Skipper, 115 Fed. 69, 72, .52 C. 46 Am. Rep. 683; Cincinnati Mutu-
C. A. 666; McClain v. Provident al Health Ins. Co. v. Rosenthal, 55
Savings Life Assur. Soc. 110 Fed. 80, 111. 85, 8 Am. Rep. 626.
92. 49 C. C. A. 44 (s. c. 184 U. S. 7x'a».s«.s.— State v. Phipps, 50 Kan.
699, 46 L. ed. 765, 23 Sup. Ct. 938) ; 609. 18 L.R.A. 6o4, 34 Am. St. Rep.
Corlev V. Travelers' Protective A.«?soc. 152, 31 Pac. 1097.
105 Fed. 854, 859, 46 C. C. A. 283. Marifkind.— Talbot v. Fidelity &
^rA:a»^«s.— Woodson v. State, 69 Casualtv Co. 74 Md. 536, 13 L.R.A.
Ark. 521, 529, 65 S. W. 465. ' 584 and note. 22 Atl. 395.
Ma.^sachusetts. — Commonwealth v. Missi-^sippi. — Closes v. State, 65
Nutting, 175 Mass. 1.54, 156, 78 Am. Miss. 562, 3 So. 140, under Code
St. Rep. 483, 55 N. E. 805. Miss. 1880, sees. 1073-81.
Missouri. — Cravens v. New York Missouri. — Cravens v. New York
Life Ins. Co. 148 Mo. 583, 604, 53 Life Ins. Co. 148 Mo. 583, 53 L.R.A.
L.R.A. 30.5, 71 Am St. Rep. 628, 50 30.5, 71 Am. St. Rep. 628, 50 S. \Y.
S- ^- 510. 519 (aft'-d New York Life Ins. Co. v.
^ Tennessee.— Conimeutal Fire Ins. Cravens, 178 U. S. 389, 44 L. ed.
J?f-7--o ?"^''-v'''-,y-- T''"''-<J?^'i'^' J116, 20 Sup. Ct. 1162, 29 Ins. L. J.
64 L.R.A. 4o7, lO.j Am. St. Rep. q7r\ . Qf.,f^ ,, xj^^ v^^u t :f^ t„^
mn ^n o itt nn XT ^.u T5 •*• i e ^'^6) btate V. JNew York Jjite Jns.
916, i9 S. W. 119: North British & n^ Q^ \\^ on i4-\ u-
-T,ir ' xi T r* n ■ TA« Co. 81 Ato. 89 (the penalties are
Mercantile Jns. Co. v. Craisr, lOo • •, i -^ ) \^ c^. .
Tenn. 621, 630, 62 S. W. 155: State ^^f^f «" ^^^J^f **l^^°t) ; State v.
(ex rel. Actor) v. Schlitz Brewing Charter Oak Life Ins. Co. 9 Mo.
Co. 104 Tenn. 715, 732, 78 Am. St. '"^PP- '^"■^•
Rep. 941, 59 S. AV. 103.1. "^^"' ^(^^^- — \N oodward v. [Mutual
^United States.— Yinniev v. Mutu- Reserve Life Ins. Co. 178 N. Y. 485,
al Reserve Life Ins. Co. 218 U. S. ''I N. E. 10.
57.3, 584, 54 L. ed. 1155, 31 Sup. Ct. T^r^.s-.— Smith v. State, 18 Tex.
127, 30 L.R.A. (N.S.) 686, N. Car. App. 69.
act, 1899; Orient Ins. Co. v. Daggs, Ftirjhind. — See Hagain v. Corap-
172 U. S. 557, 43 L. ed. 552. 19 Sud. toir D'Escompte de Pans, 23 Q. B.
Ct. 281, 28 Ins. L. J. 97. aff'g Daggs Div. 519.
v. Orient Ins. Co. 136 ^lo. 382, 35 Sufficiency of complaint to recover
L.R.A. 227, 58 Am. St. Rep. 368. 38 penalty. See Sandell v. Atlanta
S. W. 85, 26 Ins. L. J. 67; Horn I\Iutual Life Ins. Co. 53 S. Car. 241,
Silver ]\lining Co. v. New York 31 S. E. 230.
State, 143 U. S. 305, 314, 36 L. ed. Statute is in nature of a pemdtif
164, 12 Sup. Ct. 403, per Field, J.; where it prohibits issuing license to
Norfolk & Western R. R. v. Pennsyl- life company where salary of any
vania, 136 U. S. 114, 118, 34 L. ed. officer thereof exceeds a certain
394, 10 Sup. Ct. 958; Philadelphia amount. State (ex rel. Equitable
744
PARTIES— THE INSURER
§ 328
corporations from doing business within the state, or to exact con-
ditions for allowing it to do business therein is limited only where
the corporation is- employed by the Federal government or where
itri business is strictly commerce, interstate or foreign, ^^ or where
such corporation is created by Congress or engaged in business of
a Federal nature.^^
Corporations engaged in the marine insurance business are with-
in the rule a})plicable to other insurance companies and may like-
wise be allowed to enter the state only on performance of specified
conditions or they may be entirely excluded therefrom.^" So the
state may impose upon life or health insurance companies as a con-
dition precedent of doing business in the state, the obligation to
pay damages and attorneys' fees in case of default in the payment
of losses.^
It is held that the legislature may restrict the business of such
corporations to i)articular localities, and may require security for
Life Assur. Soc.) v. Vandiver, 222 Minnesota. — Seamans v. Christian
Mo. 206, 267, 121 S. W. 45, 63. Bros. Mill. Co. 66 Minn. 205, 207, 68
It is noteworthy that an act passed N. W. 1065.
in 1814 in New York, Laws N. Y.
3814. c. 49 (passed .March 13t.h,
1814), was the first enactment of its
kind in that state and was entitled
"An act to prevent foveigiiers from
becoming insurers in certain cases in
this state." There is a special refer-
Missouri. — Cravens v. New York
Life Ins. Co. 148 Mo. 583, 614, 58
L.R.A. 305, 314, 71 Am. St. Rep.
628, 50 S. W. 519.
New Jersey. — Hickman v. State,
62 N. J. L. 499, 504, 41 Atl. 942.
^ Fidelitv Mutual Life Assoc, v.
ence by name to a certain English Mettler, 185 U. S. 308, 46 L. ed. 922,
company or association, and it ex- 22 Sup. Ct. 662.
pressly prohibited all foreign in-
surances against tire. Chancellor
Kent, hoAvevcr, dissented to its pas-
sage in the council of revision.
^^ Pembina Consolidated Silver
Mining & M. Co. 325 IT. S. 181, 8
Sup. Ct. 737. 31 L. ed. 650.
19 New York Life Ins. Co. v. Brad-
ley, 83 S. Car. 418, 65 So. 438.
^° Hooper v. California, 155 U. S.
648, 39 L. ed. 297, 15 Sup. Ct. 207.
(,:ilcd in: Untied Stales. — Nutting
v. Massachusetts, 183 U. S. 553, 556,
.46 L. ed. 324, 326, 22 Sup. Ct. 238;
Noble V. ]\Iitche]l. 164 U. S. 367, 370,
41 L. ed. 472, 473, 17 Sup. Ct. 110.
Illinois. — Indiana Millers Mutual
Fire Ins. Co. v. People, 65 111. Apr'.
355, 358.
Massachusetts.— ^Commonwealth v.
Nuttino-. 175 Mass. 156, 78 Am. St.
Rep. 483, 55 N. E. 895.
745
Cited in: t'nited States. — Carrol
v. Greenwich Ins. Co. 199 U. S. 401,
409, 50 L. ed. 246, 249, 26 Sup. Ct.
ReiL 66.
Illinois. — North American Ins. Co.
V. Yates, 234 111. 272, 276. 73 N. E.
423.
Kansas. — Alliance Co-op. Ins. Co.
V. Carbett, 69 Kan. 564, 571, 77 Pac.
108.
Missouri. — Keller v. Home L. Ins.
Co. 198 Mo. 440, 459, 95 S. W. 903.
Tennessee. — Continental F. Ins.
Co. V. Whitaker, 112 Tenn. 151, 171,
64 L.R.A. 457, 105 Am. St. Rep. 916,
79 S. W. 119.
On right of burglary and theft in-
surance comi)anies to do business in
foreign states, see note in 46 L.R.A.
(N.S.) 563.
§ 328 JOYCE ON INSURANCE
the performance of its contracts as shall be deemed for the best in-
terests of its own citizens, since a foreign corporation has no abso-
lute right of recognition in other states ; ^ it doas business in a state
other than that of its incorporation, not by right but by grace, and
. must conform to its laws.^ A corporation is a mere creature of
local law; it can have no legal existence beyond the limits of the
state of its creation, and is entitled to no recognition in other states,
except upon the principle of comity. It is not a citizen within
those clauses of the Federal Constitution which provide for citizens
of each state all the privileges and immunities of citizens in the
several states.* But an insurance company having capital stock
and stockholders for whose benefit it was created may be admitted
to transact business on the assessment plan in Ohio, if authorized
to transact such business under the laws of the state which created
it, although there is no statutory authority given to Ohio stock cor-
porations to do such business.^
2 Bank of Augusta v. Earle, 13 Citv Fire Ins. Co. v. Basford, 27 S.
Pet. (38 U. S.) ^519, 538, 589, 10 L. Dak. 164, 130 N. W. U.
P(j 274. -A- foreign insurance company does
On restrictions on business of for- not acquire any vested rights by
eign insurance companies, see note in complying with existing police reg-
24 L.R.A. 298. ulations or comity laws which can-
" 3 Cravens v. New York Life Ins. not be affected by subsequent changes
Co 148 Mo. 583, 53 L.R.A. 305, 71 in such regulations or laws. State
Am. St. Rep. 628, 50 S. W. 519, aff'd (ex rel. Crow) v. Firemen's Fund
in New York Life Ins. Co. v. Cravens, Ins. Co. 152 Mo. 1, 52 S. W. 59,), 4;)
178 U. S. 389, 44 L. ed. 1116, 20 L.R.A. 363.
Sup. Ct. 762. A foreign insurance company do-
4 Paul v. Virginia, 8 Wall. (75 U. ina- business in a state, without cora-
S.) 168, 19 L. ed. 357. See Bank of plying with, and in defiance of, its
Augusta V. Earle, 13 Pet. (38 U. S.) laws, cannot insist that its courts
538^^ 10 L. ed. 274. See 2 Morawetz must, as an exercise of comity, give
on Corporations, sec. 973; 1 Thomp- effect to its contracts made with citi-
son on Corporations, see. 12. zens of the state. Commonwealth
See also Orient Ins. Co. v. Daggs, :\[ut. Fire Ins. Co. v. Hayden, 60
17'^ U S 557, 43 L. ed. 552, li) Neb. 636, 83 Am. St. Rep. 545; 83
Sup. a. 281, 28 Ins. L. J. 97 (cor- N. W. 922.
poration not citizen within 14th See also American Automobile
am'd't U. S. Const.); Equitable As- Ins. Co. v. Palmer, 174 Mich. 295,
sur. Soc. V. Frommhold, 75 111. App. 140 N. W. 557, 42 Ins. L. J. 885,
143 (interstate comity) ; Common- where the right of the in.surer to issue
wealth V. Gregory, 121 Ky. 256, 89 a so-called liability insurance on au-
S. W. 168 (not "a citizen within U. tomobiles as a matter of comity was
S. Const, art. 4, sec. 2) ; Webster v. denied. Examine as to comity the
Columbian National Life Ins. Co. 116 opinion of Walker, J., in United
N. Y. Supp. 404, 131 App. Div. 837 States Fidelity Sc Guaranty Co. v.
(is a citizen of New York so far as Linehan, 73 N. H. 41, 58 Atl. 956, 33
litigation is concerned), aff'd (mem.) Ins. L. J. 1023.
196 N. Y. 523, 89 N. E. 1114; Queen ^ state (ex rel. National Life As-
746
PARTIES— THE INSURER
§ 328
Statutes prohibiting foreign insurance companies from carrying
on business except on compliance with ]3rescribed conditions, such
as obtaining a hcense therefor, etc., do not conflict with the guar-
anty under the Federal Constitution of privileges and immunities
to citizens in the several states; ^ nor do such statutes conflict with
soe.) V. Matthews, 58 Ohio St. 1, 40
L.R.A. 418, 49 N. E. 1034, under
Ohio Rev. Stat. sec. 3630e.
On laws of state of incorporation
as limitation on powers of insurance
company, see notes in 63 L.R.A. 853,
and 52L.R.A.{N.S.) 278.
6 Paul V. Viroinia, 8 Wall. (75 U.
S.) 168, 19 L. ed. 357; Tatem v.
Wright, 23 N. J. L. (3 Zab.) 429.
Such statutes are constiiuiional.
United States. — Orient Ins. Co. v.
Board of Assessors for Orleans, 221
U. S. 358, 55 L. ed. 769, 31 Sup. Ct.
554 (ease atfirms 124 La. 872, fiO
So. 778) ; Liverpool & London &
Globe Ins. Co. v. Board of Assessors
for Orleans, 221 U. S. 346, 55 L. ed.
762, 31 Sup. Ct. 550, L.R.A.1915C,
903 (ease affirms 122 La. 98, 47 So.
415) ; Fidelity Mutual Life Assoc, v.
Mettler, 185 t. S. 308, 46 L. ed. 922,
22 Sup; Ct. 662; John Hancock Mu-
tual Life Ins. Co. v. Warren, 181 U.
S. 73, 45 L. ed. 955, 21 Sup. Ct. 535,
30 Ins. L. J. 623, case aflfirms 59
Oliio St. 45, 51 N. E. 546.
Iowa. — Parker v. C. Lamb & Sons,
99 Iowa, 265, 34 L.R.A. 704, 68 N.
W. 686.
Kentuckii. — Commonwealth v. 111.
Life Ins. Co. 159 Ky. 589, 167 S. W.
909.
Missouri. — Cravens v. New York
Life Ins. Co. 148 Mo. 583, 53 L.R.A.
305, 71 Am. St. Rep. 628, 50 S. W.
519, aff'd in New York Life Ins. Co.
V. Cravens, 178 U. S. 389, 44 L. ed.
1116, 20 Sup. Ct. 762.
New York. — Bush v. New York
Life Ins. Co. 63 Misc. 89, 116 N. Y.
Supp. 1056; Fire Department of
City of New York v. Stanton, 51 N.
Y. Supp. 243, 28 App. Div. 334.
South Carolina. — Saudall v. Atlan-
ta Mutual Life Ins. Co. 53 S. Car.
241, 31 S. E. 230.
74
Statutes merely regulating the
methods of conducting the business
of insurance, foreign and domestic,
are but the exercise of tlie police
power of the state in the interests of
the public, and are valid and con-
stitutional. Swinii' V. ]Munson, 191
Pa. St. 582, 58 L.R.A. 223. 71 Am.
St. Rep. 772, 43 Atl. 342. See eases
throughout this .section.
A law of a state requiring insur-
ance companies of other states or
countries to file security, or take out
a license, or pay a specific tax or cer-
tain fees and percentages, before
they can issue policies in the state, is
constitutional. Home Ins. Co. v.
City Council of Augusta, 93 U. S.
116, 23 L. ed. 825.
Difitinguished in State v. Hipp, 38
Ohio St. 226.
Cited in Postal Telegraph Cable
Co. V. Charleston, 153 U. S. 692,
695, 38 L. ed. 871, 873, 4 Inters. Com.
Rep. 639, 14 Sup. Ct. 1094; Western
Union TelegTaph Co. v. Charleston,
56 Fed. 421 ; Bishoft" v. State, 43 Fla.
67, 80, 30 So. 808; Badger v. City
of New Orleans (State ex rel. Badger
V. New Orleans) 49 La. Ann. 804,
843, 37 L.R.A. 555, 21 So. 870.
When unconstitutional: See Atlas
Mutual Ins. Co. v. Fisheries Co. 6
Penn. (Del.) 256, 68 Atl. 4; Mutual
Reserve Fund Life Assoc, v. City
Council of Augusta, 109 Ga. 73, 35
S. E. 71.
Whether constitutional or not,
quaere? Katz v. Herrick, 12 Idaho,
1, 86 Pac. 873.
Are mere police regulations. State
(ex rel. Equitable Life Assur. Soc.)
V. Vandiver, 222 Mo. 206, 267, 121
S. W. 45, 63.
As to police power, see Joyce on
Franchises (ed. 1909) sec. 366, and
§ 328
JOYCE ON INSURANCE
the statutes providing that Congress sliall have power to regulate
commerce with foreign nations and between the states, since issuing
a pohcy of insurance is not commerce, notwithstanding the dom-
icil of the parties be in different states.' Nor is marine insurance
commerce, or an instrumentaUty thereof, but is merely an incident,
and the state has power to prescribe and enforce conditions upon
which foreign companies may transact business, notwithstanding
the constitutional provision as to interstate commerce.* There is a
Exclusion of foreign companie.s as
affecting commerce, see note 2-t
L.l^'.A. :512.
^ Hooper v. California, 155 U. S.
648, 3!) L. ed. 297. 15 Sup. Ct. 207,
40 Cent. L. J. 228. The court, per
White, J., said: "The business of
insurance is not commerce. The con-
tract of insurance is not an instru-
mentality of commerce. The mak-
ing of such a contract is a mere in-
cident of commer('ial intercourse, and
J. 172; Nutting v. Massaciiusetts, 183 in this respect there is no difference
U. S. 553, 46 L. ed. 634, 22 Sup. Ct. Avhatever between insurance against
238, 239; New York Life Ins. Co. v. fire and insura,nce against 'the perils
Cravens, 178 U. S. 389, 44 L. ed. of tlie .sea.' The state of California
llKi, 20 Sup. Ct. 762, 29 Ins. L. J. has the right to exclude foreign in-
876, aff'g Cravens v. New York Life surance companies altogether from
Ins. Co. 148 Mo. 583, 71 Am. St. her territory, whether they were
note p. 582; Joyce on Electric Law
{2d ed.) see. 215 and note.
- 'Paul V. Virginia, 8 Wall. (75 U.
S.) 168, 19 L. ed. 357.
See also the following cases :
United States. — New York Life
Ins. Co. V. Deer Lodge County, 231
U. S. 495, 58 L. ed. 332, 34 Slip. Ct.
167, 43 Ins. L. J. 3; Hunter v. I\Iu-
lual Reserve F'und Life Ins. Co. 218
U. S. 573, 54 L. ed. 1155, 3] Sup. Ct.
127, 30 L.R.A.(N.S.) 686, 40 ins. L.
Rep.
519.
628, 53 L.R.A. 305, 50 S. W
Kansas. — State v. Phipps, 50 Kan.
609, 18 L.R.A. 657, 31 Pac. 1097, 34
Am. St. Rep. 152.
Kentuchif. — Commonwealth v.
Gregory, 121 Ky. 256, 89 S. W. 168.
formed for the purpose of doing a
fire or marine business. Slie has the
poM er, if .she allows any such com-
]ianies to enter her confines, to de-
tennine the conditions on which the
entries shall be made. And, as a nec-
essary consequence of her possession
Montana. — New York Life Ins. Co. of these powers, she has the riglit to
V. Deer Lodge County, 43 Mont. 243, enforce any conditions imposed by
115 Pac. 911
Pennsi/lvania. — List v. Common-
wealth, 118 Pa. 322, 12 Atl. 277, 279 ;
Insurance Co. of North America v.
Commonwealth, 87 Pa. 173, 183, 30
Am. Rep. 352.
her laws as a preliminary to the
transaction of business within her
confines by a foreign corporation,
whetiier the business is to be carried
on through officers or througli ordi-
nary agents of the company. And
Tennessee.^D' Avcy v. Connecticut slie has, also, the further right to pro-
108 TeiH). 567, liibit a citizen from contracting with-
in her jurisdiction with any foreign
Te.ras. — Queen Ins. Co. v. State, company which has not acquired the
privilege of engaging in business
therein, either in his 0A?n behalf or
Mutual Life Ins. Co
69 S. \V. 768, 769.
W
86 Tex. 250, 22 L.R.A. 483, 24 S
397.
Virijiiiia. — Harris v. Common- Uirough an agent empowered to that
wealth, 113 Va. 746, 73 S. E. 561, end. The power to exclude embraces
38 L.R.A. (N.S.) 458 note. the power to regulate and enforce all
748
PARTIES— THE INSURER
§ 328
distinction, with reference to the power to contract, between the ex-
istence of a corporation de facto and de jure. A valid contract can-
not be made with a corporation that does not exist as a matter of
fact at tlie time of contracting, and it must be shown that the cor-
poration was in existence de facto at the time of entering into the
contract. But a contract can be entered into with a corporation
actually in existence at the time, although the legality of its organ-
ization may be questioned or its acts forbidden by law. The ques-
tion of the legal validity of such a contract will be one to be deter-
mined by the courts, dependent upon the terms of the prohibition.^
The principal object of such statutes is the protection of the inter-
ests of its own citizens b}^ the slate. The legislature may also pro-
vide for the supervision of such corporations, as in case of domestic
corporations.
legislation, in regard to things done sec. 744. See Jennings v. Dark, 1/5
within the territory of the stale, Ind. 332, 92 N. E. 778. "(5) Assum-
which may be directly or incidental- iiig, as defendant contends that the
ly requisite in order to render the i)Iaintitit''s case falls short of the evi-
enforcenient of the conceded power dence required to establish the ore-
efiicacious to the fullest extent, sub- ation of a corporation de jure, the
ject always, of course, to the para- record neverthele.ss discloses e\idence
mount autiiority of the Constitution amply sufficient to support plain-
of the United States." tiff's existence as a de facto corpf)ra-
^ This is subsUinlially the rule laid lion, and as such it was entitled to
down ill the learned treatise of Mr. maintain this action." Creditors
Morawetz on Private Corporations, Union v. Lundy, IG Cat. App. ~)67,
2d vol. 2d ed. sees. 744-40. He also ]17 Pac. 624, 40 Ins. L. J. 1<IS1,
says: ''The courts have, in some in- 1083. Case of action on a premium
stances, failed to bear in mind the note executed to insurance c()m])any.
distinction l)etween Ihe aclual exist- Estoppel to deny coi-porale existence,
ence of a corporate association, and see Brady v. Delaware Mutual Life
the legality of such an ass()ciali(jn Ins. Co. — Del. — , 4.1 All. 34').
after it has been actually formed. An unconstitutional act of the leg-
it seems to have been assumcil in islature does not constitute a suili-
some of the cases that a coriiorale as- cient basis for a cor])()rali()n de facto,
sociafion formed in violation of the That can exist only where there is
general rule of the common law pro- a valid law under which the corpora-
hibiting such associations must nee- lion migiit have b(>en created de jure,
essarily be treated by the courts as a and the law that corporate existciico
nullity — as no corporation at all. cannot be inquired into except by a
This doctrine is not only founded on direct action in the name of the
a misconception, but is in most ca.s- hlate is not applicable to a pretended
es unjust in its consequences." Id. but not even a de facto corporation,
see. 74."i; and in a ])ri()r section he Huber v. Martin, 127 Wis. 412, 3
says: "The unauthorized dealings of L.R.A.fN.S.) 053, 115 Am. St. Rep.
such associations will, in many in- 1023, 7 Amer. & Eng. Ann. Cas. 400,
stances, be recognized and given ef- ]05 N. W. 1031, 1135, 35 Ins. L. J.
feet by the courts, notwitlistanding 334.
the common-law prohibition." li\.
749
328
JOYCE ON INSURANCE
These statutes provide that certain acts be done by agents of such
companies as prerequisites to making contracts within the state,^°
and prescribe the manner in which the agents of such companies
shall be qualified before entering on their duties." The legislature
has power also to prohibit foreign insurance companies, their
agents or brokers from soliciting business within a state, even
though the insurance contract makes the solicitors the agents of
'"^Florida. — Requirement of pay- of New York v. Stanton, 51 N. Y.
ment from agent constitutes license Supp. 242, 28 App. Div. 334.
taxes under acts 1905, c. 5459, sec. 7; Oregon. — Certificate or license re-
acts 1907, c. 5597; Afro-American quired. Roane v. Union Pacific Life
Industrial & Benefit Assoc, of the In.s. Co. 67 Greg. 264, 135 l^ac. 892,
United States of America v. State, Lord's Oreg. Laws, sec. 4609.
61 Fla. 85, 54 So. 383. Pennsylvania.— Agent must com-
<9eor^/a.— License tax payable by pl.y with laws or become personally
a<'ent of association on assessment liable. Bartlett v. Rothschild, 214 Pa.
plan: Mutual Reserve Fund Life As- "i^l,. 63 Atl. 1030. Agent's hcense
soe. V. City Council of Augusta, 109 iiot issuable to corporation. Incorpo-
Ca 73 35 S E 71 rated Ins. Agent, In Re, 38 Pa. Co.
■',"•' " J Ct. 104. Insurance Agents Licenses,
Kentucky. — License required; pen- " '
of agent must procure license or be- J^,^ (opinion 'of Attv. Genl.).
come sub,ect to penalty; Common- ,^,,, J, ^^,^^,-„«._s. Car. Civ. Code
ibject to pena
wealth V. Gaither, 107 Ky. 572, 54
S. W. 956, 30 Ins. L. J. 91.
Louisiana. — When license fees can-
sec. 1801, specifies upon what con-
ditions license to agent issuable; dis-
. . ^ ', e crimination; constitutionality; Trav-
not be required from joint agents of ^j^^.^, j^^ ^^ ^^_ McMasters, 84 S.
two nonresident companies. State
V. Philadelphia Underwriters, 112 La.
Car. 495, 66 S. E. 877.
1^ List V. Commonwealth, 118 Pa.
47 36 So. 221. Agent for soliciting g^_ g^o, 12 Atl. 277; Paul v.' Virginia",
and placing insurance is not under g ^^^^^ ^ g^ ^g ^ ^^
La. acts, 1886, no. 101, sec. /, liable — m • t n ro .i ++ no
^„ ,:„ ' „ -P„ ' . c.„f. ,, w^Li. ±a 3o< ; Phoenix Ins. Co. v. Burdett, 112
for license fees: State v. Woods, 40
I^. Ann. 175, 3 So. 543; State v.
New England Mut. Ins. Co. 43 La.
Ann. 133, 8 So. 888.
New York. — Statute valid: Haus-
er V. North British & Mercantile Ins
Ind. 204, 13 N. E. 705. under Rev.
Stat. Ind. 1881, sec. 3768. Massa-
chusetts Rev. Stat. c. 37, sec. 40, re-
quiring deposit by agent of foreign
company of copy of charter, etc., ap-
General
^ ;o^ xt\. c nnr- Tro A plies to mutual companies. General
Co. 136 N. Y. Supp. lOlo, 152 App. K... y,^„ ^^ „ punn^^ 13 Gray
Div. 91, atf'd 206 N. Y. 456, 42 ^L^^tual Ins. Lo. ^^ l^lnilips, id Lrray
L.R.A.(N.S.) 1139, 100 N. E. 52, N. ('^ ^a^^-) 90-, ^ee notes m Jones
Y. In.s. Law sec. 50, as am'd by Laws ^^ Business Corporations 106 et
1912 (but see same case as to police ^eq. See also Bulware v. Davis 90
power). Agents of all companies in- Ala. 207, 9 L.R.A. 66, 8 So. 84; City
eluded under N. Y. Consol. act see. of Trenton v. Huniel, 134 Mo. App.
523, a.s to liability for support of fire 595, 114 S. W. 1131 (agent of fra-
dei)arlinent. Fire Department of City ternal benefit association).
750
PARTIES— THE INSURER
§ 328
the insured in the transaction.^^ Nor is any state or Federal con-
stitutional right abridged by enactments restraining persons from
acting as agents of foreign insurance companies.^^ Again, a state
can lawfully punish or regulate, by the imposition of civil liability
or otherwise, the doing of acts within its territory by agents of a
foreign insurance company, which are calculated to neutralize and
make ineffective a statute prescribing conditions of the right of
such corporation to do business within the state.^*
Such statutes fiu'ther provide for a license tax or fee,^* for taxa-
^^ Commonwealth v. Nutting, 175
Mass. 154, 78 Am. St. Rep. 483, 55
N. E. 895.
"Hickman v. State, 62 N. J. L.
499, 41 Atl. 942, aft'd 44 Atl. 1099.
" Noble V. Mitchell, 164 U. S. 367,
17 Sup. Ct. 110, 41 L. ed. 472.
Cited in London, Paris & American
Bank v. Aronstein, 117 Fed. 601,
608, 54 C. C. A. 663, 670; Cook v.
Howland, 74 Vt. 393, 398, 59 L.R.A.
338, 339, 93 Am. St. Rep. 912, 52
Atl. 973. When indictment against
agent bad on demurrer, see Gage v.
State, 67 Ark. 308, 55 S. W. 165.
As to actions against agents of
foreign insurance companies acting
•without a license; statutes, see § 713
herein.
^^ Alabama.— K(tis 1886, 1887, in-
cludes foreig)! companies only.
Hoadlev V. Purifov, 107 Ala. 276, 30
L.K.A. 351, 18 So. 220.
Florida. — No express limitation on
states power; .statute is constitu-
tional; Taxes under Fla. acts 1905
c. 5459, sec. 7; act 1907, c. 5597 are
license tares; ease of sick and funer-
al benefit insurance. Afro-American
Industrial & Bonetit Assoc, of the
TTnited States of America v. State, 61
Fla. 376, 54 So. 383.
Indiana. — Payment required of a
certain amount on premiums received
not a license fee hut taxes under
Burns's Ann. Stat. Ind. 1908. sec.
10213. Taxes are not ''debts" and
bear no interest from time due if not
paid. State v. IMutual Life Ins. Co!
of N. Y. 175 Ind. 59, 42 L.R.A.
(N.S.) 256, 93 N. E. 213, 40 Ins. L.
J. 216.
7
Louisiana. — Companies doing a
life accident, and icorkingmen's col-
lective business liable, and they ai'e
also liable for a second license if oth-
er insurance combined. State v.
Maryland Casualty Co. 133 La. 146,
62 So. 606. When company entitled
to reduction of city license by credit
for license tax paid on premiums col-
lected outside such city; City of New
Orleans v. London, Liverpool &
Globe Ins. Co. 52 La. Ann. 1904, 28
So. 267.
Pennsylvania. — ^Etna Fire Ins. Co.
V. Reading, 119 Pa. St. 417, 5 Pa. L.
ed. 570, il Cent. Rep.. 858, 13 Atl.
451, under acts Pa. April 4, 1873,
Sec. 17 (Pub. L. 20), May 24, 1887
(Pub. L. 204).
South Dakota. — ■ Legislature may
classify, etc.; License tax and not
property tax; is constitutional;
Queen Citv Fire Ins. Co. v. Basford,
27 S. Dak. 164, 130 N. W. 44.
Texas. — Tax on net receipts not a
license but a tax; net receipts ai"e
personal property ; increase of assess-
ment ; review. American Bonding
Co. V. Wilhams, — Tex. Civ. App.
— , 131 S. W. 652.
Wisconsin. — Accident Company
obligated to pav license fee under
Wis. Rev. Stat. 1878, sec. 1220, not-
withstanding Laws Wis. 1880, e. 105,
subject.s it to same fees and taxes as
tire insui'ance companies. State (ex
rel. Fidelity Casualty Co.) v. Fricke,
102 Wis. 107, 10 Am. & Eng. Corp.
Ca-s. N. S. 584, 78 N. W. 455.
See further as to license and occu-
pation taxes and when corporations
51
§ 328 JOYCE ON INSURx\NCE
tion,^^ for a deposit with the state, or giving bonds,^"^ for procuring
subject thereto notes 129 Am. St. Orient Tns. Co. v. Board of Assessors
Rep. 288, 24 L.R.A. 299. for Orleans, 221 U. S. 358, 55 L. ed.
Foreign insurance company may 769, 31 Sup. Ct. 554, affg 124 La.
be required to pay fees and ])er- 872, 50 So. 778, follovvino- as to tirst
centages on all premiums received point. Liverpool & London & Globe
as a condition of doing business in Ins. Co. v. Board of Assessors for
Slate Ducat v. Chicago,' 10 Wall (77 Orleans, 221 U. S. .'UG, .55 L. ed. 702,
U. S.) 410, 19 L. ed. 972. 31 Sup. Ct. 550, aff'g 122 La. 98, 47
Cited in : United States. — Ashley So. 415. See also La. cases cited be-
V. R_.yan, 153 U. S. 436, 442, 38 L. low in this note. "Policy loans" so
ed. 1 73, 777, 14 Sup. Ct. 865, 4 In- called and which are only a witli-
ler.-^. Com. Rep. 26; Pembina Con- drawal by the policy holder of a por-
solidated Silver ^Mining & Milling Co. tion of the reserve are not taxal)le
v. Penn.sylvania, 125 U. S. 181, 186, "credits;" when hank deposit not
31 L. ed. 650, 652, 8 Sup. Ct. 737, taxable. Board of Assessors for Or-
2 Inters. Com. Rep. 26; Barron v. leans v. New York Life Ins. Co. 216
Burnside, 121 U. S. 186, 200, 30 L. U. S. 517, 54 L. ed. 597, 30 Sup. Ct.
ed. 915, 920, 7 Sup. Ct. 931, 1 Inters. 385, affg New York Life Ins. Co.
Com. Rep. 290. v. Board of Assessors for Orleans,
Arkansas. — Baker v. State, 44 Ark. 158 Fed. 462. But see Travelers
138. Ins; Co. v. Board of Assessors for
Indiana.— Htate (ex rel. Baldwin) Orleans, 122 La. 129, 24 L.R.A.
V. Insurance Co. of Nortli America, (N.S.) 388, 47 So. 4.'!9. See also N.
115 Ind. 257, 17 N. F. 574; State (ex J. case cited below in this note. Tax
rel. Carr) v. Woodruff Sleeping & on premium receipts a tax on bnsi-
Parlor Coach Co. 114 Ind. 155, 157, ness and not on property; when de-
15 N. E. 814, 1 Inters. Com. Rep. posits with state superintendent are
803; Phoenix Ins. Co. v. Burdett, taxable. "Western Assur. Co. v. Hal-
112 Ind. 204, 205, 13 N. E. 705; In- liday (U. S. C. C.) 127 Fed. 830, s. c.
surance Co. of North America v. 110 Fed. 259; Rev. Stat. Ohio, sees.
Biiui, 111 Ind. 281, 288, 12 N. E. 2730, 2731, -2734, 2745, 3660. Tax
315. on gross premiums under Iowa Code,
Louisiana. — Parker v. North Brit- sec. 1333; remedy for nonpayment,
ish & JNtercantile In.s. Co. 42 La. Ann. Manchester Fire Ins. Co. v. Herriott
428, 431, 7 So. 599. (U. S. C. C.) 91 Fed. 711.
Maine. — State v. Western Union Alabama. — Tax a privUccje or li-
Teleg. Co. 73 Me. 518, 525. (ense la.r, and not franchise far;
Michigan. — Hartford Fire Ins. Co. statute constitutional; (ax payable
V. Raymond, 70 Mich. 485, 502, 38 whether iiremiums received williin or
N. W. 474. ' outside of slate; Brown v. Pittsbm'ii'h
Tennessee. — State v. Phoenix Ins. Life & Trust Co. 10 Ala. App. 614,
Co. 92 Tenn. 420, 4.31, 21 S. W. 893. 65 So. 699.
Wisconsin. — Stanhilber v. Mutual California. — When taxation is a
Mill Ins. Co. 76 Wis. 285, 291, 45 N. revenue and not intended as a condi-
W. 221; State v. United States Mu- tion under Pub. act. Mar. 3, 1885.
tual Accident Assoc. 67 Wis. 624, San Francisco v. Liverpool & London
630, 21 S. W. 893. & Globe Ins. Co. 74 Cal. 113, 15
^^ United States. — Premiums or Pac. 380.
credits due on open accounts are Connecticut. — Insurance Comrais-
taxable; state may limit reasonable sioner to determine amount of taxes
iime iciihin which action for reduc- to be refunded; retaliatory laws;
tion of assessments mav be brought; mandamus; Conn. Genl. Stat. 1902,
752
PARTIES-THE INSURER § 328
sees. 2450, 360G ; N. Y. Laws 1901, e. is constitutional, whether such
118, p. 297; N. Y. Laws 1896, p. 864, moneys be regarded as taxes for reve-
c. 908, sec. 195; State (ex,rel. Metro- ntie or as license fees. State v. In-
politan Life Ins. Uo.) v. Upsou, 79 .surauce Co. of North America, 115
Conn. 154, 64 Atl. 2. Ind. 257, 17 N. E. 574, 15 West Rep.
Statute constitutional. State v. 93; Tenn. act, Jan. 29, 1879, sees. 7,
Travekrs' Ins. Co. TA Conn. 255, 57 53.
L.R.A. 481, 47 Atl. 299. Kentucky. — When liahle after
Georgia.—When tax on gross pre- witlidrairal from stale for tax on
miums not a propertij tax so as to premiums, midcr Ky. Stat. sees. 4226,
apply ad valorem system; ordinance 4227-4230a; Statute constitutional ;
unconstitutional for want of uiiifor- Commonwoaltli v. Illinois Life Ins.
mity; Mutual Ke.serve Fund Life As- Co. 159 Ky. 589, 167 S. W. 909; Coni-
soc. V. City Council of Augusta, 109 monwealth v. Life Ins. Co. 159 Ky.
Ga. 73, 35 S. E. 71. 581, 167 S. W. 8/2. Gross premiums
Illinois. — Castialty Company's net included without deduction of divi-
receipts not taxable under general dends; not a property tax; but li-
Revenne Act; is in nature of special cense tax; classification valid; Ky.
tax; property taxable, only such as Stat. sec. 4226, as am'd by acts 1906,
has situs in state acts 1869, 1879, c. 22, art. 13, subd. 2; Northwestern
1899. Fidelity & Casualtv Co. of Mutual Life Ins. Co. v. James, 138
N. Y. V. Board of Review', 264 111. Kv. 48, 127 S. W. 505; see Metro-
II, 105 N. E. 704, 44 Ins. L. J. 322. politan Life Ins. Co. v. City of Paris,
Unearned premiums returned on can- 338 Ky. 801, 129 S. W. 112; Mutual
celation of policies not a part of - Benefit Life Ins. Co. v. Common-
gross premiums taxable; when action wealth, 128 Ky. 174, 107 S. W. 802.
against insurance superintendent to Deposits ivrongfully withheld by
refnnd not action against state; state treasurer, not taxable; Board
equitv. (rerman Alliance Ins. Co. v. of Councilmen of city of Frankfort
Van 'Cleave, 191 111. 410, 61 N. E. v. Illinois Life Ins. Co. 129 Ky. 82;?,
94. (See case under Nebraska cited 112 S. W. 924.
below in this note.) Tax on net re- Louisiana. — Outstanding accounts,
ceipts is not Ucense but tax; People credits liable to taxation. S(;indard
V. Cosmopolitan Fire Ins. Co. 246 Marine Ins. Co. Ltd. v. Board of
III. 442, 92 N. E. 922. Assessors, 123 La. 717, 29 L.R.A.
Indiana. — Percentage of receipts (N.S.) 59, 49 So. 483. Fin-eign col-
on premiums is not license fee but porations are not taxable for premi-
a tax. State v. Mutual Life Ins. Co. urns uncollected. Railey v. Board of
of N. Y. 175Ind. 59, 42L.R.A.(N.S.) Assessors, 44 La. Ann. 765, 11 So.
256, 93 N. E. 213, 40 Ins. L. J. 251; 93. See also Liverpool & London &
Burns's Ann. Stat. 1908, sec. 10.216. Globe Ins. Co. v. Board of A.ssessors
Payment to auditor of state is not for Orleans, 51 La. Ann. 1028, 45
payment into treasury of state under L.R.A. 524, 25 So. 970, and U. S.
Burns's Ann. Stat. Ind. 1908, sees, cases above cited in this note.
9247, 10,216; Dailev v. State (ex rel. Massachusetts. — Rate imposed un-
Bigler) 171 Ind. 646, 87 N. E. 4. der Mass. Stat. (Rev. Laws c. 14,
Life policies not subject to taxation; sees. 24, 28) equal to higliest rate im-
Const. Ind. art. 10, sec. 1; Tax Law posed by foreign state. IMetropolitan
1891, sec. 3 (Rev. Stat. Ind. 1894, Life In's. Co. v. Conunonwealth, 198
see. 8410) sees. 50, 53; State Board Mass. 466, 84 N. E. 863.
of Tax Commrs. v. Holliday, 150 Ind. Minnesota. — Payment of tax on
216, 42 L.R.A. 820, 49 N. E. 14, 27 premiums received no exemption
Ins. L. J. 97. from j>aymerit of fee on debt secured
The act Rev. Ind. Stat. Sec. 3773, bv mortgage; Minn. Genl. Laws 1907,
Joyce Ills. Vol. I.— 48. 753 "
§ 328 JOYCE ON INSURANCE
e. 328, p. 448, also Id. p. 449, see. 3; Ins. Co. v. Bradley, 83 S. Car. 418,
Mutual Benefit Life Ins. Co. v. Mar- 65 S. E. 433.
tin County, 104 Minn. 179, 116 N. South Dakota. — Tax on gross
W. 572. premiums is license tax, not property
Mississippi. — When Odd Fellows tax: statute constitutional: Queen
property not exempt under Ann. City Fire Ins. Co. v. Basford, 27 S.
Code Miss. sec. 3744 as to ''charitable Dak. 164, 130 N. W. 44.
society" etc. Ridgely Lodge No. 28, Tennessee. — Amended Laws 1881,
I. 0. 0. F. V. Redus, 78 Miss. 352, e. 85, sec. 18, does not impose a tax
29 So. 163. upon foreign insurance companies,
Montana. — Intrastate tax on excess but on the agents who do business in
of premiums does not interfere with that stat«, and is not affected by the
interstate commerce. New York Life revenue acts of 1887, 1889, and 1891,
Ins. Co. V. Deer Lodge County, 43 providing for a payment by such
Mont. 243, 115 Pae. 911. Statute companies of a certain per cent in
applies to foreign life insurance cor- lieu of taxes: City of Memphis v.
porations. Northwestern Mutual Carrington, 91 Tenn. 511, 19 S. W.
Life Ins. Co. v. Lewds & Clarke Coun- 673.
ty, 28 Mont. 484, 98 Am. St. Rep. A foreign corporation has no
572, 72 Pac. 982. status as a citizen in other states,
Nehraskoi. — Unearned premiums and cannot object that the tax is not
returned to insured not taxable; tax uniform: Phoenix Ins. Co. v. Com-
on gTOSs receipts not in lieu of all monwealtli, 5 Bush (Ky.) 68, 96
other taxes. When statute not un- Am. Dec. 331; Ducat v. City of Chi-
constitutional ; State ex rel. Breck- cago, 48 111. 172, 95 Am. Dec. 529.
enridge v. Fleming, 70 Neb. 523, 97 But see Erie Rv. Co. v. State, 31 N.
N. W. 1063. See" Illinois case cited J. L. (2 Yroom) 531, 86 Am. Dec.
above in this note. When entire stat- 226. Legislature may discriminate
nte unconstitutional. State v. Poyn- as to taxation between domestic and
ter, 59 Neb. 417, 81 N. W. 431. foreign corporations when the policy
New Jersey. — Average weekly and interest of the state demand it.
premium deposit by local agent in Ducat v. City of Chicago, 48 111. 172,
bank when not assessable for yearly 95 Am, Dec" 529. But see Erie R.
taxes: Metropolitan Life Ins. Co. v. q^ y g^ate, 31 N. J. L. (2 Vroom)
City of Newark. 62 N. J. L. 74, 40 53^^ 36 Am. Dec. 226. Compare
Atl. 573. See 216 U. S. 517, cited Mutual Reserve Fund Life Assoc, v.
above in this note. City Council of Augusta, 109 Ga. 73,
New York. — Foreign corporation 35 "g jj_ y^.
is not liable for taxation of capital Exemption of firemen's relief as-
invested in United States bonds: sociation includes what: Long
International Life Assur Co. v. Com- grarieh Firemen's Relief Assoc,
missioners, 28 Barb. (N. Y.) 318; /pj-os.) v. Johnson (State v. John-
Laws N. Y. 1855, c. 37. Compare ^^^^ 33 N. J. L. 625, 43 Atl. 573.
Home Ins. Co V New York, 119 U. n jj^Hed States.^When deposit
S. 129, 30 L. ed. 3o0, 8 Sup. Ct. 138o ^^^^ required by statute does not
(court divided). constitute trust for domestic policy
Pennsylvanm.-Grosspremmmsol ^^^^^^^^ ^^^^^ ^. ^j^ ^ ^ife
every character included under l^a. „ , „„„ lofi n n a
Pub: L. sec. 1 (June 1895); North- l^ Co. 209 Fed. 309, 126 C. C. A.
western Mutual Life Ins. Co., In re, ^^^- , ^ ^ . , -x
36 Pa Co Ct Rep 100. Arkansas. — Guaranty or indemnity
South Carolina.— When tax on l>ond filed by mutual fire company
gross receipts a 2?roper^?/ faa;.- statute covers loss tvhrle bond in force al-
unconstitutional: Civ. Code 1902, though executed after issuance of
sees. 302, 1808, 1809; New York Life policy. Acts Ark. 1905, p. 492, sec.
.754
I
PARTIES— THE INSURER § 328
a certificate of authority or license from the state/^ for an annual
4; American Fire Ins. Co. v. Haynie,
91 Ark. 43, 120 S. W. 825.
Connecticut. — Such law is consti-
tutional. Cooke V. Warner, 56 Conn.
234, 14 All. 798.
Illinois. — A foreign company
which has made a deposit as large as
is required by the Illinois statutes
for any kind of insurance business
is not required to make a different de-
posit for each kind of insurance
business which it cai"ries on, although
one domestic corporation could not
be organized to carry on the same
kinds of business. People (ex rel.
Stephens) v. Fidelity & Casualty Co.
153 Jll. 25, 26 L.R.A. 295, 38 N. E.
752." See People (ex rel. Ocean Acci-
dent & Guarantee Corp. Ltd.) v. Van
Cleave, 187 III. 125, 58 N. E. 422.
Kentucky. — As to amount of de-
posits rec^uired under Ky. Stat. sec.
687, el. 2, sec. 693; Ky. Const, sec.
202 : See Clav v. Employers Indem-
nity Co. of Pliila. 157 Ky. 232, 162 S.
W. 1122. When foreig-n reinsurer of
domestic reinsured entitled to tcith-
draw deposit: When reinsurer not
required to make deposit: Under
Ky. Stat. 1903, see. 648, Const, sec.
200. See Prewitt, Ins. Commr. v.
Illinois Life Ins. C.o. 29 Ky. L. Rep.
447, 93 S. W. 633, 35 Ins. L. J. 688.
North Carolina. ■ — When policy
void where deposit not made under
Code sec. 3062, and Laws 1893, c. 299,
sec. 8. Commonwealtli Mutual Fire
Ins. Co. V. Edwards, 124 N. Car. 116,
32 S. E. 404.
North Dakota.- — Deposit required
from Mutual Hail Companies:
State (ex rel. State Farmei's' Mutual
Hail Ins. Co.) v. Cooper, 18 N. Dak.
583. 120 N. W. 878.
Ohio. — Assignee in insolvency can-
not recover securities 'unless company
no longer liable to policy holders.
State (ex rel. Cincinnati Life Assoc. 's
Assignee) v. Matthews, 64 Ohio St.
419. ""60 N. E. 605. Such law consti-
, tutional. Fidelity & Casualty Co. v.
Hahn, Supt. Ins. (Ohio, 1895) 33
Week. L. Bull. 286.
South Dakota. — Employer's lia-
bility: Laws 1905, c. 73, sec. 2, as
am'd by Laws 1907, c. 110, Laws
1909, c. 243, Laws 1911, c. 176;
Metropolitan Casualty Ins. Co. of N.
Y. V. Basford, 31 S. Dak. 149, 139
N. W. 795.
Texas. — When bond inures to
benefit of policy holders: South-
western Surety Ins. Co. v. Anderson,
— Tex. — , 155 S. W. 1176, rev'g —
Tex. Civ. App. — , 152 S. W. 816.
Only one bond required under the
several provisions of Tex. act of
March 20, 1909, sees. 1, 3, and it must
contain only the statutory conditions.
.-Etna Ins. Co. v. Hawkins. Commr.
103 Tex. 195, 125 S. W. 313, 39 Ins.
L. J. 511. Betaliatory statutes :
deposit: Rev. Stat. 3066. See Seid-
ers V. Merchants' Life Assoc, of the
U. S. 93 Tex. 194, 54 S. W. 753, 29
Ins. L. J. 97, rev'g — Tex. Civ. App.
— , 51 S. W. 547.
Washington. — Must comply with
statute even though state of incorpo-
ration requires no deposit: Statute
(3 Kern, and Bal. Code, sees. 6059-
22, 6050-24) constitutional. State v.
Fishback, 79 Wash. 290, 140 Pac.
387.
^^ Jones' Business Corporation
Laws of New York, 105, 106. See
also the following cases :
United States. — Knapp-Stout &
Co. V. National Mutual Fire Ins. Co.
30 Fed. 607.
Idalio. — Katz v. Herriek, 12 Idaho,
1, 86 Pac. 873.
Illi)iois. — Cincinnati Mutual Health
Assur. Co. v. Rosenthal, 55 111. 90, 8
x\m. Rep. 626.
Louisiana. — Separate license may
be required by every municipality
wherein foreign comjiany transacts
business. City of Lake Charles v.
Equitable Life Assur. Soc. 114 La.
836. 38 So. 578. See State v. :\rnrv-
land Casualty Co. 133 La. 146, 62 So.
55
§ 328 JOYCE OX INSURANCE
606, noted ante; herein under license N. H. 41, 47 Atl. 611, 33 Ins. L. J,
fee or tax. 1023.
Missouri. — License not a cn)itract Foreign company cannot be de-
hut police regulation, a grant of au- nied license by reason of similarilij
thority: effect of refn.'^ai to renew of its name to that of domestic
license: State mav amend or repeal corjioration, under 111. act. May 3,
statute: Mo. Laws 1907, p. 315; 1879, see. 1, and 1 StaiT. & C. Ann.
State (ex rel. Equitable Life Assur. Stat. e. 73, sees. 2, 4. People (ex.
Soc.) V. Vandiver, 222 Mo. 206, 267, rel. Traders' Fire Ins. Co.) v. Van
121 S. W. 45, 63. See Joyce on Cleave, 183 111. 330, 47 L.R.A. 795.
Franchises (ed. 1909) sees. 47, 48. 55 N. E. 698. Examine Knights of
Minnesota. — In action by fidelity Modern Maccabees v. Mai'tin, 32 Pa.
^'guarantij insurance corporation" no Co. Rep. 58; Knights of jNlaccabees
presumption that it has not complied of tlie World v. Searle, 75 Neb. 285,
with statute, although the complaint 106 N. W. 448.
fails to allege a licen.'^e to do an in- Nature of acts and powers of com-
surance business. That is a matter missioner or superintendent of insur-
of defense. Fidelity & Casualty Co. ance: Mandamus : Quo warranto.
V. Eickhoff, 63 Minn. 170, 30 L.R.A. Under Tenn. Code, sec. 2575, the ac-
586, 56 Am. St. Rep. 464, 65 N. W. tion of the commissioner is judicial:
351. State y. Thomas, 88 Tenn. 491, 12 S.
Mississippi. — Sick benefit and W. 1034. So also in Mississippi the
hurial insurance association within, commissioner acts judicially in is.sa-
statute requiring permit, under Laws ing a license, and mandamus will not
Miss. 1902, c. 59; Fikes v. State, 87 lie to compel him to revoke a license
Miss. 251, 39 So. 783. in the absence of evidence dehors the
Nebraska. — Must obtain license as policy. Cole v. State, 91 Miss. 628,
statute provides as act 1873, Genl. 45 So. 11. Contra, Hartford Fire
Stat. 1873, c. 33, p. 428, applies to In.s. Co. v. Commissioner of Insur-
all except life companies: State (ex ance, 70 Mich. 485, 34 N. W. 474.
rel. National Employees' As.soc.) v. So the statute is mandatory and duty
Barton 92 Neb. 666 139 N. W. 225. ^ministerial and no exercise of dis-
Mulfiform insurance biisiness mav ""etion is allowed superintendent of
be carried on bv foreign corporation insurance where company applying
in state where \lomestlc corporation ior certihcate has fully complied with
not authorized to do so, if no posi- ^^^ /=^^,> e n"r ^ ao'^T. f^n^"-^'''
,- , -,••.. , , , . T^ 1 Bovle (LT. S. C. C.) 82 Fed. <0d; dis-
tive prohibition by statute: People •• , o i ^t >. i t -.e t r-
, 1 r,, N ■ TT 1 1-^ p /-. missed, Bovle v. Mutual Lire Ins. Co.
(ex rel. Stevens) ^^ Iidehty & Casu- gg p^^ -^5^4 3., ^ c. A. 604. In
oiv^^- Jro ^n ^°%-^ ^•^"^- -^^' ^^««««-^-- That such act is within
38 N E. /52. Casualty company en- ^^^^^^,^1 ^f ^^^ ^^^^^^ ^^^ ^^^ 1,^ j.^,
titled to license to carry on several viewed under Kan. Laws, 1889, c.
lines of casualty insurance on com- 159, see Kansas' Home Ins. Co. v.
phance with statute: Laws 1899, p. Wilder. 43 Kan. 731, 23 Pac. 1061.
237 (act of April 21, 1899): People In Nebraska: Auditor's discretion
(ex rel. Ocean Accident & Guarantee is broad and legal and not arbitrary
Corp. Ltd.) V. Van Cleave, 187 111. in determining Avhether fraternal
125, 58 N. E. 422. Foreign suretii beneficiary society shall be licensed.
company, empowered by charter to State (ex rel. Bankers' Union of the
engage in other kinds of business, World) v. Searle, 74 Neb. 486, 105
may, in absence of prolnbitory stat- N. W. 284. Under N. Y. Ins. Law,
ute, be licensed under N. H. Pub. art. 7, sec. 231, duty of superintend-
Stat. c. 172, sec. 1 ; United States Fi- ent of insurance is ministerial en-
delity & Guarantee Co. v. Linehan, 73 forceable bv mandamus: ineorporat-
756
PARTIES— THE INSURER § 328
statement of the company's financial condition/^ for the possession
of certain assets,^" for limitation of amount of any one risk unless
(>(1 liintual fraternity: reincorpora- upon an independent valuation of
lion: United States Grande Lodge 0. such reserve. Bankers Life Ins. Co.
B. A. V. Pavn, 28 Misc. 275. Under v. Howland, 73 Vt. 1, 57 L.R.A. 374,
N. Y. Laws, 1881, e. 256, giving 48 Atl. 435, 30 Ins. L. J. 193: first
certitieate to do business is within case prescrihiny rule for valuation
supeiinlondont's discretion, and not of life policy. Note Id. 208. Ex-
reviewable by inand^mns. In Re amine Bankei's' Life Ins. Co. v. Fleet-
Hartford Life & Ann. Ins. Co. 63 wood, 76 Vt. 297, 57 Atl. 239. In
How. Pr. (N. Y.) 54. The Ohio Wisconsin foreign assessment cora-
Kev. Slal. sees. 3G31-11, 3631-13, panies have a riglit, under Wis. Laws,
3631-14, is mandatory upon superin- 1891, c. 418, to a license to do busi-
tendeiit of insurance to issue license: ness upon complying with the condi-
State (ex rel. Great Camp Knights of tions imposed by that act, of which
Modern ^Maccabees) v. Vorys, 69 the insurance commissioner has no
Ohio St. 56, 68 N. E. 580. His act discretion to deprive them. State (ex
is ministerial, not judicial, and such a rel. Covenant Mutual Ben. Asso.)_v.
license, although it will protect the Root, 83 Wis. 667, 19 L.R.A. 2/1,
company in the transaction of busi- 54 N. W. 33. Compare, as to dis-
ness during its continuance, is not a cretion of commissioner. High Court
bar to a proceeding in quo warranto of Wisconsin Independent Order of
when the company is found to be Foresters v. Commissioner, 98 Wis.
exercising any of the franchises of 94, 73 N. W. 326.
the state, without authority of law. ^^ American Ins. Co. v. Storv, 41
State V. Fidelitv & Casualty Ins. Co. Mich. 385, 1 N. W. .388.
49 Ohio St. 4-10. 16 L.R.A. 611. .34 20 ^nder Rev. Laws of Vt. sec.
Am. St. Rep. 573, 31 N. E. 658; 3607, amended act 1884, No. 45, ap-
State V. Western Mutual Life & Ac- plies also to mutual or co-operative
cident Soc. 47 Ohio St. 167, 8 L.R.A. companies: Granite State Mut. Aid
129, 24 N. E. 392. The statute is Assn. v. Porter, 58 Vt. 581, 3 Atl.
held mandatory in Pennsylvania 545. In computing the reserve of a
and commissioner has no discietion. life insurance compani/ under a
Knights of the a\[odern Maccabees v. statute requiring it, in order to be en-
Martin, Commr. 32 Pa. Co. Ct. Rep. titled to do business in the state, to
58. In Tej-as: Mandamus lies have, in addition to its capital, as.'^ets
where duty of commissioner is clear- equal in amount to its outstanding
ly ministerial, but where tiiere is no liabilities, reckoning the pi'cmium re-
such duty and the statute vests him serve on its life risks based on the
with discretionary power mandanms actuaries' tables of mortality. Avith
does not lie: Tex. Rev. Stat. 1895, interest at 4 i)er cent, as a liability,
arts. 3048, 30.50, 3061, 3062; .Metro- the exiienses of securing the first
politan Life Ins. Co. v. Love, 101 year's business may be deducted from
Tex. 444, 108 S. W. 821. In Ver- the amount it receive.'^ as ])r(>mium3
mont, under a statute requiring in- for that year by providing that a
suranee commissioners to issue policy shall be valued as a term
licenses to a foreign insurance com- policy for one year and a life policy
pany to do business in the state, if afterwards. Bankers Life Ins. Co. v.
satisfied with its statement showing Howland, 73 Vt. 1, 48 Atl. 435, 57
its financial condition and standing, L.R.A. 374. But eramine Bankers'
they liave no aulhoriti/ to question the Life Ins. Co. v. Fleetwood, 70 Vt.
method of computing the reserve .set 297, 57 Atl. 239. As to amount of
forth in the statement, or to enter paid-up capital required, see Clay v.
757
§ 328 JOYCE ON INSURANCE
excess be reinsured in a solvent company in state of enactment of
statute,^ for contributions to fire departments or fire companies of
cities, or to exempt firemen's benevolent funds,^ for the revocation
of licenses,' for the appointment of some person on whom papers
Employers' Indemnity Co. of Pliila. City v. Trustees of Exempt Firemen's
157 Kv 232, 162 S/W. 1122, Kv. Benev. Fund of L. I. City. 34 App.
Stat. sec. 687, cl. 2, sec. 693 ; Ky. Div. 138, rA N. Y. Supp. 621, Laws
Const, .sec. 202. Iowa statute, Mc- N. Y. 1896, c. 141, Const. N. Y. art.
Clain's Code, sec, 1144, constitution- 12, sec. 2. See'further as to eliargcs
al. Parker v. C. Lamb & Sons, 99 for lire department or firemen's fund,
Iowa, 265, 34 L.R.A. 704, 68 N. W. note 24 L.R.A. 290.
686, 9 Am. & Eng-. Corp. Cas N. S. When city ordinance requiring:
493. such payment not inconsistent with
^ Glens Falls Ins. Co. v. Hawkins, state statute, see Knnz v. National
103 Tex. 327, 126 S. W. 1114, Tex. Fire Ins. Co. 169 111. 577, 48 N. E.
Rev. Stat. 1895, art. 3076, as am'd 682.
))y laws 29th Legislature, c. 80, p. ' United States. — Power of com-
113. missioner how far limited in Cal.:
2 So under Wis. Rev. Stat. c. 65, discretion must be exercised in g-ood
Fire Department v. Helfenstein, 16 faith: Liverpool & London & Globe
Wis. 130. The act of March 3, 1885, Ins. Co. v. Clnnie (tj. S. C. C.) 88
Stat. 1885, c. 15, proyidino' for such Fed. 160.
payment, is unconstitutional under California. — Only the comraission-
the constitution of California, art. 11, er, under Cal. act March 26, 1869,
sec. 12; City and County of San may require insolyent insurance coin-
Francisco v. Liverpool, London & pany to repair its capital stock with-
Globe Ins. Co. 74 Cal. 113, 15 Pac. o^it "revoking its certificate : Palache
380, s. c. (U. S. C. C.) 88 Fed. 160. ,._ paeifie Ins. Co. 42 Cal. 419. See
The same is true under Neb. Const, gg Yed. 160, above cited.
sec. 7, art. 9 ; State y._ Wheeler, 33 Kentiichy.— Rex oQaXiox). where corn-
Neb. 563, 50 N. W. 7/0. Examine ^^^^^. j^^g ''failed to comply with the
Rhniehart v. State, 121 Tenn. 420, ja^^.V- eonstrued, under Ky. Stat.
117 S. W. 508. Legislature has jqq-^^ ^^^. 753. ^^.j^gj^ commissioner
poller to impose such burden: Fire- (^annot revoke: see IMutual Life Ins.
man's Benev. Assn. y. Lounsburv, 21 q^ ^. Prewitt, 127 Kv. 399, 105 S.
111. 511, 74 Am. Dec. 115. Such act ^r 4(33
is not unconstitHlional, as granting Michigan.— VwAqt Mich. Pub.
an exclusive privilege or as giving ^^.^^^ -^ggy^ ^^_ 285, revocation bv
money of the state to a private ^^^ commissioner is wJnislerial act;
undertaking or as a tax: Trustees Hartford Fire Ins. Co. v. Ravmond,
of Exempt^ Firemen's Fund v. -q i^ji^.j^^ 435^ 33 n_ ^^Y. 474. Where
Roome. 93 N. Y. 313, 45 Am. Rep. ^ company is doing business against
217. See also Fire Department ot «^soZ«/e prohibition of hue, license
£'^L?^.^^xT ^''i''V?^''"x^'''\' o ; mav be revoked, although the cause is
^; ?.-^'' rt ^- ^'- T' ^^^J.«"^ ^"?fi not specified in statute: National Life
of Fire Undenvriteiy . Higo^is 114 ^ ^^ Commissioner of Insur-
N. Y. Supp. 506, 130 App. Div. /», . ^ -,
aff'd (without opinion) 198 N. Y. «"^e ^^ M^ch. ..21.
634, 92 N. E. 1043, considered under 0/..o.-Power to revoke or decline
§ 326b, herein. Fire Department of to renew license, because of refusal
Troy v. Bacon, 2 Abb. App. Dec. '« paP ^«'^««' "ot suspended by pen-
(N/ Y.) 127. 7.S unconstitulionaJ : dency of action for such taxes : State
Exempt Firemen's Assoc, of L. I. (ex rel. National Life Assoc.) v.
758
I
PARTIES— THE INSURER
§ 328
may be served in actions, suits, or proceedings commenced by or
against the company.*
Matthews, 58 Ohio St. 1, 40 L.R.A.
418, 49 N. E. 1034, 39 Oliio L. J. 241,
39 Wkly. L. Bull. 2.^'3, 27 Ins. L. J.
614. Statute rcquirins: notice of
revocation or discontinuance of
license is mandatory. State (ex rel.
Grand Fraternity) v. Lemert, 56
Ohio L. Bull. 118. See also 58 Ohio
St. 1, last above cited.
Wisconsin. — Revocation where
accident company lias not paid an-
nual fees, Rev. Stat. sec. 1955. See
State (ex rel. Fidelity & Casualty
Co.) V. Fricke, 102 Wis. 107, 77 N.
W. 732, 78 N. W. 455; Travelers'
Ins. Co. V. Fricke, 99 Wis. 367, 41
L.R.A. 557, 74 N. W. 372, 99 Wis.
377, 78 N. W. 407.
* United States. — Service good on
medical examiner as one who "adjusts
or settles a loss," under 2 Mo. Rev.
Stat. 1899, sec. 7992. Commercial
Mutual Accident Co. v. Davis, 213 U.
5. 245, 29 Sup. Ct. 445, 53 L. ed.
782. Foreign insurance com.panies
are not included under Ark. Stat.
April 4, 1887, c. 135, requiring
foreign corporations generally to
designate agent. St. Louis, Iron
Mountain & Southern R. Co. v. Com-
mercial Union Ins. Co. 139 U. S. 22.!,
11 Sup. Ct. 523, 35 L. ed. 154. Serv-
ice on superintendent of insurance:
effect of N. Mcx. Const, all. 11, sec.
6. See Mitchell v. National Sui-etv
Co. (U. S. D. C.) 206 Fed. 807, N.
Mex. L. 1909, e. 48, see. 4.
What must appear, to hind by serv-
ice on superintendent of insurance
under Rev. Stat. Mo. 1899, sec. 7991,
Ann. Stat. 1906, p. 3799 : Webster v.
Iowa State Traveling Men's Assoc.
(U. S. C. C.) 165 Fed. 367. Insur-
ance CO mm'iss loner's power to bind
after withdrawal of company from,
state: Acts of Tenn. 1895, p. 322,
c. 160; Mutual Reserve Fund Life
Assoc. V. Tuckfeld, 159 Fed. 833, —
C. C. A. — , 37 Ins. L. J. 536. When
secretary of mutual insurance as-
sociation is agent to receive service of
process under Rev. Stat. Wis. sec.
2637, subd. 9, and section 1977:
Dixon V. Order Railway Conductors
of America. 49 Fed. 910. Presumed
that the company has complied with
the law, and judgment will be entered
on service on the commissioner,
although he refuses to accept service :
Knapp Stone & Co. v. National Mut.
Fire Ins. Co. 30 Fed. 607.
Service on auditor is good service :
Ehrman v. Teutonia Ins. Co. 1 Fed.
471.
Arkansas.— ^ee 139 U. S. 223, cited
above in this note.
California. — When law complied
with as to filing with commissioner
agent's name. Polit. Code 1878, sec.
616. Harrigan v. Home Life Ins. Co.
128 Cal. 53i, 61 Pac. 99.
Connecticut. — When company be-
comes resident through its duly
authorized agent for service : Crouse
V. Plwnix Ins. Co. 56 Conn. 126, 7
Am. St. Rep. 298, 14 Atl. 82.
Idcdio. — Compliance ivith. statute
as to designating agent, ■necessary :
Katz V. Herrick, 12 Idaho, 1, 86 Pac.
.872.
Indiana. — Service may be made on
state auditors: Rehm v. German Ins.
& Saving Inst. 125 Tnd. 135, 25 N.
E. 173. Under Lid. Stat. Elliott's
Supp. sees. 993, 994, exempts foreign
insurance companies from provisions
of Rev. Stat. tnd. 1881, sees. 316,
3022, 3023, in regard to service on
foreign corporations in general.
Mutual insurance companies are
within the Indiana statute requiring
designation of agent to receive service
of papers : Lamb v. Lamb, 13 Bank.
Reg. 17.
Iowa. — When assent presumed to
continuing last designated agent for
service after company has ceased
business: Green v. P^quitablo Mutual
Life & Endowment Assoc. 105 Iowa,
628, 75 N. W. 635.
r59
§ 328
JOYCE ON INSURANCE
Statutes of the character of the last are held to apply to actions
growing out of the ordinary businesis of insurance, and not to other
Kentucky. — Fraternal benejit so-
ciety not within statutes: agent must
be designated and so remains until
new agent desig-nated : Service on
commissioner insufficient: American
Patriots v. Kinkead, 144 Ky. G62, 139
S. W. S34. Consent to service upon
commissioner: effect of company's
■withdraii-al from state: Germania
Ins. Co. V. Aslibv, 112 Ky. 303, 23
Ky. L. Rep. 1564, 99 Am. St. Rep.
295, 65 S. W. 611.
Louisiana. — Agency of Secretary
of State: duruiion of time mandate
'in force: acts 1898, no. 105: The
Fair, Ltd. v. American Union Fire
Ins, Co. 135 La. 48, 64 So. 977.
Maryland. — The act of Maryland,
1378, c. 106, is exclusive, and general
corporation act does not apply:
Oland V. Agricultural Ins. Co. 69
Md. 248, 14^Atl. 669, 12 Cent. Rep.
881.
Michigan. — Surety companies: sec.
5198, Comp. Law.«, is not an act af-
fecting general jurisdiction of courts,
but icaiver of general provisions as
to service: People, to use of Wipfler
V. Fidelity & Deposit Co. 163 Mich.
94, 17 Det. Leg. N. 748, 127 N. W.
765. Surety companies: Appoint-
ment of commissioner prerequisite
for service on time to bind company :
Comp. Laws, sec. 5196, as ara'd Pub.
ads 1907, no. 321: Wells v. United
States Fidelity & Guaranty Co. 160
Mich. 213, 125 N. W. 57. The Mich.
St<at. Comp. L. 1871, sec. 1683, Laws
1873, p. 206, only applies to courts of
record, and not to justices' courts:
Hartford Ins. Co. v. Owen, 30 Mich.
441.
Minnesota. — Statute constitution-
al requiring appointment of com-
missioner: State V. Queen City Fire
Ins. Co. 114 Minn. 471, 131 N. ^Y.
628.
Missouri. — Where foreign insur-
ance company ha.s complied with act
Mo. 1874, p. 74, .';ec. 25, whicli re-
pealed Wagner's Mo. Stat. 770, sec.
7
25, delivery of icrit to local agent is
not sufficient: Baile v. Equitable Fire
Ins. Co. 68 Mo. _617. See 213 U. S.
245, 165 Fed. 36 <, cited above in this
note.
New Mexico.— See 206 Fed. 807,
cited above in this note.
New York. — Legislature has power
to enact statute: service on commis-
sioner or on secretary of state: Wood-
Avard V. ^lutual Reserve Life Ins. Co.
178 N. Y. 485, 102 Am. St. Rep. 519,
71 N. E. 10. Appointment under N.
Y. Laws, 1884, c. 346, of "superin-
tendent of insurance or his successor
in office," is valid, and extends to an
incumbent of office and his succes-
sors : Lafflin v. Travelers' Ins. Co. 121
N. Y. 713, 31 N. Y. S. R. 900, 24 N.
E. 934. Service on designated attor-
ney gives court jurisdictio)i : Gibbs v.
Qiieen Ins. Co. 63 N. Y. 114, 20 Am.
Rep. 513. Service on superintendent
gives jurisdiction of city court of New
York: People's Fire Ins. Co. v. New
Y^ork City Justices, 33 N. Y. 147.
Effect of revocation see Hunter v.
Mutual Reserve Life Ins. Co. 184 N.
Y'. 136, 30 L.R.A.(N.S.) 677n, 6
Amer. & Eng. Ann. Cas. 291, 76 N.
E. 1072, s. c. 99 N. Y. Supp. 888 ;
Klein Bros. & Co. v. German Union
Fire Ins. Co. of Bait. 123 N. Y. Sui)p.
1082, 66 Misc. 538; Tierney v.
Helvetia-Swiss Fire Ins. Co. 122 N.
Y. Supp. 869, 138 App. Div. 469;
Badaer v. Helvetia-Swiss Fire Ins.
Co. 120 N. Y. Supp. 161, 136 App.
Div. 31; Woodward v. Mutual Re-
serve Life Ins. Co. 82 N. Y. Sujip.
908, 84 App. Div. 324.
North Carolina. — Effect on limita-
tion of action of statute providing
for service on commissioner. Green
v. Hartford Life Ins. Co. 139 N. Car.
309, 1 L.R.A.(N.S.) 623, 51 S. E.
887.
Oklahoma. — Service on chief officer
of agency, valid. Comp. Laws 1909,
sec. 560}); Continental Ins. Co. v.
Hull, 38 Okla. 307, 132 Pae. 657.
60
PARTIES— THE INSURER
328
actions on contract.^ They also amount substantially to a consent
on the part of foreign insurance companies to be sued in the courts
of the state where they are doing business,^ and some tribunals have
held that such acts confer exclusive jurisdiction on the courts of
the state.''' But the United States Supreme Court ^ decides that such
a statute, so far as it requires an agreeiiicnt against the removal of
suits into the Federal courts, is repugnant to the Constitution of the
United States, and such an agreement would be void. So in an
earlier Wisconsin case ^ it was held that such an act did not deprive
a foreign insurance corporation of its right to remove into the Fed-
eral courts a suit commenced in that state against such company by
a citizen thereof, and it is so decided in Massachusetts.^" Some of
the states have, however, enacted laws providing that the license of
a foreign insurance company shall be revoked or suspended if such
company make an a|)plication to remove a suit commenced in the
state court to the United States district or circuit court. ^^ And such
Pennsijlvania.—Sevvice must be .169, 24 L. ed. 853; Raih'oad Co. v.
made upon company's registered state Han-is, 12 Wall. (79 U. S.) 65, 20 L.
agent. Hall v. Metropolitan Lif:e Ins.
Co. 63 I^o.. Intell. 104, 15 Dist. Rep.
144, 32 Pa. Co. Ct. Rep. 14. See
Southard v. Home Life Ins. Co. 67
Leg-. Jntell. 428.
South Carolina.— Code Proc. 1902,
see. 155, permitting service on ani/ herein.
ed. 354: Lafayette Ins. Co. v. French,
18 How. (59 U. S.) 404, 15 L. ed.
451; Rehm v. German Ins. & Saving
Inst. 125 Ind. 135, 25 N. E. 173;
Cunningham v. Southern Express Co.
67 N. C. 425. See §§ 3497, 3498
agent, not repealed by act 1910, sec.
17, 26 Stat, at L. 755, requiring ap-
pointment of commissioner. JMont-
gomerv v. United States Fidelity &
Guaranty Co. 90 S. Car. 283, 7i S.
E. 1084.
Tennessee. — See 159 Fed. 833,
cited above in this note.
TFa-s// inglon. — Su/)erintendent of
Insurance cannot accPj)t or waive
peisonal service. Laws 1901, p. 360,
'''New York Life Ins. Co. v. Best,
23 Ohio St. 105, under Laws 1872, 69
Ohio Laws, 155. sec. 18; People (ex
rel. Glens Falls Ins. Co.) v. Judge of
Jackson Circuit, 21 Mich. 577, 4 Am.
Rep. 504. This case also holds that
a writ of mandamus was not the
yjroper remedy, even "if the cause
could be transferred. .Morse v. lloiiie
Ins. Co. 30 Wis. 496, 11 Am. Rep.
580, under Wis. Stat. Laws 1870, c.
c. 1/4, sec. 6; Bennett v. Supreme 5(1, sec. 22. Overruled, see next note.
Tent of Kniglits of -Maccabees of the ^Insurance Co. v. Morse, 20 Wall.
Worl 1, 40 Wash. 431, 2 L.R.A.(N.S.) (87 U. S.) 445, 22 L. ed. 3(55 (Morse
389, 82 Pae. 744. v. Home Ins. Co.) (IT. S. Sui>. Ct.)
Wisconsin. — See 49 Fed. 910, cited 13 Am. liep. '2'.h , overruling same
above in this note.
See also as to service of ]>apers or
process; agent of foreign company;
statute.s; jurisdiction, etc., see $5§ 702,
703, 3497, 3706 herein.
* Rehm v. Gernuin Ins. & Saving
Inst. 125 Ind. 135, 25 N. E. 173. See
also § 270 Iiei-ein.
^ Ex parte Sehollenberger, 96 U. S.
761
ca.se, 30 Wis. 4!)(i. 11 Am. Rep. 580.
^ Knorr v. Tlduic Ins. Co. 25 Wis.
143, 3 Am. Rep. 26.
10 Morton v. Mutual Life Ins. Co.
105 Mass. 141, 7 Am. Rep. 505, and
note 50/.
11 Statutes as to foreign companies;
removal of causes, see § 3498 herein.
§§ 32Sa, 328b JOYCE ON INSURANCE
a statute is not unconstitutional, where it does not require an agree-
ment against the removal of suits into the Federal courts.^^
§ 328a. State regulation: insurance business as franchise. — The
state has the right to regard the business of insurance as one de-
pendent upon the exercise of a franchise/^ a franchise subject to
regulation by the state.-'* So in Ohio the authority required to en-
able a foreign corporation to carry on business in a state other than
that of its incorporation, emanates from the state and the privilege
granted is a franchise and any company or corporation carrying
on its business in the domestic state without authority is unlaw-
fully exercising a franchise. ^^
§ 328b. State regulation: quasi public character of insurance
business. — It is determined that although insurance companies are
not classed as public but as private corporations and though they
are not even styled quasi public corporations, still a large insurance
company is a public institution.^^ But it is also declared that a
business, such as that of insurance, private in its inception may be-
come affected with a public interest. To the eye of the law and in
the interest of the public, it is one and the same thing whether a
corporation is created to subserve the public interest or whether it
achieves success of such a nature that the duty of regarding the in-
terest of the public is thrust upon it.^' Again, in a Federal case,
the court; per Pollock, D. J., in discussing the question of the con-
12 Security Mutual Life Ins. Co. ^^ gtate v. Ackerman, 51 Ohio St.
(Travelers Ins. Co.) v. Prewitt, 202 163, 194, 24 L.R.A. 298, 37 N. E.
U. S. 246, 50 L. ed. 1013, 26 Sup. Ct. 828, per Williams, J., quoting from
019, following Dovle v. Continental Spelling on Extraordinarv Relief,
Ins. Co. 94 U. S. 535, 24 L. ed. 148, sees. 1807, 1808, and cited in John
which is held not overruled by Barron Hancock Mutual Life Ins. Co. v.
V. Burnside, 121 U. S. 186, 30 L. ed. Warren, 181 U. S. 73, 74, 75, 45 L.
915, 7 Sup. Ct. 931, nor by any other ed. 755, 21 Sup. Ct. 535, 30 Ins. L.
decision of said court. See also J. 623, as ruling that foreign insur-
Prewitt V. Security Mutual Life Ins. ance companies wlrellier incorporated
Co. 119 Ky. 321, 1 L.R.A. (N.S.) 1019 or not are required as a condition
and note, 115 Am. St. Rep. 264, 83 precedent to doing business in the
S. AY. 611. state to obtain a certificate of autlior-
On revocation of License of for- ity so to do, and that the privilege
eign company on account of removal so conferred is a franchise. See
of action to Federal court, see notes Joyce on Franchises (ed. 1909) sec.
in 1 L.R.A. (N.S.) 1019, and L.R.A. 13."
1915F. 1187. 16 Watson v. National Life & Trust
13 People V. Loew, 44 N. Y. Supp. Co. 189 Fed. 872, — C. C. A. — ,
42, 43, 19 Misc. 248. See Joyce on 40 Ins. L. J. 2065.
Franchises (ed. 1909) see, 18, see also " State (ex rel. McCarter) v. Fire
§ 328 herein. man's Ins. Co. 74 N. J. Eq. ,372, 29
1^ Boston lee Co. v. Boston & L.R.A. (N.S.) 1194 note, 135 Am. St.
Maine Rd. Co. 77 N. H. 6, 45 L.R.A. Rep. 708, 73 Atl. 80, 18 Amer. &
(N.S.) 835, 86 Atl. 356. Eng. Ann. Cas. 1018, ease reverses 70
762
\
PARTIES— THE INSURER
§ 328b
stitutionality of a statute regulating fire insurance rates and charges,
and the police powers of the state, says that "It is not entirely clear
at this late day" that ''the business of fire insurance, although in it.^
nature a private business will in future continue to be regarded as
entirely unaffected with a public use." ^^ jj- jg ^^jg^ decided that the
business of fire insurance is of an extensive and peculiar character,
and its management concerns a large number of people, especially
those desiring to protect their property by insurance; and there-
fore, the state may, in the exercise of its police power, by appropri-
ate legislation, regulate such business within constitutional limits. ^^
So under a Mississippi decision insurance contracts are not matters
of purely private concern. The public is interested in them to such
and extent that they may be said to be contracis of a quasi public
character, to a greater or less extent affected with a pul^lic interest. ^^
And fire insurance is further held to be of such a quasi ])ublic char-
acter and matter of public concern as to be subject to state regula-
tion,^ and this applies to the regulation of rates, and a statute so
regulating rates is not unconstitutional.^
A fire insurance patrol is a private association and not a public
corporation or a public charity where its object is to save life and
property, minimize losses and promote the financial interests of its
members who are fire insurance companies, said patrol being sup-
ported by assessments.^
N. J. Eq. 291, 61 Atl. 705, cited in
Blancliard v. Prudential Ins. Co. 78
N. J. Eq. 471, 477, 79 Atl. 533.
^^ German Alliance Ins. Co. v.
Barnes, (U. S. C. C.) 189 Fed. 709,
40 Ins. L. J. 2176, 2187; Kan. Stat.
1909, ('. 152, see third next loUowing
note lierein construing same .statute.
^^ German Alliance Ins. Co. v.
Boston & Maine Rd. Co. 77 N. H. 6,
45 L.R.A.(X.S.) 835, 86 Atl. 356, 42
Ins. L. J. 831. Southwestern JNIulual
Life Ins. Co. v. Lewis & Clarke Coun-
ty, 28 Mont. 484, 72 Pao. 982. See
note last above.
2 German Alliance Ins. Co. v. Lew-
is, 233 U. S. 389, 58 L. ed. 1011,
L.R.A.1915C, 1189, 34 Sup. Ct. 612,
Hale, 219 U. S. 307, 55 L. ed. 229, 31 43 Ins. L. J. 739, Kan. Stat. 1909, c.
152. The Cliief .Justice and two jus-
tices di.ssenting.
^ Coleman v. Fire Insurance Patrol
of New Orleans, 122 La. 626, 21
L.R.A.(N.S.) 810, 48 So. 130. Or-
ganized under La. act 1902, no. 115,
p. 180.
Police Relief Association a private,
iind not a jiublic or qua.si pul)lic cor-
poration. De Runtz v. St. Louis Po-
ice Relief Assoc. 180 Mo. A]^^. 1,
D. C.) 197 Fed. 435. See also Feople 162 S. W. 1053, Rev. Stat. 1909, sec.
V. Aachen & Munich Fire Ins. Co. 3458.
126 111. App. 636; Boston Ice Co. v.
763
Su|). Ct. 216, a case of combination to
fix insurance rates, penalty and- con-
stitutionality of a statute.
On fire insurance as a 1)usiness af-
fected by a public intei'est, see notes
in 29 L.R.A.(N.S.) 1195, and L.K.A.
1915C, 1189.
20 Fidelity Mutual Life Ins. Co. v.
Miazza, 93 Miss. 18, 136 Am. St. Rep.
534, 48 So. 1017.
1 Citizens Ins. Co. v. Clay (U. S.
§ 329 JOYCE ON INSURANCE
§ 329. Foreign company: retaliatory and anti-compact laws:
combinations to control rates. — A majority of the states have en-
acted what ai'e known as retaUatory laws. By these laws one state
imposes the same or like reslrictions and conditions upon insurance
corporations of other states doing business within its territory, as
such other states impose upon its insurance corporations doing bus-
iness therein.* Such acts have been held unconstitutional in Ala-
bania, as not within the principle of uniformity of taxation, and
as an unwarranted delegation of the legislative power of such state
to other states.^ So the retaliatory tax law of Kentucky is uncon-
stitutional.^ But in Georgia an act''' has been held to l)e constitu-
tional and not repealed by subsequently enacted general tax laws ; *
and the retaliatory law of Indiana^ is declared in that state to be
constitutional, and not open to the objection that it is an attempt
to levy different fees for the same privilege from different mem-
bers of the same class. It is also held not to be an enactment of
the statutes of one state into those of another, nor unconstitutional
on tlie oround of uncertaintv.^" So in New York such statute is
held not unconstitutional, although the amount required for taxes
may be greater than that required by other laws of the same state."
If a foreign corporation has complied with the Minnesota laws,^^
it should not be excluded from doing business there where it is
doubtful whether the laws of the state of incorporation of such com-
pany would prevent corporations of Minnesota from doing business
there, and a judgment of ouster against such corporation will be re-
fused in such a case.^'
4 Conn. Gen. Stat. 1902, sees. 24o0, ^Rev. Stat. LkI. 1883, see. 3773.
3606, impo.<;ing- taxes by reason of See acts 1880, c. 709, sec. 2.
like taxes being' imposed under laws ^° State v. Insurance Co. of North
N. Y. 1901, p. 297, c. 118. See also America, 115 Ind. 257, 17 N. E.
Conn, act 1905, as to reiundino' 575; Blackmer v. Royal Ins. Co. 115
taxe-s. State (ex rel. Life Ins. Co.) Ind. 291, 17 N. E. 580.
v. Upson, 79 Conn. 154, 64 Atl. 2. "People v. Fire Assn. 92 N. Y.
Retaliatory statutes, see note 24 311, ,44 Am. Rep. 380. See 3 R. S.
L.H.A. 303. 8th ed. p. 1617; Laws 1892, c. 090,
5 Clark V. Mobile, 66 Ala. 217, 10 sec. 38.
Ins. L. J. 3. 12 den gtiit. 1878, c. 34, sec. 269.
6 We.stern & Southern Life Ins. Co. See Stat. 1891, vol. 1, sec. 2907.
V. Commonwealth, 133 Kv. 292, 117 ^3 state Attorney General v. Fideli-
S. W. 376; Ky. Stat. 1909, .sec. 637; ty & Casualty Ins. Co. 39 Minn. 538,
Russeirs Stat* sec. 4284, Const. Ky. 41 N. W. 108. See Stat. 1891, vol. 1,
sees. 60, 171, 180. sec 2907. For construction of Con-
' Act 1869. See Laws 1887, p. 124, necticut statutes, .see Croke v. War-
sec. 12. ner, 56 Conn. 234, 14 Atl. 798. See
^ Goldsmith y. Home Ins. Co. 02 also tirst note umler this section. The
Ga. 379. rule requiring an order, etc., to with-
764
PARTIES— THE INSURER § 329
In State v. Moore ^* it is held that the io^^iirance cominissioner-
could not be compelled by mandamus to issue a certificate to a com-
pany organized in a state where Ohio companies were not permitted
to carry on business on the same basis substantially as in Ohio.
A state statute imposing on insurance companies of another state
or nation the same obligations and prohibitions that are imposed
in such other state or nation upon corporations of the former state
is retaliatory in character, and must be confined to cases fairly with-
in its letter; and to make a case for the retaliatory provision of Uio
statute of Ohio ^^ as to insurance companies of a state which im-
poses prohi])itions upon Ohio companies "doing business in such
state," it must appear at least that an Ohio comj^any has been
formed to do substantially the same kinds and lines of insurance
as tlie foreign company wishes to do in Ohio.^^ Again ina.smuch
as Michigan statutes allow policies of life insurance to be issued
only when they specify the sum payable at a fixed amount, and do
not permit endowment policies Ijy assessment companies, while
assessment com])anies in Ohio are not allowed to guarantee any
fixed sum further than what might be realized from assessments,
unless they have complied with the statutes relating to regular mu-
tual life insurance companies, and in that case are allowed to issue
endowment policies at a fixed sum, Ohio companies are not per-
mitted to do business in Michigan on substantially the same basis
and limitations as they are in Oliio, and therefore, under the pro-
viso of Ohio Statute, Michigan insurance corporations are not en-
titled to a license to do business in Ohio.^'' in an Illinois case it
draw securities under Wagner's Mo. sistent violation of law regulating
Stat. p. 769, sec. 20, is not affected such corporations; and Wis. Rev.
by the fact that the state of ineorpo- Stat. sec. 1974, providing that such
ration of the foreign company does company shall not issue any new poli-
not require such order for sucli pur- cy after sixty days from rendition of
pose. State v. Gates, 67 IMo. 496. final judgment against it, do not ap-
See Rev. Stat. 1889, see. 5932. As to ply to appeal taken in good faith
taxation, see Stale v. Reinmund, 45 from final judgment. State v. Spoon-
Ohio St. 214, 13 N. E. 30, under er, 47 Wis. 438, 2 N. W. 555. See
Rev. Stat. Ohio, sees. 282, 2745. See Sanb. & B. Annot. Stat. 1889, vol. 1,
Rev. Stat. 1890, sec. 282. As to de- sec. 1221.
Ijosits from insurance companies, see ^* 39 Ohio St. 486, under 80 Ohio
Seiders v. Mercliants Life Assoc. 93 Laws, 180, sec. 3630e. See Rev. Stat.
Tex. 194, 54 S. W. 753, rev'g — Tex. 1890, sec. 282.
Civ. App. — , 51 S. W. 547, hew Stat. ^^ Rev. Stat. see. 282 note.
Art. 30C3. Deposit with state treas- ^^ State (ex rel. Atty. Genl.) v. Fi-
urer, see Gen. Stat. 1888, sees. 2835, delity & Casualtv Ins. Co. 49 Ohio
2913, and Pub. Laws, 1889, c. 95; St. 440, 16 L.R.A. 611, 34 Am. St.
Wis. acts of 1879, c. 171, requiring Rep. 440, 31 N. E. 658.
insurance commissioner to revoke li- ^^ State (ex rel. Atty. Genl.) v.
cense of foreign company upon per- Western Union Mutual Life & Ac-
765
§ 329 JOYCE ON INSURANCE
is decided that retaliatory legislation, which provides against future
like legislation on the part of other states, does not become opera-
tive until the enactment by such other state of the laws so provided
against.'^* It is also held in that state that retaliatory statutes will
not be enforced against a foreign insurance corporation on the
ground of alleged restrictions in the statutes of the state which
created it, unless it is clearly proved that those statutes would have
the restrictive effect which is claimed. ^^ Under a Maryland deci-
sion a statute providing that whenever the laws of any other state
impose upon Maryland insurance companies seeking to do business
wuthin its borders greater obligations or prohibitions than are pre-
scribed for foreign companies seeking to do business in Maryland,
the same obligations and prohibitions shall be imposed on com-
panies of such state which shall seek Maryland Ijusiness, makes
such foreign law the rule which Maryland will apply to companies
of the foreign state asking permission to do business within its ter-
ritory ; and if a Maryland company is refused a license in the for-
eign state merely on the ground of discretion, the latter's companies
may be refused license in Maiyland on the same ground, although
the Maryland statutes do not in terms authorize it.^"
Some of the states ^ provide substantially that the license of any
insurance company not organized under the laws of the state, but
doing business therein, may be revoked if it shall enter into any
compact or combination with other insurance companies, for the
cident Soe. 47 Ohio St. 167, 8 L.R.A. Georgia.— Code 1895, sec. 2085,
129, 24 N. E. 392; Ohio Rev. Stat. Ga Laws 1890-91 vol 1 p. 206^
sec 3638E. ^ ^«*^«:-4^^- Code 1897, sec. 1/54,
,» ^ . T ^ c • (- Supp. 190y, sec. l/o4.
^8 Germania Ins. Co. v. bwigert, *^ '^^^ q,^, -,qqq ^ i -,
128 111. 237, 4 L.R.A. 473, 21 N: E. ^^e ^ "
530, under Stat. 111. 1874, c. 73, see. iouisiana.— Act 1900, No. 110.
29. See Cothian's Rev. Stat. 1891, p. Michigan.— B.o\Ye\Vs Stat. Supp.
830, sec. 29 ; p. 833, see. 55 ; p. 840g-, 1883-89, sec. 4340e; Comp. Laws
see. 63w. See Union Central Life Ins. 1897, sec. 5124.
Co. V. Durfee, 164 111. 186, 45 N. E. Nebraska.— Laws 1897, c. 81.
441, 111. Laws 1869, p. 234, see. 20a. New Hampshire.— L,a.ws 1885, c.
Like statute as that in the last above 93.
cited case Ohio. — Rev. Stat. 1892, sec. 3659,
19 People (ex rel. Stephens) v. Fi- Bates Ann Stat. 1906 sec. 3650.
delity & Casualty Co. 153 lU. 25, , ^fo "fr^ ?7 ""'Tono ' ao^ "'"'
26 KR.A. 295, 38 N. E. 752. ^819, 1 Code Laws, 1902, p 695
20 Talbott ^^ Fidelity & Casualty ^ \%f; Dakota.-La.-s 1903, c. lo8,
Co. 74 Md. 536, 13 L.R.A. 584, 22 ' Tennessee.— Acts 1905, c. 479, p.
Atl. 39o. 2019.
^ Arkansas.— Acts May 6, 1899; Washington.— Ball, Codes & Stat.
act 1905, p. 1, as am'd by acts 1907, p. 725, see. 2841B; Pub. Stat. 1901,
p. 430. e. 169, see. 10.
766
PARTIES— THE INSURER § 329a
purpose of governing or controlling the rates charged for fire in-
surance on property within the state, and such an act is held con-
stitutional in Alichigan.^ But an insurance company is not pre-
cluded from bringing a suit to enjoin revoking its certificate and
canceling its bonds even though it is a member of an illegal com-
bination to raise insurance rates.^
§ 329a. Anti-compact laws: combinations to control rates contin-
ued : conspiracy. — The state has the power to legislate against com-
binations, agreements, pools, trusts, etc., to fix prices, and subject
to penalties any foreign insurance corporation and preclude its
doing business in the state while a member of such combination,
etc.* But a foreign company which enters into an agreement with
other insurance companies outside the state in which it is doing
business, for the purpose of fixing rates of insurance in foreign
countries, not intended to affect, and which does not affect, persons,
property, or prices of insurance in the state does not subject it«elf
to a penalty imposed by statute upon any corporation transacting
any kind of business in the state, which becomes a party to any
pool or combination to fix or limit rates of insurance.^ And a state
statute fixing a penalty, to be recovered by the insured, of a certain
per cent in excess of the policy amount, where the insurer is con-
nected with a tariff association is not unconstitutional under the
Fourteenth Amendment and is a valid exercise of the police power
of the state.^ The Iowa statute "^ prohibiting combinations or agree-
ments of such companies as to rates, commissions and manner of
transacting business, is not unconstitutional, its only object being
to insure competition.*
2 Hartford Fire Ins. Co. v. Rav- Ct. 216, Ala. Code 1896, sees. 2619,
mond, 70 Mich. 485, 38 N. W. 474, 2620, as am'd by Code 1907, sees,
under Pub. acts Mich. 1887, no. 285. 4954, 4955; Firemen's Fund Ins. Co.
See Howell's Stat. Supp. 1883-89, v. Hellner, 159 Ala. 447, 49 So. 297,
see. 4340c. But see Niaoara Fire Code 1907, sec. 4594, Code 1896, sec.
Ins. Co. V. Cornell (U. S. C. C.) 110 2619. See Joyce on Monopolies (ed.
Fed. 816. See § 329a herein. 1911 ) sec. 370.
^ Livei-pool & London & Globe Ins. ' Code 1897, sees. 1754, 1755.
Co. V. Clunie (U. S. C. C.) 88 Fed. "Carroll v. Greenwich Ins. Co. 199
160. U. S. 401, 50 L. ed. 246, 26 Sup. Ct.
* Hartford Fire Ins. Co. v. State, 66, rev's: Greenwich Ins. Co. v. Car-
76 Ark. 303, 89 S. W. 42, Ark. act roll (U. S. C. C.) 125 Fed. 121. The
Jan'y 23, 1905, sec. 1. See Hartford court vev Mr. Justice Holmes, said:
Fire Ins. Co. v. Perkins (U. S. C. C) ''Whatever may be thought of the
135 Fed. 502. policy of such attempts it cannot be
* State V. Lancashire Fire Ins. Co. denied in this court, unless some of
66 Ark. 466, 45 L.R.A. 348, 51 S. W. its decisions are to be overruled, that
632, Ark. act 'Slay 6, 1899. statutes prohibiting- combinations be-
^ German Alliance Ins. Co. v. Hale, tween possible rivals in trade may be
219 U. S. 307, 55 L. ed. 229, 31 Sup. constitutional. The decisions concern
767
§ 330
JOYCE OX INSURANCE
Insurance companies nn,2,lit legally combine at common law to
establish uniform rates of insurance and of commissions to agents; '
and although a combination to maintain rates may be a void con-
tract, still it was not an indictable offense at common law.^° But
an ultra ^•ires contract in restraint of trade, to restrict competition,
to fix rates, etc., may l)e restrained in equity at the suit of the at-
torney general, where it violates public policy and works a public
injury." And a combination of foreign insurers to increase rates
of insurance may with their agents become liable to prosecution
under a statute prohibiting unlawful trusts and combinations "in
restraint of trade and products.'" ^^
§ 330. Foreign companies: what constitutes "doing business,"
etc. — ^\.shas been stated, the object of legislation regarding foreign
insurance comj)anies seems to be the protection of the interests of
the citizens of the legislating state, and certain of the statutory pro-
visions above referred to are substantially conditions precedent to
not only statutes of the United States rates of insurance and of ao'ent.«' c-om-
. but also state laws of simi- missions. Queen Ins. Co. v. State,
lai- import." See also State v. Smi- 86 Tex. 250, 22 L.R.A. 483, 24 S.
ley, 6.') Kau. 240, 67 L.R.A. 903, 69 W. .397, under Tex. act of Mareh
Pac. 199; State (ex rel. Crow) v. 30, 1899. Contra as to commoditif
Firemen's Fund Ins. Co. 152 Mo. 1, under MeClain's Iowa Code, set*.
45 L.R.A. 363, 52 S. W. 595. Com- 5454; Beechley v. Mulville, 102 Iowa,
jiare Niagara Fire Ins. Co. v. Cornell 602, 63 Am. St. Rep. 479, 70 N. W.
(U. S. C. C.) 110 Fed. 816. 107, 71 N. W. 428. See Joyce on
9 Queen Ins. Co. v. State, 86 Tex. Monopolies (ed. 1911) sec. 421. The
250, 22 L.R.A. 483. 24 S. W. 397. words '-trade and business" under the
On legality of combination among Nebraska Statute, Laws 1897, c. 79,
insurance iniderwriters, see notes, in includes the regulation of insurance
24 L.R.A. (N.S.) 153, and 38 L.R.A, contracts in restraint of com[)etiti()n.
(N.S.) 459. The laws of 1897, c. 81, prohibited
^° Aetna Ins. Co. v. Commonwealth, combinations to fix rates and commis-
j06 Ky. 864, 45 L.R.A. 355, 51 S. sions by fire insurance companies and
W. 624; Harris v. Common >vealth, provided ]ienalties therefor. State v.
113 Va. 746, 38 L.R.A. (N.S.) 458, American Surety Co. 91 Neb. 22, 135
73 S. E. 561, 41 Ins. L. J. 883. N. W. 365, 41 Ins. L. J. 1380, rey'g
" State (ex rel. McCarter) v. 90 Neb. 154. 13 N. ^Y. 235, 41 Ins.
Firemen's Ins. Co. 74 N. J. Eq. 37, 29 L. J. 185, but aff'g the point that
L.R.A. (N.S.) 1194, 135 Am. St. Rep. '-trade and commerce" does not in-
708. 18 Amei-. & Eug. Ann. Cas. elude insurance business. Insurance
1048, 73 Atl. 80, case reverses 70 N. is not an article of merchandise or
J. Kq. 291, 61 Atl. 705. manufacture or one of the "neces-
^^ State V. Phipps, 50 Kan. 009, 18 sarics of life'' or of prime necessity
L.R.A. 657, 31 Pac. 1007. under Kan. within the letter or spirit of laws of
Laws 1889, c. 257. Virginia against engrossing. It is
Insurance is not "trade" nor an not a subject of trade or barter.
"article of commerce" or a, "commndi- Harris v. Commonwealth, 113 Va.
ti/" and these words are not applica- 746, 38 L.R.A. (N.S.) 458, 73 S. E."
ble to a condiination to fix uniform 561.
768
PARTIES— THE INSURER
§ 330
doins; insurance business by such companies in states other than
the one of incorporation. Therefore, tiie question of what consti-
tutes doing an insurance business or making contracts becomes im-
portant. It is held that taking an application for a policy, and for-
warding it to the home office of the company in another state, is
not doing insurance business. ^^ And the insurance by correspond-
ence through the mail of property in a state, belonging to a resi-
dent therein, by a foreign company is not "doing business," there
being no proof that the company ever issued other fire policias cov-
ering property in that state." Nor is it doing business in one state
where the contract for renewal is ai)pHed for and consunnnated,
through the mail, in another state; ^^ nor receiving by mail at the
home office renewal premiums on j)olicies in force after withdrawal
^' Hafheny v. Leary, 12 Or. 40, 7 421 ; Lhoneux v. Banking- Corp. 3.'}
Pac. 329. ''Not only the intent of the Cli. Div. 446; Watkins v. In.suranee
statute must be given elfect, but the Co. 23 Q. R. Div. 285; Hagsrin v.
sweeping character of its penalty Coniptoir d' Kscninpte de Paris, 23 Q.
must be considered. This penalty ex-
tends to every contract. It applies to
one transaction with as much force as
it does to a hundred, and it reaches
the case of a corporation that has no
particular locality for transacting
corporate business here, as well as
the case of one that has such a place
of business, but is unwilling to com-
ply with the terms of the statute. No
foreign coi})oration, tlierefore, can re-
ly upon enforcing any contract here
made by it in the courts of this state,
unless it obeys the statute." Jones'
B. Div. :)1(); Palmer v. Railroad Co.
[1892] 1 Q. B. 82.;.
"Business" defined in Flint v. Stone
Tracv Co. 220 U. S. 108, 171, 55 L.
ed. 389, 31 Sup. Ct. 357, Ann. Cas.
1912B, 1312, quoted in Sargent Land
Co. V. Von Baumbach (U.^S. D. C.)
207 Fed. 423. 42(). 427. Tax on priv-
ilege of doing business.
JVhat is not ''doing bu.siue>is" un-
der Corp. Tar. Lair, Aug. 5, 1909, o.
6, 36 Stat. 112-117 (U. S. Comp.
Stat. Supp. 1911, pp. 946, 9.")1) ;
United States v. Nipissing Minas Co.
Business and Corporation Law, 111, 206 Fed. 431, 124 C. C. A. 313, rely-
in(i upon McCoach 'v. Minehill &
Scinivlkill Haven fJd. Co. 228 U. S.
293, 57 L. ed. 842, .33 Sup. Ct. 419,
which is disTnifiui^ihed in Sargent
Land v. Von l->auinl)ach (U. S. D.
C.) 207 Fed. 423, 427.
On insuj-ance contract made by
mail by unauthorized foreign com-
pany, see note in 24 L.R.A. 296; on
112.
" Hazeltine v. Mississipj^i ^'alley
Fire Ins. Co. (U. S. C. C.) 55 Fed.
743. The Court, per Hammond, J.
cites "as showing iiow the elastic
phrase 'carrying on business' or 'do-
ing business' seems to give trouble
everywhere," the following English
cases chronologicallv : Wilson v. Rail-
road Co. 5 Kxch. 822; Carron Iron effect of location of insured proj^erty
Co. v. Madaren, 5 11. of L. CiUi. 416, within the state to prevent an action
458; Ingate v. Llovd Austria Co. 4 C.
B* N. S. 704; Shields v. Great North-
western Railroad Co. 7 Jur. N. S.
631; Newby v. Von Oppen, L. R. 7
Q. B. 293:" Mackereth v. Glasgow &
S*)uthweslern Rv. Co. L. R. 8 E.\ch.
149; Jones v. Ins. Co. 17 Q. B. Div.
Joyce Ins. Vol. I.— 49. 769
by a foreign nisuranee company on
contract made in another state, see
note in 9 L.H.A.(N.S.) 417.
i^Huntinoto!! v. Sheehan, 206 N.
Y. 486, 100 X. E. 41, 42 Ins. L. J.
267.
§ 330 JOYCE ON INSURANCE
of insurer from the foreign state, premiums being payable at such
otiice under tlie policy; ^^ nor preliminaiy telegraphic negotiations,
the policy being executed in and sent by mail from another state; "
nor does doing business include such preliminary conditions as the
appointment of agents, but contemplates only the business of in-
surance,^^ nor is the sale of stock and taking notes therefor doing
business. ^^
Again, an agent who keeps his ofHce and carries on his business
in another state is not required to take out a license in Alabama,
because he issues policies on houses there, nor does the single act
of examining one house there, with a view to efiect insurance there-
on, bring the agent within the statute of that state in relation to
foreign companies ; ^° and it is well settled that a single isolated fact
is not doing business ^ nor is effecting insurance on a single item
of property doing business,^ nor the transaction of such business a.s
is necessary under policies outstanding at the time of withdrawal
from the state of the' company's agencies and the surrender of its
license.^ And "doing business,"' under a statute exempting assess-
ment corporations from being subject to the general insurance laws
of the state, refers to issuing policies and not to pacing policies
which have been issued in the past.* And a few separate and dis-
connected transactions, such as merely recognizing existing insur-
ance policies and receiving premiums thereon at its ofhce in anoth-
er state, together with four isolated acts extending over a period of
16 State V. Connecticut Mvitnal Life to file its charter as a condition prec-
Ins. Co. 106 Tenn. 282, 61 S. W. 75. edent. Shannon's Code Tenn. sees.
1' Hammond v. International Ry. 2546, 2547 ; Tennessee River Coal Co.
Co. 116 N. Y. Supp. 854, 63 Misc. In re (U. S. D. C.) 206 Fed. 802.
437, aff'd (mem.) 119 N. Y. Supp. On single or isolated transaction
1127, 134 App. Div. 995. by foreign corporation as doing busi-
i^Rehm v. German Insurance & ness within the state, see note in 10
Savings Inst. 125 Ind. 135, 25 N. L.R.A.(N.S.) 693.
E. 173. ^ Richman Cedar Works v. Buck-
ie Hughes V. Four States Life Ins. ner (U. S. C. C.) 181 Fed. 424.
Co. (1914) — Tex. Civ. App. — , ^ gt^te v. Columbian Natural Life
164 S. W. 898. Ins. Co. 141 Wis. 557, 124 N. W. 502,
20.1ackson v. State, 50 Ala. 141, under Stat. 1898, sec. 1954, as am'd
under Sess. acts 1868, p. 330, sec. by Laws 1907, c. 597, requiring annu-
107. But see State v. Beazlev, 60 Mo. al statements.
220. See § 330a herein. ' * Knights Templans' & Masons'
1 Frawley, Bnndv & Wilcox v. Life Indemnity Co. v. Jarman, 187
Pennsylvania Casualtv Co. (U. S. C. U. S. 197, 47 L. ed. 139, 23 Sup. Ct.
C.) 124 Fed. 259, 264. But see § 108, cited in Hunter v. Mutual Re-
330a herein. serve Life Ins. Co. 184 N. Y. 136,
The mere execution of a mortgage 144, 30 L.R.A.(N.S.) 677 note; 6
and recording the same does not con- Amcr. & Eng. Ann. Cas. 291, 76 N.
stitute ''doing business" under a stat- E. 1072. •
ute requiring a foreign corporation
770
PARTIES— THE INSURER
330
three years, consisting in rewriting an existing policy, sending a
check in ])ayment of a policy, to be delivered upon receipt of cer-
tain unpaid assessments, and two adjustments within the state of
claims which have accrued, do not constitute doing business with-
in the state after the company's asserted withdrawal therefrom in
good faith, so as to preclude it from revoking its designation of the
insurance connnissioner as its agent to receive service of process, as
such acts do not operate to continue in force such designation.*
Doing business within the meaning of the General Corporation Law
of New York relates to the ordinary business which the corporation
is organized to do, and has no relation to the incidental contract of
a foreign corporation with a domestic corporation such as insviring
its property, and a foreign corporation is not doing business in New
York by taking out a policy in said state, where the property in-
sured was in a foreign state in which it transacted its general busi-
ness, where it did no business in New York when the insurance was
taken out, and whatever books it had within New^ York state Avere
sent to the foreign state prior to entering into said contract.^ And
in that state an agreement by A. to pay B., a trousers' manufactur-
er, for services in case of damage by fire to material furnished B. to
manufacture said garments for A. does not constitute engaging ''in
the business of insurance," for no risk is run.''^ Nor does issuing a
policy by a corporation of one state on property in another state
* Hunter v. Mutual Reserve Life
Ins. Co. 184 N. Y. 136, 30 L.R.A.
(N.S.) 677 note, 6 Amer. & Ens'.
Ann. Cas. 291, 76 N. E. 1072, 51
Misc. 26, 99 N. Y. Supp. 888, f)7 App.
Div. 222, 89 N. Y. Supp. 849, 43
Misc. 251, 87 N. Y. Supp. 438. See
Birch v. Mutual Reserve Life Tiis.
Co. 91 App. Div. 384, 86 N. Y.
Supp. 872, aff'd in Hunter v. Mu-
tual Reserve Life Ins. Co. 218 U. S.
573, 54 L. ed. 1155, 31 Sup. Ct.
127, 30 L.R.A.(N.S.) 686, 40 Ins. L.
J. 172. Consi(lerinc) and distinijuish-
■inq: Commercinl Mutual Accident
Co. V. Davis, 213 U. S. 245, 53
L. ed. 782, 29 Sup. Ct. 445; Mn-
Inal Reserve Ins. Co. v. Birch.
200 V. S. 612, 50 L.
26 Sup. Ct. 752;
Fund Life Assoc, v
147, 47 L. ed. 987,
Connecticut Mutual
ed. 620.
Mutual Reserve
Phelps, 190 U. S.
23 Sup. Ct. 707;
Life Ins. Co. v.
Sju-atlev, 172 U. S.
569, 19 Sup. Ct. 308.
Mr. Justice McKenna
602, 43 L. ed.
The coiirl, per
in tlie prin-
7
cipal case, says: ''The contention of
plaintiff, so far as based on the in-
stances adduced, encounters a great
difficulty. They were not new busi-
ness. They related to old transac-
tions and were intended only to ful-
lil tlieir ob]i^atiolls. Tliis was the
plain duty of dclVndanl, a duty which
it could not evade nor could the state
even prevent it. Bedfoi'd v. Eastern
Building & Loan Assoc. 181 IJ. S.
227, 45 L. ed. 834, 21 Sup. Ct. 597.
Between doing business for sucli pur-
poses and doing business generally
there is quite a difference. If not,
the eonsequeuce.s are somewhat seri-
ous. Tlie Ci'aig act, as we have seen,
imposes a penalty," etc. Id. 584.
^ Kline Brothers & Co. v. German
Union Fiie Ins. Co. 132 N. Y. Supp.
181, 147 App. Div. 790, aff'd (mem.)
210 N. Y. 535.
'Stern v. Rosenthal, 128 N. Y.
Supp. 711, 71 Misc. 422, Cou.>^ol.
Laws N. Y. 1909, e. 280, sec. 54.
71
§ 330a JOYCE ON INSURANCE
constitute carrying on business in tlie latter state ; ^ nor insuring
property in one state, wliere the application is received at, and the
policy issued from, the home othce in another state; ^ nor bringing
an action in a state other than that of the insurer's home office, to
roco\'er an assessment adjudged due hy a court in the latter state
under a policy issued there, upon an application made in a third
state, to a resident of the state where the suit was brought and the
property insured was located.^" Nor is adjusting a loss by an un-
certified agent of a foreign insurance company ''transacting the
business" of insurance.-^^
§ 330a. Same subject. — Doing or transacting ''business" may be
limited to certain kinds of busina*s and preclude doing only sucli
a particular kind or class as a corporation, notwithstanding its char-
ter powers, may carry on uj^on compHance with statutes prescrihiug
conditions precedent to transacting certain specified business.^^ A
single transaction indicating a j)iu'pose to transact a substantial part
of insurers dealings in the state constitutes doing business. ^^ So
it is held that taking a note for an instalment of premivuu and
transmitting it to the company is "doing insurance business." "
So where the policy is applied for, received and the [)remium ])aitl
in the state the insurer is within a statute as to taking risks and
transacting business.^^ So an agent who has received premiums for
insurance, taken his commissions, advertised himself as agent, for-
8 Marine Ins. Co. v. St. Louis iron New Jersei/. — Columbia Fire Jus,
Mountain & Southern R. Co. 41 Fed. Co. v. Kinyon, 37 N. J. L. 33.
643; New Orleans v. Virainia Fire & Pewisi/lrania. — Commonwealtli v.
Marine Ins. Co. 33 La. Ann. 10. Biddle, 13i) I'a. 603, 11 L.l^.A. 5()1,
9 Swin->' V. Taylor & Crate, G8 W. 21 Atl. 147.
Va. 621,' 70 S. E. 373. ii People (ex rel. McCall) v. Cil-
lOSwin^ V. Brister & Co. 87 Miss, bert, 44 Hun (51 N. Y. Sup. Ct.)
516, 40 So. 146, 35 Ins. L. J. 223. 522.
Citing nnd reli/in(j, Hi< to the right \o ^^ Mi'iropoUtixn Casualty Ins. Co.
insure property in a foreign state of N. Y. v. Basford, 31 S. Dak. 149,
and to enforce Use contract there 139 N. \V. 795, Laws 1905, c. 73, see.
where insured resides, etc., upon: 2; Laws 1907, e. 110; Laws 1909, c.
T'nited States. — Allaever v. Tjouisi- 243; Laws 1911, c. 176.
ana, 165 U. S. 578, 590, 591, 41 L. ^^ £,^^1.^ pio^,. Co. v. W viand, 60
ed. 832, 17 Sup. Ct. 427. Kan. 255, 76 Pac. 863, Gen. Stat.
Alabama. — Christian v. Auiei'ican 1901, sec. 1283, cited in Toinson v.
Freehold Land & Mortg. Co. 89 Ala. Iowa State Traveling Men's Assoc.
198, 7 So. 427. 88 Neb. 399, 129 N. W. 529, 40 Ins.
Arkansm. — Railway Co. v. Fire L. J. 591, 594, see § 330 herein.
Assoc. 55 Ark. 163, 174, 18 S. W. 43. i* Hacheny y. Leary, 12 Or. 40, 7
Indiana. — Swing v. Hill, 165 Ind. Pac. 329. Thayer, J., dissenting.
411, 75 N. E. 658. ^^ Stevens y. Rasin Fertilizer Co.
Mm.somW. — Lumberman's Mutual 87 Md. 679, 41 Atl. 116, Code Pub.
Ins. Co. y. Kansas City, Ft. S. & M. Gen. Laws, art. 23, sees. 118, 119, 124.
R. Co. 149 Mo. 165, 50 S. W. 281.
772
PARTIES— THE INSURER § 331
•warded premiums to tlie iusuranee company, and received policies
for delivery to the insured, is an agent of the company and a per-
son aiding in the transaction of insurance business, under the Wis-
consin statute, sufficiently so at least to give the court jurisdiction
by the service of process upon him.^^ And although a foreign com-
I)any makes a voluntary assignment of its property, it will be con-
sidered as "doing business" within the intent of the statute where
such company has been transacting business in the state, although
it ceases to take new risks; ^"^ a company is doing business sufficient
for the service of process upon a local agent where it has outstand-
ing policies in the state and the right to investigate losses thereun-
der, to have an examination of deceased's body in proper cases and
to do whatever is necessary within the state to adjust and pay loss-
es." Other instances of what constitutes doing business are: Issu-
ing insurance to residents upon property located in the state by an
unlicensed company without an otHce in the state; ^^ where a com-
])any, with an office in a state foreign to that of it*; incorporation
there insures property in other states, even though it does not in-
sure property in the state where such office is located; 2° actively
soliciting membership by a foreign fraternal accident association
and receiving large sums of money for assessments; ^ collecting pre-
miums on policies in force after withdrawal of agents from the
state; ^ collecting premiums and paying losses on policies outstand-
ing after insurers withdrawal from the state; ^ and the statute may
provide that collecting premiums from a citizen of the state shall
constitute doing business therein.'*
§ 331. Foreign company estopped to avoid contract by setting
up noncompliance with statutes. — A foreign insmance com])any
cannot avail itself of its own turpitude in not cou)plying with the
16 State v. United States Mul. Ace. 20 f^jaj^, y Amazon Ins. Co. 24
Assn. 67 Wis. 624, 31 N. \\. 220, Oliio Cir. Ct. Rep. 387.
under Rev. Stat. Wis. %ec. 19<7. ^ Tomson v. Iowa State Traveling
1'^ Williams v. Commeveial Ins. Co. ^'en's Assoc. 88 Net). 309, 129 N. W.
75 Mo. 388; Relfe v. Conmieicial his. .')29, 40 Ins. L. J. 591.
Co. 5 Mo. App. 173, under Wagner's ~ Cnnmionwealtli v. Providence Sav-
]\Io. Stat. 772. ' inos Life Assnr. Soc. 155 Kv. 197,
18 Commercial ]\Iutual Accident Ins. 159 S. W. 698, Kv. Stat. see. 4226.
Co. V. Davis, 213 U. S. 245, 53 L. ed. See i; 330 herein.
782, 29 Sup. Ct. 445, 38 Ins. L. J. ^ Connecticut Mutual Life Ins. Co.
655. V. Spratley, 172 U. S. 602, 43 L. ed.
i^McCord V. Illinois National 569, 19 Sup. Ct. 313, s. c. 99 Tenn.
Fire Ins. Co. 47 Ind. Aj)p. 602, 94 N. 322, 42 S. W. 145, 44 L.R.A. 442,
E. 1053, 40 Ins. L. J. 1428, Act statute as to service of process.
March 11, 1001, Burns' Ann. Stat. * Owen v. Bankers Life . Ins. Co.
1908, see. 4708, as to service of pro- 84 S. Car. 253, 137 Am. St. Rep.
«'ess. See Swing v. Munson. 191 Pa. 845, 66 S. E. 290.
582, 58 L.R.A. 223, 43 Atl. 342.
773
§ 332
JOYCE ON INSURANCE
statutes regarding insurance, to defeat an action against it on a pol-
icy. It is estopped, or at least prohibited, by the prohibition of the
common law against unauthorized corporate action, from denying
its authority to transact business as against innocent persons.^ It
is estopped from setting up that the contract was made in violation
of the statute, in order to avoid liability on the policy where in-
sured participated in the transaction without knowledge, actual or
constructive, of the fact of noncompliance with the law by insur-
er,^ and the rule as to estoppel precludes pleading disability of the
corporation to contract by one who is sued upon such contract.'
§ 332. When contracts valid although company has not complied
with statutes.^ — But preliminary contracts authorized to be entered
into by an insurance company become valid on completing the or-
ganization as required by statute,^ and the presumption attaches
that a company has been duly incorporated where a question arises
between the receiver of a corporation and persons who have con-
tracted with it as such,^° nor is compliance with the statute as to
transacting business necessary to enable a foreign insurance com-
pany to take securities in the state of Wisconsin for debts due them
5 United States.— Bevry v. Knights
Templars' & Masons' Life luderanity
Co. (U. S. C. C.) 46 Fed. 439.
Illinois. — Watertown Fire Ins. Co.
V. Rust, 141 111. 85. 30 N. E. 772,
under Rev. Stat. 1887, c. 73, sec. 124.
Michigan.— CUy Fire & Marine
Ins. Co. V. Huron Salt & Lumber
Mfg. Co. 31 Mich. 346.
Minnesota. — Ganser v. Fireman's
Fire Ins. Co. 34 Minn. 372, 25 N. W.
943.
Pennsylvania. — Hoge v. Dwelling
House Ins. Co. 138 Pa. 66, 20 Atl.
039; Watertown Fire Ins. Co. v.
Simons, 96 Pa. St. 520; Swan v.
Watertown Fire Ins. Co. 96 Pa. St.
37.
See next section. See, also, as to
general rule, 2 Morawetz on Private
Corporations, 2d ed. sec. 752. As
to estoppel of corporation to plead
that contract is ultra vires, see note
13 Am. Dec. 108. For cases where
insurance company may set up ultra
vires, see Harahro v. Hull & London
Fire Ins. Co. 3 Hurl. & N. 789; Web-
ster V. Buffalo Ins. Co. 2 McCrary
(C. C.) 348, 7 Fed. 399. When it
T
is estopped, see Gray v. National
Benefit Assn. Ill Ind. 531, 11 N. E.
477. And see generally, .') Tliomp-
son on Corporations, (ed. 1894) sec.
6015, et seq.; 2 Id. (2d ed.) sees.
1945-1994, and § 334 lierein. As to
estoppel to deny corporate existence,
see Farmers' Mutual v. Reser, 43 Ind.
App. 634, 738, 88 N. E. 353.
On right of foreign corporation to
set up noncompliance with conditions
of doing business in order to defeat
recovery against it, see note in 25
L.R.A. 569.
^ Corbett v. Physicians Casualty
Assoc. 135 Wis. 50o, 16 L.R.A.(N.S.)
177, 115 N. W. 365.
■^ Johnson v. Mason Lodge, No. 38,
106 Ky. 868, 51 S. W. 620.
8 See § 1452 herein.
9 Williams v. Babcoek, 25 Barb. (N.
Y.) 109. See Dalv v. National Life
Ins. Co. 64 Ind. 1; National Mut.
Fire Ins. Co. v. Pursell, 10 Allen (92
Mass.) 231; Skillern v. Continental
Ins. Co. — Tenn. Ch. — , 42 S. W.
ISO, acts 1895, c. 119.
10 White V. Coventry, 29 Barb. (N.
Y.) 305.
74
PARTIES— THE INSURER § 332
from residents thereof," nor does such noncompliance invalidate the
bond of an insurance agent/^ and where the statute does not declare
the transactions of the company void, in ca.«e of noncompliance with
its pro^•isions, a mortgage made by a foreign company will be up-
held ; ^^ nor does it invalidate subscriptions to the stock of such cor-
porations; or notes given in payment therefor. Such contracts are
not "taking risks" nor "transacting any business of insurance." ^*
So it has been held ^^ that a statute requiring a certified copy of ar-
ticles of association to be filed with the county clerk did not affect
the validity of contracts, as it was intended merely to furnish proof
of corporate existence. -^^
In Massachusetts, it is held that a foreign company may make a
valid contract of insurance there.^''^ In Arkansas, a failure to com-
ply with the statutes relating to foreign insurance companies doing
business in that state does not afl'ect the validity of the policies is-
sued by such company, but only renders the agents and brokers?
of such corporation liable to the penalties imposed by the statute. ^^
So in Indiana, a policy is held not to be void for noncompliance
with such statute. ^^ Nor is the policy void in Ohio under such cir-
cumstances, nor is the policyholder excused from payment of pre-
miums under his contract.^" And a claim for premiums may be
enforced by a corporation which has not complied with the statu-
tory prerequisites even though such unauthorized company is guilty
of a misdemeanor and subject to a penalty by reason of the in-
surance ; ^ and there are numerous cases which hold such policies
" Charter Oalc Life Ins. Co. v. MeCrary (U. S. C. C.) 123, 1 Fed.
Rawvev, 44 Wis. 387. 471.
12 United States Life Ins. Co. v. i^ Bolder v. German Mut. Fire
Adams, 7 Biss. (U. S. C. C.) 30, Ins. Co. 68 Ind. 347. But see § 332
Fed. Cas. 16,792. lierein.
13 Northwestern Mut. Life Ins. Co. 20 Uiiion Mut. Life Ins. Co. v. Mc-
V. OvcrhoU, 4 Dill. (U. S. C. C.) 287, Millen, 24 Ohio St. 67. See also
Fed. Cas. No. in,;!38. State Mutual Fire Ins. Co. v. Brink-
i^Bartlett v. Chouteau Ins. Co. 18 ley Stave & Heading Co. 61 Ark. 1,
Kan. 369. 29 L.R.A. 712, 54 Am. St. Rep. 191,
15 dlions V. People, 25 Mich. 499, 31 S. W. 157. Compare § 333
under Mich. Sess. Laws 1859. p. 1083, herein,
sec 9. 1 State IVFutual Fire Ins. Co. v,
isjhous V. People, 25 Mich. 499. Brinkley' Slave «fc Heading Co 6_1
See, also, American Ins. Co. v. But- Ark. 1, 29 L.R.A. /12 31 S. W. lo/,
ler 70 Ind. 1. '^4 Am. St. Rep. 191. Compare
17 T- 'u ,n A 4^ T American Ins. Co. v. Wellman, 69
I'lvennebec Co. V Augusta Ins. j^^ 4^3 s,^,^^^, ^, Christian
Co. 6 Gray (/2 Mass.) 204. Brothers Mill Co. 66 Minn. 205, (iS
On effect on insurance of non- n. w. 1065. Compare § 333 herein.
compliance with statutory' require- 2 ii..„.ff,,r(l Live Stock Ins. Co. v.
ments, see note in 20 L.R.A. 405. Matthews, 102 :Nrass. 221; Connecti-
18 Ehrmann v, Teutonia Ins. Co. 1 cut River Mut. Fii-e Ins. Co. v. Whip-
775
§ 332a JOYCE ON INSURANCE
valid and the premium or premium notes collectable.^ Again, un-
der a statute providing that suits may be brought against foreign
companies upon any contract made and delivered in the state, an
action may be maintained on a policy delivered by an agent of the
company within the state.^ And a foreign company may sue upon
its contracts as they are not invalidated by noncompliance with
statutory conditions precedent to doing business, where by such
noncompliance the officers and stockholders are rendered indi-
vidually liable under the statute.* The insurance of one's own
j)r()perty in an unauthorized foreign company is not criminal under
the Pennsylvania statute,^ prohibiting such companies from doing
business and making it an offense for ''any person . . . pay-
ing or receiving or forwarding any premiums, applications for in-
surance, or in any manner securing, helping, or aiding in the plac-
ing of any insurance or effecting any contracts of insurance'' with
such companies.^
§ 332a. Same subject. — If a statute permits a resident of one
state to procure insurance at the home office of a foreign company
unauthorized to do business, a policy consummated by mail in the
foreign' company's state is valid.' And a policy issued by a foreign
compan}!- on property in a state without compliance with its laws
prohibiting, under a penalty issuing such policies without comply-
ing with said laws, is valid as to insured and binds the insurer where
no duty or proliibition in that respect is imposed on insured by
said laws.* So a resident of a state may safely deal with a com-
pany, which, although unauthorized, holds it.-^elf out as qualified to
do business with him, in the absence of knowledge, actual or con-
structive, to the contrary. And his right to presume that said
company is qualified to do business is not impaired by the fact that
it uses the mail in negotiating its contract with him.^ If a com-
ple, 61 N. H. 61; Provincial Ins. Co. 42 Att 982, Vt. Stat. sees. 4181,
V. Lapslev, 15 Cray (81 Mass.) 262; 4182.
Behler v. German Ins. Co. 68 Ind. On insurance contract made by
347, overruling Sun Ins. Co. v. mail by unauthorized foreign corn-
Slaughter, 20 Ind. 520; Clark v. pany. see note in 24 L.R.A. 296.
Middleton, 19 Mo. 53. Compare § « Pennypacker v. Capital Ins. Co.
333 herein 80 Iowa, 86, 8 L.R.A. 236, 20 Am.
3 Burns v. Provincial Ins. Co. 35 St. Rep. 395, 45 N. W. 408; Phoeni.K
Barb (NY) 525. Ins. Co. v. Pennsvlvania Ins. Co. 134
* Helvetia * Swiss Fire Ins. Co. v. Ind. 215, 20 L.R.A. 405u,_ 33 N. E.
Edward P. Allis Co. 11 Colo. App. 970; Strampe v. Farmers' Mutual
"64 53 Pae '^4'^ Ins. Co. 109 Minn. 364, 26 L.R.A.
" 5 Act 1887. note. (N.S.) 99n, 123 N. W. 1083. See §
6 Commonwealth v. Biddle, 139 Pa. 331 herein.
605, 11 L.R.A. 561. 21 Atl. 134. » Corbet t v. Physicians Casualty
7 Baker v. Spaulding, 71 Vt. 169, Assoc. 135 Wis. 505, 16 L.R.A.
776
PARTIES— THE INSURER
§ 332b
pany has complied with conditions precedent and obtains a hcensc
under one statute but has not complied with a former law on the
subject, such law is repealed by implication and the company is
lawfully in the state and may enforce its contract;^ there, and a sub-
sequently enacted statute as to certain requirements will not render
such licensed company's contracts void and unenforceable.^"
A fraternal beneficiary association's liability is unaffected b}^ the
fact that it has received a certificate to do business a.s such, where
it has issued a certificate payable to a beneficiary not within the
class permitted by statute. ^^
§ 332b. Same subject: insurance in foreign state of property in
another state. — In. Michigan the statute does not apply to contracts
made abroad upon property within the state, but only to operations
therein. ^2 And a contract of insurance effected and issued in a
foreign state on property situate in another state whose laws render
it void if made there is valid and enforceable by either party. ^^
And a renewal policy covering property in one state belonging to
a resident thereof, and which is consummated through the mail
in another state is a lawful contract in the former state even though
insurer had no license to do business there.^* yVnd a party can pro-
cure insurance by a contract made without the state even though tlic
(N.S.) 177, 115 N. W. 36.5. See also
Watertown Fire Tus. Co. v. Rust, 141
111. 85, 30 N. E. 772. ,
^° Continental Ins. Co. v. Rieoen,
31 Oreg. 336, 48 Pae. 476, 26 Ins. L.
J. 490.
^^ Ordelheide v. Modern Brother-
hood of America, 158 Mo. App. 677,
139 S. W. 269, 40 Ins. L. J. 1845.
^^ Clav Fire & Marine Ins. Co. v.
Hu7-on Salt & Lumber :\rfo-. Co. 31
Mich. .346, nndcr Mich. Stat. Comp.
L. 1871, .sec. 1683.
^^ Columbia Fire Ins. Co. v. Kin-
yon, 37 N. J. L. 33, 36. See also
Swing V. Hill, 165 Ind. 411, 75 N. E.
658; Hammond v. International Ry.
Co. 116 N. Y. Sup|). 854, 63 Misc.
437, aff'd (mem.) 119 N. Y. Supp.
1127, 134 App. Div. 995: Seamens v.
Knapp-Stout & Co. 89 Wis. 171, 27
L.R.A. 362, 46 Am. St. Rep. 425, 61
N. W. 757. See S§ 226, 231a, 231c,
231f, 333-333b herein.
Eramine the following cases:
loioa. — Seamans v. Zimmerman, 91
Iow;i, 363, 59 N. W. 290.
77
Maine. — Corbin v. Houlehan, 100
Me. 246, 70 L.R.A. 568, 61 Atl. 133.
Massachusetts. — Commonwealth
Mutual Fire Ins. Co. v. Fairbank
Canning Co. 173 Mass. 161, 53 N. E.
373.
Michigan. — Clay Fire & Marine
Ins. Co. V. Huron Salt & Lumber
Mfg. Co. 31 Mich. 346.
Missouri. — Lumbermen's Mutual
Ins. Co. V. Kansas Citv, Ft. S. & M.
R. Co. 149 iMo. 165, 50 S. W. 281.
Nebraska. — Commonwealth Mutu-
al Fire Ins. Co. v. Havden, 60 Neb.
636, 83 Aift. St. Rep. 545, 83 N. W.
922.
New Hampshire. — Connecticut
River Mutual V'wv Ins. Co. v. Wav,
62 N. H. 622.
Netv Jersei/. — Northampton Mutual
Live Stock Ins. Co. v. Tuttle, 40 N. J.
L. 476.
Neur York. — AV astern v. Genesee
Mutual Ins. Co. 12 N. Y. 2.58.
Washington. — Ward v. Tucker, 7
Wash. 399, 35 Pac. 1086. ■
^* Huntington v. Sheehan, 206 N.
§ 333 JOYCE ON INSURANCE
statute prohibits procuring insurance from an unauthorized com-
pany making it a misdemeanor to do so/^ or making such contracts
voidV^ as the legislature has no power to prohibit making such con-
tracts," for a law of one state which interferes with the constitutional
right of an insurance company of another state to make them would
1)6 void/^ at least a statute prohibiting making them would to that
extent be unconstitutional.^'
§ 333. When contracts not valid where company has not com-
plied with statutes, — Notwithstanding some of the cases in the last
scftion hold that a noncompliance with statutes regulating the busi-
ness of insurance companies does not invalidate the contract, there
are numerous decisions which hold, that where the contracts are
made within the state a strict compliance with such statutes is neces-
sary to the validity of the contract. And it would seem reasonable,
in view of what has been stated in the preceding sections herein, that
it would necessarily follow that a contract made in violation of or
noncompliance with such laws could not be valid, or at least should
be voidable on principle.^" The decisions, however, are not unani-
mous, and it is extremely difficult to state any positive governing
rule. In Illinois, it is held that a foreign coiporation cannot en-
force such a contract, nor recover on a note given for stock and
premiums, notwithstanding the law imposes a penalty for doing
l)usiness in the state in violation of the statutory provisions relating
thereto.^ In Massachusetts, the statute prohibits the "making of
any contract of insurance within the state," unless certain statutory
conditions have been complied with, and it has been decided in
that state that a noncompliance with such requirements prevents
recovery on a premium note given a mutual company.^ And in
Y. 486, 100 N. E. 41, 42 Ins. L. J. Hilton, 58 N. Y. Supp. 996, 42 App.
267. Div. 52.
15 Hooper v. California, 155 U. S. ^^ Atlas Mutual Ins. Co. v. Fish-
648, 39 L. ed. 297, 15 Sup. Ct. 207, eries Co. 6 Penn. (Del.) 256, 68 Atl.
5 Inters. Com. Rep. 610, Cal. Pen. 4, 3/ Ins. L. J. 285.
Code, sec. 649. See also Atlas .Mutu- ^o Williams v. Cheney, 3 Gray (69
fil Ins. Co. V. Fislieries Co. 6 Penn. Mass.) 215, and following eases in
(Del.) 256, 68 Atl. 4, 37 Ins. L. J. this section.
285. ^ Cincinnati Mut. Health Assn. v,
^MVestern Massachusetts Mutual Rosenthal, 55 111. 85, 8 Am. Rep. 626.
Fire Ins. Co. v. Hilton, 58 N. Y. Compare § 332 herein.
Supp. 996, 42 App. Div. 52. ^ Wa.shington Mut. Ins. Co. v.
"Swin? V. Hill, 165 Ind. 411, 75 Hastings, 2 Allen (84 :\rass.) 398;
N. E. 658. Jones v. Smith, 3 Gray (69 Mass.)
18 Hammond v. International Ins. 500. But see National Mutual Fire
Co. 116 N. Y. Supp. 8.54, 63 Misc. Ins. Co. v. Pursell, 10 Allen (92
437, atf'd (mem.) 119 N. Y. Supp. Mass.) 232. In this case it appeared
1127, 134 App. Div. 995; Western that statute provided that the con-
Massachusetts Mutual Fire Ins. Co. v. tract should be valid, though pro-
778
J
PARTIES— THE INSURER § 333a
Nebraska a premium note given to a foreign insurance company,
which has not acquired the right to do business in the state, is not
enforceable.^ And it has also been decided in Indiana that a pre-
mium note cannot be enforced in the state where no certificate has
been issued to the agent of a foreign company, as required by the
statute, to enable him to transact business.* So, in tJiat state, there
are cases which hold such contracts void, both as to the foreign com-
pany and its agents, and the insured may sustain an action to re-
cover back his premium, and may do this independent of the doc-
trine of recovering back the consideration upon the rescission of a
contract.^ And the insured may recover back premiums paid on
a policy issued by an unlicensed company, where the agreement
was to procure insurance from a licensed company,^ In a case in
Illinois it appeared that after publishing notice and filing an inten-
tion to organize an insurance company, the persons so intending
secured an application for insurance and a premium note payable to
the company, which they presented to the state auditor, and on the
day of the loss made the oath required by statute, and it was held
that as at the time of the contract the corporation had no legal ex-
istence, it could not be bound thereby.'^
§ 333a. Same subject. — No recovery can be had in Minnesota of
a premium for insurance on property there by either a foreign cor-
poration or a foreign unincorporated mutual association which has
not complied with the statutes.' And in Mississippi noncompli-
ance with the statutory requirements precludes recovery of pre-
miums due for insurance on property there whether the policy was
issued in or out of the state. ^ >So under an Ohio decision, an un-
licensed company cannot maintain an action in that state for pre-
miums on policies covering property located there but it can be
brought in the state where the policy was issued where jurisdiction
over the policyholder may'be had." Under a Michigan decision
a foreign insurance corporation, prohibited by statute from issuing
visions of statutes were not com- ants' Mat. Ins. Co. 107 111. 652, s. c.
plied with. Leonard v. Washburn, 13 111. App. 308. See American Ins.
100 Mass. 251. Co. v. Stoy, 41 Mich. 38.J, 388.
^ Barbor v. Boehm, 21 Neb. 450. * Seamans v. Christian Bros. Mill
* Holiman v. Banks, 41 Ind. 1. Co. 6(i Minn. 205, G8 N. W. 1065.
^ Union Central Life Ins. Co. v. ^ Cowan v. London Assur. Corp,
Thomas, 46 Ind. 44. See Farmers' 73 Miss. 321, 55 Am. St. Rep. 535,
& Merchants' Ins. Co. v. Harrali, 47 19 So. 208.
Ind. 236; Charter Oak Life Ins. Co. i° Bankers Casualty Co. v. Rieh-
V. Sawyer, 44 Wis. 387. But see pre- land County Bankino: Co. 55 Ohio
ceding section. Law Bull. 428. See Parker v. Lamb
6 Barrett v. Elliott, 24 Canadian & Sons, 09 Iowa, 265, 34 L.R.A. 704,
Law Times, 344. See § 1402 herein. 68 N. W. 686.
' Gent v. Manufacturers' & Merch-
779
§ ;]33b JOYCE ON INSURANCE
policies on property within the state without expre&s authority, and
from doing business or maintaining actions therein without com-
pliance with certain regulations and conditions, cannot, without
complying with sut-h requirements, maintain an action in that state
for an a.-^sessment on a contract of insurance made through the mail
on property situated therein as such a contract is in contravention
of the policy of the state, even if it evades the statute. ^^ And under
an Illinois decision assessments are not recoverable where the stat-
ute has not been complied with ; ^^ nor can assessments be recovered
in Pemisjdvania by a foreign corjioration which has not complied
with its laws.^^ If the statute declares that the contract shall be
deemed to have been made in the state within which the applica-
tion is taken this applies to a foreign insurance company and makes
its contract void if its application is taken in a state with the laws of
which it has not complied and precludes recovery there of assess-
ments on its contract,^*
Again, a contract made by mail for the insurance of property
within the state by a foreign company which is prohibited from
transactinsi insurance busina^* within the state, directlv or indirect-
ly, will not sustain an action by a receiver of the company against
the policy holder to recover an assessment. ^^
§ 333b. Same subject. — A foreign company can maintain no
action on a contract made before compliance with a statute requir-
ing the company to file a statement of its condition. ^^ It is also
held that the failure to comply with the requirements of a statute
prescribing the terms upon which foreign insurance companies may
do business in a state, such companies and their agents and brokers
render themselves liable to the penalties denounced by' the act, but
such failure does not affect the validity of the policies issued by
them, or in any manner operate to the prejudice of the policy
holder.^' So it is held in Vermont that an insurance contract is
" Seamans v. Temple Co. 103 Mich. Co. 6 Pa. Dist. K. 54, 19 Pa. Co. Ct.
400, 28 L.R.A. 430, 55 Am. St. Hep. 113.
457, (i3 N. W. 408. See also Swing ^^ Commonwealth Mutual Fire Ins.
v. Cameron, 145 Mich. 175, 9 L.R.A. Co. v. Edwards, 124 N. Car. 116, 32
(N.S.) 41 7n, 108 N. W. 5(K), 35 Ins. S. E. 404.
L. .1. 73(1 " Rose V. Kimberly & Clark Co. 89
On effect of location of insured Wis. 544, 27 L.R.A. 556, 45 Am. St.
property within the state to prevent Rep. 855, 62 N. W. 526.
an action by a foreign insurance ^^ ^Etna Ins. Co. v. Harvey, 11
company on contract made in another Wis. 394.
state, see note in 9 L.R.A. (N.S.) 417. i''' Ehrmann v. Teutonia Ins. Co.
i2Buell V. Breese ^lill & Grain Co. 1 McCrary (U. S. C. C.) 123, 1 Fed.
65 111. App. 271. 471, citing Union Mut. Ins. Co. v.
" Western Massachusetts Mutual ]\IcMillen, 24 Ohio St. 67. See Hoop-
Fire Ins. Co. V. Girard Point Stora2:e er v. California, 155 U. S. 648, 39 L.
^780
PARTIES— THE INSURER
§ 3331)
void when made by a foreign company before it has complied with
tlie statute, obtained a license, and filed a copy of its by-laws with
the secretary of stale, and become responsible for the acts and neg-
lects of its agents.^* If the laws of a state declare that all insur-
ance effected by foreign corporations which have not complied with
such laws is unlawful, void, and of no effect whatever, a policy is-
sued in violation of this rule is void not only in that state, but in
every other, and hence no recovery can be had thereon in the state
in which such corporation was organized.^^ And it is decided that
a contract of insurance made with a foreign insurance coinpany,
and valid where made, cannot l)e enforced in another state, when
in conflict with its statutes and the declared policy of its laws.^"
Under the Tennessee statute a foreign company unauthorized to
transact business there cannot make a lawful insurance contract
there through an agent not a licensed broker therefor, and any
agent soliciting such insurance without complying with the law is
guilty of a misdemeanor, and personally liable upon his unlawfully
made contracts with unauthorized companies.^ And a corpora-
tion in one state in sending a policy to an agent in another state,
where it is not authorized to do business has been held chargeable
with knowledge that it is participating in an unlawful act.^ Nor
can an unlicensed company in Illinois maintain an office there and
solicit and write insurance upon property in other states.^ In
Pennsylvania, a foreign insurance company cannot recover from
tbe bondsman of a sul)agent for his default, he not having been,
commissioned by the insurance commissioner as required l)y tlie
statute of that state.'*
The want of authority to do business is a matter of special de-
fense, if it be a valid one, to an action on a i)remium note.^ So it
ed. 297, 13 Sup. Ct. 207, under Cal.
Pen. Code, see. (549; Lainh v. Bowser,
7 Biss. (U. S. C. C.) 315, Fed. Cms.
No. 8,008, s. c. Id. 372, Ved. Cas. No.
8009; Hartford Live Stock Ins. Co. v.
Matthews, 102 Mass. 221; Clay Fire
& Marine Ins. Co. v. Huron Salt Mt'<i'.
Co. 31 Mich. iUO; Cohunl)ns Ins. Co.
V. Walsh, 18 Mo. 229. See §S 713.
714 herein.
^^ Lyeomino- Fire Ins. Co. v.
Wrislit, 3.") Vt. 32G.
19 Wood V. Cascade Fire & Marine
Tn.s. Co. 8 \Yasli. 427, 40 Am. St.
Rep. 917, 36 Pac. 267.
20S\vino' V. Munson, 191 Pa. St.
582, 71 Am. St. Rep. 772, 58 L.R.A.
223, 43 Atl. 342.
1 Woolvine v. Mason, 128 Tenn. 35,
137 S. \V. ()82; Shannon's Code, sees.
;!274-:}3(i9.
2. Millers' Mutual Kire Ins. Co. v.
Peo]>le, 03 111. App. 353. See § 313
herein.
^ North American Ins. Co. v. Yates,
116 111. Ap)). 217, 37 Ciiic. Le,<j'. N. 59.
* Mutual Benefit Life Ins. Co.
v. Bates, 92 Pa. St. 352. See further
what policy is void and note un-
collectabie, Franklin Ins. Co. v. LouLs-
ville Packet Co. 9 Bush (Ky.) 390.
^ Creditors I^nion v. Lnndv, 16
Cal. App. 567, 117 Pae. 624, 40 Ins.
L. J. 1981. See Swinsj v. Cameron,
143 Mich. 175, 9 L.R.A. (N.S.) 417n,
108 N. W. 306, 33 Ins. L. J. 736.
81
§ 334 JOYCE ON INSURANCE
is decided that proof of authority to do business in a state is re-
quired to maintain an action there on a contract relating to insur-
ance.^
§ 334. Charter: corporate powers: ultra vires. — The charter of
a corporation is the measure of its powers, and the enumeration of
certain powers implies the exclusion of all others.' This rule, how-
ever, does not prohibit a corporation from exercising such powers
as are requisite to carry on its business in a manner usual and nec-
essary, for this it has authority to do ; ^ but the rule does operate
to restrain a corporation from engaging in transactions which are
not calculated to effect the particular purpose for which it was in-
6 Gilbert v. State Ins. Co. 3 Kan. German Ins. Co. v. Commonwealth,
App. 1, 44 Pao. 442. See Delaware 141 Ky. 606, 133 S. W. 798.
Ins. Co. V. Security Co. — Tex. Civ. New YorA.— Lord v. Equitable Life
App. _, 54 S. W. 916. case rev'd A.ssur. Soc. 194 N. Y. 212, 22 L.H.A.
Security Co. v. Panhandle Nat. Bank, (N.S.) 420, 87 N. E. 443, 38 Ins. L. J.
93 Tex. 575, 51 S. W. 22. 435, 108 N. Y. Supp. 67, 96 N. Y.
'State V. Atchison & Northern R. Snpp. 10, 109 App. Div. 252; Bush
Co. 24 Neb. 143, 38 N. W. 43 ; Ger- v. New York Life Ins. Co. 119 N. Y.
man Ins. Co. v. Commonwealth, 141 Supp. 796, 135 App. Div. 447.
Ky. 606, 133 S. W. 798. Pennmjlvania. — Union National
"^If a statute specifies the provisions Life Ins. Co., In re, 58 Pitts. L.
which must be contained in the J. 2.
charters of insurance companies, the Wisconsin. — Huber v. Martin, 127
statute must be complied with. State Wis. 412, 115 Am. St. Rep. 1027, 105
(ex rel. Lumberman's Accident Co.) N. W. 1031, 3 L.R.A.(N.S.) 653.
V. Michel, 124 La. 558, 50 So. 543, Charter or franchise as a contract:
Acts 1898, No. 105, p. 134, sec. 2. Im])airment of obligation of con-
But see Shoun v. Armstrong, — tract: vested rights. See Joyce on
Tenn. Ch. — , 59 S. W. 790. Franchises (ed. 1909) sees. 311 et
Insurance companies have the same seq. Reservation of power to alter,
rights as individuals to limit their amend or repeal grant of franchise or
liability and to impose whatever con- charter, see Id. sees. 317 et seq.
ditions thev please upon their obli- ^ See Whitewater Valley Canal Co.
gations, not inconsistent with public v. Yallette, 21 How. (62 U. S.) 414,
policy or statutory provisions. Du- 424, 16 L. ed. 154; Ohio Life & Trust
mas V. Northwestern National Ins. Ins. Co. v. Merchants' Ins. Co. 11
Co. 12 App. D. C. 245, 40 L.R.A. Humph. (30 Tenn.) 22, 53 Am. Dec.
;}58. 742; Alli.son v. Fidelity i\Lutual Fire
Laws of states of incorporation as Ins. Co. 81 Neb. 494,^129. Am. St.
limitation upon powers of insurance Re]i. 694, 116 N. W. 274.
companies, see notes in 63 L.R.A. rori)orations are creatures of the
653, and 52 L.R.A. (N.S.) 278. legislative department of the govern-
Asi to poicer io oiler or amend ment. They can exercise no powers
charter: reserved poirer, .see: which are not expressly granted them
Uniled States.~Fo\k v. Mutual or are necessarily implied from the
Reserve Fund Life Assoc. 207 U. S. express powers given. Knapp v. Su-
310, 52 L. ed. 222, 28 Sup. Ct. 65. preme Commandery United Order of
////■;;o/s.— Yates v. People (ex rel. the Golden Cro.ss of the World, 121
Anderson) 207 111. 316, 69 N. E. 775; Tenn. 212, 118 S. W. 390.
782
PARTIES— THE INSURER
§ 334
corporated.^ And where a corporation has become a corporate en-
tity for obtaining subscriptions b}' receiving a certilicate of incor-
poration it cannot be held to have acted unlawfully in issuing a
check before it is licensed to do business, as against a bona fide hold-
er for value, even though the statute declares it unlawful to do any
kind of business before being licensed.^" But entering into an
agreement by two companies to form an uninc©r])orated associa-
tion which is in fact a partnership is ultra vires where the charter
of neither company authorizes a joint or partnership contract.^^
And a life insurance company is not empowered to transfer its pol-
icy holders without their consent to another company. ^'^ So it is
ultra vires a fire insurance company to enter into a contract in re-
straint of trade, to restrict competition, to limit its business within
certain territory, and to regulate and fix prices therein. ^^
An insurance company has no authority to invest its capital stock
in another corporation under a statutory power to invest its monej''
in "real or personal property, stocks, or choses in action." ^* But
whether an investment by an insurance corporation in the stock of
a bank is authorized or not affects the state only.^^ And a contract
whereby a guaranty life association undertakes to pay losses which
may accrue against another and similar association is an attempt
' See Penobscot Corp. v. Lamson,
16 Me. 224. 33 Am. Bee. 656 ; Beatty
V. Knowles, 4 Pet. (29 U. S.) 152,
162, 7 L. ed. 813. People v. Utica
Ins. Co. 15 Jolnis. (N. Y. ) ;]58, 8 Am.
Dec. 243. Thi.s rule with its qualifi-
cations is fully considered in Mora-
wetz on Private Corporations (ed.
1882) sees. 189, 209. See also in in-
dex thereto "Ultra Vires," "Construc-
tion of Charter," and " Validity of
Corporate Acts." See also Angell &
Ames on Corporations, (9th ed.) sec.
111.
^° Reynolds v. Gerdelman, — Mo.
App. — , 170 S. W. 1153.
^^ Philadel])hia Underwriters, In re,
54 Leg. Intel!. 469, 6 Pa. Dist. R.
699.
^^ Watson v. National Life & Trust
Co. 189 Fed. 872, 111 C. C. A. 134,
40 Ins. L. J. 2065. The options of
which they may avail themselves in
case an attempt is made to so trans-
fer them are stated in this case. See
Timberlake v.' Supreme Commandery
United Order of the Golden Cross of
the World, 208 Mass. 411, 36 L.R.A.
(N.S.) 597, 94 N. E. 685. See §§
350r et seq. herein.
On liability of insurance company
on contracts of another company
which it has absorbed or attempted
to absorb, see note in 36 L.R.A.
(N.S.) 597.
" State (ex rel. McCarter) v.
Firemen's Ins. Co. 74 N. J. Eq. 37,
29 L.R.A.(N.S.) 1194, 135 Am. St.
Rep. 708, 18 Amer. & Ens;. Ann.
("as. 1048, 73 At I. 80, rev'g' 70 N. J.
Eq. 291, 61 Atl. 705. See § 329a
herein.
^* Commercial Fire Ins. Co. v.
Board of Revenue, 99 Ala. 1, 14 So.
490, 42 Am. St. Rep. 17. Compare
Hvde v. Equitable Life Assur. Soc.
116 N. Y. Supp. 219, 61 Misc. 518.
^^ Hvde V. Equitable Life Assur.
Soc. lie N. Y. Supp. 219, 61 Misc.
518.
783
§ 334 JOYCE ON INSURANCE
to divert the funds to objects not authorized by its charter, and is
therefore uhra vires and void.^^
An insurance company can borrow money to pay a loss or give
a note to raise the money for that purpose," and it can borrow
money to preserve its assets, and it may agree to indemnify the
guarantors if they are required to pay the debt. The power to bor-
row money to protect its assets is an incidental power of every cor-
poration, and its choice of a means for the execution of such power
pi-esents no question for judicial interference where the means is
neither prohibited nor corrupt. ^^ It is also within the power of a
life insurance company, and is not ultra vires to make a loan under
au agreement fully executed before insured's death, ^^ and in mak-
ing a loan it may lawfully require the borrower to insure the prop-
erty with the company and to pay the premium in addition to the
legal rate of interest.^"
A corporation may also hold real estate, acquired in good faith
for such purpose, for a necessary and proper future use in carry-
ing on its business, especially where it is so authorized by special
charter, although there is a constitutional and statutory limitation
as to time in such case.^ So the purchase by a life insurance com-
})any of real estate upon which to maintain a hospital to care for
and treat such of its employees as are afflicted with tuberculosis, is
a valid exercise of its power within a statute permitting the acquisi-
tion of such real estate as shall be requisite for its convenient ac-
commodation in the transaction of its business.^
Under the Kansas statute a local camp of -Modem Woodmen is
limited as to its right to hold real estate to such as may be necessary
for the transaction of its business and holding meetings, although
such necessary buildings may be partly used for other purposes.^
^^ Twiss V. Guaranty Life Assn. 87 Kv. Const, sec. 192, Ky. Stat. see.
Towa, 733, 55 N. W.' 8, 43 Am. St. 567, Russell's Stat. sec. ■2152. It was
Reji. 418. claimed tiu^t a suljsequent constitu-
" Furniss v. Gilclnist, 1 Sand. (N. tioual enactment or leaislation could
Y.) 53; Oliio Lite Insurance & not imj)air cliarter rights.
Trust Co. V. Mercliants' Insurance & ^ People (ex rel. Metropolitan Life
Trust Co. 11 Humph. (Tenn.) 1, 53 Ins. Co.) v. Hotchkiss, 120 N. Y.
Am. Dee. 742. Supp. 649, 136 App. Div. 150, 39
^^ Hyde V. Equitable Life Assur. Ins. L. J. 314, Ins. L. Consol. Laws,
Soc. 116 N. Y. Supp. 219, 61 Misc. c. 28, see. 20, subdiv. 2.
518. ^Kpnnett v. Kidd, 87 Kan. 652,
i^Freese v. Mutual Life Ins. Co. 125 Pac. 36, 44 L.R.A.(N.S.) 544n,
of N. Y. 11 Cal. App. 385, 105 Pac. 89 Kan. 4, 44 L.R.A.(N.S.) 549, 130
265. See § 350 lierein. Pac. 691, case of right to take person-
^° New York Fire In.^. Co. v. al property or devise of farm hinds
Donaldson, 3 Edw. (N. Y. ) 199. under Ka'n. Gen. Stat. 1909, sees.
1 German Ins. Co. v. Common- 1832-1834.
wealth, 141 Kv. 606, 133 S. W. 793:
784
PARTIES— THE IXSIKEK § 334
Wliere the cliai'ler provided that an insurance company mighf
i.ssue poHcies on lives and gi'^nt annuiti^^, and authorized the set-
ting apart of a. portion of its capital as security for the payment of
annuities, it was held that the company might insure lives and
grant annuities hefore making such approi)rialion of the fund.^
Where the chai-ter of a com})any authorized it to insure property
'•'against loss or damage by fire, lightning, and inland navigation
and transportation," a conti-act made by it, insuring horses against
death by accident or disease, is void.* But a company authorized
to issue policies against accidents to ])ersons or property mav issue
policies against accidents to live stock although the statute doas not
expressly refer to the latter; an authority, however, under the statute
to insure the lives of horses, cattle, and other live stock does not em-
power a company organized thereunder to issue accident policies.^
So a company authorized to insure against losses by storms and hur-
ricanes on hay, grain, and other agricultural products in barns,
stacks or otherwise has power to insure growing crops, and is liable
for loss to such croi)s caused by a hailstorm. '^ But it is held in
Colorado that a lire insurance company could not avail itself of
the defense of ultra vires when it had insured plaintiff's crop against
loss from hail, and had received the premium therefor, even though
the contract were ultra vires.* And a corporation cannot set uj) its
lack of power to contract after the other party has perfoi-med the
contract and it does not contravene any statute or ])ul)lic policy.^
And a similar ruling has been made in Iowa, where it was held
that a religious society insuring lives could not defend against a
suit on one of its policies, upon the plea of ultra vires, when it had
received asse^ssments on the policy.^"
An employers' liability insurance company has no authority to
issue an automobile policy covering liability im))osed by law by
reason of bodily injuries including death accidentally sustained by
reason of maintenance, use, etc., of automobiles, nor is such a policy
authorized by a provision permitting insurance of health of persons
* Vfrplaiick v. Mercantile Ins. Co. ''MiUual Fire Ins. Co. v. DeHaven,
1 Edw. Ch. (N. Y.) 84. 18 Wlcly. Notes Ca.s. (Pa.) 125, 5
Miocliester Ins. Co. v. Martin, 13 Atl. 65.
Minn. 5!). See Buroe„ss & Stock's * f)eiiver Fire Ins. Co. v. McClel-
Case, 31 L. ,]. Cli. 74!) ; 2 .1. & 11. 441 ; land, 9 Col. 11, 9 Pae. 771, 59 Am.
Natiisch V. Irving, in Gow. on Part- Rep. 134.
nersliip. app. ii. 9 State Life Ins. Co. v. Nelson, 46
« Pennsylvania Casualtv Co., Re, Ind. Apj). i:!7, 92 N. E. 2.
36 Pa. Co. Ct. Rep. 635, act Uiiy 1, i° Malt v. Roman Catholic Mut.
1876, P. L. 53, as am'd by act Julv Soc. 70 Iowa, 455, 30 N. W. 799.
9, 1897, P. L. 239.
Joyce Ins. Vol. I — 50, 785
§§ 334a, 335 JOYCE ON INSURANCE
and against accidents, injuries, etc., resulting from traveling or
general accidents by land or water."
A company also has power to reject an application, and is not
bound by a contract by its agent in retaining the premium note
while endeavoring to induce it to reconsider its action. ^^ 3^^ [^ \^.^^
no power to purchase upon credit the mortgage obligation of one
insured by the company and entitled to indemnity for a loss, for
the purpose of setting off such mortgage against the policy ,^2 nor
can such company treat as profits, subject to be divided, premiums
received upon unexpired risks, when it has a fund sufficient, inde-
pendent thereof, to meet all liabilities that might accrue on the
pending risks, and dividends thus paid may be reclaimed by the
corporation.^*
if a corporation has received the benefits and retains the advan-
tages of a contract it cannot escape its obligations upon a plea of
ultra vires.^^
§ 334a. Same subject: power of corporation to insure life of its
president. — A corporation has no implied power to insure the life of
its president for its benefit and carry the policy after he has retired
from office, and a stockholder who has not consented to or acqui-
esced in a threatened ultra vires act of the conipany may enjoin it.
In such a case the quastion of insurable interest, and of assignment
to one without such interest arises although not very clearly in-
volved here.^^
§ 335. Forfeiture of charter.— AVhere the legislature repeals a
statute under which an insurance company is organized, and de-
clares its charter forfeited except it comply with certain require-
ments, outstanding policies of the company are not canceled by
such repealing act, notwithstanding the company fails to comply
with the provision of such act," and an insurance company does
not forfeit its charter because of nonuser, by refusing to insure
against extrahazardous risks.^^ But it forfeits its franchise by de-
" American Fidefity Co. v. Bleak- ^^ Victor v. Louise Cotton Mills,
lev, 157 Iowa, 442, 138 N. W. 508. 148 N. Car. 10<, 16 L.K.A.(N.S.)
'12 Otterbein v. Iowa St. Ins. Co. 57 1020n, 16 Araer. & Eng. Annot. Cas.
Iowa, 274, 10 N. W. 667. 291, 61 S. E. 648. See §§ 888, 914-
13 Kansas In.s. Co. v. Craft, 18 910, 9351) herein.
Kan. 283. ^^" right of corporation to insure
1* Lexington Life, Fire & Marine life of officer for benefit of corpora-
Ins Co V Page & Richardson, 17 B. tion, see notes in 16 L.R.A.(N.S.)
Mon (ky.) 412. 1020, and L.R.A. 1915F, 979.
15 Hyde v. Eqnitable Life Assur. i'' Manlove v. Coramercial_ Mut.
Soc. 116 N. Y. Supp. 219. 61 Misc. Fire Jns. Co. 47 Kan. 309, 2i Pac.
518: Knott v. Securitv Mutual Ins. 979
Co 161 Mo. App. 579, 144 S. W. ^^ State ex rel. Corwin v. Urbana
178, 41 Ins. L. J. 843. See § 331 & C. Mut. Ins. Co. 14 Ohio 6.
herein.
786
PARTIES— THE INSURER ' § 335
liberatcly exceeding the amount for which it is allowed by law to
issue policies on any one life, thus intentionally attempting to evade
the insurance law in one of its most important provisions." And
where the making of prohibited insurance contracts is the only bus-
iness the company is transacting it constitutes a ground for forfei-
ture of its charter even though it has authority to vaUdly do other
things.^" So a company may be ousted of all rights, privileges and
franchises, because of the violation of the state laws by their agents
through whom they do l)usiness.^^
" International Fraternal Alliance ^^ State (ex rel. Crow) v. Fire-
V. State, 86 Md. 550, 40 L.R.A. 187, men's Fund Ins. Co. 152 Mo. 1, 45
39 Atl. 512. L.R.A. 363.
20 Stale (ex rel. Fishback) v. Globe
Ca.sket & Undertakinj? Co. 82 Wash.
124, L-R-A. 1915B, 976, 143 Pae. 878.
787
I
CHAPTER XV.
INDIVIDUALS, UNINCORPORATED ASSOCIATIONS, LLOYDS,
PARTNERSHIPS.
§ 335a. English and American Lloyds systems compared.
§ 335b. Individuals, unincorporated associations, Lloyds: Alabama.
§ 335c. Same subject: Florida.
§ 335d. Same subject : Georgia.
§ 335e. Same subject : Illinois.
§ 335f . Same subject : Kentucky.
§ 335g. Same subject : Massachusetts.
§ '335h. Same subject : Minnesota. ^
§ 335i. Same subject: Mississippi.
§ 335j. Same subject : Missouri.
§ 335k. Same subject : New Jersey.
§ 3351. Same subject : New York.
§ 335m. Same subject : Ohio.
§ 335n. Same subject : Pennsylvania.
§ 335o. Same subject : decisions inferentially bearing thereon.
§ 335p. Partnerships as insurers.
§ 335a. English and American Lloyds systems compared.^—
Many of the American iJoyd's policies or agreements are very in-
tricate in their provisions and it is diflicuU to determine, from tliose
wliich have been ]>eforc the coiu'ts, to what extent they differ from
the EngUsh Lloyds ]>olicies. Certain (hfferences, however, exist l)e-
tween the two systems, snch as the form of nndervvriting and mode
of execntion of tlie i)oH{y or contract; the power and anthority of
the agent or manager, jind the nature of the agency; the parties to
an action to recover the loss; and the nature and extent of their ha-
bility. The exact status of the American Eloyds is necessarily de-
pendent upon the terms of their agreement as construed by tlie
courts, aUhough it is somewhat in the nature of a Umited liability
partnership.^ 8o in a New York case it is stated that the present
1 See §§ IVa, TVc, herein. C. IDIU) 424 (coinpo.<ed ot uiuler-
2 As to plan see: writers residing for the most part in
United States. — Riclimond Cedar Canada : known a.^ New York Corn-
Works V. Buckner, 181 Fed. (U. S. C. mercial Underwriters) : Sumner v.
788
INDIVIDUALS, ETC.
§ 335a
use of tlie term ''American ].loyds" lias no other signification llian
to designate a partnership or an organized association of individual
underwriters.^ In Alabama, however^ it is declared that the policy
is the contract of a "company" or "association'-' which is not a part-
nership in a legal sense and in no sense a corporation.* It is de-
clared in a New Jersey case that a Lloyds insurance originally waa
an insurance based upon a fund made up of deposits by each one
of the members from which when a loss was adjusted, the agent
took the means of payment. In this country, in adopting the
Lloyd's system of insurance, money representing the entire insur-
ance was not deposited. In lieu of such a deposit the members
each contributed a certain sum to make up a fund, and each con-
tracted with agents, who were the representatives of the association,
to pay in from time to time so much as should be needed to pay
losses. Under the Lloyd's system of insurance, after the loss was
adjusted or ascertained by action against the agents, the insured
received from the fund so provided the amount of loss. The fund
deposited was in the strictest sense a trust fund for the benefit of
persons holding policies. Under the Lloyd's system, as adopted in
Piza (U. S. D. C. 1899) 91 Fed. 677
(composed of thirty per.^ons called
South & North American Lloyds.
Policy signed in behalf of the thirty
by attorneys).
Alabama. — Hoadlev v. Piuifoy
(1894) 107 Ala. 276, 30 L.R.A. 351,
18 So. 220 (business wa.s carried on
in manner ot ancient Lloyds). .
Florida. — State (ex rel. lloadley)
V. P.oard of fiis. rommissionors
(1896) 37 Via. 564, 33 L.R.A. 288, 20
So. 772 (South & North American
Lloy(l.s. See 91 Fed. ante: tliis note).
Georgia.— Fort v. State (1893) 92
Ga. 8, 23 L.R.A. 86, 18 S. E. 14
(guarantee and accident, Lloyds, a
voluntary unincorporated association
consisting of one hundred natural
persons).
Illinois. — Warfiold-Pratt-IIowell
Co. V. Williamson (1908) 233 111.
487, 84 N. E. 706; Clark v. Spafford
(1892) 47 111. App. 160.
Mrs\srt!<r/.— State v. Stone, 118 Mo.
388 (1892) 25 L.R.A. 243. 40 Am.
St. Rep. 388, 24 S. W. 164.
New Jersey. — Durbrow v. Eppens,
(1900) 65 N. J. L. 10, 46 Atl. 582.
New York: — Imperial Shale Brick
Co. v. Jewett (1901) 169 N. Y. 143,
62 N. E. 167, 31 Ins. L. J. 376;
Thompson v. Colonial Ins. Co.
(1900) 68 X. Y. Supp. 143, 3.] :\Iisc.
;J7, case aff'd 70 N y. Si,pp. §5. 60
App. Div. 325; New York Board of
Fire Ihiderwriters v. Whipple & Co.
(1898) 55 N. Y. Supp. 188, 36 App.
Div. 49; (Jough v. Sutterlee, 52 N. Y.
Supp. 492, 32 App. Div. 33 (Pro-
visions declared very complicated and
their meaning obscure and doid)tf'ul,
per Cullen, ,)., Id. lUj).
Ohio. — State (ex rel. Riciiards) v.
Ackermaii, 51 Ohio St. 163, 24 L.R.A.
298, 37 N. E. 828 (plan stated in
note, S 335j herein ).
3 Fire Department of City of N.
Y. V. Stanton, 159 N. Y. 225,' 232, 54
N. E. 28, per Gray, J., case affirms
57 N. Y. Supp. 1138, 38 App. Div.
6-tO, Avhich affirms 28 App. Div. 334,
51 N. Y. Supp. 242, en opinion there.
See also Balli v. White, considered in
ne.xt following note herein.
* Hoadlev v. Purifov, 107 Ala. 276,
30 L.R.A. 351, 18 So. 220.
789
§ 335b JOYCE ON INSURANCE
this country, the trust in favor of the insured consists of the amount
deposited by each member and the covenant on the part of each
member to pay in money enough to answer the amount due from
him upon such loss.^-
§ 335b. Individuals, unincorporated associations, Lloyds: Ala-
bama. — In Alabama incorporation has been held not a prerequisite
to engaging in the business of fire insurance in that state; there
being no statute law, nor any principle of public policy precluding
citizens of the state acting as individuals, associations, partnerships,
or companies from engaging in such business without being first
incorporated, and it was also held that under the Federal Constitu-
tion the citizens of each of the United States are entitled to '*like
privileges and immunities, and that citizens of other states, not in-
corporated were not required to have a license to engage in the fire
insurance business in said state" being entitled to the same privi-
leges and immunities as unincorporated citizens of that state.^
^ Durbrow V. Eppens (1900) 65 N. members are not partnei-s for they
J. L. 10, 19, 46 Atl. 582, 585, per do not bind themselves jointl}^, but
Depue, C. J. severally, in a specified amount, until
It is said in a New York ease that, the sum insured for is nuide up. In
"The modern methods of these as- England, where the-se institutions
soeiations merit notice. Instead of originated, they have been alternate-
passing- the proposed policy of the ly called 'dubs,' 'societies,' 'associa-
applieant among the members, that tions,' and 'individual underwriters.'
each may underwrite for such portion There tlie contract has been held legal
of the required amount as he wishes where the members bound themselves
to become liable for, according to the severally for specified amounts, but
early practice at Lloyds, tlie under- void, as contrary to the insurance
writers at the metropolitan Lloyds (in laws of that country, when the under-
common with those of other assoeia- writers untlertook a joint liability on
lions in this state) organized for joint capital. Lees v. Smith, ( Term,
business by executing a formal instru- R. 338 ; Strong v. Harvey, 3 Bing. 304,
ment declaring their purpose, and 11 Moore, 73; Harrison v. Millar,
authorizing attorneys in fact to iss'ue 2 Esp. 513, 7 Term. R. 340, note;
policies in their names, binding each Bromley V. Williams, 32 Beav. 177,
underwriter severally to an equal 32 Law J. Ch. 71(). While the extent
amount. These attorneys determined of liability of each underwriter is
what risks the underwriters should specially limited to his individual
assume, and the premiums to be share of the loss, the rules of Jaw
paid therefor, and, in effect, be- applicable to insurers generally must
come the chief executors and raana- in oth'^r respects determine when a
ging agents of the enterprise, having liability under the policy arises."
almost unlimited power in that re- Balli v. Wiiite (1800 4< N. Y. Supp.
gard. . . . These associations are 197, 203, 21 Misc. 285, 292, per Me-
anomolous institutions, not eorpo- Adam, J.
rations, or joint stock companies, ^ Hoadley v. Purifoy, 107 Ala.
though in some respects resembling 276, 30 L.K.A. 351, 18 So. '2'20. In
both, but a combination of individuals this ease the business was carried in
acting concretely as insurers. The the manner of ancient Lloyds. It was
790
1ND1\'1DL'ALS, ETC. §§ 335e, 335d
§ 335c. Same subject: Florida. — Under a Florida decision unin-
corporated associations or individuals are authorized to obtain a cer-
tificate of autliority to engage in the business of insurance in that
state upon compliance with certain statutory requirements. The
Federal constitution places citizens of eiich state upon the same foot-
ing as citizens of other states so far lis the advantages from citizen-
ship in those states are concerned. The privileges and inununities
thus secured to citizens of each state in the several states are those
which are common to the citizens of other states under their consti-
tution and laws by virtue of their status as citizens.'^
§ 335d. Same subject: Georgia. — ^In Georgia a Lloyds voluntary
association, consisting of natural persons merely, and unincorpora-
ted, could not l)e licensed to transact business in that state * under
the Act of 18(S7,^ as that enactment only included chartered com-
panies. The legislature, however in 1893 ^° passed an act which pro-
vided that "all laws regulating the business of insurance in this
state by companies are applicable to individuals, associations, and
corporations in like business," so that a license became, neces-
sarv in such cases. ^^ And the Code of 1911 in one section recos-
nizes individuals,^^ although another section, which provides that
•
also held that only chartered insiir- act of 1895, e. 4380, sec. 3, Fed.
ance companies are inchuled within Const. Art. 4, sec. 2. See also Penin-
Ala. Acts 1886-87, p. 85, requiring all sular Industrial Ins. Co. v. State, 61
insurance companies doing business Fla. 376, 55 So. 398. As to require-
in the state, "whether chartered by luents as to associations, tirms and
the state or admitted from other individuals transacting insurance,
states," to have an actual capital of See Fla. Genl. Stat. 1906, pp. 1078
not less than $100,000. et seq. sees. 2757 et seq. Laws 1909,
"The term 'insurance company,' as p. 32, c. 5887 (No. 18).
used in this article, includes every » Fo^t y. State ( 1893 ) 92 Ga. 8, 23
company, corporation, association or L.R.A. 86, 18 S. E. 14.
partnersliij) organized for the pur- ^ Acts 1887, p. 114, embodied in
pose of transacting the business of sec. 2032, Civ. Code 1895.
insurance." Art. II. c. V., Tit. 12 lo Acts 1893, p. 81, Civ. Code 1895,
Ahi. Code sees. 1205, 1206, 1207, reg- sec. 2071.
ulating the subject of fire and marine n Jalonick v. Green. Countv Oil Co.
insurance within tliat state by foreign j q.^ ^pp. 309, 66 S. E. 615, per
companies construed in Noble v. tt-ii r- j
Mitchell (1896) 164 U. S. 367^ 41 L. i^'.^rh; "contract of tire insurance is
ed. 4/2, 1/ Sup. Ct. 110, following the , , • j- -j i
state court decision in Noble v. Mitch- ""^ ^^'.'^^'"^•^ .^ ^^^dividual or corn-
el!, 100 Ala. 519, 25 L.R.A. 238 (an- P^!^/' ^" consideration of a premium
notated on restrictions on insurance 1^^^^' ^§'^^^^ ^"^ indemnify the assured
by unincorporated associations or in- against loss by fire to the property
dividuals; Lloyds associations) 14 ^lescribed in the policy, according to
So. 581. the terms and stipulations thereof.
' State (ex rel. Hoadley) v. Board Such contract, to be binding must be
of Ins. Commissioners, 37 Fla. 564, in writing; but delivery is not neees-
33 L.R.A. 288, 20 So. 772; Revenue sarv if, in other respects, the con-
791
§ 335e JOYCE ON INSURANCE
insurance companies must be licensed, covers only chartered domes-
tic or foreign insurance companies.*'
§ 335e. Same subject: Illinois. — Under an Illinois decision,
where there is nothing in the statutes of a state proliibiting citizens
thereof from transacting insurance business, and nothing abridg-
ing or restricting such privilege, and when not precluded by public
policy an individual ha'; the right to engage in said business. And
a foreign citizen has the same right as an individual to engage in
the insurance business as has a citizen of the state. Underwriters
residing without the state cannot be discriminated against. If citi-
zens of a state can without restriction, enter into contracts of insur-
ance, the same right is guaranteed under the Federal constitution to
citizens of other state.«. It was also held in the same case that an
agent acting for citizens of another state or individuals not incor-
porated nor acting as partners was not liable for a penalty for acting
for a foreign insurance company without complying with the re-
quirements of the statute governing insurance companies doing
business in Illinois. ^^ In another case in that state the question was
whether any association or number of persons was acting in tlie state
as a corporation without being legally incorporated, and it was held
that they were so acting.as a corporation in limiting their liability
to the amount of monev contributed bv each, and in assuming to
give perpetuity to the business by making membership certificates
transferable by the assignment of the member or his personal rep-
resentatives and the fact that such individuals can be held legally
liable upon the policies issued by them does not malce them any the
less a corporation and a judgment quo warranto will be granted. It
was declared that even if individuals could insure property against
loss by fire they must act either openly upon their responsibility as
individuals, or must become incorporated.*^ In an earlier case a
Lloyds certificate was issued for memliership in a proposed mutual
fire insurance company acting as individuals to indemnify each
other. A like certificate was issued by an attorney in fact, except
as to date, amount, and premium. The company had filed its dec-
laration and charter, ete., and when licensed and organized and the
application for membership became operative, the above agreement
was to become ended provided the com])any then delivered a stan-
dard form of policy to a])plicant. The agreement was provisional
and temporary only until the corporation was licensed. It was held
tract is consummated." Ga. Code 48 N. E, 91. See also Clark v. Spof-
1911, p. 650, sec. 2470 (see. 2089). ford, 47 111. App. ICO. See also §§
13 Ga. Code 1911, p. 027, sec. 244 713, 714 heiein.
(sec. 2032). is Greene v. People (1894) 150 111.
1* Barnes v. People, 168 111. 425, 513, 37 N. E. 842.
792
A
INDIVIDUALS, ETC. - §§ 335f-33:)j
that at common law any number of people could enter into mutua'
covenants to indenmify each other and unless restricted by statute
such agreements would be valid. It was also decided that the
enforcement of a proportionate contrilnition from the numerous
parties to the agreement for mutual indemnity, and ascertainment
and assessment of proportionate shares for such parties were proper
subjects for a court of equity. ^^
§ 335f. Same subject: Kentucky. — It is declared in a Kentucky
case that an insurance company exercises no special or exclusive
privilege not allowed by law to natural persons, and that the statu-
utes of that state recognize the common law right of 'individuals to
make contracts of insurance."
§ 335g. Same subject: Massachusetts. — Tlie Massachusetts stat-
ute of 1907 ^^ inchides all coi'])(»rations, associations, or individuals,
in its declaration of what shall be deemed to be life insurance com-
panies.^^
§ 335h. Same subject: Minnesota. — I"^nder a Minnesota decision
all corporations, associations and partnerships or individuals nuist
comply with the law requiring a license to do business as they are
enumerated in the statute.^"
§ 3351. Same subject: Mississippi. — In Mississippi one section of
the Code specifies the concerns subject to the insurance laws, whicli
are: all companies, corporations, partnerships, associations, individ-
uals and fraternal orders, whether domestic or foreign, thereby
clearly including every possible character of association or organi-
zation doing an insurance business of any kind whatsoever, and this
purpose of the legishiture is further expressed by other sections of
said Code which prohibit any foreign insurance company from
doing business in that state until it has conijilied with certain condi-
tions precedent and which define the word "company" to mean:
all corporations, associations, partnerships or individuals, etc.^
§ 335j. Same subject: Missouri. — In Missouri a statute providing
that "no company" shall transact an insurance business within the
16 Clark V. Spoirord (1892) 47 111. 20 gt^t^ v Beardslev, 88 Minn. 20,
App. 160. 92 N. W. 72, Gon. Laws 1895, e. 17:>,
"Aeliia Life Tns. Co. v. Coulter, § 101. See Seauiaiis v. Christian
25^ Ky. L. l^ep. 193, 197, 74 S. W. Bros. Mill. Co. (i(i .Minn. 205, 08 N.
lOoO, a case of assessment of foreign W. 1005.
conipanv for Iranchise tax. ^ Code Miss. 190(i, p. 766, c. 69,
18 l^ev. L. 1907, c. lis, see. 65. sees. 2559, 2562, 2563, 2606. See
1^ This statute is construed in Cur- Laws 1910, amd'j;- <■. 69, also Id. sec.
tis v. New York Life Ins. Co. 217 2559, covering LlOyds. Said sections
Ma.'^s. 47, 104 N. E. 553, 43 Ins. L. are construed in State v. Allev, 96
.1. 551, fully considered under § 336f Miss. 720, 51 So. 467, 39 Ins. L. J.
herein. 629.
793
§§ 335k, 3351 JOYCE OX INSURANCE
state without having received proper license to do so from the state
insurance superintendent, includes individuals or associations of in-
dividuals, as well as incorporated companies. A state also has the
right to prescribe reasonable conditions upon which insurance bus-
iness may be cai'ried on within it^ limits by individuals as well aa
by corporations, provided that it does not discriminate between citi-
zens of equal standing and merit within or without the state.^
§ 335k. Same subject: New Jersey. — Under a New Jersey deci-
sion it is held that a fire Lloyds association is not prohibited from
making contracts of insurance there by the laws of 1896.^ And in
an earlier case in that state it is declared that an action founded up-
on what is familiarly known as a Lloyds contract or policy of insur-
ance where insurers are such as individuals and not a corporate in-
surance company and where liability for loss is several and not joint
that the validity of such insurance in the absence of a statute pro-
hibiting the same is well established.*
§ 3351. Same subject: New York. — It is declared in New York
that an American Lloyds is not a corporation imder the laws of
that state.^ But it is also decided in that state that attorneys in fact
2 State V. Stone, 118 Mo. 388, 25 42 Atl. 1063, Id. 21, per Lippineott
L.R.A. 243, 40 Am. St. Rep. 388, 24 J.
S. W. 164. Agent here Avas eliarsed Citing AJabamn. — Noble v. Mitch-
with a violation of Rev. Stat. Mo. ell, 100 Ala. 517, 25 L.R.A. 238, 14
1889, sec. 5916, by repre.sentino- as So. 581.
agent certain individuals in writing Florida. — State (ex rel. Hoadley)
for them a policy agieeing to indem- v. Board of Ins. Commissioners,^ 37
nifv against accident, before said in- Fla. 564, 33 L.R.A. 288, 20 So. 772.
dividnals had procured a license to Georgia.— Fort v. State, 92 Ga. 8,
do business in Missouri. See also 23 L.R.A. 86, 18 S. E. 14.
State (ex rel. Inter-Insurance Aux- Michigat). — Clav F. I. Co. v. Huron
iliary Co.) v. Revelle, 257 Mo. 52.^). Salt Lake Co. 31 Mich. 346.
165 S. W. 1084, Laws 1911, p. 301. Missouri.— State v. Stone, 118 Mo.
Individuals are not debarred from 388, 25 L.R.A. 243, 40 Am. St. Rep.
acting as insurers under the laws of 388, 24 S. W. 164.
Missouri; they are only required to New Hampshire.— Vnion Ins. Co.
conform to the statutory regulation.s v. Smart, 60 N. H. 458.
on the subject. State v. Phelan, 66 Pennsglvania. — Commonwealth v.
Mo. App. 548, 5.58, citing State v. Vrooman, 164 Pa. St. 306, 44 Am. St.
Stone, 118 Mo. .388, 25 L.R.A. 243, Rep. 603, 25 L.R.A. 250, 30 Atl. 217:
R. Stat. 1889, c. 89. Arrott v. Walker, 118 Pa. 249, 12
3 Sun Ins. Office v. Merz(1900) 64 Atl. 280; Commonwealth v. Reinhold,
N. J. L. 301, 52 L.R.A. 330, 45 Atl. 3 Pa. Dist. Rep. 287.
785, 29 Ins. L. J. 344. an insurable in- ^ Fire Department of Citv of N. Y.
terest ease. N. J. Pub. L. 1896, p. v. Stanton, 159 N. Y. 2-25, 232, 54 N.
156, Pub. acts March 26, 1896, amd'g E. 28, per Grav, J. a case of special
act March 25, 1895. tax. payable to city fire department,
* Enterprise Lumber Co. v. Mundy upon agents of associations of indi-
(1899) 62 N. J. L. 16, .55 L.R.A. 193, vidual fire underwriters not incorpo-
794
INDIVIDUALS, ETC. § 335m
of an unincorporated Lloyds association wlio insure in New York
City, vessels, freight, cargo and automobiles against fire are en-
gaged in business so as to become obligated for their share of assess-
ments for the benefit of a fire patrol.^ And under the New York
laws of 1892,'^ all persons, partnerships or associations were required
to do certain acts as conditions precedent to doing business there,
)>ut it was thereafter provided by the laws of 1894,* that said provi-
sion should not apply to individuals, partnerships, or associations of
underwriters known as ^'Lloyds" or as individual underwriters
which were theretofore on a date specified^ lawfully engaged in
business there, and not required to report to the superintendent of
insurance or the insurance department.^'' It was thereafter made
unlawful for any such association or copartnership, or individual
underwriters to engage in or transact the business of insurance after
a specified date ^^ unless it had complied with certmn conditions
precedent. ^^
§ 335m. Same subject: Ohio. — ^In Ohio an unincorporated guar-
anty and accident Lloyds association of another state, which issues
policies in that name and has a board of managers with powers like
those of corporate directors, to whom each member gives a power of
attorney for management of the business, and the members of which
contract for several liability to a limited amount, with the right to
transfer their membership, must be held, when conducting business
in Ohio without compliance with the conditions of the statutes, to
be exercising a franchise and acting as a corporation so as to be sub-
ject to quo warranto proceedings."
rated bv laws of New York, and of ^° Statutes construed in People v.
ai)i)licatioii of statute § 523, N. Y. Loew, 23 Misc. 574, 52 N. Y. Supp.
City Con.sol. Act, Laws 1882, c. 410, 799, where a Lloyd.s association was
ca.s'e affirms 57 N. Y. Supp. 1138, 38 held to be unlawfully engaged in
Ai)|). Div. 640, which aff'd 51 N. Y. business, as they were transferees of
Supp. 242, 28 App. Div. 334, on opin- certain Lloyds which had not organ-
ion there. ized in good faith but only for pur-
^ New York Board of Fire Under- poses of sale and so were not within
writers v, Higgins (1909) 114 N. Y. the exception noted in tlie above text.
Supp. 506, 130 App. Div. 78, aff'd See People v. Loew, 44 N. Y. Supp.
(1910 without opinion) 198 N. Y. 42, 19 Misc. 248.
034, 92 N. E. 1093. under N. Y. Laws, " Sept. 1, 1902.
18(i7, p. 2113, c. 846, organizing a fire ^^ L^^^g 1902^ c. 297, Laws 1903, c.
])atrol corporation, etc. See also New 471. See Parkers N. Y. Ins. Law
York Board of Fire Underwriters v. (1914) p. 79.
A\niipple, 55 N. Y. Supp. 188, 36 " g^ate (ex rel. Richards) v. Ack-
App. Div. 49, under same statute. erman, 51 Ohio St. 163, 24 L.R.A.
' N. Y. Laws 1892, c. 690. 298. 37 N. E. 828, The court, per
"N. Y. Laws 1894, e. 684, amd'g Williams, J. said: "It is claimed,
sec. 57. however, that the laws of Ohio do not
9 On Oct. 1, 1892. apply to the defendants, because they
795
§ 335u JOYCE ON INSURANCE
§ 335n, Same subject: Pennsylvania. — In Pennsylvania the Act
of 1870 ^* prohibited any pei-son, pailneri^hip or association, to issue,
sign or seal, or in any manner execute any policy of insurance, con-
tract or guaranty, against loss by hre or lightning, without author-
ity expressly conferred by a charter of ini-orporation, and making
such policy so executed etc. void. The act was entitled "An Act to
prevent the issue of unauthorized policies of insurance." In a case
are not an organized corporation, to the fund, or authorized by him; so
company or association, or acting as that, if some of tlic iiieinhers become
such, but that, in making contracts of insolvent, and their contribution is ex-
insurance, each individual acts for liausted by losses, or otherwise, tlie
l;imsclf. A caxet'ul considevalion of policy shall be enforceable against
their plan of business, as shown by the others only for an alicjuot part
the articles of agreement and powers equal to tlie proportion of tlie solvent
of attorney executed by the defend- to tlie insolvent members. The lia-
ants, has bronglit us to a different bility of a stockholder of a corpora-
conclusion. They have associated tion is not more restricted. Then, the
themselves together in a business un- interest of each member in the con-
dertaking, under a company name, cera is made transferable; a member
in which, viz: 'Guarantee and Ac- who wishes to withdraw l)eing au-
eident Lloyds, New York,' all of their thoiized to i^rocuic another to take
policies are issued. Each suljscriber his place, and the representative of
to the articles has contributed an a deceased member may transfer the
equal amount to the capital stock of latter's share in like manner, and, in
the concern, which is i)l"aced in the that way, the organization may be
control of a board of managers, called made as enduring as it is possible for
an advisory committee, to meet los.ses any corporation to be. The associa-
arising on the policies. This board tion has the appearance, and some
of managers is chosen by tlie sub- of tlie characteristics of a corpoia-
scribers, like directors of a corpora- tion fomied for the purjiose of doing
tion, and invested with powers quite a general insurance business in its
as plenai-y. All the subscribers have line, and its form of policies and
executed powers of attorney to the mode of conducting its business are
same individuals, investing them with calculated to impress one who does
the business management of the in- not make a critical examination, with
surauce, under the supervision of the the belief that it is a corporation, eon-
advisory board. The powers con- forming to the usages of such com-
ferred on the attorneys in fact are panies." State v. Ackerman (ISOi)
analogous to those of the executive .'>! Ohio St. 103, 195, 19(3. 37 N. E.
officers of a corporation. They exe- 828, 24 L.R.A. 298, per Williams, J.
cute the policies, keep accounts of the This decision is cited as ruling that
business and expenses, which are foreign insurance companies, wheth-
open to the inspection of the advisory er. incorpoi'ated or not were required,
board adjust all losses, and prosecute as a condition precedent to doing
and defend all suits growing out of business in the State, to obtain a cer-
the business. Each member of the tificate of authority so to do and that
association stipulates with the others the i)rivilege so conferred was a fran-
that no policy shall be issued unless chise. John Hancock IMutual Life
it is executed in behalf of all, and yet, Ins. Co. v. Warren, 181 U. S. 73, 74,
that his liability shall be several only, 75, 45 L. ed. 755, 21 Sup. Ct. 535.
and limited to the amount contributed ^* Act Feb. 4, 1870, P. L. 14.
796
INDIVIDUALS, ETC. § ;J35n
of iiulic'tiiiciit for issuino- a policy of insurance in violation of the
above, it a[)peared that defendant acting for himself and five otliers
had issued a policy of insurance and contract of guaranty against
loss 1)}' lire. It was held that the statute was a valid exercise of the
police power of the state; that it- did not prohibit but merely regu-
lated (he business of insurance ; that it did not strike at the privilege
of citizenship nor discriminate between citizens of that state and
those of other states; that it did not deny but merely regulated the
right to acquire, possess and protect jirivate property, and did not
violate either the Federal or state constitution.^^ And the above rea-
sons as to the police power are declared applicable to life in.surance,
although the statutes other than the above Act of 1870 are said not
to directly ])roliibit issuing a life policy and that an individual's
right at common law to make a contract of any kind of insurance
seems to be admitted. ^^ Again, the words "insurance companies."
in the Pennsylvania statutes of 1876, and 1870, have reference
only to incorporate insurance companies and not to unincorjxii-ated
insurance companies of individual underwriters, such as Lloyds,
and therefore an agent of individual underwriters of auotlier state
is not liable to the penalty under the statute of 187(> im])osed upon
insurance agents for issuing policies of insuraiu*e without a license."
So a contract of insurance or guaranty against fire made by a pri-
vate person, who.se incompetency to make it both partias are bound
to know, is void under the Pennsylvania statute of 1870 providing
. ^^ Commonwealth v. Vrooraan, 120, as to police power, see -Tovre on
(1804) 164 Pa. SOG, 25 L.R.A. 250, Fraiu-liises (ed. 1909) sec. .36(i. note
44 Am. St. Rep. (iOll. .30 Atl. 2.'')0 p. 582; .Joyce on Electric Law (2d
(Three justices dis.-eiited) said to be ed.) sec. 215, note p. ;>92.
pioneer case in that state on ques- Tn an opinion by tlie attorney gen-
lion of constitutionality of statute de- eral of T^cnnsylvania, tlie .Net of May
nying riijht of nniruH)rporated per- 8. 1899, it was decdared thai in con-
sons to do insurance business. In struiuij- tlie laws relatins' to licens-
the court l)elow tliere was a discus- iiisj- insurance agents, firms or copart-
sion of the right of individuals to in- nersiiips were not to be recognized
sure others against loss by lire. See in any way, and non-resideid indi-
also opinions of Steirett, ('. .1., Dean, \iduals could under no circunistan-
J. and (ireen, .J. ces transact business in tlie stale, but
^^ Unincorporated Insurance Busi- licenses were to be issued to agents in-
ness (Atty. Genl. 190(i) ,32 Pa. Co. dividually, and that said licensed
(^t. R. 35. See Act A])ril 4, 187;i, sec. agents were recpiired to sign all poli-
0, 12, Pub. L. 20, am'd bv Act June cies in tlieir individual names. Opin-
23, 1885, Pub. L. 134. License of in- ion of Ally. (ienl. 8 Pa. Dist. Rep.
dividual underwriters, partnerships 354, 56 Leg. Int. 290. See License in
and unincor])orated life associations Penn.sylvania, In re, 3 Pa. Dist. Rep.
should in abseiu-e of judicial determi- 822.
nation be refu.sed. Id. See also ^''' ('omnionwealtli v. Rein.oelil
Life Insurance (Attv. Geids. opinion (1894) 163 Pa. 287, 25 L.R.A. 247,
1906) 63 Leg. Intell.'79, 15 Dist. Rep. 20 Atl. 896.
797
§ 335o
JOYCE ON INSURANCE
that a contract of insurance or guaranty against loss by fire or light-
ning could not be issued by any person, partnership or association
without authority expressly conferred by a charter of incoi*poration
given according io law.^^
§ 335o. Same subject: decisions inferentially bearing thereon. —
In addition to the preceding decisions there are numerous cases in-
ferentially bearing in a greater or less degree, upon the right of these
associations or individual underwriters to insure. Certain of these
decisions are noted here, but they are hereinafter more fully con-
sidered. They determine the nature and extent of liability of such
associations, actions to enforce the same, parties thereto, right8 and
remedies, proofs of loss, etc.-^^
"Arrott V. Walker, 118 Pa. 249, Co. v. Mundv (1899) 62 X. J. L. 16,
12 Atl. 280. 55 L.R.A. 193, 42 Atl. 1063 (condi-
1^ United States. — Richmond Cedar tion valid that action must be brought
Works V. Buckner (U. S. C. C. 1910) only against attorney in fact),
(right to sue in Federal Courts; non- Neiv York. — Imperial Shale Brick
compliance with state laws; agree- Co. v. Jewett (1901) 169 N. Y. 143,
ment to jointly and severally insure; 62 N. E. 167. 31 Ins. L. J. 376 (un-
pleadings). Sumner v. Piza (U. S. derwriters jointly liable, except one
D. C. 1899) 91 Fed. 677 (liable for who had revoked his power of attor-
proportionate share of entire amount ; ney etc.), modifying 60 N. Y. Supp.
assured may proceed against any- 35, 42 App. Div. 588; Unterberg v.
one of associates, and hold each for Elder (1911) 72 i\lisc. 363, 130 N. Y.
whole amount until satisfaction had, Supp. 166 (policy must be" issued in
but cannot sue jointly). McAllister compliance with joint powers of at-
V. Hoadlev (U. S. D. C. 1876) 76 tornev) : Kriegman v. Dumphy
Fed. 1000 "(several liability to assured (1910) 66 Misc. 221, 122 N. Y. Supp.
for whole subscription; contribution). 1116 (supplementary proceedings) ;
Ahihama. — Hoadlev v. Purifov McLean v. Tobin (1908) (action lies
(1894) 107 Ala. 276", 30 L.R.A. 35i, against attorneys in fact); Burke v.
18 So. 220 (mandamus to compel is- Rhoades, 79 N. Y. Supp. 407, 39
sue of license; each underwriter liable ^lisc. 208, aff'd 81 N. Y. Supp. 1045,
for fixed amount, but not for whole 82 App. Div. 325 (not liable when
or anv part of anotlier'.s liabilitv). limited fund exhausted, unless, etc.)
//Z/ho/.s.— Warfield - Pratt - Howell Cook v. Loew, 69 X. Y. Supp. 614, 34
Co. v. Williamson (1908) 233 111. Misc. 276 (wh^n not liable for entire
487, 84 N. E. 706 (need not sue eacli subscriptions) ; Ketchum v. Belding,
separate member; all members need 68 N. Y. Supp. 1099, 58 App. Div. 295
not be made parties; when association (conditions precedent to suing indi-
liable for loss) ; Barnes v. People vidual underwriters, valid) ; Thomp-
(1897) 168 111. 425, 48 N. E. 91 son v. Colonial Assur. Co. (1900) 68
(same decision as to liability as 107 N. Y. Supp. 143, 33 Misc. 37, aff'd 70
Ala. above cited) ; Blair v. National N. Y. Supp. 85, 60 App. Div. 325
Shirt & Overalls Co. (1907) 137 111. (case of associate's individual right
App. 413 (each liable for amount to sue reinsurers) ; ConanI v. Jones
fixed; agent no authority to stipulate (1900) 64 N. Y. Supp. 189, 50 App.
as to number of suits and jurisdic- Div. 336 (action on judgment against
lion.) general manager and attorney in
New Jersey. — Enterprise Lumber fact); American Lucol Co. v. Lowe,
798
INDIVIDUALS, ETC.
§ 335p
§ 335p. Partnerships as insurers. — The citizens of a state are en-
titled to carry on insurance business as partnerships or companies,
in the absence of any prohibitory statute and this includes citizens
of foreign states.^" But under a South Carolina deeision articles of
agreement that the members of an insurance company should each
bear his proportion of the losses, without any negative words that
they should not be liable for more in case of insolvency of some of
the ]jarties, is an ordinary copartnership: the members are bound in
solidu, each for the whole; not only as to strangers, but as to mem-
bers of the company, who have procured insurance.^ And in Penn-
58 N. Y. Snpp. 687, 41 App. Div.
500 (I'ight to sue nndenvriters ; con-
dition precedent; misjoinder of par-
ties) ; New York Board of Fire Un-
dei-writers v. Whipple (1898) 55 N.
Y. Snpp. 188, 36 App. Div. 49 (who
may be made party defendant ; here
held jointly and severally liable on
assessment for fire patrol) ; Gough
V. Satterlee (1898) 52 N. Y. Supp.
492, 32 App. Div. 33 (extent of lia-
bility of attorney as trustee of trust
funds in his hands; when action lies.)
Strauss v. Hoadlev (1897) 48 N. Y.
Supp. 239, 23 App. Div. 360 (liable
severally not jointly) ; Lia\\Tenee v.
Sehaefer, 46 N. Y. Supp. 719, 20
App. Div. 80, 42 N. Y. Supp. 992,
19 Misc. 239 (separate action can-
not be first brought against each un-
derwriter but only against attorney
of all; condition valid); Walker v.
Beecher, 36 N. Y. Supp. 470, 71 N.
Y. St. Kep. 458, 15 Misc. 149 (when
stipulation complied with as to' serv-
ice of notice and proofs of loss upon
attorneys in fact. See § 3312 here-
in).
Ohio. — State (ex rel. Richards) v.
Ackerraan, 51 Oliio St. 163, 24 L.R.A.
298, 37 N. E. 828 (liable to extent of
subscription; cannot restrict liabili-
tv) ; r^errvsburg tV: Toledo Transp.
Co. V. Gilchrist' (1902) 24 v)liio Cir.
Ct. Re]). 165 (when individual mem-
ber may be sued; clause valid which
provides as to partv defendant).
20 Hoadlev v. Purifov, 107 Ala.
276, 30 L.RiA. 351, 18 So. 220 (noted
under § 335B herein) ; as to require-
ments as to firms, see Fla. Genl. Stat.
1906, pp. 1078 et seq. sees. 2757 et
seq. Laws 1909, p. 32, c. 5887 (No.
18).
iShubrick v. Fisher (1802) 2 Des,
Eq. 148. In this case the company
formed was called '"The South Caro-
lina Insurance, Company" for the
purpose of insuring vessels and ear-
goes. Several persons formed the
company and signed by their agents
the policias of insurance. Lo.sses
wei'e agreed to be borne by each and
eveiy of the several subscribers or
members in average or proportion to
the sums of money by them sub-
scribed. Each party severally, not
jointly, and not one for the other,
covenanted that the company should
be called the South Carolina Insur-
ance Company; that there should be
a president, vice president, director,
treasurer, and clerk; that any one of
the directors signing a policy on be-
half of the company made it binding
on all the other members in average
and proportion to the sums by them
subscribed and that the treasurer
should give security for faitliful dis-
diarge of duties of his office. In case
any loss should hapy)en over and
above the sums subscribed and depos-
ited as capital, such loss .was lo be
borne by each and every of the sub-
scribers in average and proportion to
the sum by him subscribed. The pol-
icy in suit was issued in 1777, was
signed for said company by one of
the members acting for himself and
for others as their said agent for
such purposes specially constituted.
799
§ 335p JOYCE ON INSURANCE
sylvania, a policy of iiipuraiice issued by a partnership without au-
thority expressly conferred by act of incorporation as required by
the statute of 1870 is held to be void in its inception.^ It is also
declared in that state that two or more insurance companies may
lawfully issue a policy where it distinctly appears that each receives
a certain and definite proportion of the premium and assumes only
a certain and definite proportion of the liability, although where
such company acts only for itself and not for the other no two cor-
porations can engage in a business where, by any possibility, there
is such a community of interests as to constitute a partnership. In
other words corporations generally have no authority to enter into
I)artnership with individuals or other corporations, and cannot en-
ter into agreements which may create partnerships, and since no
authority is given to insurance companies to combine in issuing pol-
icies in Pennsylvania such a proceeding is prohibited ^ under a
Georgia decision where a policy was issued in the name of the 'Xi^n-
derwriters Agency," consisting of four companies, signed by a per-
son acting as agent for all and not of each company, although un-
der the contract each was liable separately to pay his share and each
received his share separately of the connnon premium, still a joint
action lay against them for a loss, the contract being a joint one like
a partnership with a fh-m name, but the jury might, it was held
under the Code, make their verdict conform to the contract, by find-
ing one-fourth of the loss against each separately.* In Minnesota
partnerships must comply Avith the law requiring a license to do
business as they are among those enumerated in tlie statute.* And
the Mississippi code includes partnerships.^ So also do&s the Massa-
chusetts statute of 1907.' Under a New Hampshire decision the
parties plaintiff suing on a premium note for an insurance contract
were held not a corporation, but a partnership or association and so
prohibited from doing business in the state until they complied
with its statutes but it also held that an insurance contract made in
2 Weed V. Cummin^, 198 Pa. 442, cv (1874) '^3 Ga. 442. See Serjeant
48 Atl. 409; Act. Febv. 4, 1870. P. v. Goldsmitli Dry Goods Co. (1913)
L. 14. See also Philadelpliia Under Tex. Civ. App. — , 159 S. W. 1036.
writers, In re (1897) 54 Leg. Intell. * state v. Beardslev, 88 I\Iinn. 20,
403, Pa. Dist. K. 699 (opinion At- 92 N. W. 72. "In this case tlie Home
ty. Genl.). See § 335k herein. Ex- Co-operative Co. was a copartner-
amine Weed v. Cumming', 8 Pa. Di.st. ship organized in another State and
K. 320, 56 Leg. Intell. 268, 23 Pa. Co. its contract with persons not mem-
Ct. 27. hers was held to be one of life in-
^ Insurance Policies by Unders\rit- surance. Gen. Laws 1895, c. 105,
ors Agencies, in re (1897) 55 Leg. § 101.
Intell. 6, 7 Pa. Dist. R. 17 (By Atty. « See § 3351i herein.
Genl.) ''See § 336f herein.
* Sutherlin v. Underwriters Agen-
800
INDIVIDUALS, ETC. ' § 33.->p
the state was valid even though said parties had failed to comply
with tlie statute and that they could recover on the note.* Tn an
Indiana case tlie Farmers Mutual was an unincori)orated lire asso-
ciation of individuals partaking of the nature of a copartnership
for the purpose of nuitual insurance against fire and lightning. Bv
its agreement a person to be insured must become a member, no
<aj)ital was provided except a sum sufficient to pay expenses, the
business was transacted by its officers, executive committee and oth-
er agents. The constitution and by-laws were set out in the policies.
It was held that such an association was not a corporation and could
not be sued in the company name and. unless another mode was au-
thorized by its articles, the action should be against all the mem-
bers.^ Again, it is decided that a partnership contract is invalid
where the ))olicies issued are purely wager policies, a speculation
up(m life and contrary to public policy, even though the beneficiary
is entitled to a certain siiare of the insurance.^"
8 Union Jns. Co. v. Smart, 60 K. H. i" Cisna v. Slielby. 88 111. App 385
458. 20 Nat. Corp. Repr. 546.
9 Farmers Mutual v. Reser (1909)
43 Ind. App. 634, 738, 88 N. \V. 353.
Joyce Ins. Vol. 1. — ul. 801
§
336.
§
336a.
§ 336b.
§
336c.
§
336d.
§
336e.
§ 336f.
§
336g.
§
337.
§
337a.
§
337b.
§
337c.
§
337d.
§
337e.
§
338.
§
338a.
§
338b.
§
338c.
§
338d.
§
338e.
§
339.
§
339a.
§
339b.
§
339e.
§ 339d.
§ 339e.
§ 339f.
§ 339g.
§ 339h.
§ 339i.
CHAPTER XVI.
DIFFERENT FORMS OF INSURANCE CLASSIFIED.
Policy against railroad liability for fires is fire, not guaranty, in-
surance.
Whether inter-insurance or inter-indemnity plans are insurance
contracts.
Same subject: agreement between printing companies.
When copartnership agreement is life insurance.
Burial or funeral benefit insurance is life insurance.
Wliether annuities are life insurance.
Endowment: pure endowTnent and annuity contracts.
To what extent tontine insurance is life insurance.
Whether contract one of loan or of life insurance.
Other instances of what is and is not life insurance.
Whether policy, life or accident : generally.
Industrial insurance with provisions as to accidental death is not
accident insurance.
Newspaper contract may constitute an accident policy : ultra vires.
Employers' liability or indemnity insurance.
Insurance of and by carriers : agreement of, to procure insurance.
Burglary insurance.
What is not insurance on automobiles.
When bicycle association not insurance company.
Sanitary inspection of buildings, etc., is not insurance.
Contracts to compensate unemployed employees.
When guaranty or surety company contracts constitute insurance.
Fidelity guaranty bonds or contracts constitute insurance.
Same subject.
Contract to indemnify "assured" for banks' default is contract of
insurance: bond to secure deposits.
When contract, guaranty bond, mortgage, and securities guaranty,
do and do not constitute insurance.
Guarantee to repay loan is contract of insurance.
When building contractors' bonds are insurance contracts.
Title guarantee contract constitutes insurance.
Credit guarantee contracts constitute insurance.
Loss of crops : guarantee of realty revenue constitutes insurance.
802
DIFFERENT FORMS OF INSURANCE CLASSIFIED §§ 336, 336a
§ 336. Policy against railroad liability for fires is fire, not guar-
anty, insurance. — A contract insuring a railroad company against
claims for loss or damage to property occasioned by fire communi-
cated bv its locomotives, and for which it is liable under a statute
and in which property it has an insurable interest, constitutes hre
and not guaranty insurance and such 'policy may be issued by a
company authorized to insure only against loss or damage by fire."
§ 336a. Whether inter-insurance or inter-indemnity plans are in-
surance contracts. — The contract of inter-insurance involved in a
Mississippi Ccose, decided in 1910, is declared to be the first of its kind
ever reviewed by any court. The plan is set forth in the append-
ed note. The parties mutually insured each other. The association
was a voluntary one but it was neither a ''mutual" nor ''stock" com-
pany, although it possessed features incident to both, and it was held
that it came more nearly under the classification of a "mixed"' com-
pany or association ; that the question whether or not an association
is doing an insurance business, within the meaning of the statutes
of that state, is not affected by the fact that the association confines
itself to the insurance of only a particular kind of property, and
that such a construction is not unconstitutional ; that the determin-
ing feature as to the application of insurance laws to an organiza-
tion, such as this one, lies, not in the name by which it is called
but in the business conducted by it; that the contract was clearly
one of insurance falling literally within the Code provisions specify-
ing the concerns subject to the insurance laws, also prohibiting any
"foreign insurance company" from doing business in that state
until it had complied with certain conditions precedent, and de-
fining "company" and a contract of insurance. It was also decided
that, in a more complicated form the association was in effect noth-
ing but an insurance association organized for the purpo.se of profit
to its originators, that they did receive a large profit, and in reality
constituted the association itself. It was further determined that
the business was unlawful, that the association was conducting it
unlawfully, and that insurer's agent had unlawfully assumed to act
as such in soliciting insurance.^^ \^ Missouri a statute, providing
" Canadian Pacific Ry. v. Ottawa to Lloyds, but it differed therefrom in
Fire Ins. Co. 11 Ont. L." Rep. 465, 6 certain important features. The
Amer. & Eng. Ann. Cas. 567. former comprehended an exchange of
12 State v.^Alley, 96 Miss. 720, 51 contracts between the individual un-
So. 467, 39 ins. L. J. 629, under Code derwriters, called "subscribers," eon-
of 1906, e. 69, p. 766, sees. 2559, sisting of a number of persons, firms,
2562, 2563, 2606. See Laws 1910, and corporations designated as Man-
arad'g Code 1906, also Id. sec. 2559. ufacturing Lumbermen's Under-
Whitfield, C. J., dissenting. The plan writers, whereby the. properties of
in some of its operations was similar each was to be protected against
803
33Gb
JOYCE ON INSUKANCE
that contracts between individuals, tirnis or corporations, indemnify-
ing each other against lire, casualty, or other contingency or dam-
age do not constitute insurance business, is held unconstitutional
as to the title of the act and as to sjjecial laws. It is also held that
the legislature cannot, within its power to regulate, discriminate or
enact class legislation."
§ 336b. Same subject: agreement between printing companies. —
In a Missouri case it appeared that in lUOG certain corporations,
loss from fire. It was exclusive in also contained a provision concerninjif
that the association contined itself litig'ation and tixin^' lial)i]ity. Upon
to the insurance of oidy a partic- delivery of said contract the subscrib-
idar kind of jiroperty, no contracts er i)aid to the attorneys in fact the
of insurance were written for the amount of a stipulated deposit or
public, and onlj' known persons en- "premium," and tliis was delivered
gaged in the same business and to the treasurer, and by him creilitcd
wliose standing was of a satisfactory to the several other subscribers in
character acceptable to the others the same proportion in which tliey
were permitted to subscribe. The
exchange of contracts, on account
of the number written, was ac-
complished through an attorney in
;;ssunied liability to the
])aying said deposit or '
subscriber
piemium.
Said sums thus credited were kept in
separate and distinct accounts for
fact wlio conducted the plan, to whom eacli subscriber. The rate of prenii-
each concern entering into contractu- um was based upon that of reputable
al relation executed its separate pow- corporations writing- similar risks for
er of attorney. Said attorney in fact profit. The individual amount of in-
received for expenses and services demnity was determined by the rela-
twenty-five per cent of the amount of five risk, and was exchanged In-
premiums paid in. His acts were di- each subscriber witli the others on a
reefed by an advisory committee, ])roportionate basis, that is, each
which acted without iiay and was se- agreed to indemnify the others in
lecfed from the subscribers. The proportion as he received indemnify,
treasurer was one of the subscribers. In the event of a hiss each confnbuf-
In addition to the above twenty-five ed liis pro rata share, based upon the
per cent there was a certain element indemnity that the one who had suf-
of profit ill tliat the object of each fered loss had agreed to indemnify
subscriber joining in the a.ssociation each of the other contracting parties.
and faking out insurance was to effect
cheaj) insurance, 'i'liere was no actual
(•a])ital nihcr tlian the premiums paid
l)v tiiose becominsi' members. The in-
See plan set forfli in I^armers Mutu-
al Fire Ins. Co. v. Cole, 90 Miss. 508.
On contracts, by which individual
or firms undertake to indemnifv each
dividual subscribers were protected oflier, as nuisance, see note in 47
by the privilege of wiflidi-awal at any L.R.A.fX.S.) "Jft?.
time. A subscriber's apidication and " State (ex rel. Inter-insurance
note being satisfactory, a contract of Auxiliary Co.) v. Revelle, 2'u Mo.
indemnity following the standard r)29, 165 S. W. 1084, Laws 1911, p.
forms used by insurance corporations, iJOl, Const, ail. 4, sees. '2S, od, par.
was executed to him by the attorney 'A3. Compare Wallace & Co. v. Fer-
in fact for the underwriters. The guson, 70 Oreg. 30fi, 140 Pac. 742,
policy, however, set out the various where by a similar enactment such
amounts for which each sub.scriber contracts constitute insurance busi-
assumed liabLlitv in case of loss, and ness; Laws 1911, pp. 37t), 377, sees.
804
DIFFERENT FORMS OF INSURANCE CLASSIFIED §§ 336e, 336<I
linns and individuals organized under llie name of ''The Printers'
<fc Publishers' Reciprocal Underwriters at Priulers' Exchange" for
tlie ]>urpose of insuring each other's business establishments. A
number of different concerns in difl'erent cities became members of
tlie association by signing the i)reliminary wi'itlen agreement by
wliicli it was created. Tlicy indemnified eacli other against loss by
fire. Tliere was a connnittee of subscribers elected annually, also
a managei' who underwrote for subscribers in his own name policies
of insurance against loss by fire or lightning, to reinsure same, et<'.
Haid manager was under secui'ity. He also had power to adjust and
settle losses, etc. The organization was not formed for profit but
to provide insurance to members at cost. It was held not a contract
for creation of insurance business within the statute, but an inter-
iiidenmity contract or exchange.^* ■
§ 336c. When copartnership agreement is life insurance. — A con^
tract, although containing other provisions may be one of life insur-
ance, and it is innnaterial that such a contract does not on its face
purport to be one for insurance and this applies to a copartnership
agreement especially where such copartners] lips are among those
required by statute to obiain a license to do business.^*
§ 336d. Burial or funeral benefit insurance is life insurance. —
Burial insurance being detei-minable upon the cessation of human
life and being dei)en(lent ui)on that contingency constitutes life in-
surance. So where a contract is issued by an association, to furnish
the holder with the burial at his death, at a specified cost, based upon
a system of nmtuMl contribution or asse-ssments, the mciiibci's of the
association being both underwriters and underwritees it conies with-
in the above principle and constitutes life insurance in all respects
similar to that of a mutual life insurance com])any. and is within
the meaning of a statute regulating such busine.ss.^^ fSo an agree-
1-4, covering also the riglit of agents sen.se members of tlie eopartnersliip
1o a license, see next following sec- or company. The comi)any was en-
tion herein. ' titled to all proHls and bore all los.ses
^* Isaac H. Blanehard Co. v. Hamb- if any. A stipulated amount was
lin, 1()2 Mo. App. 242, 144 S. W. 8S0, paid for menibevship fee and also a
41 Tns. L. J. 894. certain montidy amount by ea(4i con-
^^ State V. Beardsley, 88 Minn. 20, tract holder as a premium and there
92 N. W. 72. In this case the Home was no provision for levying assess-
Co-opcrative Company was a copart- ments upon such holdei-s to cover
ner.«;hip organized in another state. losse.s. The company assumed all ob-
it consisted of a number of citizens ligations outside of that of the holder
of the latter, and under tlic above to pay his premium,
name entered into its contracts as ^^ State v. Willett, 171 Tnd. 206,
j.arlies of the first part, the parties 23 L.R.A.(N.S.) 107 note, 8ti N. E.
of the second part being holdcis mere- ti8, under Burns's Ann. Stat. 1008,
ly of the contracts and not in any sec. 4713, act 1001, p. 374. See also
805
§ 336e
JOYCE ON INSURANCE
ment to furnish funeral and requisite accessories when issued by a
company organized for the purpose of selling such contracts con-
stitutes life insurance, even though no beneficiary is dasignated."
§ 336e. Whether annuities are life insurance.^''* — Annuities are
held not to constitute life insurance under a New York decision."
The New York insurance law providas for the incorporation of per-
sons for the purpose of making life and health insurance, etc., ''and
to grant, purchase or dispose of annuities." ^^ And in a Michigan
case an agreement was made with the defendant, as a consideration
for the sale of his business, to pay the vendor a certain monthly
sum during his life, and it was contended that the corporation had
no power to make such an agreement as it was in the nature of a
contract for an annuity and under it the corporation would be prac-
tically dealing in life insurance but this contention was not sus-
tained.2° In a Maryland case the points involved were as to the
necessity of a seal and the form of instrument required for the crea-
tion of an annuity and the power of a life insurance company to
grant an annuity, ])ut the contract was based upon the consideration
of a sum certain to pay the annuitant specified sums annually dur-
State (ex rel. Atty. Genl.) v. Wichita 505, c. 204, sec. 70. Valuation of an-
Mutnal Burial Association, 73 Kan. unities; provisions as to lapsed or
179, 84 Pac. 757, under Gen. Stat, forfeited policies and annuities; de-
1901, sec. 3386; Fickes v. State, 87 ferred annuities. Laws 1909, c. 33,
Miss. 251, 39 So. 783, under acts sees. 84, 88, c. 28, Cousol. Laws.
1902, c. 59, see. 10. See §§ Vila, 20 L^e v. United States Graphite
7c herein. Co. 161 Mich. 157, 125 N. W. 748.
On burial insurance and funeral The court, per Montgomery C. J.,
benetits, see notes in 23 L.R.A.(N.S.) said: "It is first insisted that the
197, and 47 L.R.A.(N.S.) 299. corporation itself did not have the
"State (ex rel. Fishback) v. Globe power to make this agreement, as it
Casket & Undertaking Co. 82 Wash, was in the nature of an agreement
124, L.R.A.li)15B, 976, 143 Pac. 878. for an annuity, and that this agree-
"* See VIIc herein. ment would show the corporation to
18 People V. Security Life Insur- be practically dealing with life in-
ance & Annuity Co. 78 N. Y. 114, 7 surance and granting and disposuig
Abb. N. C. 189, case of receivership of annuities. We think this is too
and distribution of assets. The court narrow a construction. The agree-
per Earl, J., said: "Fifth. There ment to pay the plaintiff so much
are several annuitants of this com- per month during his life was based
pany — persons to whom the company, upon a good and sufficient eonsidera-
f or gross sums paid, agree to pay cer- tion. It involved more than the mere
tain sums annually during life, purchase of annuity. It involved
. . . These are not cases of insur- supposed benefits to accrue to the
ance, and they are not to be governed company from time to time. It was
by any of the rules applicable to life only a means of measuring the ex-
insurance." Id. 128. tent of the consideration which should
19 N. Y. Laws 1909, c. 33, sec. 70, be parted with for the purchase of
c. 28, Consol. Laws; Laws 1914, p. this business."
806
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 336f
ing life and it was held that said annuity was a mere chose in action
for the payment of money, the same as a policy of life insurance.^
§ 336f. Endowment: pure endowment and annuity contracts. —
Under a Massachusetts decision a distinction is made between an
ordinary endowment policy and the contract before the court. The
validity under the statutes of that state of pure endowment and an-
nuity contracts is also fully considered. The principal point de-
cided, however, is that a pure endowment contract guarantying the
payment of a certain sum to a person if living at the end of five
years and if not, then said sum with the premium paid should re-
main the insurer's property, is not a contract of insurance, within
the statutory definitions in Massachusetts, but it is a valid and en-
forceable contract.^
1 Cahill V. Maryland Life Ins. Co.
of Bait. 90 Md. 333, 47 L.R.A. 614,
45 Atl. 180.
2 Curtis V. New York Life Ins. Co.
217 Mass. 47, 104 N. E. 553, 43 Ins.
L. J. 551, under Rev. L. c. 118, sec. 3.
The court, per De Courcy J., consid-
ers the statutory detinition of insur-
ance and says: "The contract in
question does not provide for pay-
ment upon the 'destruction, loss or
injury,' of anything. Under it the
defendant assumed the obligation of
payment not upon the destruction or
loss during- the period named, but up-
on the continuance of the life of Jen-
ne.ss durins: that period. It is not
what is ordinarily known as an en-
dowment insurance policy, under
which the sum named in the policy
is payable to the insured himself,
if he lives a certain length of time,
and in the event of his prior death
is payable to his beneticiarics, as
in the ordinary life policy. Carr
V. Hamilton, 129 U. S. 252, 32 L.
ed. 669, 9 Sup. Ct. 295; Briggs
v. McCulloug-h, 36 Cal. 542; State
V. Federal Investment Co. 48 Minn.
110, 50 N. W. 1028. Such a con-
tract is in reality a combination
of a contract of investment and one
of term insurance; and it is the kind
that Jenness first applied for and
which the defendant declined to issue.
The plaintiff is right in his conten-
tion that the policy in controversy
80
was not a contract of insurance with-
in the scope of our statutory defini-
tion.
On whether endowment policies are
within statute exempting life insur-
ance policies, see note in 25 L.R.A.
(N.S.) 722.
"(2) A pure endowment contract,
such as that involved in this case,
not being a contract of insurance
within the definition of R. L. c.
118, sec. 3, the next question is
whether it is an agreement which
our laws prohibit an insurance com-
pany from nuiking in this common-
wealth. In the ease of Lord v. Dall,
12 Mass. 115, 7 Am. Dec. 38, where-
the legality of a contract of insurance
and a life was first decided in this
state, Parker, C. 'J., in deUvering the
opinion of the court said : 'This is
a contract fairly made; tlio premium
is a sufficient consideration ; there is
nothing on the face of it whicli leads
to the violation of the law; nor any-
thing objectionable on the score of
policy or morals. It nnist then be
valid to support an action, until
something is shown by the party re-
fusing to porfonn it, in excuse of
his noni)orformance.' At tliat time
insurance contracts were usually on
marine risks. Tlie system since then
has grown and broadened until it
now furnishes protection and indem-
nity in almost every department of
7
§ 33()£
JOYCE ON INSURANCE
bu^;inesS arifl pi-ivate life and enter- plicable to a contract of pu;-e endow-:
prise. See Stat. 1!)()7, c .')7(), sec. 32, ment, as an annuity contract in effect
as amended by Stat. 11)08 (chaps. 24<S, is one providing for the payment of
r)09, and Stat. 1910, c. 490. Some a .series of pure endowments,
of these contracts for many years "Although as we liave seen, such
have been a recognized part of the pure endowment and annuity con-
insurance bu.siness, although they do tracts are not contracts of insurance
not come witliiii our present statutory as defined by R. L. c. 118, sec. 3, it
definition. This is especially true of does not follow that insurance com-
contracts of pure endowment with panies are prohibited by our law
return of premium. See . Gould v. from writing them. That these com-
Curtis (1912) 1 K. B. 635; Pruden-
tial Ins. Co. V. Commissioners of In-
land Revenue (1904) 2 K. B. 658_;
Carter v. John Hancock Ins. Co. 12/
Ma.ss. 153. And one of the Avell-
panie.s are not conHned to the making
of the contracts delined by section 3
above cited, is apparent from other
provisions of the chapter. Thus,
section 65 provides: "AH corpora-
known forms of contract is that of tions, associations, partnerships or
annuities — not Avithiu the technical individuals doing business in this corn-
meaning of the term, or incoi'i)oreal monwealth under any charter, corn-
hereditaments created by grant but in pact, agreement or statute of this or
the modern sense of a simple i)romise any otlier state, involving the pay-
to pay a certain amount yearly, ment of money or other thing of
There is nothing in such contracts value to families or representatives
that offends against public policy or of policy and certificate holders or
any jjrinciple of law. Hayden v. members, conditioned upon the con-
Snell, 9 Gray (75 Mass.) 31).'), (i9 Am. tinuance or cessation of human life,
Dec. 294; Cahill v. Maryland Life or involving an insurance, guaranty,
Ins. Co. 90 Md. 333, 45 Atl. 180, 47 contract or pledge for the payment
L.R.A. 614; Berry v. Doremus, 30 N. of endowments or annuities shall be
.J. Law. 399. As was said bv the court deemed to be life insurance compa-
in Mutual Life Ins. Co. v. Smith, 184 nies, and shall not make any such in-
Fed. 1, 106 C. C. A. 593, 33 L.R.A. surance, guaranty contract or pledge
(N.S.) 439: 'We see verv little to'be i" tlii« conunonwealtli, or to or with
urged against insurance of the nature any citizen or resident thereof, which
in question,
that does not o'o (^oea not distinctly state the amount
to the merit of insurance itself. It Ls of benehts payable, the manner of
not unnatural that one should act up- Pa.vm™t and-the consideration there-
on the idea that, in the davs when he f^''' nor any such insurance, guar-
is handling monev, it is the part of »^it>'' ^:?"tract or pledge, the perloi-ra-
wisdom to safeouard the period of ^"""^^ of which is contingent upon the
old age, in which business and earn- P-'.vment of assessments made upon
ing capacity will have become a thing
of the past. Under modern condi-
tions in the various industries, as
Avell as in business and in ofTicial life,
men are influenced to enter upon a
particular work by various old-age
safeguards which become operative at
the end of a specihed ])eriod of .serv-
ice.' In the Smith case the ]iolicies in
question provided for deferred annui-
survivors.
"This recognition and regulation of
policies conditioned upon the 'con-
tinuance' of life, and of contracts
for the payment of 'endowments or
annuities' is inconsistent with the
view that insurance companies .are
forbidden to make such contracts.
The reasonable inference rather is
that, subject to the limitations stated.
ties, beginning in 1916, if the insured they may be made in this common-
should be alive at that time. But wealtli, even though they are not con-
Avhat was there said seems equally ap- tracts of insurance as defined in sec.
808
DIFFERENT FORMS OF INSURANCE CLASSIFIED § ;J3Gf
3. In other parts, also, of the in- "Fi-om wlial lias boon said it seems
siiran('-e statute are |)ruvisious iiuli- clear that while the contract of pure
catiiiir that annuity contracts as well endowment in (juestion is not one of
as those of endort-iuent, may be writ- insurance as defined by R. L. c. 118,
ten under the Massachusetts law. sec. 3, nevertlieless it is a legal con-
See R. L. c. 118, sec. 11, cl. 3; \i\. tract and one which the Massachu-
secs. 68, 76. And in the revision of setts laws do not iiroliiliit an insur-
St. 1907 (c. rw6), although the deti- ance company from making. In
nition of R. L. c 118, sec. 3, is re- form it complies with the require-
tained, fre<|uent reference is made to ments of sec. 6') in distinctly stat-
endowment, pure endowment, and an- ing 'the amount of benelits payable,
nuity contracts as a recognized the manner of payment and the con-
l)art of the business of life insurance sideration thei-efor.' As it is not a
companies. See, for instance, sees, 'contract of insurance' within tiie deti-
11, 69, 75, 76, 81. Section 80, as nition of our statute, the statutory
amended by statute 1908, c. 166, re(iuirements relative to medical ex-
in dealing with the options open to amination and to the form of the ap-
the holder in case of surrender of the plication are not applicable and need
])olicy, provides that. 'in case of an not be considered. Nor is this a con-
endowment policy, if the sum ap- tract that can be rescinded as fraud-
l)licable to the purchase of temporary ulent or unconscioiial)le. Jenness
insurance shall be more than sufti- must have understood from the ex-
cient to continue the insurance to press terms of the application that
the end of the endowment term tlie premium was not to be returned
named in the policy, the excess shall if he should die Ijefore the maturity
be used to purchase in the same man- of the pure endowment. The premi-
ner noni)articipating paid-up pure um Avas based upon the standard
endowment, payable at the end of American Elxperience Tables, and the
the endowment term on the same loading added for expenses was less
condition." And the same section, as than 4 i^er-cent. The wisdom of the
further amended by St. 1910, c. :)6(i, investment whicli he carried for more
concludes in these terms: 'The pro- than four years M'a.s for him to de-
visions of tlie section shall not apply termine. Lee v. Kirby, 104 Mass.
to annuities, or to policies of pure 420. Finally, that the making of the
endowment with or without return of contract in controversy was within
premiums, or to survivorship insiir- ^j^g charter power of the defendant
ance, and, in case of a policy provid-
ing for both insurance and annuity,
shall apply only to that i>art of the
contract providing for insurance, but
every such contract providing for a
deferred annuity on the life of tlie
insured only shall, iniless paid for by
a single j)reniium, provide that in the
event of the nonpayment of any pre-
mium after three full years' premi-
ums sliall liave been ]nud. the annuity
shall automatically become converted
into a ]>aid-up annuity for such pro-
portion of the original annuity as the
number of completed years' premi-
ums paid bears to the total number
of ]Memiums required under the con-
tract.'
corporation apparently is not ques-
tioned. Its amended charter, adopted
under the New York Insurance Law
of 1892 (Laws 1892, c. 690), pro-
vides: 'Article 111. The busin&ss of
the company shall l)e insurance on
lives and all and every insurance per-
taining to life, and receiving and ex-
ecuting trusts and making endow-
ments and granting, purchasing and
disposing of annuities, such kind of
insurance being authorized under
subdivisi<;ii (1), sec. 70, of the In-
surance Laws.' "
Endowment policy of benevolent
Society is life insurance. Rockhold
v. Canton Masonic Benevolent Soc.
809
§§ 336g, 337 JOYCE ON INSURANCE
§ 336g. To what extent tontine insurance is life insurance. — '*
A tontine contract of insurance is more than a policy of life insur-
ance. In addition, it is an agret^ment on the part of the insurance
company to hold all the premiums collected on the policies forming
that class for the specified period, which is called the tontine period
or period of distribution, and, after paying death losses, expenses,
and other losses out of the fund so accumulated, to divide the re-
mainder among those who are alive at the end of the tontine period,
and who have maintained their policies in force.^ But when the
accumulated surplus upon a policy is payable to assured at his op-
tion upon the completion of the tontine dividend period if he sur-
vives that period, and is not payable at all in the event of his death
before the expiration thereof, the agreement is nothing in the nature
of life insurance but is merely a contract to pay assured a computa-
ble sum upon certain contingencies, and this result is not varied by
the fact that the wife of assured is named as beneficiary. The con-
tract is only one such as a savings bank might make.*
§ 337. Whether contract one of loan or of life insurance. — In a
Federal case the contract was one of loan secured by a mortgage on
real estate with an agreement to release the remainder of the debt
in case of death of the borrower before full payment. The contract
had about it certain features of life insurance but it was declared
"certainly not an ordinary 'life insurance contract,' in the general
acceptation of the term," as the undoubted purpose was to loan
money and secure at the same time, as far as possible, indemnity
against loss at the borrower's expense. And under the circumstances
of the case the contract was held to be tainted with usury and con-
trary to public policy warranting a cancellation of the notes and
mortgage involved.^ The same or substantially the same contract
was under consideration in a IMinnesota case although it did not
there appear what the nature of the corporation was except that it
was organized for pecuniary profit and that it had never complied
2 L.R.A. 420, 19 N. E. 710, aff'd 129 * Ellison v. Straw, 119 Wis. 502.
111. 440, 21 N. E. 794. 97 N. W. 168.
^* See § 11 herein. ^ Krumseig' v. IMissouri, Kansas &
3 Equitable Life Assur. Society of Texas Trust Co. 71 Fed. 3r)0, afif'd
U. S. V. Winn, 13^ Ky. 641, 28 in Missouri, Kansas & Texas Trust
L.R.A.(N.S.) 558, 126 S. W. 153, 39 Co. v. Krumseig, 77 Fed. 32, 23 C. C.
Ins. L. J. .587, holder held entitled to A. 1, aff'd in Missouri Kansas &
an accounting. Texas Trust Co. 172 U. S. 351, 43 L.
On right of tontine policyholder to ed. 474, 19 Sup. Ct. 179, but whether
an accounting by insurer, see note in the contract was one of life insur-
28 L.R.A. (N.S.) 558. On right to ance, void because defendant had
subject tontine policy to clainas of not complied with the Minnesota
creditors, see note in 4 L.R.A. (N.S.) contract was not considered by the
456. Supreme Court.
810
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 337a
with the state laws regulating the transaction of life insurance and
the court assumed, without deciding, that the contract was not one
of life insurance.^ But in another case in that state the Krumseig
case''^ was considered and quoted from as being a combination of a
mortgage loan and a life insurance policy and as holding that,
viewed as a contract of a life insurance, either in whole or in part, it
was void for non-compliance with the insurance laws of Minnesota
and the court, per Collins, J., said: ''The contract there under con-
sideration does not really differ from the one now before us which
we regard as a combination of a loan of money with security and a
life insurance policy. It has the features and essentials of both, and
the defendant having solicited and acted as agent in procuring it,
without being licensed as an insurance agent, violated the law." ^
In a case in the District of Columbia the contract seemed to com-
bine with the ordinary plan of insurance something of the prin-
ciple of annuities, as well as some features of the scheme on which
building and^ loan associations are established, and the principal
characteristic feature that distinguished it from the ordinary plan
of life insurance was, that the sum in gross payable by the insurance
company was payable at the beginning instead of at the end of the
risk. It was held that the contract was not one of loan but of in-
surance governed by the rules of construction applicable to ordinary
insurance contracts.^ In a Kentucky case it is held that a note given
by insured for a loan as stipulated in the policy, where the stipula-
tions in the note are not inconsistent with the terms of the policy
but merely elaliorate its meaning and effectuate its purpose, is not
within a statute prohibiting the making of any contract of insur-
ance except such as is expressed in the policy.^"
§ 337a. Other instances of what is and what is not life insurance.
— Life insurance is also held to include cattle or livestock insur-
ance; ^^ also an option to purchase realty upon certain conditions as
to the disposition of the unpaid balance of the sum })rovided for in
^ Missouri, Kansas & Texas Trust i° Ja.ijoe v. Aetna Life Ins. Co. 12:>
Co. V. McLadilau, 59 Minn. 468, 473, Kv. 510, 96 S. W. 598, 36 Ins. L. J.
61 N. W. 560. 104, Ky. Stat. 1903, sec. 656.
On loan contracts canceled upon ^^ Under the act 55, George III. c.
death as insurance, see note in 47 184, an insurance on the lives of cat-
L.R.A.(N.S.) 298. tie is hold an insurance on lives. At-
' Missouri, Kansas & Texas Tru.st tornev General v. Cleobury, 18 L. J.
Co. V. Krumseig, 77 Fed. 32, 23 C. C. Ex. 395, 4 Ex. 65. See also State v.
A. 1, above considered. Vigilant Ins. Co. 30 Kan. 585, 2 Pac.
* State V. Beardsey, 88 Minn. 20, 840; State v. Northwestern Mutual
25, 26, 92 N. W. 472. I^ive Stock Assoc. 16 Neb. 549, 20
Hlnited Security Life Insurance & N. W. 852; Examine State v. Bur-
Trust Co. V. Bond, 16 App. D. C. gess, — Tex. Civ. App. — , 107 S.
579 W. 366. See §§ 7, 27g herein.
811
§ 337b
JOYCE ON INSURANCE
the contract, in case of death or total or permanent disability and
so held even though the contract did not on its face ]:)urport to be
one of insurance. ^^ But an act to create a police relief, health, life
insurance and pension fund and providing for the payment of a sum
certain after death does not make a contract one of life insurance."
§ 337b. Whether policy, life or accident: generally. — It is de-
clared in Missouri that the calling of a contract of insurance an ac-
cident, tontine or regular Hfe policy, or for that matter, by any other
appellation that may be adopted for business or conventional use.s
or classification, cannot make a policy containing an agreement to
pay to another a sum of money designated upon the happening of
an unknown or contingent event dependent upon the existence of a
life, less a policy of insurance on life, and it is none the less life in-
surance because coupled with an investment or bond feature. All
policies of insurance in wdiich the payment of the insurance monev
is contingent upon the loss of a life are included within insurance
upon life.^*
A policy of insurance which primarily secures a weekly indem-
nity in money to the insured in the event of his disability from ac-
cidental injury and in certain specified contingencies resulting from
such injuiy agrees to pay a certain gross sum, or a ]iroportionate
12 State V. Beardslev, 88 Minn. 20,
92 N. W. 472.
13 Clarke v. Police Life & Health
Ins. Co. 123 Cal. 24, 55 Pac. 570.
1* Losan V. Fidelity & Casualty
Co. 14(i I\lo. 114, 47 S.'W. 948, a case
of the a])plication of the statute, sec.
5855, Kev. Stat. 1889, as to <leath liy
suicide being" no defense, to policies
issued by accident insurance compa-
nies. The above case is quoted from
in Zimmer v. Central Accident Ins.
Co. 207 Pa. 472, 56 All. 100.!, 33 Ins.
L. J. 333, which holds that a life pol-
icy includes an accident policy under
a provision of a statute requiring a
copy of the ajjplication to be at-
tached. Case is also cited 193 Fed.
under this section. But comjxire Tic-
tin V. Fklelity & Casualty Co. (U. S.
C. C.) 8/ Fed. 543, dccidinii co)itra as
to sec. 5855 of the ^lissouri statute
and holdins: that it did not ap])ly to
accident policies notwithstandino- Mo.
Kev. Stat. 1889, .sec. 5811, wiiereby
Hie companies were authorized to en-
cage in the business of accident in-
surance, but making it a separate de-
liartment of the life insurance com-
])any engaging' therein. This case is
cited in I\larvland Casualty Co. v.
(iehrmann, 9(j Md. 634, 650, 54 Atl.
678, where court, per Pearce, .J.,
says: '*We prefer to adopt and fol-
low the view of the state court as
the .sounder and more salutary view,"
viz. the Logan case although the
Federal case was decided prior there-
to. In tiie Maryland case above not-
ed, tlie main question was whether
the warranties made in an applica-
tion for an accident insurance policy
were within the scoj^e and operation
of the Acts of 1894, c. 662 (codified
in Poe's Suppl. to Code, as sec. 142A,
of art. 23) relating to life insurance.
Said Code art. 23, sec. 127, providing
that life insurance conijianies includ-
ed engagements for the payment of
money in tlie event of sickness, acci-
dent and death, or other contingency,
and so sul).j('ct to all the requirements
of law applicable to life insurance
812
companies.
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 337b
pari of the principal sum, or the whole ainouiit thereof, as in ease
of death resulting from the accident within a stated time, is not a
life insurance policy within a statute relating:; "to life and Hre in-
surance policies upon the lives or property of persons." ^^ So a pol-
icy which insures against death resulting directly and inde)>end-
ently of all other causes from l)odily injuries effected llii'oiigh
external, violent and accidental means, though in a sense a jxdicy of
life insurance is not the sort of policy contemphited by the Alabama
Code ^^ nor does it evidence tiie character of contract generally
spoken of as life insurance." Under a Federal decision rendered in
1912 it is decided that the Pennsylvania act of 18sr),i8 providing
for nonforfeiture of life policies in case of warranty, misrepresen-
tation or untrue statement, unless the same relates to some matter
material to the risk, applies to accident policies. ^^ In a .Massacbu-
setts case the court, per Knowlton, C. J., says: "An ordinary life
l)olicy includes the occurrence of death by accident as one of tbe con-
ditions which call for a payment by tbe company, as well as death
from any other cause, and ordinary accident policies include in-
juries by accident causing death, and to that extent tbey provide
insurance for life. Yet neither of tbese two classes of ])olicies is, for
that reason, brought within the other class also."' ^° in tliat state a
life insurance contract may combine certain fealni'cs of accident in-
15 Standard Life & Acci. Ins. Co. 11,1881 [P. L. 20] ) covered accident
V. Can-oil, 86 Fed. 567, 30 C. C. A. policies, it is reasonable to suppose
233, 41 L.R.A. 19. that the legislature by its subsequent
16 See. .')283, Form 12. use in the act of 188.') of the words
1''^ National Life & Accident Tiis. v. 'lite insurance' meant to cover acci-
Lokey, 166 Ala. 174, 52 So. 45. dent policies also. [3] For these rea-
1^ 7\.ct June 23, 1885, P. Ij. 134. sons, and with a view to harmonize
1^ Miller v. Maryland Casualty Co. state and Fedei-al decisions, and pro-
193 Fed. 343, 113 C. C. A. 267, 41 ducing uniformity in the Pennsyl-
Ins. L. J. 900. The couil, per vania .system of insurance, we hold
Buttington, C. J., said: "Wliilc the llie act of 1885 is applical)le to
case of Zimmer v. Central Accident accident policies. Support of this
Ins. Co." 207 Pa. 472, 56 Atl. lOO."!, conclusion is fouml in Logan v.
33 Ins. L. J. 333, "construed another Fidelity & Casualty Co. 146 Mo.
insurance statute, yet, as that statute 114, 47 S. W. 948; Maiyland
and the one befoi'e us ai-o in pari (^asualty Co. v. Cichrmann, 9(i Md.
materia, we consider that case evi- 634, 54 Atl. ()78; Duiany v. Fidelity
dences the views of tiie supreme & Casualty Co. 106 Md. 17, 66 Atl.
court of Pennsylvania on the sco|)o of 614; Cook on Life Ins. sec. 2; and
such insurance legislation. Moreover, McClain v. Provident Savings Life
as the act of 1885 was pas.sed after Assur. Soc. 110 Fed. 80, 49 C. C. A.
that court had, in Pickett v. Pacific .31."
Mutual Life Ins. Co. 144 Pa. 79, 13 20 ]y|etropolitan Life Ins. Co. v.
L.R.A. 661, 27 Am. St. Rep. 618, 23 Ilardison, 208 Ma.ss. 386, 94 N. E.
Atl. 871, held that the term 'life in- ^77, 40 Ins. L. J. 901.
surance' in the act of 1881 (act Mav
'813
§§ 337e, 337d
JOYCE ON INSURANCE
snrance upon compliance with provisions of the statutes as to state-
ments of benefits and cost of concessions.-^
If it is evident from the whole contract that the risk is strictly
an accident insurance, and not a fire risk, it will be so construed.^
"Travelers insurance" is made a specialty of by most accident
companies.^
§ 337c. Industrial insurance with provisions as to accidental
death is not accident insurance. — Where an industrial insurance
policy makes a distinction between death from different causes and
excepts death from accident occurring within a certain time and also
limits the amount payable if death occurs within said specified time,
such provisions are only incidental to the business of life insurance
and the contract is not one of insurance against accident except so
far as all life insurance which includes death by accident is to that
extent insurance against accident. It is not the giving of direct af-
firmative benefits of a special kind on account of the accident. It
is simply the exception of this class of cases from the limitation up-
on the ordinary rights of an insured pei'son. The provision is as if
the limitation upon payments for death occurring within the time
specified were expressed as applying to such deaths occurring from
causes other than accident.'*
§ 337d. Newspaper contract may constitute an accident policy:
ultra vires. — If one is induced to buy or to subscribe for a copy of a
newspaper by reason of a promise to pay a certain sum of money to
his heirs, in case of death by accident within a specified and limit-
ed time, such person to be identified by having the paper in his pos-
session, it is a contract of accident insurance although it may be be-
yond the company's power to issue it.*
^ Metropolitan Life Ins. Co. v.
Hardison, 220 Mass. 52, 107 N. E.
397, Stat. 1912, c. 524. The question
in the above case was wliether the
provision as to cost of concessions
had been complied Avith. Prior to
this statute, however, accident insur-
ance could not be issued in combi-
nation with life in.surance in one
policy, ^liltna Life Ins. Co. v. Hardi-
son, "199 Mass. 181, 85 N. E. 407,
distinguished in Metropolitan Life
Ins. Co. v. Hardison, 208 Mass. 386,
94 N. E. 477, 40 Ins. L. J. 901.
2 Western Refrigerator Co. v.
American CasuaJtv & Security Co.
(U. S. C. C.) 51 Fed. 155.
^ Travelers' In.s. ]\Iachine Co. v.
Travelers' Ins. Co. of Hfd. 142 Ky.
523, 528, 529, 134 S. W. 877, a case of
action to enjoin use of a name. See
also Herron's Suppl. 1908-1910, to
Sayles' Tex. Civ. Stat. p. 233. See
§§ 8, 9a herein.
* IMetropolitan Life Ins. Co. v.
Hardison, 208 Mass. 386, 94 N. E.
477, 40 Ins. L. J. 901, under Stat.
1907, e. 576, sec. 34, cl. 5, distin-
guishing iEtna Life Ins. Co. v.
Hardison, 199 Mass. 181, 85 N. E.
407.
* Commonwealth v. Philadelphia
Inquirer, 15 Pa. Co. Rep. 463. See
§ 2535 herein.
On newspapers undertaking to in-
demnify against accident as insur-
ance, see note in 47 L.R.A.(N.S.)
299.
814
DIFFERENT FORMS OF INSURANCE CLASSIFIED
5§ 337e, 338
§ 337e. Employers' liability or indemnity insurance.^ — An em-
ployers' liability or indemnity policy is lield to be a contract of in-
surance' and such a policy is construed most favorably, for in-
sured.* And the right of subrogation exists in case of employers'
liability insurance, as in cases of fire and marine insurance, against
the wrongdoer or person liable for the loss upon payment by such
company of the loss.^ It is also decided that employers' liability in-
surance is a branch of accident and casualty insurance even though
a distinction is seemingly made by statute as to capital stock and
the right to do business.^"
§ 338. Insurance of and by carriers: agreement of, to procure in-
surance. — As we have elsewhere stated the insurance of carriers
against liability for losses from injuries to passengers is a contract of
indemnity,^^ and where goods are received by a common carrier for
transportation he is held to be an insurer of the goods with a con-
tinuing liability until the goods arrive at their destination and arc
there delivered so that such carrier becomes liable as an insurer
where the goods have been delivered to it by a railroad company
and they are destroyed by fire while in possession of such carrier.^'
^ See § 9a herein. maintain action against the party
' Standard Life & Accident Ins. Co. causing the loss, see note in 2 L.R.A.
V. Banibrick Bros. Construction Co. (N.S.) 922.
163 Mo. App. 504, 143 S. W. 845; " Metropolitan Casualty Ins. Co. v.
Mears Mining Co. v. Maryland Ca.su- Basford, 31 S. Dak. 149, 139 N. W.
alty Co. 162 Mo. App. 178, 191, 144 145, 42 Ins. L. J. 579, Laws 1911, c.
S. * W. 883. Examine §§ 27a-27d 176. See also Laws 1905, c. 73, sec.
herein. 2; Laws 1907, c. 110; Laws 1909, c.
On employers' indemnity contracts 243. See Traders Insurance Ma-
as insurance, see note in 47 L.R.A. chine Co. v. Travelers Ins. Co. 142
(N.S.) 294.
' London Guarantee & Accident Co.
Ltd. V. Morris, — 111. App. — , 40
Natl. Corp. Rep. 889.
Ky. 523, 531, 134 S. W. 877, 881, per
Lassing, J.
That employers' liability insur-
ance for liability under employers'
On construction of bond or policy liability act, 1880. workmen's com
indemnifying em])loyer agairi.st loss pgnsation act of 1897, and common
from neg^ig-ence o± employee, see note j^^^, ^^ ^^^ ^ p^li^^ ^^ insurance
in 31 L.K.A.(N.S.) <^5. against accident under the English
J:!:lT^l".^."." ^rA^S^f «tamp act of 1881, sec. 98, sched. 1.
See Lancashire Ins. Co. v. Commis-
sioners of Inland Rev. [1899] 1 Q. B.
Div. L. Rep. 353.
" See § 27e herein.
As to distinction between agent and
Engineering Works Co. 36 L.R.A
(KS.) 60, 184 Fed. 426, 107 C. C. A.
20.
On right of life or accident insur-
ance company to subrogation, see note
inl8L.R.A."(N.S.) 211. On right of
action of one legally responsible for carrier m accident policies, see § 2862
another's death against a third person herein.
whose negligence caused the death, As to agent and insurance by car-
see note in 36 L.R.A. (N.S.) 61. On rier, see § 630 herein,
right of insurer who has paid loss to ^^ j^^jjatjeip^iia JVlilling Co. v.
815
^§ :538a, 338b JOYCE ON INSURANCE
An agreement made bv carriers bv water, in consideration of the
shipping of goods and of the money to be paid for its carriage, that,
they would ])ro<ure insurance of tlie goods against loss by lire in a
consignee's open lire policy, from the time received until delivery
to the consignee, is not a contract of insurance, nor a maritime con-
tract, even though a contract of insurance may be a maritime con-
tract.^3
§ 338a. Burglary insurance. — Burglary insurance falls under tho
general designation of insurance and is within a statutory condition
j)recedent to obtaining a license to carry on insurance business." So
a corporation is an insurance company where it has a system of
protection against burglary and fire b\' means of wire connections
and the contract is based upon a consideration of periodical pay-
ments, and an indemnity up to a specified amount in ca.'^e of loss is
to be paid by the company.^*
§ 338b. What is not insurance on automobiles. — A guarantee or
indemnity policy does not constitute insurance authorized by statute
"upon automobiles, wdiether stationary or being operated under their
own power against any hazard," nor is it an insurance upon proi)er-
ty, where the indemnity provided is against loss or expense result-
ing from claims upon the assured for damages by reason of the
ownership, maintenance, manipulation or use of any automobile,
on account of injury to or death of persons resulting from accident,
or on account of damage to or destruction of proi)t>rty, with certain
exceptions, said provisions being connected with an agreement to
defend suits, pay costs, and reimburse insured for the expense of
providing medical aid for immediate relief when imperative in
case of accident. ^^
Smoker T\Terf'li;in<lise Co. 100 Ark. _As contract of indomnity, see §
37, 139 S. W. 680. 27f liereni.
Carriers as insurers, see notes 3 On hurulary and tlieft insurance,
L I\ A. 424; 1 L.R.A. TOli. see notes in 4(i I..lx.A.(N.S.) oO'J, and
"Citvof ClarksvUle, The (U. S. D. 47 L.R.A.(N.S.) -JOIi.
C.) 94 Fed. 201, 205. ^^ Wood v. Gross, Rap Jud. Que-
As to lia})ility of warehouseman bee, 5 B. R. 116.
under aiireement witli carriers to ^^ ^\^,„ei.if.j)„ ^^nt^omobile Ins. Co. v.
insure, see § 2750 lierein. Palmer, 174 IMich. 295, 140 N. W.
As to limitation ofliabilitv of ship- r)r)7, 42 Ins. L. J. 885, Pub. acts
owners under acts of Congress 1894, 1869, No. 136, as am'd by Pub. acts
18.')1. See Great Lakes Towiug Co. v. 1911, No. 15, sec. 1. The court, per
Mills Transp. Co. If).') Fed. 11, 83 C. Moore, J., said : "The primary ques-
C. \. 607, 22 L.R.A. (N.S.) 769, and tion presented for determination is
note. whether or not in that act the words
"United States Fidelity & Guar- 'any hazard' mean 'any hazard' or
anty Co. v. Linehan, 73 N. 11. 41, 58 'any hazard except personal lia-
Atl. 958, 33 Ins. L. J. 1023. bility.' . . . The language of
816 .
DIFFERENT FORMS OF INSURANCE CLASSIFIED §§ 338c-338e
§ 338c. When bicycle association not insurance company. — A
mutual protective association is not an insurance company where
it was chartered for the purpose of the accumulation of a fund de-
rived from the payment of a fixed annual due and certain specified
amounts periodically for the protection of its members, by virtue
of which payments they became entitled to have their bicycles
cleaned; also repaired when damaged by accident, or replaced when
destroyed by accident; the tires repaired when punctured by acci-
dent; and the bicycle replaced when stolen, if not recovered in a
certain time, and to provide a bicycle during that time. Such cor-
poration does not fall within a statutory class authorized to make
insurance against loss, damage or liability, "arising from any un-
known or contingent e\ent whatever." ^"^
§ 338d. Sanitary inspection of buildings, etc., is not insurance. —
The inspection and certification as to the sanitary condition of
buildings and premises is not insurance, within the New York
statute.^*
§ 338e. Contracts to compensate unemployed employees. — An
association incori)orated for the purpose of selling contracts to em-
ployees to compensate them when out of employment is an insur-
ance company within a statute regulating insurance companies and
the statute is not complex. Au- or indemnifying- against injury or lia-
thority is given to make insurance bility for injury cau;?ed tliereby, see
on automobiles. If it was an in- notes in 44 L.R.A.(N.S.) 7U; 51
suranee on the automobile against L.R.A. (N.S.) 583; and L.R.A.1915E,
fire, that would be a recognized 575.
hazard to wliich automobiles are ^''Commonwealth (ex rel. Hensel)
subject. If it was an insurance v. Provident Bicycle Assoc. 178 Pa.
on the automobile against theft, that, 63G, 30 W. N. C."498, 36 L.R.A. 589,
too, would be a recognized hazard to 36 AU. 197.
which the automobile is subject. So On insurance of bicycles, see notes
of injury by accident, and the lia- in 47 L.H.A. 307, and 47 L.R.A.
bility in each case would not be (N.S.) 298.
greater than the value of the auto- ^® Pco]jle (ex rel. Woodward) v.
mobile. Is not the relator doing more Rosendale, 142 N. Y. 126, 36 N. E.
than placing insurance on auto- 806; reversing 2^5 N. Y. Supp. 769.
mobiles? . . . We think it is a The court said: "This is not insur-
strained construction of language to ance in any legal sense, but an entire-
say that a contract of this sort is ly distinct kind of business not with-
simply the placing of insurance on in the purview of the statute now
an automobile. The liability thus under consideration. We therefore
created is not limited l)y the value of hold that the lieclaration and charter
the automobile. Instead of being of the proposed company were not in
property insurance, it makes a con- accordance with tlie requii'einenfs of
tract of an entirely different char- law, and are not entitled to be tiled
aeter from that authorized by the in the odice of the superintendent of
amendment." insurance."
On insurance covering automobiles,
Joyce Ins. Vol. I.— 52. 817
§§ 339, 339a JOYCE ON INSURANCE
applying to all kinds of insurance except that of life, and requiring
a license from all insurance companies whose object is to transact
business within the state. ■^^
§ 339. When guaranty or surety company contracts constitute
insurance. — A class of contracts generally designated as guarantee
insurance has been before the courts in numerous cases for adjudi-
cation. This class comprises fidelity, title, credit, bond and contract
guaranty generally, and after much discussion it seems to be well
settled that these contracts are essentially those of insurance where
the companies engage in the business for profit and where the terms
of the contract itself closely resemble the essential elements of an
insurance contract, so that the rights and liabilities of the parties
are governed by the rules of construction applicable to insurance
rather than by the rule strictissimi juris which determines the
rights of ordinary guarantors or sureties without pecuniary consid-
eration. The application of this rule will appear under the next
following sections.^" But an insurance company is not a guaranty
or security company within the ordinary meaning of that term
within a statutory declaration of what is meant by guaranty or
security company.'^
339a. Fidelity guaranty bonds or contracts constitute insur-
ance.^'' — The bonds or contracts of those companies which guaran-
tee the fidelity of employees and which make the business one for
profit are essentially insurance contracts. This is well settled, not
only by express adjudications but also inferentially by those deci-
sions where these contracts are involved but where the point is not
Instate (ex rel. National Em- persons: "The overwhelming weight
plovces' Assoc.) v. Barton, 92 Neb. of authority supports the proposition
666, 139 N. W. 225. that the rule of strictissimi juris by
2° As contracts of indemnity, see which the rights of uncompensated
§§ 27h, 27i,. 271 herein. sureties are determined, is not
"Many companies issue 'guaranty applicable to the contracts of surety
policies.' The use of the word 'policy' companies which make the matter of
or 'insurance' does not neces.'^arily de- suretyship a business for profit : that
termine whether a contract is one of their business is essentially that of in-
insurance or guaranty; the whole snrance: and that, therefore., their
contract must be looked at in order to rights and liabilities under their con-
ascertain its real nature, and whether tracts will be governed by the laws of
the parties contemplated the rights insurance." Note 33 L.R.A.(N.S.)
and duties of principal and surety 513-519.
or of assurer and assuree." 6 Ren- On what constitutes insurance, see
ton's Ency. of Laws of Eng. p. 106. note in 47 L.R.A.(N.S.) 290.
See Dane" v. Mortsrage Ins. Corp. ^ ^tna Life Ins. Co. v. Coulter, 25
Law Rep. [1894] l^Q. B. 54, noted Ky. L. Rep. 193, 197, 74 S. W. 1050,
under § 339c herein. a case of assessment of a foreign
Character of, and rules governing company for franchise tax. Ky.
contracts by corporations engaged Stat. 1899.
for profit in business of guarantying ^^ See § 339 herein,
the fidelity or contracts of other
818
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 33iib
discussed as it is evidently conceded bv the contract beino; dealt
with as one of insurance.^ Po a bond given to indemnify a county
treasurer against loss occurring through acts of a dejDuty treasurer
is to be treated as a contract of insurance and is to be construed
against the insurer as the rule strictissimi juris does not apply to a
surety for hire.^ It is declared in a Georgia case that, under the
Code * there is a well recognized difference between a contract of
suretyship and of guaranty, but it was not necessary to determine
whether the contract involved was one of suretyship or of fidelity
insurance as it possessed some of the features of both and that that
point was not the real question in issue.*
§ 339b. Same subject. — In the Federal supreme court the rule of
construction governing insurance contracts is applied to fidelity
guaranty contracts.^ And in the lower Federal court a bond guar-
antying against loss and dishonesty of a cashier of a bank is in effect
one of insurance although the attitude of a "surety" is assumed by
the form,' and it is also determined that the law of insurance ap-
plies by analogy.' In Arkansas a bond insuring the fidelity of an
employee issued by a paid surety is not an ordinary obligation
given by a surety, but is an indemnity bond in the nature of a con-
2 See Champion lee Manufartur- Supp. 523, 31 Misc. 433, affd
ins: & Cold Storage Co. v. American (mem.) 66 N. Y. Supp. 1140, 7A
Bonding & Trust Co. 25 Ky. L. Rep. App. Div. 633; Buchner v. Title
239, 75 S. W. 197; Nortliem Assur. Guaranty & Surety Co. 128 N. Y.
Co. of England v. Borgelt, 67 Neb. Supp. 1007, — App. Div. — , 40 Ins.
282, 93 N. W. 226. As to the latter L. J. 1510.
class of decisions see the following South Carolina. — Walker v. Holtz-
cases : claw, 57 S. Car. 459, 35 S. E. 754.
United States. — Missouri, Kansas On contracts guarantying fidelity
& Texas Trust Co. v. (terman Na- of employees as insurance, see note
tional Bk. 77 Fed. 117, 23 C. C. A. in 47 L.R.A.(N.S.) 295.
65; Supreme Council Catholic ^American Surety Co. of N. Y. v.
Knights of America v. Fidelity & Pangburn, 182 Ind. 116, 105 N. E.
Casualty Co. 63 Fed. 48, 11 C. C. A. 769.
96. *Civ. Code (1910) sees. 2550,
loiva. — Perpetual Building and 3538.
Loan Assoc, v. United States Fidolitv * John Church Co. v. ^ICtna In-
& Guarantee Co. 118 Iowa, 729, 92 demnity Co. 13 Ga. App. 826, Stt S.
N. W. 686. E. 1093.
Minnesota.— Fidelity & Casualty ^American Surety Co. v. Paulv,
Co. V. Grays, 76 Minn. 450, 79 N. W. 170 U. S. 133, 42 L. ed. 977, 18 Sup.
531; Eickhoff v. Fidelity & Casu- Ct. 552, s. c. 170 U. S. 160, 42 L.
alty Co. 74 Minn. 139, 76 N. W. ed. 987, 18 Sup. Ct. 563.
1030; Fidelitv & Casualty Co. v. ''^Guarantee Co. of North America
Eickhoff, 63 Minn. 170, 56 Am. St. v. Merchants' Sav. Bk.& Trast Co.
Rep. 464, 30 L.R.A. 586, 65 N. W. 80 Fed. 766, 772, 26 C. C. A. 146.
351. ' Mechanics Savings Bank & Trust
New Yor/c.— People (ex rel. Na- Co. v. Guarantee Co. (U. S. C. C.)
tional Surety Co.) v. Feilncr, IGG N. 0*8 Fed. 459.
Y. 129, 59 N. E, 731, s. c. 65 N. Y.
819
§ 339b JOYCE ON INSURANCE
tract of insurance.^ It is also declared in Illinois that guaranty
insurance by whatever name called is an insurance contract," and
in tiiat state guarantying; tlie fidelity of oflicers and the perform-
ance of contracts is insurance within a statute excepting insurance
business from those for which corporations may be formed, al-
though such insurance is of a kind not known at the time of the
I)assage of tlie enactment and provision is made in another statute
for corporations to transact all kinds of insurance then known.^^
In Kentucky the contract expressed in a fidelity bond is but a form
of insurance witliin the rule that ambiguities must be construed
most strongly against the insurer.^^ It is also decided in that state
that such contracts are those of insurance and are equally, as well
as policies of life and fire insurance, within a statute as to repre-
sentations and warranties.^3 Under a Michigan decision a bond for
indemnity against loss through default of an employee makes the
surety an insurer in all essential particulars and subject to the same
rules as fire and life insurance companies in regard to a general
agent's authority.^* So in Missouri these companies are classed as
insurers and their contracts interpreted by the rules applicable to
ordinary insurance contracts.^* Under a North Carolina decision
a fidelity indemnity bond, given by a surety company, which in its
form and essence resembles an insurance contract and difi'ers ma-
terially from the ordinary forms of bonds should be placed in the
general class of insurance policies, at least so far as the same general
principles of construction apply.^^ In Tennessee employers' in-
denmity or fidelity bonds are contracts of insurance,^' and a lidehty
corporation is an insurance company within the statute of that state
imposing a privilege tax on insurance companies,^^ and a statute as
9 Title Guaranty & Surety Co. v. Surety Co. 159 Midi. 102, 123 N.
Bank of Fulton," 89 Ark. 171, 33 W 019. ^ ^ „
L R A ( N.S. ) U7G, 117 S. W. 537, 38 ^^ Long Bros^ Grocery Co. v.
^- T^T 709 United States Fidelitv & Guaranty
3 ^ri let ttf '■ '""' ^^^^^'^^:^ Se^Lf^
-^^,ii^- 1?-'/°^ 7 ft' \ R.«a Surety Co. 130 Mo. App. 401, 110
"People (ex reblvasson) V.Rose, <;;^^y-^-j^
16 Bank of Tarboro v. Fidelity &
246
6- . . P Deposit Co. 128 N. Car. 366, 83 Am.
12 Champion Ice Manufacturing & g^ j^^p gg2, 38 S. E. 908.
Cold Storage Co. v. American Bond- 'n Hunter v. United States Fidelity
ing & Trust Co. 115 Ky. 863, 103 ^ Guaranty Co. 129 Tenn. 572, 167
Am. St. Rep. 356, 75 S. W. 197. g, w. 692.
"Fidelity & Guaranty Co. v. is American Surety Co. y._Folk,
Western Bk. 29 Ky. L. Rep. 639, 94 124 Tenn. 139. 135 S. W. 7/8, 40
S. W. 3, 35 Ins. L. J. 692. Ins. L. J. 1074 and note, Laws 1907,
"Crystal Ice Co. Ltd. v. United c. 541, sec. 6.
820
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 339e
to representations and warranties also applies to such fidelity bonds.**
In Texas the rule of construction against the insurer applies to fi-
delity indemnity contracts.^" So in Wisconsin bonds of this char-
acter have all the essential features of insurance contracts/ so as to
make the rule of construction against the insurer applicable.^
§ 339c. Contract to indemnify "assured" for banks' default is
contract of insurance: bond to secure deposits. — If a party desig-
nated as tlie assured be guaranteed under an instrument purporting
to be a policy of "insurance" against the loss of a sum of money de-
posited in a bank, it is a contract of insurance.^ In this case there
was a contract under which "the Mortgage Insurance Corporation,
Limited," guaranteed to a depositor in a certain bank the payment
of the amount deposited, should the bank fail to pay. The con-
tract used these words: "This policy of insurance/' and the court
in construing the same said: "It seems to me that the intention
was this contract should be one of insurance, and that those who
entered into it with the plaintiff should be in the position of under-
writers. Here the policy recites that the plaintiff is the holder of a
deposit receipt for one thousand pounds of the Commercial Rank
of Australia, and is desirous of being 'insured' as thereinafter ap-
pearing, and the defendants thereby in effect promise to ))ay the
assured the .principal sum if the debtors have made default in so
doing. What'the defendants have done, as it appears to me. is to
insure payment of the deposit receipt according to the contract made
between the depositor and- the bank, i. e., that the bank will pay the
amount at the date fixed by that contract for payment. The policy
is not a guaranty that the bank will be able to pay. It is a posi-
tive, direct contract that if the bank does not pay a certain sum on
a fixed day, the insurance company will pay that amount." * So
companies organized for the purpose of guarantying the repay-
ment of deposits in state and national banks are within the Kansas
statute relating to the incorporation of surety, fidelity, and guaran-
ty companies.*
19 First National Bank v. United (Eng. C. A. isn4), 1 Q. B. Div. 54.
States Fidelity & Guaranty Co. 110 See § 339 iierein. Examine Shaw v.
Tenn. 10, 75 S. W. 1076. R(pyfe, Ltd. [1011] 1 Law Rep. Ch.
20 Griffin v. Znber, 52 Tex. Civ. D. 138, considered under § 339d
App. 288. 113 S. W. 961. herein.
1 First National Bank v. United * See Young v. Trustee Assets &
States Fidelitv & Guaranty Co. 150 Invest. Ins. Co. Ld. (Scot. C. S.
Wis. 601, 137 "N. W. 742. 1894), 31 Scot. L. R. 199.
2 U^nitod American Vive Ins. Co. v. * Bankers' Deposit, Guaranty &
American Bonding Co. of Bait. 146 Surely Co. v. Barnes, 81 Kan. 422,
AVis. 573, 40 L.R.A.(N.S.) 661n, 131 105 Pae. 697, Laws 1905, e. 159, sec.
N. W. 994, 40 Ins. L. 1805. 1, p. 223.
^ Dane v. Mortgage Ins. Coiji. Ld. As to bond given to secure mu-
821
§ 339d JOYCE ON INSURANCE
t
§ 339d. When contract, bond, mortgage and securities guaranty-
do and do not constitute insurance.^ — A surety or bonding company
organized under the Nebraska statute "regulating insurance com-
panies" and whose declared businass, among other chartered ]Hir-
poses, is to be responsible for any violation of contract or statutory
duty of the principal for whose conduct it becomes responsible is in
its character an insurance and this applies where such a company
becomes surety on the bond of a licensed saloon keeper.' Under
the New York Insurance Law which classifies as insurance com-
panies those guarantying the performance of contracts other than
insurance policies and executing or guarantying bonds and under-
takings required or permitted in all actions or proceedings or by
law required,* and also limiting the amount of risk to which an in-
surance company may expose itself,^ a surety company is an insur-
ance company and is not exempt from such limitation of hazard."
In a South Dakota case a bond of indenniity against liability on an
undertaking in a criminal action Avas given, dndemnity being de-
fined under the statute as a contract by which one agrees to save
another from a legal consequence of the conduct of one of the
parties or of some other person, and a distinction was made by the
decision between an indemnity contract as an independent one, and
nieipal funds deposited with trust guaranty) ; American_ Credit In-
company: action for premiums, see demnity Co. v. Wood, 73 Fed. 81, 19
Fidelity & Desposit Co. of Md. v. C. C. A. 2(34 (credit guaranty).
Commonwealth Trust Co. 65 Misc. ArkamaH. — American Bonding Co.
88, 110 N. Y. Supp. 598. v. :\Iorro\v, 80 Ark. 49, 1], Am.
As to bond given for repayment of St. Kep. 72, 90 S. W. (J13 (lideiity).
deposits or money received for trans- Illinois. — People (ex rel. Kasson)
mission to foreign countries by sellers v. Rose, 174 Til. Ml 9, 44 L.R.A. 124.
of foreign steamship tickets, under 51 N. E. 246 (fidelity).
N. Y. Laws 1908, c. 479. See Russo Iowa. — Van Bureu County v.
V. Illinois Suretv Co. 12.') N. Y. American Surety Co. 137 Iowa, 490,
Supp. 991, 141' App. Div. 690. 115 N. W. 24 (building contractor's
Examine Cappadona v. Illinois Sure- bond; public).
ty Co. 08 Misc. 470, 125 N. Y. Supp. H'/scows/h.— Sbakman v. United
lO'' under same statute; Mattone v. States Credit System Co. 92 Wis.
Illinois Suretv Co. 121! N. Y. Supp. :160, 32 L.R.A. 383, 53 Am. St. Rep.
230, under same statute. 920, 66 N. W. 528 (credit guaranty).
6 See § 339 herein. * N. Y. Ins. Law (L. 1892, c. (i90),
"^ Sullivan v. Radznweit, 82 Neb. sec. 70, and aindts. L. 1895, e. 917; L.
657, 118 N. W. 571 (Gen. Stat. Neb. 1899, c. 093: L. 1901, c. 634; L. 1905,
1873, c. 23), citing U. S. Guarantee c. 5/3; L. 1900, c. 326.
Co. of North America v. Mechanics' » N. Y. Ins. Law (L. 1892, c. 690)
Savings Bank & Trust Co. 183 U. S. § 24. aindts L. 1906, c. 32().
402, 46 L. ed. 253, 22 Sup. Ct. 124 1° Industrial & General Trust, Ltd.
(fidelity) ; Tebbets v. Mercantile v. Tod, 67 N. Y. Supp. 302, 56 App.
Credit 'Guarantee Co. of N. Y. 73 Div. 39.
Fed. 95, 19 C. C. A. 281 (credit
822
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 339e
a contract of guaranty or suretyship as one collateral to a principal
existing contract, but the question of insurance as such was not dis-
cussed.^^ Under an English decision a contract, called a policy and
which purported to insure a mortgage debt and securities, was held
to be a contract of suretyship and not of insurance but that whether
the contract was one of suretyship or insurance the company and
surety were, under the facts of the case liable to contribute in pro-
portion to their respective liability as their position was that of per-
sons under a common liability arising in the same transaction which
had been paid by one of them.^^ This case is, however, distin-
guished in another English decision. As where certain debentures
were issued by a guaranty company forming part of an issue se-
cured by a trust deed, which provided that the debentures should
be guaranteed by a guaranty trust society which was to be trustee
for the debenture-holders in consideration of a remuneration for
services as trustee at a stipulated premium, it was held that the
guarantee was in the nature of a policy of insurance as well as a
contract of suretyship and was not destroyed by the disappearance
of the debt.^' Under an Illinois decision a mortgage guaranty com-
pany or one organized for the purpose of guarantying the per-
formance of contracts, bonds, recognizances and indebtedness of
every kind, secured by real estate mortgage or deed of trust cannot
be organized mider the casualty insurance act of Illinois," but may
be organized under the surety act ^^ of that state although such a"
company might be classed as guaranty or casualty insurance com
pany.^®
§ 339e. Guaranty to repay loan is contract of insurance.^"^ — An
instrument whereby underwriters at Lloyds agreed to ■"guarantee"
11 W&stern Surety Co. v. Kellev, 27 and Finley v. Mexican Investment
S. Dak. 465, 131 N. W. 808. ' Cor])oration [1807] 1 Q. B. 517, than
12 Denton's Estate, In re (TjicoiKst's, the document wliioli wa.^ under dis-
Insurance, Corporation & (Juarantoe cussion in In re Denton's Estate
Fund, Ltd. v. Denton) [1003] Law [li)04] 2 Ch. 178. Without soin,^
Rep. Ch. Div. 670, 2 Ch. 178. See ^ more into tlie matter T thitdc there
330c herein. are material di.stinctions between tliis
1^ Shaw v. Royce, Ltd. [1911] 1 document and the one discussed in
Law Rep. Ch. D. 138 (a case of a In re Denton's Estate, and no ma-
majority of bon(thoIders binding tlie terial distinctions between this and
minority, and for an injunction), the documents discussed in the other
The court, per Wasliin2:ton. J., two cases." See § 330c herein,
said: "I think this document, which i* Par. 7, sec. 1 (Kurd's Stat.
contains an obli<?ation on the part of 1013, p. 1466).
the society, to arise only in case of i* Act 1800 (ITurd's Stat. 1913, p.
default, is more like the documents 602).
which were the subject of discussion 1^ People (ex rel. Goslins:) v.
in the case of Dane v. Mort^aoe Ins. Pott.'^. 264 111,522. 106 N. E. 524.
Corporation [1894] 1 Q. B. 54, i' g^e § 339 herein.
823
§ 339f
JOYCE ON INSURANCE
to a bank to repay a loan, which instrument is deposited with the
bank as security for a loan made to a syndicate ui)on the personal
guaranty of two of the directors of the syndicate is with respect to
said undenvriters' contract, a contract of insurance and not of sure-
tyship, and the latter havino; paid the loss are subrogated to the
rights of assured, and the underwriters and the sureties do not stand
in the relation of co-sureties.''*
§ 339f. When building contractor's bonds are insurance con-
tracts.^^ — The rule that the bonds of surety companies, who en-
gage in the business for profit, are essentially insurance contracts
governed by the rules of construction applicable thereto rather than
by the rules applicable to suretyship applies also to building con-
tractor's bonds. Thus in a Pennsylvania case a surety company
became surety on the bond of a contractor for the erection of a
schoolhouse, said bond being given under a city ordinance to secure
payment to subcontractors and others for labor and materials sup-
plied in the prosecution of the work, and the court, per Moschzisker,
J., quoting with approval from anotlier case in that state, said:
" 'The trend of all our modern decisions, state and federal, is to dis-
tinguish between individual and corporate suretyship where the
latter is an undertaking for money consideration by a company
chartered for the conduct of such business. In the one case the rule
of strictissimi juris prevails as it always has, with respect to the
other, because it is essentially an insurance against risk, underwrit-
ten for a money consideration by a corporation adopting such busi-
ness for its own profit, the courts generally hold that such a com-
pany can be relieved from its obligation for suretyship only where
a departure from the contract is shown to be a material variance.
. While such corporations may call themselves surety com-
panies, their business is in all essential particulars that of insur-
ance. Their contracts are usually in the terms prescribed by them-
selves, and should l)e construed most strictly in favor of the ol>ligee.' "
And the court continues as follows: "Here the bond was for the
protection of subcontractors and others in the construction of a
public building. It differs from the ordinary suretyship in that
it is not an obligation for the performance of any particular con-
tract. It was given for the benefit of all ])ersons who might furnish
labor or material in the course of the work, whetlier the contracts
for such labor and materials were in existence at the time the bond
was executed or not, and without regard to the terms of purchase,
whether for cash or credit. In its nature the obligation was mOre
18 Parr's Bank
Syndif-ate (1900)
Mathew, J.
V. Albert INIines
5 Com. Cas. 116
^^ See § 339 herein.
824
DIFFERENT FORMS OF INSURANCE CLASSIFIED § 339f
of a contract of insurance than of suretyship." ^^ Under a Mary-
land decision it appeared that the indemnity company in a letter
to insured, as was said by the court, characterized "the bond very
properly as a contract of insurance." ^ In an Iowa case, a bond for
the faithful performance of a building; contract, it is held that the
suretyship was not gratuitous, and as the bond was prepared by the
company for the purpose of furnishing security for hire, the rules
applicable to guaranty insurance governed and if the language of
the bond is in doubt, and is fairly and reasonably susceptible of two
constructions, one favorable to the obligee and the other to the
surety, the one favoral)le to the obligee should be adoi)ted.2 So in
Minnesota a guarantee insurance bond given to secure the perform-
ance of a building contract, and entered into by a surety company
engaged in the business for profit is to be construed by the rules
governing ordinary insurance contracts, and not by the rules of
construction governing contracts of suretyship, as such guarantee
bonds are in effect insurance contracts, even though in form they
resemble those of suretyship.' So under a Washington decision
a guaranty company which, for a compensation, becomes surety on
a building contractor's bond for the faithful performance of his con-
tract effects a contract of insurance which cannot be distinguished
in principle from a fidelity guarantee insurance.'* Under a Mis-
souri decision, however, where the bond involved was executed, in
compliance with a statutory requirement, to a board of education
by a contractor, conditioned for the faithful performance of a con-
tract and for the benefit of all persons furnishing material or labor
under a contract to install heating, etc. apparatus in a school build-
ing the court, ])er Norton, J. said: ''Though a surety is regarded
as a favorite of the law and the obligation of suretyship in its ap-
plication to concrete facts is therefore considered strictissimi juris,
the suretyship contract itself is nevertlieless interpreted and con-
20 City of Philadelphia v. Fidelity Iowa, 490, 126 Am. St. Rep. 290, 115
& Deposit Co. of Md. 231 Pa. 208, 80 N. AV. 24.
Atl. 62, quotinf) from Young v. ' Hornell & Co. v. American Bond-
American Bonding Co. 228 Pa. 373, ing Co. 112 Minn. 288, 33 L.R.A.
77 Atl. 623. (N.S.) 513, and note 513-519 (on
^ TFAna. Indemnity Co. v. George character of and rules governing con-
A. Fuller Co. Ill Md. 321, 338, 73 tracts by corporations engaged for
Atl. 738, 743, 74 Atl. 369. Case of profit in business of guarantying the
subcontractor's bond. tidelity or contracts of other persons)
2 A. E. Sliorthill Co. V. iRtna In- 128 N. W. 12, 40 Ins. L. .J. 137.
demnity Co. of Hfd. 145 Iowa, 651, * Cowles v. United States Fidelity
124 N."W. 612, 619, c///wr/ Van Buren & Guaranty Co. 32 Wash. 120, 98
County V. American Surety Co. 137 Am. St. Rep. 838, 72 Pac. 1032.
825
3392 JOYCE OX INSURANCE
o
strued in accord with the identical rules which obtain with respect
to other undertakings. In other words the terras employed in the
obligation are to be given a reasonable interpretation according to
the intent of the parties as disclosed by the instrument read in the
light of surrounding circumstances and the purpose for which it
was made." The analogy of such a bond to a contract of insur-
ance was not discussed and except so far as the above rule of con-
struction is applicable to insurance contracts in general with others
this case is certainly not in accord with the Pennsylvania decision
above considered.^ And in that state as only a substantial compli-
ance is required with the contract of a surety for hire the obligation
is not discharged by technical or immaterial variations from the
strict letter of the contract and this applies to a building contractor's
bond.^
§ 339g. Title guaranty contract constitutes insurance. — A title
guaranty contract constitutes insurance within the rule above
stated.' And a title insurance company is not a surety where it
agrees to "indemnify, keep harmless, and insure" a mortgagee
''from all loss or damage, not exceeding" the amount of the mort-
gage debt, w^hich he or his assigns might sustain by reason of defects
in the title to the mortgaged premises, or by reason of liens or en-
cumbrances thereon existing at the date of the policy.^ So it is
determined in Missouri that a guaranty of title is also an indemnity
similar to that of insurance and is governed by the same rule.^
In Pennsylvania it is decided that a contract to indemnify and in-
sure against all loss or damage from defects or unmarketableness of
title, or against loss on a mortgage given as collateral security on a
loan, coupled with a guarantee for the completion of certain build-
ings is one of indemnity alone and cannot be severed, and evidence
is inadmissible as to the nonerection of the buildings in the absence
of a showing that a loss on the mortgage had been sustained by rea-
son thereof.^" Under a New York case a contract of title guaranty
is one of insurance and it is also there declared that the contract in-
5 Board of Education of City of Estate Title Ins. & Trust Co. 160
St. Louis V. United Statas Fidelity & Pa. 408, 28 Atl. 849.
Guaranty Co. 155 Mo. App. 109, 134 Title oruaranly insurance is con-
S. W. 18. tract of indemnity, see § 2tg herein.
6 Boppart V. Illinois Surety Co. » Minnesota Title 3ns. & Trust Co.
140 ^lo. App. 675, 126 S. W. 768. v. Drexel, 70 Fed. 194, 198, 17 C. C
' See § 339 herein, as to decisions A. 56.
where it is treated as an insurance ^ Pureell v. Land Title Guarantee
contract without discussion, see Co. 94 Mo. App. 5, 67 S. W. 726.
Stenso-aard v. St. Paul Real Estate i" Wheeler v. Equitable Trust Co.
Title ins. Co. 50 ^linn. 429, 17 L.R.A. 206 Pa. 428, 55 Atl. 1065, s. e. 221
425, 52 N. W. 910; Wheeler v. R«al Pa. 276, 70 Atl. 750, 37 Ins. L. J.
826
DIFFf:RENT FORMS OF INSURANCE CLASSIFIED § 339h
suriiig agaiiLsl losri or damage on account of defects of title, by rea-
son of liens and encumbrances, etc., was a contract of insurance
pure and simple and that such corporations were, under the statute,
placed upon substantially the same footing and were subject to the
same rules as applied to other insurance companies, except so far
only as the character of the business transacted differed from that
transacted by other insurance companies recognized and provided
for in the same law, and that these contracts are subject to the same
rules of construction as are applicable to other insurance contracts. ^^
§ 339h. Credit guaranty contracts constitute insurance. — The
rule above stated^^ applies to credit guaranty contracts.^^ So in a
Federal case it is declared that these contracts "of indeuniity are
merely contracts of insurance carefully framed to limit as narrowly
as possible the liability of the insurer.'"' ^* And in anotlier Federal
case it is decided that a contract to guarantee against loss by uncol-
lectible debts is a contract of insurance and not one of suretyship
and whether such corporations call themselves "guaranty" or "sure-
ty"' companies their business is in all essential particulars that of
insurers.^^ Again, under a Massachusetts decision an agreement to
purchase at a fixed price all accounts which during one year a cer-
tain business firm should have against ascertained insolvent debtors
1037. See Ganler v. Solieitois' Loan demnity Co. (U. S. C. C.) 51 Fed.
& Trust Co. 9 Pa. Co. Ct. R. 634. . 751.
" Trenton Potteries Co. v. Title Mari/lavd. — American Credit In-
Ouarantee & Tra.st Co. 64 N. Y. detnnity_Co. v. Cassard, 83 Md. 272,
8u|)p. 116, 50 App. Div. 490. See 34 Atl. /03.
also Trenton Potteries Co. v. Title Blinnesota.— Smith v. National
Cniarantee & Trust Co. 176 N. Y. 63, Credit ins. Co. 65 Minn. 283, 33
68 N. E. 1.32. L.R.A. 511, 68 N. W. 28.
^^ § 339 herein. Aetc Jersey. — United States Credit
13 Hayne v. Metropolitan Trust System Co. v. Robertson, 57 N. J. L.
Co 67 Minn. 245, 69 N. \\. 916 (is l"-^, -9 Atl. 421; Lauer v. Gray, 55 N.
insurance within the statute). See ''• E'^-./H' ^IJ f*l\ '^^.j,, ^o-'\ n'
Seaton v. Heath [1899] 1 Q. B. Div. Kc'vnolds, o5 N. J. Kq. oOl, 3. Atl.
Law Rep. 782, 68 L. J. Q. B. 631, '*^\-
o/^ T m XT o --n ^~ wi 1 u„^ A^io York. — People v. Mercantile
80 Law T. N. S. 0(9, 4< Wkly. hep. ^ ..^ n .. n inr \- v n .-
' • Credit Guarantee Co. lob IS. i. 41b,
"^^'^ . , , 60 N. E. 24; Steinwender v. Phila-
On contracts securing agam-st loss ^^^,p,^j^ Casualty Co. 126 N. Y.
by gning- credit as insurance, see note ^^^^^^^ ^71, 141 App. Div. 432.
in 47 L.R.A.(N.S.) ^93. Credit guarantee insurance is con-
As to decisions where point as not {j.^^^ ^f indemnity, see § 271 herein.
discussed but such contract is treat- 14 ^njei-i^-an Credit Indeuinily Co.
ed as one of insurance. See: v. Alliens Woolen Mills, 92 Fed. 581,
United States. — American Credit 34 c. C. A. 161.
Indemnity Co. v. Wood, 73 Fed. 81, isxehbels v. Mercantile Credit
]9 C. C. A. 264; United States Guarantee Co. 73 Fed. 95, 97, 19 C.
Credit System Co. v. American In- C. A. 281.
827
§ 339i
JOYCE ON INSURANCE
or judgment debtors against whom execution should be returned
unsatisfied is a contract of insurance.^^ So in another case in that
state a guaranty as to insolvency of debtors is considered as a con-
tract of indemnity, although there is no discussion upon the point
of analogy to insurance. ^''^ And under a Missouri decision a bond
of indemnity or credit guaranty contract to indemnify against loss
of claims is held one of indemnity against loss of property. ^^ Again,
in North Carolina a contra-t indemnifying a merchant against a
credit loss is construed against the insurer as the application, bond
and a schedule to which the bond refers are held to constitute a
contract of insurance although a new branch of underwriting.^'
In Ohio an indemnity contract against losses from debts which are
not collectable constitutes an insurance contract and is construed
against the insurer in case of ambiguities.^" So under a' Wisconsin
decision a contract to indenmify against loss for insolvency of cus-
tomers is a contract of insurance, as the peril of loss to a merchant or
manufacturer is as definite and real a peril as that of loss by fire,
lightning, tornado or accident and may occur more frequently.^
§ 3391. Loss of crops: guarantee of realty revenue constitutes in-
surance. — A contract guarantying a fixed revenue per acre from
farming land and which for a certain consideration agrees to pay a
lixcd amount per acre for the crop grown upoii such land, without
regard to its value, if the owner chooses to sell it constitutes an in-
surance contract very like that of a valued policy. AVhen the con-
tingency ha])pens which creates the liability then the amount of
the policy nuist be paid and it cannot be distinguished in principle
from a contract to purchase bad accounts and judgments at a fixed
price, irrespective of value, which contracts constitute insurance.^
16 Clafflin V. United States Credit
Svstcm Co. Ifio Mass. 501, 52 Am.
St. Rep. 528, 43 N. E. 293, quoting
definition in Commonwealth v.
Woatherbee, 10.", :\Iass. 149, 160.
17 Rice V. National Credit Co. 164
Mass. 285, 41 N. E. 276, cited in
American Credit Indemnity Co. v.
Champion Coated Paper Co. 103
Fed. 609, 614, 43 C. C. A. 270 (no
discussion, but bonds of this char-
acter declared to be essentially insur-
ance contracts. Id. p. 614).
" State v. Phelan, 66 Mo. App.
54S. 549, 558.
1^ Lexin2,-ton Grocery Co. v. Phila-
delphia Casualty Co. 157 N. Car. 116,
72 S. E. 870.
20 Mercantile Credit & Guaranty
Co. V. Littloford Bros. 18 Cir. Ct.
Rep. (42 Wkly. L. Bull.) 889.
1 Shakraan v. United States Credit
System Co. 92 Wis. 366, 374, 32
L'.R.A. 383, 53 Am. St. Rep. 920, 66
N. W. 528, cited in People v. Rose,
174 111. 310, 314, 44 L.R.A. 124, 51
N. E. 246.
2 Ho<>an, In re, 8 N. Dak. 301, 45
L.R.A.'^166, 73 Am. St. Rep. 759, 78
N. W. 1051, 28 Ins. L. J. 520, under
Rey. Codes, sees. 4441, 4445, regulat-
ins: insurance. Citing Claffiin y.
United States Credit System Co. 165
i\Iass. 501, 52 Am. St. Rep. 528, 43
N. E. 293; Shakman v. United States
Credit Systems Co. 92 Wis. 366, 32
L.R.A. 383, 53 Am. St. Rep. 920, 66
N. W. 528, both considered under
S 339h herein.
828'
CHAPTER XVII.
PARTIES-~MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES.
§ 340. Mutual insurance benefit, etc. companies or associations defined.
§ 341. Mutual and benefit, etc. companies or associations: capital stock:
funds for payment of losses : guaranty or reserve funds.
§ 341a. Same subject.
§ 342. Kinds of mutual insurance companies or associations.
§ 343. Plans of mutual insurance.
§ 344. When mutual, etc. societies or associations are and are not insurance
companies.
§ 344a. Same subject: pecuniary profit as a factor.
§ 344b. Same subject: pecuniary profit as a factor: lodge systems.
§ 344c. Same subject: lodge s.ystem continued.
§ 344d. Same subject: pecuniary profit as a factor: masonic benevolent or
relief associations.
§ .344e. Same subject : rules of construction as a factor.
§ 344f. Same subject: attachment of copy of application or by-laws.
§ 344g. Same subject: other insurance as a factor.
§ 344h. Same subject: liability as a factor.
§ 344i. Same subject: applicability of insurance laws: statuory exemp-
tions.
§ 344j. Applicability of insurance laws continued: right to do business as a
factor.
§ 344k. Applicability of insurance laws : live stock association.
§ 340. Mutual insurance benefit, etc. companies or associations
defined. — A nuilual insurance company is one in which the niem-
l)ers mutually contribute to the payment of losses and exi)onseH,
vy^here the benefit to accrue or indenuiity is conditioned in any man-
ner upon persons holdin.2; similar contractsS. Such companies differ
essentially from stock insurance companies. The former need
many by-laws and conditions that are not required in stock com-
panies, and each person who insures therein becomes a member of
the association.' A mutual company is also defined as one wherein
' Baxter v. Chelsea Mutual Fire Corporation Law of New York, Laws
Ins. Co. 1 Allen (83 Mass.) 204, 70 1802, c. 087, sec. 2, a membership
Am. Dec. 730; under the General corporation includes benevolent
820
§ 340
JOYCE ON INSURANCE
the members coni^litute both insurer and insured, where the mem-
bers all contribute by a system of assessments, to the creation of a
fund from which all losses and liabilities are paid, and wherein the
profits are divided among themselves in proportion to their in-
terests.* And a Ijenevolent association is defined as a corporation
society or voluntary association conducted not for profit but for the
sole benefit of its membei's and their beneticiai'ies.*
orders. Jones' Business and Corpo- under N. Y. act, April 10, 1849) ;
ration Laws, 87 ; N. Y. Ins. L. e. 28, INIodern Woodmen of America v.
Consol. L. c. 33 of L. 1909, sec. 1 Tevis, 117 Fed. 369, 372, 54 C. C.
(Parker's Ins. L. [ed. 19151 P- 3) the A. 293 (fraternal) ; National Union
term "Insurance Law" is declared v. Marlow, 74 Fed. 775, 21 C. C. A.
"applicable to all . . . corpo- 89, 40 U. S'. App. 95 ("fraternal
rations, associations and societies beneficial society").
. . . authorized by law to make Colorad-o. — Spruance v. Farmers
insurances." & Merchants' Ins. Co. 9 Colo. 73, 77,
As to stockholders and members, 10 Pac. 285, 287 (mutual),
see § 341 herein. Connecticut. — Examine Miles &
Although tlie distinction between Co. v. Odd Fellows Mutual Aid
stock and mutual companies is now Assoc. 76 Conn. 132, 134, 55 Atl. 607,
clear, nevertheless it was declared at under Pub. acts 1895, p. 592, c. 255,
an early date that: "There has been sec. 1 (fraternal),
much controversy between 'stock' and Illinois. — Examine Lov3 v. Modern
'mutual' companies, most of which is Woodmen of America, 2-59 111. 102,
a mere war of words. Insurance, as 106, 107, 102 N. E. 183 (fraternal),
an average eontributionship, is Indiun-a. — Muller v. State Life Ins.
fundamentally mutual in its struc- Co. 27 Ind. App. 45, 51, 60 N. E. 958,
ture. Whether a premium shall be 960.
anticipated as absolute or eontinsrent, Maine. — Adams v. Mutual Fire
is a question of administratron." Ins. Co. 16 Shep. (29 Me.) 292, 294.
Pamphlet on Progress of American Mi.chigan. — Walker v. Giddings,
Life Insurance (Review Pub." Co. Commr. 103 Mich. .344, 347, 348, 61
Philadelphia, 1877). N. W. 512 (fraternal).
* State v.. Willett. 171 Ind. 296, 23 3Iinnesota.— National Protective
L.R.A.(N.S.) 197, '86 N. E. 68. Legion v. O'Brien, 102 Minn. 15, 16,
5 Thompson v. Royal Neighbors of 17, 112 N. W. 1050 (beneficial and
America, 154 Mo. App. 109. 133 S. fraternal).
W. 146, Rev. Stat. 1909. sec. 7109. Missouri.—Rodgers v. National
Mutual companies defined, .see Burt Council Junior Order United Am.eri-
on Life As.surance (1849) p. 53. can Mechanics, 172 Mo. App. 719,
"Where two or more persons 155 S. W. 874 (fraternal benefici-
mutually agree to insure each other ary societies included in "insurance
against marine losses there is said to companies," under Rev. Stat. 1909,
be a mutual insurance." Earl of sees. 7109, 7112, 7114) ; Umberger v.
Halsburv's Laws of England, vol. 17, 3Iodern Brotherhood of America, 162
p. 505 and note. ^ Mo. App. 141, 143, 144, 144 S. W.
For other definitions see the 898 (fraternal. Rev. Stat. 1909, sec.
following cases: 7109).
United States. — Union Ins. Co. v. Neic York. — Mvjratt v. New York
Hoge, 21 How. (62 U. S.) 35, 64, Protection Ins. Co.^21 N. Y. 52, 65.
65, 16 L. ed. 61 (mutual, organized North Dakota. — J. P. Lamb & Co.
830
PARTIES— MUTUAL COMPANIES § 340
The statutes of some of the states define mutual insurance com-
panies, mutual benefit associations, fraternal beneficiary orders and
like associations.^
V, Merchants' National Mutual Fire 15 Am. & Eng. Ann. Cas. 96, 91 N.
Ins. Co. 18 N. Dak, 253, 259, 119 N. E. 466, 39 Ins. L. J. 817.
W. 1048 (mutual fire). lotca. — Acts 21st Gen. Assembly,
Pennsylvania. — Given v. Rettew, c. 65, see. 20 (what deemed a mutual
162 Pa. 638, 640, 29 Atl. 703. association).
Texas. — Examine Splawn v. Chew, Kentucky. — Ky. Stat. sees. 641,
60 Tex. 532, 535 (benefit associa- 664 (insurance company or insurance
lion). corporation defined; societies with
Becomes member Boeck v. Modern lodge system, etc.), construed in
Woodmen of America, 162 Iowa, 159, Sims v. Commonwealth, 114 Ky. 827,
143 N. W. 999; J. P. Lamb & Co. v. 71 S. W. 929 (as to unlicensed a.u:onts
Merchants' National Mutual Fire and incorporation) ; also in Grand
Ins. Co. 18 N. Dak. 253, 119 S. W. Lodge Ancient Order United Work-
3048; Bixler v. Modem Woodmen of men v. Edwards, 27 Ky. L. Rep. 469,
America, 112 Va. 678, 38 L.R.A. 85 S. W. 701 (as to attachment of
(N.S.) 571n, 72 S. E. 704, 41 Ins. L. application to policy).
J. 89. See § 317 herein. Louisiana. — Acts La. 1912, p. 565,
6 California.— Ca\. Stat. 1891. c. No. 256.
116, p. 126, sees, 1, 14, pp. 126-130. Maine.— Rex. Stat. 1903, p. 497, e.
Cok>rado.—l Mill's Ann. Stat. see. 49, sec. 134 (fraternal).
638 (what associations not insurance Michiga<n. — Pub. acts 1893, No.
companies). 119 (fraternal beneficiary societies) ;
Conmctind. — Public acts 1895, construed in McMorran v. Great Hive
p. 592, c. 255, sec. 1, construed in of the Ladies of tlie Maccabees, 11^
]\Tiles & Co. V. Odd Fellows Mutual Mich. 398, 5 Det. Leg. N. 266, 75 N.
Aid Assoc. 76 Conn. 132, 55 Atl. 607 W. 743 (title of act not uneonstitu-
( fraternal). tional).
Georfjia.—Q&. Code 1911 (Civ.) Missouri.— "Rew . Stat. 1909, sec.
sec. 2529 (sec. 2134) p. 660 (mutual 7109, p. 371: Rev. Stat. 1909, sec.
insurance) : Civ. Code 1910, sees. 6896; Rev. Slat. 1899, sees. 1408,
2866-2877, construed in Puryear v. 7853 (benevolent association; fra-
Farmers ?tlntua! Ins. Assoc. 137 Ga. ternal, with lodge system; mutual
579, 73 S. E. 851 (fraternal). Laws companies), construed in National
1900, p. 71 (fraternal beneficial order Union v. Marlow, 74 Fed. 775, .778,
defined as a corporation, society, or 21 C. C. A. 89; Toomey v. Supreme
voluntary association having no Lodge Knights of Pythias, 147 Mo.
capital stock and having a repre- 129,^136, 48 S. W. 936: Jacobs v.
sentative form of crovernment and a Ompha Life Assoc. 146 Mo. 523, 48
lodge system, etcj, construed in S. W. 462 (Rev. Stat. 1889, see. 5860,
Graham v. Eminent Household of "assessment companies") ; Umberger
Coliimbinn Woodmen, 135 Ga. 777, v. Modern Brotherhood of America,
70 S. E. 649, 40 Ins. L. J. 1098 162 Mo. App. 141, 144 S. W. 898;
(constituent members and powers of Thompson v. Royal Neighbors of
"supreme bodies"). America, 154 Mo. App. 109, 133 S.
7/;,„^,/s.— Ilnrd's Rev. Stat. 1908, W. 146; Tico v. Supreme Lodge
c. 73, sec. 258 (fraternal beneficiarv Kni?-hts of Pythias. 123 Mo. Ap]-).
f.wiety defined, societies on lodge 85, 100 S. W. 519, aff'd 204 Mo. 349,
system), construed in Peterson v. 102 S. W. 1013. For history of
ManliattjMi Life Ins. Co. 244 111. 329, state legislature as to same, see State
831
§ 340
JOYCE ON INSURANCE
Other statutes exempt certain mutual benefit or fraternal organi-
zations from the insurance laws, although such societies or associa-
tions might otherwise come within their operation.'
(ex rel. Supreme Lodge K. of P.) v.
Vaiidiver, 213 Mo. 187, 204 et seq.
ill S. W. 911; Kern v. Supreme
Couneil American Legion of Honor,
167 :Mo. 471, 479 et seq., 67 S. AV.
252.
Nernd.a.—Rex. Laws 1912, p. 379,
.<=ec. 1310 (mutual companies), Comp.
L. 1900, sec. 942.
Neiv Hampshire.— Fah. Stat. 1901,
p. 578, c. 86. sec. 1 (fraternal).
New York. — Ins. Law, c. 28,
Consol. Laws, c. 33 of L. 1909;
(Parkers Ins. Law, N. Y. [ed. 1915]
p. 342) see. 230 (fraternal). See
also sec. 1 of tlie same Law con-
sidered in first note to this section.
North Carolina. — N. C. Revisal
1905, sec. 4795 (fraternal), con-
strued in State v. Arlinoton, 157 N.
C. 640, 73 S. E. 122, 41 Ins. L. J-
319.
0/./fl//oma.— Okla. Rev. Stat. 1903,
sec. 3236 (fraternal).
Tf'.ms.— Tex. Rev. Stat. 1899, sec.
1408, Ann. Stat. 1906, p. 1111.
Washin()ton.-^2 Rem. & Ball. Ann.
Codes & "stats, sec. 6166, p. 1012
(fraternal).
Porto Bico. — Rev. Codes (Civ.)
1902, sec. 1694 (mutual insurance).
"^ Arkansas. — Ark. Stat. ( Sand &
H. Dig.) sec. 4133 (mutual insurance
company on assessment plan), con-
strued in Iiiijle V. Batesville Grocery
Co. 89 Ark. 378, 117 S. W. 241.
California.— ^iiiL 1891, c. 116, p.
126, sec. 14, p. 130. ,
Illinois.— fitnt. 1885, c. 32, sec. 31.
Kentnchy.— Stat. 1903, sec. 641
(fraternal).
Massachusetts. — Pub. acts 1882, c.
115, sees. 8-10, amdt. 1882, c. 195,
sec. 2.
Michigan.— Puh. acts 1893, p. 186,
No. 119; acts 1907, p. 243, No. 180,
construed in Knights of the Modern
]\Iaccabees v. Barrv, 155 Mich. 693,
118 N. W. 585 (fraternal).
Missouri. — Laws 1881, p. 87; Laws
1897, p. 132, construed in W&ster-
man v. Supreme Lodge Knights of
Pythias, 196 Mo. 670, 94 S. W. 470
(fraternal beneficiary associations) ;
acts 1887, construed in Aloe v.
Fidelity Mutual Life Ins. Co. 164
Mo. 675, 55 S. W. 993, 29 Ins. L. J.
679 (asses-sment companies) ; Jacobs
^•. Omaha Life Assoc. 142 Mo. 49, 43
S. W. 375 (wliat is not contract on
assessment plan under Rev. Stat.
1889, sec. 5849); Ordelheide v. Mod-
ern Brotherhood of America, 158 Mo.
App. 677, 139 S. W. 269, 40 Ins. L.
J. 1845 (fraternal association not
within general insurance laws) ; INIis-
sey V. Supreme Lodge Knights &
Ladie.s of Honor, 147 Mo. App. 137,
136 S. W. 559 (benevolent or mutual
benefit plan: not subject to general
insurance laws) ; Citv of Trenton v.
Ilumel, 134 Mo. App. 595, 114 S. W.
1131, Rev. Stat. 1899, sec. 1408, Ann.
Stat. 1906, p. 1111 (fraternal bene-
ficiary association) ; Tice v. Supreme
Lodge Knights of Pvthias, 123 Mo.
App. 85, 100 S. W. 5i9, aff'd 204 Mo.
349, 102 S. W. 1013 (as to non-
exclusion from operation of Rev.
Stat. 1899, sec. 1423, Ann. Stat. p.
1118, Laws 1897, p. 132, relating to
fraternal beneficiary association and
specifying lodges or orders exclud-
ed) ; Shotliff V. ^lodern Woodmen
of America, 100 Mo. App. 138, 73 S.
W. 326, Rev. Stat. 1899, sec. 1408
(I'rater'nal) ; Missouri statutes are
also construed in National Union v.
Marlow, 74 Fed. 775, 21 CCA. 89,
40 U. S. App. 95 ("fraternal bene-
ficial society"); Grand Lodge An-
cient Order United Workmen v.
Grand Lodge A. 0. U. W. 83 Conn.
241, 76 Atl. 533 (fraternal).
New York. — See Parker's Ins. Law
(ed. 1915) p. 343.
Ohio.— Rev. Stat. 1880, sec. 3630;
Rev. Stilt, sees. 3631-11, construed in
832
PARTIES— MUTUAL COMPANIES § 341
§ 341, Mutual and benefit, etc., companies or associations: capital
stock: funds for payment of losses: guaranty or reserve funds. —
The funds out of which damages and losses are to be paid are
the premiums, the earnings in the business, and premium and de-
posit notes, which hitter are a sort of reserve fund.* These usually
constitute tlie capital of the company,^ although an absolute reserve
or safety fund may be provided, and all the notes, whether in one
department or anotlier, nuist be resorted to if necessity exists.^" So
where a mutual company is authorized to and does issue policies
. on the cash princii»lc to other than its members, the premium notes
of the members represent the capital stock of the company to such
other insm-crs.^^ 80 parol evidence is admissible to show whether a
note executed prior to the completion of the organization, and in
form like those required to form part of the capital, was intended
to and did constitute a part thereof.^^ But a guaranty fund in ap-
proved notes to be used only in paying claims, and any part so
used to be refunded out of the first surplus receipts, caimot be
reckoned as assets in determining whether the company is solvent; ^^
80 a guai-anty fund is not, strictly speaking, assets of a nmtual in-
surance company for the purpose of determining its solvency, when
the company is required to refund all moneys obtained from it,^^
nor can a premium note be treated b}' a receiver of the company as
capital, and the whole note collected, regardless of losses.^^ But
it is held in another ca.se that a note for premiums in advance passes
Gilliaau V. Supreme Council of ^^ llavs v. Lyeotniiig Fire Iiis. Co.
Roval Arcanum, 2U Ohio Cir. Ct. R. 98 Pa. St. 184*
42 (fraternal). 12 i).^„3 y Mmison, 23 N. Y. 504,
Pennsi/lvania. — Acts 18!)3, see. 4 limited in Jackson v. Van Slyke, 52
(P. L. 9), construed in Thayer v. N. Y. 645, to the extent tliat when a
Tliompson, 220 Pa. 241, 69 Atl. 758 note is given before the organization
(beneticial association limited to cer- of the company there is ground for
lain city employees exempt). an inference tliat it was given as a
Texas. — Rev. Stat. 1895, art. 3096 stock note, altliough evidence of the
(mutual relief associations). attendant fads and circnmstances
Wisconsin. — Laws 1891, c. 418, may l)e sutlicient to raise a question
construed in State v. National Acci- for llie jury whetlier the note was a
dent Soc. 103 Wis. 208, 79 N. W. 220, pi'cmium or stock note. The last case
28 Ins. L. J. 793 (bencliciarv as.soeia- is cifed in Sands v. Isaac Sou, 56
tion furnishing casualty or life insur- N. Y. ()62.
ance on assessment plan). ^' Russell v. Bristol, 49 Conn. 251.
See cases in SS 344-346 lierein.- ^* Corey v. Sherman, 96 Iowa, 114,
8 Planters' Ins. Co. v. Comfort, 50 60 N. W. 232, 64 N. W. 828, 32
Miss. 662, 668. L.R.A. 490. See S§ 1273, 1288, 1455
^ Planter's Ins. Co. v. Comfort, 50 herein.
Miss. 662, 668. ^^ P.ell v. Sliiblev, 33 Barb. (N. Y.)
10 Sands v. Sanders, 28 N. Y 416, (ilO. Sc:- Farmers' Ins. Co. v. Smith,
25 How. Pr. 82. (i3 111. 187.
Joyce Ins. Vol. I.— 53. 833
§ 341 * JOYCE ON INSURANCE
to the receiver of a company on its becoming insolvent.^^ But the
notes advanced to the company by intending insurers do not con-
stitute the makers stockliolders ; ^'^ So a guaranty fund which is
merely a temporary advancement or loan and does not constitute
any part of its working capital does not change the character of
a mutual lire insurance company organized exclusively to insure
the property of its members so as to make subscribers liable to
creditors as stockholders.^* And the fact that a mutual company,
authorized by statute to insure the property of its members on the
mutual plan, provides in its articles for a guarant}^ fund to con-
sist of shares issued to subscribers does not make it a stock com-
pany." Although it is decided that in the absence of a charter pro-
vision to the contrary the policy holders are, so far as rights and
remedies are concerned, stockholders the same as stockholders in a
stock corporation.^"
If a note be proven to be a capital stock note, given, taken, and
used as such, on the organization of the company, the whole amount
may be recovered without an assessment.'^ A guaranty fund note
may be given to a mutual company to create a reserve fund re-
quired by statute and where the withdrawal of such notes is pro-
hibited except on certain conditions the maker is released from lia-
bility where certain notes are returned without complying with said
conditions.^ If the charter provides that its working capital shall be
in lieu of a reserve, under the Connecticut statute such capital is
treated as a liability in proceedings for a receiver.^
Where a mutual insurance company has deposited securities with
the state treasurer, under a statutory requirement therefor, it has
no absolute right to collect the income therefrom. But the treasurer
may grant permission to the company to receive such income,
^^ Cruikshank v. Brouwer, 11 Barb. As to liability of maker of capital
(N. Y.) 228. stock note of mutual tire insurance
^■^ Hill V. Nautilus Ins. Co. 4 Sand, corporation, see Raegener, Receiver,
Ch. (N. Y.) 577. V. Hubbard, o7 N. Y. Supp. 1018, 40
18 Smith V. Sherman, 113 Iowa, App. Div. 359, afif'd 167 N. Y. 301,
601, 85 N. W. 747. 60 N. E. 633; Raegener, Receiver, v.
19 Mutual Guaranty Fire Ins. Co. Warner, 56 N. Y.'^Supp. 310; Rae-
In re (Alvord v. Barker) 107 Iowa, gener. Receiver, v. Phillips, 26 Misc.
143, 70 Am. St. Rep. 149n, 77 N. W. 311, 56 N. Y. Supp. 174. Examine
868, 28 Ins. L. J. 205. Raeaener v. Medicus, 32 Misc. 591,
20 Huber v. Martin, 127 Wis. 412, 66 N. Y. Supp. 4(50.
3 L.R..A.(N.S.) 653n, 115 Am. St. 2 ^eale v. Head, 133 Cal. 42, 65
Rep. 1023, 7 Am. & Eng. Ann. Cas. Pac. 131, 576, Cal. Stat. 1865-66, p.
400, 105 N. W. 1021, 1135, 35 Ins. 752.
L. J. 334. ^ Betts v. Connecticut Indemnity
1 Sands v. St. Johns, 36 Barb. (N. Co. 71 Conn. 751, 44 Atl. 65, GenL
;y.) 628. Stat. sees. 2854, 2870.
834
I
PAK TIES— MUTUAL COMPANIES § 341a
should it he Ijcst for the interests of the policy holders. Should such
permission be refused, the accrued interest, with the principal, goes
to the payment of the policy holders and creditors in the order
named.*
§ 341a. Same subject. — In the absence of a charter limitation to
the contrary it is competent for a mutual insurance corporation to
make rates for insurance with a view of probably creating a surplus
and of subsequently distributing the same to members so far as
experience shall show that the same is not needed in the business.*
And if a reserve fund is not created under any by-law or rule and
there is no provision specifying of what it shall consist, but certain
moneys are specially devoted to other purposes, all the net assets
not so specially appropriated may be treated as belonging to said
fund.^ The Indiana statute providing for the organization of com-
panies on the assessment plan also provides that nothing therein
shall prevent the accumulation of other funds exceeding the amount
required for the purposes of incorporation.' Again, a special fund
may be created as where a foreign insurance comjjany may, in the
absence of fraud or some positive prohibitory law, agree voluntarily
with its local agent that a certain per cent of the premiums re-
ceived by him shall be deposited in trust as a fund for policy hold-
ers insured by such agent as a special fund for payment of losses
in preference to other policy holders.^ And a reserve or special de-
posit fund with a lien in favor of beneficiaries may be required by
statute in the case of mutual assessment life companies.^ So the
*Meies v. Economical Mutual Life tinguishing New York Life Ins. Co.
Ins. Co. 12 R. I. 259. As to what is v. Styles [1889] 14 App. Cas. .381;
capital, subject to taxation, see Last v. London A.ssur. Corp. [1885]
People V. Board of Supervisors, 20 10 App. Cas. 438.
Barb. (N. Y.) 81; People v. Board ^ Bass v. Mutual Relief A.ssoc. 118
of Supervisors, 16 N. Y. 4'M; Sun Cat. 6, 49 Pac. 1056, 26 Ins. L. J.
Mutual Ins. Co. v. Mayor of New 992.
York, 8 N. Y. (4 Seld.) 241, 5 Sand. 'Federal Life Ins. Co. v. Arnold,
Ch. (N. Y.) 10; Mutual Ins. Co. v. 46 Ind. App. 114. 90 N. E. 493, Laws
Board of Supervisors, 4 N. Y. (4 1897. p. 318, c. 195.
Comst.) 442. 8 Babcock Printing Press Mfg.
5 Huber v. Martin, 127 Wis. 412, Co. v. Ranous, 164 N. Y. 440, .58 N.
3 L.R.A.(N.S.) 653, 115 Am. St. E. 529, 30 Ins. L. J. 164, aff'g 54
Rep. 1023, 7 Amer. & Eng. Ann. Cas. N. Y. Supp. 1048, 31 App. Div. 629.
400, 105 N. W. 1031, 1135, 35 Ins. 9 San Francisco Savings Union v.
L. J. 334. Long, 123 Cal. 107, 53 Pac. 907, Stat.
When net surplus of mutual plan 1891, p. 126, sees. 2, 4.
life insurance company constitutes As to right to issue paid up insur-
"annual profits or gains" asse.ssable ance under statute providing for cre-
to income tax irresyiective of return ation. maintenance, disbursement,
or credit to policyholders, see Equi- and application of reserve, emergen-
table Life Assur. Soc. v. Bishop cy or surplus fund by mutual bene-
[1899] L. R. 2 Q. B. Div. 439, dis- fit societv, see State (ex rel. Grand
835
§ Slla
JOYCE ON IXSl iJAXCE
statutes of the state may coiitemi)la(c llic payinom of fraternal
benefit certificates from surplus or reserve funds derixcd from assess-
ments and the charter may provide for a '•'mortuary fund" to meet
death claims from special causes, also a "death benefit fund" to
meet ordinary death claims when regular assessments are insuffi-
cient. Such reserve adds to the security of the contract of insur-
ance and makes more valuable the contributor's rights as certificate
holders. The intent being to create permanent funds. And dur-
ing the life of the order, the existence of the trust and the fulfill-
ment by the contributors of their insurance contracts, their interest
is limited to the right to endow their l)eHeliciaries and compel tbe
preservation of the funds and maintenance of the trust and such
funds are for the benefit of all who may l>ecome members during
the life of the fund.^° And although assessments may be made, still
tbe reserve fund may be drawn on when necessary to pay death
claims in full." So where the articles of association so provide,
the guaranty fund, consisting of deposits or pledges by members
for payment of assessments, may be resorted to and levied upon
for the death benefit fund.^^ Ihit wbere a statute for the incorpora-
tion and regulation of co-o])erative or assessineut life and casualty
insurance corporations authorizes the creation of a reserve fund
for the payment of death losses it does not permit tbe aci-uuuilation
wholly from one class of members of such reserve fund and tben
devote it to the payment of death losses to another class who have
not contributed to it.^^
The reserve fund may be one not set apart for any speci.i!
purpose and may be transferable to the policy fund when deemed
expedient by the directors of a beneficial association without ca})i(al
stock, and without funds for payment of losses except those deri\cd
from assessments of members. In such case a member has no
vested interest in the reserve fund.^^ Again, the safety fund of u
non-fraternal co-operative company may only be available for death
claims whei'e it is transferred, by^xpress direction of the trustees,
to the mortuarv fund, and be also limited to persistent living
Fraternity) v. Lemert, 66 Ohio L. i3 IVople (ex rel. Atty. Genl.) v.
Bull. 118: Ohio Laws 123, Act 97, Life & Keserve Assoc. 150 N. Y. 94,
see. 9, Gen. Code 0170. 45 N. E. 8. See tliis ease also as to
^° Kane v. Knights of Columbus, transfer from "reserve fund"
84 Conn. 96, 79 Atl. 63, 40 Ins. L.
J. 874.
^^ Supreme Lodge National Re-
serve Assoc. V. Mondruwski, 20 Tex.
Civ. App. 322, 49 S. W. 919.
12 Purdv V. Bankei's' Life Assoc.
104 Mo. App. 91, 74 S. W. 486.
to
"death fund" and a.ssessmeuts on
holders of "life reserve eertiticates."
1* Kahu v. Fidton (Wisconsin Odd
Fellows Mutual Life Ins. Co. In re.)
101 Wis. 1, 42 L.R.A. 300, 70 N. W.
775.
836
PARTIES— MUTUAL COMPANIES §§ 342. 343
members ^^ and only the surplus of the reserve fund over a certain
sum may be available for death claims which may be limited to
persistent members for a certain time after the completion of the
fund.^^ The "surplus" of a mutual life insurance company belongs
equitably to the policy holders who contributed to it, in the propor-
tion in which they contributed.^''^
Where an association is required to accumulate and maintain
an "a.^scssment fund'' and an "endowment fund" and all endow-
ments are to be paid out of the latter fund which is made up of a
certain per cent of all assessments actually paid in, except all first
assessments, the balance of the assessments, less expenses, consti-
tutes the "assessment fund" out of which beneficiaries are paid
where they die within the endowment period."
§ 342. Kinds of mutual insurance companies or associations. —
Mutual insurance companies may be divided into two general
classes 1. Those which are organized for the purpose of doing an
insurance business; 2. Those mutual societies or associations which
have a social, benevolent, or like character, but the nature and
prevalent purpose of which is that of insurance.-^'
§ 343. Plans of mutual insurance. — There are numerous plans or
schemes of mutual insurance. Premium notes may be given which
are assessable from time to time to the amount stated therein; or
the members may be assessed periodically, or as required; or they
may be obligated to pay a fixed sum upon a loss; or notes may be
given for a ]jart only of the premium, the other part being payable
in cash, or the entire ])remium be paid in advance in cash. Mutual
companies are also organized to issue policies upon premium notes,"
and also for all cash premiums, and the fund thus realized may
constitute a common fund for the payment of losses.^" Again, the
plan may require a casli deposit, from each member of an unin-
corporated association, fi-om which losses are to be met such member
^5 People V. Family Fund Soc. ()lus upon the dissolution of a mu-
(Shorb's Appeal) 52 N. Y. Supp. tual insurance company, see note in S
867, 31 App. Div. Ifif). appeal dis- L.R.A.(N.S.) G.'kI
missed (mem.) 159 N. Y. 534, 53 N. " Kerr v. Minnesota Mutual Bone-
E. 1129. tit Assoc. 39 :Minn. ]74, 177, 12 Am.
'iSRird v. Mutual Union Assoc, of S(. I.^ep. 631, 39 N. W. 312.
Rochester, 52 K. Y. Suiip. 1044, 30 ^^ As far as necessary we have al-
App. Div. 346. so noticed the shipping duhs and
1'^ United States Life Ins. Co. v. Friendly Societies of England under
Spinks, 126 Kv. 405. 13 LM.A. § ^ herein.
(NS ) 1053. 96 S. W. 389. See also 20 Lj.],igi, Valley Fire Ins. Co. v.
Calkins v. Rump, 120 Mich. 335. 6 SchimpI', 13 Phila. (Pa.) 515, 521.
Det. Leg. X. 182. 79 N. W. 491. See See § 1138 heroin.
§§ 1273, 1288, 1455 herein. As to right to change plan, see §§
On the di-stribution of the sur- 350m-350q herein.
837
§ 343
JOYCE ON INSURANCE
to become entitled to a return of the unexpended portion of the
deposit ^t the expiration of his poUey.^ Where the eliarter of a Hfe
assurance society provides that its business shall be conducted on the
mutual plan such provision is judicially declared to contemplate
that the premiums paid by each member for insurance constitutes
a common fund devoted to the payment of losses as they may occur.^
The fact that cash premiums are paid, without further liability,
at the election of assured, as well as premiums secured by note does
not abrogate the mutual principle.^ In the cash premium plan
each member has an interest in the surplus premium fund remain-
ing after payment of losses and expenses,* for all persons insured on
that principle are entitled to look to the premium notes of the
members as tbe capital of the company;^ and a mutual company
may, in New York,^ issue policies for a fixed cash premium, with-
out liability to contribute by the assured.' And the charter of a
mutual company may clearly provide for the issuance of policies on
the cash premium basis.^ Nor does such company under the Mis-
1 Sersreant v. Goldsmith Drv Goods ^ As oro-anized under N. Y. Stat.
Co. (1913)
Tex. Civ. App.
1819, e. 308.
159 S. W. 1036. ' Myg-att v. New York Protection
As to relinquisliment of capital Ins. Co. 21 N. Y. 52,_67, s. c. 19
stock or deposit notes by mutual com- How. Pr. (N. Y.) 61, il. See Mu-
pany to maker, see N. Y. Ins. Law tual Fire Ins. Co., Matter of, 161 N.
1909, c. 33, c. 28 Consol. Laws, sees. Y. 10, 16, 58 N. E. 29; Dickinson v.
113, 115 (Parker's Ins. Law of N. Y. Continental Trust Co. 52 N. Y. Supp.
[ed. 1915] pp. 206, 208).
672, 673, 23 Misc. 489, 491.
2 Lord V. Equitable Life Assur. » Ely v. Oakland Circuit Judcre, 62
Soc. 96 N. Y. Supp. 10, 109 App. :Micli. 466, 17 Det. Leg. N. 62, 125 N.
Div. 252 {eiting Union Ins. Co. v. W. 375, 127 N. W. 769.
Hose, 21 How. [62 U. S.] 35, 64, 16 As to cash premium in addition to
L. ed. 61) The principal case also amount of note to be given by in-
appears on otlier points in 194 N. Y. sured in domestic mutual fire insur-
212, 22 L.R.A.(N.S.) 420, 87 N. E. ance company. See N. Y. Ins. L.
443. 1909, c. 33, Consol. Laws, c. 28, sec.
3 Union Ins. Co. v. Hoge, 21 How. 113 (Parker's Ins. L. of N. Y. [ed.
(62 U. S.) 35, 16 L. ed. 61. See 1915] pp. 206, 207); and as to de-
Schwarzwalder v. Tegen, 58 N. J. posit note and cash payment by mem-
Eq. 319, 321, 324, 43 Atl. 587. bers of such corporations, and as to
* Spruance v. Farmers' & Mer- relinquishment by corporation to
chants Ins. Co. 9 Coi. 73, 77, 78, 10 maker of such note after expiration
Pac. 285, under Col. Gen. Stat. see. of insurance term, see sec. 115 of
1704. same law. (Parker's, pp. 208, 209).
^ Hays V. Lycoming Fire Ins. Co. As to corporations doing business
98 Pa. St. 184; Hummel's Appeal, on the advance premium plan pur-
78 Pa. St. 320 ; liehigh Valley Fire suant to the provisions of art. IX. of
Ins. Co. V. Schimpf, 13 Phila.^ (Pa.) N. Y. Ins. Law, relating to Co-oper-
515, 521, .see Schimpf v. Lehigh Yal- ative Fire Ins. Corp. See N. Y. Ins.
ley Mutual Ins. Co. 86 Pa. 373, 376. Law 1909, c. 33, Consol. L. c. 28, sec.
838
PARTIES— MUTUAL COMPANIES § 343
soLiri statute.^ expose itself to the charge of doing business upon the
joint stock plan, by receiving all cash premiums on all policies
running less than six years.^^ Nor is a combined premium note,
assessment, and cash premium plan ultra vires where the company
is chartered to do business on the mutual plan only.^° It is said by
the court in a Colorado case ^^ that "the principle of mutuality ex-
ists when the persons constituting the company contribute either
cash or assessable premium notes, or both, as the plan of transact-
ing business may provide, to a common fund, out of which each is
entitled to indemnity in case of loss,^^ though where cash is accept-
ed for premiums the insured is held, in Illinois, not to thereby be-
come a member." And under an Iowa decision one who insures
his property in a specific amount for a certain premium does not
thereby become a meml)er.^* But in Michigan the holders of pol-
icies issued on a cash premium basis become members of the com-
pany.^^ Where a New York company was authorized to receive
subscriptions payaljle in cash, and give receipts therefor bearing
interest, which receipts showed that the cash was received in ad-
vance for premiums only of insurance, but the charter did not pro-
vide that those paying such cash should take policies of insurance
the premiums on which should equal the cash so paid in, it was held
that such plan was not that of mutual insurance under the Illinois
laws.^^ Persons so associated are said to be members of the com-
pany. They have, or may have, a voice in the management of its
affairs, and are practically both insurers and insured. All are in-
terasted in what may be termed the profits and losses of the associa-
tion ; for if the assessable note system in any of its forms be adopt-
ed, the demands upon each member to meet assessments during the
life of his policy or risk are large or small, according to the multi-
267; Parker's N. Y. Ins. L. (ed, Mygatt v. New York Prot, Co. 21 N.
1915) pp. 384 et seq. Y. 52, 19 How. Pr. 61; White v.
9 Act 1877, Rev. Stat. Mo. 1879, Haight, 16 N. Y. 310; Ohio Mutual
sec. 5988. Ins. Co. v. Marietta Woolen Factory,
3» State V. Manufacturers' Mut. 3 Ohio St. 348; May on Insurance,
Fire Ins. Co. 91 Mo. 311, 318, 3 S. sec. 548; Angell on Insurance, sec.
W. 383. 413.
1° Lehigh Valley Fire Ins. Co. v. " Illinois Mutual Fire Ins. Co. v.
Schimpf,^13 Phila. (Pa.) 515; Davis Stanton, 57 111. 354.
V. Oshkosh Upholstery Co. (Parcher i* Mutual Guaranty Fire Ins. Co.,
& J. & A. Stewart) 82 Wis. 488, 495, In re (Alvord v. Barker) 107 Iowa.
52 N W. 771. See Runclle v. Ken- 143, 70 Am. St. Rep. 149 note, 77 N.
nan, 79 Wis. 492, 497, 48 N. W. 516. W. 868, 28 Ins. L. J. 205.
1^ Spruance ex rel. v. Farmers & ^^ Elv v. Oakland Circuit Judge,
Merchants Ins. Co. 9 Col. 73, 77, 78, 162 Mich. 466, 17 Det. Leg. N. 62,
10 Pac. 285. 125 N. W. 375, 127 N. W. 769.
12 Citing Union Ins. Co. v. Hoge, ^^ Mutual Fire Ins. Co. v. Swigert,
21 How. (62 U. S.) 35, 16 L. ed. 61; 120 111. 36, 44, 11 N. E. 410.
839
344
JOYCE ON INSURANCE
plication or diminution of losses; while if a cash premium plan
prevail, each member has an interest in the surplus premium fund
remaining after payment of losses and expenses, and of course the
amount of such surplus is governed by the extent of the losses suf-
fered. The policyholder in the joint stock company is not thus
situated. He pays a certain definite sum as a premium, and the
company agrees therefor to pay him a certain specific amount in
case of loss. He has no voice whatever in the management of the
business, and whether the profits or losses are large or small does not
concern him. provided the company remains able to liquidate any
lossas contemplated by his contract. . . . The principle of
imituality has probably been more often recognized and enforced
in these associations through the assessable note system in some of
its numerous forms, but . . . it is perfectly consistent with
the payment of cash premiums." ^' In case of deposit notes, con-
tributions are obtained from the makers for losses and damages by
pro rata assessments of a just i3roportion upon each member liable
thereon, and payments thereof are required upon due notice.^*
Mr. Niblack ^^ makes three general divisions of the plans of in-
surance in mutual benefit societies, as follows: ''1. Where the so-
ciety agrees, upon certain conditions, to ])ay a certain sum of money
on the death of a member; 2. Where the society agrees to pay, on
certain conditions, as many dollars as there are members of the
society in good standing at the time of the death of a member;
3. Where the society agrees, upon certain conditions, on the death
of a member, to levy an assessment uj^on ite members of a certain
Sinn of money, and to pay the proceeds of such assessment to the
beneficiary of the member." This division is at once concise and
comprehensive.^"
§ 344. When mutual, etc., societies or associations are and are not
insurance companies. — When a mutual benefit society or association
contracts for a consideration to pay a sum of money upon the
happening of a certain contingency, and the prevalent purpose and
.nature of such society or association is that of insurance, the
organization is a mutual insvirance company. This is true whether
the society be a voluntai'y one or incorporated, and whether it be
n\
"As to the government and or- and e. 33 of 1909, as am'd) pp. 200
ganization of mvitual comi)anies in et seq., 342, et seq.
New York, and tlie statutes of that ^^ planters' Ins. Co. v. Comfort, 50
state down to and including that of Miss. 602, 668.
1849, as well as the relations of mem- ^^ Niblaek's Mutual Benefit Soeie-
bers, etc., see opinion of Denio, C. ties, see. 384.
J., in White v. Haight, 16 N. Y. 310. 20 ggg further 16 Am. & Eng.
Nee also Parker's N. Y. 'Ins. Laws Ency. of Law, 17-19.
(ed. 1915, being e. 28, Consol, Laws
840
PARTIES— MUTUAL COMPANIES § 344a
known as a relief, benevolent, or benefit society or by some similar
name. Nor does the manner or mode of the payment of the con-
sideration or of the loss or benefit aff'ect the question, and make
the conti-act the less one of insurance. The test is, what is the
real purpose and nature of such society, and if the prevalent
purpose is to make contracts, which are in effect contracts of
insurance within the meaning of that word, they are insurance
companies. A'arious facloi's or elements, however, enter into the
consideration of this question as will appear throughout the next
following sections.^ The above rule is also especially subject
to those exceptions which arise in favor of such companies by
reason of statutory exemptions in some of the states, or other
statutory provisions defining or fixing their status.^ It is held
in Arkansas that the rights of persons claiming under a con-
tract nmst be fixed thereby, without regard to the character of
the society, where the statute affords no aid in determining whether
it be an insurance contract or not.' And it is decided in JMaine that
if the prevalent purpose be that of insurance, its benevolent or
charitable featiu-es do not afi'ect its legal status as an insurance com-
pany.'* But a company may be substantially an old-line life com-
pany and neither a mutual nor fraternal benefit association even
though annual dues instead of premiums ai'e collected to meet obli-
cations.*
§ 344a. Same subject: pecuniary profit as a factor. — Under a
Missouri decision in fraternal benefit associations where the princi-
pal object is social and benevolent the insurance feature is merely
an incident.^ And in another case in that state it is stated in the
opinion in discussing the point before the court that in such associa-
tions the insurance feature is a mere incident to the fraternal pur-
pose in contradistinction to those companies the one purpose of
^ 7s a benefit association an insur- ^ See §§ 340, 344a et seq. herein.
ance companiif I. Where the ques- ^ Block v. Valley Mutual Ins. As-
tion is as to ''other iii.'^uraiice." II. sec. 52 Ark. 201, 20 Am. St. Rep.
Where the construction of tlie certif- 1G7, 12 S. W. 477.
icate is in question. III. Where * Bolton v. Bolton, 73 Me. 2f)9.
compliance with state insurance law ^ p^'iHey v. Illinois Life Ins. Co. 93
is recpiired before doing business. Kan. 2!)3, 144 Pac. 257. See this
IV. Where the question is in regard case also for definitions and distine-
to juiisdiction. V. Under statute ex- tion between the above ditferent
empting benevolent .societies. VI. classes.
Where the question is not discussed. ^ Umberger v. Modern Brother-
VII. Some definitions. VIII. Sum- hood of America, 162 Mo. App. 141,
mary. Note. 38 L.H.A. 33-57. Com- 144 S. W. 898, considered more fully
pare Peterson v. ^Manhattan Life Ins. under § 344b herein.
Co. 244 111. 329, 18 Am. & Eng. Ann.
Cas. 96, 39 Ins. L. J. 817.
841
344a
JOYCE ON INSURANCE
which is to make a profit for the promoters, and one feature of
which is the payment of fixed premimns at stated times by the in-
sured, and the payment of a sum certain by the company to the
named beneficiary^ upon the death of insured.' It is declared in
Illinois that there is a fundamental distinction between life insur-
ance companies and those organizations generally known as fra-
ternal associations, fraternal beneficiary societies, or mutual benefit
societies requiring separate codes for the management and regu-
lation of each, which difference has been continuously recognized
by the courts and the legislature of that state. The court, per
Cooke, J., said: ''Life insurance companies are organized to engage
in the business of insuring the lives of persons for profit. They
are authorized to combine and frequently do combine, with the con-
tract of insurance other features, such as the payment of annual
dividends to the insured, and the payment of the face of the policy,
together with dividends, to the insured in case he survives a certain
period. The whole scheme of such insurance is that of a business
transaction between the company and the insurant in which the
object of the company is to obtain profit from the transaction.
. The primary object of fraternal associations is to obtain
social intercourse among the members and to furnish relief and
assistance to members and persons dependent upon them— not upon
a commercial or business basis, but upon the broad principle of
friendship and brotherly love. The insurance feature is but an
incident to the main purpose of organization. It is limited to the
payment of benefits to membei-s and to persons dependent upon
them, and is conducted, not for the purpose of gain or profit to the
association, but to further the benevolent purposes of its organiza-
tion." * In Iowa mutual insurance companies, with certain excep-
tions, are not, under the statute exempt from taxation as organiza-
tions not for pecuniary profit^-^-XJnder the Maryland Code a cor-
poration having a capital stock in which many members do not
share, and conducting business for the pecuniary benefit of the
stockholders, is not acting "for the sole benefit of its members and
their beneficiaries, and not for profit," so as to be entitled to issue
fraternal beneficiarv certificates.^" And though by the plan of a
' Aloe V. Fidelity Mutual Life As- ® Iowa Mutual Tornado Ins. Assoc,
soe. 164 Mo. 675, "55 S. W. 993, 29 v. Gilbertsen, 129 Iowa, 658, 106 N.
Ins. L. J. 679. W. 153; Code Supp. 1902, sec.
As to fixed premium-profit, etc., 1333d; Code sees. 1304, 1642.
and distinctions, see further, § 346b 1° International Fraternal Alliance
herein. v. State, 86 Md. 550, 40 L.R.A. 187,
8 People V. Commercial Life Ins. 39 Atl. 512.
Co. 247 111. 92, 93 N. E. 90, 40 Ins.
L. J. 163, 168, 169.
842
PAK TIES— MUTUAL COMPANIES 5^ ;J44l)
mutual benefit unincr)rporated fire association the accumulation
of profits is not intended it may be for mutual protection profit and
advantage and not merely one for benevolent, etc., purposes."
§ 344b. Same subject: pecuniary profit as a factor: lodge sys-
tems. — In Illinois fraternal beneficiary societies are within the term
"insurance company" in its broader meaning; but such orders are
not included within that term in a restricted sense and confining it
to its literal meaning. And a distinction is made with reference to
its statutes, between fraternal orders or beneficiary societies and in-
surance companies in that the former are not organized for the'tjur-
pose of profit, and their certificates cannot be used for business
purposes nor can their members receive any pecuniary benefit
therefrom. Creditors cannot reach such certificates and the only
purpose of the society is the benefit of the widows or orphans
of its members or persons within the other classes mentioned
in the statute; while the latter are ordinary business coiporations
and their policies are obtained for ordinary business purposes,
for investment, for security, and for the benefit of credit, as well
as for protection of the family.^^ ^i^^j {^ that state the term
"contract of insurance" as applied to a mu1.ual or fraternal bene-
fit association with local camps embraces the application for
membership, the certificate, and the constitution and by-laws
of the association." But in Missouri under a statute similar
to that of Illinois relating to societies having a lodge system,
etc., and conducted for the sole benefit of its members and their
l^eneficiaries the certificate of incorporation together with the
facts as to the manner of conducting business determine whether an
association is within the statute, and a company is governed by in-
surance laws as to misrepresentations rather than by those governing
benevolent associations irrespective of the fact whether it is a life
company or a mutual benefit association on the assessment plan."
Under the jNIissouri statute fraternal beneficiary associations are
voluntary associations organized solely for the benefit of their mem-
bers and their beneficiaries who are named and not one of the
class named can be a beneficiary," such associations have for their
" Sergeant v. Goldsmith Dry di.stinction was based thereon. See
Goods Co. — Tex. Civ. App. — , 15!) CathoUc Knig-hts of 111. v. Board of
S W. 1036. Review of Etfing-ham County, 198
12 Peterson v. Manhattan Life Ins. 111. 441, 64 N. E. 1104.
Co. 244 111. 329, 15 Am. & Vjug. "Love v. Modern Woodmen of
Ann. Cas. 96, 91 N. E. 466, 39 Ins. America, 250 111. 102, 102 N. E. 183.
L. J. 817. The order was the Mod- ^^ Thompson v. Royal Neighbors of
ern Woodmen of America, organized America, 154 Mo. App. 109, 133 S-
under the statute of that state with W. 146.
a lodge system, etc., and the above ^^ Rev. Stat. 1909, sec. 7109.
843
§ 344b
JOYCE OX INSURANCE
professed primary object the social and moral benefit of the member-
ship and so take the form of an organized brotherhood the insur-
ance feature being merely an incident. They are esi^entially be-
nevolent ^^ and aim to make no profit. They have lodges, ritual,
and a representative form of government.^"' So a fraternal benevo-
lent association is not conducted for profit within the Missouri stat-
ute defining a fraternal beneficiary association, where its charter
declares that it is not in business for gain and a uniformed rank
Knights of Pythias is a fraternal beneficiary association within such
statute and not an old line insurance company." And where a
fraternal organization, with a, lodge system is not conducted for
profit but only for the sole benefit of its members and their bene-
ficiaries it is within a statutory definition of a fraternal benefit so-
ciety. ^^ So, a fraternal beneficiary society known as the Modern
Woodmen of America organized under the Illinois' laws is not a
life insurance company .2° Again, an association organized under
a general act and reincorporated under a special one and designated
as the Supreme Lodge Knights of Pythias is a fraternal beneficiary
association and is not within a nonforfeiture insurance statute which
is limited to regular or old-line insurance companies, where such
association is not conducted for profit and its declared charter pur-
pose is fraternal and benevolent with no lawful power to engage in
the general life insurance business or to issue ordinary life policies
to its members for gain or profit, and it has a representative form of
government and ritualistic form of work.^ In another ca.^^e the as-
sociation was organized under the laws of Iowa and licensed to do
business in Missouri as a fraternal beneficiary association and under
the statutes of the former state it could issue certificates for the bene-
fit of legatees and legal representatives of its meml)ers which were
classes not designated by the laws of the 4tttter^ Sfate and it was
urged, for that rea^^nn, that it should be treated as an old-line insur-
ance company, but the court decided against this contention as the
statute of Missouri ^ did not include the above class of persons and
defined such associations as those formed or organized and carried
^^ Uraberjjer v. Modern Brother-
hood of Ameriea, 162 Mo. A pp. 141,
144 S. W. 898.
^"^ See State (ex rel. Supreme
Lodc^e Kniohts of Pvthias) v. Yau-
diver, 213 Mo. 187, '200, 15 Am. &
En?. Ann. Cas. 283, 111 S. W. Pll.
^^ Tice V. Supreme Lodge, 123 Mo.
App. 85, 100 S. AY. 519, aff'd 204 Mo.
349. 102 S. W. 1043, Rev. Stat. sec.
1408, Ann. Stat. 1906, p. 1111.
^^ Loyd V. Modern Woodmen of
America. 113 Mo. App. 19. 87 S. W.
530. under Rev. Stat. 1890, see. 1408,
and 111. Laws 1893, p. 130, sec. 1.
2° Almond v. Modern AYoodmen of
America, 133 Mo. App. 382, 113 S.
W. 695.
^ Westerman v. Supreme Lodge
Knights of Pythias, 196 Mo. 670, 94
S. W. 470, 5 L.R.A.(N.S.) 1114n.
2 Rev. Stat. 1899, sec. 1408 (sec,
7109, R. S. 1909).
844
PARTIES— MUTUAL COMPANIES § 344b
on for tlie ?ole honofit of it^; member? and tlieir tjeneficiaries and not
for proiil, and provided for a lodge system, sick and death ))cnelits,
etc. It was declared that the main dividing line between fraternal
beneficiary associations and old-line insurance companies is that
the former are organized to ]»rotect their members and such other
persf)ns as are ])i'oj>er siiljjects of their benevolence, and not for
prop'f to the jiersons organizing or carrying on such as.'^ociations;
while the old-line insurance companies are organized primarily for
profit to the persons who own the corporate stock and the court, per
Brown, P. J., adds: "We do not think the mere fact that a member
of one of these fraternal organizations may procure a certiftcate
payable to some ])erson not specifically designated in the statute,
should have the effect of destroying the purposes of the associa-
tion and putting it in the same class as the old-line companies."' ^
In Colorado it is held to be the settled law there that a fraternal
beneficiary association, engaged in the business of insuring its mem-
ber's lives through subordinate lodges, is an insurance company,
and its contract of indemnity by whatever name called, a life in-
surance policy, and the holder thereof a policy holder, and that such
contract is subject to the same statutory regulations and limitations
as those issued by old line and mutual assessment companies, un-
less expressly exempted therefrom by statute.* And under a Ne-
l)raska decision such an association is in effect a mutual life insvu'-
ance compan}'.* The Kentucky statutory definition of an insur-
ance company, or insurance corpoi-ation ; includes any corporation
or association engaged in the transactions, in any manner, of in-
surance business, although it exce))ts fraternal orders exclusively
on tlic lodge system.^ Under an Indiana decision, where the plead-
ing showed that the "plan of insurance" of a fraternal order was
carried on through and bv means of subordinate local lodges and
^ Armstrong v. IModern Brother- diction Woodmen of the World v.
hood of America, 245 Mo. 153, 149 Sloss, 49 Colo. 177, 31 L.R.A.(N.S.)
S. W. 459, 41 Ins. L. J. 1544, 831n, 112 Pac. 49; acts 1903, c. 119,
*]\bi(lern Brotherhood of America (act April 11, 1903); 1 Mills' Ann.
V. Lock, 22 Colo. Api). 409, 125 Puc Stat. sec. 638.
55G, 41 Ins. L. J. L533; Laws 1907, ^ Modern Woodmen of America v.
c. 193, p. 73, sec. 1, d. 1 (Rev. Stat. Colman, 08 Neb. 000, 94 N. W. 814,
sees. '3087, 3160), reiving upon Head 96 N. W. 854.
Camp Woodmen of the World v 6 Kentncky Stat. 1903, see. 641,
Sloss, 49 Colo. 177, 112 Pac. 49, 31 construed in Grand Lodge Ancient
L.R.A.(N.S.) 831n; Supreme Lodi-o Order United Workmen v. Edwards,
Kniglits of Honor v. Davis, 26 Colo. 27 Ky. L. Rep. 469, 85 S. W. 701.
252, 257, 58 Pac. 595; Chartrand v. See also Sims v. Commonwealth, 114
Brace, 16 Colo. 19, 12 L.R.A. 209, Kv. 827, 24 Ky. L. Rep. 1591, 71 S.
25 Am. St. Rep. 235, 26 Pac. 152. W. 929 ; Ky. Stat. sec. 641.
See also Head Camp Pacific Juris-
845
344c
JOYCE ON INSURANCE
the complaint showed the parties, subject-matter, insurable interest,
amount of insurance, the premium or fees paid, and compliance
with conditions requisite to obtaining a certificate, although none
was issued, it was held that "an oral contract of insurance" was
valid and enforceable and the cases relied upon to support this
point were those of insurance, although such contract being one
for the protection of its members and their beneficiaries by means
of indemnity, and the organization being a fraternal mutual one
not seeking profit it was also held that the constitution, by-laws and
other writings afl'ecting the parties rights were to be liberally con-
strued to promote the benevolent objects of the corporation. The
question, however, whether such a contract was one of insurance
was not discussed.' Under a Michigan decision a statute relating
to the provisions of life insurance policies does not apply to fra-
ternal beneficiary associations carrying on the business of life,
health, casualty or accident insurance for profit under the express
provisions of another enactment in that state.'
The "Golden Cross" was incorporated for the general welfai-e and
not for profit as an insurance order based upon the principle of mu-
tual assessment of its members and is what is known to the Tennes-
see laws as a fraternal beneficiary association, and such associations
have neither capital stock, stockholders, nor property to be used in
business for individual profit. Those having an interest therein
are not stockholder but members and are so styled by the statutes
of that state, nor have such associations either franchises or prop-
erty which are susceptible of lease or sale, so as to be used and oper-
ated by another corporation.^
§ 344c. Same subject: lodge system continued. — Under a New
York decision an unincorporated association for the promotion of
fraternal association and for relief and benefits in which money
was no part, and known as the grand united Order of Odd Fellows,
is not a pecuniary benefit and mutual a.ssurance society, but a fra-
ternal association, although provision is incidently made for fi-
nancial assistance and relief derived from dues, stated contributions
and fines and also for a specified sum in case of death. ^° Under
the AVisconsin statute, an Odd Fellows' association incorporated un-
' Brotherhood of Locomotive Fire-
men & Enginemen v. Corder, 52 Ind.
App. 214, 97 N. E. 125, 41 Ins. L. J.
384.
8 Knights of the Modem Maccabees
V. Barrv, Comm'r, 155 Mich. 693, 118
N. W:585; Pub. acts 1893, p. 186,
No. 119; acts 1907, p. 243, No. 180.
See Howell's Mich. Stat. Annot. (2d
ed.) sec. 9022, am'd 1895, act No.
150, 1901, act No. 226.
9 Knapp V. Supreme Commandery,
United Order of the Golden Cross of
the World, 121 Tenn. 212, 118 S. W.
390; acts 1875, c. 142, p. 232; Shan-
non's Code see. 2524.
10 Anthony v. Carl, 28 Misc. 200,
58 N. Y. Supp. 1084.
846
PARTIES—MUTUAL COMPANIES § 344d
der the laws of another state for the purpose of fraternal benevolent
insurance uj^on the assessment plan, and which continas its member-
ship to persons belonging to its allied order, is held exempt from the
state insurance laws relating to life insurance companies, and is one
of the ^'charitable and benevolent orders of . . . Odd Fel-
lows," within the meaning of the statute.^^ In Nebraska a society
or order with a lodge system whose objects are social and to furnish
aid in case of accident or sickness; to provide for the families of de-
ceased members; to furnish life indemnity, based upon a mutual
co-operative or assessment plan ; to render mutual assistance, and
promote benevolence and charity, is in so far as it seeks to give in-
demnity to those holding certilicates, a mutual life insurance com-
pany.^2 In a North Carolina case a benefit order, designated as the
Order of Owls, with power of self-perpetuation, and having a head
organization with subordinate bodies in various sections of the
country with by-laws providing for sick and death benefits, with in-
surance features, is a fraternal benefit order within the statutes of
that state defining such orders, making them subject to the same
rules, regulation and supervision as foreign insurance companies,
with certain exceptions, and requiring a license from one assuming
to act as insurance agent for foreign companies. And the words in-
surance companies, associations and orders, used in such statutes
contemplate both incorporated and unincorporated companies.^^
In Pennsylvania, a benefit society which does business through the
lodge system is not an insurance company under the statute of that
state.i*"^
§ 344d. Same subject: pecuniary profit as a factor: masonic be-
nevolent or relief associations. — A masonic benevolent association
is substantially a life insurance company, even though not engaged
in business for profit and without capital as an investment, but hav-
ing for its general purpose mutual protection and the giving of aid,
etc., to widows and children of deceased members, and the contract
is unilateral the same as life insurance contracts." So in the United
States circuit court it is held that a Masonic life indemnity com-
pany whose business is on the assessment plan, but which has no
" State V. Whitmoro, 75 Wis. 332, 2 Revisal, c. 100, sees. 4691, 4706,
43 N. W. 1133, under Laws 1883, c. 4715 (3) 4794-4798, 2 Revisal, c. 81,
94; Laws 1879, c. 204. See al.so Cal. see. 3484.
Stat. 1891, c. cxvi. p. 126, sec. 14, i* Donlevy v. Supreme Lodge
p. 130. Sliield of Honor, 11 Pa. Co. Ct. Rep.
12 Home Forum Benefit Order v. 477, 49 I^s- Intell. 145, under act
Jones, 5 Okla. 598, 50 Pae. 165, 27 of May 11, 1881.
Ins. L. J. 8. " Clark, Receiver, v. Seliromyer,
Instate V. Arlington, 157 N. C. 23 Ind. App. 565, 56 N. E. 785, 29
640, 73 S. E. 122, 41 Ins. L. J. 319, Ins. L. J. 477.
847
§ 344e
JOYCE ON INSURANCE
fraternal, social, or like purposes, is an insurance company.^* In
a Pennsylvania case, however, the association was an Illinois cor-
poration. It was not organized for profit or gain, but its purpose
was to secure pecuniary aid to the widows, orphans, heirs and de-
visees of deceased members of said association. It wa>s incorporated
under a statute which expressly provided that associations with such
a [)urpose, where no annual dues or premiums were required and
where the members were to receive no money as profit or otherwise
should "not be deemed insurance companies." It was held, there-
fore, that the association was not an insurance company, nor the
certificates, issued by it in Illinois, contracts of insurance. In this
case the distinction is made between contracts of insurance, which
are purely a business adventure the characteristic feature of which
is granting an indemnity, or security against loss, for a stipulated
consideration, and benevolent societies of a purely philanthropic
or benevolent character the object of which is not indemnity or se-
curity against loss, but the accumulation of a fund bv contributions
of members for aid or relief in case of sickness, injury, or death. ^'''
§ 344e. Same subject: rules of construction as a factor. — The
same rules of construction apply to death benefit certificates as are
a])plical)le to contracts of insurance as such certificates are held to
be insurances-contracts.^® And in the absence of statutes wherein
nuitual benefit fraternal and like societies and associations are de-
clared not to be insurance companies, it is determined by tlie weight
ft
ft
i
i
^^ Knights Teuiplar & Masons'
Life Indemnity Co. v. Berry, 50 Fed.
511, 1 C. C. "a. 561, 4 U. S. App.
353.
That such Masonic relief associa-
tions are life insurance companies.
See also the following cases:
L'niled States. — Knights Templars'
& Masons' Life Indemnity Co. v.
Jarman, 104 Fed. 638, 44 C. C. A.
93, 30 Ins. L. J. '230, aft'd 187 U. S.
197, 47 L. ed. 139, 23 Sup. Ct. 108,
32 Ins. L. J. 57 (holding that a stat-
ute forbidding the defense of suicide
to an action on a life policy ai) plied
1o certificates issued by a INIason's
life indemnity company, on the as-
sessment ])lan) ; Jarman v. Kniglit.s
Templars' & Masons' Life Indem-
nity Co. 95 Fed. 70.
Illinois. — Lehman y. Clark, 174 111.
279, 43 L.R.A. 648, 51 N. E. 222,
27 Ins. L. J. 745, rey'g 71 111. App.
366 (contract expressly held one of
life insurance), quoting from Rock-
hold y. Canton Masonic Benevolent
Society, 129 111. 440, 2 L.R.A. 420.
21 N.'E. 794, aff'g 26 111. App. 141
(where it is said "That the undertak-
ing evidenced by the certificate is one
of insurance . . . cannot be seri-
ously ([uestioned," etc.).
loira. — Prader y. National Masonic
Accident Assoc. 95 Iowa, 149, 63 N.
W. 601.
Maine. — Bolton y. Bolton, 73 Me.
299 {considered under § 346 herein).
Minnesota. — Lake v. Minnesota
Masonic Relief Assoc. 61 Minn. 96,
52 Am. St. Rep. 5.38n, 62 N. W. 261.
^' Northwestern Masonic Aid
Assoc. V. Jones, 154 Pa. St. 99, 35
Am. St. Rep. 810, 26 Atl. 253, quot-
ing from and apphjing Common-
wealth y. Equitable Beneficial Assoc.
137 Pa. 412, 18 Atl. 1112.
18 Small y. Court of Honor, 136
Mo. App. 434, 117 S. W. 116.
i
848
PARTIES— MUTUAL COMPANIES § 344e
of authority, in so far as the construction of the certificate in gen-
eral and as to forfeiture, beneficiaries, etc., are concerned, that such
societies and associations are to be treated as life insurance com-
panies, and their certificates as life insurance contracts, althbu.2;h
under some of the decisions the certificates dift'er in some respects
from ordinary insurance policies in that the constitution and by-
laws b9come part of the contract. ^^ So, in Colorado, in an action
upon a fraternal benefit policy, the court held that in order to ar-
rive at the intention of the parties, the same rules of construction
governed.^" Again, in a case in tlie Federal court in an action
founded upon a certificate in a Masonic life indemnity company, an
assessment association, the court in discussing the question of the
company's right to make certain amendments declared that: "All
contract^;, notwithstanding the general words or phrases tliey may
contain, should receive an inter])retation which will accord with the
presumed intention of the contracting parties, and will not work
an injustice or lead to absurd consequences'' and this rule of con-
struction was applied.^
1^ See also the following eases: defense in case of misrepresentations
Arkansa-'^. — Brotherhood of Loco- and warranties).
motive Firemen & Enginemen v. Nebraska. — Modern Woodmen of
Aday, 97 Ark. 425, .S4 L.R.A.(N.S.) America v. Coleman, 68 Xob. 660, 94
126," 134 S. W. 928, 40 Ins. L. J. N. W. 814, rehearing denied 96 N.
737' (construed like any other insur- W. 154 (governed by general rules of
ance policy, according to plain and law applicable to life insurance com-
obvious meaning with a view to ac- panies).
complish purpose for which brother- New Tor A-.— Weinberg v. Wood-
hood maintained). ward, 67 ^Nlisc. 283, 124 N. Y. Snpp.
Indiana. — ^Modern Woodmen of 480 (governed by principles which
America v. .Miles, 178 Ind. 105, 97 apply insurance contracts).
N. E. 1009 (construed to effect in- See also note 38 r..R.A. 34-40, on
tent) ; Brotherhood of Locomotive whether a benefit association is an in-
Firemen & Enginemen v. Corder, 52 surance company where the construc-
Ind. App. 214, 97 N. E. 125 (liberal- tion of tlie certilicate is in question;
ly construed). §§ ^8^ ef «'<l-i -<J'' --'^ et seq. herein.
iUmnesota.— Mady v. Switchmen's 20 ^f^^^t.^^ Woodmen of America v.
Union of North America, 116 Minri. International Trust Co. 25 Colo. Ap|).
147, 133 N. W. 472 (cannot be given 26, 136 Pac. 806. See also Supremo
interpretation at variance with clear Lodge Knights of Honor v. Davis,
.sense and meaning of language em- 26 (Jolo. 252. 58 Pac. 595; Grand
ployed). Circle Women of Woodcraft v.
i/tssown.— Brittenham v. Sover- Rauscli, 24 Colo. App. 304, 134 Pac.
eign Camp Woodmen of the World, 141.
180 Mo. App. 523, 167 S. W. 587 ^Knights Templars' & Masons'
(effect should be given to all parts Life Indemnity Co. v. Jarman, 104
printed or written.^ See §§ 212, 223 Fed. 638, 44 C. C. A. 93, 30 Ins. L.
herein) ; Evans v. Modern Woodmen J. 230, case is aff'd in 18/ L. S. 197,
of America, 149 Mo. App. 166, 129 47 L. ed. 139, 23 Sup. Ct. 108.
S. W. 485 (strict interpretation in
Joyce Ins. Vol. I.— 54. 849
§ 344f
JOYCE ON INSURANCE
So the rule, applicable to regular insurance contracts, that the
contract should be construed against the insurer and most favor-
ably to insured so as not to defeat a recovery and to prevent a for-
feiture, applies likewise to mutual and fraternal benefit and like con-
tracts.^ And a fraternal beneficiary association on the lodge sys-
tem is not within a nonforfeiture insurance statute which is limited
to old-line insurance companies,'
§ 344f. Same subject: attachment of copy of application or by-
laws. — A fraternal association on the lodge system is not in i\Iassa-
chusetts within a statute requiring attachment of an application to
a life insurance policy.* But in Kentucky a society is a "fraternal
society" under a statute requiring a copy of the application to be
2 Arkansas. — ^Industrial Mutual In- Woodmen of America, 236 Mo. 32G,
demnity Co. v. Hawkins, 94 Ark. 417, 139 S. W. 151; Simmons v. Modern
29 L.R!a.(N.S.) 635n, 21 Am. & Eng. Woodmen of America, 185 Mo. App.
Ann. Cas. 1029, 127 S. W. 457, 483, 172 S. W. 492; Wintergerst j.
quoted from in Brotherhood of Loco- Court of Honor, 185 J\Io. App. 373,
motive Firemen & Enginemen v. 170 S. W. 346; Brittenham v.
Aday, 97 Ark. 425, 34 KR.A.(N.S.) Sovereign Camp Woodmen of the
126,*134 S. W. 928, 40 Ins. L. J. 737. World, 180 Mo. App. 523, 16/ S. W.
Illinois. — Zeman v. North Ameri- 587; Beile v. Travelers Protection
can Union, 263 111. 304, 105 N. E. 22 ; Assoc, of America, 155 Mo. App. 629,
Mutual Protective League v. McKee, 135 S. W. 497, 40 Ins. L. J. 1028.
122 111. Ap^. 376, aff'd 223 111. 364, New Jersey.— Coghlan v. Supreme
79 N. E. 25. Conclave Improved Order of Hepta-
Indiana. — Modern Woodmen of sophs, 86 N. J. Laws 41, 91
America v. Miles, 178 Ind. 105, 97 Atl. 132; Johnson v. Grand Lodge
N. E. 1009 (liberally in favor of as- Ancient Order United Workmen, 81
sured) ; Supreme Council Benevolent N. J. Law 511, 79 Atl. 333, 40 Ins.
Legion v. Grove, 176 Ind. 356, 36 L. J. 924 (forfeitures not favored,
L.R.A.(N.S.) 913, 96 N. E. 159. etc.).
Kentucky. — Brackett v. Modem Tennessee. — Independent Order of
Brotherhood of America, 154 Ky. Foresters v. Cunningham, 127 Tenn.
340, 157 S. W. 690. 521, 156 S. W. 192 (forfeiture not
Minnesota. — Geronime v. German favored).
Roman Catholic Aid Assoc, of Min- Tex«s.— Haywood v. Grand Lodge
nesota, 127 Minn. 291, 149 N. W. of Texas Knights, — Tex. Civ. App.
291. — , 138 S. W. 1194 (construed in fav-
Mississippi. — Grand Lodge (col- or of insured to prevent forfeiture),
ored) Knights of Pythias v. Jones, 3 -Westerman v. Supreme Lodge
100 Miss. 469, 56 So. 458; Masonic Knights of Pythias, 196 Mo. 670, 94
Benefit Assoc, v. Hoskins, 99 Miss. S. W. 470, 5 L.R.A.(N.S.) 1114n.
812, 56 So. 169, 40 Ins. L. J. 1671, * Attorney Gen'l v. Colonial Life
quoting from Morgan v. Independent Assoc. 194 Mass. 527, 80 N. E. 455.
Order of Sons & Daughters of Jacob, See §§ 190, 190a herein.
90 Miss. 864, 44 So. 891, which cites On conflict of laws as to necessity
Murphy v. Independent Order of of attaching application or copy
Sons & Daughters of Jacob, 77 Miss, thereof to policy, see notes in 63
830, 50 L.R.A. Ill, 27 So. 624. L.R.A. 867; 23 L.R.A.(N.S.) 982;
i¥issoMri.— Mathews v. Modern and 52 L.R.A. (N.S.) 285.
850
I
PARTIES— MUTUAL COMPANIES §§ 344g, 344h
attached to the policy, except as to such societies, where it operates
under a lodge sj^stem and does not pay commissions to procure
members.* Although it ig also held in that state that a fraternal
order exclusively on the lodge system, although excepted under a
statute defining an insurance company is within a statute requiring
the attachment of the application or a copy thereof to policies issued
by assessment or life insurance companies.^ A certificate of mem-
bership of a beneficial association is not an insurance policy under
the Pennsylvania statute so as to make its by-laws inadmissible in
evidence although not attached to the certificate.'
§ 344g. Same subject: other insurance as a factor, — Certificates
in mutual aid societies are held in a Federal case not to constitute
insurance within the meaning of a question in an application blank
of an insurance company as to "existing insurance" in this or any
other company.* This decision upon the point of other insurance
accords with other decisions where the question was directly in-
volved and also where the question was one of estoppel and the
question whether such associations ai*e insurance companies or
not is not discussed.^
§ 344h. Same subject: liability as a factor. — In a case in Ar-
kansas it was claimed that a company was one of mutual fire insur-
ance organized under the laws of another state, and that by virtue
of the laws thereof, the articles of incorporation, and the by-laws
of the company, its policy holders became members of the com-
pany and as such were not subject to certain liabilities, biit it was
5 Yeomen of America v. Eott, 145 Chamberlain, 132 U. S. 304, 33 L. ed.
Ky. 604, 140 S. W. 1018. 341 (question turned on estoppel) ;
^ Grand Lodge, Ancient Order McCollum v. Mutual Life Ins. Co.
United Workmen V. Edwards, 27 Ky. 55 Hun (N. Y.) 103; Peterson v.
L. Rep. 469, 85 S. W. 801. See also Manhattan Life Ins. Co. 244
Supreme Coramandery of the United 111. 329, 91 N. E. 466, 18 Am.
Order of the Golden Cross of the & Eng. Ann. Cas. 96, 39 Ins. L.
AVorld V. Hughes, 114 Ky. 175, 24 J. 817 {citing and quoting from
Ky. L. Rep. 984, 70 S. W. 405; ex- Ihe Penn :Mut. Life ease); Kemp v.
amine Corley v. Travelers Protective Good Templars ^lutual Benefit Assoc.
Assoc. 105 Fed. 854', 46 C. C. A. 278. 46 N. Y. St. R. 429; White v. Na-
•7 JMareus v. Heralds of Liberty, 241 tional Life Ins. Co. 39 Ohio L. J.
Pa. 429, 88 Atl. 678, act of May 11, 23 < ; Equitable Life Ins. Co. v.
1881, Pub. L. 20. Hazlewood, 75 Tex. 338, 7 L.R.A.
8 Penn Mutual Life Ins. Co. v. 217 (question turned on estoppel).
Mechanics' Savings Bank & Trust Examine Clapp v. Massachusetl.s
Co. 38 L.R.A. 33, 72 Fed. 413, 19 Benefit Assoc. 146 Mass. 519, 16 N.
C. C. A. 286, 37 U. S. App. 692, 73 E. 433 (where question not discussed
Fed. 653, 19 C. C. A. 316, 43 U. S. but only whether under the evidence
App. 75, 38 L.R.A. 33, and note 33- jury should have been instructed as
57. See §§ 2456a et seq. herein. for a nonsuit).
3 Continental Life Ins. Co. v.
851
.§ 34ii JOYCE OX INSURANCE
held that under the statutes of Arkansas the liabilities of a foreign
mutual insurance company doing business therein under policies
therein issued were the same as those of stock fire insurance com-
panies, therein' placing them on the same basis. But other than a,s
above stated the question whether or not such mutual companies
are insurance com])anies was not discussed. ^°
§ 3441. Same subject: applicability of insurance laws: statutory
exemptions. — Whether or not or to what extent mutual benelit,
fraternal benelit and like associations or societies are within the
moaning of the insurance laws must depend upon the terms of the
diHerent statutes, and the various circumstances of each particular
case, must also be considered in order to determine whether it is
within the intent of the statute or statutes involved. No govern-
ing rule can be stated for the reason that there is no common ground
upon which to base such a rule, and even though there may be an
underlying' principle it is difficult to apply it. This undoubtedlv
accounts for whatever disagreement exists in the decisions.^^ In
Colorado a voluntary association issuing benefit certificates is not en-
titled to the benefit of a statute providing that societies founded un-
der it shall be corporations, and if intended to benefit widows and
orjihans of members shall notjbe deemed insurance companies. -i
And a benefit certificate in which the beneficiary may be anyone,
even a stranger, dependent upon the holder, is not within a statute
providing that societies intended to benefit widows, orphans, heirs,
and devisees of members shall not be deemed insurance companies.^^
10 Federal Union Surety Co. v. of insurance law, or to particular
Flenii.'^ter, 95 Ark. 389, 130 S. W. statutes applicable to insurance com-
574, ;i9 Ins. L. J. 1485; acts 1905, see. panics, where such association is not
4, p'. 772, and Kirl)y's Dig. sec. 4339, an insurance company, or where it is
as to giving bond as prerequisite to declared not to be an insurance corn-
doing busines.';. panv, or where it is expressly ex-
As" to limitation of liability of empted by statute."
members of mutual or assessment tire Note 38 L.R.A. 49-53.
insurance companies, organized, etc., See §§ 340, 346b herein,
under Ky. Stat. c. 32, subd. 5, see "Where the question is in regard
Ky. act approved :\Iarch 24, 1910 to jurisdiction. It is generally held
(c. 93, Stat.). under statutes providing for jurisdic-
11 "Under statutes exempting ben- tion in actions against life insurance
erolevt socielies from the operation companies, that benevolent associa-
of cerlain insurance laws, some cases tions are controlled by the general in-
notwithstanding such statute have de- surance laws, but there are exception-
fined such associations to be insur- al cases in lllinois.''_
ance companies owing to the busi- Note 38 L.R.A. 47-49.
ness carried on by such benevolent i^ Head Camp Pacific Jurisdiction
societies. . . . But other eases v. Sloss, 49 Colo. 1/7, 31 L.R.A.
iiold that most benefit companies are (N.S.) 831, 112 Pae. 49.
not subject to the general principles
852
PARTIES— MUTUAL COMPANIES § 344i
In Illinois, a society which sets apart a fund rai?ecl by voluntary
contributinns from its members, and which pays therefor a certain
amount to designated beneficiaries of deceased members, and other
sums 1() living members, holding numbers just above or just below
that (»!' the deceased, is an insurance company, and is not exempt
under the statute providing that societies shall not be deemed insur-
ance companies, the purpose of which is to benefit widows, orphans,
heirs, and devisees of deceased members and members receiving
permanent disabilities.^^ in an Iowa case it is held that where the
prevalent purpose of a secret order is to create a benefit for sickness
or disability of members, and to pay a certain sum to a designated
[)erson on a member's death, such association is an insurance com-
pany within the statutory insurance requirements of that state,**
and in Kansas a mutual aid association whicli does business with its
members upon a iriutual life insurance plan is subject to the control
of the insurance department and to the laws relative to insurance
companies.*^ In Kentucky, a mutual life association which has
the essential elements of a life insurance company comes within the
provisions of the insurance statute.*^ Under a Michigan decision
fraternal beneficiary societies are exempt from the provisions of the
general insurance laws.*'^ In Missouri fraternal benefit societies
are exempt from all laws governing old-line companies.** And a
fraternal society which issues a death benefit certificate is not within
the general insurance laws of that state.** And where the evidence
*3 Golden Rule v. People, 118 111. *^ Sherman v, Coramonwealtli, 8">
492, 9 N. E. 342, 7 West. Rep. 219. Ky. 102.
Compare Rockhold v. Canton Ma- ^''^ Knights of the Modei-n iMacca-
sonic Mutual Beneht Soe. 129 111. bees v. Ban-y, Commr. 155 Midi
440, 2 L.R.A. 420, 21 N. E. 794. 693, 118 N. W. 585.
Examine Bastian v. Modern Wood- ■'^ Evans v. Modern Woodmen of
men of America, 16G ill. 595, 46 N. America, H9 i\Io. App. 166, 129 S.
E. 1090. AV. 485. Examine Hudnall v. IStod-
** State (ex rel. Graham) v. Nieh- ern Woodmen of America, 103 Mo.
ols, 78 Iowa, 747, 41 N. W. 4. Ex- App. 356; Sliotlitf v. .Alodern Wood-
amine Brown v. Modern Woodmen of men of America, 100 Mo. App. 138,
America, ]]5 Iowa, 450, 88 N. W. 77 S. W. 84.
965; Donald v. Chicago, Burling-ton The Missouri Statute exem))ting
& Quiney Ry. Co. 93 Iowa, 284, 33 such associations from general insur-
L.R.A. 492, 61 N. W. 971; State (ex ance law.s is constitulidnal. daudy
rel. Graham) v. Nichols, 78 Iowa, v. Roval League, 259 Mo. 92, 168 S.
747, 41 N. W. 4; State v. Iowa Mn- W. 593.
tual Aid Assoc. 59 Iowa, 125, 12 See also as to exemptions, Schil-
N. W. 782. linger v. Boes, 85 Kv. 357, 9 Ky. L.
15 State V. National A.s.s'n of the Rep. 18, 3 S. W. 427.
Farmeis & Alechanics Mutual Aid ^^ Claver v. Woodmen of the
Assoc. 35 Kan. 51, 9 l^ic 956; State World, 152 Mo. App. 155, 13;J S. W.
V. Yi-iilant Ins. Co. 30 Kan. 585, 2 153. See Aloe v. Fidelity Mutuixl
Pac. 840. Life Assoc. 164 Mo. 675, 55 S. W.
853
§ 344i
JOYCE ON INSURANCE
shows a license to do business as a mutual benefit or benevolent so-
ciety and also that the form of government, constitution and by-
laws are on that plan, the company will be held to be such and so
not subject to the general insurance laws.^° But in an earlier case
in that state a society known as the Merchants' Exchange Mutual
Benevolent Society had executive officers and a board of trustees.
It divided its membership into classes, in each of which the fees
paid by members of a certain class were kept separately and exclu-
sively for its benefit. Assessments and the inter&st on a fund raised
by initiation fees were resorted to for making payments and fur-
nishing aid to the widows, children, etc., of deceased members. It
was determined that the society was a mutual insurance company,
subject to the insurance laws of that state. ^ A fraternal benefit as-
sociation may, however, be exempt from the insurance laws and
nevertheless be subject to an ordinance requiring life insurance
agents to be licensed.^ Again, the law exempting fraternal bene-
ficial societies in that state does not include a corporation which
transacts its business through the lodge system by assessments and
renders aid in sickness, etc., where such company is organized solely
for the transaction of insurance businass.^ And, although a fra-
ternal beneficiary corporation may not be exempt from the general
insurance laws it may be subject to a statute prohibiting life in-
surance companies from setting up the defense of suicide.* In
Pennsylvania a mutual aid association of another state is not a for-
eign insurance corporation within its statute, and is exempted under
the statute relating to beneficial associations from the control of the
insurance commissioner.^ In Texas, a corporation was held to be
an insurance company, subject to the provisions of the insurance
laws, where it had salaried ofiicers and agents, required an examina-
tion by a physician of intending insurers, and which, in considera-
tion of a membership fee and assessments, agreed to provide for
members during life and the payment of a certain sum to a mem-
ber's family upon his decease.® The Ontario insurance act®'' does
993, 29 Tns. L. J. G79, considered un- * Ordellieide v. Modern Brother-
dcr § ;54(Jb herein. hood of America, 158 Mo. App. fi77,
2o'Missey v. Snpreme Lodge 139 S. W. 269, 40 Ins. L. J. 1845;
Knights & Ladies of Honor, 14/ Mo.
App. 137, 126 S. W. o59.
1 State V. Merchants' Exeh. Mat.
Ben. Soc. 72 Mo. 146, 159.
2 City of Trenton v. Hnmel, 134 1876.
Mo. App. 595, 114 S. W. 1131.
' National Union v. Marlow, 74
Fed. 775, 21 C. C. A. 89, 40 U. S.
App. 95.
Rev. Stat. 1909, sees. 6945, 7109.
^ Commonwealth v. National Mu-
tual Aid Assoc. 94 Pa. St. 481, under
act-s of April 4, 1873, and May 1,
6 Farmer v. State, 69 Tex. 561, 7
S. W. 220, under Rev. Stat. Tex.
title 20.
6a 60 Vict. c. 36, sec. 144.
854
PARTIES— MUTUAL COMPANIES § 344j
not appl}^ to certificates to an unincorporated society of workmen
of a particular class on the lodge system whose members or their
representatives are entitled to certain pecuniary benefits upon com-
pliance with specified conditions and payment of certain assess-
mentsJ
§ 344j. Applicability of insurance laws continued: right to do
business as a factor.'^ — In a Missouri case an action was treated as
being founded on an ordinary policy of life insurance where the
defendant, a fraternal beneficiary society, failed to prove that at the
time the policy was issued it was authorized to do business in that
state, as such a society.^ So foreign fraternal beneficiary societies
while not insurance companies in the broad sense of that term,
nevertheless are engaged in the business of insurance and are in one
sense insurance companies within a statute authorizing them to do
a fraternal life business upon appointment of the state superintend-
ent of insurance to accept process.^ But the mere fact that, at the
time a foreign fraternal insurance company renewed the certificate
of a member for the purpose of increasing his benefit, no law existed
authorizing it to do business in the state, does not render the con-
tract amenable to the laws governing regular policies of insurance
issued by old-line companies.^" A fraternal benefit association con-
ducts a life insurance business, within the terms of an ordinance re-
quiring life insurance agents to be licensed, where the plan set forth
in its prospectus is referred to as, and stated to be that of life in-
''^ Wintemute v. Brotliei'hood of state relatinof to insurance companies
Raih-oad Trainmen (Out. S. C. J. C. before transacting- business in the
A.) 20 Can. Law T. 0. C. C. N. 347. state, and some go further and de-
"^^ See §§ 330, 330a herein. clare that such mutual benefit eom-
* Conner v. Life & Annuity Assoc, panies are not within the saving
171 ]\lo. App. 364, 157 S. W. 814, clause of a statute exempting be-
42 Ins. L. J. 1274, citing Schmidt v. nevolent societies, but some cases
Supreme Court United Order of For- hold that some of these companies
esters, 228 Mo. 675, 129 S. W. 653; are within such exemptions while
State (ex rel. Supreme Lodge K. of some cases restrict their attempts to
P.) V. Vandiver, 213 Mo. 187, 15 such unantlu)rized business, where
Am. & Eng. Ann. Cas. 283, 111 S. they depart from the benevolent char-
W. 91; Newland v. Modern Wood- acter."
men of America, 168 Mo. App. 311, Note 38 L.R.A. 40-47.
153 S. W. 1097; Gruwell v. Natural ^ Rodgers v. National Councd
Council Knights & Ladies of Securi- Junior Order United America Me-
ty, 126 Mo. App. 496, 104 S. W. 884. chanics of United States, 172 Mo.
Under statutes requiring compli- App. 719, 155 S. W. 8/4, under Rev.
ance with state insurance law, a large Stat. 1909, sees. 7109, 7112, 7114.
number of cases "define mutual bene- ^° Westerman v. Supreme Lodge,
fit companies to be insurance com- Kniglits of Pvlhias, 196 Mo. 670, 5
panies. Some merely hold that they L.R.A. (N.S.) 1114, 94 S. W. 470.
must comply with the statutes of the
855
§ 344j JOYCE ON INSURANCE
surance, and this is so iiTCspective of the name by which it is called
and even though such associations are exempt from the provisions
of the insurance laws." In Connecticut, it is held that although a
society, organized in another state as a secret and fraternal society,
hafi an insurance plan as one of it^ corporate purposes, consistins;
in the participation in a benetlt fund by )nembers of local branches,
wlio pay assessments, nevertheless it is not within a statute requiring
foreign corporations, organized for the purpose of furnishing in-
surance on the assessment plan, to obtain authority from the insur-
ance commissioner, in order to do business within the state, ^^ but
is within the statute excepting from such requirement every ''secret
and fraternal society.'"' ^^ In Iowa, a fraternal benevolent corpora-
tion of a sister state which provides a beneticiary fund for the pay-
ment of death benefits is a life insurance organization, and subject
to the provisions of the statute requiring a guaranty capital as a
prerequisite to transacting business in that state. ^* And where a
foreign fraternal association has not been licensed to do business in
a state as required by statute it must be considered a regular life
company so far a.'^ the defense, under the statute, of suicide is con-
cerned.^^ A contract whereby a benefit is to accrue upon the death
or physical disability of a person, which benefit is or may be condi-
tioned upon the collection of an assessment upon persons holding
similar contracts, is a contract of insurance within the meaning of
Rhode Island laws respecting business by foreign insurance com-
panies.^® In A^irginia, only such assessment companies are entitled
to be licensed, without making the deposit of bonds required under
the statute, as make an assessment upon surviving members in order
to pay losses." The character of a benefit insurance association as
an assessment company is not destroyed, so as to deprive it of the
privilege of doing business in Wisconsin on compliance with the
provisions of the laws of that state ^^ by the facts that it agrees to
pay the assured a definite sum, and has established rates of pre-
miums which it is authorized to receive in advance, if it has no
"legal reserve," but merely an ''emergency fund." and its contracts
expressly authorize it to levy assessments beyond those designated
"City of Trenton v. Humel, 134 lie v. McClanahan, .50 Tex. Civ. App.
Mo. App. 59.3. 114 S. AV. 1131. 256, 109 S. W. 973.
^2 (Jon. Stat. Conn. see. 2892. ^® Lubrano v. Imperial Couneil of
"Gen. Stat. Conn. sec. 2903; Faw- Order of United Friends, 20 R. I.
eett V. Supreme Sittinu' of Order of 27, 38 L.R.A. 546, 37 Atl. 345, 6
Iron Hall, 64 Conn. 170, 24 L.R.A. Am. & Eng. Corp. Cas. N. S. 673.
815, 29 Atl. 614. i''^ ]\Iutual Benefit Life Ins. Co. v.
1* State v. Miller, 66 Iowa, 26, 23 Mayro, 85 Va. 643. 8 S. E. 481, un-
N. W. 241. der Ya. act. ^May 18, 1887.
15 Loyal Araerieans of the Repub- is Knws 1891, c. 418.
856
PARTIES— MUTUAL COMPANIES § 344k
in its table.^^ Asiain. under a Mipsissip])! deeisioii a niutnal com-
pany without capital stock, incorporated and empowered to injure
the property of its members only, which is not subject to the insur-
ance department, and which is not organized under the statutory
chapter on "Insurance," and which possesses none of the essentials
required by the statute as conditions precedent to the rioht to trans-
act insurance business in the state cannot compel the issuance to
it of a certificate of authority to carry on the general business of in-
surance. The statute has no reference to tlie restricted right of a
mutual insurance company to insure the property of its own mem-
bership.'^''
§ 344k. Applicability of insurance laws: live stock association. —
in Xcbra>ka. an association for insuring the live stock of members
is an insurance company, and subject to the requirements of the in-
surance statutes. In this case the membership wa'^ unlimited,
though certificates of membership were issued and the premium was
l»aid as an admission fee and l>y assessments.'^ In Texas a company
incorporated under the statute for that purpose is a live-stock insur-
ance company on a mutual or co-operative plan without capital
stock, and not a "mutual relief association" where the statute ex-
pressly excludes such associations.^
i» State (ex rel. Covenant Mutual 109 S. W. 922, s. c. ^ Tex. Civ. App.
Benefit Assoc.) v. Root, 83 \Yis. 667, — , 107 S. W. 366; Rev. Stat. ISn.").
]f» L.R.A. 271, 54 N. W. 33. art. 642, subd. 46. art. 3096. See
20 Farmers Mutual Fire Ins. Co. v. Wriorht, In re, 18 L.R.A. (N.S.) 193,
Cole, 90 Miss. 508, 43 So. 949. 157 Fed. 544, 85 C. C. A. 206, s. e.
1 State v. Northwestern Mut. Live 177 Fed. 579, under Tex. Rev. Stat.
Stock Ass'n, 16 Neb. 549, 20 N. W. 1895, art. 642, subd. 46, when Tex.
852. See also State v. Vigilant Ins. Laws 1907, p. 291, e. 150, not ap-
Co. 30 Kan. 585, 2 Pac. 840. plicable.
2 State V. Burge.ss, 101 Tex. 524,
857
CHAPTER XVIII.
PARTIES— MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES
CONTINUED.
§ 345. What societies or associations are not insurance companies : cases.
§ 346. What societies or associations are insurance companies: cases.
§ 346a. Same subject.
§ 346b. Whether co-operative or assessment plan or old line company :
distinctions.
§ 346c. Whether companj' fraternal beneficial association or mutual
assessment company : distinctions.
§ 346d. Whether sick benefit, burial, and beneficial association an insur-
ance company.
§ 346e. Whether railroad relief associations are insurance companies.
§ 346f. Stock associations with beneficiary fund not an insurance com-
pany.
§ 345. What societies or associations are not insurance companies:
cases. — It is held in Illinois that an association whose policies were
payable only to the widow, orphan, heir, or devisee, and whose
members might be assessed not to exceed twenty dollars each year,
was exempted from the operation of the statute of that stale requir-
ing of life insurance companies a guaranty capital.^ In Kentucky,
it is decided that the statute regulating "stock or mutual" insurance
companies does not include associations organized before that act
without capital stock or premium notes to indemnify against loss
of life, the performance of whose obligations is .secured by a pledge
of the property of each member to the extent of his own insurance,
the entrance fees being intended only as a fund for paying the exr
penses.* ^Vnd in Michigan it is also held that its statute forbids the
transaction of insurance business by companies, the policies of
which do not distinctly show the amount of life benefits assured, and
^ Commercial League Assoc, v. * Louisville German Mut. Fire Ins.
People, 90 111. 166, under 111. Rev. Ass'n v. Commonwealth, 9 Bush
Stat. 1874, c. 32, see. 31, exempting (72 Ky.) 394, under act of March
from the operation of act of March 12, 1870.
26, 1869.
858
PARTIES— MUTUAL COMPANIES § 34G
the premiums in which are not fixed nor contingent on losses.^ In
Missouri, the term ''insurance purposes" does not inchide associa-
tions which aid families of deceased members.^ In New York, a
benevolent association organized under the general act, and which
provides for the paj-ment by the members of one dollar each for the
benefit of the widow or minor children of a deceased member, is
held not to be a life insurance company,' and in the same state it is
decided that a society is not governed by the general insurance law
where it maintains a relief fund for the benefit of members reach-
ing a certain age, or when they shall become permanently disabled
by disease or accident, but is controlled by the statute regulating
charitable, benevolent, and beneficiary associations or societies.'
§ 346, What societies or associations are insurance companies:
cases. — 111 Dakota, where the principal objects and })urposes of an
association organized under the general incorj^oration laws of the
state is to secure to the beneficiarj', or representative of each mem-
ber on his death, the payment of a certain sum of money in accord-
ance with the conditions and requirements of the charter and by-
laws, such association is a life insurance company, and the relations
sustained by the members are ba-=cd upon contract.^ In Colorado
the ^Vncient Order of United Workmen, so far as it is engaged in
the business of life insurance, is to be treated in law as a mutual life
insurance company ; and a certificate of membership and insurance
tlierein is to be regarded as a written contract, and, so far as it goes,
^ People of the National Life Ins. S. W. 881 (held to be assessment
Co. V. State Commissioner, 25 Mich, plan insurance).
321, under Ins. Law 1872, p. 86. Keiv York. — Ronald v. Mutual Re-
^ Barbaro v. Occidental Grove, 4 serve Fund Life Ass'n, 132 N. Y.
Mo. A pp. 429. 378, 30 N. E. 739, 21 Ins. L. J. 634
'Durian v. Central Verein Her- (organized as a mutual benefit as-
mann'.s Soelune, 7 Daly (N. Y.) 168. socialion upon co-o])eraLive assess-
' Supreme Council Order of Chos- ment plan and so not entitled to no-
en Friends v. Fairman, 10 Abb. N. tice of due date of dues).
C. (N. Y.) 162, 62 How. Pr. (N. Y.) 0/(/o.— State v. Mutual Protective
386. Soc. 26 Ohio St. 19.
See further on this subject what Pevnsijlvania. — Ogle v. Barron
societies or associations are not in- (Supreme Council of the Royal Ar-
surance companies. canum) 247 Pa. 19, 92 Atl. 1071;
Minnesota. — State (ex rel. Clapp) Marcus v. Heralds of Liberty, 241
V. Federal Invest. Co. 48 Minn. 110, Pa. 429, 88 Atl. 678; Re National
50 N. W. 1028 (held not a life, Indem. & Endowment Co. 142 Pa.
casualty or endowment company and St. 450, 21 Atl. 879 (not a beneficial
not subject to the provisions of a association under the act of 1874 so
statute expressly declaring what that the court of common i)leas had
companies are included). no power to incorporate it).
Missouri. — Morrow v. National ^Masonic Aid Assoc, v. Taylor, 2
Life Assoc. 184 Mo. App. 308, 168 S. Dak. 324, 50 N. W. 93.
859
§ 346a
JOYCE ON INSURANCE
it is the measure of the rights of all parties.^" Under an Illinois
decision the term "insurance company" includes fraternal benefici-
ary associations, but not so in its restricted sense.^^ In Indiana, a
mutual benevolent society which provides a certain sum for the ben-
eficiary in the event of a member's death, to be paid from a fund
raised by assessment on the surviving member's death is in effect a
life insurance company. ^'^ In Kansas where such an association
contracts to pay at stated periods certain sums as endowments to
living members, or, in case of a member's death, then to pay the
benefit to designated beneficiaries, such contracts constitute life in-
surance, both as to the endowments and the benefits ; ^^ so in Maine,
in the case of Bolton v. Bolton,^* which was that of a Masonic relief
association, the court declares that if the prevalent purpose be that
of insurance, such purpose controls, whatever may be the associa-
tion's name, and that the benevolent or charitable results to the
beneficiaries will not change its legal character, and that the a.ssoci-
ation and others of like nature were mutual life insurance com-
panies.^* In Massachusetts, a contract by which an association, for
a consideration, engages to pay money upon the death of a member
to one Avho has an interest in the life, is not the less a contract of
insurance, because the amount to be paid is not a gross sum, but is
graduated by the number of members holding similar contracts;
nor because a portion of the premiums is^ to be paid upon the un-
certain periods of deaths of suchfnlembers ; nor because it provides
no means of enforcing payment of the assessments; and the fact
that the general objects of the association are benevolent, not spec-
ulative, will make no difference. Such an association is within the
operation of a statute imposing restrictions upon insurance com-
panies.^^ Under a Missouri decision it is held that the company
was not governed by the laws relating to benevolent associations but
by those governing life insurance companies."
§ 346a. Same subject. — In Missouri it is held that a contract of
insurance existed where there was a promise, based upon a consid-
i» Cbartrand v. Brace, 16 Colo. 19,
25 Am. St. Rep. 235, 12 L.R.A. 209,
26 Pac. ir)2.
^^ Peterson v. Manhattan Life Ins.
Co. 244 111. 329, 91 N. E. 466, rev'g
lir, III. App. 421.
12 Elkliart Miit. Aid Benevolent &
Relief Ass'n v. Iloushton, 103 Ind.
286, 287, 2 N. E. 763, 53 Am. Rep.
514, 1 West. Rep. 284.
1^ Endowment & Benefit Assoe. v.
State, 35 Kan. 253, 10 Pac. 872. 7?./-
amine State (ex rel. Supreme Lodge
of Fraternal Union of America) v.
Orear, 144 Mo. 157, 45 S. W. 1081.
1*73 Me. 299, 303.
1* See § 344d herein.
1^ Commonwealth v. Wetherbee,
105 Mas.-^. 349, 161.
1' Thompson v. Royal Neighbors of
America, 154 Mo. App. 109, 133 S.
W. 146, considered more fully under
§ 344b herein.
860
PARTIES— MUTUAL COMPANIES § 34Ga
eration, to pay upon a loss, and where the principal object and pur-
pose of the association was to insure the members under sucli con-
tracts. In this organization there were salaried ofTicers, and anyone
was entitled to membership upon compliance with the required con-
ditions as to age and health. Commissions were also paid by the
society to its members on risks obtained for it. It was also decided
that the contract couhl be made none the less one of insurance by
the organization calling itself a benevolent society, and obtaining
a charter as such, and though the amount payable was not a gross
sum, but graduated by the number of persons in a given class at the
time of the death of the insured, and though there was no means of
comi)plHng the payment of an assessment made upon a member's
deatli, and though the insurer was not liable for the amount ac-
tually collected from, members upon the happening of the loss, the
agreement would nevertheless be an actual contract of insurance
under the above facts. ^^ It is also decided in that state that an or-
ganization does not become a fraternal association by the designa-
tion of itself as such nor by being authorized to transact business as
such, where it is not within a statutory definition of what constitute^
these associations, but it is an insurance company within a stntulc
as to misrepresentations.^^ And where a fraternal beneficiary certif-
icate is assumed by a corporation and a policy substituted tlierefor
it w^ill be deemed an ordinary life policy where there is no proof
that it was to be otherwise treated.^" So the statutes relating to val-
ued policies govern mutual fire companies, not town companies, in
Missouri.^ Again, an association of railway mail clerks is not a luu-
tual benefit association but an accident insurance company where
its members are furnished accident insurance upon payment of dues
only, without initiation or ritual. ^ In a Nebraska case the contract
of a fraternal beneficiary association is construed as to representa-
tions and warranties as an insurance risk.^ In New Jersey the au-
thority conferred upon associations incorporated under an act to
incorporate benevolent and charitable associations with further au-
thority, under sup])lementary enactments to contract with members
Instate V. Citizens' Benefit Ass'n, Mutuat Fire Ins. Co. 80 Mo. App.
G Mo. App. 163, under Mo. acts 1874, 18, 2 IMo. App. Kep. 573.
p. 81, sees. 3, 5. ^ Young v. Raifway Maif Assoc.
19 Herzber"- V. Modern Brotlu rhood 12() Mo. App. 32o, 103 S. U. .ru.
of America, 110 Mo. Apj). 328, 85 S. ' Goff v. Supre_me Lodge Royal
W 986, Rev. Stat. 1899, sees. 1408, AcluUe.s, 90 Neb.o/S, 134 N. W. 239,
7890. 41 Ins. L. J. 375, 37 L.R.A.(N.S.)
20 Lovvenstein v. Old Cofunv Life 1191n, quoting from Aetna Ins. Co.
Ins. Co. 179 Mo. App. 304, 166 S. v. Simmons, 49 Neb. 811, 69 N. W.
W. 889. 1-5, 135.
1 Marshall v. American Guavanly
861
§ 346a
JOYCE ON INSURANCE
for death benefits,* is authority to make contracts in the nature of
life insurance. Such supplementary statutes are ineffectual, how-
ever, to authorize contracts of ordinary life insurance. But so far
as they provide for the payment of death benefits as a gratuity to
those entitled it is a life insurance having a benevolent purpose.*
In New Hampshire, a mutual relief association which makes an
assessment on surviving members of one dollar each for the pay-
ment of a benefit to an appointee of the deceased or a member of his
family is a life insurance company.® So in that state an ordinary
contract of membership in a mutual benefit association is a policy
of life insurance within the New Hampshire laws so that insol-
vency of the estate does not subject the sum insured to payment of
debts.' In Pennsylvania, it is said that a beneficial association for
mutual assistance in sickness or inability to labor is virtually a mu-
tual health insurance company.^ And in that state it is held that
throughout the insurance laws and in insurance parlance the word
"policy" is ordinarily used to indicate the contract of insurance
upon which there is a fixed premium. It does not usually' indicate
a contract with a member of a beneficial association or mutual in-
surance company. It does not indicate a certificate of membership.
A "certificate of membership" refers only to the contract between
a mutual company or a beneficial association and its members.^ In
Tennessee if a certificate obligates a fraternal order to pay a certain
sum where a member's death results from accident and he has also
the right to change his beneficiary the contract is one of life insur-
ance.^" In Texas a certificate of a fraternal benefit society is so far
a life insurance policy as to be a chose in action.^^ In Wisconsin, a
Ijenevolent mutual aid society was held subject to the same legal
principles in determining its liability for a loss as apply to mutual
life insurance companies.^^
* Act jMarcli 2, 1883, act approved
AprU 2, 1886.
* Goldeu Star Fraternity v. Mar-
tin, 59 N. J. L. 207, 35 Atl. 908.
6 Smith V. Bullard, 61 N. H. 381,
under N. H. Gen. Laws, c. 175.
7 Mellows V. iMellows, 61 N. H. 137,
139.
^ Franklin v. Commonwealth, 10
Pa. St. 357, 359.
^ Pennsylvania Mutual Life Ins.
Co. (Atfv-Genrs Opinion) 36 Pa.
Co. Ct. Rep. 687.
10 Littleton v. Sain, 126 Tenn. 461,
150 S. W. 423, 41 L.R.A.(N.S.) 1118.
11 Coleman v. Anderson, — Tex.
86
Civ. App. — , 82 S. W. 1057, aff'd 98
Tex. 570, 86 S. W. 730.
i^Erdmann v. Mutual Ins. Co. 44
Wis. 376, 379.
See further the following cases in
which the company, society, etc., have
been held to be life insurance com-
panies :
Alabama.— Supreme Commandery
Knights of the Golden Rule v. Ains-
worth, 71 Ala. 436, 46 Am. Rep: 332.
CoJorado. — Head Camp Pacific
Jurisdiction Woodmen of the World
V. Sloss, 49 Colo. 177, 31 L.R.A.
(N.S.) 831n, 112 Pac. 49.
Georgia. — Heralds of Liberty v.
PARTIES— MUTUAL COMPANIES § 346b
In the following appended cases such societies, etc., have been
held life insurance companies although the question is not dis-
cussed.^'
§ 346b. Whether co-operative or assessment plan or old line com-
pany: distinctions. — The statute may exclude the application of
the insurance laws to mutual insurance companies on the assess-
ment plan.^* And under a Wisconsin decision an insurance corpor-
ation furnishing life or casualty insurance in consideration, in
whole or in part, of contributions by its members on a basis of
equality, sufficient to meet its expenses and matured memberships,
as the necessities therefor arise, is a benefit or beneficiary corpora-
tion furnishing ca.<ualty or life insurance upon the mutual assess-
ment plan within the statute of that state exempting certain insur-
ance organizations from the general insurance laws of the state. ^^
Under a Missouri decision, it is decided that under the statute of
1887 assessment companies were not merely exempt from the laws
relating to the insurance department but also from the general in-
surance laws, and that the company before the court was not an
assessment company but a regular or old line company, as the pol-
icy was issued for a fixed sum, and the payment thereof was in no
degree dependent upon the collection of assessments upon persons
holding similar policies, but in consideration of a fixed premium to
be paid at stated intervals, based upon the mortality experience of
Bowen, 8 Ga. App. 325, 68 S. E. Pennsylvania. — Lane v. American
1008. Relief Assoc. 25 Pa. C. C. Rep. 129.
Illinois. — Martin v. Stubbin2:s, 126 Texas. — JSIational Life Association
111. 387, 9 Am. St. Rep. 620, 18 N. E. v. Hagelstein, — Tex. Civ. App. — ,
657. 156 'S. W. 353.
Iowa. — Grimes v. Northwestern Virginia. — Cosmopolitan Life Ins.
Leo'ion of Honor, 97 Iowa, 315, 327, As.soc. v. Koegel, 104 Ya. 619, 52 S.
64^N. W. 806, 66 N. W. 183. E. 166.
Missouri. — JMcPike v. Supreme ^' McClure v. Johnson, 56 Io.wa
Rulino: of the Fraternal Mvstic Cir- 620; Expressmen's Aid Society v.
cle, 187 Mo. App. 679, 173 S. W. 71; Lewis, 9 Mo. App. 412; Mutual Ac-
Edwards V. American Patriots, 162 cident & Life Assoc, v. Kavser, 14
Mo. App. 231, 144 S. W. 1117; Gru- Wkly. Not. Cas. (Pa.) 86:"risk v.
well V. National Council Knights & Equitable Aid Union, 20 Wkly, Not.
Ladies of Security, 126 Mo.^ App. Cas. (Pa.) 290.
496, 104 S. W. 884. See note 38 L.R.A. 53.
New York. — Alden v. Supreme ^* Ingle v. Batesville Grocery Co.
Tent of the Knights of Maccabees of 89 Ark. 378, 117 S. W. 241. As to
the World, 178 N. Y. 535, 71 N. E. statutory exemptions see § 344i here-
104; Weinberg v. Woodward, 26 in.
Misc. 283, 124 N. Y. Supp. 480. ^^ state v. National Accident Soc.
O/r/o.— State v. Standard Life As- 103 Wis. 208, 79 N. W. 220, 28 Ins.
soc. 38 Ohio St. 281; State v. Moore, L. J. 793, Law.s Wis. 1891, c. 418.
38 Ohio St. 7. "Benefit" and "beneficiary" not al-
863
§ :M6b JOYCE OX INSURANCE
life insurnnoe companies, even though it was conditioned that if
the amount specified in the policy was not suttlcient. the company
reserved the right to increase the premium. ^^ In a Federal case it is
said: "It is important to understand distinctly what is assessment
insurance or insurance on the assessment plan. A general state-
ment of this proposition is that it is an assessment insurance where
the benefit to be paid is dependent upon the collection of such as-
sessments as may be neces.sary for paying the amount insured. In
other words, it is assessment insurance if payments to be made by
the insured are not fixed — unalterably fixed — by the contract. On
the contrary, an old line policy is a contract where the amount to
be paid by the insured is fixed, the premiums to be paid are unalter-
able, and the lialiility incurred l)y the defendant company is also
fixed, definite and unchangeable.'' ^^ This distinction, thus defined,
is adopted in a Missouri decision as accurate and comprehensive and
as well supported in the courts of that state. And the court adds •
"Tlie character of the i^olicy is to be determined by the nature of
the contract it expresses*. If the benefit to be paid by the insurer
is fixed, and level premiums are charged with no provision in the
contract authorizing a raising or lowering of the premiums to meet
the demands of changed conditions, the policy will be classed as an
old line contract, regardless of the nomenclature of the policy, or
the character and avowed purpose of the company that issued it."
And the policy in issue in the ca.se was held an old line policy.^*
ways used in same sense in statutes That certifieate of assessment com-
as descriptive of insurance corpora- jjany is life policy under Missouri
tions or societies. Id. 214. statute forbidding suicide as defense,
^^ Aloe V. Fidelitv ^Mutual Life As- see Knights Templars' & Masons*
soc. IG-t Mo. 675, Vo S. W. 993, 29 Life Indemnity Co. v. Jarman, 104
Ins. L. J. 679. See also Jacobs v. Fed. 638, 44 C. C. A. 93, 30 Ins. L.
Omalui Life Assoc. 146 Mo. .")23, 48 J. 230, aff'd 187 U. S. 197, 47 L. ed.
S. W. 462. Examine Jacobs v. 139^ 23 Sup. Ct. 108, 32 Ins. L. J. 57.
Onuilia Life Assoc. 142 Mo. 49, 43 ^yi,^^ cori>orations, associations or
b. \v . oio. .societies are deemed to be engaged in
As to pecuniary profit as factor, ^j^^ business of life or casualty in-
^^^n^h i'\ '"^ T,"^; T o"- ^ ^ ^"^-an^e on the co-operative or assess-
" Havdel v. Mutual Iteserve bund 4^ 1 • xt v 1 i- nnno
T -4^ V ' /TT o n n \ no T? 1 onn i^^^t plan m New York, see act lf)09
Life Assoc. (U. S. C. C.) 98 led. 200, -jo oq +- r< it om
»• 1 -I A 1 T.-' 1 '7^^Q \\ n n a <"• ■><5. c- 28 ot Consol. Laws, sec. 201 ;
case attd. 104 led. ^18, 44 C. C. A. „ 1 , t t *xt ^r / j ini-\
2QC) Parkers Ins. Law of N. Y. (ed. 191.))
For definition of assessment insur- P- ''O*'- ^^^ People (ex rel. Mount)
ance, see § 7a herein. "•'■ Chapter General of America,
18 Knott V. Security Mutual Life Knights of St. John & Malta, 198 N.
Ins. Co. 161 Mo. App. 579, 592, 144' Y. 15, 90 N. E. 1134.
S. W. 178, 41 Ins. L. J. 842, 851, Policy to indicate a.ssessment plan
852. See Tice y. Supreme Lodge by printing on face of policy "assess-
Knights of Pythias, 204 Mo. 349, 102 ment system." N. Y. Ins. Law, 1900
S. W. 1013. ■ c. 33, Consol. L. c. 28, see. 219; L.
864
PARTIES— MUTUAL COMPANIES § 34Gb
In the Michigan case of Rensenhouse v. Seeley "* it is said that
mutual benefit and co-operative associations, whether corporations
or mere voluntary associations, are, strictly speaking, insurance or-
ganizations, whenever, in consideration of periodical contributions,
they engage to pa}' the member or his designated beneliciary a ben-
efit upon the happening of a specified contingency. What consti-
tutes life insurance on the assessment plan within the meaning of
Ohio Statute, must be determined by the laws of that state; and
these contemplate that such insurance must be for the sole benefit
of the policy holders, and the principal source of revenue must arise
from post mortem assessments intended to liquidate specified losses
and if a foreign company complies with the statute it may be ad-
mitted to transact business in the state even though it may have
capital stock and stockholders for whose benefit it was created. ^^
The test is not the manner or mode of affording insurance but
whether the company undertakes and agrees for a consideration to
indemnify or give security against loss. And where a fire insurance
company conducted on the mutual co-operative plan, relies entirely
upon assessments to pay losses, and owns no property and accumu-
lates no fund therefor, it is an assessment insurance company.^"
And the charter powers, by-laws and the laws of the state where the
company was organized do not determine the character of the in-
surance issued, but that is settled by the terms of the policy and the
laws of the state where the foreign company takes its risk.^ So un-
der a Missouri decision the character or terms of the policy which
a company issues determinas whether or not it is an a.ssessment com-
pany, and not the certificate issued by the superintendent of insur-
ance.'' In Illinois a corporation is one of life insurance, though or-
ganized to do business on the assessment plan under the name of a
benevolent society.^ Under an Iowa decision a mutual insurance
1913, c. 28, sec. 219; Parker's N. Y. '^° Lee Mutual Fire Ins. Co. v.
Ins. L. (ed. 1915) p. 340. State, (50 IMis.s. 395.
As to provisions affectinj? assess- ^ Federal Union Surety Co. v.
ment corporations only, and N. Y. Flemister, 9.") Ark. 389, 130 S. W.
Ins. Laws, art. IX. relatin"- to Co- ")74, cilln;/ Minneapolis Fire & Ma-
operative Fire Ins. Corp. see N. Y. rine Mutual Ins. Co. v. Norman, 74
Ins. Law 1909, c. 33, Consol. L. c. 28, Ark. 190, 85 S. W. 229. Eramine
sec. 266; Parker's N. Y. In.s. L. (cd. Travelers Protective Assoc, of Ainer-
1915) p. 383. ica v. Sniitli, — Ind. — , 101 N. E.
"» 72 Mich. 603, 617, 40 N. W. 817, 42 Ins. L. J. 780.
765. 2]yfpX)onald v. Bankers' Life As-
19 State (ex rel. National Life As- soc. 154 Mo. 618, 55 S. W. 999, 29
see.) V. Matthews, 58 Ohio St. 1, 39 Ins. L. J. 780.
Ohio L. J. 241, 40 L.R.A. 418, 49 N. ^ Lehman v. Clark, 174 Til. 279, 43
E. 1034, 27 Ins. L. J. 614; Kev. Stat. L.R.A. 648, 51 N. E. 222, 27 Ins. L.
sec. 3630e. • J. 745, rev'g 71 III. App. sm.
Joyce Ins. Vol. I. — 55. 865
§ 34()b JOYCE ON INSURANCE ,
company organized under a statute authorizing an a.ssociation of
persons making mutual pledges and giving valid obligations to each
other for their own insurance on the av<sessnient plan, does not be-
come a stock company by the issuance of shares to the subscribers
of a guaranty fund, which shares are secured bv obligations of the
liolders, and are subject to assessments from time to time to meet
any deficiency that might arise in the advancements, assessments,
and pledges made to pay losses and expenses. Therefore, it cannot
do business on the stock plan, cannot write a policy for a fixed
amount, accept premiums as such, nor declare dividends.* In Kan-
sas, an insurance association organized on the co-operative plan, is
exempt from the insurance laws where payments are made to a ben-
eficiary by assessments on living members, but one of the require-
ments of the company is that each person, before becoming a mem-
ber, shall make a deposit to form a guaranty fund for the payment
of assessments.* In Michigan, a mutual or co-operative association
is not a life insurance company, under the statutes of that state, al-
though it has initiation fees and assessments, and pays a weekly
amount for accidental disability.^ So a co-operative or mutual ben-
efit associations are life insurance companies and are likewise with-
in the terms of an anti-rebate statute.' The Minnesota courts hold
tliat an association for the transaction of the business of life and
casualty insurance on the co-operative or assessment plan is, in
effect, a mutual benefit society,* and that an association which raises
a fund by a.ssessment of one dollar each on all the members, for the
endowment of the wife of each member, is not a "benevolent soci-
ety" under the state statute relating to the incorporation of such
societies.^ And an incorporated association for the purpose of ob-
taining employment for its members while living, and to render
pecuniary assistance in a stated amount to the families of deceased
members by assessments upon the survivors, is a life insurance com-
pany within the meaning of the Minnesota statute.^" So the laws
governing life insurance are held to apply to a nuitual benefit com-
pany on the assessment plan rather than the laws applicable to ben-
* Mutual Guaranty Fire Ins. Co. sioner of Ins. 128 Midi. 85, 8 Det.
(In re Assignment)" v. Barkor (Al- L. N. 544, 87 N. W. 126, 30 Ins. L.
vord V. Barker) 107 Iowa, 143, 70 J. 919.
Am. St. Rep. 149, 77 N. W. 868. » Hesinger v. Home Benefit Assn.
5 State v. Bankers' & Meroliants' 41 Minn. 516, 43 N. W. 481.
Mutual Ben. As.soe. 23 Kan. 499, un- ^ State v. Critcliett, 37 Minn. 13,
der r.aws 1871, p. 248. 32 N. W. 787. See State v. Trubey,
SRensenhonse v. Seelev, 72 Mieh. 37 Minn. 97, 33 N. W. 554.
603, 40 N. W. 765, under How. Stat. ^^ Brown v. Balfour, 46 .Minn. 68,
sec. .4225, Law.'; 1877, act No. 29. 12 L.K.A. 373, 48 N. W. 604, Gen.
' Citizens Life Ins. Co. v. Commis- Slat. 1878, c. 34, sec. 368.
866
PARTIES— MUTUAL COMPANIES § 346c
evolent a^gociations a.s defined by the Missouri statute. ^^ Again, a
commercial traveler' association which has not complied with a
statute relating to fraternal associations is a niuUial benefit associa-
tion on the assessment plan and not an old line insurance com-
pany. ^^
§ 346c. Whether company fraternal beneficial association or mu-
tual assessment company: distinctions. — A company organized in
one stale as a fraternal l)eneficial association, not for profit, but with
power, among other things, to establish an indenmity fund to care
for disabled meml>ers of families, that is to carry certain benefits in
the nature of accident insurance, declares itself within the provi-
sions of the statutes of another state governing mutual assessment
insurance companiCvS by applying for a license to do business there
as such an assessment company, and by issuing policies authorizing
assessments of policy-holders.^' So it is held that it is settled by the
weight of authority that the character of the business- done by a ben-
eficiary association is to be determined by tlie laws of each state in
which it transacts business and not by the laws of the state of dom-
icil." But it is decided that if all the allegations in the answer of
a fraternal benefit association show it is not such, and the policy is
held to be an assessment one. the laws of the state where it was or-
ganized as a fraternal insurance company are admissible to show the
character of tlie association.^* ]n (Jeorgia an assessment fire insiu--
ance company is not a fraternal benefit order under a statute as to
such orders. ^^ The New York laws malvc a distinction between
assessment casualty insurance companies and beneficiary or fra-
ternal societies."
^1 Tlionipson V. Eoval Neighbors of W. 002; Knott v. Seeuritv ^lutual
America, 154 Mo. App. 109, 133 S. Lile Ins. Co. 101 Mo. A pp. .',79, 144
W. 146. S. W. 178; Missey v. Supreme Lodge
^2 Western Comnici-cial Travelers Knights & Ladies of Honor, 147 Mo.
Assoc. V. Tennent, 128 Mo. App. 541, App. i;{7, 120 S. W. .').')9. Compare
106 N. W. 1073. Association was or- I\lcI)onald v. Bankers Life Assoc. 154
ganized under laws 1878 but did not :\Io. 018, 55 S. W. 999, 29 Ins. L. J.
comply with or take advantage of 780.
subsequent statutes. ^* ^larcus v. Heralds of Liberty,
13 Travelers Protective Assoc, of 241 I'a. 429, 88 All. 678. See ^§ 225
America v. Smith, — hid. — , 101 N. et seq. herein.
E. 817, 42 Ins. L. J. 1197, act 1897, " Easter v. Brotherhood of Amer-
Burns 1908, sees. 4739-4764. See ican Yeomen. 154 Mo. App. 456, 135
Federal Union Surety Co. v. Flem- S. W. 904.
ister, 95 Ark. 389, 1*30 S. W. 574; i« Pitryear v. Farmers Mutual Ins.
Armstrong v. Modern Brollici-liood Assoc. 137 Ga. 579. 73 S. E. 851, Civ.
of America, 245 Mo. 153, 149 S. W. Code 1910, sees. 2866-2877.
459 (considered under § 344b here- i' People (ex rel. Mount) v. Chap-
in) ; Ea.ster v. Brotheihood of Amer- ter General of America, Knights of
ican Yeomen, — Mo. App. — , 156 S. .
867
§ 346d JOYCE ON INSURANCE
r
§ 346d. Whether sick benefit, burial, and beneficial association an
insurance company. — Under an Indiana decision, a contract issued
by an association to furnish tlie holder with burial at death, at a
specified cost, the money to be raised by assessments upon members
of the association who are secured by solicitation from the gen-
eral public, is one of life insurance within the meaning of a
statute regulating such business. ^^ So in Missouri although the
object of a fraternal benefit association is to furnish old age,
sick and funeral benefits in consideration of stipulated pay-
ments, still the nature of its business will be considered irre-
spective of the name of the association and where the plan set
forth in its prospectus is referred to as, and stated to be that of life
insurance, it conducts a life insurance business. ^^ And in Washing-
ton the business of a corporation is that of life insurance where its
sole agreement is to furnish funerals and accessories even though no
beneficiary is designated, the person who would otherwise be obli-
gated for the buriaf expenses being the beneficiary.^" It is held in
New Jersey, however, that a benevolent society the aim of which is
to help sick members, furnish burial and to help widows and other
surviving beneficiaries is not an insurance company even though the
members have a right to benefits and an interest in all the property
. which is in a sense impressed with a trust for the uses of the associa-
tion and also a trust for all the members. The court per Stevens,
V. C. said: ''That tlie contract of a beneficial society with its mem-
bers is not ordinarily a contract of insurance was decided by the
supreme court in State v. Taylor.^ The constitution and by-laws
of this society do not embody the elements of such a contract. The
amounts paid in. in fees and dues, bear very slight, if any, relation
to the amount to be paid in ca.se of sickness or death. The death
payment seeins to be derived, in great part, from a special assess-
ment 'of a certain sum' in the case of a member and of 'a less but
certain sum' in the case of a member's wife. , . . It is admitted
that the fund has been increased by means of picnics, balls, etc.
St. John & ^Falta. lf)8 N. Y. 1.'), 00 Definition of burial insurance, see
N. E. 1134, I^ws 1903, c. 4.')0, sec. § 7e lierein.
235 ; Laws 1892, c. 690, sees. 207, 23.1 ; As to burial, etc., associations, see
Laws 1883, c. 17."); Laws 1881, c. 2:)(), Howell's Mich. Stat. Annot. (2d ed.)
sec. 1. See also Ins. Laws, act 1909, sees. 943.J, 9436 ; ani'd 190-3, act No.
e. 33, p. 28, Consol. L. sec. 201; Park- 68; ain'd 1911, act No. 126.
er's Ins. Law of N. Y. (ed. 191.')) p. " Citv of Trenton v. Humel, 134
306. Mo. App. .-39.-), 114 S. \Y. 1131.
18 State V. Willett, 171 Ind. 296, 23 20 state (ex rel. Fishback) v. Cas-
L.R.A.(N.S.) 197, 86 N. E. 68. ket & Undertakiii.s: Co. 82 Wash. 124,
On burial insurance and funeral L.R.A.191.")B, 9/6, 143 Pac. 878.
benefits, see notes in 23 L.R.A.(N.S.) ^ 56 N. J. L. 49, 27 Atl. 797.
197, and 47 L.R.A.(N.S.) 299.
868
PARTIES— MUTUAL COMPANIES § 346e
. . . By the contract itself, . . . the amount payable for sick
and death benefits, is subject to annual revision. . . . The prop-
erty of the association is, in a sense, as counsel arguas, impressed
with a trust for the uses of the association, but the trust is for all the
members." ^
§ 346e. Whether railroad relief associations are insurance com-
panies. — The question whether railroad relief associations or depart-
ments are insurance companies has been discussed at length in a
case in New Jersey and the authorities reviewed. The relief fund
scheme, whereby its employees might enter certain contract relations
with the company, based upon a consideration of regular payments,
said stipend being taken from their wages as a voluntary contribu-
tion, provided for payment of sick and accident benefits to said em-
ployees, and death benefits to their relatives and appointees. In case
contributions of employees, with legacies, gifts, and interest on in-
vestments were insufficient for the company to make the required
payments under its contracts, it supplied the deficit It did not ap-
pear that the employees who entered into the offered contract be-
came members of any fraternal organization or acquired any right
to govern or control the operations of the relief department, or the
investment or expenditure of its moneys. The contract, in the ab-
sence of legislation on the subject, was held enforceable between the
parties whatever might be the relation of the relief depai'tment to
the insurance laws of the state, even if in violation thereof, and that
a trust fund was exhibited in the case out of which the payments
under its contracts were primarily to be made by the company. In
its opinion the court, per Stevenson, V. C. says: "The relations of
the Voluntary Relief Department established by the Pennsylvania
Railroad Company to the company itself and to the employees of
the company who become members of this department are disclosed
to some extent in the opinion of Vice Chancellor Bergen, in the case
of Pennsylvania R. R. Co. v. AVarren.^ The scheme which seems
to be a combination of a sick benefit society and a life insurance
company, has been ad()[)ted by several of the larger I'ailroads of the
country. In some states the courts, probably basing their decision
upon views of the essential nature of insm-ance contracts and insur-
ance business which do not obtain in this state, have held that this
scheme in its entirety does not involve the prosecution of insurance
business.* The law of New Jersey in regard to the character of busi-
2 Pirics V. First Russian Slavonic railroad employees as insurance corn-
Greek Catholic Benev. Soc. 83 N. J. panies, see note in 47 L.R.A.(N.S.)
Eq. 29, 89 Atl. 1036. 299.
3 69 N. J. Eq. 706, 60 Atl. 1122. * Citing DonaM v. Chicago, Bur-
On associations providing relief for lington & Quiney R. R. Co. 93 Iowa,
869
§ 346e JOYCE ON INSURANCE
ness such as this Relief Department is organized to prosecute may
be ascertained from the following cases: State v. Taylor,* Golden-
star Fraternity v. Martin.^ Holland v. SnjH-eme Council of Order of
Chosen Friends.'' No legislation in New Jersey has been cited which
relieves the defendant corporation from the operation of our general
insurance law.' Whether in case the whole scheme of the Relief
Department of the defendant corporation is violative of the lettei-
and policy of our insurance laws that fact can in any way affect the
equities claimed by strangers to the contract between the defendant
<-or|)oration and its emj)loyees. is a question which has not been
raised in this case, and will not be considered. Whatever may be the
relation of this Relief Department to the insurance laws of the state,
the cojilract witli which we have to deal is plainly enforceable l>e-
tween the parties, and will be regarded as enforceable in this court
at the suit and on behalf of any party for whose benefit the contract
was made.
"1. The contract in this case is in writing, and consists of the ap-
plication of the employee of the defendant corporation, the accept-
ance of the superintendent of the Relief Department, an ofticer of
the corporation, and the regulations of the Relief Department ap-
proved by the board of directors of the defendant corporation. The
written application expressly refers to the regulations and incorpor-
ates them into the contract. While the bill alleges that the object
of the Relief Department as expressed in the regulations is the es-
tablishment and management of a fund for the payment of accident
and sick benefits to the employees of the Pennsylvania Railroad
Company, and death benefits to 'the relatives (of such employees)
or other beneficiaries specified in the applications of such employees,'
onlv two of the regulations and a portion of a third are set forth. It
may be that no more liglit would be thrown on this ca.^^e if the entire
book of regulations had been presented to the court in the bill of
complaint, but, if any doubts arise as to the legal or equitable rights
of any of the parties to this suit on account of the difficulty of dis-
covering the exact terms of the contract, the solution of such doubts
284, 33 L.R.A. 492, 496 (1895) 61 N. Life Ins. Co. v. i\refliaiiics' Savings
W 971; Jolinson v. Philadelphia R. Bauk & Tiu.st Co. 38 L.R.A. 33, 40,
Co. 163 Pa. 127, 29 Atl. 854 (1894). 72 Fed. 413, 19 C. C. A. 286, 316, 37
5 56 N. J. Law, 49, 27 Atl. 797, .s. o. U. S. App. 692, 73 Fed. 653, 19 C.
aft'M 56 N. J. I^w 715, 31 Atl. 771 C. A. 316, _43 U. S. App. 75, 38
(189;!). L.R.A. 33, (0; 1 Bacon on Benefit
659 N. J. Law, 207, 35 Atl. 908 Societies and Life Insurance, sees.
(Errors and Appeals 1896). 50, 51, 52.
754 N. J. Law, 490, 493, 25 Atl. » Laws 1902, pp. 445, 44G, sees.
367 (1892). See note to Penn Mutual 88, 89.
870
PARTIES— MUTUAL COMPANIES § 346e
I think must be in favor of the defendants. 'Omnis presumptio con-
tra preferentem.'
"2. In this case we have to deal with contract relations pure and
simple, unaffected by any special charter from the state, or any pro-
visions of a statute regulating the creation and operations of benev-
olent associations, or quasi benevolent insurance departments of cor-
porations. No legislation has been cited at the argument qualifying
the above statement. This characteristic of the case before the court
distinguishes it from numerous cases such as Britton v. Supreme
Council of the Royal Arcanum,^ Supreme Council Order of Chosen
Friends v. Bennett,^" American Legion of Honor v. Perry,^^ Grand
Lodge Ancient Order L^nited Workmen v. Connolly.^^ On account
of this distinction, these cases and similar ones in my opinion are
destitute of a large part of the force attributed to them by counsel
for the complainant in his oral argument and brief." ^^
Under an Ohio decision an association established by a railway
company, composed of some or all of its employees and the compa-
ny, for the purpose of accumulating and maintaining a relief fund
created by voluntary contributions from their wages by employees
who apply for membership in said fund and are admitted : the rail-
way company to take charge of, and be responsible for, the funds;
make up deficiencies in the same, supply facilities for conducting the
business, and pay the operating expenses, supply surgical attendance
for injuries received in its service and pay the members or their des-
ignated beneficiaries the stated share of the benefit fund retained by
the company, is not an insurance company or association; and in
agreeing to perform and in performing each and all of said acts, said
railway company is not engaged in the transaction of insurance bus-
iness.^* In an Iowa case a relief department of a railroad company
to aid employees in case of sickness, accident or death, from a fund
raised by assessments upon, supplemented by contributions from the
railroad company, resort to which fund shall bar an action against
the company, or be barred in turn by such an action, is not an in-
9 46 N. J. Eq. 102, 19 Am. St. Rep. Co. 6.3 N. J. L. 2.T2, 76 Am. St. Rep.
376, 18 Atl. 675. 211. 6 Am. Ne^. Rep. 601, 15 Am. &
1047 N. J. Eq. 39, 19 Atl. 785, En?. R. Cas. N. S. 851, 4 Chic. L. J.
rev'd 47 N. J. Eq. 563, 24 Am. St. Wklv. 370, 43 Atl. DOS, where a sim-
Rep. 416, 14 L.R.A. 343, 22 Atl. 1055. ilar oontraet is held not one of insur-
" 140 Mass. 590, 592, 5 N. E. 634. ance within the meaning of the New
12 58 N. J. Eq. 180, 43 Atl. 286. Jersey law.
^^ Wolfstern v. Pennsylvania Rail- ^* State (ex rel. Sheets) v. Pitts-
road Relief Department, 76 N. J. Eq. bursrh, Cincinnati, Chicago & St.
78, 74 Atl. 533, 39 Ins. L. J. 137, per Louis Ry. Co. 68 Ohio St. 9, 64
Stevenson, V. C. L.R.A. 40.5, 67 N. E. 93, 96 Am. St.
Compare Beck v. Pennsylvania Rd. Rep. 635.
871
§ 346e JOYCE ON INSURANCE
surance company.*^ And under an Illinois decision an association
of like nature is not required to comply with the insurance law.^^
In New York a railroad relief association is not engaged in life or
casualty insurance business upon the co-operative or assessment plan
so as to be subject to the provisions of the article of the insurance law
relating to the latter class of corporations." In a 'Nebraska case a
Voluntary Relief Department in connection with a railroad com-
pany is mentioned in the syllabus by the court as a "relief depart-
ment in the nature of a mutual insurance association" and in the
opinion as ''somewhat in the nature of a mutual benefit society."
The general features of this voluntary association were as follows:
it paid to its members stipulated sums during disability caused by
sickness or accident, and paid to designated beneficiaries certain
sums upon the death of members. The members were employees of
the railroad companies operating the department. The employing
railroad company contracted to make up deficiencies in the relief
fund for the payment of losses accruing to those employees. It also
furnished clerks and other employees to conduct the affairs of the
department. The department had a superintendent, charged with
the general conduct of its business, but subject to the supervisory
control of an advisory committee, consisting of the general manager
of the railroad, certain members chosen by the directors of that road,
and other members chosen by employees of dift'erent divisions of the
road who were members of the department. The method prescribed
for obtaining membership was for the employee to make an appli-
cation upon a form prescribed hj the by-laws, and submit himself
to a physical examination by an examiner appointed by the depart-
ment. His application was then passed upon by the superintendent,
and, if approved, a certificate of membership was issued. The prin-
cipal source of income was by deducting specified amounts monthly
from the wages of the members. The railroad company made this
deduction and retained the fund, paying interest to the department
upon monthly balances, in his hands. These are the general fea-
tures. The court per Ervine, C, said: ''While the authorities are
very numerous in regard to contracts of mutual insurance and in re-
gard to benefit associations, but little light is derived from them in
the solution of the questions here presented. The cases are nearly
all inapplicable because of the pecuniary constitution of this associa-
15 Donald v. Chicago, Burlington " Colaizzi v. Pennsylvania Rd. Co.
& Quincy Rd. Co. 03 Iowa, 284, 33 208 N. Y. 275, 101 N. E. 859: Consol.
L.R.A. 492, 61 N. W. 971. Laws 1909, e. 28, sec. 201; Parker's
16 Eckman v. Chicago, Burlington N. Y. Ins. Law (ed. 1915) p. 306.
& Quincv R. Co. 64 lU. App. 444, 1
Chic. L. J. Wkly. 325.
872
PAKTIES— MUTUAL COMPANIES § 346f
tion. ]\Iost of the mutual benefit associations perform social func-
tions, or are such organizations that the insurance is only an inci-
dent of the membership. There the question as to whether one is
or is not a member must be solved Avith a view to other objects of the
association. In the case of mutual insurance companies every pay-
ment is voluntarily made by the member, and may be wdth the
express or implied understanding that its payment is merely condi-
tional. Here, while the assessments are termed 'voluntary contribu-
tions,' they are only voluntary in the sense that an employee of the
railroad may enter the association or not, as he sees fit. If he elect
to enter, he must in so doing give to his employer and the associa-
tion the power to seize the assessments without any further exercise
of his own volition." ^® In an Indiana case where the point at issue
and the one decided was the right to change benefieiarie:^. it was held
that the statute of that state relative to such right ^^ did not apply
to a railroad relief association which was unincorporated. The con-
tract in this case; which was with a number of railroad companies,
provided for the creation of a fund, the ratable contributions of each
company and its employees of such sums as might be necessary to
meet the expenses of administration and to pay such benefits as be-
came due. It was also provided that the association's affairs should
be managed by a joint advisory committee, elected in part, from
time to time, by the respective employees of the constituent com-
panies. Fixed death benefits were to be paid to the relatives of the
employee or to other designated beneficiaries. As the association
had no capital stock, and as its members contributed cash to a com-
mon fund, out of which benefits were paid, and as the contributing
employees, through their representatives, participated in the admin-
istration of the association it was declared to be clearly of a mutual
character and not, as above stated and for the reason above stated,
within the terms of the statute. It was further declared that the
courts recognize a difi'erence between ordinary insurance contracts
and the certificates of mutual insurance companies as to the extent
of the right of insured to change l)eneficiaries.2°
§ 346f. Stock associations with beneficiary fund not an insurance
company. — A voluntary unincorporated association combined for
the purpose of facilitating the purchase and sale of its stocks and
also provides for the creation of a trust fund from which upon death
of a member a payment of a certain sum is directed to be made to
18 Burlington Voluntary Relief De- " Burns 1901, see. 5050.
partraent of Chicago, Burlington & ^o jyfjjg^jj y Mason, 160 Ind. 191,
Quiney Rd. Co. v. White, 41 Neb. 547, 65 N. E. 585.
43 Am. St. Rep. 701, 59 N. W. 747,
751, 26 Ins. L. J. 224.
873
346f
JOYCE ON INSURANCE
such person or objects as he might have designated in writing, or
in case of no written designation, then to certain specified persons,
such paj'ment to be deemed an absolute donation free from all other
claim or control does not constitute a contract of insurance nor is
such association doing a life insurance business, but such provision
merely constitutes a beneficiary fund incidental to the primary ob-
ject.^
^ Swift V. San Francisco Stock & those organized for benevolent, social,
Exchange Board, 67 Cal. 567, 8 Pac. etc. purposes to which the purpose of
94, distinguishing between assoeia- mutual insurance is added for mutual
tions contracting primarily for life aid.
insurance with their members and
874
CHAPTER XIX.
PARTIES— MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES,
CONTINUED POWERS.
§ 350. Power of mutual companies, societies, or aasoeiations affecting
the contract : ultra vires.
§ 350a. Same sub ject : powers as to membership.
§ 350b. Same subject: power to classify members: discrimination as to.
§ 350c. Same subject: power to restrict or extend classes of beneficiaries.
§ 350d. Same subject: limitation of amount of risk.
§ 350e. Same subject: limiting liability as to premiums and assessments.
§ 350f. Same subject: contract to return dues.
§ 350g. Same subject: paid-up or extended insurance: non-forfeitable and
incontestable insurance.
§ 350h. Same subject: waiver by association, or mutual benefit company.
§ 350i. Same subject: estoppel: defense of ultra vires.
§ 350j. Same subject: reinsurance.
§ 350k. Same subject: power as to other business or risks.
§ 3501. Same subject: contract with amusement company valid.
§ 350m. Same subject: when company or society can change plan: im-
pairment of obligation of contract.
§ 350n. Same subject: when company or society cannot change plan.
§ 350o. Same subject: when change from mutual, etc., to joint-stock or
stock plan can be made.
§ 350p. Same subject : when change from mutual, etc., to joint-stock or
stock plan cannot be made.
§ 350q. Right to convert friendly society into company: injunction.
§ 350r. Same subject: consolidation or merger.
§ 350s. Same subject: reincorporation or reorganization of mutual com-
pany on stock plan.
§ 350t. Same subject: reorganization or reincorporation: impairment of
obligation of contract.
§ 351. Same subject : guaranty or reserve fund.
§ 35la. Same subject : guaranty or reserve, "mortuary reserve," "death
benefit," "reserve and emergency," funds: trust funds.
§ 352. Benevolent and fraternal organizations subject to laws of state
and jurisdiction of courts: conditions precedent to resort to
courts.
875
§ 350 JOYCE ON INSURANCE
§ 352a. Same subject.
§ 352b. Same subject: strict construction of such conditions precedent.
§ 352c. Same subject : Kelly v. Trimont Lodge.
§ 353. Absolute right to become member under charter of mutual com-
pany.
§ 354. Contributions by subordinate lodge to supreme lodge : specific
purpose : power of disposal of funds.
§ 354a. Right of subordinate circles or lodges to funds: rights of member
who has withdrawn.
§ 354b. Funds of subordinate circle or lodge: trust funds: cannot be di-
verted.
§ 354c. Duty of association to protect subordinate circle's funds against
diversion.
§ 355. Effect of decision by official body created by constitution of order.
§ 356. Delegation of power by supreme lodge : mutual benefit society.
§ 357. Subordinate association cannot be deprived of charter without
hearing.
§ 358. Member or officer of benevolent association cannot be expelled
without hearing.
§ 350. Power of mutual companies, societies, or associations af-
fecting the contract: ultra vires. — In mutual companies or societies
or associations whether they be incorporated or voluntary organiza-
tions, the charter or articles of association must be looked to as the
measure of their powers, as these constitute their fundamental and
organic law, the compact governing their acts subject to the consti-
tution and laws of the state.^ So in Illinois the rule is applied to a
fraternal beneficiary society that in ascertaining the scope of the
powers of a corporation organized under a general law, the court
2 Chamberlain v. Lincoln, 129 Mass. Ohio. — State ex rel. v. Monitor Fire
70. Assoc. 42 Ohio St. 555.
See also the following cases: Pennsylvania. — Commonwealth v.
/Z//no/s.— Golden Rule v. People, St. Patrick's Ben. Soc. 2 Binn. (Pa.)
118 Jll. 492, 9 N. E. 342. 441, 4 Am. Dec. 453.
Kansas. — State ex rel. v. Bankers' Tennessee. — Knapp v. Supreme
& Merchants' Mutual Benefit Assoc. Commandory, United Order of the
23 Kan. 499. Golden Cro.ss of the World, 121 Tenn.
Massachusetts.— GvosvenoT v. Unit- 212, 118 S. W. 390.
ed Society, 118 Mass. 78. See also 1 Morawetz on Corpora-
Minnesota. — Bergman v. St. Paul tioiis (ed. 1882) e. vii. (2d ed.) c. xv.
Mut. Building Assoc. 29 Minn. 275, As to powers of regular or old-line
13 N. W. 120. companies; ultra vires. See § 334
Missouri. — Gibbs v. Knights of Py- herein. As to powers; parol con-
thias, 173 Mo. App. 34, 156 S. W. 11. tracts; mutual companies; see § 34
Neiv York. — Austin v. Searing, 16 herein.
N. Y. 112, 69 Am. Dec. 69.
876
PARTIES— MUTUAL COMPANIES § 350
loolcs to the certificate of the promoters and the articles of incorpo-
ration, and its powers are such only as are therein specifically enu-
merated and such others as are incidental or necessary to carry the
express powers into effect.^ And the following general rule, govern-
ing cases other than mutual etc., companies, is followed in a frater-
nal beneficiary association case. That is, that a corporation has pow-
er to do such business only as it is authorized by its act of incorpo-
ration to do and no other. It is not held out by the govenrment, nor
by the stockholders, as authorized to make contracts which are be-
yond the purpose and scope of its charter; also that there is a clear
distinction between the exercise of a power not conferred upon it,
varying from the objects of its creation as declared in the law of its
organization, and the abuse of a general power, or the failure to com-
ply with prescribed formalities or regulations, in a particular in-
stance, when such abuse or failure is not known to the other con-
tracting party, and it was declared that the correctness of the first
propo,sition was not doubted, and that the second proposition, a
rightful limitation of the ap})lication of the general principle, was
no less firmly established both in sound reason and authority, and
said last principle was held decisive in the case before the court*
Again, in Nebraska in the case of two mutual fire insurance com-
panies organized under the laws of that state to insure city and vil-
lage property * the court, per Good, C, stated the rule applicable to
and governing the ca.se as follows: "It is a well-known and recog-
nized principle of law that a corporation possesses only such powers
as are granted to it. This is modified to the extent that all powers
which are necessary to the enjoyment of the rights and,^privileges
granted are included in the grant of powers. This is upon the
theory that it is essential that the corporation shall have the right to
carry out and enjoy the rights and privileges conferred upon it, so
that any right or power which is essential to the enjoyment of the
powers granted is imi)lied. In Smith v. Steele,^ it is said: 'But a
corporation is a mere creature of the statute, and. being such, it pos-
sesses only those [)roi)erties and powers which the charter of its crea-
tion confers upon it' In State v. Atchison & Nebraska Kd. Com-
^ National Union V. Keefe, 263 111. liability of insurance company on
453, 105 N. E. 319, 44 Ins. L. J. 125, contracts of another comapiiy wliicli
citing Rockhold v. Canton Masonic it has absorbed or attempted to ab-
Benevolent Soc. 129 111. 440, 2 L.R.A. .sorb), 94 N. E. 685, 40 Ins. L. J.
240, 21 N. E. 794. 1177.
* Timberlake v. Supreme Com- * Session Laws 1897, p. 257, c. 45;
mandery, United Order of the Gold- Cobbey's Ann. Stat. 1903, sees. 6525-
en Cross of the World, 20S Mass. 411, 6544.
36 L.R.A.(N.S.) 597 (annotated on ^8 Neb. 115, 118.
877
§ 350
JOYCE ON INSURANCE
pany'' it is held: 'The powers of a corporation oroanizcd under
legislative statute are such, and such only, as the statute confers.
The charter of a corporation is the niea>-^ure of its powers, and the
enumeration of these powers implies, the exclusion of all others.'
And in the hody of the opinion' the following language, taken from
Thomas v. Railroad Company^ is quoted with approval : 'Conced-
ing the rule applicable to all statutes that what is fairly implied is
as much granted as what is expre^'^sed, it remains that the charter of
a corporation is the measure of its powers, and. that enumeration of
{he.<e powers implies the exclusion of all others.' In State v.
Nel)ra«ka Distilling Company^" it is said: 'Unlawful acts of a
corporation are not limited to those which are mala prohibita and
malum in se, but include powers which the corporation is not au-
thorized to exercise, and contracts which they are not empowered to
make.'" 11
Such corporations have the right 'to manage their own affairs and
to control their members, ^^ and an insurance association is bound
by the act of the majority in the absence of restrictions in the articles
of association.!^ So a fraternal society has power to make rules for
payment of dues and assessments and for forfeiture in ca.se of non-
payment. ^^
A nmtual insurance company may borrow money to pay its loss-
'24 Neb. 143, 8 Am. St. Rep. 164
n, 38 N. W. 43.
8 At page 162 of 24 Nebraska.
9 101 U. S. 71, 25 L. ed. 950.
10 29 Neb. 700, 718, 46 N. W. 155.
11 Allison V. Fidelity Mutual Fire
Ins. Co. 81 Neb. 494, 129 Am. St.
Rep. 694, 116 N. W. 274, 37 Ins. L.
J. 602.
"For tbe purposes of this case we
may also admit the entire r-orrcptness
of the appellee's contention (1) that
a corporation may lawfully exercise
only such powers as are expressly or
impliedly granted by statute; and (2)
that as between a corporation and the
public any rea.sonable doubt as to tlie
granting of a corporate power will
be resolved in favor of the public."
Bankers Mutual Casualtv Co. v. First
National Bank, 131 Iowa 456, 108 N.
W. 1046, 36 Ins. L. J. 10.
"A corpoiation has power to do
such business only as it is authorized
by its act of incorporation to do and
no other. It is not held out by the
8
government nor by the stockholders,
a.s authorized to make contracts which
are beyond the purposes and scope
of its charter-. It is not vested with
all the ca]>acities of a natural person,
or of an ordinary partnership, but
v,ith such only as its charter confers."
Davis v. Old Colonv Rd. Co. 1.31
Mas.s. 259, 41 Am. " Rep. 221, per
Gray, C. J. quoted with approval in
^Memphis Grain & Package Elevator
Co. V. Memi)his & Charleston Rd. Co.
85 Tenn. 703, 4 Am. St. Rep. 791, 5
S. W. 52; Knapp v. Supreme Com-
inandery Fnited Order of the Gohl-
en Cross, 121 Tenn. 212, 118 S. W.
390.
12 Anacosta Tribe v. Murbach, 13
Md. 911, 71 Am. Dec. 625.
13 Korn V. Mutual Assur. Soc. of
Va. 6 Cranch. (10 U. S.) 192, 3 L.
ed. 195; Dean v. Tucker, 2 Cranch
(U. S. C. C.) 26, Fed. Cas. No. 3711.
1* Stone V. Grand Lodge Ancient
Order United Workmen, 78 Mo. App.
546, 2 Mo. App. 296.
/'8
PARTIES— MUTUAL COMPANIES § 3.30
es, and nin}' give i(s note for such borrowed money, and a menil)er
of the company is liable to an assessment to pay a judgment on the
note.^* Rut where such power is not expressly conferred by charter,
and is not necessary to the exercise of its express powers or to effect
the purpose of its creation an incorporated fraternal insurance cor-
poration cannot issue promissory notes. ^^
A conti'act, whereby a guaranty life a'^sociation undertakes to pay
losses which mav accrue or have accrued against another and similar
association, is an attempt to divert the funds to objects not author-
ized by its charter, and is therefore ultra vires and void." Nor can
a nnitual association appropriate assessments made to pay losses,
nor the annual deposits received in view^ of assessments to the pur-
chase of the assets of another like corporation, including unneces-
sary real estate, nor may it devote such funds to the payment of loss-
es of the members of such other corporations, as such act constitutes
a misapplication of trust funds. ^^ But a mutual benefit association
may purchase real estate where a statute in force Avhen it was incor-
porated empowers it so to do, even though a by-law may provide
otherwise as to tlie disposition of its funds. ^'
Where the charier of an insurance company permits it to receive
notes for premiums in advance, subject to be used by the company
in payment of losses, etc., and requires the notes, so given, to be
n)ade ])nya]jle within twelve months from date,"' the notes must be
drawn in accordance therewith, and used for the purposes men-
lioned therein.^" Such mutual company, or its receiver, also has
))()wer lo allow equitable claims for losses, though no actions to re-
cover tlie same could be maintained bv reason of the neglect of the
chiimants to bring them within the time prescribed by the charter
or by-laws of the company, or that limited by statute; and actions
uj^on premium notes to collect money to pay such claims cannot be
defeated on the ground that payment of them migiit have been
avoided.^
iSQrrv. Mercer County Mutual ^^ Colaluca v. Soeieta Cooperativa
Fire Iiis. Co. 114 Pa. St. 387, ti All. Di Mutuo Socoorso Fratelli Bandiera,
(i<)6. 30 R. 1. 304, 75 Atl. 2d5.
^® Sf'Olt V. Baiiker.s' Union of th& As to engaging in building; and
World, 73 Kan. 575, 85 Pac. 604. loan associalion business, see § 350k
^■"Tviss V. Guaranlv Life As.M)f*. lierein.
87 Iowa, 733, 43 Am.' Si. Rep. 418, 20 Osg^ood v. Toplitz, 2 Lans. (N.
55 N. W. 8. See §§ 112b et seq. Y.) 184. See § 1289 herein,
herein. ^ Sands v. Hill, 42 Barb. (N, Y.)
^^ Slate V. Monitor Fire Assoc. 42 651.
Ohio St. 555.
As to application or appropriation
of fund.'i, see § 1289 herein.
879
§§ 330a- 350c
JOYCE ON INSURANCE
§ 350a. Same subject: powers as to membership, — Under a New
Jersey decision a mutual company may insure city corporations as
well as individuals where the charters of the company and city both
so autliorize.^ But assessment fire associations or,£2;anized under the
Ohio statute have no authority to accept non-residents as members.'
§ 350b. Same subject: power to classify members: discrimination
as to. — A charter of a mutual insurance company may provide that
the corporation can divide applications for insurance into two or
more classes, according to the degree of hazard, and that the pre-
mium notes shall not in such case be assessed for any losses, except
in the class to which they belong, where such provision does not con-
flict with the terms of the act under which it Was formed.* When
so empowered by statute members may be classified by fraternal ben-
eficiary societies and certificates may be issued in conformity with
such classification.^ But a cla.ssification of members under an
amended by-law will violate a member's rights when his contract
antedates such amendment.^
A mutual company cannot in a single instance deal with one of
its members on a basis different from that on which all others are
dealt with.'
§ 350c. Same subject: power to restrict or extend classes of bene-
ficiaries, — A fralernal beneficiary society may restrict the object of
its benevolence to classes more limited than those which the statute
authorizes it to include, and in such cases persons not within the re-
stricted classes specified cannot receive the benefits of the association.
It cannot under the statute extend rights to additional classes, unless
2 French v. City of Millville, 66 N.
J. L. 392, 49 Atl. 465, affd (mem.)
67 N. J. L. 349, 51 Atl. 1109. See
also St. Paul Trust Co. v. Wampach
Manufacturing Co. 50 Minn. 93, 52
N. W. 224.
' State (ex rel. Richards) v. Manu-
facturers Mutual Fire Assoc. 50 Ohio
St. 145, 24 L.R.A. 252, 33 N. E. 401;
Rev. Stat. sees. 3686-3690.
* White V. Coventry, 29 Barb. (N.
Y.) 305.
As to assessments where risks are
classified, see § 1298 herein.
* Ellison V. District Grand Lodge,
No. 23, Grand United Order of Odd
Fellows, 11 Ala. App. 442, 66 So.
872; Acts 1911, pp. 701, 702, 716,
sees. 5, 6, 9, 23a. "The conclusion is
that the society had the right to
create the separate class of members,
of which particular class the member
on whose life the appellant held a
beneficiary certificate was not a mem-
ber, and to maintain for the benefit
of that other class of members a sep-
arate mortuary fund." Id. per Pel-
ham, P. J. See Roval League v.
Shields, 251 111. 250, 36 L.R.A. (N.S.)
250, 96 N. E. 45, 40 Ins. L. .1. 2100.
® Parks v. Supreme Circle, Broth-
erhood of America, 83 N. J. L. 131,
89 Atl. 1042. See § 377a hereui.
On validity of retrospective by-law
or other rule of benefit association
excluding certain class of members
from benefits, or reducing benefits of
that class, see note in 24 L.R.A.
(N.S.) 1030.
' Clevenger v. Mutual Life Ins. Co.
2 Dak. 114, 3 N, W. 313. See § 370
herein.
880
PARTIES— MUTUAL COMPANIES § 350cl
the articles are amended.' And an association organized 'Tor the
mutual protection and relief of its members, and for the payment
of stipulated sums of money to the families or heirs of deceased
members," has no authority to issue a certificate of membership pay-
a,ble to the beneficiary "or assigns," or, in the event of his death,
payable to any other than his family or heirs.^ So want of author-
ity to issue certificates to a class of beneficiaries within the statute
under which a beneficial society is organized cannot be availed of by
a rival claimant of the benefit, even though said beneficiaries are
not within the classes specified or limited under the society's consti-
tution and by-laws.^° But where the general purpose of such society
is the welfare of its members and their relief in times of sickness
and distress, it may extend its benefits to the families of members
and provide for widows of deceased members. ^^
§ 350d. Same subject: limitation of amount of risk. — In a Mis-
souri case a mutual insurance company is held to be within the rule
that there may be a departure from the particular way in which a
thing is required to be done under the power vested in a corporation,
and where such departure does not apply to the method, it will be
good up to the authorized limit, extent or quantity, but void as to
the excess and this applies where the constitution of a mutual com-
pany limits the amount of risk which can be taken, and the act of
such company is not ultra vires and the entire policy made void if
the amount of indemnity is fixed at a greater sum, but the excess
will be deducted. ^^ But policies for more than a certain, specified
8 National Union v. Keefe, 263 TU. 59 N. J. Eq. 321, 45 Atl. 111. Soeietv
453, 105 N. E. 319, 44 Ins. L. J. 125, was organized under Mass. Stat.
revg-. 172 111. App. 101. Citing '^ot- 1877.
wegian Old Peoples Home Society v. That by-laws must not contravene
Wilson, 176 111. 94, 52 N. E. 41. See terms of charter, see § 375 herein.
Royal League v. Shields, 251 111. 250, ^^ Gundlach v. Germania Meclian-
36"L.R.A.(N.S.) 208, 96 N. E. 45, 40 ic's Assoc. 4 Hun (N. Y.) :539, 49
Ins. L. J. 2100; Coulson v. Flynn, 86 How. Pr. 190. But compare Nation-
N. Y. Supp. 1133, 90 App. Div 613, al Union v. Keefe, 263 111. 453, 105
affd. 181 N. Y. 62, 73 N. E. 507. N. E. 319, rev'g 172 111. App. 101
As to statutes limiting benefici- (first ease considered under this sec-
aries: certain classes: when no waiv- tion) ; Wagner v. St. Francis Xavier
er of charter provisions, see § 878 Ben. Soc. 70 Mo. App. 161.
herein. As to designation of beneficiaries:
^ State V. People's Mutual Benefit specified classes : equities, see § 728
Assoc. 42 Ohio St. 579 (organized herein,
under Ohio Rev. Stat. see. 3630). Beneficiaries: when mode of exer-
On meaning of word "family" in cising corporate power prescribed by
by-laws, see note in 3 L.R.A.(N.S.) charter differs from general rule of
334. law, see § 745 herein.
^° Tepper v. Supreme Council of Where designation of beneficiary
Royal Arcanum, 61 N. J. Eq. 638, 80 invalid, see § 752 herein.
Am. St. Rep. 449, 47 Atl. 460, rev'g ^^ Boulwave v. Farmers' & Labor-
Joyce Ins. Vol. I.— 56. 881
s 3oOe JOYCE ON INSURANCE
S
amount on one life, when they are policies of insurance such as co-
operative assessment associations issue, and not certificates such as
fraternal beneficiary a^^sociations issue, cannot be lawfully issued by
a corporation subject to the Maryland Code, although its charter
provides, not only for insurance, but ''for social or fraternal benefi-
cial purposes, of both." "
§ 350e. Same subject: limiting liability as to premiums and
assessments. — In an assessment fire association in Ohio the liability
of the members is limited only by the amount of the losses, and an
attempt to limit that liability, either to the amount of cash premium
paid when the policy is issued, or to the amount of three or five an-
nual premiums, is not sanctioned but is expressly forbidden by stat-
ute,^* and mutual insurance companies on the assessment plan have
no authority to provide for the payment of an agreed annual deposit
during the life of a policy, by which the holder shall be exempt from
assessment for losses during the year of the prepayment, as such
annual deposit is in fact a premium for carrying the risk, and not a
specific assessment authorized by the statute; ^^ and an attempt, by
contract, of a mutual insurance company to limit the number and
amount of assessments for which its members are liable is ultra vires
and void. The liability of a member is a continuing one so long as
he remains a member and he must respond to any and all assess-
ments, required to satisfy the company's indel)tedness.^^ But under
a Pennsylvania decision, it is not ultra vires to stipulate in the con-
tract that the premiums and assessments shall, during the life or
term of the policy, not exceed a certain sum. The court, per Purdy,
P. J., said: ''With reference to the contentiou that the officers of the
company have no authority to limit the liability of a policy-holder,
it seems to us that this question would largely depend upon circum-
stances. It may be true that the officers of this insurance company
would have no authority to make such a stipulation in a few isolated
cases, yet if this course of dealing with its policy-holders is sufficient-
ly extensive to become a system, known, or which may be presumed
to be known to members of the company, it seems to us only equit-
ers' Co-operative Ins. Co. 77 Mo. Ohio St. 145, 24 L.R.A. 252, 33 N. E.
App. 639, 2 Mo. App. Repr. 128, 401, Rev. Stat. sees. -3634, 3687.
quoting as supporting the rule first On liability of members of mutual
above stated, from Farmers & Trad- insurance company, see note in 32
ers Bank v. Harrison, 57 Mo. 503, L.R.A. 481.
521, ^* State V. Monitor Fire Assoc. 42
13 International Fraternal Alliance Ohio St. 555.
V State, 86 Md. 550, 40 L.R.A. 187, ^^ Morgan v. Hog Raisers' Mutual
39 Atl. 512 ; Code art. 26, see. 128. Ins. Co. 62 Neb. 446, 87 N. W. 145,
" State (ex rel. Richards) v. Man- Comp. Stat. 1899, c. 43, sees. 130, 137,
ufaeturers' Mutual Fire Assoc. 50 140.
882
PARTIES— MUTUAL COMPANIES §§ 350f, 350g
?.ble that the company slioukl be estopped from denying the bind-
ing force of this limitation as against those who, in good faith,
relying upon this provision to protect them from a liability which
otherwise, they might be unable to meet, had become members of
the company." The case however turned upon the question of lia-
bility of insured for losses after surrender of his policy.^'''
§ 350f. Same subject: contract to return dues. — While an associa-
tion has power to contract to pay sick benefits still it is ultra vires to
stipulate that at the expiration of a specified time the amount of
dues received during that period will be returned, less the amount
if any drawn for sick benefits.^^
§ 350g. Same subject: paid-up or extended insurance: non-for-
f citable and incontestable insurance. — In Missouri it is not lawful
for a fraternal beneficiarv association to issue life insurance under
a tM'enty-year. paid up policy plan, nor under a plan making the
policy non-forfeitable after payment of premiums for a certain num-
Ijer of months. ^^ But, under a Pennsylvania decision an insurance
company on the mutual plan, may issue paid up or term policies,
instead of life as the mutual principle is not affected thereby, and
the term or life of a policy is not a determining factor in respect to
the principle upon which insurance is carried on, nor is its charter
mandatory on the company as to the manner of conducting its bus-
iness.^" And a company organized and doing business on the assess-
ment plan, under the Indiana statute, may contract for extended in-
surance.^ But an incontestable clause with an exception for fraud
in a certificate of a fraternal benefit society is Hot ultra vires.^
^' Moore, Receiver, v. Frey, 29 Pa. As to endowment policies: ultra
Co. Ct. Rep. 298. There were six- vires, see § 2r)18 herein,
teen other policies before the court in ^^ Commonwealth v. Provident Life
all of which the policies contained tlie & Trust Co. 6 Lack. Leg. N. 140, 9
same provision or limited liability Pa. Dist. R. 479, 56 Leg. Int. 339, 3
clause. Dauph. Co. Rep. 130.
As to defense to actions: assess- As to right to issue paid-up insur-
ments, see § 1311 herein. ance, see State (e.x rel. Grand Frater-
^^ Southern Mutual Aid Assoc, v. nity) v. Lemert, 66 Ohio Bull. 118;
Watson, 154 Ala. 325, 45 So. 649; Ohio Laws 423, art. 97, sec. 9, Gen.
Southern Mutual Aid Assoc, v. Cobb, Code 94/0.
60 Fla. 198, 53 So. 505. ^ Federal Life Ins. Co. v. Arnold,
Instate (ex rel. Supreme Lodge 46 Ind. App. 114, 90 N. E. 493. 91 N.
Knights of Pythias) v. Vandiver, 213 E. 357, under Laws 189/, p. 318, c.
Mo. 187, 15 Am. & Eng. Ann. Cas. 195. The case of Mutual Reserve
283, 111 S. W. 911. Citing (Id. Life Ins. Co. v. Roth, 122 Fed. 853,
202) Western)an v. Supreme Lodge 59 C. C. A. 63, considered and held
Knights of Pytliias, 196 Mo. 670, 5 in nowise parallel.
L.r!a.(N.S.) 1114, n. 94 S. W. 470. 2 j^^yal Americans of the Republic
As holding that there could be no sucli v. Mayer, 137 111, App. 574.
thing as a paid-up policy issued by
a fraternal society.
883
§§ 330h, 350i JOYCE OX INSURANCE
§ 350h. Same subject: waiver by association, or mutual benefit
company, — A waiver by a fraternal beneficiary association under a
by-law is not an ultra vires act, where the code provides that such a
society shall make provision for payment of benefits in case of death
or disability "subject to compliance by its members with its consti-
tution and by-laws." Such statutory statement, however, adds noth-
ing to the general law governing corporate action. The by-law was
not prescribed by statute, and such a provision is inherent in flie law
governing corporate obligations to members of all corporations hav-
ing a constitution and by-laws.^ And a corporation itself can waive
the compliance by an intended member with any of its requirements
not prescribed by its charter or the laws of the state, for his admis-
siorr^ membership and the conclusion of a binding contract of
insurance.* If a fraternal beneficiary association itself has made a
contract within its general powers, knowing it to have been made
without compliance with the provisions of its own regulations, and
has received the full consideration for which it stipulated it cannot
afterwards avoid its contract as ultra vires by reason of such non
compliance; this being a rightful limitation of the application of
the general principle or rule as to the powers of a corporation being
limited to its charter, etc.* And a town or county co-operative conj-
pany w411 be precluded from contending that a resolution, under
which it has extended its limits of business operations, was not reg-
ularly passed, when it has acquiesced for several years in dealings
with agents and insurers in such extended limits.® And by accept-
ing and retaining the dues and fees of a member, with knowledge
of the facts, a mutual benefit association waives all irregularity in
the organization of a subordinate lodge.'^
§ 3501. Same subject: estoppel: defense of ultra vires. — Mutual
benefit societies are estopped from defending on the ground of ultra
vires against one of its contracts where it has received assessments
3 Johnson v. Modern Brotherhood Assoc. 73 Minn. 297, 76 N. W. 37;
of America, 114 :Minn. 411, 131 N. Morrison v. Odd Fellows Ins. Co. 59
W. 471, 40 Ins. L. J. 1424, Code sec. Wis. 162, 18 N. W. 13.
2822. * Timberlake v. Supreme Com-
* Timberlake v. Supreme Com- mandery, United Order of the Gold-
mandery, United Order of the Gold- en Cross of the World, 208 Mass. 411,
en Cross of the World, 208 Ma&s. 411, 36 L.R.A.(N.S.) 597n, 94 N. E. 683,
36 L.R.A.(N.S.) 597n, 94 N. E. 685, 40 Ins. L. J. 1177.
94 N. E. 1177, 40 Ins. L. J. 117/. « gi^a„eateles Paper Co. v. Amer-
<The above rule was sanctioned by ican Underwriters' Fire Ins. Co. 114
the court although it was declared not N. Y. Supp. 200, 61 Misc. 457.
necessarv to consider the question.) 'Ferine v. Grand Lodge of An-
Citing Watts v. Equitable INIutual eient Order United Workmen, 48
Life Assoc. Ill Iowa, 90, 82 N. W. :\Iinn. 82, 50 N. W. 1022, 21 Ins. L.
441: Wiberg v. Scandinavian Relief J. 213.
884
PARTIES— MUTUAL COMPANIES § 350i
thereon.^ And if a mutual fire insjurance company without power
so to do, und-er the Hmitations of its charter, insures country i)roper-
ty and receives premiums or levies assessments therefor it is estojiped
to plead ultra vires.^ Nor can an assessment company defend on
the ground of ultra vires an action on an old-line policy, issued by
it without authority, where it has received premiums thereon.^" So,
the question of power to contract for an endowment policy cannot be
raised where such policy has been issued, and premiums and assess-
ments have been accepted by a mutual benclit association.^^ So,
where a fraternal association, consolidates with and assumes the con-
tracts of another association, and issues to one of the members of the
latter company, and assumes his contract and accepts his assess-
ments, said member being over the age limited by its charter, it can-
not avail itself of the defense of ultra vires.^^ And, the relief depart-
ment of a railroad company, in the nature of a mutual insurance
association, organized for the benefit and -protection of railroad em-
' ployees, in case of sickness or death, and which ])laces an employee's
name upon the roll of its members at his solicitation, and deducts
from his waees his assessment for benefits, on the basis of member-
ship, with knoAvledge of the fact that no formal application had been
made and no physical examination had, as required by the by-laAvs,
is estopped from disputing such employees membership, upon the
suit of a widow to recover a death Ijenefit, notwithstanding a rule of
the depai'tment, defining and limiting its liability in cases of regular
and formal application.^^ Again, if the contract sets forth verbatim
a charter clause purporting to authorize such insurance a beneficial
association is estopped to deny its power to provide in its con-
tract for payment of a definite specified sum in case of permanent
disability, and in such case a provision is not applicable, that bene-
fits should be due until disability ceased.^*
•Matt V. Roman Catholic Protee- Benefit Assoe. 8 Pa. Dist. Rep. 231,
tive Soc. 70 Iowa 455, 30 N. W. 799. 56 Loo-. Tnt. 102.
On estoppel of corporation to set ^^ Edwards v. American Patriots,
up plea of ultra vires, see note in 20 162 Mo. App. 231, 144 S. W. 1117.
L.K.A. 705. See Wood v. Supreme Ruling: of
9 Garner v. Mutual Fire Ins. Co. Fraternal .Mystic Circle, 212 111. 532,
_ Iowa — , 86 N. W. 289. 72 N. E. 783, rev'g- Supreme Ruling
1° Knott V. Security Mutual Life of Fraternal Mystic Circle v. Wood,
Ins. Co. 161 Mo. App. 579, 144 S. 114 111. A])p. 431.
W. 178, 41 Ins. L. J. 842, criticising, ^^ Burlington Voluntary Relief De-
as mere dictum and opposed to the partment v. White, 41 Neb. 547, 43
unbroken current of authority, Smoot Am. St. Rep. 701, 59 N. W. 747, 751,
V. Bankers' Life Assoe. 138 Mo. App. 26 Ins. L. J. 224. See this ca.«e un-
438, 120 S. W. 719. der § 346e herein.
11 Wa"iier v. Keystone Mutual i* Binder v. National Masonic Ac-
885
§§ 3-")0j, 350k JOYCE ON INSURANCE
Members of a mutual fire and marine insurance company are es-
topped to dispute the power of such corporation to carry on two sep-
arate department's, without recourse by either to the assets of the
other, where such act has been fully advertised for more than twenty
years, and members have had full knowledge of the arrangement.^*
§ 350j. Same subject: reinsurance. — Where the purpose of the
legislature is to limit the risks, and to confine the business of mutual
fire insurance companies to the insurance of tangible property
owned by their members a contract of reinsurance made by sucli
company is ultra vires and assessments cannot be collected on ac-
count of such policy.^^ But where it is beyond the power of mutual
fire insurance companies to reinsure, the law under which they were
organized not having specifically granted such authority, but on the
contrary had limited the risks which such companies might write,
so that none but owners of property might become members and
non-members property could not be insured, and such contract of
reinsurance is not executed, the reinsuring company is not estopped
from urging the defense of ultra vires."
§ 350k. Same subject: power as to other business or risks. — A
casualty company on the assessment plan has no power to issue sick
benefit certificates where it is restricted by statute to risks of acci-
dental death or disability from accident." So, a corporation of an-
other state, authorized to issue policies on the lives of members, upon
the assessment plan, for the benefit of any person who has an in-
surable interest is not entitled to carry on business under the Ohio
statutes, which allow assessment companies to insure lives of mem-
cident Assoc. 127 Iowa 25, 102 N. W. As to contract of reinsurance by
190. fraternal benefit .'societies by transfer
^^ Doane v. Millville Mutual Ma- etc. of entire membership or funds of
ri. e & Fire Ins. Co. 43 N. J. Eq. 522, anotlier .society, see N. Y. Ins. Law
11 Atl. 739. See also Citizens' Mu- 19U9, e. 33, Consol. L. c. 28, sec. 23(5,
tual Fire Ins. Co. v. Sortwell, 8 Allen L. 1911, c. 198; Parker's, N. Y. Ins.
(90 Ma.ss.) 217. L. (ed. 1915) p. 352.
^^ Allison V. Fidelity Mutual Fire As to diversion of funds, and ultra
Ins. Co. 81 Neb. 894, 129 Am. St. vires, by paying- losses of another as-
Rep. 634, 116 N. W. 274, 37 Ins. L. soeiation, see Twiss v. Guaranty Life
J. 602. Ajjplies to mutual com- Assoc. 87 Iowa, 733, 43 Am. St. Rep.
panies organized under Neb. Laws 418, 55 S. W. 8, considered under §
Sess. 1897, e, 45, p. 257. See §§ 115a, 350 herein.
115b herein. "Allison v. Fidelity Mutual Fire
As to reinsurance by life or cas- Ins. Co. 81 Neb. 494, 129 Am. St.
ualty corporations on co-operative or Rep. 694, 116 N. W. 274, 37 Ins. L.
assessment plan, see N. Y. Ins. Law J. 602. See §§ 115, 115a, 115b here-
1909, c. 33, Con.sol. L. c. 28, sec. 209, in.
Parker's N. Y. Ins. L. (ed. 1915) p. " Knowlton, Att'y Gen. (ex rel.)
321. V. Berkshire Health & Accident As-
886
PARTIES— MUTUAL COMPANIES § 3j0k
bers only for the benefit of their famiUes and heirs, as a company
cannot carry on a business not authorized by the laws of the state.^*
And a corporation authorized by its charter to insure against fire,
whether caused "by accident, lightning, or any other means," can-
not insure against damage by lightning not resulting in fire, al-
though their by-laws provide for their doing so.^** Nor can a mutual
fire insurance company, organized under the general laws of Wis-
consin, effect insurances on property other than that mentioned
therein.^ And policies issued by a mutual company on farm prop-
erty in violation of the express proliibition of the statute are ultra
vires, illegal and void.^ But such company incorporated in New
York, and having a general power to insure under its charter, may
issue policies on personal property in Canada owned by parties
there.'
Under the Indiana statute a mutual life company cannot engage
in the business of a building and loan association or establish a
building and loan department and enter into contracts of that char-
acter as such act is ultra vires, even though it is empowered by stat-
ute to loan or invest its funds, and so, although it obtains a legaliz-
ing act from the legislature where such act contains nothing as to
the above ultra vires business.*
But where the code authorizes insurance against fire or other cas-
ualty and by an amendment burglary insurance is authorized, and
prior to said amendment a company, the general nature of whose
business was to insure the property only of members against loss or
damage by casualty etc., adopted articles of incorporation expressly
assuming to transact the business of burglary insurance, and secured
soc. 171 Mass. 458, 50 N. E. 930; business." Id. 172, per Williams, J.
Stat. 1800, c. 421, s. c, 171 Mass. 455, See Ordelheide v. .Modern Brotlier-
50 N. E. 929. liood of America, 158 Mo. App. 077,
Instate (ex rel. Att'y Genl.) v. 139 S. W. 2()9.
Western Union Mutual Life Ins. Co. ^o Andrews v. Mutual Ins. Co. 37
47 Ohio St. 167, 8 L.R.A. 129, 24 N. Me. 256. That by-laws must not con-
E. 392, under Rev. Stat. sees. :)630, travene terms of charter, see § 375
3630e. "Whatever powers sucli com- herein.
panies possess, are derived exclusive- On nature of risk under insurance
ly from the laws of tliis state, and the against loss by liglitning, see note in
limitations and lestrictions imposed 26 L.R.A. 267.
upon them by those laws, both with ^ O'Neil v. Pleasant Prairie Mut.
respect to the classes of business they Fire Ins. Co. 71 Wis. 621, 38 N. W.
may transact, and the mode of doin<^ 345.
it operate upon them as well when ^ Ely v. Oakland Circuit Judge, 62
doing business outside of tlie state, Mich. 466, 17 Det. Leg. N. 62, 125 N.
as within it. Their corporate capac- W. 375, 127 N. W. 769.
ity in these respects cannot be en- ' Western v. Genesee Mutual Ins.
larged by the laws of any other state Co. 12 N. Y. 258.
in which they are permitted to do * Huter v. Union Trust Co. 153
887
g.§ 3501, 350m
JOYCE ON INSUKANCE
from the proper authority a finding that such business was author-
ized by the statute, and that its organization was sufficient for said
purpose, and its right to do sucli busincvss had not been challenged
for ten years, the insured cannot escape liability on a premium note
on the plea of ultra vires. Such a plea is not favored in law and will
not be sustained except when required by the utmost considerations
of public policy.^
§ 3501. Same subject : contract with amusement company valid. —
A contract with an amusement company to furnish an "amusement
enterprise" complete at their own cost and expense, except that a
suitable location and license were to be supplied by the beneficial as-
sociation may be validly made by a policemen's beneficial associa-
tion, for an equal division of the revenue above a given sum.^
§ 350m, Same subject: when company or society can change plan:
impairment of obligation of contract. — It is held that a mutual
benefit society may change its plan of insurance, and such change
does^ hot violate its prior contracts.''' So, legislative authority to
change the plan of the business done by a life insurance company
from the assessment plan to the legal reserve flat premium plan of
"old line" insurance does not work a violation of the contract with
those certificate holders who failed to change to the new plan, al-
though their assessments may have increased because of the lesser
number subject to the assessment, and the death of members, where
the right of amendment was expressly reserved in the articles of
association.^ And a member may consent to a change of plan,
Ind. 204, 54 N. E. 755, 51 N. E. 1071, ' Supreme Lodge Knights of Pyth-
1 Repr. 303; acts 1865 (R. S. 1881, ias v. Knight, 117 Ind. 489, 3
sec. 3763, Burns' Rev. St. 1894, sees. L.R.A. 409, 20 N. E. 479.
4884,4895) Horner's Rev. Stat. 1897, As to transfer of risks by life or
see. 3753; acts 1893, p. 192 (legal- casualty insurance companies on the
izing act). co-operative or assessment plan, see
As to void and illegal insurance N. Y. Ins. Law, 1909, c. 33, Consol.
and distinctions to be observed, see L. e. 28, sec. 209 ; Parker's N. Y. Ins.
§§ 2506, 2507 herein. L. (ed. 1915) p. 321.
As to effect of subsequently enact- As to plans of mutual insurance,
ed statutes upon void or illegal in- and that payment of cash premni^ns
surances, see § 2524 herein. does not abrogate the mutual prin-
5 Bankers Mutual Casualty Co. v. ciple, see § 343 herein.
First National Bank, 131 Iowa, 456, On rights of a.ssessment company
108 N. W. 1040, 36 Ins. L. J. 10 ; to change plan or class of policies, see
McClains Code, sees. 1685, 1695, note in 1 L.R.A. (N.S.) 627.
am'd act, 28th Gen. Assemb. c. 60, « weight v. Minnesota Mutual Life
p. 44. Ins. Co. 193 U. S. 657, 48 L. ed. 832,
6 Brindze v. Atlantic City Police- 24 Sup. Ct. 549, died in Polk v. Mu-
men's Beneficial Assoc. 75 N. J. Eq. tual Reserve Fund Life Assoc. 137
405, 72 Atl. 435. Fed. 273, 277; Hinckley v. Schwartz-
888
PARTIES— MUTUAL COMPANIES § 350ra
from one of assessment to monthly payments, by making payments
and surrendering his certificate.^ It is declared in a Federal Su-
preme Court case that: ''It is not every change in the charter of
articles of association of a corporation that will work such a depart-
ure from the puq^oses of its creation as to forfeit obligations in-
curred to it or prevent the carrying on of the modified business. A
radical departure affecting substantial rights may release those who
had come into the corporation on the basis of its original charier.
There is much discussion in the authorities as to wdien a charter
amendment is of that fundamental character that a majority of the
members or stockholders cannot bind the minority by agreeing to
a change in the nature of the business to be carried on or the pur-
poses or objects for which the corporation was created. Each case
depends upon its own circumstances, and how far the right of
amendment has been impliedly or expressly reserved in the crea-
tion of corporate rights. It would be unreasonable and oppressive
to require a member or stockholder to remain in a corporation whose
fundamental purposes have been changed against his will. On the
other hand, where the right of amendment is reserved in the stat-
ute or articles of a.ssociation, it is because the right to make changes
which the business may require is recognized, and the exercise of
the privilege may be vested in the controlling body of the corpora-
tion. In such cases, where there is an exercise of the power in good
f;iith which does not change the essential character of the business,
])ut authorizes its extension upon a modified plan, both reason and
authority support the corporation in the exercise of the right. ^° In
the })rcsent case we have by express stipulation the right to amend
the articles, with the reservation noted. . . . Nor does it appear
that the changes were arbitrarily made without good and substan-
tial reasons. The changes of 1898 to a plan of issuing, in exchange
for certificates and upon new business, a policy having some of the
features of old line insurance, seems to have been fully justitled by
the state of the company's business. And the subsequent change to
a policy with straight premiums and fixed indenniity was approved
by the majority of the members upon proceedings had under the
Minnesota statute and has resulted in a successful business and a
Rchild & Sulzbe)-2cr Co. 95 N. Y. ^^ Citing Nugent v. The Supcrvi-
Supp. :Vi7. 3G3, i07 App. Div. 470, sors, 19 Wall. (86 U. S.) '241, 251, 22
478; Green v. Hart lord Life & Fire L. ed. 83; Picard v. Huohey, 58 Oliio
Ins. Co. 139 N. C. 309, 311, 1 L.H.A. St. 577, 51 N. E. 133; .Miller v. Amer-
(N.S.) 625, 51 S. E. 887. See § 350t iean Mutual Accident Ins. Co. 92
herein. Tenn. 167, 185, 20 L.K.A. 765, 21 S.
^Supreme Ruling of Fraternal W. 39; Supreme Lodge Knights of
Mystic Circle v. Ericson, — Tex. Civ. Pythias v. Knight, 117 Ind. 489, 3
App. — , 131 S. W. 92. L.R.A. 419, 20 N. E. 479.
889
§ 350n JOYCE ON INSURANCE
considerable change of the members to the new and more stable
plan. . . . The business is still that of mutual insurance, not-
withstanding changed methods of operation. The new plan has
been legally adopted and approved by the insurance commissioner
of the state. The ai'gument for appellants in that, having begun
as an assessment company, the plan can never be changed without
the consent of all interested. But we have seen that the right of
amendment was given in the original articles of association. There
was no contract that the plan of insurance should never be changed.
On the contrary, it was recognized that amendments might be nec-
essary. There was no vested right to a continuation of a plan of
insurance which experience might demonstrate would result disas-
trously to the company and its members. We are cited to the stat-
utes of many states authorizing similar changes and transfer of
membership, but to no case holding legislative authorization of a
change of this character to work the impairment by the state of the
obligation of a contract. The courts are slow to interfere with the
management of societies, such as this mutual insurance company.
While the rights of members will be protected against arbitrary ac-
tion, such organizations will ordinarily be left to their own methods
of action and management. The changes under consideration were
made in good faith and have been accepted by many of the old
members as well as those who have taken policies since the changes
in plan have been made. In our view of the case the law of Minne-
sota did not impair the obligation of any contract, nor were the
changes in the method and plan of this company beyond its cor-
porate powers. There is much testimony in the record as to the
good faith of this proceeding and the motives of the complainants
in bringing it, which we do not deem it necessary to consider, as the
conclusions announced dispose of the case in favor of an aftirmance
of the judgment" "
§ 350n. Same subject: when company or society cannot change
plan. — Under a Mis.-ouri decision a company which does business
on the assessment plan in conformity with the power conferred by
11 Wright V. Minnesota ]\rutual Life That certifieate of insurance com-
Tns. Co. 193 U. S. 657, 664, 66.3, 48 missioner not conclusive in determin-
L. ed. 832, 24 Sup. Ct. 549. The com- ing the nature of the bu.-iness trans-
pany was organized under Minnesota acted but that the executive officers
laws as one on the a-'sessment life in- construction entitled to weight, se-J
surance plan. Subsequently the pro- Smoot v. Bankers' Life Association,
visions of the general laws IPOl, c. 138 Mo. App. 438, 120 S'. W. 719.
143 were accepted whereby the com- As to vested rights: change of by-
pany changed its plan to a regular laws, see § 380 herein,
reserve company with certain pre-
miums and fixed amount.
890
PARTIES— MUTUAL COMPANIES § 350o
the statute under which it was organized cannot engage in tlie bus-
iness of life insurance or any other plan and an attempt to do so is
ultra vires.12 In Michigan a mutual life insurance company can-
not issue a policy payable upon the occurrence of total disability
where its articles of association provide only for payment in the
event of death of insured and the statute under which it was organ-
ized require the articles of association to state definitely the object
of incorporation, the classification of members and the purpose of
such classification.^' Under the insurance laws of Pennsylvania
no insurance company can be licensed to do more than one class of
insurance and a company to which is issued a license to insure on
the level premium of legal reserve plan, is not entitled to a certifi-
cate of authority also to do business on the assessment basis, and
without such certificate it cannot legally do business.^* And an
assessment fire association under the Ohio statute cannot do busi-
ness on the ''contingent liability plan." ^^
In Michigan the statute prohibits a stock company from trans-
acting business on the mutual plan.^^
§ 350o. Same subject: when change from mutual, etc., to joint-
stock or stock plan can be made. — Tbe statute may empowei- mu-
tual companies to change to joint stock companies upon giving no-
tice but if no method is prescribed for such change other than by
proceedings in conformity with charter provisions, corporate action
upon special notice to members is required to effect the change."
i^Smoot V. Bankers Life Assoe. 401; Rev. Stat. sec. .3634. See also
138 Mo. App. 4.38, 120 S. W. 719: sefs. 36S6-:U)!)0.
company organized under Code Iowa, ^^ Ely v. Oakland Circuit Judge,
sec. 1784 etc. 162 l\Iich. 466. 327 N. W. 760, s. c.
An authority to do ;ni;nne.s.= on the 125 N. W. 375; Comp. L. sec. 7256,
assessment plan prtr-ludp? the mak- Pub. acts 1909, No. 197.
ing of insurance contracts or the Is- " Schwarzwalder v. Tegen, 58 N.
suance of certificates on another plan. J. Eq. 319, 43 Atl. 587, afif'd 44 .\tl.
Missey v. Supreme Lodg*- Kniulit.s & 769; Oinian .Mutual Fire Ins. Co. v.
Ladies of Honor, 147 Mo. App. 137, Schwarzwalder, 59 N. J. Eq. 589.
126 S. W. 559. As to cash premium plan — mutual,
^3 Preferred Masonic Mutual Life etc. companies, .see § 343 herein.
Assoc, v. Giddings, 112 Mich. 401, 4 When mutual company is not made
Det. Lc.i,. N. 82, 70 N. W. 1026, com- a stock company, see IMutual (luar-
panv was incorporated under Midi, anty Fire Ins. Co. In re (Alvord v.
Gen". Laws 1887, act No. 187, ani'd Barker) 107 Iowa 143, 70 Am. St.
Oen. Laws 1895, act No. 58. Rep. 149 n, 77 N. W. 868, 28 Ins. L.
1* Pennsylvania Mutual Life Ins. J. 205, con.s((?^r<?fi under § 341 herein.
Co. of Philadelphia (Att'y Genl's When mutual fire insurance c-jr-
Opinion) 36 Pennsylvania County poration may amend charter so as to
Court Rep. 687. convert it into stock corporation, .see
15 State (ex rel. Richards) v. Man- N. Y. Ins. Law 1909, c. 33, Consoi.
ufacturer's Mutual Fire Assoc. 50 L. c. 28, sec. 125; Parker's N. Y. Ins.
Ohio St. 145, 24 L.R.A. 252, 33 N. E. L. (ed. 1915) p. 226.
891
i
§ 350p
JOYCE ON INSURANCE
But a mutual insurance company is not changed into a stock com-
pany by raising a gTiaranty fund to secure temporarily the pay-
ment of losses when assessments are insufficient, even if such guar-
anty fund should be held valid."
§ 350p. Same subject: when change from mutual, etc., to joint-
stock or stock plan cannot be made. — Whatever power, if any, a mu-
tual company possesses to change into a joint stock company must
have its source in some statutory provision, and where the power
must be exercised by the corporation iiself in accordance with the
statute, and not by unauthorized directors it could not be exercised
in JSiew Jersey prior to the statute of 1899 against any members
will where he had acquired his rights as such prior to said enact-
ment.^^ So, an assessment fire association has no authority under
the Ohio statute to do business on the joint-stock plan but is limit-
ed to business in whielr its members insure each other against loss
b^^ fire and other casualties and agree to be assessed specifically for
payment of losses and for incidental purposes.*^" And if a mutual
lire insurance company issues a stock policy contrary to and in vio-
lation of an express statutory prohibition such policy is non-en-
forceable as it is absolutely void.^ Nor can a mutual company by
mere force of a by-law change from a corporation having no capi-
tal stock to one which has,^ and, where the charter of a mutual fire
insurance company contemplates the issuance of policies not mu-
tual, for a cash premium it has no power to issue such policies when
expressl}^ prohibited by the statute under which it is organized upon
New York laws 1896, c. 850, amd'g
Laws 1892, c. 690, sec. 125, as to
fliange by mutual company to stock
company and the rights of members
as t9 stock is not unconstitutional be-
cause some members do not avail
themselves thereof. Grobe v. Erie
('ounty Mutual Ins. Co. 57 N. Y.
Supp." 290, 39 App. Div. 183, aff'd
169 N. Y. 613, 62 N. E. 1096.
When domestic mutual marine cor-
poration may change its busiuiess
})]an to that of capital stock corpo-
ration, see N. Y. Ins. Law, 1909, c.
33, Con.sol. L. c. 28, sec. 159; Park-
er's N. Y. Ins. L. (ed. 1915) p. 279.
Stock life insurance corporation
mutual life insurance.
N. Y. Ins. Law 1909,
L. c. 28, sees. 16, 95;
Ins. L. (ed. 1915) pp.
may become
corporation.
c. 33, Consol.
Parker's N. Y.
31, 163.
" Corey v. Sherman, 96 Iowa 114,
32 L.R.A. 490, 60 N. W. 232, 64 N.
W. 828. See also IMutual Guaranty
Fire Ins. Co., In re (Alvord v. Bar-
ker) 107 Iowa, 143, 9 Am. & Eng.
Corp. Cas. N. S. 774, 77 N. W. 8(i8,
28 Ins. L. J. 205, considered under §
350p lierein.
^^ German Mutual Fire Ins. Co. v.
Schwarzwalder, 59 N. J. Eq. 589, 44
Atl. 769, afif'g Schwarzwalder v. Te-
gen, 58 N. J. Eq. ;nn, 43 Atl. 587;
2 Gen. Stat. p. 1744, act Apr. 9,
1875, am'd P. L. 1899, p. 17, act
March 6, 1899.
20 State (ex rel. Richards) v. .Alan-
ufacturer's jMutual Fire Assoc. 50
Ohio St. 145, 24 L.R.A. 252, 33 N.
E. 401; Rev. Stat. sees. 3686-3690.
^ Smith V. Sherman, 113 Iowa, 601,
88 N. W. 747; Code sec. 1159.
2 State v. Utter, 33 N. J. L. (4
Vroom) 183.
892
PARTIES— MUTUxVL COMPANIES § 350ci
tlie mutual plan. But policies of such a comj)any in the standard
form containing an additional assessment liability clause are sub-
ject to assessment as mutual policies although those issued as cash
premium stock plan policies without such additional clause are
ultra vires and in violation of the statute and void.' Again, where
the powers of a mutual company, organized under the assessment
plan to insure each other's property and which is expressly prohibit-
ed from doing business or taking risks on the stock plan, they do not
extend to the insurance of property of -non-members or to receiving
premiums or declaring dividends, and where such company has no
stock, except the shares issued to sul)scribers of the guaranty fund,
it is not made a stock company by the issuance of such shares and
the creation of such fund. But the issuance of a non-participating
policy for a specified premium to a non-member, contrary to the
statute, was held ultra vires and void.* And where a company is
organized under a statute which authorizes the insurance of prop-
erty of meml^ers only and prohibits a mutual company from tak-
ing risks upon the stock plan and it issues policies for spec i lie
amounts for an all cash premium to persons who are not bound to
pay any assessments such contracts are without authority of law.^
§ 350q. Right to convert friendly society into company: injunc-
tion. — Where a registered friendly society, in avowed exercise of the
powers of Sec. 71 of the Friendly Societies act, 1806.6 passed a
special resolution to convert itself into a company under the com-
panies acts, with a memorandum of association annexed thereto,
and obtained registration of itself as a company, and a member of
the company, who had been a member of the friendly society, su-
ing on behalf of himself and all other members of the company for
a declaration that so much of the business described in the memo-
randum of association as was larger than that of the Friendly So-
cieties act was illegal and void and moved for an injunction to re-
strain the company from carrying on such business or exercising
any of the powers enumerated in said memorandum of association
in excess of those allowed by the Friendly Societies act, 1896. It
' Ely V. Oakland Cirr-uit Judge, suranre eompanies — one a joint stock
162 Mich. 466, 127 N. W. 769, s. e. company on the mutual plan and one
125 N. W. 375; Comp. L. see. 7256, of character slated in the above text.
Pub. acts 1909, No. 197. Void and illegal insurances, see §
* Mutual Guaranty Fire Ins. Co. 250(i herein.
In re (Alvord v. Barker) 107 Iowa, * Corey v. Sherman. 96 Iowa 114,
143, 9 Am. & Eng. Corp. Cas. N. S. 32 L.K.A. 490, 60 N. W. 232, 64 N.
774, 77 N. W. 868, 28 Ins. L. J. 205; W. 828.
Code 1873, sec. 1160. At the time As to cash premium plan, see § 343
this company was organized the law herein,
authorized two kinds of mutual in- « 59 & 60 Vict. c. 25.
893
§ 350r
JOYCE ON INSURANCE
was held ^' that the motion for an injunction was misconceived and
should be refused. But, whether, notwithstanding the certificate
of incorporation, the vahdity of the special resolution and of the
registration could have been successfully impeached by a member
of the old friendly society in a properly constituted action, quaere,"'
§ 350r. Same subject: consolidation or merger. — The charter of a
corporation or the statute under which it is created is the source of
])ower of one corporation to consolidate or merge with another, and
such authority must be expressly so granted, for otherwise corpo-
rations have no general power to so consolidate or merge. And
a fraternal beneficiary association which is organized for general
welfare, and has neither capital stock, stockholders, nor property
to be used in business for individual profit, and no franchises
or property which are susceptible of lease or sale, and in which
association those interested are denominated ''members" not "stock-
holders," and which has no express authority under its chaiier
and no power under the statutes to enter into a ''merger or
union" contract with another company, cannot lawfully make
such contract and if such contract is made it is ultra vires and
void and cannot be enforced.® So, a fraternal beneficiary asso-
ciation incorporated in Massachusetts cannot consolidate or amal-
gamate with a foreign corporation nor can it transfer its membership
to a subordinate council of such foreign corporations, such at-
tempt is inefficacious and void where it does not appear that it
was ''submitted to and approved by a two-thirds vote of the certifi-
cate holders of each corporation, nor that other statutory require-
ments were complied with." ^ Again, if the statute law of one state
undertakes to regulate the consolidation of fraternal beneficiary as-
sociations or societies such fact may be taken as a recognition of the
power of societies organized under its laws to make such an agree-
ment but it cannot be held to confer such power upon a society
organized under the laws of a foreign state, and the domestic asso-
6a By Eve, J. and the Court of Ap- acts 1901, p. 163, c. 113; acts 1905,
peals. p. 1021, c. 480.
' (Per Cozeus-Hardy, M. R. and As to merger, or transfer of sub-
Bucivley, L. J.) McGlade v. Royal stautialiy the entire membership or
London Mutual Ins. Soe. Ltd. [1910] funds of domestic fraternal benefit
2 Chancerv, Law Rep. 169. Com- societies, see N. Y. Ins. Law 1909,
panies (Consolidation) act 1908 (8th c. 33, Consol. L. c. 28, see. 236; Laws
Edw. VII. e. 69) see. 17, subsec. 1. 1911, e. 198; Parker's N. Y. Ins. L.
8 Knapp V. Supreme Commandery, (ed. 191.5) p. 352.
United Order of the Golden Cross of ^ Conseil Rochambeau No. 128, de
the World, 121 Tenn. 212, 118 S. W. L'Union Saint Jeau Baptiste d'Amer-
390 ; acts 1875, p. 232, e. 142 ; Shan- ique v. Lafleur, 215 Mass. 347, 102
non's Code sec. 2524 ; acts 1887, p. N. E. 412 ; R. L. e. 119, sec, 11, am'd
329, c. 198; acts 1897, p. 144, c. 19; St. 1908, c. 463; St, 1911, e. 628,
894
PARTIES— MUTUAL COMPANIES § 350r
ciation is precluded from purchasing the business and assuming
the risks of the foreign company and not having the legal capacity,
its attempt to assume said obligation is void in both states.^" But
any insurance corporation organized under a Pennsylvania statute
is within the terms of the enactment of that state providing for con-
solidation and merger of corporations."
A consolidation contract whereby the membership of a mutual
association is transferred to another which agrees to cai'ry out the
former's insurance contracts, does not constitute an agreement to
insure and so does not release the latter association from liability
on a certificate of a member of the transferring association although
he was at the date of such transfer agTeement over the age of risk
prohibited by statute.^*^ And a fraternal beneficiary corporation
whose attempted consolidation with another company fails because
ultra vires cannot avoid liability upon the certificates of the mem-
bers of the latter, if upon its invitation they accept membership in
it, pay their dues, and meet their other obligations, although they
do not follow the procedure prescribed by its rules for the reception
of members." If a transfer of risks or membership is made by one
mutual benefit association to another in conformity with statutory
requirements providing the manner in which such transfers may
be made, the legal result is that all members of the transferring
association become ipso facto members of the latter association
where such members have not asked in writing, as provided by
statute, to be transferred to some other a.ssociation. But nothinc:
can alter the express terms of the original contracts of the members
of such transferring association, if not surrendered and exchanged
for certificates in the transferee association.^*
^^ Starr v. Bankers' Union of the manderj', United Order Golden Cress
World, 81 Neh. 377, 129 Am. St. Rep. of the' World, 208 Mass. 411, 36
684, 116 N. W. 01, 37 Ins. L. .1. 740. T;.R.A.(N.S.) 597 (annotated on lia-
As to rights of stockholders upon bility of insurance company on con-
con.solidation or merger of mutual as- tracts of another company which it
soeiations or companies of different has absorbed or attempted to absorb),
states, see Southern Mutual Aid As- 94 N. E. 635.
soc. V. Blount, 112 Va. 214, 70 S. E. i* Robinson v. Mutual Reserve Life
487, 40 Ins. L. J. 1091. Ins. Co. (Scovill v. Mutual Reserve
" Guardian Fire Ins. Co. In re, 32 Life Ins. Co. (U. S. C. C.) 182 Fed.
Pa. Co. Ct. R^p. 494; act May 29, 850, 40 Ins. L. J. 190 (transfers were
1901. made under Illinois statute regulat-
*2 Cathcart v. Equitable Mutual ing life and accident insurance on
Life Assoc, of Waterloo, 111 Iowa assessment plan. Ilurd's Rev. Star.
471, 82 N. W. 9()4; McClain's Code, 111. 1909, p. 1320, Art. 245), s. c. 189
sec. 1767, prohibiting such associa- Fed. 347, 111 C. C. A. 79, 40 Ins. L.
tion from insuring a person over six- J. 2091, s. c. (U S. C. C.) 175 Fed.
ty-tive years of age. 624, 39 Ins. L. J. 442, s. e. (U. S. C.
" Timberlake v. Supreme Com- C.) 175 Fed. 629. As to incorpora-
895
;
§§ 330s, 350t
JOYCE ON INSURANCE
§ 350s. Same subject: reincorporation or reorganization of mutual
company on stock plan. — If a statute provides for reincorporation
or reorganization of miitufil fire companias on the stock plan and
such a company succeeds, as lo form, in an attempt to so reorganize
and carries on the business ostensibly as such new creation using the
old company's assets and good will, still, if such attempt is ineffec-
tual Ijecause of the enabling act being void, such continued business
will be regarded as really that of the old coi-poration ; that is, as be-
longing to it.^^
§ 350t. Same subject: reorganization or reincorporation: impair-
ment of obligation of contract. — In a Federal Supreme Court case it
appeared that a beneficial association was originally incorporated
under the New York laws of 1875/^ for tlie purpose of providing
l)enetits for families and others dependent and to provide a fund
for the common and exclusive benefit of all members. It reincor-
porated under the laws of 1883," which provided for the incorpor-
ation and regulation of co-operative and assessment life and casual-
ty insurance corporations, and its charter declared that the business
was to be conducted as upon that plan : said law was subject to alter-
ation and repeal. Thereafter said association accepted the provi-
sions of the Insurance Law of 1892, ^^ which repealed previous laws
upon the subject, and was expressed to be applicable to all corpo-
rations authorized by law to make insurances. An amendatory
law Avas passed in 1901,^^ providing for reorganizations of exist-
ing corporations and amendment of certificates.^" Said associ-
ation accepted the provisions of that law, amended its charter,
changed its name to that of a regular company and also the
character of its business to that of life and health insurance of
every kind. One of the questions before the court was whether
the incorporation of the company and the transfer to it of the as-
sets, property and membership of the association impaired any con-
tioii and reincorporation of same
company. See § 350t herein.
15 lluber V. Martin, 127 Wis. 412,
3 L.R.A.(N.S.) 653n, 115 Am. St.
Rep. 1023, 7 Am. & Eng. Ann. Cas.
400, 105 N. W. 1031, 35 Ins. L. J.
334.
As to reincorporation as a stock
corporation under existing corporate
name, by life or casualty insurance
corporations upon co-operative or as-
sessment plan, .see N. Y. Ins. Law
1909, c. 33, Consol. L. c. 28, sec. 217;
Parker's N. Y. Ins. L. (ed. 1915) p.
339.
Existing fraternal benefit societies,
not required to reincorporate, see N.
Y. Ins. Laws 1909, c. 33. Consol. L.
c. 28, see. 235; L. 1911, c. 198; Park-
er's N. Y. Ins. L. (ed. 1915) p. 351.
16 C. 267.
" C. 175.
" N. Y. Ins. Laws, 1892 ; Laws
1892, p. 1930.
19 C. 722, am'd sec. 52, L. 1892.
20 See also N. Y. Ins. Laws 1909,
c. 33, Consol. L. c. 28, sec. 52; Par-
ker's N. Y. Ins. L. (ed. 1915) p. 68.
896
PARTIES— MUTUAL COMPANIES § 351
tract obligation between the association and its policyholders, pos-
sibly implying by such question that a new corporation was created
by said reincorporation. It was decided that the corporation was
not changed to a stock, hut continued as a nuitual company, that the
old corporation w;is still in existence, under a new name, and with
added powers, but with unchanged memhei-ship, and was hound
to perform all its existing obligations, and that none of the contract
obligations of the associations to its meml)ers were impaired by the
reorganization. It was also decided that the law which authorized
Ihe reincorporation did not impair the obligation of contracts l>e-
tween the association and its policy holders or de[)rive them of their
praperty without due process of law and was not unconstitutional
in these respects.^
§ 351. Same subject: guaranty or reserve fund. — It is held in
Wisconsin that in tlie absence of a charter provision tlierefor, or of
a general power to raise a fund for losses and ex[)enses. the act of a
mutual company in contracting with its members for establishing
a g-uaranty fimd for its existing and future indebtedness is ultra
vires and void.^ In a New Jersey case a nuitual insurance company
without authority by charter, established a guaranty fund of bonds
secured by mortgages. It was held that as the comjjany had no
power to make the contract with the guarantors, it was absolutely
void, and that the fund could not be reached in law or equity by a
creditor of the company after its insolvency.^ But it is held in oth-
er states that an insurance company has inherent j)Ower in the ab-
sence of positive restrictions to establish a guaranty fund.* and to
receive a promissory note from one of its trustees as a part of such
fund. Such note is a valid security in the liands of a receiver, for
the heneht of the company's creditors, 'i'lie act of the comi)any in
undertaking business in another state, under an act of the legisla-
ture thereof requiring other and special security, does not exoner-
^ Polk V. Mutual Reserve Fund ' Trenton IVhitnal Life & Fire Ins.
Life Assoc. 207 U. S. 310, 55 L. ed. Co. v. .McKclvvay, 12 N. J. Eq (1
222, 28 Sup. Ct. 65 {following Beas.) 13.!.
Wright V. Minnesota Mutual Life Wlien iruo.stmoiit of part of bene-
Ins. Co. 193 U. S. 657, 21 Su]). Ct. liciary association's emergency fund
549, 48 L. ed. 832, considered under may be legally attached by creditor,
§ 350m liereiii). Tlie power to alter, see Attorney Cencral v. Massachu-
amend or repeal charters was re- setts Ben. Liie A.ssoc. 173 .Mass. 110,
served in the N. Y. Constitution, 53 N. E. 879.; Mass. Pub. acts 141,
altliouoh it was lield that the legisla- sec. 3.
tive power to alter, amend and re- * Hope Ahiluai VaW- Ins. Co. v.
peal charters was equally effective Perkins, 2 Abb. Dec. 383, 38 N. Y.
whether so reserved or not. 404; Hope iMulual Life Ins. Co. ".
Mvennan v. Kindle, 81 Wis. 212, Weed, 28 Conn. 5L
51 N. W. 426.
Joyce Ins. V'ol. L— 57. 897
§ 3.31a
JOYCE OX INSURANCE
nte the signer of <\K-h a .cniiraiity fioin liability thereon, at kast in
respect to policies not is-ucd in t^ucli slale. The indneeuient held
out to the public to insure by reason of the security afforded by the
guaranty is a sufUcient consideration, or furnishes the ground for
an esto]»i)el.^
§ 351a. Same subject: guaranty or reserve, "mortuary reserve,"
"death benefit," "reserve and emergency," funds: trust funds. — If
a nnitual lire insurance comiuuiy is expres-iy so autborizcd l.y its
chai-ter it may create a guaranty fund by the issuance of certificates
for money loaned, and where it reserves the rights to i)ay off said
loans it may when so authorized by a resolution of the board of
directors give notes to certificate holders, and the execution thereof
by the comjiany is not ultra vires, when it does not violate the stat-
ute regulating such companies.^ A fraternal benefit society, the
amended charter of which authorizes the creation and maintenance
of reserve or surplus funds in support of its certificates has power
to provide for a '•Mortuary Reserve Fund" and also a further re-
serve or suri)his fund as a "Death Benefit Fund,'"' the former to
meet extraordinary demands and the latter, ordinary demands.'
A statute construed with those to which it is related may authorize
the creation of a reserve or guaranty fund from initial cash pay-
ments, from surplus money accruing from lawful assessments to
luaintain a reserve and pay expenses and losses, and interest on tho
invested reserve and such other lawful sources as may, with those
above specified, aid in accunudating funds which it may not be
necessary to resort to to recruit the reserve or pay losses and expen-
ses.^ A mutual life insurance company on the assessment plan,
under the Indiana statute, is not limited in fixing premiums, to
merely a sufficient sum to create a death benefit fund but it may
create an unlimited reserve, and contract for extended insurance.^
In construing the term "reserve and emergency fund," in the
Missouri statute, the words "reserve"' and •'emergency" tii-e there
both used as adjectives qualifying the same noun. and. as such, ai-e
convertible terms, and by the use of the term "reserve" fund, what
5 Hope :\Iuliuil Life Ins. Co. v. Stat. 1900, art. 5, c. :)5; Gen. Stat.
tVrkin.s, '2 Abb. App. Dec. 383, 38 N. 1900, sees. 4216, 4227, limiting lia-
Y. 404; Russell v. Bristol, 49 Conn, bility to a.ssessnients on premium
251. notes (1) lo maintaining a reserve
^ Ainley v. American Mutual Fire fund equal to a certain per cent of
Ins. Co. 113 Iowa TOO, 84 N. W. notes in force; (2) to pay losses
504: Code 1873, tit. 0, c. 4. which may accrue and defray ex-
' Kane v. Knights of Columbus, 84 penses.
(\inn. 9(1, 79 Atl. (i3. ^ Federal Life Ins. Co. v. Arnold,
8 Smith V. Republic Countv Mu- 4li Ind. App. 114. 90_N. E. 493, 01
tual Fire Ins. Co. 82 Kan. 697. 109 N. E. 357; Laws 189/, c. 195, sees.
Pac. 390, 39 Ins. L. J. 1323; Gen. 4. 0.
898
PARTIES— MUTUAL COMPANIES § Sola
is called llie roj^crve in its strict, tccliiiical sense of life insurance was
not intended by the legislature. The above interpretation ap}»lies
to fraternal beneficiar}' associations, and the purpose of the statute
was to enable tlieni to proV-ide in advance and hold in reserve a
fund for an emergency such as some unusual occurrence which
might render them unable to meet death losses.^"
Surplus or reserved funds established by a fraternal benefit so-
ciely in conformity with its charter and ])y-laws are trust funds of
which the society is trustee. ^^ An emergency fund of a fraternal
benehciary association is a trust fund and when the beneficiary has
established any right to the death benefit certificate the corporatif)n
comes under a fiduciary relation to the benefician^ as one of the
persons entitled to share in the emergency fund. But that does not
att'ect the relation between the corporation and the beneficiary
named in the certificate, so far as tlie question is concerned whether
anything is due under the certificate as a contract so far as that
question is concerned, the only relation between the two is that
growing out of contract witli the member for the payment of money
which, if due, is due to the beneficiary.^^ A mortuary reserve fund
of a fraternal benefit society, created for extraordinary purposes,
must be preserved to answer such purjioses until it definitely ap-
])ears that those have failed or that tlie fund will never be required
therefor when it may be distributed.^^ So, where a mutual insur-
ance asociation transfers its membership to another association un-
der a contract entitling the transferred members to full rights as
members of such transferee and the transferring company's certifi-
cates required a levy of a per cajiita assft'^sment at a member's deatli
and the api)lication thereto of the proceeds, not exceeding a certain
specified sum, a beneficiary cannot compel said transferee to ajiply
property transferred to it in trust to fulfill the terms of the transfer
contract where it does not appear that such application was neces-
^•^ State (ex rcl. Supreme Lodge ^^ Attorney General v. Supreme
Kiiiiihts of Pvlhias) v. Vandiver, Council American Legion of lionoi-,
L'1;]\Mo. 187, 15 Am. & Eng. Ann. '200 ]\lass. 158, 166, 92 N. E. 130.
("as. 283, 111 S. W. 911; Act ISHT, KnuMgoncy fund here was to meet an
see. 1408; Kev. Stat. ]8!)!l. emergency wliicli )niglit arise if as-
Reserve or emergency liiiid: life sessmenls did not realize enough to
cori)orations, associations or socle- jiay death benelits. See also At-
tics on co-operative or assessment loriiey General v. American Legion
].lan, see N. Y. ins. Laws 1009, c. of Honor, 206 Mass. 131, 92 N. E.
:V.], Consol. L. c. 28, .sec 20.'); Par- I'M.
ker's N. Y, Ins. L. (ed. 1915) p. ^^ Kane v. Ki:i<:lils of Columbus,
3L3. 84 Conn. 96, 79 AtL 03.
^^ Kane v. Kniiihts of Columbus,
84 Conn. 90, 79 Atl. 63.
899
§ 352
JOYCE ON INSURANCE
sary to pay the claim of the l>eneficiary.i* But a transferee mutual
insurance association which has drawn from its mortuary fund, ac-
quired before consolidation, to pay death benefits of members of
the transferring association, may reimburse said fund from assess-
ments levied upon said members, as against their beneficiaries.^*
If no authority is given a mutual fire insurance company to levy
a direct guaranty fund assessment it cannot he done; and an assess-
ment of premium notes, not necessary to maintain the reserve fund
at the per cent si)ecified under the statute and not necessary to f)ay
losses or expenses, l)ut levied merely for purposes to be develoi)ed
in the future is illegal. ^^ But an emergency fund cannot be created
by an assessment insurance association, by deducting a certain per
cent from the amount agreed to be paid under the certificate, even
though the statute authorizes the creation of an emergency fund,
and such deduction was authorized by a subsequently enacted by-
law, and the promise, under the certificate, to pay was based upon
a consideration of compliance with existing and future by-laws."
A mortuary reserve fund of a fraternal benefit order, created to
meet extraordinary demands, cannot be transferred under a new
plan. to. or merged in, the connnon fund as such act constitutes an
unwarranted change in the object of the trust and an illegal diver-
sion of the fund, although this does not apply to a surplus death-
benefit fund, created for ordinary i)uri)oses.^*
Although a contract of consolidation between a foreign fraternal
beneficiary society and a domestic association is ultra vires and void
the latter cannot defend an action for conversion of the former's
funds on the ground that its acts in obtaining such funds were not
within its corporate power. ^'
§ 352. Benevolent and fraternal organizations subject to laws of
state and jurisdiction of courts: conditions precedent to resort to
courts. — It may l)e stated generally thai all benevolent and frater-
nal organizations or a.-sociatious are .subject to the laws of the state,
and in all proper cases, where pro})erty rights are involved, the
1* Cathf-art v. Equitable :\rntnal Mass. Ill, 63 N. E. 1, 31 Ins. L. J.
Life Assoc. Ill Iowa 471, 82 N. W. 38!).
964. ^8 Kane v. Kni<;hts of Columbus,
i^Cathcart v. Eciuitablo Mutual 84 Conn. 96, 79 Atl. 63.
Life Assoc. Ill Iowa 471, 82 N. W. As to wrongful transfer or diver-
964. sion of .safety funds of assessment
^6 Smith V. Republic County Mu- company, and lial)ility of directions,
tual Fire Ins. Co. 82 Kan. 097, 109 see Ridley v. Paillard, 20 Muse. 513,
Pac. 390, 39 Ins. L. J. 1323; Gen. 57 N. Y. Supp. 693.
Stat. 1909, art. 5, e. 55; Gen. Stat. ^^ Starr v. P,ankers Union of the
1909, sees. 4216, 4227. World, 81 Neb. 377, 129 Am. St.
"Newhall v. Supreme Councd Rep. 684, 116 N. W. 61, 37 Ins. L.
American Legion of Honor, 181 J. 740, citing National Bank v. Gra-
90U
PARTIES— MUTUAL COMPANIES
§ 352
court's may entertain jurisdiction and afford relief'.'^" And a stat-
utory exemption does not operate to exeini»t an assessment com-
pany from all laws, decisions and rules thereunder but relates only
to the business of said company.^ So, the court can control the pay-
ment of funds, for beneficiaries, in accordance with the rules of
law.2
The courts will, however, take into consideration the objects and
purposes of the organization in granting relief. They will further
cor-ider the modes provided Ijy the charter, constitution, and by-
laws for determining the rights of members. Courts, however, or-
dinarily leave all questions involving policy or discipline to be .set-
tled in the manner pointed out by the regulations of the order.
These organizations are formed by a purely voluntary association
of individuals for the accomplishment of agreed-upon purposes.
The selection of the ))urposes intended and the determination of
the means of accomplishment of those purposes are peculiarly mat-
ters within the decision of the a.ssociation alone. And it is an es-
tablished rule that the courts are reluctant to interfere with a mat-
ter of internal management of a bepetit as.<ociation, unle.ss the order,
itself refuses or neglects to perform its duty.' Thus, the grand
ham, 100 U. S. 699, 25 L. ed. 750; ^Kaue v. Kniirlits of Columbus, 84
Mendel v. Boyd, 3 Neb. (unoff.) 473; Conn. 96, 79 Atl. 63, 40 Ins. L. J.
Cook on Corp. (5th ed.) see. 15b.
20 Reno Lodjre No. 99, I. 0. 0. F.
V. Gnind Lodjre I. O. 0. F. 54 Kan.
73, 80, 26 L.R.A. 98, 37 Pae. 1003,
per Allen, J. Ciling Bauer v. Samson
Lodc:e No. 32, Knis'lits of Pythias,
1(12 Ind. 262, 1 N. E. 571; Goodman
V. .ledidjah Lodg'c, No. 7, 67 ^Id.
117, 9 Atl. 13, 13 Atl. 627; Genest
V. L'Union St. Joseph, 141 Mass.
8<4, citing Wrii^ht v. IMinnesota Mu-
tual Life'lns. C'o. 193 U. S. 657, 48
L. ed. 832, 24 Sup. Ct. 549.
See also the following cases:
Kenlucliji. — Wallace v. Grand
Lodtje of' United Brothers of Friend-
ship, 32 Ky. L. Rep. 1049, 107 S. W.
724 (case of expulsion of members).
Missouri. — Stone v. Grand Lod^re
Ancient Order United Workmen, 78
417, 6 N. E. 380: Dolan v. Court Mo. App. 546, 2 Mo. App. 296 (bene-
Good Samaritan. No. 5910, 1. O. 0. ' '
F. 128 .Mas.^. 437; Toricy v. Baker,
1 Allen (83 Mass.) 120; Au.stin v.
Searing, 16 N. Y. 112, 69 Am. Dec.
()65 and note. See also Patron's Mu-
tual Fire Ins. Co. v. Attornev (Jen-
tit .societies may adopt and enforce
leasoiiabie I'ulcs, etc., and except for
most ui'gent reasons courts will not
interfere).
Sortli ('(troUiia. — See Kellv v. Tri-
mont Lodge, 154 N. C. " 97, 52
eral, 166 Midi. 438, VM N. W. 111!). L.R.A. (N.S.) 823, 67 S. E. 764, 40
As to .iurisdiction, see §§ 3502,
3520 herein.
^ I\Iurrav v. Superior Court of
Los Angeles County, 129 Cal. 628. (i2
Pac. 191. As to statutory exemp-
tions, see §§ 340, 344i lierein.
2RovaI Leao-ue v. Shields, 251 ill.
250, 36 L.R.A.(N.S.) 208, 96 N. E.
45, 40 In.s. L. J. 21GG.
ins. L. J. 768, considered under §
352c herein.
TeKis. — Lone Star Lodge No.
1,935, Knis'ht.s of Ladies of Honor v.
Cole, — Tex. Civ. App. — , 131 S.
W. 1180 (courts cannot decide, di-
rect or control as to questions of
internal policy or of discipline of
members) ; Thomp.son v. Grand Inter-
901
§ 352
JOYCE OX IXSUKANX'E
lodge of the state of Kaiii^a.- of a certain order liad for one of its-
fmuUnDcnlal (ihject- llio caro of orphans of deceased members. In
order to make use of certain property conveyed to it in trust, it
levied an assessment of so much per (•a[)ita on all the suljorcUnate
lodges in Kansas, to pay oti' an indelftedness and make certain im-
l>r(ivements for the benefit of a home for ihe maintenance and (mIu-
cation of orphans of deceased^ meinbers of the order. The right in
do this wa.s not in violation of any law of the state. An appeal ex-
isted from the grand lodge to tlie sovereign grand lodge, either with
or without the consent of tlie grand lodge, and such sovereign grand
lodge was conceded to have full legislative and judicial power in
determining matters relating to the order. No appeal was taken
to the latter lodge, and an injunction was sought to prevent the
levy of the assessment, which was refused, it being held that the
question of methods and amount to be raised was a matter of ]»ol-
icy for the association to determine, and that courts will not under-
take to direct or control the internal policy of such societies.*
So it is held in Connecticut that remedies within the order nuist
first be exhausted where property rights are not involved, and that
this rule is universally acce[)ted.^ The circumstances or the nature of
national Brotherhood of Locomotive 23 L.R.A. 227, 27 Atl. 591, ciling and
Enaineers, 41 Tex. Civ. App. 170, 91 considering Hawes v. Oakland, 104
S. \V. 834 (courts will not ordinarily U. 8. 450, 26 L. ed. 827; Hall v. Su-
interfere, yet under facts case siiuuld preme Lodge Knights oi' Honor, 24
have been submitted to jury: expul-
sion of member).
Washiiirjton. — Ivelly v.. Gra;id Cir-
cle Women of Woodcraft, 40 Wash.
691, 82 I^ac. 1007 (expulsion of mem-
ber: courts will not inti'rfere whore
jurisdiction regularly and lawfully
exercised except laws of association
invalid or procedure irregular and
injustice thereby results).
'4 Keno Lodge No. 99, I. 0. O. F.
V. Grand Lodge, I. O. O. F. 54 Kan.
73, 2fi L.R.A. 98, 37 Pac. 1003, per
Allen, J., citing Harrington v. Work-
ingmen's Benevolent Assoc. 70 Oa.
340; Osceola Tritie
pendent Order of
98;
175,
Fed. 450.; Schmidt v. Abi-aiiam
Lincoln Lodge, 84 Ky. 490, 8 Ky.
Law R. 655, 2 S. W. 156; Oliver v.
Hopkins, 144 :\La.'^s. 175, 10 N. E.
776; Chamberlain v. Lincoln, 129
INIass. 70; McAlees v. Supreme Sit-
ting Order of The Iron Hall (Pa.
1888) 13 Atl. 755, 12 Cent. Rep. 415,
10 Sad. 188. See Grand Grove of the
Unitetl Ancient Order of Druids v.
Duchein, 105 Cat. 219, 226, 38 Pac.
acts un-
of the
are not
947, per Harrison, J., that
der jurisdiction by rules
order properly conferred
sul)ject to review.
The following decisions also sup-
port the text :
Delauare. — King v. Wyneraa
Council No. 10, Daughters of Poco-
hontas Imi)roved Order of Red Men,
25 Del. (2 Boyee's) 255, 78 Atl. 845.
loira. — Byram v. Sovereign Camp
oieties, sees. 79, 130 ; Bacon's Benefit of Woodmen of the World, 108 Iowa,
Societies, sec. 94. 430, 79 N. W. 144 (expulsion of
*Mead v. Stirling, 62 Conu. 580, member).
902
Schmidt, 57 Md.
kins, 144 Mass.
Chamberlain v. Lincoln,
70; Lafoud v. Dcemes,
No. 11, Inde-
Red ^len v.
Oliver v. Hop-
10 N. E. 776;
129 Mass.
81 N. Y.
507; Niblack's Mutual^ Benefit So-
PARTIES— MUTUAL COMPANIES § 332
the case, however, may be such that a resort to the courts may be had
without exhausting in the first instance the remedies provided for
within the order.® Even though a beneficiaiy under a certificate in
a fraternal a-^sociation cannot sue in court until remedies prescribed
by its constitution ai'e exhausted, still, where an attempt to do this
Kentucky. — Brotherhood of Rail-
road Ti'ainmen v. Sweaiiniieii, 101
of ^lutaal Protection v. Meister, 204
111. 527, 68 N. E. 4-34 (beiu'Ciciary).
Ky. 603, 171 S. W. 455 (and if Indiana. — Voluntary Relief Dc-
remedies are e.xhausted may appeal partment v. Spencer, 17 Jud. Ai)pw
to courts). 123, 4() N. E. 477.
Michigan. — Allen v. Patrons' Mu- Maryland. — I)a<iue v. Grand Lodge
tual Fire Ins. Co. 163 .Mich. 18, 130 Brolliorhood of Railroad Trainmen,
N. W. 196, 40 In.s. L. J. 070; Con- 111 Md. 93, 73 Atl. 735 (when socie-
ley V. Supreme Court Independent ty estopped)
Order of Foresters, 158 Mich. 190,
122 N. W. 567, 39 Ins. L. J. 1112;
Monger v. New Era Assoc. 156
Mich. 645, 24 L.R.A. 1027n, 121 N.
W. 823; Fillmore v. Great Carap of
Maccabees, 109 Mich. 13, 2 Det. L.
News, 1012, 66 N. W. 675.
Minnesota. — Kulberg v. National
Council of Knights & Ladies of Se-
curity, 124 Minn. 437, 145 N. W.
120 (expulsion of member) ; Marcus
V. National Council of Knights &
Ladies of Security, 123 'SVnm. 143,
143 N. W. 265 (expulsion of mem-
ber).
Oregon. — Montour v. Grand Lodge
Ancient Order of United Workmen,
38 Ore. 47, 62 Pac. 524 (expulsion
of member).
Pennsylvania. — Wick v. Fraterni-
ties Accident Order, 21 Pa. Sup. Ct.
Rep. 507; Mustin v. Grand Fraterni-
ty, 50 Leg. Inteil. 350, 12 Dist. Rep.
468.
Texas. — Lone Star Lodge No.
1935, Knights & Ijadies of Honor v.
Cole, — Tex. Civ. Ai)p. — , 131 S. W.
1180.
Wisconsin. — Loefller v. IModern
Woodmen of America, 100 Wis. 79,
75 N. W. 1012.
On necessity of exhausting reme-
dies within order a^^ainst decision ex-
pelling or suspending a member from
a mutual lionetit association, see note
in .32 L.R.A. (N.S.) 817.
* Illinois. — Supreme Lodge, Order courts)
903
Minnesota. — Malmsted v. Minne-
apolis Aerie, No. 34, Fraternal Or-
der of Eagles, 111 .Alinn. 119, 126
N. W. 486 (expulsion of member).
Xew York. — Brown v. Independent
Order of Foresters, 72 N. Y. Sujip.
8()(), 66 App. Div. 259 (courts will
pi'otect the rights of such meml)or
wliere an unjust and unreasonai)lc
burden is put on the member of a
fraternal society by its laws or con-
stitution); HoUomany v. National
Slavonic Society, 57 N. Y. Su])p.
720, 39 App. Div. 573.
Pennsi/lrania. — Tucker v. George
Sliiftler Council Jr. 0. U. A. M. 68
Leg. Intel). 18 (there was notliing in
the constitution or by-laws requiring
ai)peal and nieinlx'r was entitled to
sue witliout appealing to society's
tribunal).
Tennessee. — Benson v. Grand
Lodge of B. of L. F. — Tenn. Ch.
— , 54 S. W. 132 (constitution did not
prohibit resort to courts).
Texas. — St. Louis Southwestern
Ry. Co. v. Thompson, — Tex. Civ.
App. — , 108 S. W. 453 (exi)nlsion
of member).
Wisconsi)). — State (ex rel. Wein-
gart) V. Board of Ofiicers of Gegen-
seitig'e Unterstuetzungs Gesellscha tt
Germania, 144 Wis. .316, r29 N. W.
630, 40 Ins. L. J. 433 (when oflicevs
wrongfully removed not required to
exhaust remedies within society as
condition pieccdent to resort to
352a
JOYCE ON INSURANCE
has been made in good faith in accordance with the rules of the as-
sociation and it arbitrarily refuses to act upon the claim an action
may be brought in a court of competent jurisdiction to enforce the
claim J 80, the certificate of membership issued to a member of a
mutual benefit society is a contract of insurance, and his right to
recover upon it does/Hot dej^end upon the action of the oflicers of
the society, for if he has performed his part of the contract and is
totally disabled by disease or accident, he has a complete cause of
action. A refusal by the officers of the society to allow the claim
will not defeat a recovery.* And a beneficial association or society
cannot, by force of a by-law make itself a judge in its own case by
requiring that all claims or cases shall be tried by its board, in the
first instance.^ So, a beneficiary may resort to the courts without
exhausting liis remedy under the rules and by-laws where they at-
tempt to make an ofiicer or officers of tlie association tlie arbiter or
tribunal to whom the claim shall be submitted for adjudication as
a condition precedent. ■^° Nor is it necessary to take an appeal with-
in the society before resorting to the courts for redress, when such
appeal would be unavailing and fruitless because it could not be
heard in time to att'ord any relief. ^^ And a beneficiary may seek a
remedy in the courts where the right of appeal provided for by the
association is denied. -^^ Again, remedies need not be exhausted
within the order, even though so stipulated, where the question in-
volved is one of property rights. ^^
§ 352a. Same subject. — Resort to the internal tribunals of a fra-
ternal benevolent a.-^sociation may be validly imposed as a condi-
tion precedent to resort to the courts against the association.^* It
'Brotherhood of Railroad Train- ^^ Rose v. Supreme Court, Order of
men v. Swoarin^en, IGl Ky. 665, 171 Patricians, 12() ]\Iich. 577, 85 N. W.
S. ^Y. 455; Haa? v. Good, 7 Pa. Sup. 107.3.
Ct. 425, 42 Wkly. Not. Ca-s. 5.30. 13 Kelly v. Trimont Lodge, 154 N.
See Caine v. Benevolent & Protective Car. 97, 52 L.R.A.(N.S.) 823, 69 S.
Order of Elks, 34 N. Y. Supp. 528, E. 764, 40 Ins. L. J. 268; see Lone
88 Hun (N. Y.) 154. Star Lodge No. 1935, Knights &
* Supreme Council of The Order Ladies of Honor v. Cole, — Tex. Civ.
of Chosen Friends v. Forsino:er, 125 App. — , 131 S. W. 1180; see §§ 372,
Ind. 52, 21 Am. St. Rep. 196, 9 2503, 3502, 3520 herein.
L.R.A. 501, 25 N. E. 129.
^* Ocean Castle, Knights of the
^ Placa V. Polizzi Generosa Soc. Golden lilagle v. Smith, 58 N. J. L.
138 N. Y. Supp. 822. 545, 33 Atl. 498. See also Cotter v.
1° Great Hive, Ladies of Modern Grand Lodge A. 0. U. W. 23 Mont.
Maccabees v. Hodge, 130 111. App. 1. 82, 57 Pac. 650.
^^ State (ex rel. Weingart) v. On validity of requirement by mu-
Board of Officers of Gegenseitige Uu- tual benefit society that remedies
terstuetzungs Gesellschaft Germania, within the order must be exhausted
144 Wis. 516, 129 N. W. 636, 40 Ins. before resort to the civil courts, see
L. J. 4.5.3, note in 8 L.R.A. (N.S.) 916.
904
PARTIES— MUTUAL COMPANIES §§ 3521), 352c
is alpo competent for a mutual benefit society to provide for tlie pre-
sentation of claims to ofiicers designated in it-^ by-laws, and it may
also prescribe a mode of procedure, provided tliat such mode is not
such as to deprive parties of property rights." Ho, a member must
exhaust his remedies within a mutual benefit order before resorting
to the courts, where he has voluntarily submitted himself to the laws
of such order which so provide. ^^ And a person voluntarily sub-
mits himself to the society's jurisdiction so long as it does not ex-
ceed its authority, where he accepts membership.^' Nor will equity
aid a member who refuses to avail himself of his remedies provided
for in the order in case of grievance.^®
§ 352b. Same subject: strict construction of such conditions pre-
cedent. — A restriction upon the rights of members of fraternal as-
sociation to resort to the courts must be imposed in the clearest and
most express terms, mere inference is insufficient.^^ And the rule
of strict construction, even to a strained interpretation, will be ap-
plied to the constitution or by-laws when they require remedies and
an appeal within the society, provided therein, to be exhausted be-
fore resorting to the courts. ''°
§ 352c. Same subject: Kelly v. Trimont Lodge. — The following
extract from the opinion in the case of Kelly v. Trimont Lodge ^ is
important in connection wath the subject under consideration here-
in.^ The court, per Manning, J., said: "It is contended by the
defendant that the stipulation contained in the application for mem-
bership in the defendant lodge by the deceased, that he would seek
the remedy for all his rights on account of such membership, in the
tribunals of the order, precludes any resort to the established courts
of the state for the enforcement of any right, however just or how-
ever plainly established by contract, unless the tribunals of llic
order deliberately refuse to act, or their action is fraudulently taken.
^* Supreme Council of the Order ^^ Supreme Lodge, Order of Select
of Chosen Friend.s v. Forsinger, 125 Friends v. Raymond, 57 Kan. 647,
Ind. 52, 21 Am. St. Rop. 196, 4n L.R.A. :573n, 2 Chi. L. J. Wklv.
L.R.A. 501, 25 N. E. 120. 128, 47 Pac. 5:53.
^^ Cohen V. Superior Lodge No. ^^ Brotherhood of Railroad Train-
516, I. 0. B. A. 35 R. 1. 94, 85 Atl. men v. Powell, 70 111. App. 500.
653. U54 N. C. 97, 52 L.R.A. (N.S.)
1' Holmes v. Royal Fraternal 823, 69 S. E. 764, 40 Ins. L. J. 268.
Union, 222 Mo. 556, 26 L.R.A. lOSOii, On conclusiveness of decisions of
121 S. W. 100. lril)unals of ai;s()ciations or corpora-
^^ LoelHer v. Modern Woodmen of lions, see notes in 49 L.R.A. 35.3; 2
America, 100 Wis. 79, 75 N. W. 1012. L.R.A. (N.S.) 672; and 52 L.R.A.
See also Finerty v. Supreme Council (N.S.) 806, 823.
Catholic Knights of America, 115 ^ 5<^ 352-352b. See also §§ 372,
Iowa, 398, 88 N. W. 834. See § 3520 ,3205, 3520 herein,
lierein.
905
§ 3.52c
JOYCE ON INSURANCE
Tlie precise question was considered and determined by the Su-
])reiiie Court of Illinois, in the ease of Ivaihvay Passenger & Frci.^ht
Condnetors' Mutual Aid & Benefit Association v. Robinson ^ in
which case the court said : 'That it is competent for memljers of
societies of this character to so contract that their riohts as mem-
bers shall depend upon the determination of some tribunal of their
own choice, may be conceded. But where the designated tribunal
is the society itself, one of the parties to the controversy, or what is
substantially the same thing, the board of directors, which is its
oihcial and organic representative, the courts will hesitate and even
refuse to treat its decisions as final and conclusive, unless the lan-
guage of the contract is such as to preclude any other const' iiction.
Tlie judicial mind is so strongly against the propriety of allowing
one of the parties, or its special representative, to be judge or ar-
l)itrator in its own case, that even a strained interpretation will be
resorted to, if netessary to avoid the result." In Fears(»u v. Ander-
burg,* the Supreme Court of Utah having announced the same con-
clusion as the Illinois court said: 'To hold otherwise would l^e an
attempt to clothe such voluntary association with power lo create
judicial tril)unals. which would be contrary to the law of the land.^
We therefore hold that plaintiff was not required to exhaust the
remedy provided by the tribunals of the association as a condition
[)rocedent to the bringing of this action. We have no doubt of the
power of meml)ers of a voluntary association to restrict themselves,
as to matters incidental to the operation of the a.ssociation, to reme-
dies hefore tril:»unals created by the association, the n.ature and kind
of which we need not here consider. We are, however, of the opin-
ion that this case does not fall within such rule. The right to the
moneys due here was a property right, and was created by and
growing out of a contract.' In 2 Bacon on Benefit Societies and
Life Insurance,^ the learned author, after quoting from many cas-
es, says: 'It seems to us that the reasoning of the Supreme Court of
Illinois is most logical and in accordance witb the ])rinciples of
jn.-lice. It is certainly al)horrent to a sense of justice that a cor-
poration should be judge and jury when defendant, and should de-
cide upon the validity of claims against itself, to the exclusion of
the civil courts of any rights on the part of the claimant to have a
review Ijy the courts of such judgment.' Limiting the stipulation
in the application lo an agreement to submit to the decisions of the
tribunals of the order upon all (questions of a legislative or admin-
3 147 111 138, 159, 35 N. E. 1G8, Anr-ient Order of United \ 'orkmen,
17fi. 10 Utah, 110, 37 Par-. 24.3.
*28 Utali, 40.5, 80 Pac 307.
5 Citing Danilier v. Grand Lodge,
906
6 Sec, 400a, p. 1016.
PARTIES— MUTUAL COMPANIES §§ 353, 354
istrative nature, and to their judi^nient upon controversies of mem-
l)ers with one anotlier within the order, we think the stipulation can
be sustained, and we would say that upon a question involving one
of the above matters, the member had by such stipulation precluded
himself from a resort to the court, in the absence of charges of fraud
or misconduct. lUit where the question involved is the enforce-
ment of a property right, such as is presented in this case, we hold
that the courts can be invoked by a member to aid him in the en-
forcement or protection of such righl-. without resorting, in the
first instance, to the tribunal of (lie order. The Sn])rciiic Court of
Elaine, in Stephen.^on v. Insurance Comi)any,''' thus ter.^ely stated
the principle: 'The law. and not the contract. prcscril)os the reme-
dy, and parties have no more right to enter into stipulation ugainst
a resort to the courts for their remedy in a given case, tlmn they
have to provide a remedy prohibited by law.' ^ Our court has uui-
formily held to the doctrine that when a cause of action has arisen,
the courts cannot be ousted of their jurisdiction by agreements pre-
viously entered into, to submit the liabilities and rights of the par-
ties to the determination of other tribunals named in the agree-
ment; but it has been, also, generally held that the agreement to
submit the particular question of the amount of loss or dauiage of
the assured under an insurance policy, is not against public policy
and is sustained. That is simply a method for the asceiiainment
of a single fact and not the determination of the legal liability of
the insurer." ^
§ 353. Absolute right to become member under charter of mutual
company. — If the charier of a mutual in.-urance comjjany makes
it the absolute right of a certain class of persons in a certain locality
to become members, the conditions being subscribing the articles
and applying for insurance on the terms and requirements of the
chiU'ter and by-laws. u])on compliance with the conditions such
right may be insisted on, and cannot be cut oft" bv an officer of the
corporation. f(tr he has no option on the subject.^"
§ 354. Contributions by subordinate lodge to supreme lodge:
specific purpose: power of disposal of funds. — If the su])rcme lodge
of a benevolent society receives, in resi)ouse to a "distress call,"
funds by way of contributions from suboi-dinate lodges, it has no
power to withhold any part of such fund from the persons for
whom intended, even though the approximation of the persons in-
'54 Me. 55. v. Plioniiix' Assurance Company, 106
8 Citing Biaddy v. New York Bow- N. C. 28, 10 S. E. 1057.
erv Fire Insurance Company, 115 N. ^° Gay v. Farmers' Mutual Ins. Co.
C' 354, 20 S. E. 477. " 51 Midi. 245, 16 N. W. 392.
^Citing Manufacturing Company
!»07
§§ 3o4a, 3r)4b
JOYCE ON INSURANCE
jured and intended to be benefited is of a greater number than
actually injured. ^^ In this case the court, per Bennett, C. J., said:
"We agree that when contrilnitions are made to the common fund
of a society, oi^as a special fund, to be used in whole or in part by
it, at itnS discretion, for the benefit of such members as it might se-
lect, or in such proportion as it might agree, a court of equity can-
not control its judgment either as to the amount or as to the pro-
portion of the donation among the members. But, as said, the
contributors raised a fund and ])laced it in the hands of appellant,
as trustee, for a specific purpose, and the trustee was not given the
power to pay the money or withhold it. or a part of it, at its discre-
tion, but the only discretion given it was the power to distribute it
according to the necessities of the donees. It was the trustee of an
express trust for that pur})ose alone, and had no power to withhold
any part of the fund from dis(ril)ution. because it was not delegated
to it. The wlidlc was contributed for their benefit, and they, as far
as the ai)pellaii1 is concerned, are entitled to it."
§ 354a. Right of subordinate circles or lodges to funds: rights of
member who has withdrav/n. — Under a Connecticut decision, where
a fraternal beneficial association with subordinate circles, incor-
porated by special charter,^^ has power thereunder to establish local
circles and goverii and manage them by laws of its making, and re-
quires said circles, under the constitution prescribed for them, to
maintain a general fund for sick benefits and general expenses and
a mortuary fund for death and funeral benefits, such funds so ac-
cunuilated by said subordinate body, belong to it; but a memljer
wdio ha« withdrawn therefrom loses his interest and rights over
said funds. ^^ The above decision, however, seems to be in conflict
with one rendered in Toloi'ado.^*
§ 354b. Funds of subordinate circle or lodge: trust funds: cannot
be diverted. — As soon as paid in by members of a subordinate circle
of a fraternal beneficiary association, the general fund for sick
benefits and general expenses and the mortucuy fund for death
^1 Snproino Lodsfo Knicrlils & La- Order of Tvon Hall, 64 Conn. 170, 24
dies of Honor v. Owens, i)4 Kv. ;!27, L.K.A. 815, 29 Atl. 614; Freund-
20 L.R.A. 347, 22 S. W. 327. " seliaft Lodge, No. 72, D. 0. H. v.
^2 Conn. Special Laws, 1007, p. Adilemberoer, 235 111. 438, 85 N. E.
402. 053. K.tamiiie (irand Lodge A. 0. U.
^^ National Cir(4e, Dauahters of W. of Conn. v. Grand Lodge A. 0. U.
Isabella V. Hines, 288 Conn. 676, 02 W. of Mass. 81 Conn. 180, 70 Atl.
Atl. 401, 45 Ins. L. J. 132. CUinij 017.
as to rigbts of member wlio lias witli- ^* Die Gross-Loge Des Ordens der
drawn, Grand Lodge, A. 0. U. W. Heinianns-Soebne v. Wolfer, 42 Colo,
of Conn. V. Grand Lodge, A. 0. U. 303, 04 Pae. 329, considered under
W. of Mass. 81 Conn.'l89, 70 Atl. § 350b berein.
617; Faweett v. Supreme Sitting of
908
PARTIES— MUTUAL COMPANIES § 354c
and funeral bene fil.s become ini})rer^ped witli a trust tbe terms of
whicb are found in the cluntiM' of the association aud iu the con-
stitutions and laws of the subordinate body.^^ As the general fund
and mortuary fund of a subordinate circle of a fraternal beneficiary
association are trust funds they cannot be diverted from tbe pur-
poses of the trust as specified by the charter and laws of the associa-
tion and equity will enforce tbe trust and prevent such diversion. ^^
Nor does any power exist in such subordinate circle nor in its mem-
bers, whether a majority or a minority, to divert said funds from
the purposes of the trust to anotlier ortiaiiization. Said funds also
remain impressed with the trust which innnediately attaches upon
creation of the fund." Under a Colorado decision, the funds or
assets of a subordinate lod,2,e, even though incorporated, are held
by it and its members in trust for the benefit of the grand lodge
and may be followed by it into the hands of officers who with the
members have diverted and a|)])ropriated it.^*
If the funds of a fraternal benelit order are being diverted, con-
trary to law, from the purposes contemplated, such illegal act will
be restrained. ^^
§ 354c. Duty of association to protect subordinate circle's funds
against diversion. — it is the duty of a fraternal beneficiary a.^socia-
tion, where its charter under a special statute provides for the es-
taljlishment of subordinate circles and the creation of a general
fund and a mortuary fund, to protect the uiembers of said circle in
their right to such funds against tlieir diversion to uses and pur-
^^ National Circle, Daugliters of " National Circle, Daunliters of
Isabella v. Hines, 88 Conn. ()7(), 92 Isabella v. I lines, 88 Conn. (576, 02
Atl. 401, 45 Ins. L. J. 1:52 ritiiuj All. 401, 45 Ins. L. J. 132, cithig
Grand Lodge, A. O. U. W. of Conn. Koernci- Lodije, No. 6, Knijrlits of
V. Grand Lodge x\. O. U. \V. of Pythias v. Grand Lodge, Knigiils of
Mass. 81 Conn. 18!), 20;i, 70 Atl. 617; Pvtiiias, 14(i hid. 630, nr^r,, 45 N. E.
note 47 L.R.A.(N.S.) 027, !):;i, on li03; McFadden v. .Murphy, 140
right to i)roperty of local brancli by Mass. 341, 342, 21 N. E. 868.
benefit society in event of secession or A.s to want of power of directors
attem])ted secession. of a benelit association to transfer
^^ National Circle, Daughters of from reserve to mortuary fund, see
Isabella v. Ilines, 88 Conn. 67(i, 02 Fai mers Loan & Tiiist Co. v. Aberle,
Atl. 401, 45 Ins. L. J. 132, rili)>fj 46 N. Y. Sui)p. 10, IS) .\pp. Div. 7!),
Grand Lodge A. O. U. W. of Conn, modifying 41 N. Y. Siipp. 63S, 18
V. Grand Lodge A. O. U. W. of Misc. 257.
Mass. 81 Conn.'l80, 203, 70 Atl. 617; "Die Gross-Loge Des Ordens der
Penfield v. Skinner, 11 Vt. 206, 208; Hermanns-Soehne v. WoH'er. 42 Colo.
High on Injunctions (4tli ed.) .sec 303. 04 Pac. 320. Cumpdre ^ 354a
1192, p. no;!. herein.
As to ajtplication or appro|)riation ^^ State v. P.ankers Union of the
of funds bv society or lodge, see World, 71 Neb. 622, 99 N. W. 531.
§ 1289 herein.
909
§§ 355-357
JOYCE ON INSUKAXCE
poses other tlinn tlio.-e of its charter and laAv, by an api")eal to equity.
And even if tlic cliartcr liad not conferred such power it would exist
by reason of tlie fact thai the circle owed its origin to the associa-
tion and existed under its laws and government and secured and
maintained said funds for purposes prescribed by said association.^"
§ 355. Effect of decision by official body created by constitution of
order. — AVhere ihe endowment rank of an order is separate from
ihe lodge, and is for insin-ance purposes only, and the constitution
creates a board of control having entire control over the endowment
rank. sul)ject to certain restrictions by the supreme lodge, with au-
tli(trity to hear and determine all appeals, a record made by said
board in pursuance of this authority and consequent upon certain
oti)er acts which it was authorized to do. operates as an authoritative
construction of its regulations ; the courts will follow its ruling, and
it is not a decision res inter alios acta.^ A member of an unincor-
porated Masonic lodge cannot, while he Tias fhe right of redress
within the order, obtain the aid of the state courts.^
§ 356. Delegation of power by supreme lodge: mutual benefit so-
ciety. — Although the supreme lodge of a nmtual benefit society
may have the fullest ])ower under its charter to pass all such rea.<^on-
able laws as it may deem proper for the establishment and govern-
ment of an endowment rank, and to enact general laws, yet where
its charter vests that power alone in the supreme lodge, it cannot
abdicate its authority and delegate the power to a board of control
or other agency.^
§ 357. Subordinate association cannot be deprived of charter
without hearing. — If a corporation passes a by-law which authoriz-
es a subordinate association to be de)»rived of it^: charter without a
hearing, such bj'-law is unreasonable and void. The opinion of the
court in this case is important and we quote therefrom as follows:
"The ])laintiff is the supreme tribunal of Druidism in California,
and the defendant, Garibaldi (h-ove, No. 71, is a subordinate grove
of Druids, of which the appellant. Duchein. is the trea.surer. The
relation between the plaintifl' and the subordinate grove is estal>
lished by the constitution and liy-laws of the order, by virtue of
which the grand grove is given 'sole right and full power to grant
20 National Circle, Dauuhtors of Pyihi;is v. Kalinski, 6 U. S. C. C.
Lsaljella v. Mines, 88 Conn. U76, 02 :]73, 5< Fed. .348, 13 U. S. App. 574,
Atl. 401, 45 Ins. L. J. 132, citinr, 23 In.'^. L. J. 44.
Ceneral Hospital See. v. New Haven ^ j^.j^v.«on v. Ilewell, 118 Cal. 613,
Renderinij Co. 79 Conn. 581, 585, 118 40 L.K.A. 400n, 50 Par. 7G3.
Am. St. Rep. 173, Am. & Eng. Ann. ^ Supreme Lodge Knights of Pyth-
Cas. 168, 65 Atl. 1065. ias v. La Malta, 95 Tenn. 157, 158,
1 Supreme Lodge Knights of 30 L.R.A. 838, 31 S. W. 493.
910
PARTIES— MUTUAL COMPANIES § 337
cliartcrs to subordinate groves, to receive appeals and redress griev-
ances, and, in its discretion, for good cause sliown, to susi)end
groves, arrest cliarters'. etc. By section 15 it is provided that when
any subordinate grove sliall violate the terms of its charter, or refuse
or neglect to ol)ey the direction and laws of the grand grove, or the
general laws of the order, charges thereof may be pi-eferred in writ-
ing to the grand grove, and a copy thereof shall be furnished to
the grove complained of. and notice when and where to appear for
trial. The grand grove holds an annual session on the third Tues-
day of June in each year, and it is provided in section 9 of article
20 that 'during the recess of the grand grove the noble grand arch
may. whenever he shall deem it necessary, suspend a delinquent
or offending grove, such suspension to hold good until annulled by
the grand gTOve.' On the 5th of September, 1802, the noble grand
arch of the plaintiff susjiended Garibaldi Grove, No. 71, for the rea-
son that he considered it was an 'offending grove,' and issued a
proclamation of this fact to the other subordinate groves within the
state. Article 19 of the rules of the order provides that the trustees
shall be the custodians of the property of the grand grove, and that
'it shall be their duty to execute all orders of the noble gTand arch,
to receive, by legal process or otherwise, all moneys, papers, and
other property of dissolved or suspended groves in this jurisdiction,'
etc. In December, 1892, the noble grand arch reported this sus-
pension to the trustees of the plaintiff', and directed them to com-
mence the present action for the possession of the books and records
of the suspended grove, and for the moneys l>elonging to it. The
court found that the appellant. Duchein. as treasurer of Gtribaldi
Grove, had in his possession nine hundred and lifty-four dollars
and liftecn cents, moneys belonging to .said grove, which he re-
fused to deliver upon the demand of the trustees therefor, and ren-
dered judgment directing him to pay the said money to the plain-
tiff' herein or to its trustees. From this judgment and an order
denving a new trial Duchein has a])pealed.'' As to the law the court
says: "It is a principle of natural justice that no one shall be con-
deumed without an oi)])ortunily to be heard in his defense. Who-
ever would claim the right to deprive another of property or i)rivi-
lege, without giving him an op])ortuiiity to defend the same, must
show some consent on his j)art to such action . . . . ; there
is no distinction in princii)le between expelling a member from a
subordinate grove and I'cvoking the charter of the grove itself or
suspending its charter We are of the opinion, how-
ever, that the rules of the plaintiff do not authorize an arbitrary
suspension of the grove by him (the noble grand arch"), but that
whenever he propo.-;es to take such action the grove which is charged
911
§ 358
JOYCE ON INSURANCE
with an offen«e for which he is authorized to suspend it has the
right to be informed of sucli charge, and to be heard in its defense
before he can act The Hniitation upon the power of
the grand grove to itself suspend a subordinate grove 'for good cause
shown' implies that formal charges must be presented and sus-
tained, and the provision in section 15, that when charges are made
against a subordinate grove a copy of the charges shall be furnished
to it, and an opportunity given to be heard, show that the general
principles under which a suspension may he had require such notice
and liearing. The power of suspension which is conferred upon
the noble grand arch is to be exercised l)y him only during the re-
cess of the grand grove, and, in the absence of express terms, ought
not to be construed as greater than that of the grand grove itself,
or to be exercised in any other mode than 4hat provided for the
grand grove. The authority given to this officer is not limited to
a suspension until the next session of the grand grove, but holds
good 'until annulled' by the grand grove. This provision indicates
tbat it is to have the same effect as if the suspension had l)een made
by the grand grove, since unless some action in the nature of an
appeal is taken from the act of the noble grand arch, the gTcUid
grove is never required to exercise its will upon the subject.
. . . . We hold, therefore, that the action of the noble gTand
arch in suspending C^aribaldi Grove, No. 71, was not in accordance
with the rules of the order." *
The charter of a subordinate lodge cannot be revoked without a
hearing and if there is an unauthorized revocation of the charter
of a subordinate lodge a recourse to the courts may be had without
exhausting a remedy by appeal where the charter of the association
does not provide for an appeal by such lodge.^
§ 358. Member or officer of benevolent association cannot be ex-
pelled without hearing. — It is well settled that a member of a be-
nevolent a.ssociation cannot be expelled without being given notice
or a hearing, and that a by-law which authorizes such a course is
unreaiionable and void.^ This rule is qualified, however, under a
* Grand Grove Ancient Order of
Druids v. Duchein, 10.') Cal. 210, 38
Pac. 947, per Harrison, J. See Su-
preme Sitting of the Order of Iron
Hall V. Moore, 47 111. App. 251. As
to power of subordinate lodge of be-
nevolent society to appropriate funds
5 Golden Star Lodge No. 1 v. Wat-
tersou, 158 Mich. 696, 133 Am. St.
Rep. 404, 123 N. W. 610. See
Swain v. Miller, 72 Mo. App. 446;
St. Patricks Alliance of America v.
Byrne, 59 N. J. Eq. 20, 44 Atl. 716.
^ Grand Grove United Ancient Or-
for support of lodge under the same der of Druids v. Duchein, 105 Cal.
jurisdiction, see Lady Lincoln Lodge 219, 225, 38 Pac. 947, per Harrison,
No. 702, Knights & Ladies of Honor J., citing Fritz v. Muck, 62 How. Pr.
V. Faist, 52 N. J. Eq. 510, 28 Atl. 555. (N. Y.) 69; Wachtel v. Noah Wid-
912
PARTIES— MUTUAL COMPANIES
§ 3.58
New Jersey deci.-^ion to the extent that unless tlie member would
be deprived of a possible benefit from the hearin<2;. a by-law is not
invalid which autliorizes a member's expulsion without an opj»or-
tunity to defend.' And under a Wisconsin decision if a certiticate
of insurance issued by an order to one of its members provides tliat
no liability shall accrue unless the member shall in everj^ particu-
lar, while a member, comply with all tlie by-laws of the order, and
he is afterward iiuiUy of an otfense against the by-laws, for which
he might have been expelled, his right to insurance is forfeited,
though no i)roceeding was taken for his expulsion.^ An arbitrary
exercise by the ruler, of the power of removal of ofhcers is not justi-
fied when made witliout notice or an opportunit}' to appear and be
heard. ^
ows' & Orpliau's Beneficial Soc. 84 E. 4G9, 33 Ins. L. J. 778 (notice re-
N. Y. 28, tiO How. Prac. 424, ;]8 Am. quii-od but none g-iven).
Rep. 478; People v. Musical Mutual Minnesota.- -Kiilherg v. National
Protective Union, 118 N. Y. 101, 108, Council Kniolits & Ladies of Honor,
2.3 N. E. 109; Bacon's Benefit Socie- 124 Minn. 4:-i7, 145 N. W. 120 (ex-
ties, sec. 101. See SS 14.56, 3.502, pulsion without opportunity to be
3520 herein. heard, invalid).
See also the following case.s: Missouri. — See Wanek v. Supreme
Indiana. — Federal Life Ins. Co. v. Lodge of Bohemian Slavonic Benevo-
Risinger, 46 Ind. Ai)p. 146, 01 N. E. lent Soc. 84 Mo. Apj). 185 (service
.533 (member with privileges or prop- of notice of expulsion required),
erty rights must lia\e notice and jiri- Wushinglini. — Dui)eich v. Grand
vilege of a hearing). Lodge A. 0. U. W. ;!3 Wasii. ()51, 74
Iowa. — Finerty v. Supreme Conn- Pac. 832 (member entitled to be rep-
cil Catholic Knights ol' America, 115 resented by conipelent authority to
Iowa, 3.58, 84 N. W. !)!)!), 88 N. W. protect right.s).
834 (notice necessary): I'>yram y.
Sovereign Camp Woochnen of the
World, 108 Iowa, 430. 70 N. W. 144
(charges in writing rc(|iiireil to !>«
preferred and served on accused, ex-
pulsion by vote on motion alone,
void).
Kentuckij. — Rogers v. Union Be-
nevolent Soc. No. 2, 111 Kv. .598, 55
L.R.A. 605, 64 S. \V. 444 (fail- and
impartial trial reijuireil).
ilia.s'.scr.(7/«.sc//.s-. - Ilorgan v. Meti'O-
politan Mutual Aid Assoc. 202 Mass.
524, 88 N. E. 890 (entitled to notice
and hearing) ; Kidder v. Supreme
' Bei'kiioul y.
Koval Arcanum,
All. 1.
* Langneckcr
Grand Lodge A.
Supreme Council
62 N. .T. L. 103, 4.3
v. Trustees of
(). U. W. Ill Wis.
279, 87 Am. St. Rep. 860, ,55 L.R.A.
185, 87 N. W. 293.
^ Caine v. Benevolent & Protective
Ordei- of Elks, 34 X. Y. Supp. ,528,
88 II im (\. Y.) 154.
As to rights of ollicei-s wrongfully
expelled without a hearing; need not
exhaust lemedies within order before
resort to courts, see State (ex rel.
Weingart) v. Boai-d of Ollicei-s of Ge-
genseitige Unterstuetzungs Gesel"
Coramandery United Order of the schafl Germania, 144 AVis. 516, 120
Golden Cross, 192 Mass. 326, 78 N. N. W. 630, 40 Ins. L. J. 453.
Joyce Ins. Vol. I. — 58.
913
CHAPTER XX.
MUTUAL COMPANIES— BENEFIT, ETC., SOCIETIES— BY-LAWS.
§
364.
§
365.
§
365a.
§
365b.
§
365c.
§
366.
§
367.
§
368.
§
369.
§
369a.
§
369b.
§
369c.
§
369d
§
370.
§
371.
§
371a
§
371b
i^
371c.
§
372.
§
372a
§
372b
§
373.
§
374.
§
375.
§ 376.
Definition of by-laws.
Power to enact by-laws inherent: how exercised.
Same subject.
When statutory power to adopt by-laws is exclusive.
Association may be estopped to assert by-law not properly
adopted.
Charter provisions concerning by-laws.
Adoption of by-laws by custom or usage.
Incorporated societies: unreasonable by-laws.
Unincorporated societies : unreasonable by-laws.
When by-laws reasonable : continued.
Same subject: police power.
When by-laws unreasonable : continued.
When member bound by unreasonable by-laws.
By-laws must not be unequal: discrimination.
By-laws, rules, and regulations: when valid.
By-law providing wedding gift valid : ultra vires.
When by-laws invalid.
By-laws valid in part and void in part.
By-laws excluding resort to civil courts : constitutional provisions.
Same subject : when courts will not intervene : decisions.
Same subject: when courts wall intervene: decisions.
By-laws must not be contrary to laws of state or United States.
By-laws against public policy are void.
By-laws must not contravene terms of charter, constitution, or
articles of association.
Enforcement of by-laws: penalty.
§ 364. Definition of by-laws. — r.y-laws are tlie rule:5 and regula-
tions for the <iovci'niiuMil and coiKluci of tlic alVairs of the society,
association, or corporation enacted within ihe liiiuts and by virtue
of the power conferi'cd hv llie cliaiier or arlicles of association. ^°
i°See Smoot v. Bankers Life Users' Assoc. 68 Ore. 402, 137 Pac.
Assoc. 138 Mo. App. 438, 465, 120 S. 22(); 1 Morawetz, Private Corp. (2d
W. 719; GrifTith v. Klamath Water ed.) sees. 491, et seq.; Id. (ed. 1882)
914
MUTUAL COMPANIES— BY-LAWS
§ 364
Wliere a subordinate branch or order of a beneficial society is in-
corpoialcd and the certificate of incorporation does not recognize
any oI)li,a,alion to or dei)endence iijion or connection with the order
at large, the constitnlion and laws of said order so far as adopted by-
said branch arc only by-laws. It is in legal contemplation an in-
dependent entity and its by-laws must stand or fall upon that as-
sumption.^^
see. 3GG; 1 Thomp.^on on Corp. (2(1 of the corporate powens." Colaluea
V. Societa Co-operativa tli jNIutuo
Socoororio Fratelli Baiuliera, 30 R.
I. 304, 307, 75 All. 265.
"The term 'by-law' has a well
known but limited and peculiar
meaning. It is used to designate
Ihose regulations which as one of its
lesal incidents a corporation is em-
ed.) sec. 976; 8 Id. (White's Supp.)
sec. 975; 1 Words & Phrases, pp.
936-938; 8 Id. p. 594; 1 Id. (2d
series) p. 548.
"By-laws of a corporation are the
laws for the regulation of its atfairs
and the management of its property.
They have much the same force and
effect when applied to the members powered to make affecting the man-
and olhcers in the conduct of the af- agement of its business, the control
fairs of the corporation that a public of its officers and agents, and the
statute has." J. P. Lamb & Co. v. rights and duties of members of the
Merchants National Mutual Fire Ins. corporation." Cheney v. Canfield,
Co. 18 N. Dak. 253. 259, 119 N. W. 158 Cal. 342, 348, 32 L.R.A.(N.S.)
1048, 1050, per Spalding, J,
" *A by-law is a rule or law adopt-
ed by a corporation or association for
the regulation of its own action and
concerns, and of the rights and du-
ties of its members among them-
selves.' Am. & Eng. Ency. of Law
vol. 5, p. 87. 'This term (by-law)
has a peculiar and limited signitiea-
tion, being nsed to designate the or-
ders and regulations which a corpora-
16, 111 Pac. 92, 93, 94, per Lori-
gan, J.
"Angell & Ames, sec. 110, recites
that by-laws are considered as pri-
vate statutes for the government of
the corporate body. 2 Blackstone,
475, describes them in the .same way.
Cook, 6th edition, speaks of them as
'a permanent rule of action.' Thomi)-
son, sees. 935, 936, 937, broadly dis-
tinguishes them from resolutions and
tion, as one of its legal incidents, has regulations. Bouvier's definition runs
power to make, and whicli is usually tlirougliout in the same line. In no
exercised to regulate its own actions way can they be held analogous to
and concerns, and the rights and du- the hasty proceedings of the e.xecu-
ties of its members among them- tive committees or of the directors
selves.' Per Sliaw C. J., in Common- whicli have been laid before us." Per
wealth V. Turner, 55 Mass. 493. Putnam, Cir. J., in Hayes v. Canada
. Again, the l)V-laws, rules and Atlantic & Plant Steam.ship Co. 181
^ulations of a coi'poration are es- Fed. 289, 296, 104 C. C. A. 271, 278.
sentially legislative in their char- ii Grand Court Foresters of Amer-
acter" Haves v. German Beneficial ica v. Court Cavour No. 133, Forest-
Union, 35 Pa. Super. Ct. 142, 148, ers of America, 82 N. J. E^. 89, 88
resri
149, per Head, J
"By-laws are on
Atl. 191, aft''d 83 N. J. Eq. 343, 91
ly a means of regu- All. 1068. See Supreme Lodge
lating the corporate powers, not of Knights of Pythias v. Kutscher, 179
surrendering or suspending them. 111. 349, 70 Am. St. Rep. 115, 53 N.
. . By-laws are pro])erly re- E. 620, s. e. 72 111. A pp. 462; Domes
strictions on the manner of the use v. Supreme Lodge Knights of Pythias
915
§§ 3fi5, 365a
JOYCE ON INSURANCE
§ 365. Power to enact by-laws inherent: how exercised. — The
power to enact by-laws is inlierent in every private corporation or
association, ^2 for it cannot Ije otherwise than rea.sonable that the
power to prescrilje rules and regulations as to the manner in which
the corporate powers shall he exercised sliould reside in the corpora-
lion or association, subject to such limitations a.s exist in the charter
or articles of association and the constitution and laws of the state. ^^
Such power is generally exercised by the majority in the absence
of a provision in the charter or articles of association, or some gen-
eral statute to which the charter is subject, providing otherwise.^*
If the president and directors are empowered to make by-laws, the
power may be exercised by the president and a majority of the di-
rectors; ^*' but where neither the statute mir_chartei- gives the ex-
elusive right to the directors to make by-laws, they may ])e duly
passed by the members at a proper meeting.^®
§ 365a. Same subject.— This power to adopt a constitution and
by-laws and to provide reasonable rules and by-laws for relief with-
in the association also exists in unincorporated secret fraternal Ijene-
hciary association or societies.^'' And such association may validly
of the World. 75 Miss. 466, 1 Miss. (ed. 1882) sec. 366; 1 Id. (2d ed.)
Dec. (No.' 14) 106, 23 So. 1.91. sec. 491; Angell & Ames on Corpora-
When resvlutiuns of a benevolent tions, (9tlied.) see. 32 (.
society constitute by-laws under a by- ^^ Calnll v. Kalamazoo ]Mutnal Ins.
law making- such resolutions 1)incliii2: Co_. 2 Doug'. (Mich.) 124, 43 Am. Dec.
as bv-laws, see Flalierty v. Portland 45 <.
Longshoremen's Benevolent Soc. 99 "To pass and make efl'ectne such
Me. "253,- 59 Atl. 58. See quotation by-laws the consent of all parties, as
from Hays Ca.^^e, 181 Fed. in note 10 in actual and ordinary contracts, is
herein under this section. not necessary, as a bare ma.iority of
12 Supreme Lodge Knight.^ of Py- the stockholders of the corporation
thia.s V. Knight, 117 In<l~ 489, 20 N. may do so. Civ. Code, sec. 301.
E. 479, 3 L.K.A. 409; 1 Blackstone's While in a general sense the by-laws
Commentaries, 496; "By-laws," 3 witii tiie article?^ of incorporation
Salk. 76; Morawelz on Private Corp. constitute a contract under which the
<ed. 1882) sec. 366; 1 Id. (2d ed.) reciprocal rights and duties of the
sec. 491; Angell & Ames on Corp. corporation and its stockholders are
<9t"h ed.) sec? 345; 8 Thompson on measured, the by-laws themselves do
Corp. (White's Supp.) sees. 965, 967, not constitute such a contract so as
985; Cook on Corp. (6th ed.) sec. 4a. to make the provision with reference
As to power to amend bv-laws, etc. : to directors' meetings an act to be
How exercised, see §§ 378-378d performed under a contract within
herein. the contemplation of the code see-
As to delegation of power, see tion.'' Cheney v. Can held, 158 Cal.
§ 378c herein. 342, .348, .32 L.R..A.(N.S.) 16, 111
13 See Commonwealth v. St. Pat- Pac. 92. 93, 94, per Lorigan, .).
rick's Benevolent Soc. 2 Binn (Pa.) is Bogards v. Farmer's Mutual Ins.
441, 4 Am. Dec. 453. Co. 79 Midi. 440, 44 N. W. 856.
i*See Morawetz on Corporations, "Brotherhood Railroad Trainmen
916
JIUTUAL COMPANIES— BY-LAWS §§ 365b-36S
iinpo.-e rules, teiins and conditions, and ma}' provide for suspen-
sion and i-einstatenienl. and a member will be bound llierel)y wliere
such rules etc. are not contrary to law.^^ And a resolution of a
mutual benefit society adopted by unanimous vote may be abro-
gated by a majority vote of the members where it constitutes no
part of the contract of a member. ^^
§ 365b. When statutory power to adopt by-laws is exclusive. —
The sole power to adopt by-laws for the manaj;ement of a mutual
insurance corporation may be vested by statute in the policy hold-
ers and the prescril)ed mode must be followed.'^"
§ 365c. Association may be estopped to assert by-law not properly-
adopted. — A nuitual beneiit association may be estopped to assert
that certain of its by-laws have not been approved by the supreme
council and properly adopted.^
§ 366. Charter provisions concerning by-laws. — Where the char-
ter prescribes the mode of enactment of by-laws, that mode must be
followed.^ The charter may, however, restrict legislative power to
the supreme lodge and thereby limit the power of a mere minis-
V. Swearinger, 161 Ky. (itio, 171 S. oate insiirino- liis life for $2,000,
W. 455. Examine al.so §§ 352-35'2c which contained a single covenant, as
licrcin. i'ollows: 'Tliis ccitificate is issueil
^^ (iiffurd V. Workmen's Ben. uixm the express condition that the
Assoc. 105 Me. 17, 72 Atl. 680. said Michael Dowdall shall, in every
^^McKean v. Biddle, 181 Pa. 361, particular while a member of said
37 Atl. 528. association, comply with all the laws,
^^ Empire State Supreme Lodge rules and requirements thereof.' Tlie
of Degi-ee of Honor, In re (Seymour (Id'cndant also delivered to the plain-
V. Bcldeii) 103 N. Y. Supp. 465, 118 lift a jniuted book or pamphlet con-
App. Div. 616, 53 Misc. 344, aftVl laining- the constitution and by-laws
(mem.) 103 N. Y. Supp. 1124; JS. of the association. Section 6 of ar-
Y. Insurance Law, sec. 209, Laws tide 3 of the constitution provided,
18!)2, p. 2013, c. 690; Parker's N. Y. in substance, tliat all members should
Tns. L. (ed. 1905) pp. 321-323, un- be assessed according- to their age
der art. VI. relating to life or ca.sual- when admitted. The defendant
ty insurance corf)orations upon the asked the trial court to find that said
co-operalive or assessment plan. See section 6 of article 3 so appearing in
§ 373 herein. the printed constitution had not been
As to amendments under same adopted, nor had it been approved
statute, see Robinson v. Mutual He- by the Supreme Council, and its pub-
serve Life Ins. Co. (II. S. C. C.) 159 lication in said pamphlet was unau-
Fed. 564 under ^ 378b herein. thorized. This request was very
^Dowdall V. Supreme Council of properly refused in view of tlic fact
Catholic Mutual Benefit Assoc. 196 that some thousands of the pamphlet
N. Y. 405, 31 L.R.A.(N.S.) 41 7n, 89 bad been sent to members."
N. E. 1075, 3i) Ins. L. J. 87, rev'g As to amended by-laws — Waiver
122 N. Y. Supp. 1130, 123 App. Di\-. and Estoppel, see §§ 380f et seq.
913. In the principal case the court, herein.
per Bartletf, J. said: "The plaintiff ~ Dunslon v. Imperial Gas Co. 3
received from the defendant a certifi- Barn. & Adol. 125.
917
§ 367
JOYCE ON INSURANCE
terial committee of an endowment lod.^e with administrative func-
tions only.^ And a cliarter provision l)inds a member under a con-
tract issued after its amendment.'* But a charter wliich authorizes
by-laws which give an association an entirely iiidefmite power of
expulsion over members cannot be sustained in that respect al-
thoujih it is common to found the right of expulsion upon the re-
sult of a trial in court. ^
§ 367. Adoption of by-laws by custom or usage. — Where an as-
sociation or corporation, or its otticers and agents, have invariably
and uniformly, for a sufhcient length of time pursued a certain
course of procedure in a matter which could properly have l)een
regulated by a valid by-law, such custorn and usage of the society
is evidence of the adoption of a by-law, ahdj^hile-iT might not
strictly be construed into a by-law. yet it may have the force and
effect of one in determining the rights of members or the obliga-
tions of the organization,^ although a b^'-law will not be assumed to
exist from a custom to pursue a particular course in regard to sus-
pensions.''^ But the adoption of a code of by-laws in the regular
manner excludes any presumption as to the existence or adoption
of by-laws from custom or usage: * and in case the by-law provides
for the specific manner of payment of assessments, payment in ac-
cordance with this requirement is sufficient even though there be a
custom contrary thereto, inasmuch as the company cannot avail
itself of a custom, as against a by-law, to declare a forfeiture.'
Again, a usage of a mutual benefit association, constituting a part
^ Supreme Lodge Knis'hts of Py-
tliia.s V. Stein, 7') Miss. 107, 37 L.I^.A.
775, 65 Am. St. Rep. 589, 21 So. 559,
26 Ins. L. J. 557. See also Supreme
Lodge Knights of Pvthias v. Kutsi-h-
er, 179 111.' 340, 70 Am. St. Rep. 115,
53 N. E. 620, s. c. 72 111. App. 462.
* Harrison v. Philadelphia Con-
tributionship for Insurance of Hous-
es from Loss bv Fire, 171 Fed. 178,
afif'd 176 Fed. 323, 99 C. C. A. 613.
^ Butfhers' Beneficial Assoc. No. 1,
In re 38 Pa. St. 298; Butchers' Bene-
ficial A.SS0C. In re, 35 Pa. St. 151;
Roehler v. Mechanics' Aid Soc. 22
Mich. 86, 89; Queen v. Saddlers' Co.
10 H. of L. Cas. 404.
8 State V. Curtis, 5 Nev. 325 ; An-
gell & Ames on Corporations, 9th ed.
sees. 328, 329 ; Moravvetz on Private
Corporations, see. 369.
See also the following eases:
918
Georgia. — Georgia ^Masonic Mutual
Life Ins. Co. v. Whitman, 52 Gg.
419.
irii)iois. — District Grand Lodge v.
Cohn, 20 111. App. 335, 344.
Marjjland. — Union Bank of Md. v.
Ridgely, 1 Har. & G. (Md.) 413.
New York. — American Ins. Co. v.
Oakley, 9 Paige Ch. (X. Y.) 496, 38
Am. Dec. 561.
Pennsylvania. — Hamilton v. Ly-
coming Mutual Ins. Co. 5 Pa. St. 339,
344.
Vermont. — Henry v. Jackson, 37
Vt. 431, 432.
' District Grand Lodge v. Cohn, 20
Bradw. (111.) 335.
* District Grand Lodge v. Cohn, 20
111. App. 335.
^ As to custom relating to payment
of assessment, see § 1361 herein.
MUTUAL COMPANIES— BY-LAWS §§ 3G8, 3(ji)
of the contract with each of its members, that Masonic questions
shall be dec-ided by Masonic tribunals, with respect to whetlier the
members are Masons or not under the requirements of the by-laws
of the association, is as conclusive on the assqciation as though it
provided in terms that the question of being or continuing to be a
Mason in good standing should be decided by the Masonic officers.^"
§ 368. Incorporated societies: unreasonable by-laws. — In incor-
porated societies by-laws will not be upheld which are oppressive,
vexatious, unequal, or arbitrary, and contrary to the provisions of
its charter, for by-laws in such societies must be reasonable, and the
power to enact them be exercised with discretion, and not in a man-
ner manifestly detrimental to corporate interest," for by-laws
which are unreasonable are void.^^ In determining the reasonable-
ness of a by-law. the objects and purposes of the society must l)e
considered, as this constitutes an important factor, for what might
be reasonably necessary to effectuate the corporate purposes of one
society and promote its welfare, might l^e unreasonable as outside
the general purposes of another organization, and detrimental to
its interest. ^^
§ 369. Unincorporated societies: unreasonable by-laws. — The
rule that by-laws must be reasonable does not ap[>ly to unincorpo-
rated societies or voluntary a.^^sociations. The question of their rea-
sonableness will not be inquired into by the courts, nor will the
^"Connelly v. Masonic Mutual Michigan. — Samberg v. Knis^hts of
Benefit Assoc. 58 Conn. 5.')2, 9 L.R.A. Modern :Maccabees, 158 Mich. 568,
428, 20 Atl. 671. 133 Am. St. Rep. 396, 16 Det. Leg!
" People ex rel. Stewart v. Young N. 677, 123 N. W. 25, 39 Ins. L. J.
Mcn*s leather Matthew Total Ab_sti- 34; People (ex rel. Stewart) v.
nence Benevolent Soc. 41 Mich. 6<, 1 Young Men's Father Matthew Total
N. W. 931; Angell & Ames on Cor- Abstinence Benevolent Soc. 41 Mich.
I)orations, sec. 347; Cartan V. Father 67, 1 N. W. 931; Allnutt v. High
Matthew United Benevolent Soc. 3 Court of Foresters, 62 Mich. 110, 28
Daly (N. Y. ) 20. But see Coleman N. W. 802.
v. Supreme Lodge Knights of Honor, 3//s,so?<r/.— Mulroy v. Supreme
18 Mo. App. 189, ''By-laws must be Lodge Knights of Honor, 28 Mo.
reasonable, and all which are uuga- App. 463.
tory and vexatious, unequal, oppres- New York. — Kent v._ Quicksilver
sive, or manifestly detrimental to the Mining Co. 78 N. Y. 159.
interests of the corporation, are North Carolina. — Duffy v. Fidelity
void; " Angell & Ames on Corpora- Mutual Life Ins. Co. 142 N. Car. 103,
tions (9th ed. ) sec. 347; Morawelz on 7 L.R.A. (X.S.) 238, 55 S. E. 79.
Private Corporations, sec. 368. That amended by-laws must be
That amendments of by-laws must reasonable, see §§ 379k et seq. here-
be reasonable, see §§ 379k et seq. in.
lierein. ^^ Commonwealth v. St. Patrick's
^^ Kenincl-ii. — Schmidt v. Abraham Benevolent Soc. 2 Binn. (Pa.) 441.
Lincoln Lodge, 84 Kv. 490, 8 Ky. L. 449, 4 Xm. Dec. 453; Dickenson v
Rep 655, 2 S. W. 1*56. Chamber of Commerce, 29 Wis. 49
919
§ 369a JOYCE ON INSURANCE
court declare invalid a by-la^A- of a voluntary association, agi'eed
upon by its members, even though in the opinion of the court, it
is unreasonable : ^* and a member is bound by all by-laws which are
legal, so long as he remains in the society. The act is considered
as voluntary on his part, and the terms of the contract his own to
the extent, at least, that he may withdraw at any time and deter-
mine his ]-elations with the society.''^
§ 369a. When by-laws reasonable: continued. — By-laws have been
held reasonable under the following decisions: A by-law which re-
quires an initiation of the member in addition to a proposition fee
and being elected, notwithstanding that the initiation ceremony is
secret; ^* a constitutional ])rovision of a local lodge precluding ad-
mittance to membership of a person engaged in retailing intoxicat-
ing liquors as a beverage ; ^' a by-law which provides that a mem-
l)er who has not paid his dues may be suspended without notice
other than said by-laws ; ^* which provides for forfeiture where
death is caused by intemperance : ^^ for forfeiture when member en-
gages in a prohibited occupation : ^° prohibiting as an occupation
the sale at retail of intoxictiting liquors as a beverage and provid-
ing for expulsion or suspension of members engaging therein after
a- certain date, and that the forfeiture would be self-executing and
could not be waived by thereafter receiving assessments ; ^ provid-
ing that misstatement as to age is an offense, and also fixing the
penalty as expulsion and the procedure for trial and appeal; ^ when
the intent is to prevent fraud, as where a period of six months is
required to elapse after paying up dues in arrears before benefits
can be claimed ; ^ that benefits cannot be had for six months after
reinstatement, where by-laM- limits new members benefits to same
period ; * which limits relief in a benefit society from the time of
" Kehlinbeck v. Logeman, 10 Daly 20 Qninn v. North American Union,
(N. Y.) 44/. _ 111. App. — 42 Nat. Corp. Rep.
^^ Grosvenor v. United Society of 593.
Believers, 118 Mass. 78 ; Kehlinbeck As to clause prohibiting change of
"'• i^^'/r^"^^'"' -^^ ^^'x ^^- ^^-^ "^^'-^ occupation— construction of, ^ see
^^ Matkm v. Supreme Lodge « ooSQ herein
Knights of Honor, 82 Tex. ;101, 27 1x11. n i t ^ a • <-
A e*. T> OOP 10 o ^\T on,' ^ Wickum v. Grand Lodge Ancient
Am. St. Rep. 880, 18 S. W. .30 1. ^ -, ^j xx^ .3- „ ^ /-.i. -d m/i
17 XT- 1 r< 1 T 1 A • i. Order N. V\ . 3/ Pa. Co. Ct. Rep. 104.
^' Mickum V. brand Lodge Ancient oat xt ^- 1 /-. 1 ^
Order N. W. 37 Pa. Co. Ct. Rep. ,/.^ ^"'"Z ;• .^''^^^TL ^""T .no
2Q^ Knight-s & Ladies or Security, 123
18 Nelson v. Modern Brotherhood Minn.. 145, 143 N. W. 265.
of America, 78 Neb. 429, 110 N. W. . Stanton v. Eccentric Assoc, of
]008 Firemen, Local Union No. 56, of I.
19 St. Mary's Benevolent Soc. v. B. of S. F. 114 N. Y. Supp. 480, 130
Buri'ord. 70 Pa. St. 321 ; Harrington App. Div. 129.
V. Working Men's Benevolent Assoc. ■* Hart v. Adams' Cylinder & Webb
70 Ga. 340. Press Printers' Assoc. No. 51, 75 N.
920
MUTUAL COMPANIES— BY-LAWS § 369b
the application therefor;' which provides for the investigation by
a committee of the condition of a member who applies for such
benefits;® requiring the presentation of claims to subordinate of-
ficers, and, in case of a decision adverse to the claimant, that an
appeal be taken to the governing body of the society, and such by-
law is not invalidated by a further distinct invalid provision assum-
ing to make the decision on such appeal final and conclusive; "^ pro-
viding that members of a railroad relie'f association shall release
the railroad from damages before claiming relief from the society ; *
a time limitation of six months, by a fraternal society, for giving
notice of death : ^ providing for arbitration, and that award shall
be final and precluding resort to law or equity;^" limiting the
amount of benefits in case of suicide ; ^^ and a by-law or rule of a
board of fire underwriters, a voluntaiy unincorporated association,
prohibiting any member from taking an agency of a company with
an existing agency represented in the city.^^
§ 369b. Same subject: police power. — A by-law is reasonable
which is, within what has been denominated by the court as the
police power of a beneficial association, as where expulsion is pro-
vided for doing certain acts, such as defamation, causing dissension,
etc.i3
Y. Supp. 110, 69 A pp. Div. 578, Mutual Fire Ins. Co. of Mich. Ltd.
cited as to by-law bein.i^' reasonable, v. Attorney General, 166 Mich. 438,
^Brennau V. Franklin Beneficial 131 N. W." 1119.
A.SSOC. 3 Watts & S. (Pa.) 218. As to by-laws excludinc: resort to
® Van Poucke v. Nefherland St. civil courts, see §i^ 372 et seq. herein.
Vincent de Paul Soc. 63 Mich. 378, As to arbitration and award daus-
29 N. W. 86;>. See Lucas v. Tliomp- es and validity; generally, see §§ 3731
.son, 146 Pa. St. 31.'), 23 Atl. 321; et seq. herein.
Harrington v. VVorkingnien\s Benevo- ^^ Scow v. Roval League, 223 111.
lent Assoc. 70 Oa. :!40. 32, 79 N. E. 42.
'Supreme Council Order of As to suicide clauses, see §§ 2635,
Chosen Friends v. Forsinger, 125 et seq. herein.
Ind. 52, 21 Am. St. Rep.'^ 196, 9 ^2 Louisville Board of Fire Under-
L.R.A. 501, 25 N. E. 129, see §§ v.riters v. Johnson, 133 Ky. 797, 24
372 et seq. herein. L.R.A.(N.S.) 153 (annotated on le-
^ State V. l->aUimore & Ohio Rd. gality of combination among under-
Co. 36 Fed. 655. See also Fuller v. writers), 119 S. W. 153.
Baltimore & Ohio Employees' Relief ^^ Del Ponte v. Soeieta Italiana Di
Assoc. 67 IVld. 433, 10 Atl. 237. M. S. Guglielmo Marconi, 27 R. I. 1,
9 Ilalas v. Narodni Slovenssky 70 L.R.A. 188, 114 Am. St. Rep. 17n,
Spolok, — 111. App. — , 43 Nat. Corp. 60 Atl. 237. The court per Dubois,
Repr. 286. J. said: "The power of expulsion in
A.s to by-laws as to notice of death, a corporation is included in wliat may
etc. see § 3298 herein. be denominated its police power,
^° Russell v. Nortli American Bene- which is derived from tlie law of self-
fit Assoc. 116 Mich. 699, 5 Det. Leg. preservation."
N. 113, 75 N. W. 127. See Patrons As to expulsion of member: ter-
921
§§ 369e-370
JOYCE ON INSURANCE
§ 369c. When by-laws unreasonable: continued. — A by-law i? un-
reasonable whicli provides that the mailing of notices of assessments
may be conclnsively shown by the certificate of an officer of the cor-
poration who is not required to be personally cognizant of the fact ; "
which precludes member from benefits of order when he is sick
after he is in arrears even though he makes payment thereof and
the association thereafter continues to accept his dues : ^^ which
limits the time of commencing action to six montlis after death of
insured where the company's final determination as to payment of
the claim is not made until within a few days of the expiration of
said limited period. ^^ So provisions of the constitution and by-
laws are unreasonable where they deny the right to resort to civil
courts until remedies within the order are exliausted and the next
meeting of the tribunal to which an ai)i)eal can lie made, is in a
foreign country at a date three years after the claim in question
accrues.^'
§ 369d. When member bound by unreasonable by-laws. — It is
held that an unreasonable by-law may be good as a contract. ^^ So,,
by-laws existing when a person becomes a member may obligate
liini, notwithstanding they are unreasonable, where he voluntarily
agrees to be bound liy becoming a member.^^
§ 370. By-laws must not be unequal: discrimination. — A by-law
must apply equally and he capable of like o[)eration as to all mem-
bers. By-laws which discriminate against, or in favor of, certain
members, to the exclusion of others, are invalid.^" J>iit members
raination of risk: jurisdiction, see see notes in 4!) L.K.A. 38'J; 8 L.R.A.
§§ 14.56, 3502, 3520 herein. (N.S.) Olti; and 52 L.R.A.(N.S.)
i^DuttV V. Fidelity Mutual Life 840.
Ins. Co." 142 N. C. 103, 7 L.R.A. ^^Pi^rdv v. Banker.s Life As.soc.
(N.S.) 238, 55 S. E. 79. 104 Mo. App. 91, 74 S. W. 486.
IS Phoenix Council No. 85, Junior ^^ Stanton v. Eccentric Association
Order United Ameri^-au Mechanics v. of Firemen, Local Union No. 56 of
Bennett, 26 Ohio Cir. Ct. Rep. 110; I. B. of S. F. 114 N. Y. Supp. 480,
Bennett v. Plurnix Council No. 85, 130 App. Div. 129.
Junior Order United American Me- 20 p^^^pie (ex rel. Stewart) v.
chanics, 14 Ohio Dec. 593. Young: Men's Father JNLatihew Total
i6]\Iaoner v. ^lutual Life Assoc. Abstinence Benevolent Soc. 41 Mich.
44 N. Y. Supp. 862, 17 App. Div. 67, 1 N. W. 931; Taylor v. Griswold,
13, aff'd in 162 N. Y. 657, 57 N. E. 14 N. J. L. 223. See Clevenijer v.
1116. Mutual Life Ins. Co. 2 Dak. 114, 3
1'^ Lindahl v. Supreme Court, Inde- N. W. 313.
pendent Order of Foresters, 100 Powe^ of mutual, etc., companies
Minn. 87, 8 L.R.A. (X.S.) 916n, 117 or associations to classify members:
Am. St. Rep. 666, 110 N. W. 87. discrimination, see § 350b herein.
On the validity of requirement that As to amended by-laws, etc.:
remedies within the order must be classification: discrimination, see
exhausted before resort to civil courts, i^ 380e herein.
922
MUTUAL COMPANIES— BY-LAWS § 371
may be classified by fraternal benefit societies where the statute so
provides.^
§ 371. By-laws, rules, and regulations: when valid. — A by-law is
not invalid which is fairly within the scope of the general purposes
of the organization, and it has been held that in determining what
are the purposes of an association the courts will liberally construe
its articles, especially if the provisions are meritorious ; ^ and a by-
law of a fraternal order is not void, even though not adopted in
conformity with prescribed rules of procedure Avhere it is otherwise
lawfully enacted.^ So, a mutual insurance company, unless pre-
vented by the terms of its charter, may enact a by-law that if an
assessment on a premium note is not paid within thirty days after
demand, the policy for which said note is given shall be void until
the assessment is paid.*
By-laws are also valid which provide a self-executing rule for sus-
pending a member in case of failure to promptly pay assessments
and dues ; ^ which give procedure for expulsion of members when
such rules and regulations are not so grossly unfair as to be con-
trary to public policy; ^ by-laws of a fraternal order providing that
misstatement as to age is an oftense, also fixing the penalty as ex-
pulsion, and the procedure for trial and appeal;"^ which provide
for notice of a.ssessment by mail ; ^ that remedies within the order
be exhausted before resorting to the courts ;9 for arbitration, that
award shall be final, and wholly precluding resort to law or
1 Ellison V. District Grand Lodge Knights & Ladies of Security, 12-1
No. 23, United Order of Odd Fel- Minn. iSi, 145 N. W. 120.
lows, 11 Ala. App. 442, 66 So. 872; '^Marcus v. National Council of
acts 11)11, pp. 701, 702, 716, sees. 5, Knights & Ladies of Security, 123
Q^ 9^ 23a. Minn. 145, 143 N. W. 265.
' 2 Gundlack v. Germania Mochan- ^ Dudley v. Fidelity Mutual Life
ics' Assoc. 4 Hun (N. Y.) 339, .341, Ins. Co. 142 N. Car. 103, 7 L.R.A.
49 How. Pr. (N. Y.) 190. (N.S.) 238, 55 S. E. 79, s. c. 143 N.
3 Supreme Lodge Knights of Pyih- Car. 69/, 55 S. E. 1047.
ias V. Kutscher, l79 111. 340, 53 N. As to service of notice by mail, see
E. 620, rev'g 72 HI. App. 462. § 1336 herein.
* Foo'el V. Lycoming- Ins. Co. 3 ^ King v. Wynema Council No. 10,
Grant ll^as. (Pa.) 77. Daughters of Pocohontas, Improved
^Gifford V. Workmen's Benefit Order of Red Men, 25 Del. (2
' Assoc. 105 Me. 17, 72 Atl. 080; Old- Boyce's) 255, 78 Atl. 845; Supreme
ham V. Supreme Lodge Modern Council of the Order of Chosen
Brotherhood of America, 110 :\Io. Friends v. Forsinger, 125 Ind. 52, 9
App. 564, 157 S. W. 92. Compare L.K.A. 501, 21 Am. St. Rep. 196, 25
§§ 1261, 1264 herein. N. E. 129; Cotter v. Grand Lodge
' On necessity for compliance with Ancien] Order U. N. 23 Mont. 82, 57
by-laws as to payment of assessment, Pac. 650.
see note in 38 L.R.A.(N.S.) 571. On validity of requirement that
6 Kulbero- v National Council, remedies within the order must he ex-
923
§§ 371a, 371b
JOYCE ON INSURANCE
equity ; ^° that a decision of a tribunal created by a mutual benefit
a.«<ociation .«liall be final and shall bar a suit in law or equity to re-
cover claims; ^^ and prescribing a rule necessitating proof of actual
death, irrespective of time of absence or disappearance of member.^^
Again, a by-law or rule of a board of fire underwriters, a voluntary
association which prohibits a member from taking an agency witli
an existing agency represented in the city is neither arbitrary, op-
pressive nor illegal. ^^
§ 371a. By-law providing wedding gift valid: ultra vires. — A
by-law which provides for a specified sum of rfioney as a wedding
gift, after the continuance of membership for one year, upon
marriage between persons of a certain faith, if necessary, to pay
the wedding gifts or presents according to the circumstances of
the society, is valid and not ultra vires, and is within one of the
objects of the society '^to elevate the moral- and social standing of
its members," and is also valid upon the ground that its purpose
was to encourage marriage on the part of its members in accord-
ance with such forms and ceremonies as would tend to promote the
religious faith of its members.^*
§ 371b. When by-laws invalid. — As stated elsewhere herein un-
reasonable by-laws are void,^^ as are also by-laws or amendments
thereto which impair contract obligations or vested rights. ^^ So,
hausted before resort to the eourts, ^^ Kelly v. Supreme Council of
see notes, in 49 L.R.A. 382; 8 L.K.A. Catholic Mutual Benefit Assoc. 46
(N.S.) 916; and 52 L.R.A. (N.S.) App. Div. 79, 61 N. Y. Supp. 394.
840. Contra, Samberg v. Knights of Mod-
Compare §§ 352-332c herein. ern Maccabees, 158 Mich. 568, 133
lORuscell V. North American Bene- Am. St. Rep. 396, 16 Det. Leg. N.
fit Assoc^ 116 Mich. 699, 5 Det. Leg. 677, 123 N. W. 25, 39 Ins. L. J. 34.
N. 113, to N. W. 137. See also Pa- On validity of by-law of mutual
Irons' Mutual Fire Ins. Co. of Mich, benefit society refusing to pay indem-
Ltd. V. Attorney General, 166 Mich, nity upon presumption of death from
438, 131 N. W. 1119. seven years' absence, see note in
As to arbitration and award elaus- L.R.A.1915B, 793.
es and validity ; generally, see §§
3731 et seq. herein.
^^ Hembeau v. Great Camp of
As to presumption of death : evi-
dence, see § 3772 herein.
^^ Loui.-^ville Board of Fire Lander-
Knights of Maccabees, 101 Mich. 161, writers v. .lohnson, 133 Kv. 797, 24
49 L.R.A. 59_2, 45 Am. St. Rep. 400, L.R.A. (N.S.) 153 (annotated on le-
59 N. W. 41y. gality of combination among under-
On conclusiveness of decisions of wiiters), 119 S. W. 153.
tribunals of a.ssociations or corpora- ^* Pterin v. ^liusker Young Men's
tions, see notes in 49 L.R.A. 353; 2 Commercial Aid Assoc. 147 N. Y.
L.R.A. (N.S.) 672; and 52 L.R.A. Supp. 440.
(N.S.) SOU, 823.
But compare as to by-laws exclud-
ing resort to civil eourts, § 372 here-
in.
924
^* See § 368 herein.
^^ See §§ 380 et seq. herein.
MUTUAL COMPANIES— BY-LAWS § 371c
amendments to Ijy-laws even nnder a reserved power to adopt
the same mu^^t 1)0 reasonable to be valid. ^"^
By-Unvs which prohibit a mutual benefit organization from doing
that which it has power to do. as in case of waiver of its by-laws, are
void.^^ So, a by-law of a beneficial association is held invalid where
it attempts to invest an ofhcer thereof with powers which usm-p ju-
dicial functions of government by autliorizing him to construct a
law as to limitation of .tlic association's liahiHty and making such
construction binding u])on a member. ^^ And a by-law is invalid
which ])r<)vi(lcs that Ibe recei))t and retention of unpaid delinquent
dues and assessments in case a susj)ended member is not in good
health shall not liavc the effect of reinstating such meml^er or en-
title him or his beneliciarics to any rights under his certificate;
especially so where such delinquent dues and assessments are re-
ceived and retained by the association.^" .\ by-law is also void
which provides thiil the members of an insurance company shall
bring a suit in a. certain county where theii- claims are disallowed
by the directors.^ So, a provision of a l)y-law as to proximity of
risks will be rejected where it is meaningless and unintelligible as
to what risks it intends to prohibit,^ and a by-law is void wliich
limits the number of daj^s within wbich an assessment nuist l)e
paid to one-tenth the period required for notice thereof under the
constitution.^
§ 371c. By-laws valid in part and void in part. — A by-law which
consists of several distinct and independent [)arts may be valid as
to one part, though void as to the otliers: ■* but it is otherwise where
the by-law constitutes an entirety, each part of whieh depends ui)on
the other j)art-. for it is void as to the whole if void in a matei'ial
part^ A by-law providing for expulsion wilhoiil any right on the
part of the meml)er to be heai'd in defense is void only to the ex-
" See S 37!)k lieiein. Co. (i Gray (72 Mans.) 174. Wliether
Incline v. Sovereign Camp "Wood- by-law is void, see Matt v. Roman
men of tlie World, 111 Mo. App. (iOl, Catliolic Mutual ProU-clive Soe.
8t) S. W. 501. TO Iowa, 4.55, :;0 N. W. /O!).
13 Fraternal Aid As.soc. v. Hitch- ^ p„,^i^yj,j.^, ^. [,^^^.„^p^.j.;• ^^^ Iial)orers'
cock, 121 HI. App. 402. Co-operative Ins. Co. 77 Mo. App.
20(iodwin V. National Council (i.iO, 2 Mo. App. Repr. 128. ^
Kni"-lil.s & Ladies of Securitv, Kili ^ Illinois Conuncrcial .Men's A.ssoc.
Mo.' App. 289, 148 N. W. OSO, 41 v. Walil, ()8 III. Apj). 411.
Ins. L. J. 139;j ((lue.stit)n of waiver As to validity of i)rovisions as (o
of forfeiture was also involved, at- assessments, see ^ 1240 herein,
thous'li the i)oint in tiie text as to m- *Anicsl)ury v. Bowiliu-li .Mutual
validitv was directly adjudicated); Fire Ins. Co. () Gray { (2 .Mass. ) 5i)(i.
Schuster v. Ivnislits & Ladies of Se- * State v. Curtis, 9 Nev. ;;25; An-
ourity, fiO Wash. 42. 110 Pac. 680. gell & Ames ou Corporations, see.
1 Nute v. Hamiltoa Mutual Ins. 358.
925
§ 372
JOYCE ON INSURANCE
tent that it deprives him of a right which might resuU to his bene-
fit.«
§ 372. By-laws excluding resort to civil courts: constitutional
provisions. — Tluit by-laws may not by their provisions wholly ex-
clude members from resorting to the civil courts for remedies under
contracts of insurance is substantially and by analogy held in sev-
eral cases.''^ although cases to the contrary are numerous.* A dis-
tinction, however, should be made between those by-laws, or consti-
tutional provisions which have reference to disputes of members
among themselves, and those which apply to contests with the order
over payment of losses under the contract.^ In Indiana, it is lield
^ Berkhout v. Supreme Council
Royal Arcanum, 62 N. J. L. 103, 43
Atl. 1.
' California. — Grimbley v. Ilar-
rold, 125 Cal. 24, 73 Am. St. Rep.
19, .37 Pac. 0.38.
Indiana. — Sui)reme Council Cath-
olic Benevolent Legion v. Grove, 176
Jnd. 356, 36 L.R.A.(N.S.) 913, 96
N. E. 159; Supreme Council Order
of Chosen Friends v. Gan-iaus. 104
Ind. 133, 54 Am. Rep. 298, ^^3 N. E.
818; Bauer v. Sampson Lods-e, 102
Ind. 262, 1 N. E. 571; Elkhart M\\-
tual Aid Benevolent & Relief Assoc.
V. Houghton, 98 Ind. 149; Kestler v.
Indianapolis & St. Louis R. R. Co.
88 Ind. 460; Voluntar>-^ Relief De-
jiartment v. Spencer, 17 Ind. App.
123, 46 N. E. 477.
Maine. — Stejilien.^on v. Piscataqua
Fire & ]\larine Ins. Co. .54 Me. 70.
Massachusetts. — Wood v. Humph-
rey, 114 .Alass. 185.
Michigan. — Russell v. North Amer-
ican Benefit Assoc. 116 ]\Iich. 699, 5
Det. Ijeg. N. 113, 75 N. W. 137.
Missouri. — ]\IcAIahon v. Su]ireme
Tent Knights of jMaccabees, 151 Mo.
522, 52 ^S. W. 384; Mulroy v.
Kniglits of Honor, 28 Mo. App. 463.
Pennsijlvania. — Sweeney v. Rev.
Huiili AlcLauglilin Benevolent Soc. 14
Wkly. N. Cas. (Pa.) 466; Myers v.
Fritchman, 6 Pa. Super. Ct. 580.
Tihofle Island. — Pepin v. Societe St.
Jean Baptiste, 23 R. I. 81, 49 Atl.
387.
West Virgini a. -^K'mney v. Balti-
9
more & Oliio Emplovees' Relief
Assoc. 35 W. Va. 385, 1.5 L.R.A. 142,
14 S. E. 8, 21 Ins. L. J. 176.
As to jurisdiction of tribunals of
mutual l)eneHt, etc., societies or as-
sociations, see §§ 3502, 3520 herein.
* California. — Robinson v. Templar
Lodge No. 17, Independent Order of
Odd Fellows, 117 Cal. 370, 49 Pac.
170.
Man/lavd. — Anacosia Tribe v.
Murbach, 13 Md. 911, 71 Am. Dec.
625.
Michigan. — Hembeau v. Great
Camp of Knights of Maccabees. 101
:\lich. 161, 45 Am. St. Rep. 400, 49
L.R.A. 592, 59 N. AY. 417; Canheld
V. Great Camp of Knights of Macca-
bees, 87 Mich. 626, 24 Am. St. Rep.
186, 13 L.R.A. 62.5, 49 N. \Y. 875; 21
Ins. L. J. 3.
Minnesota. — Rigler v. National
Council Knights & Ladies of Securi-
ty, 128 Minn'. 51, 150 N. AY. 178 (ex-
pulsion: tinaUty of judgment).
Xew York. — Wilcox v. Supreme
Lodge Roval Arcanum, 210 N. Y.
370, .52 L.R.A. (N.S.) 806, 104 N. E.
624, att'g 136 _N. Y. Supp. 377, 151
App. Div. 29/ (when judgment of
expulsion not reviewable).
Ohio. — Cincinnati Lodge No. 3, In-
dependent Order Odd Fellows v.
LittUburv, 6 Cin. L. Bui. 237, 8 Ohio
Dec. 194," 8 Wkly. L. Bui. 237.
England. — Scott v. Avery, 5 H. of
L. Ca.<. 811.
^ Bukofzer v. Fnited States Grand
Lodsre, Independent Order Sons of
26
MUTUAL COMPANIES— BY-LAWS § 372a
that a by-law of a mutual benefit society which provides that a
member claiming Ijcnelits must make proof of loss before certain
subordinate officers, and, if their decision is against him, appeal to
higher officers, whose decision shall be final, is valid in so far as it
requires such an appeal to be taken before suit may be brought on
the membership certificate, and void in so far as it declares the de-
cision of the appellate tribunal final so as to bar a resort to the
courts.^"
§ 372a. Same subject: when courts will not intervene: decisions.
— A provision of the laws of a mutual benefit society formed by the
\oluntury association of its memljers, that the determination of the
tribunals of the society upon an endowment certificate payable on
the death of a memljer shall be conclusive, and that no suit at law
or in equity shall be commenced by any member or beneficiary, is
not invalid as against public policy, in ousting the courts of juris-
diction." And where, in conformity with the associations by-laws
making its finding final, a claim is voluntarily submitted to such
association's tribunal the party submitting said claim is bound
where the decision is made in good faith. ^^ 80, it is held that
where the plaintift' in pursuance of a judgment of the state court
has presented his demands to the courts of the defendant order, he
is not permitted to take the judgment of these tribunals, and there-
after, the judgment being adverse and in fraudulent conduct being
charged or relied on, pursue his remedy in the state courts. ^^ Nor
will the state court interfere in a direct attack by a local council to
vacate the judgment whether final or not, of the state council on
appeal regularly taken and decided a,s provided by the rules of the
order.^* Again, where a by-law of a beneficial association, consti-
Benjamin, 15 N. Y. Supp. 922, 40 " Canfield v. Great Camp of
N. Y. Lt. R. 6r)3, aft'd (mem.) 139 Kiii.fflits of Mar-cabees, 87 Midi. 626,
N. Y. 612, 35 N. E. 204. See also 13 L.R.A. 625n, 24 Am. St. Rep.
Patrons' Mulual Fire Ins. Co. v. At- 186, 49 N. W. 475. See also Ilem-
lorney General,' 166 Mu-h. 438, 131 beau v. Great Camp of Knialits of
N. W. 1119 (considered under § 372a Maccabee.s, 101 Mieh. 161, 49 L.R.A.
berein) ; Kelly v. TrinionI Lodce Xo. 592, 45 Am. St. Rep. 400, 59 N. W.
249; Independent Order Odd Fellows, 417.
154 N. Car. 97, 52 L.R.A. (N.S.) 823, 12 Derrv v. Great Hive, Ladies of
()9 S. E. 764, 40 Ins. L. J. 268. See Modt'vn Maecabees, 135 Micb. 494,
§ 352c herein. 98 S. W. 23 ; Barker v. Great Hive,
1° Supreme Council of Order of Ladies of Modern Maccabees, 135
Cbosen Friends v. Forsinijer, 125 Ind. Mi,.], 499 98 N W '^4
52, 9 L.R.A. 501, 25 N. E. 129. 13 lir ' xt ' t^^ a 1-1
'r\ 1 • ^ 1 • ■ P 13 Alonffer v. New Era Assoc. 1^1
On fonclusiveness ot decisions or ,,. , rtA -10-7 xr wr ro-i ai t t
. •, , ,. ,^11 (>( .^,;„ Mu'b. 614, 137 N. W. 631, 41 Ins. L.
tribunal ut mutual Ijeneiit aasoeia- _ -,^00 o ■\t -\t -c^
,. ^ f u Ri J J. 1/88. See Monsrcr v. New Era
tions upon claims tor benents, and . -ic^ tvi- 1 ^-i- o 1 t r> a
J , , ^ , , -i- n • „ As.soc. 156 Micb. 64o, 24 L.R.A.
dutv to e.xbaust remedies witbin as- ...^^ j^ , moT 101 xt tit qoq
• , - , • -o T r> A / XT c % (iN.o.) lU.i/, IZl JN. Vy . o_0.
sociation, see note in o2 L.K.A.(N.b.) ^ ' ' ' .
823. • * Lincoln Council No. 1, Junior
927
Oi
2b
JOYCE ON INSURANCE
tilting part of tlie contract between the council of the a.ssociation
and assured provides that should any person feel aggrieved at the
action of the council for failing to pay Ijenefits claimed to be due,
such ])erson may appeal, upon notice given, etc. and if such person
still feels aggrieved lie may appeal to the Ijoard of appeals and if he
fails to do so the action of the council shall Ijc linal and conclu-
sive, includes and binds both members and beneficiaries, and must
be complied with before resorting to the coiu'ts for relief.^^ And a
beneficiary is precluded from obtaining the aid of the courts where
tlie deceased had been suspended and was not in good standing at
the time of his decease, and an appeal had not been prosecuted by
his representative or said beneficiary and the latter had failed to
appeal from the rejection of her claim; and. therefore, the reme-
dies provided for under the by-laws have not been exhausted the
decision of the order was final. ^® So, by-laws of a mutual fire in-
surance company providing for a board of arbitration to report on
the loss and claim of assured and providing that its jurisdiction
shall be exclusive and its decision final are valid and do not conflict
with a statute authorizing suits in sixt}' days from the date a claim
shall become due. And as no claim can become due until such
board awards it, the by-law does not oust the courts of jurisdiction,
and the board's decision is final when there is no bad faith in its
decision. 80 it is declared, per Bird, J., that: "The doctrine is
well established in this state that members of a voluntary society
may set up a tribunal to adjust the diiferences tliat arise between
the association and its members, and make its decision final in the
absence of bad faith or a refusal to act or to pay after an adjudica-
tion has taken place." ^'
§ 372b. Same subject: when courts will intervene: decisions. — •
A provision of a by-law for reference to the directors for final ad-
justment where the adjuster and assured disagree does not have the
effect of making such director's decision final so as to preclude a
resort to the courts, ^^ and if the right of appeal within the order
is denied, resort may be had to the civil courts. ^^ So, "valid rea-
Orcler United American Mer-hanics v. l'^ Patrons' Mutual Fire Ins. Co. v.
State Council Junior Order United Attornev General, IGG .Mich. 438, 1?A
American Mechanics, 78 N. J. L. Ill, N. W. 1119.
73 Atl. 24"). On conclusiveness^ of decisions of
^^ King" v. Wynema Council, No. tribunals of associations or corpora-
10, Dauoliters of Pocohontas, I. O. tions, see notes in 49 L.R.A. 353; 2
of R. M. 2.-) Del. (2 Bovee's) 255, 78 L.R.A.(N.S.) 072; and 52 L.R.A.
Atl. 845. (N.S.) 800, 823.
^^ Conlev v. Supreme Court Inde- ^* Downing- v. Farmers' Mutual
pendent Order Foresters, 158 Mich. Fire Ins. Co. 158 Iowa, 1, 138 N. W.
100, 122 N. W. 507, 38 Ins. L. J. 917.
1112. ^^ Ruterbuseh. v. Supreme Court
928
MUTUAL COMPANIES— BY-LAWS § 373
sons" for which, under his contract, a person may be reinstated in
a benefit association after faihire to pay an assessment, are not to
be arbitrarily determined by its officers, but their determination is
subject to review in tlic conrt'*.^"
In a Nebraska case involving a relief department in- the nature
of a mutual insurance association maintained in connection with a
railroad company, its employees being the members, the court, per
Irvine, C, said : ''A section of the rules of the department provides
that all questions or controversies of whatsoever character arising in
any manner or between any parties or persons in connection with
the relief department, or operation thereof, whether as to the con-
struction of language or the meaning of the regulations of the re-
lief department, or as to any right, decision, instruction, or acts in
connection therewith, shall be submitted to the determination of
the superintendent of the department, whose decision shall be final
and conclusive, subject to the right of appeal to the advisory com-
mittee. Based upon this rule, the defendant requested an instruc-
tion that if the jury believed that the superintendent had passed
upon this claim, and rejected the same, such decision was conclu-
sive, unless an appeal had been taken to the advisory committee.
This instruction was properly refused. We have no doubt of the
power of members of voluntary associations to restrict themselves,
at least as to matters incidental to the operation of the association,
to remedies before tribunals created by the association. It is only
to this extent that the rule seems to apply." And it wa.s held that
such rule did not preclude an action to enforce payment of a death
benefit.^
§ 373. By-laws must not be contrary to laws of state or United
States. — All by-laws must be consistent with the constitution and
laws of the state and of the United States, as well as with particular
statutes which relate to the corporation and which do not imj)air the
charter obligation.^ And where a statute empowers mutual hene-
. fit associations to make regulations for their own government not
contrary to United States or state laws, the Federal and state con-
stitutions are included within the term ''laws." ' So, the charter
Inde{5enclent Order Forresters, 162 ^ y^, j.q Butfher.s' Beneficial Assor.
Mich. 213, 127 N. W. 288. 3.') I'a. St. lol; Lange v. Royal
20 Dennis v. xMassachiisetts Ben. Hisililanders, 7o Neb. 188, 121 Am.
Assoc. 120 N. Y. 496, 9 L.R.A. 189, SI. Kep. 786, 10 L.K.A.(N.S.) 666,
24 N. E. 843. 106 N. W. 224, 110 N. W. 1110;
^ Burlington Voluntary Relief De- Angell & Ames on Corporations (9tli
partraent of Chicago, Burlington & ed.) sees. 332 et seq.
Quincv Raihoad Co. v. Wliite, 41 ^ Kern v. Arheiter Unterstuetzungs
Neb. 547, 43 Am. St. Rep. 701, 59 Verein. 139 Mich. 233, 102 N. W.
N. W. 747. 751, 26 Ins. L. J. 224. 746; Fed. Const, art. 1, see. 10; 14tli
Jovce Ins. Vol. I— 59. 929
§ 373 JOYCE ON INSURANCE
and by-laws of a fraternal benefit society must be in harmony with
the statute law of the state where it is located.* And in case of
conflict the by-laws must yield to the statute.^ A hy-law which is
against the laws of the state or government is void and totally in-
operative, and an act relative to the contract cannot be permitted
under a by-law when such act would contravene the laws of the
state.^ Nor can the powers of an association be extended by a by-
law, and the powers derived from the statute may be limited but
not increased by articles, of association J
A by-law is therefore void which requires that a member shall
take part in a strike.* And a by-law is void which renders nuga-
tory a statute as to presumption of death from seven years ab-
sence.^ Nor can insured be deprived of his guaranteed and valu-
able statutory rights by a by-law inconsistent with the statute and
which in effect operates to repeal it, as in case of provisions as to
venue. ^° Again, it is held that a mutual insurance company creat-
ed without any capital stock cannot create a capital stock by virtue
of a by-laAV passed for that purpose, and thereby withdraw from the
class of mutual corpora,tions without capital stock to which it be-
longs; " and where a mutual insurance company in Massachusetts
was authorized to do business as a stock company, a by-law which
prohibited the continuance of the stock department and makes a
division of the surplus accumulated thereunder is contrary to the
general insurance laws of that state, and void.^^
By-laws, however, as to adjustment and arbitration are held not
to conflict with a statute as to prosecution of claims by a suit at
law.^2 Nor do by-laws limiting the time during which sick bene-
amd't Mich. Const, art. 4, sec. 43-, Society of Operative Masons, 3 Him
Howell's Stat. 164, sec. 4. (N. Y.) 36L See Snow v. Wheeler,
* Supreme Colony United Order of 113 Mass. 179.
the Pilsrira Fatlicrs v. Towne, 87 ^ Bamber": v. Knights of the Mod-
Conn 644, 89 Atl. 264. ern ]\la.-cal)ees, 158 Mich. 568, 133
5 Finnell v. Franklin, 55 Colo. 156, Am. St. Kep. 396, 16 Det. Leg. N.
134 Pac. 122. 677, 123 N. W. 25, 39 Ins. L. J. 34.
« Price V. Supreme Lodge Knights But compare Kelly v. Supreme
of Honor, 68 Tex. 361, 4 S. W. 633. Council Catholic Mutual Benefit
See also Briggs v. Earl, 139 Mass. Assoc. 61 N. Y. Supp. 394, 46 App.
473, 1 N.E. 847; Angell & Ames on Div. 79.
Corp sees. 333 et seq. ^° Eaton v. International Travelers
■7 National Union v. Keefe, 263 111. Assoc, of Dallas (1911) — Tex. Civ.
453, 105 N. E. 319, 44 Ins. L. J. 125. App. — , 136 S. W. 817.
See Cerney v. Sesterka Podpornjici ^^ State (ex rel. Mutual Benefit
Jednota, 146 111. App. 590; Cerney Life Ins. Co.) v. Utter, 34 N. J. L.
V. Jednota Cesky Dam, 146 111. App. 489.
.518- ^Vao•ner v. St. Francis Xavier 12 Traders & Mechanics' Ins. Co. v.
Benefit Soe. 70 Mo. App. 161. Brown, 142 Mass. 403, 5 N. E. 134.
8 People v. New York Benevolent " Pajrons' Mutual Benefit lire
930
MUTUAL COMPANIES— BY-LAWS § 374
fits shall lie paid conflict with a statute requiring every policv or
certiticate to specify the exact sum of money which is promised to
be paid upon the happening of the contingency insured against.^*
If the statute of incorporation of mutual benefit societies empowers
them to establish rules for the regulation of the corporate affairs not
contrary to the Federal or state laws and to decide the necessary
qualifications of membership, such societies may prohibit, by a by-
law, members from being connected with other societies not ap-
proved by a particular church. ^^
§ 374. By-laws against public policy are void. — That a by-law
which is contrary to public policy is void, is well settled. So, rules
and regulations as to expulsion of members must not be so grossly
unfair as to be against public policy.^^ And a provision in a mu-
tual benefit certificate making conclusive the decision of the as-
sociation upon the question whether or not a member is entitled to
the benefit provided is void as against public policy, under an In-
diana decision.^''' But a constitutional provision of a benefit so-
ciety, that decisions of its tribunals as to claims for benefits are
conclusive, is held not contrary to public policy in California. ^^
And a by-law is held not contrary to public policy where it pre-
cludes resort to the civil courts until remedies within the order are
exhausted, and also prescribes a time limitation for suing after a
claim is rejected. ^^ 80. a by-law is held not to be against public
policy although it contravenes the rule as to presumption of death
from absence, etc.^" Again, a rule or by-law of a board of fire un-
derwriters prohibiting a member from taking an agency of a com-
pany already represented in the city and which, while it denies cer-
tain ]:)rivi leges to and imposes certain restraints upon members is
not arbitrary or oppressive or injurious to the public, is not against
Ins. Co. of Midi. Ltd. 166 Mich. 438, Berlitski v. St. Peter & St. Paul So-
131 N. W. 1119. • ciety (Pa.) 21 Lancaster L. Rev. 62.
1* Courtney v. Fidelity Mutual Aid Compare §§ 372-372b herein.
Assoc. 120 Mo. App. 110, 94 S. W. ^^ Timmerlioff v. Supreme Tent of
768; Rev. Stat. Mo. 1899, sec. 7903. tlie Kniulils of IMaccabees of the
15 Mazurkiewicz v. St. Adelbcrtus World. 155 111. Ap]). 395, 40 Natl.
Soe. 127 iVlich. 145, 54 L.R.A. 727, 86 Corp. Repr. 337. Compare §§ 352-
N. W. 543. 352c, 355 heroin.
1^ Kulberg v. National Council of ^o x^'Uy v. Supreme Council of
Knights & Ladies of Security, 124 Catholic Benevolent Assoc. 46 App.
Minn. 437, 145 N. W. 120. Div. 79, 61 N. Y. Supp. 394. Bat
"^"^ Supreme Council Catholic Be- compare Samberg v. Knights of Mod-
nevolent Legion v. Grove, 176 Ind. ern Maccabees, 158 i\Iich. 568, 133
356, 36 L.R.A.(N.S.) 913, 96 N. E. Am. St. Rep. 396, 16 Det. Leg. N.
159. 677, 123 N. W. 25, 39 Ins. L. J. 34.
1^ Robinson v. Templar Lodge No. As to presumption of death; evi-
17, Independent Order Odd Fellows, dence, see § 3772 herein,
117 Cal. 370, 49 Pac. 170. Examine
931
3r5
JOYCE ON INSURANCE
public policy.^ And a by-law of a railroad relief association which
requires the release of the railroad from any claim for damaoes
before a member can apply to the association for relief is not in
valid as against pubhc policy.^
§ 375. By-laws must not contravene terms of charter, constitu-
tion, or articles of association. — By-laws are not vaUd which con-
flict with the charter or articles of association, for to acknowledge
the power to enact such Ijy-laws would admit the power of a cor-
poration to re-create itself on such basis and for such purposes as-
it mi.uht desire, and wholly defeat the object of its original crea-
tion ; 3 nor is a member bound by his consent to by-laws which are
invalid for the above reasons.* So, by-laws only regulate, but do
not surrender or suspend corporate powers.^ And if a statute of
the state of a fraternal association is in effect an amendment to the
charter subsequent contracts must conform thereto.^ So, a by-law
which materially conflicts with the constitution of an unincorporat-
ed society is invalid, and must yield to the constitution^ Where a
particular mode for obtaining funds for the payment of losses and
expenses is provided by charter, a by-law is void which changes such
specific provision and provides an entirely different mode therefor.'
But the courts will not sustain an action by a member of a cor-
poration to restrain it from enforcing against him a by-law of a
^ Louisville Board of Fire Under- ]Minn. 278 ; Angell & Ames on Corpo-
writers v. Johnson, 133 Kv. 797, 24 rations (9th ed.) sees. 343 et seq. See
L.R.A.(N.S.) 153n, 119 S. W. 153. also Cerney v. Sesterska Podpornjici
2 Owens v. Baltimore & 0. R. R. Jednota, 146 111. App. 599; Cerney
Co. 35 Fed. 715, 1 L.R.A. 75; State v. Jednota Cesky Dam, 146 111. App.
v. Baltimore & Ohio R. Co. 36 Fed. 590; Roulo v. Schiller Bund, 172
655; Fuller v. Baltimore & Ohio Em- Mich. 557, 138 N. W. 244; Lange v.
ployees' Relief Assoc. 67 Md. 433, 10 Roval Higlilanders, 75 Neb. 1S8, 10
Atl. 237. ■ L.R.A. (N.S.) 666, 121 Am. St. Rep.
On contracts requiring servant to 786, 106 N. W. 224, 110 N. W. 1110 ;
elect between acceptance of benefits Wagner v. St. Francis Xavier Ben.
out of a relief fund, and a prosecn- Soc. 70 J\lo. App. 161.
tion of his claims in an action for * People v. Benevolent Soc. 24
damages, see notes in 11 L.R.A. How. Pr. (N. Y.) 216.
(N.S.) 182, and 48 L.R.A.(N.S.) ^ Qoialuca v. Societa Co-operativa
440. On validitv of provision in Di Mutuo Soccorso Fratelli Bandiera,
contract of railroad relief depart- 30 R. I. 304, 75 Atl. 265.
ment for forfeiture of benetlts in ^ Finnell v. Franklin, 55 Colo. 156,
case of suit against company for 134 Pac. 122.
damages, see note in 10 L.R.A. (N.S.) "^Sherry v. Operative Plasterer.'^'
198. :Mutual Union, 1.39 Pa. St. 470, 20
3 Diligent Fire Co. v. Common- Atl. 1062; Powell v. Abbott, 9 Week,
wealth. 75 Pa. St. 291; Presbvterian Not. Cas. 231. See Roulo v. Schiller
Assurance Fund v. Allen, 106 Ind. Bund, 172 Mich. 557, 138 N. W. 244.
593, 7 N. E. 317; Bergmann v. St. « gt^te (ex rel.) v. Monitor Fire
Paul Mutual Building Assoc. 20 A.ssn. 42 Ohio St. 555.
932
MUTUAL COMPANIES— BY-LAWS
§ 376
imidiiil society wliieli provides that it shall be the duty of eyery
niciuKer to refuse to perform in any orchestra in which are any per-
sons not members in good standing, and that it shall be deemed a
bi-each of good faith between members to employ a suspended or
noiniiember, or to ass^ist in a public performance given wholly or in
l)art by amateurs, and which impose a penalty for their violation;®
and a bv-law cannot limit or extend benefits beyond the chailor i)j-o-
visions prescribing the class entitled to benefits.^" But a by-law
which provides for forfeiture for non])ayment of an assessment doe.s
not contravene a charter provision thai the ofiicers may declare a
policy forfeited for a like cause.^^ ♦
§ 376. Enforcement of by-laws: penalty. — The power to enact a
bj'-law carries with it necessarily the power to enforce the same by a
reasonable penalty, within the scope of the corporate purposes, and
upon due notice and hearing.^^ ^q^ ^ member may be suspended
for nonpayment of assessments; ^^ but a by-law which subjects the
member to a (juasi ])enalty of deprivation of l)enefits for three
months' after he has ])aid dues in arrears for a certain time, is un-
reasonable, oppressive, and detrimental to the interests of the cor-
poration.^* And an amendment of the constitution which is ex
post facto in its effect, in that it enforces a penalty not existing at
the time of default in payment of dues by a member, is not valid."
® Daniels, J., dis.senting; Thomas v. 50 Pae. 7(J3; AugoU & Ames on Cor-
Musical Mutual Prolcctive Union, poi'ations (Otli etl.) sees. 360 et seq.
121 N. Y. 45, 8 L.R.A. 175, 24 N. E. ^3 jlansen v. Supreme Lod-e
24, reversing 49 Hun (N. Y. ) 171. Knights of Honor, 140 111. 301, 29 N.
^° Hicks Su)). Council American E. 1],21.
Legion of Honor v. Periy, 140 Mass. ^* Cartan v. Father Matthew Unit-
580, 5 N. E. 634; Kentucky Masonic ed Benevolent Soc. 3 Daly (N. Y.)
Mutual Life V. iAjillci', 13 Busli (Kv.) 20. See ConnoUv v. Shamrock Be-
489.
^^ Equitable Lilc Assui'. Soc. v.
McLennon (Tenn. Sup. Ct. 1876) 6
Ins. L. J. 124.
^^ See Beadle v. Cliennnso Co. Ins.
Co. 3 Hill (N. Y.) Kil: "Lawson v.
Hewell, 118 Cal. 613, 49 L.K.A. 400,
933
nevolent Soc. 43 Mo. App. 283; Ca-
liill V. Kalamazoo Ins. Co. 2 Doug.
(Mich.) 12-1. 4:! Am. Dec. 4.57.
nH'ord V. Fire Department, 31
159. See sections herein on
15
Mich'
loileiture, etc.
CHAPTER XXI.
MUTUAL COMPANIES, BENEFIT, ETC., SOCIETIES— CHANGE OF
BY-LAWS, ETC.— CONSTRUCTION.
§ 377. Power to alter or change bj'-laws.
§ 378. By-laws, constitutions, etc.: changes, how made.
§ 378a. Same subject.
§ 378b. Same subject : requirements as to notice.
§ 378c. Same subject: delegation of power.
§ 378d. Same subject: adoption of committee's report: validating unau-
thorized by-laws.
§ 378e. Same subject: right to exercise powers outside state of incor-
poration.
§ 379. By-IaAvs : statutory or charter power to repeal, change, etc.
§ 379a. By-laws, constitution, etc.: amendments, changes, or repeal under
reserved power or agreement.
§ 379b. Same subject: decisions holding amendments, etc., binding.
§ 379c. Same subject: decisions holding amendments, etc., not binding.
§ 379d. Same subject: prohibiting extra-hazardous occupation.
§ 379e. Same subject : proiiibitiog engaging in liquor or saloon business.
§ 379f. Same subject : prohibiting use of intoxicating liquors or drugs.
§ 379g. Same sul)jef't : accidental injuries: total disability.
§ 379h. Same subject: deficiency or reserve assessments: delinquent as-
sessments.
§ 379i. Same subject: time limitation for suing.
§ 379j. Same subjec-t : as to remedies within association.
§ 379k. Amendments, changes, or repeal must be reasonable even under
reserved power or agreement.
§ 3791. Reasonable amendments, etc., binding.
^ 379m. When amendments, etc., are reasonable.
§ 379n. When amendments, etc., are unreasonable.
§ 379o. Amejulments or changes must not operate retroactively: reserved
right or agTeement to amend or change : vested rights.
§ 379p. Same subject.
§ 379q. Same subject : instances.
§ 380. Change of by-laws, etc.: vested right.
§ 380a. Same subject.
934
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 377
§ 380b. Same subject : instances.
§ 380c. Same subject : changes in by-laws, etc. : increasing assessments or
dues or reducing- amount payable.
§ 380d. Same subject : changes in by-laAvs, etc., to prevent financial disas-
ter or dissolution.
§ 380e. Same subject : classification 6f risks : discrimination.
§ 380f. Right of member or beneficiary to object to amendments: waiver
or estoppel.
§ 380g. Same subject : wljen waiver or estoppel not applicable.
§ 380h. Waiver by or estoppel against association, society, etc., or officers
thereof : amendments.
S 381. Construction of bv-laws.
§ 377. Power to alter or change by-laws. — A mutual insiiranoe
corporation or association may clian,u;o its rules, or dispense with
their literal and rigorous enforcement, when hy so doing no sub-
stantial rights of the company or the insured will be impaired. ^^
And wliere a change is regiilarly made in tlio by-laws and the mo-
tive which influences the change is honestly exercised to promote
the society's welfare and all the members have an opportunity to
avail themselves of tlie change, neither members nor beneficiaries
suffer any actionable wrong.^' The right of a corporation to alter,
modify, or change its by-laws is generally reserved in tJie charier
or articles of association, but aside from the reservation of such
power it is said to be incident to the Very nature and purposes of
such organizations that they should have the right to make changes
in their laws.^* This principle is. undoubtedly true, but in its ap-
plication the courts widely diverge. An attempt has been made by
some of the decisions to reconcile the cases on the common groimd
of vested rights, but here again the question of what constitute vest-
ed rights has been the subject of much discussion, and the decisions
are far from unanimous, nor is the question settled as to what ex-
tent such societies are authorized to change their by-laws, where the
power so to do is reserved in the charter or articles of association.
We have seen that the fundamental law of organization of such
societies, and the charter and by-laws constitute a part of the con-
tract of each member,^^ and it would seem as if neither a corpora-
tion nor association would have the inherent; power to enact a
by-law which materially and radically changes the contract with
i«See Protection Life Ins. Co. v. " Fugure v. Mutual Society of St,
Foote, 79 111. 361. Joseph, 46 Vt. 369.
1^ Supreme Lodge Knights of Py- ^^ See §§ 188 et seq., 380 et seq.
thias v. Knight, 117 Ind. 489, 3 herein.
L.R.A. 409, 20 N. E. 479, 483.
935
§ 378
JOYCE OX IXSUKAXCE
members; such societies can certainly have no inherent power to ar-
bitrai'ily abrogate the provisions of a contract which members have
entered into in good faith, nor may it divest members of rights
Avliich liave become vested under their contracts. And a charter res-
ervation of the right to modify and cliange by-laws, and to which a
party consents by becoming a member, ought not to be construed
to warrant the passing of a by-law which would operate to annul a
member's contract and abrogate vested rights, or which would in
effect be a repudiation of its obligations by the society.^" The fol-
lowing extract from the opinion in a Federal case is pertinent here.
The court per Ray. D. J., said: ''It is not questioned in the New
York cases, to which attention has been called at some length, that
imder such general language the by-laws of a corporation or of an
association may be amended in those respects which go to the gen-
eral management and control of the company and the government
of its internal affairs. When it comes to so amending the by-laws
as to materially affect and change the obligations of such contract
and destroy rights or- seriously impair rights vested we have a dif-
ferent question." ^
§ 378. By-laws, constitutions, etc., changes, how made. — Altera-
tions, changes or repeal of by-laws etc., must be made in the man-
ner prescribed by statute, the charter, or articles of association and
by-laws and subject to the restrictions imposed ^ and where a by-law
prescribes the time when such alteration can be made, and the num-
l)er of votes required therefor, such provision must be followed.^
AVhere the articles of a corporation provide for the management of
its business by a board of directors, and for meetings of that lx)ard,
but do not provide for meetings of the corporation, and the first
by-laws were adopted by the directors, the latter have power to
■ ^^ Supreme Commandery Kniglits
of the Golden Rule v. Ainswoith, 71
Ala. 436, 46 Am. Rep. 332; Fire Ins.
Co. V. Connor, 17 Pa. St. 136; Stew-
art V. Lea Mutual Fire Ins. Assn. 64
Miss. 499, 1 So. 743. See Korn v.
Mutual Assur. Soc. 6 Crancli (10 U.
S.) 192, 3 L. ed. 19.5. See sections
next ensuing herein. See §§ 380 et
seq. herein.
^ Smvthe V. Supreme Lodge
Knights of Pvthias (U. S. D. C.) 198
Fed. 967, 42 Ins. L. J. 6, ease aff'd
Smyth V. Supreme Lodee Kniahts of
Pythias, 220 Fed. 438,' 137 C.^ C. A.
32. See §§ 380 et seq. herein.
2 Thibert ' v. Supreme Lodge
Knights of Honor, 78 Minn. 448, 47
L.R.A. 136, 79 Am. St. Rep. 412, 81
N. W. 220; Lange v. Roval High-
landers, 75 Neb. 188, 10 L.R.A.
(X.S.) 666, 121 Am. St. Rep. 786,
106 N. W. 224 (cannot change stat-
utory mode of exercise of power. If
amendment is in contravention of
statute it is void) ; Farmers' Mutual
Ins. Co. v. Kinney, 64 Neb. 808. 90
N. W. 926 (by-law must be adopted
in conformity with authority' con-
ferred) : Deuble v. Grand Lodge, An-
cient Order V. W. 72 N. Y.' Supp.
75.5, 66 App. Div. 323, aff'd 172 N. Y.
665, 65 N. E. llKi.
3 Tony V. Baker, 1 Allen (83
Mass.) 120.
936
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 378a
amend the by-laAvs.* An amendment of a by-law made in pursu-
ance of a by-law ])ermitting it and which is in existence when a
person becomes a member is binding as a part of the contract.^
An attempted amendment of the by-laws of a mutual benefit so-
ciety is not binding on a member who did not attend the meeting,
unless it is aflirmalively shown to have been called and conducted
as provided by the constitution.^ And parol evidence of officers and
members then present is competent to prove the enactment of
amendments to by-laws at the time and in the manner prescribed.'
A presumption also exists, when there is no evidence to the contrary,
that an amendment was voted on by all the members present and
that it was properly adopted where the record shows the votes for
and against at a regulai' meeting and its adoption.*
An association em])owered by charter, and undertaking by its by-
laws, to acciuuulate a fund for the benefit of persons dependent up-
on members at the time of their death, cannot so amend its by-laws
as to distribute the accumulated fund among the living members
and thereby bind dissenting members.^ And the governing body
of a fraternal benefit association wliich has not adopted a represen-
tative form of government as required by statute is without power
to adopt a by-law changing the terms and obligations of a certificate
theretofore issued to one of its members.^"
§ 378a. Same subject. — Under a Mississippi decision a constitu-
tion adopted by an incorporated fraternal benefit society and not
embodied in its charter has no greater force than any by-law, and
it may itself be amended or repealed the same as any other by-law
without following the mode prescribed by such constitution, and the
adoption of an amendment in a difl'erent mode is valid provided
that it does not contravene the terms of the charter and is not con-
trary to laws of the land.^^ So in Illinois although by-laws of a sub-
ordinate order are called its "constitution" they are nevertheless of
^Heinizehnan v. Druids' Relief » Parish v. New York Prod neo Ex-
Assoe. 38 Minn. 138, 3(i N. ^V. 100. cliano-e, 169 N. Y. 34, 50 L.H.A. 140,
SHass V. Mutual Kelief Assoc. 118 Gl N. E. 977. See Pokrefky v. De-
Cal 6 40 Pac lOoO, 'JO Ins. L. J. troit Kiieniens Fund Assoc 121 Midi.
992. See also Lawson v. iiewell, 118 450, Dot. Lc<,^ N. 240, 80 N. W. 240
Cal. 013, 49 L.K.A. 100, 50 Pao. 703. (contract cannot be changed against
s Metropolitan Safety Fund Acci- nienil)er's protest. See also §§ 380 et
dent Assoc, v. Windovei', 137 111. 417, seq. herein).
o- \j Yj 538 ' ^° Lange v. Royal Highlanders, 75
" 'Ma-sonic Mutual Benefit Assoc, v. Neb. 188, 10 L.R.A.tN^S.) 060, 121
Severson, 71 Conn. 719, 43 Atl. 192. Am. St. Rep. 780, 106 N. W. 224.
8 Cowan V. New York- Caledonian ^^ Domes v. Supreme Lodge
Club, 01 N. Y. Supp. 714, 46 App. Knights of Pythias of the ^Yorld, 75
Div. 288 (a purely charitable organ- J\Iiss. 400, 1 Miss. Dec. (No. 14) 10(i,
ization in respect to funeral benctits). 23 So. 191.
937
§ 378b
JOYCE ON mSURANCE
no greater force than by-laws, and by employing such a term said
order cannot extend its power to the adoption of by-laws of a char-
acter which it is solely j\'ithin the power of the supreme lodge to
enact, even though such subordinate body has power by the laws of
the order to adopt certain laws and regulations.^^
AVliere the executive committee is empowered to rerate members
the objection is immaterial that such rerating power was not exer-
cised by the supreme legislative authority of the society ^^ and a
beneficiary cannot object that amendments to articles of association
are invalid because the resolution referring the same to the subor-
dinate councils provided only for a reference of certain proposed
amendments to the constitution where it is shown that tlie amend-
ments to said articles were properly submitted and adoj)ted.^* And
wliere an amendment contains an illegal provision which, from its
importance, may have contributed more than any one of the others
to secure the small majority of votes by which it was adopted, it
will fall entirely. ^^
An amendment to an in validly enacted amendment and not
adopted in conformity with the original provisions as to the man-
ner of amending by-laws are not binding.^^ And the simultaneous
repeal and re-enactment, in terms or in substance, of parts of a by-
law of a fraternal association, preserve without interruption the re-
enacted provisions of the original by-law.^''
§ 378b. Same subject: requirements as to notice. — If notice of
amendments or additions to Ijy-laws is required it must be given
in the prescribed manner ^^ for the specified jmrpose, and it must
not be insufiicient.^^ So the rule that statutory requirements
^^ Supreme Lodge Kuights of Pv- ^"^ Quick v. Modern "VVooduien of
thias v.- Kutscher, 179 111. 340, 70 Amerk-a, 91 Neb. 10(i, 135 N. W. 43:5.
Am. St. Rep. 115, 53 N. E. G20, rev'g i^ Morris v. Farmers' :Mutual Fire
72 111. App. 462. Ins. Co. 63 Minn. 420, 65 N. W. 655;
^^ Supreme Ruling of Fraternal Allen v. Merrimack County Odd Fel-
Uystk- Circle v. Ericson (1910) — lows ^lutual Relief Assoc'. 72 N. H.
Tex. Civ. App. — , 131 S. W. 92. 525, 57 Atl. 922. Comi>are McCabe
^* Fold v. Nortli American Union, v. Young- Men's Father Matthew To-
180 111. App. 448, case afiP'd 261 111. tal Abstinence Ben. Soc. 24 Hun ( N.
433, 104 N. E. 4. Y.) 149, considered under § 379 here-
As to beneficiaries and effect of in.
subsequent change of by-laws, see ^^ Mutual Fire Ins. Co. of Mont-
5§ 748 et seq. herein.
^^ Parish v. New Y^ork Produce Ex-
change, 169 N. Y. 34, 56 L.R.A. 149,
61 N. E. 977.
gomerv County v. Farquhar, 86 Md.
668.
When presumption exists that
member of fraternal beneficiary as-
^^ Deuble v. Grand Lodge Ancient sociation had notice of change in bv-
Order U. W. 72 N. Y. Supp. 755, 66 law, see Attorney General v. Su-
App. Div. 323, att'd 172 N. Y. 665, preme Council American Legion of
65 N. E. 1116. Honor (Dunlevy, In re; Clement, In
938
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 378c
as to notice must be complied with is intci'i)retcd to mean rea-
sonable notice with reference to time, sufficiency, the complex
nature of the amendments, and the widely separated location of
the members.^" And resolutions passed by the board of directors
of a mutual insurance company suspendino- the policy of a member
does not affect a policy holder having no notice of their passage. ^^
But if power is expressly conferred npon the directors by the arti-
cles of incorporation notice need not be given each member of the
intention to exercise said power.^
§ 378c. Same subject: delegation of power. — Where no statutory
authority therefor exists the ixiwer to amend by-laws vested by
charter in the board of directors cannot be delegated to the mem-
bers.^ Nor can power be delegated by a supreme lodge to a subord-
inate order to adopt a by-law whereby the endowment rank is ex-
empted from liability for a member's death from specified causes
such by-law is not void, however, even though not adopted in con-
formity with prescribed rules of jirocedure where it is otherwise law-
fully enacted.^ And although the supreme lodge has power under
its fundamental law to enact all such reasonable laws as may Ije
deemed proper for the establishment and government of an endow-
ment rank and may also create a board of control or any other like
agency for the management of the business of that rank it cannot
re; Osterliout, In re; Tuska, In re) for stated meetings." This Art. (VI.)
206 Mass. 168, 92 N. E. 140. For relates to life or casualty insurance
citations of the several cases involved corporations upon the co-operative or
in this litigation see *^ 3801' herein. assessment plan. See § 3()5b herein.
As to estoppel Ivom laches and ac- ^^ .Martin v. Mutual Fire Ins. Co.
quiescence to assert waul of noiice, of ^iontgomery Co. 43 Md. 51.
see Kane v. Kniglits of Columbus, 84 ^ Farmers' Mutual Hail Assoc, of
Conn. 96, 79 All. 63, 40 Ins. L. J. Iowa v. SUittery, 115 Iowa, 410, 88
874, considered under ^ ."iSOf lierein. N. W. 949.
20 Robinson v. IMutnal Reserve Life ^ Farmers Loan & Trust Co. v.
Ins. Co. (U. S. C. C.) ir)9 Fed. .Kil, Aberle, 41 N. Y. Supp. 638, 18 .Misc.
N. Y. Ins. Law 1892, p. 2013, e. 690, 257, case modilied 46 N. Y. Supp. 10,
sec. 209; Parker's N. Y. Ins. L. (ed. 19 A. D. 79.
1915) p. 321, providing tliat "evory ^ t^^upi-gn^e Lodge Kniglds of Py-
such association, corporation or so- thias v. Kutsciier, 179 111. 340, 53 N.
eiety, other than secret fraternal so- E. 620, rev'g 72 111. App. 462. The
cielies now authorized to do business court said: *'We regard the question
in this state, must hereafter, before as settled that the supreme lodge
the adoption of any by-law or amend- could not delegate to a subordinate
ment thereto, cause the same to be body the power to enact laws of this
mailed to the members and directoi-s character and that said board of con-
of such association, society or cor- trol had no power to enact said law."
poration, together with a notice of Id. 343. See also Supreme Lodge
the time and place when the same Knight_s of Pythias v. .McLennan, 171
shall be considered, which notice shall 111. 41/, 49 N. E. 530, affg 69 III.
be the same as hereinbefore required App. 599.
939
§§ 378d, 378e
JOYCE ON INSURANCE
legall}' delegate its power to a board of control to pass a general law
affecting the entire endowment rank. "It could not abdicate its
liigli position and transfer its law-making power t.o such board or
other agency." * But it is decided that empowering the board of
directors to make effective and put in force by-laws or amendments
enacted by the association, delegates only the power to determine
when such laws shall go into effect, not the power to make them.*
It is declared in a North Dakota ca.'^e, relying upon the code, that :
"By-laws can only be repealed or amended in the manner provided
by statute, which in this state to a cori)oration like the appellant is
by \ote of the members, or by directors when this power to do so
lias been delegated to them by the same proportion of members as
may make amendments themselves.'" ^
§ 378d. Same subject: adoption of committee's report: validating
unauthorized by-law. — A revision and codification of the constitu-
tion and laws of a benefit society may be validly adopted and the
old laws repealed upon a report of a committee appointed and act^
ing in conformity with the requirements of the constitution of the
society.' And where a board of control, a body with no power to
enact certain by-laws, reports its action in passing such a law Avith
a copy thereof to the supreme lodge at its regular session, and that
body referred said report to one of its committees which reported
back favorably, approving the action of the board and recommend-
ing adoption of the report and it was adopted by the supreme lodge
and published as one of the laws of the order said unauthorized
by-law is validly adopted.®
§ 378e. Same subject: right to exercise powers outside state of
incorporation. — A benevolent society's supreme legislative depart-
ment, composed of delegates from head camps and when assembled
denominated the sovereign camp, has power at a meeting outside
the state of incor])oration, to adopt in the manner required by the
by-laws an amendment to the constitution, and such enactment is
a proper exercise of the corporate power to make ii*; own constitu-
tion and to exercise general legislative authority, although an ex-
ecutive council composed of the othcers of the sovereign camp may
exercise legislative authority under certain conditions and limita-
* Supreme Lodge Knights of Pv-
thias V. La Malta, 95 Tenn. (11 Pick.)
157, .31 S.W. 493, 30 L.R.A. 838.
* Evans v. Sontliern Tier i\Iasonic
Relief Assoc. 78 N. Y. Supp. 611, 76
App. Div. 151. See §§ 380 et seq.
herein.
^ J. P. Lamb & Co. v. Merchants
. National Mutual Fire Ins. Co. 18 N.
940
Dak. 253, 259, 119 N. W. 1048, 1050,
per Spalding, J.; Rev. Codes 1905,
sees. 4'.201, 4204. '
' Supremo Council American Le-
gion of Honor v, Adams, 68 N. H.
230. 44 Atl. 380.
* Supieme Lodge Knights of Py-
thias v. Kutscher, 179 111. 340, 53 N.
E. 620, rev'g 72 111. App. 462.
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379
tions and the power to liold such meetings ont.^ide the state of in-
corporation arises by iiii|)hcation where the corporation constitutes
said department to be established by it with power to orsianize sul>
ordinate bodies throu.uliout the United States and Canada.^ And
where, by autliority of the statute under which a fraternal l)onefi-
ciary association is incorporated, power is conferred to so amend or
alter its by-laws as to provide for holding the meetings of its legis-
lative body in any state or territory where it has subordinate lodges
its decision on this question is final, and a resolution of its govern-
ing bod}' to meet in another state, at a place other than that stated
in the by-laws authorizes such meetings and its proceedings regular-
ly had are not void.^°
§ 379. By-laws: statutory or charter power to repeal, change,
etc. — It is undoubtedly true that a right niay exist to repeal or
amend by-laws, where provision is made therefor in the charter,
act of incorporation, or fundamental law of the corporation or as-
sociation. Thus in the case of Stohr v. San Francisco Musical Fund
Society " the defendant was incorporated, and both the general laws
of the state and the by-laws of the society gave it the right to repeal,
alter, or amend its laws. After a menil)er's sickness a by-law was
passed limiting the allowance to which he was entitled to a certain
amount, unless otherwise ordered by the board of directors, and the
by-law was declared to be valid. So it is held in New York that
where the constitution provides that the by-laws may be amended,
the society may alter tliem. even after a member ha.s been taken
sick, and reduce the amount of his benefits. ^^ It is declared in an-
other case m the same state that the constitution and by-laws may
be changed, and the member becomes bound where the amendment
is made in accc^rdance with the constitution and laws, even without
notice to the member, in the absence of a provision therefor in the
constitution or l)y-la\vs.^3 Again, it is held that where, by statute,
insurance companies have the right to amend their charters, a per-
son who takes a policy from a company, the charter of which pro-
vides for the surrender of policies and compensation thereupon, can-
3 Sovereio-n Camp Woodmen of the Kuight.s & Ladies of Security, 69
World V. Fralev, 94 Tex. 200, 51 Kan. 2;i4, 76 Pac. 8.30.
L.R.A. 898, 59 S. W. 879, aWg -- ^^ 82 ( al. 557, 22 Pac 1125.
Tex. Civ. Api). — , 59 S. W. 905. ^^ Poultney v. Badnnan, 31 Hun
The court makes a distinction be- (N. Y.) 49, overrulinii- 62 How. Pr.
tween the rule as above stated and (N. Y.) 466. See §§ 380 et seq.
the rule conli'a with regard to ordi- herein.
nary corporations. Id. 205, per " McCabe v. Young Men's Father
Brown Assoc. J. JNlatthew Total Abstnieuce Ben. Soc.
10 Miller v. National Council 24 Hun (N. Y.) 149.
941
§ 379a.
JOYCE ON INSURANCE
not be heard to complain of a subsequent abrogation of this provi-
sion.^* And where there is an express provision in the constitution
of an association that the society may alter or change its by-laws,
and the manner of doing it is specifically pointed out, such amend-
ment may be made.^* It is also held that a total nonobservance of
a by-law operates as a repeal thereof.^^ And where, under the char-
ter of a mutual fire insurance association, the incorporators are au-
thorized to make such by-laws as they may deem advisable for the
management of their corporate affairs, such by-laws can have no
effect to modify contracts entered into between the corporation and
the assured." A\'here the charter restricts legislative power to
the supreme Lodge, a mere ministerial committee such as the Board
of Control of the Knights of Pythias, vested with administrative
functions in relation to the endowment rank, has no power to pass
a law providing a new condition which will avoid a benefit certifi-
cate in case of suicide. ^^
§ 379a. By-law^s, constitution, etc.: amendments, changes, or re-
peal under reserved power or agreement. — If a power is reserved to
amend, change or repeal the constitution or articles of association,
by-laws, rules and regulations, or there is a valid agreement between
the parties that the assured or members shall conform to, aV)i(lo by,
or in effect be bound by, such changes or repeal the}- may be made
and will be binding. Provided: (1) That they are within the
powers of the company, society, association or order to enact, liav-
ing also in view the limitations and restrictions imposed by statute,
the charter, constitution or articles of associations and by-laws: (2)
That they are validly enacted: (3) That all conditions precedent
to said enactment or adoption of such changes are complied with : ^*
^* Allen V. Life Assn. of America,
8 Mo. App. 52. See § 189 herein.
^^ Fugure v. Mutual Society of St.
Joseph, 46 Vt. 369. See, also, Poult-
ney v. Bachman, 31 Hun (N. Y.)
49, overruling 6'2 How. Pr. (N. Y.)
466, and 10 Abb. N. C. (N. Y.) 252.
^^ Attorney General v. Middleton,
2 Ves. Sr. 328.
" Stewart v. Lee Mutual Fire Ins.
Assoc. 64 Miss. 499, 1 So. 743.
^^ Supreme Lodge Knights of Py-
thias V. Stein, 75 Miss. 107, 37 L.R.A.
775, 65 Am. St. Rep. 589, 21 So. 559,
26 Ins. L. J. 557. See Supreme
Lodae Knishts of Pvthias v. Kut-
scher, 179 111. 340, 70 Am. St. Rep.
94
115, 53 N. E. 620, s. c. 72 111. App.
462.
As to adoption of by-law, § 2532.
As to suicide after contract made, see
§ 2647 herein.
^^ See §§ 377 et seq. herein.
Where a board of control of the
endowment rank Knights of Pythias
has no power to enact a certain by-
law, as.sured is not bound thereby
where he only agrees to be bound or
"controlled by all the laws, rules and
regulations of the order governing
said rank, now in force or that may
liereafter be enacted by the Supreme
Lodge" as such contract obligation
cannot be extended to include bj'-laws
MUTUAL COMPANIES— CHANGE OF BY-LAAVS, ETC. § 379a
(4) That the power is exercised in good faith and without fraud : ^^
(5) That Federal and State laws are not violated thereby:^ (6)
That they are not against public policy: ^ (7) That they are rea-
sonable:^ (8) That they are not arbitrary:* (9) That they are
necessary to effect, and are consistent with, the purposes of the com-
pany, society, association or order and for its general welfare : ®
(10) That they do not operate retroactively,^ or (11) impair the
obligation of contracts or impair or divest vested rights.''
In applying the above rule, however, it may be stated that each
case depends to some extent upon its own circumstances and how
far the right to amend, change or repeal has been expressly or im-
pliedly reserved or agreed upon.
Again, inasmuch as these reservations or agreements are made
either by statute, the charter or articles of association, constitution,
by-laws, application or certificate, or two or more of them together
as parts of or as constituting in this respect the original contract,
the rules which we have given elsewhere as governing what consti-
tutes a ]:)art of the contract and to what extent they apply should be
considered.* We will state here, however, that it is held that the
enacted by any law making body otli- pendent Order of Odd Fellows, 182
cr than said supreme lodge. Supreme
Lodge Knishts of Pythias v. INIc-
Lennan, 171 111. 417, 49 N. E. 5.30,
afifg. 69 111. App. 599.
A fraternal benefit certificate al-
though requiring compliance with
thereaftei' enacted laws by the board
of control of the endowment rank as
Mich. :^66, 148 N. W. 703. Consti-
tution and by-laws when not against
public policy are part of contract.
West V. Grand Lodge Ancient Order
United Workmen, 14 Tex. Civ. App.
471, 37 S. W. 966. See § 374 herein.
A change may he made in by-laws
or rules under a reserved power to
a condition })recedent to benelits does amend where such change accords
not authorize an amendment which with jiublic policy. Knights of Mac-
such board has no power to make, eabees of the World v. Nelson, 77
Supreme Lodge Knights of Pvthias Kan. 629, 95 Pac. 1052, 37 Ins. L. J.
V. I^utscher, 179 111. 340, 53 N. E.
620, rev'g 72 111. App. 462.
^^ See Clarkson v. Sui)reme Lodare
Knights of Pvthias, 99 S. Car. 134,
82 S. E. 1043.
^ Amendment must not violate laws
of state. Frateinal Union of Amer-
ica V. Zeigler, 145 Ala. 287, 39 So.
751; Eaton v. Liternational Travel-
ers' Assoc. — Tex. Civ. App. • — , 136
986.
3 See §§ 379k-379n herein.
* Clarkson v. Supreme Lodge
Knights of Pvthias, 99 S. Car. 134,
82 S. E. 1043.
It is not arbitrary to change a
system of rates which would better
promote the ability of the order or
association to fulfil its contract obli-
a'ations. Kane v. Knights of Colum-
S. W. 817. Must not be contrary to bus, 84 Conn. 96, 79 Atl. 63, 40 Ins.
law. Kane v. Knights of Columbus, L. .1. 874.
84 Conn. 96, 79 Atl. 63, 40 Ins. L. J.
874. See § 375 herein.
^Chicago, Burlington & Quincv Ry.
Co. v. Hendricks, 125 HI. App.' 580;
De Graw v. Supreme Court Inde-
943
^ See § 379k herein.
^ See i^§ 379o et seq. hei'ein.
"^ See §§ 380 et seq. herein.
* See §§ 188 et seq. herein.
§ 379b JOYCE ON INSURANCE
power of a fraternal benefit society granted in its charter to alter
and repeal its constitution, by-laws, rules and regulations, enters
into and forms part of its contracts with its membei-s when the lat-
ter agrees to abide not only by the existing constitution and laws
but also by amendments thereto. In other words, that the terms
of the contract between a fraternal benefit society and its members
are determined by the constitution and laws of the society as they
exist at the beginning of the membershij) and as they may be law-
fully amended from time to time, and the agreemen-is made there-
under between the incoming members and the society.^ So a re-
served charter power to change or repeal the constitution, by-laws,
rules and regulations coupled with an agreement of the applicant
for membership to conform to and abide l»y the same as they then
exist or as they may be thereafter changed or amended, is also de-
cided to constitute the contract between the society and its mem-
bers.^"
§ 379b. Same subject: decisions holding amendments, etc., bind-
ing. — Under the folloAving decisions the rule stated under the pre-
ceding section has been fully sustained, whether the reservation or
agreement was made by statute, the charter or articles of association,
constitution, by-laws, application or certificate, or two or more of
them together. In a Federal case where the stipulation was that the
contract should be governed by all the laws, rules and regulations of
the order governing the rank ''now in force or that may hereafter
be enacted.'' and there was also a condition requiring "full com-
pliance with all the laws governing this rank now in force or that
liereafter may be enacted,'' it was declared that the right so reserved
was well recognized as authorizing the association to subject mem-
Ijers to further requirements and conditions of future liability l)y
reasonable enactments within the ol)jects and for the general wel-
fare of the association, and to ap])ly the regulations to prior i'on-
trncts. but to the extent only that the conditions thus imposed arise
after the enactment, and the insurer could not repudiate obligations
already vested under the contract and that a by-law could not im-
pose a new condition or exempt froai liability, nor be made retro-
active to impair or destroy oi exempt from liability for a pre-exist-
ing cause which arose under the contract.^^ In Alabama a provi-
sion in the certificate that assured shall comply Avith all its terms
9 Kane v. Knisjlits of Columbus, 84 " Llovd v. Supreme Lodge
Conn. 96, 79 Atl. 63, 40 Ins. L. J. Knights of Pytliias, 98 Fed. 66, 38
874. C. C. A. 654, 29 Ins. L. J. 744.
^^ Hines v. IModern Woodmen of
America, 41 Okla. 135, L.R.A.1915A,
264, 137 Pac. 675.
944
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379b
and those of the constitution and that the policy will be liable to
forfeiture where existing- and future adopted by-laws and rules are
not complied with is a 1>inding contract embracing future amend-
ments of laws or rules. ^^ In California a member and his ])cnefi-
ciaries are bound where he agrees in his certificate to aliide by and
conform to the by-laws then in force or sul^sequently adopted. ^^ In
Colorado if articles of association of a b'^neficiary society raserve a
right to modify, amend or adopt a new. constitution etc., a change
in the fundamental law binds." In Connecticut where an amend-
ment to the charter of a fraternal beneficial order empowered it to
alter and repeal its constitution, by-laws, rules, and regulations,
and this was re-enacted in later amendments and there was also an
agreement in the apjjlication to conform to and abide by the con-
stitution and rules of the council which were then in force or might
thereafter be ado])tcd by the proper authoi'ity, and it was further
recited in the certificate that it was i.^sued upon condition of com-
pliance with present or future laws, it was decided that such re-
served power of amendment authorized the order to change its laws
and such changes became a part of the contract of in.surance, since
the contract was determined by the constitution and laws of the
corporation as amended from time to time and the agreements
made thereunder between the parties. ^^ It is likcwi.<e decided in
that state that where a member agrees to sul)ject himself to the
constitution and laws of the order the terms of his contract are de-
termined not only by those existing when he became a member,
but also by amendments made from time to time.^^ And under
another decision in the same state where there is an agreement on
becoming a member to be bound V)y l)y-laws in force or to be enact-
ed, a sub.sequently validly adopted by-law binds. ^' In Illinois a
benefit society may amend its by-laws imder a reserved jiower so to
do, and if the applicant expressly agreed at the time the certificate
was issued that rvdes subsequently adopted should be applicable,
such reservation or agreement is Ijinding upon both member and
beneficiary.^* fSo a member of an as.-ociation who agrees to abide
12 Fraternal Union of America v. 84 Conn. 96, 79 Atl. 63, 40 Ins. L. J.
Zeigler, 14.5 Ala. 287, .31) So, 751. 874.
1^ Caldwell V. Grand Lodo-e of ^^ Coshliii v. Knitjlits of Colnnibu.s,
United Workmen, 148 Cal. 195, 113 79 Conn. 218. 04 Atl. 22.?. 3(i In.-^. L.
Am. St. Rep. 219, 2 L.R.A.(N.S.) .J. 44.
653n, 82 Pac. 781, 7 Am. & Eng. ^^ Masonic Mutual Benefit Assoc.
Annot. Cas. 3.5G. v. Sover.-<on, 71 Conn. 719, 43 Atl.
1* Head Camp Pacific .Jurisdiction, 192.
Woodmen of the World v. Woods, :?4 ^^ Murpliv v. Nowak. 223 111. .101,
Colo. 1, 81 Pac. 2(51. 7 L.R.A.(N.S.) 393n, 79 N. E. 112.
1^ Kane v. Kniohts of Columbus.
Joyce Ins. Vol. 1.— 60. 945
§ 379d
JOYCE ON INSURANCE
by and be governed by subsequently adopted by-laws is bound by
them unless they are unreasonable.^^ So an amendment may be
enacted where the certificate is accepted subject to all subsequently
adopted laws and rules.^" So an acceptance of a certificate by a
member constitutes a sufficient reservation of a right to amend by-
laws where the certificate contains an express provision giving the
association such power.^ And acceptance of a certificate obligating
a member a.s to rules which might be subsequently enacted govern-
ing the council and funds of a fraternal association constitutes a
reserved power to amend the laws of such society.^ And a require-
ment in a certificate of a fraternal order that right to benefits is con-
ditioned upon compliance with existing and future enacted laws ob-
ligates the member and his beneficiary.^ So, a reserved power in
the by-laAvs and an agreement in the policy to be bound by subse-
quently enacted by-laws, is binding.* So, also, where right to
change by-laws is expressly reserved under the certificate or con-
tract "the insurer may make such change and an agreement that
such changes may be made is valid.^ And in other cases in that
state a contract to be bound by after-enacted by-laws or new laws
is binding upon members and beneficiaries.^ In Indiana if the
constitution clearly and expressly reserves the right to amend, a
member is bound to take notice thereof.' And a member is bound
by laws thereafter ado])ted when he so agrees in his certificate.^ In
loiva it is settled law that a contract is valid and binding whereby
the insured agrees to be bound by the constitution and by-laws and
by those w^hich may thereafter be enacted, and that members are
bound to take notice of by-laws whether adopted prior or subse-
quent to the contract.^ And a reservation in the certificate of a
" Scow V. Supreme Council of the Maccabee.s of the World v. Stens-
Roval League, 223 111. 32, 79 N. E. land. 10r> 111. App. 267; Grand Lodge
40; ° Ancient Order of U. W. 139 111. App.
20Pold V. North American Union, 4.
261 111. 433, 104 N. E. 4, aff'g 180 ' Supreme Lodge Knights of Pyth-
111 App 488 ias v. Knight, 117 Ind. 489, 3 L.R.A.
i Covenant Mutual Life Assoc, v. 409, 20 N. E. 479, 483.
Tuttle, 87 111. App. 309. ^ Supreme Lodge Knights of Hon-
2 Supreme Council of Roval Area- or v. Bieler, 58 Ind. App. 550, 105
num V. McKnight, 238 111. 349, 87 N. N. E. 244.
E. 299. ^ Norton v. Catholic Order of For-
3 Supreme Lodge Knights of Pvth- esters, 138 Iowa 464, 24 L.R.A.
ias V. Kutscher,l79 111. App. 340, (N.S.) 1030n, 114 N. W. 893. Agree-
53 N. E. 620, rev'g 72 111. App. 462. ment in certificate was that it was
* Smith v. ^Mutual Reserve Fund issued upon condition that the mem-
Life Assoc. 140 111. App. 409. ber complied in future "with the
5 Covenant Mutual Life Assoc, v. laws, rules and regulations, now gov-
Tuttle, 87 111. App. 309. erning said order, or tliat may here-
6 Supreme Tent of Knights of after be enacted by said high court."
946
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379b
right to aiuciid is valid and binding.^" And in tlmt state if insured
agrees to be bound by and subject to the ^jrovisions of all duly en-
acted laws as they are or hereafter may be changed or amended, he
is bound by amendments made subsequent to his contract." In
Kamas provisions in the application and certificates obligating the
member to conform to and be governed by by-laws thereafter on-
acted are binding upon assured and his beneliciary.^^ And suljse-
quent enactments are binding under an agreement made in the cer-
tificate and bj^-laws.^^ Tn Louisiana subsequciilly enacted by-laws
are held valid and binding,^* In a Mamackuiietts case where the
contract found in the application, certificate, the statute constituting
the charter and the constitution and laws of the order, provided for
future changes or amendments it was held that the members would
be bound by amendments regularly made even if there were no ex-
press stipulation, in regard to the by-laws, in the application or in
the certificate, but that full authority to amend the laws, rules and
regulations also existed under an express agreement, made when
joining the society to conform to and abide by bj^-laws thereafter
adopted and also under the certificate which made com])liance with
the laws, rules and regulations "now go^■erning the sui)reme council
and fund, or that may hereafter be enacted by the supreme council
to govern said council and fund" a condition precedent to payment
under said certificate.-^^ In Michigan a member when joining may
validly agree that changes may be made in the constitution and laws
in order to enable it to carry out its contracts especially when aufhor-
^^ House V. Modern Woodmen of
America, 165 Iowa, 007, 146 N. W.
817.
" Elliott V. Home Mutual Hail As-
soc. 160 Iowa 105, 140 N. W. 431.
Citing Jordan v. Iowa IMutual Tor-
nado Ins. Co. 151 Iowa, I'.i, Ann. Cas.
1913A, 266, 130 N. W. 177; Fort v.
Iowa Lesion of Honor, 146 Iowa
183, 123 N. W. 224; Sieverts v. Na-
lional Benevolent Assoc. 95 Iowa,
710, 64 N. W. 671; Hobbs v. Iowa
Mutual Benelit Assoc. 82 Iowa, 107,
11 L.R.A. 299, 31 Am. St. Rep. 466,
47 N. W. 983. The court in the prin-
cipal case (160 Iowa, 105) per Ladd,
J., said : "The authorities, however,
are quite as conclusive thai where tlie
assured agrees to be bound by amend-
ments to the by-laws or articles sub-
sequently adopted, he must take no-
tice thereof, and is as efl'ectuallv
bound thereby as by those existing
at the time of the issuance of the cer-
tificate or policy of insurance." Cit-
ing Norton v. Catholic Oi'der of For-
esters, 138 Iowa, 464, 24 L.R..V.
(N.S.) 1030, 114 N. W. 803; Ross v.
]\Iodern Brolherhood of America, 120
Iowa, 692, 95 N. W. 207.
^2 Knights of IMaccabee.s of the
World V. Nelson, 77 Kan. 629, 95
Pac. 1052, 37 Ins. L. J. 986.
^^ Miller v. National Couiicil
Kniuhts & Ladies of Security, 69
Kan. 234, 76 Pac. 830.
^^Dousrhertv v. Knichts of Pv-
thias, 48"l^i. Ann. 1203, 20 So. 712.
^* Reynolds v. Supreme Conn<il
Royal Arcanum, 192 INIass. 150, 7
L.R.A.(N.S.) 1154n, 7 Am. & Eng.
Ann. Cas. 776, 78 N. E. 129, 35 Ins.
L. J. 673.
947
at
9b
JOYCE ON INSURANCE
ized by statutory amendment of the charter.^^ And an agreement
is valid which binds the parlies to a mutual benefit c-ertificate, to by-
laws to be adopted in the future.^'' In Minnesota the rights of mem-
bers in beuelit insurance associations depend upon the articles of as-
sociation and by-laws which have been adopted; and, generally
speaking, the body authorized to make by-laws may change, amend,
or repeal those already in existence, subject, however, to the restric-
tions and limitations of the charter or articles of association, and
of the l)y-laws themselves, and also subject to the implied condition
that such change, amendment, or repeal must be reasonable.^^ In
Nebraska an agi-eement by a member of a fraternal benefit associa-
tion to be bound by subsequently enacted by-laws will be upheld
when such by-laws are reasonable in their nature and legally
enacted.^^ And an agreement in the application to be bound by l)y-
laws now in force or hereafter adopted is binding as to sulisequent-
ly enacted by-laws.^° In Neiu Hampshire an agreement in the ap-
plication and in the certificate issued on condition that the member
conform to the by-laws, rules and usages in force or thereafter en-
acted is binding as to suljsequent amendments changing rules.'
Under a Xcir Yorl- decision although the statute of organization of
a fraternal beneficiary association, the constitution and the certifi-
cates authorize amendments as to the l)enefit fund the association
may not enact amendments reducing the amount of said fund, or
increasing assessments.^ So changes in by-laws though made after
the issuance of a certificate are lield binding as a part of the con-
tract where the member of an jissessment association has agreed in
his application to be bound by by-laws thereafter enacted.^ In
Oregon mutual benefit societies have the right to alter, amend or
rei)eal their laws, or to enact others consistent with the purpose for
which they are organized.* In Pennsiilvania a by-law may bo
changed under a reserved power in the certificate stipulating that
15 De Giaw v. Supreme Court In- gion of Honor v. Adams, 68 N. H.
dependent Order of Odd Fellows, 182 236, 44 Atl. 380.
Midi. 366, 148 N. W. 703. ^ Green v. Supreme Council of
I'Wiiieland v. Kuiahts of Macca- Royal Arcanum, 206 N. Y. 591, 100
bees of the World, 148 i\Iich. 608, 14 N. E. 411, rev'- 129 N. Y. Supp. 791,
Det. Leo-. N. 345, 112. X. W. 096. 144 App. Div. 761. But compare §i?
18 Thibert v. Supreme Lodge K. of 380c et seq. herein, where this point
H. 78 Minn. 448, 79 Am. St. Rep. is fully considered.
412, 47 L.R.A. 136, 81 N. W. 220. ^ ji^-g^g ^ Southern Tier :\Lasonic
i^Lani^e v. Royal Highlanders, 75 Relief As.soc. 78 X. Y. Supp. 61, 76
Neb. 188, 10 L.li.A.(N.S.) 066, 100 App. Div. 151.
N. W. 224. * Wist V. Grand Lodge Ancient
20 Farmers Mutual Ins. Co. v. Kin- Order of United Workmen, 22 Ore.
ney, 64 Neb. 808, 90 N. W. 926. 271, 29 Am. St. Rep. 603, 29 Pac.
1 Supreme Council American Le- 610. Agreement in application to
i 948
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379c
members shall comply with the laws of the order then in force or
thereafter t« l)e enacted.^ And a member is bound where the con-
stitution and by-laws authorize making changes in the law of or-
ganization of a beneficial association.^ So an application may rea-
sonably provide that the certificate issued is accepted subject to laws
in force or which may "hereafter be adopted." ' In Tennessee an
agreement to conform to laws in force or which may "hereafter"
be enacted binds the member by a validly enacted by-law where
such agxeement is contained in his a[)plication and the issuance of
his certificate is conditioned thereon.* In Texas it is held that laws,
rules, and regulations for the government of mutual benefit socie-
ties ai-e equally obligatory upon members whether such laws eic,
exist when a person becomes a member or are thereafter enacted,
provided they are not arbitrary or unreasonable and are lawfully
enacted in pursuance of such society's inherent power.^ And if
a member agrees that by-laws and regulations may thereafter be
enacted he is bound. ^° In Wisconsin a stipulation in the certificate
binding the member to future enacted by-laws is valid where the
change relates only to matters of necessary detail and does not nul-
lify the contract as it existed.^^ Under an English decision rules of
a friendly society may be altered without the consent of one who
was a member at the time Avhen the rules provided for changes and
although said altered rules deprive him in ca.«e of a breach thereof,
of a benefit to which ho was cnlitlod he is bound thorcby-^^
§ 379c. Same subject: decisions holding amendments, etc., not
binding. — If there is no rescrvalion in the articles, by-laws or certifi-
cate«, an amendment with certain conditions precedent affecting as-
sured's rights is held not to apply." So under a Mississippi decision
a provision in the certificate that any failure to comply strictly with
the laws and regulations of the association as prescribed by tho
grand lodge will forfeit membership, is not an express reservation
comply with laws, regulations and Mystic Circle v. Erieson, — Tex. Civ.
requiroments thereafter enacted. App. — , 131 S. W. 02.
* Chamhers v. Supreme Tent ^^ West v. Grand Lodge Ancient
Kniolits ol' Maccabees or' llie Wodd, Order United Workmen, 14 Tex. Civ.
200 >a. 244, 8G Am. St. Rep. 716, 49 App. 471, 37 S. W. 966. ^
j^ll 784 ^^ Curtis v. ^lodern WoodmoM of
e'staik V. Byers, 24 Pa. Co. Ct. America, 159 Wis. 303, 150 N. W.
Rep. 517. " ^1'-
'Nickum v. Grand Lodge Ancient ^^ c;,iiit]i y Galloway (1898) 1 Q.
Order United Workmen, 37 Pa. Co. B. 71, 7< Law T. Rep. 469, 67 L. J.
Ct. Rep. 104. Q. B. N. S. 15.
* Supreme Lodse Kniijhts of Pyth- ^^ McNeil v. Southern Tier :\lasonie
ias V. La Malta, 9.') Tenn. (11 Pick.) Relief Assoc. 58 N. Y. Supp. 119, 40
157, 30 L.R.A. 838, 31 S. W. 493. App. Div. 581, a case of conditions
3 Supreme Ruling of Fraternal precedent to reinstatement.
[ 949
§ 379d
JOYCE OX INSURANCE
that a member shall lie ])Ound by all the regulations in force or
thereafter to be enacted. The court per Whitfield, C, declared : ''It
is further to be said that the overwhelming weight of authority is
to the efl^ect that in tho.<e provisions which purport to bind the in-
sured, if there is no express provision that he shall be bound by laws
to be enacted in the future, then such laws so enacted in the future
do not bind the insured." ^* So where a by-law was endorsed upon
the back of a policy providing that it should have tire same force and
effect as if it appeared on the face thereof, and said by-law^ emjiow-
ered the board of directors to change by-laws at any time and there
are subsequent changes therein by the board, assured's rights are not
controlled thereby, but only the by-laws appearing on his policy
govern, when assured has not agreed that by-laws so changed should
become a part of the contract.^^ Nor can the contract of insurance
be changed at will under a constitutional provision of the society
that persons becoming members shall be subject to said society's
power to change by-laws. ^^
§ 379d. Same subject: prohibiting extra-hazardous occupation. —
Under a reserved power so to do a fraternal benefit society may
amend a list of prohibited occupations and enlarge the same so as
to include as extra-hazardous the occupation of switchman.^''' And
a reserved right in the certificate to amend authorizes an amend-
ment specifying the occupation of lineman as extra-hazardous.
And recovery is precluded where such occupation is engaged in by
a member after the enactment of said amendment and his death
results from an accident while so employed. ^^ Again, although cer-
tain risks are classified as hazardous at the time the certificate was
issued still a subsequent by-law may reasonably classify one of said
risks as extra-hazardous, where assured has agreed to be bound by
the constitution and bv-laws then in force or thereafter enacted. ^^
^* Masonic Benefit Assoc, v. Hop-
kins, 99 Miss. 112, 56 So. 169, 40 Ins.
L. J. 1671. Citing to tlie above quo-
tation, Hobbs v. Iowa Mutual Bene-
fit Assoc. 82 Iowa, 107, 31 Am. St.
Rep. 466, 11 L.R.A. 299, 47 N. W.
983; Miller v. Tattle (Kan.) 73 Pac.
88; Startling- v. Supreme Council
Roval Templars of Temperance, 108
Mich. 440, 62 Am. St. Rep. 709, 66
N. W. 340; Morrison v. Wisconsin
Odd Fellows Mutual Life Ins. Co. 59
Wis. 162, 18 N. W. 13, 29 Cyc. 77;
1 Coolev's Briefs on In.s. 709.
Knights & Ladies of Honor, 128 N.
Car. 354, 54 L.R.A. 602, 38 S. E. 905-
^"^ Gilmore v. Knights of Colum-
bus, 77 Conn. 58, 107 Am. St. Rep.
17, 1 Am. & Eng. Ann. Cas. 715, 58
Atl. 223.
As to clauses prohibiting change of
occupation, see § 2236 herein.
^^ House v. Modern Woodmen of
America, 165 Iowa, 607, 146 N. W.
817.
^^ Norton v. Catholic Order of For-
esters, 138 Iowa, 464, 24 L.R.A.
(N.S.) 1030 (annotated on validity
15 Annan v. Hill Union Brewery of retrospective by-law or other rule
Co. 59 N. J, Eq. 414, 46 Atl. 563. of benefit association excluding eer-
V. Supreme Lodge tain class of members from benefits
950
1^ Bragaw
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379e
But even though insured has agreed in his application to abide Ijy
the con.^titution, by-laws, rules and regulations of the society and
the latter prior thereto had adopted a by-law or regulation making a
certain occupation, in which assured thereafter engaged, extra-haz-
ardous, a suit on the certificate will not be defeated where it does
not ai)pear that said member had actual knowledge of such a by-
law or that anything was ever done at the time, or after, the certifi-
cate was obtained by which he could be constructively charged with
knowledge that the occupation in which he was engaged was extra-
hazardous and it also appeared that a list of occupations deemed ex-
tra-hazardous or prima facie hazardous, printed on the back of his
application, signed by him and referred to in said application did
not mention the occupation in question. Assured's agreement in
his application must be deemed to have been made with reference
to the information given him in such case.^"
§ 379e. Same subject: prohibiting engaging in liquor or saloon
business. — Where the agreement in the application to a fraternal
society requires compliance with future enacted laws, regulations,
etc., as a condition precedent, and the certificate is expressed to be
issued on condition that the member shall comply with all the laws
rules, etc.. while a memljer, he is bound by a subsequently enacted
by-law forfeiting benefits for engaging in the retail liquor business.^
And under the same agreement in the application and certificate as
that last above stated a member was held bound by a subsequently
enact! .1 general law providing that any meml)er who should after
a specified date enter into the business of selling by retail intoxicat-
ing liquors as a beverage should be expelled from the order, and
also })roviding in such case for suspension from any and all rights
to i)articipate in the beneficiary fund and that his beneficiary cer-
tificate should become null and void from and aft«r the date of his
so engaging in said occupation with a further provision that said
or rfdncino- benefit of that class), 114 ^ Grand Lodge Ancient Order U.
N. W. 8!):! W. v. Burns, 84 Conn. 356, 80 Atl.
20Gienty v. Kniohts of Columbus, 157, 40 Ins. L. J. ItiTli. Citing Gil-
]9!) N. y. 103, 92 N. E. Ill, rev'si- more v. Knights of Columbus, 77
(mem.) 110 N. " Y. Supp. 1129, Conn. 58, 61, 107 Am. St. Rep. 17, 1
(mem.) 126 App. Div. 934, which Am. & Eng. Ann. Cas. 715, 58 Atl.
aff'd 105 N. Y. Supp. 244, 55 Misc. 223; Pain v. Societe St. John Bap-
98. In this same case upon a second tiste, 172 Mass. 319, 70 Am. St. Rep.
trial of the action judgment was en- 287, 52 N. E. 502; State (ex rel.
tered upon the verdict of the jury for Schrempp) v. Grand Lodge Ancient
the plaintiff and this was aflirmed in Order United Worknuin, vO IMo.
131 N. Y. Supp. 792, 146 App. Div. App. 456. Citing and considering,
497, aff'd (mem.) 205 N. Y. 577, Coughlin v. Knights of Columbus, 79
98 N. E. 1103. Conn. 218, 220, 64 Atl. 22.^
951
§ 379e . JOYCE OX INSURANCE
law should be self-executing,^ So the acceptance of a certificate with
a requirement that the member comply with thereafter adopted by-
laws in order to prevent forfeiture, binds him by a subsequently
adopted by-law prohiljiting engaging in the liquor business after
becoming a member and providing a forfeiture of membership
therefor.^ And a by-law enacted after a person becomes a member
of a fraternal society, prohibiting members not so engaged from
engaging in the saloon business is obligatory under an express pro-
vision of the membership contract that members shall comply with
laws, regulations, etc., thereafter enacted.* Again, a resolution of
the masonic order which denies membership to saloon keepers ap-
plies to existing members who continue thereafter in said business.^
And a member whose existing contract is expressly subject to ''such
by-laws and rules as are or may be adopted by the supreme lodge
or local lodge of which he is a member,'' is obligated by an amend-
ment of the constitution of the order providing that any memlx-r
who should thereafter enter upon the manufacture or sale of malt,
spirituous or vinous liquors, to be used as a beverage, in the capacity
of proprietor, stockholder, agent or employee should ip.so facto for-
feit all his rights as a member either social or beneficial and his
certificate should thereby become absolutely null and void. The
constitution before amendment prohibited such occupation.^
But in New York payment of a certificate of life insurance issued
2 State (ex rel. Strang) v. Cam- 172 ]\rass. 319, 72 Am. St. Rep. 287,
den Lodge, Ancient Order United 52 N. E. 502. Compare Brown v.
Workmen, 73 N. J. L. 500, 64 Atl. Great Camp of Knights of Modern
93, 35 Ins. L. J. 858. Citmg and Maccabees, 167 Mich. 123, 132 N. W.
considering, Gilmore v. Knights of 562.
Columbus, 77 Conn. 58, 107 Am. St. ^ Loeffler v. Modern Woodmen of
Rep. 17, 1 Am. & Eng. Ann. Cas. America, 100 Wis. 79, 73 N. W.
715, 58 Atl. 223; Moerschbaecher v. 1012.
Supreme Council Royal League, 188 * State (ex rel. Schrempp) v.
111. 9, 52 L.R.A. 281, 59 X! E. 17; Grand Lodge Ancient Order U. W.
State (ex rel. Schremp) v. Grand 70 Mo. App. 456.
Lodge Ancient Order United Work- ^ Ellerbe v. Faust, 119 Mo. 653, 25
men, 70 Mo. App. 456; Langnecker L.R.A. 149, 25 S. W. 390. See also
V. Trustees of Grand Lodge Ancient MaeDowell v. Aekley, 93 Pa. 277; St.
Order United Workmen, 111 Wis. Patrick's ^lale Benevolent Soc. v.
279, 55 L.R.A. 185, 87 Am. St. Rep. McVey, 92 Pa. 510.
860, 87 N. W. 293 ; Loeffler v. ]\Iod- 6 Supreme Lodge of Fraternal
ern Woodmen of America, 100 Wis. Union of America v. Light, 195 Fed.
79, 73 N. W. 1012. Citing Fullin- 903, 115 C. C. A. 591. Considered
wider v. Supreme Council Royal and explained in Smythe v. Supreme
League, 180 111. 621, 72 Am. St. Rep. Lodge Knights of Pythias (U. S. D.
239, 54 N. E-. 485; Messer v. Grand C.) 198 Fed. 967, 981, which case is
Lodge Ancient Order United Work- aff'd in Smyth v. Supreme Lodge
men^ 180 Mass. 321, 62 N. E. 252; Knights of Pythias, 220 Fed. 438.
Pain v. Societe St. John Baptiste. 137 C. C. A. 32.
952
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379f
by a "mutual benefit fraternity," or society, upon which dues had
been paid by the assured and accepted by the society to the time of
his death, cannot be avoided upon the ground that the assured, at
the time of his death, was, and for a few months prior thereto had
been, engaged in the hotel business, in violation of a by-law adopt-
ed by the society, without notice to the assured, many years after
his certificate was issued, prohibiting any certificate holder of the
society from selling liquors at retail, and declaring the certificate
of any one engaging in such business void for a violation thereof,
nor the by-laws under which the certificate was issued, contained
any restriction as to the business in wliich the assured might en-
gage.' Ho it is decided in Kansas that the adoption, by a fraternal
insurance order, of a by-law declaring that no person shall be ad-
mitted or retained as a member who is engaged in the sale of intox-
icating liquors, does not, in the absence of a specific provision to
that effect, avoid the beneficiary certificate of a member who is al-
ready engaged in that business in a state where it is not unlawful,
who continues therein, and against whom no action is taken. And
a by-law of a fraternal insurance order, which provides that any
member who shall, after the date of its adoption* have entered, or
who sliall thereafter enter, into the business of selling intoxicating
liquors, shall stand suspended from his rights to participate in the
beneficial fund, and that his certificate shall become void from the
date of his engaging in such occupation, does not, in terms, apply
to a member who, before the adoption of such by-law, was engaged
in such business, and who has remained in it continuously there-
after.^ And under an Illinois decision a member who was engaged
in the liquor business before the enactment of a by-law prohibiting
such o(cui»atIon and providing for forfeiture for non-compliance,
is not thereby precluded from thereafter re-engaging in the same
business after being forced to temporarily abandon it.^
§ 379f. Same subject: prohibiting use of intoxicating liquors or
drugs. — A reserved ))ower in the original contract to amend, author-
izes an amendment relieving the society from liability in case of
■^ Ayres v. Order of United Work- Lods^e Ancient Order United Work-
men, " 188 N. Y. 280, 281, 80 N. E. men. 72 N. Y. Siipp. 7_55, 66 App.
220, aff'g 109 App. Uiv. 919. Div. 32;?, alfd (mem.) 1/2 N. Y. 665,
8 Grand Lodge 'Ancient Order of 65 N. E. 1116 ; Langnecker v. Trus-
United Workmen v. Haddock, 72 tees of Grand Lodo-e Ancient Order
Kan. 35, 1 L.K.A.(N.S.) 1064, 82 United Workmen, 111 Wis. 2/9, 5.1
Pae. 583. Citing and considering L.R.A. 185, 87 Am. St. Rep. 860, 87
Steinert v. United Brotlierliood of N. W. 293.
Carpenters & Joiners of America, 91 ^ (hand Lodge Ancient Order Unit-
Minn. 189. 97 N. W. 668; Ellerbe v. ed Workmen v. Oetzel, 139 111. App.
Faust, 119 Mo. 653, 25 L.R.A. 149, 4.
25 S. W. 390; Deuble v. Grand
953
379g JOYCE ON INSURANCE
'o
death resulting from the use of intoxicating liquors and is applic-
able to pre-existing members.^" If the intemperate use of intoxicat-
ing liquors forfeits the certificate under existing by-laws a subse-
quently enacted by-law may provide for forfeiture in case of death
from said cause applying the same to existing members as well a,?
to future ones where the certificate also provides for the enactment
thereafter of amendments to by-laws." But a by-law of fraternal
insurance society, which provides that, if any member heretofore
or hereafter adopted shall become intemperate in the use of drugs,
the benefit certificate held by such member shall, by such acts, be-
come and be al)sohitcly void as to benefits, and all payments made
thereon shall be thereby forfeited, does not apply to the case of a
member who, prior to the enactment of such by-law, had become
intemperate in the use of drugs, and continued so thereafter. ^^
§ 379g. Same subject: accidental injuries: total disability. —
"Where it appeared that the member of a mutual ]»cnelit society, or-
ganized to provide for social enjoyments and also pecuniary bene-
fits in case of injury or death from accidental means, had read the
constitution which provided for a faithful observance of laws, rules,
etc., in force or thcJse ''added^to this constitution, by-law, and rules,"
and in taking the obligation of membership necessary to admit-
tance, the member agreed in writing to ''abide by" the constitution
''as it now is or may be hereafter amended," it was determined that
"to observe" and "to abide by" meant "to obey" and "to accept the
consequences of" and did not relate merely to disciplinary and
social regiilations, concerning which no ]iower of amendment was
needed, and therefore amendments defining more clearly what ac-
cidents were and were not within the benefits of the common fund
bound the member.^'
But a member of a benefit association who receives an injury is
entitled to recover under a by-law then in force where such injury
is fairly within the intendment of its provisions, although the by-
laws were thereafter amended before the injury became permanent
or the cause of action complete. The amendment, however, de-
10 xjrv V. Modern Woodmen of ern Woodmen of America v. Tavlor,
America, 149 Iowa, 706, 127 N. W. 67 Kan. ;568, 71 Pae. 806, rev'd be-
66.3. cause of want of certain alleo-ations
As to excepted risks and losses: and proof, upon second trial peremp-
use of intoxicants, see §§ 2612 et seq. tory instructions were uiven to find
herein. for defendant and plaintiff brous'lit
^^ Curtis V. Modern Woodmen of }:roceedino's in error (.5 L.R.A.(N.8.)
America, 159 Wis. 303, 150 N. W. 283, 72 Kan. 443).
417. ^3 Order of Commercial Traveleis
^2 Tavlor v. Modern Woodmen of of America v. Smith, 192 Fed. 102,
America, 72 Kan. 443, 5 L.R.A. 112 C. C. A. 442, 41 Ins. L. J. 770?
(N.S.) 283, 83 Pac. 1099, s. c. Mod-
954
MUTUAL C0MPANIP:S— CHANGE OF BY-LAWS, ETC. § 3791i
fined or made clearer the meaning of the former by-law.^* And a
contract providing foi- Ijenelit.s in cane of total disability cannot be
changed by a by-law thereafter adopted, even though the a^^sured
has agTeed under the terms of his certificate to observe the rules,
etc., of the society.^* So the liability of an accident a.ssociation to-
wards its members is held to be fixed by its constitution and by-laws
as they exist at the time of issuance of the certificate of membership,
and not by those in force at the death of the member, when such
constitution does not authorize amendments thereof nor of the l)y-
laws, binding- the member to any change in the contract without his
consent.^^ Again, if a mutual benefit society issues to a member a
certificate of insurance, it cannot, by the subsequent adoption of :i
by-law, modify or change the contract without the consent of the
member. Therefore, if when a certificate is issued, it defines what
shall be deemed a total disability, and declares the member to be
entitled to a sum specified on the suff"ering by him of such disabili-
ty, the society cannot, without his consent, afterward reduce tlie
classes of total disability. ^'^
§ 379h. Same subject: deficiency or reserve assessments: delin-
quent assessments. — A deficiency or reserve assessment with a crea-
tion of a lien on policies is authorized under a reserved power in
the by-laws and certificate.^' And under an agreement, made when
joining an order to conform to changes thereafter made in the con-
stitution and laws thereof, a member may be assessed under an
amended law to make up a deficiency in funds of the order, where
rates have been inadequate, when also so authorized by a statutory
amendment of the charter of organization.^' So, where the by-laws
provide that amendments subsequently enacted shall be binding
upon the member he is obligated by an amendment relieving the
association from liability while said member is delinquent in assess-
ments.^" Again, neither the obligation of a member's contract nor
a beneficiary's vested right-s are impaired by a repeal of a by-law
1* Maynard v. Locomotive Engi- ^"^ Starfing- v. Supreme Connoil
neers' Mutual Life & Accident Ins. Royal Templars of Temperance, 108
AS.SOC. 16 Utah, 145, 47 Am. St. Rep. Mich. 440, 62 Am. St. Rep. 709, 66
602, 5 Pac. 2.19, 27 Ins. L. .1. 208, s. N. W. 340.
c. 14 Utah, 458, 47 Pac. 1030, 26 Ins. ^^ yn^itii v. :MuLuaI Reserve Fund
L. J. 579. Life Assoc. 140 111. App. 409.
^5 Starling v. Supreme Council ^' Do Graw v. Supreme Court In-
Royal Templars of Temperance, 108 dependent (Jrder Odd Fellows, 182
Mich. 440, 62 Am. St. Rep. 709, 2 Mich. 366, 148 N. W. 703.
Det. Leg. N. 893, 66 N. W. 340. ^o KHiott v. Home ^Mutual Hail As-
^6 Carnes v. Iowa State Traveling soc. of Cherokee, 160 Iowa, 105, 140
Men's Assoc. 106 Iowa, 281, 68 Am. N. W. 431.
St. Rep. 286, 76 N. W. 283, 28 Ins.
h, J. 345.
955
§§ 379i-379k JOYCE ON INSURANCE
and an amendment enacted under a reserved right in the certificate
providing for self-executing forfeitures for nonpayment of assess-
ments on a specified day.^ But even though the articles of associa-
tion expressly confer upon the directors tlie power to enact by-laws
and the member has agreed to be governed by said articles and by-
laws lie is not bound by changes in the latter providing for suspen-
sion of members delinquent in meeting assessmentSj where the by-
laws when he became a member, were silent as to any such condi-
tion.^
§ 379i. Same subject: time limitation for suing. — An agreement
in the application to conform to thereafter enacted laws and rules
is held binding upon a member under an amended by-law provid-
ing a time limitation for suing.^
§ 379j. Same subject: as to remedies within association. — It is
held that where the certificate provided for compliance with condi-
tions in the constitution and laws thereafter enacted a change there-
in concerning the presentation of claims against the association to
tribunals of tlie society is binding upon a beneficiary even though
no such condition existed when insured became a member.'* It is
also held error to charge the jury, in an action for sick benefits,
that only the constitution and laws in force when the certificate was
issued bound the plaintiff', where there was a defense of non-com-
pliance with the required procedure as to remedies within the so-
ciety, and there was also an express agreement to comply with
changes which might thereafter be adopted in the constitution,
laws, etc.^
§ 379k, Amendments, changes, or repeal must be reasonable even
under reserved power or agreement.^'^ — It is well settled as one of
the essentials that an amendment change in or repeal of the consti-
tution or articles of association, by-laws, rules and regulations, must
be reasonable to be binding, even though the power to make the
^ Brown v. Knights of the Protect- ation a.s to manner of establishing
ed Ark, 43 Colo. ^Si), fl() Pac. 450. claim), 121 N. W. 823. Compare
2 Farmers' Mutual Hail Assoc, v. Monger v. New Era Assoc. 171 Mich.
Slattery, 115 Iowa, 410, 88 N. W. 614, 137 N. W. 631, 41 Ins. L. J.
940. 1788.
3 Arold V. Supreme Conclave Im- As to exhausting remedies within
proved Order of Heptasoph.^, 123 association and by-laws excluding re-
Md. G75, 91 Atl. 679. sort to civil courts. See §§ 352-3o2c,
As to limitation clauses affecting 372-372b herein,
actions, see §§ 3181 et seq. herein. ^ Union Fraternal League of Bos-
* Monger v. New Era Assoc. 156 ton v. Johnston, 124 Ga. 902, 53 S.
Mich. 645, 24 L.R.A.(N.S.) 1027 (an- W. 241.
notated on validity of retrospective ^a gee §§ 368, 369, 377-380 herein,
by-law or other rule of benefit associ- ,
956
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379k
f^ame is reserved or is agreed to in the contract of the assured or
member with a imilual company, society, association or order.^
And although the power to aher a by-law is reserved, that power
cannot be exercised to enact unreasonable by-laws, even though the
by-law is substantially an enactment of another on the same su]>
ject.''' So, a sul)sequent amendment must be reasonable and not
one which radically departs from the fundamental plan and scheme
of insurance and this applies even though the certificate makes the
contract subject to the by-laws of the association and amendments
thereafter to be made.* And a power reserved in general terms in
the charter and by-laws does not authorize a material alteration of
the contract, but only such amendments as are reasonable, in
furtherance of the contract,^ and consistent with the purpose for
which the society was organized.^" So amendments to the consti-
^ United States. — Llovd v. Supreme
Lodo-e Knights of Pythias, 98 Fed.
66, 38 C. C. A. 654, 29 Ins. L. J.
744.
Connecticut. — Kane v. Knit>bts of
Columbus, 84 Conn. 96, 79 Atl. 63,
40 Ins. L. J. 874.
Illinois. — Scow v. Supreme Coun-
cil of the Roval League, 223 111. 32,
79 N. E. 42; Smith v. ]\hitual Re-
serve Fund Life Assoc. 140 111. App.
409; Supreme Tent Knights of Mac-
cabees V. Hammers, 81 111. App. 560.
Indiana. — Supreme Lodge Knights
of Honor v. Bieler, 58 Ind. App. 550,
105 N. E. 244.
Iowa. — Ury v. Modern Woodmen
of America, 149 Iowa, 706, 127 N.
W. 665.
Kansas. — Knights of Maccabees of
the World v. Nelson, 77 Kan. 629, 95
Pac. 1052, 37 Ins. L. J. 986.
Mar I/land. — Arold v. Supreme
Conclave Improved Order of Ilep-
tasophs, 123 Md. 675, 91 Atl. 829.
Mimiesota. — Rosenstein v. Court
of Honor, 122 Minn. 310, 142 N. W.
331; Olson v. Court of Honor, 100
Minn. 117, 8 L.R.A.(N.S.) 521, 117
Am. St. Rep. 676, 10 Am. & Eng.
Ann. Cas. 622, 110 N. W^ 374; Thi-
bert v. Supreme Lodge Knights of
Honor, 78 Minn. 448, 47 L.R.A. 136,
79 Am. St. Rep. 412, 81 N. W. 220.
Missouri. — Claudy v. Royal League,
250 Mo. 92, 168 S." W. 593; Lewine
95
v. Supreme Lodge Knights of Pyth-
ias of the World, 122 Mo. App.
821; Smitli v. Supreme Lodge
Knights of Pythias, 83 Mo. App. 512.
Nebraska. — Lange v. Royal Iligli-
landers, 75 Neb. l88, 121 Am. St.
Rep. 786, 10 L.R.A.(N.S.) 666, 110
N. W. 1110; Farmers Mutual Ins.
Co. V. Kinney, 64 Neb. 808, 90 N. W^
926.
A^ew Ham psJiire.— Supreme Coun-
cil American Legion of Honor v.
Adams, 68 N. H. 236, 44 Atl. 380.
New Jersey. — O'Neill v. Supreme
Council American Legion of Honor,
70 N. J. L. 410, 57 Atl. 463.
Texas. — Eaton v. Internatiotml
Travelers' Assoc. — Tex. Civ. App.
— , 136 S. W. 817; Supreme Ruling
of Fraternal Mystic Circle v. Va-'w-
son, — Tex. Civ. App. — , 131 S. W.
92.
On reasonableness of new by-laws
as imj)lied condition of con.sent lo
change of by-laws, see note in 8
L.R.A.(N.S.)'521.
' Kent v. Quicksilver Mining Co.
78 N. Y. 159.
' Smith V. Supreme Lodge Knights
of Pythias, 83 Mo. App. 512.
^ Parks V. Supreme Circle, Broth-
erhood of America, 83 N. J. Eq. l.'U,
89 Atl. 1042.
I" Claudv V. Royal League, 250 Mo.
92, 168 S. W. 593.
§ 379k JOYCE ON IXStRANCE
tution and by-laws must be reasonable and within the scope of the
original purpose.^^ And a reserved power in the certificate where-
by the member agrees to comply with all the laws, rules and regula-
tions thereafter enacted only authorizes reasonable changes in the
manner and mode as to details of carrying on the scheme of insur-
ance, and a right to modify any essential feature of the contract is
not authorized by such reservation.^^ But amendments within the
scope of the original design, and one in which the members gen-
erally are alike interested will be upheld. ^^ Again, when the ex-
ercise of judgment and discretion is vested, either by law or con-
tract, in an individual or governing body, a reservation is implied
that it must be exercised in good faith and reasonably. In de-
termining whether it has been so exercised the court will not sub-
stitute its judgment for that of the individual or body in whom the
discretion has been vested. In such a case, the inquiry is: Does
the action under consideration fail to mea.sure up to any fair test
of reason? If the facts or circumstances are such that reasonable
men may dift'er as to the wisdom and expediency thereof, the judg-
ment and discretion of those vested with authority to decide must
be upheld. It follows that a very clear cause of abuse of discretion
must be made out to warrant judicial interference.^*
Changes or amendments in existing by-laws may be unrea.son-
al)le and invalid as to those who were members prior to the adop-
tion tliereof and who have not consented thereto, although they
may be reasonable and valid as to those who became members after
the enactment of said laws and who will be deemed to have assented
thereto by becoming members.^^
It is held, however, in a New York case, that in purely voluntary
associations the constitution and by-laws constitute the contract and
if their provisions are not illegal, immoral or contrary to public
policy they will be upheld, whether reasonable or not as parties
have the right to enter into unreasonable and unwise contracts, so
long a5 thev are not illegal and are fairlv made; and therefore the
court has nothing to do with the reasonableness or unreasonable-
ness of an amendment to a by-law. ^^ But this deci-sion is cited in
^^ Strauss v. Mutual Reserve Fund ^^ Clarkson v. Supreme Lodge
Life Assoc. 126 N. Car. 971, 54 Knights of Pvthias, 99 S. Car. 134,
L.R.A. C05, 36 S. E. 352, 128 N. Car. 82 S. E. 1043, per Hydriek, J.
465, 39 S. E. 55. ^^ Thibort v. Supreme Lodge
12 Stirn V. Supreme Lodge of Bo- Kniglits of Pythias, 78 Minn. 448, 47
hemian Slavonian Benevolent Soc. L.R.A. 136, 81 N. W. 220. See tliis
150 Wis. 13, 136 N. W. 164, 41 Ins. case under § 379n herein. The above
L. J. 1130. statement is also in accord with the
13 Matliieu v. Mathieu, 112 Md. ca.se-s throughout this chapter.
625, 77 Atl. 112, .39 Ins. L. J. 1413. ^^ Maxwell v. Theatrical Mechan-
958
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 3791
another case in that state and the court declares and so decides that
with res)3ect to reasonableness or unreasonableness of a by-law there
is no difference between the rules respecting incorporated or un-
incorporated societies." And the rights and obligations of a mem-
ber of a produce exchange, organized for strictl}" commercial pur-
poses, do not rest upon his contract alone but upon his contract as
interpreted by the charter and by laws under which it was made
and the corporation may in such case alter the by-laws by any rea-
sonable amendment, that is one which does not impair vested
rights.^*
If the facts are undisputed the question whether a by-law, rule,
or regulation is reasonable is one of law for the court. ^^
§ 3791. Reasonable amendments, etc., binding. — AVe will also
state here that, subject to the rules hereinbefore given,^° a legally
enacted, amended by-law which is reasonable will be upheld,^ and
a, member of a fraternal beneficiary association who so agrees is
bound by subsequent by-laws when they are reasonable.^ So, where
the applicant agrees to conform to and comply with the laws, rules
and usages thereafter to be enacted by the society, he is bound where
they are reasonable and within the laws of the society.^ A member
will also be held to have assented to amendments which are rea.son-
able and which are within the associations power to make where
such power is reserved, fairly advising one applying for member-
ship of the terms of his intended contract.'* So, an agreement made
while a member of a fraternal benefit order to comply with all the
laws, rules and requirements thereof obligates him to comply with
all reasonable rules and regulations thereafter enacted in the as-
sociation's interest and this applies to a new law increasing his rate
of monthly assessments.^ It is also determined that if there is re-
served in the contract a power of amendment of the laws governing
ical Assoc. 104 N. Y. Supp. 815, 54 ^ Theorell v. > Supreme Court of
Misc. 619. See §§ 368 et seq. herein. Honor, 115 111. App. 313. See also
^'Stanton v. Eccentric Association Supreme Lodijc of Fraternal Union
of Firemen, etc. 114 N. Y. Supp. 480, of America, 195 Fed. 903, 115 C. C.
130 App. Div. 129. A. 591.
^* Paiisli V. New York Produce Ex- ^ Sujireme Council American Le-
chano-e, 169 N. Y. 34, 56 L.R.A. 149, gion of Honor v. Adams, 68 N. H.
61 N. E. 977, aff'o- 69 N. Y. Supp. 236, 44 All. 380.
764, 60 A))p. Div. IL * Green v. Supreme Council of
^^ Clarkson v. Supreme Lodge, Roval Arcanum, 129 N. Y. Supp.
Kniffhts of Pvtliias, 99 S. Car. 134, 791, 144 App. Div. 761.
82 S. E. 104.]. ^ Miller v. National Council
^° See § 379a herein. Knights & Ladies of Security, 69
^ I^ange v. Royal Hiuldanders, 75 Kan. 234, 76 Pac. 830. Compare §§
Neb. 188, 10 L.R.A. (N.S.) 666, 121 380c et .seq. herein.
Am. St. Rep. 786, 106 N. W. 224.
959
§ 379m
JOYCE ON INSURANCE
such associations, reasonably designating the subjects thereof, so
that a person when he makes application for membership is fairly
advised that the terms of the contract in which he is about to enter
may be altered in the respects thus referred to, sul>sequent changes
in such laws when reasonably made by the proper authorities of the
organization are within their power and must be deemed assented to
by hiin.^ Again, a stipulation of the application to conform to
and ixh'ide by the constitution, by-laws and regulations of the as-
sociation thereafter adopted by the proper authorities, constitutes
an assent in advance to all reasonable changes properly made there-
in and an amendment which is intended to effect a modification of
the benefit plan or policy of the association, that is within the scope
of the original design, and one in which the members generally are
alike interested, will be upheld.'
As to mutual benefit societies with social and indemnity pur-
poses, if consent to amendment is exacted, it should be attributed to
the matter in respect to which consent is necessary and not to those
concerning which no reservation of power to amend is needed.^
A member of a produce exchange will be l)ound l)y reasonal)le
amendments to the laws where the charter amendment and by-
laws enacted pursuant thereto as well as the contract among the
mcinl)ers must be looked to in determining the member's rights,
and where, by the contract, the assessments to which he is liable
and the payments to his beneficiaries are to be determined by the
by-laws.^
§ 379m. When amendments, etc., are reasonable. — An agreement
or reservation that the certificate is accepted subject to such laws,
rules, and regulations as now exist or may hereafter be adopted is
reasonable.^" An amendment or change is held rea,sonable: which
provides as to classification of members ; ^^ which alters a system of
rates so as to better promote the ability of the order or association
to carry out its contracts ; ^^ which provides for an increase of as-
sessments under an agreement in the certificate or contract to com-
6 Green v. Supreme Council of ^ Parish v. New York Produce Ex-
Roval Arcanum, 143 N. Y. Supp. change, 169 N. Y. 34, 56 L.R.A. 149,
1119, 158 App. Div. 945, 40 In.s. L. 61 N. E. 977.
J. 414a. Citing Beach v. Supreme ^° Nickum v. Grand Lodge Ancient
Tent Knights of Maccabees of the Order Cnited Workmen, 37 Pa. Co.
Worhl, 177 N. Y. 100, 69 N. E. 281. Ct. Rep. 104.
^ Mathieu v. Mathieu, 112 Md. 625, " French v. Now York IMercantile
77 Atl. 112, 39 Ins. L. J. 1413. Exchange, 80 N. Y. Supp. 312, 80
* Order of United Commercial App. Div. 131.
Travelers of America v. Smith, 192 As to power to classify members:
Fed. 102, 112 C. C. A. 442, 41 Ins. discrimination, see S 350b herein.
L J 779 ^^ Kane v. Knights of Columbus,
960
MUTUAL COMPANIES— CHAXGE OF BY-LAWS, ETC. § 379nl
ply willi subsequent enactments; ^^ which reratcs existing members
as well as those becoming members thereafter, where a mutual bene-
fit s(;cicty under its constitution is empowered to rerate members
taken over by it from another society where such members arc
permitted to retain their certificates, or their rates were lower than
those of said receiving association : ^^ which provides against lia-
bility while a member is in default of the payments of a valid as-
sessment;^® which defines an injury, to indemnify which the cer-
tificate was issued ; ^^ which enlarges the list of prohibited occupa-
tions and includes that of switchman as extrahazardous ; ^' which
classifies as extrahazardous an occupation which had been cla.«sed
only as a hazardous risk at the time the certificate was issued, and
as such was not then prohibited; ^^ which tends to enhance the dig-
nity and influence of a fraternal order as well as diminish the risk
of mortality, as where it provides for forfeiture of benefits for en-
gaging, while a member thereof, in the retail liquor business;^*
which makes null and void member's certificates where they en-
gage in prohibited occupations; where the by-laws exclude persons
engaged in the sale of intoxicating liquors from becoming mem-
bers and power was vested in a committee to suspend permanently
84 Conn. 9G, 79 Atl. 63, 40 Ins. L. J.
874.
As to amendments or changes in-
creasin<? assessments or reducing ben-
efits, see >^S 'iSOc et seq. herein.
^^ Supreme Lodge Knigtits of Hon-
or V. Bieler, 58 Ind. App. 550, 105
N. E. 244.
On the riglit of mutual insurance
companv to increase rates, .see notes
in 7 L."R.A.(N.S.) 1154, 31 L.R.A.
(N.S.) 417.
^* Supreme Ruling of Fraternal
Mystic Circle v. Ericson, — Tex. Civ.
App. — , 131 S. W. 92 (case where
member was held to have consented
to change of plan from as.sessment
to one of periodical payments).
^* Farmers Mutual Ins. Co. v. Kin-
ney, 64 Neb. 808, 90 N. W. 926.
■^^ Ros.s V. Modern Brotlierhood of
America, 120 Iowa, 692", 95 N. W.
207.
^■^ Gilmore v. Knights of Columbus,
77 Conn. 58, 107 Am. St. Rep. 17. 58
Atl. 223, 1 Am. & Eng. Annot. Cas.
715. See House v. INlodern \Yood-
men of America, 165 Iowa, 607, 146
N. W. 817. See S 379d herein.
^^ Norton v. Catholic Order of For-
esters, 138 Iowa, 464, 24 L.R.A.
(N.S.) 1030 (annotated on validity
of retrospective by-law or other rule
of benefit association excluding cer-
tain class of members from benctits or
reducing benehts of that class), 114
N. W. 893.
^^Orand Lodge Ancient Order
United Workmen v. Burns, 84 Conn.
356, 80 Atl. 157, 40 Ins. L. J. 1676.
Citinr/ State (ex rel. Strang) v. Cam-
den Lodge Ancient Order U. W. 73
^^ .1. L.'500, 64 Atl. 93; Ellerbe v.
Faust, 119 Mo. 653; 25 L.R.A. 149,
25 S. W. 390; State (ex rel.
Schrempp) v. Grand Lodge A. 0. U.
W. 70 Mo. Ap|i. 456; Langnecker v.
(hand Lodge A. O. U. W. Ill Wis.
279, 55 L.R.A. 185, 87 Am. St. Rep.
860, 87 N. W. 293; LoelHer v. Mod-
ern Woodmen of America, 100 Wis.
79, 75 N. W. 1012; Schmidt v. Su-
preme Tent (it Knights of Maccabees
of the World, 97 Wis. 528, 73 N. W.
•)•)
Joyce Ins. Vol. L— Gl.
961
§ 379m
JOYCE ON INSURANCE
members engaged in prohibited occupations; ^^ and an amendment
to the constitution which prohibits members from thereafter enter-
ing upon the manufacture or sale of intoxicating liquors in the ca-
pacity of stockholder, proprietor, agent or employee binds a member
whose certificate was issued prior thereto ; ^ which limits the amount
up to which sick benefits may be received, and increases the amount
of death benefits at the same time ; ^ which limits the amount of
benefits in case of suicide ; ^ which limits, or more definitely fixes,
the time of expiration of the policy or termination of the risk ; *
and which provides that the beneficiary's not the member's admin-
2° Brown v. Great Camp of Mod-
ern Maccabees, 167 Mich. 123, 132
N. W. 562.
^ Supreme Lodge of Fraternal
Union of America v. Light, 195 Fed.
903, 115 C. C. A. 591. The court per
Adams, Civ. J., said : "We think the
true rule is this : That a member of a
fraternal beneficial organization who
accepts membership, subject to such
by-laws and rules as the Supreme
Lodge may thereafter adopt, is
bound by any reasonable legislation
thereafter adopted. The following
authorities sustain this proi^osition :
Hall V. Western Travelers Accident
Assoc. 69 Neb. 601, 96 I^. W. 170;
Head Camp Pacific Jurisdiction
Woodmen of the World v. Woods, 34
Colo. 1, 81 Pac. 261 ; Court of Hon-
or V. Hutchens, 43 Ind. App. 321, 82
N. E. 89; Union Benevolent Soc. v.
Martin, 113 Ky. 25, 67 S. W. 38;
Daughtry v. Knisrhts of Pvthias, 48
La. Ann. 1203, 55 Am. St. Rep. 310,
20 So. 712 ; Pain v. Societe St. Jean
Baptiste, 172 Mass. 319, 70 Am. St.
Rep. 287, 52 N. E. 502; Domes v.
Supreme Lodge Kniglits of Pvthias
of the World, 75 Miss. 466, 23 So.
191; Supreme Council, American Le-
gion of Honor v. Adams, 68 N. H.
236, 44 Atl. 380: Tisch v. Protected
Home Circle, 72 Ohio St. 233, 74 N.
E. 188; Chambers v. Supreme Tent
Kniohts of ]\Iaccabees, 200 Pa. 244,
86 Am. St. Rep. 716, 49 Atl. 784;
Eversberg v. Supreme Tent of Mac-
cabees, 33 Tex. Civ. App. 549, 77 S.
W. 246; Fuaure v. Mutual Societv
96
of St. Joseph, 46 Vt. 362; Loeffler v.
Modern Woodmen of America, 100
Wis. 79, 75 N. W. 1012; Supreme
Lodge Knights of Pythias v. La ]\Iat-
ta, 95 Tenn. 157, 30 L.R.A. 838, 31
S. W. 493; Louisa Moersehbaecher v.
Royal League, 188 111. 9, 52 L.R.A,
281, 59 N. E. 17 ; Supreme Command-
ery of the Knights of the Golden
Rule V. Ainsworth, 71 Ala. 436, 46
Am. Rep. 332; O'Neill v. Supreme
Council, 70 N. J. Law 410, 420, 57
Atl. 463, 1 Ann. Cas. 422."
2 Berg V. Baden.ser Understuetz.-
ungs Verein von Rochester, 86 N. Y.
Supp. 429, 90 App. Div. 474 (change
in constitution).
^ Scow V. Supreme Council of Rov-
al League, 223 111. 32, 79 N. E. 42;
Streeper v.- Mutual Protective League,
186 III. App. 535. See also Knights
of Maccabees of the World v. Nel-
son, 77 Kan. 629, 95 Pac. 1052, 37
Ins. L. J. 986, holding that a by-law
limiting the amount recoverable m
case of suicide is binding when an
amendment is enacted under a re-
served power to amend or change by-
laws or rules. Compare cases under
§ 379n herein.
On subsequent by-law excluding or
reducing liabilitv in case of suicide,
see notes in 46 L.R.A.(N.S.) 308, and
L.R.A.1915D, 1095.
As to ado'ption of by-law against
suicide after contract made, see §
2647 herein.
* Flakne v. Minnesota Farmers'
Mutual Ins. Co. 105 Minn. 479, 117
N. W. 785.
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379n
istrator is entitled to the proceeds of the certificate where the bene-
ficiary dies before tlie member.^ And a new by-law is also reason-
able which excludes from the lodge meetings those who do not
comply therewith, and it binds existing, as well as future, members
where such new law creates a compulsory insurance department
with certain fixed periodical payments applicable to all. with cer-
tain exceptions based on age and disability, and the mode or man-
ner of adopting the same is that prescribed by existing by-laws.^
§ 379n. When amendments, etc., are unreasonable. — If a member
of a beneficial association is entitled under existing by-laws to a writ-
ten or printed notice, at a specified time of a^^ssessments or levies
due, as a prerequisite to suspension and consequent loss of rights
in the benefit fund for nonpayment of such assessment", a subse-
quent change of such by-laws providing that notice shall be at the
option of each subordinate lodge, and that no failure on the part of
the lodge to give notice, or failure to receive it shall relieve mem-
bers from the penalty of absolute and unqualified suspension if as-
sessments are not paid, is, as to such member, unreasonable and
void a.s he is thereby virtually deprived of all right to any notice,
either directly or indirectly, and the giving of notice is rendered
wholly immaterial, especially so where said member is not shown
to have had any knowledge of such change, although a newspa}ier
notice of assessments was mailed to him.' An amendment or
change is also held unreasonable: which increases assessments and
dues in violation of pre-existing rights ; * which is contrary to and
renders nugatory the provisions of a statute as to presumption of
death from absence: ^ which provides for forfeiture of the certificate
of membership for engaging in an occupation in which, prior to
said amendment, members had a right to engage, and no notice
5 O'Brien v. Supreme Council MLsc 558, 1151, 119 App. Div. 014,
CatlioHf Benevolent Lecion, 80 N. Y. s. c. 196 N. Y. 391, 89 N. E. 1078, 39
Sup p. 776, Si App. Div. 1, aff'd Ins. L. J. 95.
(mem.) 176 N. Y. 597, 68 N. E. 1120. As to amendments or chancres in-
^ Ward V. David & Jonathan creasing- assessment and dues or re-
Lodge, No. 1,976 Grand United Ord- ducing^ benefits, see §§ 380c, 380d
er of Odd Fellows, 90 Miss. 116, 43 lierein.
So. 302. ^ Samberg v. Knights of ]\Iodern
''^ Thibert v. Supreme Lodge ^laccabees, 158 i\Iich. 568, 133 Am.
Knights of Pvthias, 78 Minn. 448, 47 St. Rep. 396, 16 Det. Leg-. W. 6/7,
L.R.A. 136, 79 Am. St. Rep. 412, 81 123 N. W. 25, 39 Ins. L. J. 34. The
N. W. 220. amendment was adopted fifteen years
As to notice of a.ssessments and after insured became a member, four
dues, see §§ 1320 et sen. herein. years after his disappearance, and
As to assessments and suspension three years before the beneficiary
of member, see §§ 1260 et seq. herein, cea.sed to pay assessments.
' Wright V. Knights of IMaccabees On validity of by-law of mutual
of the World, 95 N. Y. Supp. 996, 48 benefit society refusing to pay indem-
963
§ 379o
JOYCE ON INSURANCE
of said change was provided for, or had by the member ; ^° when it
impairs the ol)li,2;ati()n of contract or divests vested rights: ^^ which
diverts the fund of an association, organized for strictly coromer-
cial objects, from the purj)oses specified in the cliarter;^^ which
voids a designation of a beneficiary made before marriage of a mem-
ber, but authorizes a re-designation thereafter.^^ Again, an amend-
ment of the by-laws of- a mutual fraternal benefit society, limiting
the hencfit in case of suicide to a certain per cent of the face of the
certificate for each year the meml)er has been continuously a mem-
ber of the society, is unreasonaljle and void as to existing members,
although the riglit to change its by-laws is reserved by the society. ^^
So, a change in by-laws may be unreasonable as to a member where
he is afflicted with a disease of such a character as to preclude its ap-
plication to him.^^
§ 379o, Amendments or changes must not operate retroactively:
reserved right or agreement to amend or change: vested rights. —
The rule, outside of any constitutional governing provisions, that
a statute will be construed to have a prospective operation only and
not to operate retrospectively unless the legislative intent that it
shall be retroactive is so clearly expressed that no other meaning
can be given to the language used,^^ has been expressly applied in
nity upon presumption of death from of Honor, 79 N. Y. Supp. 68-4, 78
seven vears' absence, see note in App. Div. 746. Compare cases under
L.R.A.i915B, 7i)3. § 379n herein.
1° Tebo v. Supreme Council of As to adoption of by-laws against
Royal Arcanum, 89 Minn. 3, 93 N. suicide after contract made, see §
W. 513. 2647 herein.
^^ Hines v. Modern Woodmen of As to suicide amendment and vest-
America, 41 Okla. 135, 137 Pae. 675 ; ed rights, see § 2647 herein.
Kane v. Knights of Columbus, 84 15 Grossraaver v. District No. 1
Conn. 96, 79 Atl. 63, 40 tn.^. L. J. Independent " Order B'nar B'rith, 70
874. See §§ 380 et seq. herein. n. Y. Supp. 393, 34 Misc. 577, aff'd
12 Parish V. New York Produce 74 n. Y. Suppl. 1057, 70 App. Div.
Exchange^^ 169 K Y. 34^ 5^6 L.R.A. gQ^ ^ffVl (mem.) 174 N. Y. 550, 67
149, 61 N. E. 977, aff'g 69 N. Y
Supp. 764, 60 App. Div. 11.
i3M3ti l^^f^^' 112 Md. cal. 62i;65"Am. D;r54
020, . i Atl. 112, 39 Ins. L. J 1413 ^oZorar/o.-Edelstein v.
On retrospective by-law or benent
association in relation to beneficiaries,
see note in L.R.A.1915A, 264
v
^^ Colifornia. — ^Grimes v. Norris, 6
Carlile, 33
Colo. 54, 78 Pac. 680.
Connecticut. — Lane's Appeal, 57
1* Olson v. Court of Honor, 100 Conn. 182, 4 L.R.A. 4o, 14 Am. St.
Minn. 117, 8 L.R.A. (N.S.) 521, 117 Kep. 94, 17 Atl. 926; Goshen v.
Am. St. Rep. 676, 10 Am. & Eng. Stonington, 4 Conn. 209, K) Am. Dec.
Ann. Cas. 622, 110 N. W. 374. See 121.
Smith v. Supreme Lodge Knights of District of Columbia. — Brown v.
Pythias, 83 Mo. App. 512; Bottjer Grand Fountain United Order of
V. Supreme Council, American I<egion True Reformers, 28 App. D. C. 200;
964
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379o
construing by-laws of fraternal beneficiary associations in actions
Oliio National Bank v. Berlin, 26
App. D. C. 218.
Illinois. — Conway v. Cable, 37 111.
82, 87 Am. Dec. 240; Bruce v.
Schuyler, 4 Gilm. (111.) 221, 46 Am.
Dec. 447; Brennan v. Electrical In-
stallation Co. 120 111. App. 4C1.
Indiana. — Lewis v. Brackenridge, 1
Blacki'. (hid.) 220, 12 Am. Dee.^228.
Keniuckif. — Hes.s' AdmiiiLstrator,
(]\Ioi'5'an) V. Sefjenfelter, 127 Ky.
348, 14 L.R.A.(N.S.) 1172, 105 S. W.
476, 32 Kv. L. Rep. 22.5; Lawrence
V. Louisville, 96 Ky. 59.5, 27 L.R.A.
560, 49 Am. St. Rep. 309, 29 S. W.
450.
Maine. — Carr v. Judkins, 102 Me.
506, 67 Atl. 569.
Oregon. — Seton v. Hovt, 34 Ore.
266, 43 L.R.A 634, 75 Am. St. Rep.
641, 55 Pac. 967.
Pemisylvaiiiu. — Martin v. Green-
wood, 27 Pa, Super. Ct. 245.
Tennessee. — Slover v. Union Bank,
115 Tenn. 347, 1 L.R.A. (N.S.) 528,
89 S. W. 399; Dugger v. Mechanics
& Trader.s Ins. Co. 95 Tenn. 245, 28
L.R.A. 796, 32 S. W. 5.
Vermont. — Richardson v. Cook, 37
Vt. 599, 88 Am. Dec. 622.
West Virginia. — Stewart v. Van-
dervort, 34 W. Va. 524, 12 L.R.A.
50, 12 S. E. 736; Murdock v. Frank-
lin Ins. Co. 33 W. Va. 407, 7 L.R.A.
572, 10 S. F. 777.
United Stales. — Compare McDou-
Stock Co. 132
570, 67 L.R.A.
Maryland. — Williams v. Johnson, gal v. New York Life Ins. Co. 146
Fed. 674, 77 C. C. A. 100; I^mb v.
Powder River Live
Fed. 634, 65 C. C. A.
558.
Colorado.- — British American As-
sur. Co. V. Coloiado Southern Rail-
road Co. 52 Colo. 589, 41 L.R.A.
(N.S.) 1202. 125 Pac. 508.
Georgia. — Washington v. Atlantic
Coast Line R. R. Co. 136 Ga. 638, 38
L.R.A. (N.S.) 8tH, 71 S. E. 1066.
Illinois. — Aultman & Taylor Ma-
chinery Co. V. Fish, 120 ill. App.
314.
Indiana. — Connecticut Mutual Life
Co. V. Talbot, 113 Ind. 373, 3
St. Rep. 655, 14 N. E. 586.
Maine. — Leavitt v. Canadian Pa-
cific R. R. Co. 90 Me. 153, 38 L.R.A.
152, 37 Atl. 886.
Marijland. — Bauglier v. Nelson, 9
Gill. (Md.) 299, 52 Am. Dec. 694.
OJiio. — Commis-sitnicrs of Hamilton
County V. Rnsche, 50 Ohio St. 103,
19 L.R.A. 584, 40 Am. St. Rep. 653,
30 Md. 500, 96 Am. Dec. 61d.
Massachusetts. — City of Haverhill
V. City of Marlborough, 187 Mass.
150, 72 N. E. 743; Murphy v. Com-
monwealth, 172 Mass. 264, 43 L.R.A.
154, 52 N. E. 505.
Minnesota. — Stein v. Hanson, 99
Minn. 387, 109 N. W. 821.
Mississippi. — Givens v. Southern
Railroad Co. 94 Miss. 830, 22 L.R.A.
(N.S.) 971, 49 So. 180.
New Hampshire. — Leavitt v. Love-
rin, 64 N. H. 607, 1 L.R.A. 58, 15
Atl. 414.
New Jersey. — Coghlan v. Supreme
Conclave Improved Order Hepta- Ins.
sophs, 86 N. J. Law 41, 91 Atl. 132. Am
New York. — Rhodes v. Sperry &
Hutchinson Co. 193 N. Y. 223^ 34
L.R.A. (N.S.) 1143, 127 Am. St. Rep.
945, 85 K E. 1097; Liiidlaw v. Sage,
158 N. Y. 73, 44 L.R.A. 216, 52 N.
E. 679; People v. O'Brien, 111 N.
Y. 1, 2 L.R.A. 2.55, 7 Am. St. Rep.
684, 18 N. E. 692.
North Carolina. — Lowe v
112 N. Car. 472, 22 L.R.A. 379, 17
S, E. 539.
North Dakota. — Adams & Freose
Co. v. Kenoyer, 17 N. Dak. 302, 16
L.R.A. (N.S.) 681, 116 N. W. 98;
Blakemore v. Cooper, 15 N. Dak. 5, 4
L.R.A.(N.S) 1074, 106 N. W. 56,
Harris, 3.3 N. E. 408.
Tennessee. — Shields v. Clifton Ho-
tel Land Co. 94 Tenn. 123, 26 L.R.A.
509, 45 Am. St. Rep. 700, 28 S. W.
668.
Virginia. — Smith v. Northern Neck
Mutual Fire Assoc. 112 Va. 192, 38
L.R.A.(N.S.) 1016n, 70 S. E. 482.
965
§ 379o JOYCE ON INSURANCE
in the civil courts in which they have been involved.^' Tlie same
line of reasoning is also followed in an Oregon case and it is there
decided that a new law will not be construed as retroactive in opera-
tion, unless l)y its terms it is clearlv intended to be so, on the con-
trary it will be interpreted as operating only on causes or facts
which come into existence after its enactment. ^^ It is likewise de-
cided in a Federal case that although a member may agree to abide
by the constitution, rules, and regulations of the company "as they
now are or may be constitutionally changed hereafter," still if
there is nothing to indicate that such amendments were intended to
have a retrospective operation and no evidence to that eii'ect, but
on the contrary the evidence does indicate that thev were intended
to operate prospectively on policies thereafter to be issued it will be
so held in accord with the rule of construction by which statutes
are given a prospective operation unless it is manifest that they
were intended to operate retrospectively. The court said that there
was no reason why the same rule of statutory construction '"should
not apply to the legislative acts of a private corporation. If it as-
sumes to amend its constitution or by-law, and the amendment is
in such form that, if given a retrospective effect, it will alter obli-
gations which the company has assumed by existing contracts, it
should be presumed unless there are imperative reasons to the con-
trary, that it was not intended to have such an effect, but was only
intended to prescribe, a rule of action for the future." " It is also
declared that this acknowledged rule of construction has -been gen-
erally applied to the by-laws and regulations of corjiorate bodies.
But that the courts have frequently held that by-laws of mutual
benefit and similar societies, in view of tlie nature of the associa-
tions adopting them and the character of the by-laws themselves,
operated upon and controlled the relations of existing members
to the society and their right to future benefits, although such laws
Wisco7isin. — Seamans v. Carter, 15 ^^ Knifjlits Templars' & Mason.s'
Wis. 548, 82 Am. Dec. 696. Life Indemnity Co. v. Jarman, 104
1"^ Coghlan V. Supreme Conclave Fed. 638, 44 C. C. A. 93^ 30 Ins. L.
Improved Order Heptasophs, 86 N. J. 230, case is aff'd in 18/ U. S. 197,
J. Law 41, 91 Atl. 132; Roxbury 47 L. ed. 139, 23 Sup. Ct. 108, .32
Lodge No. 184, Independent Order Ins. L. J. 57, where the court said:
Odd Fellows v. Hocking, 60 N. J. "This agreement could liave no o])ora-
Law, 439, 64 Am. St. Rep. 536, 38 lion upon changes which upon their
Atl. 693. lace indicated that they applied ontv
^^ Wist v. Grand Lodge Ancient to policies thereafter to be issued.
Order United Workmen, 22 Ore. 271, To cover this case he" (insured)
29 Am. St. Rep. 603, 29 Pac. 610, "should have promised to abide by
cited in Norton v. Catholic Order ot amendments thereafter made, tliough
Foresters, 138 Iowa, 464, 469, 24 thev were intended to apply only to
L.R.A.(N.S.) 1030n, 114 N. W. 803. future policies."
966
MUTUAL COJMPAXIES— CHANGE OF BY-LAWS, ETC. § 379p
were not expressed in retroactive terms, and that such has generally
been held to be the rule where the member has agreed to be bound
by such laws as might thereafter be enacted.^" By-laws or changes
are, therefore, not retrospective unless no other meaning can be
given and cannot affect the validity of a prior contract not in har-
monv therewith.^ And this is so decided even though the member
lias agreed in his certificate to comply with future-enacted laws,
regulations and requirements.^ 80, it is held in Illinois that a by-
law enacted after the issuance of a benefit certilicate will not be
held retroactive as to certificates in force unless the intention that
it shall be retroactive is expressly declared or necessarily implied
from the language used, and this rule applies even though a nicni-
ber agrees to he l)ound by thereafter enacted by-laws.^
§ 379p. Same subject. — Under a New York decision the insured's
right under his original contract cannot be divested by an amend-
ment to the by-laws which is retrospective in its operation, even
^OMathieu v. Matliieu, 112 Md. Lodo-e Kniglits of Pvtliias. 98 Fed.
023, 77 Atl. 112, 39 Ins. L. J. 1413, 66, 38 C. C. A. eil, 29 Ins. L. J. 744.
per Sohmucker, J., citing: Georgia. — Ancient Order United
Connecticut. — Gilmore v. Knishts Workmen v. Brown, 112 Ga. 595, 37
of Columbus, 77 Conn. 58, 107 Am. S. E. 890.
St. Rep. 17, 58 Atk 223; Kniahts of Illinois. — Zeman v. North Ameri-
Columbus v. Rowe, 70 Conn. 550, 40 can Union, 263 111. 304, 105 N. E. 22,
Atl. 551. aft'g- 181 HI. App. 551; Haley v. Su-
Illinois. —FnWenwider v. Supreme preme Court of Honor, 139 111. App.
Council of Roval League, 180 111. 478; Cigar Makers International
261, 72 Am. St. Rep. 239, 54 N. E. Union of America v. Huecker, 123
485. 111. App. 336.
Indiana. — Supreme Lodge Knights Minnesota. — Ruder v. National
of Pythias v. Knight, 117 Ind. 489, Council Knights & Ladies of Securi-
3 L.R.A. 409, 20 N. E. 479. ty, 124 Minn. 431, 145 N. W. 118.
Massachusetts. — Pain v. Societe St. il//.s.s/,s\s/>/j/.— Grant v. Independ-
John Baptiste, 172 Mass. 319, 70 ent Order Sons Daughters of Jacob,
Am. St. Rep. 287, 52 N. E. 502. 97 Miss. 182, 52 So. 698.
New YorA:.— Parish v. New York ^'eio Yor/r.— Bolt jer v. Supreme
Produce Exchange, 169 N. Y. 34, 56 Co"""^,/™^^if'^'Vif °^^" f 11«"°^'
L.R.A. 149, 61 N. E. 977. ^.9 ^'- Y- Supp 681 '8 App. Div
Tennessee. - Supreme Lodge '46; Spencer v. Grand Lodge Ancient
T- • 1 4 i.- -n i-u- T AioUo 0-, Order United \\ orkmen, 48 N. Y.
Knights or Pvthias v. LaMalta, 9;j ^^ _„„ „„ ,^. ,' a,,, ^.
=■ „^-v ^ . oj« 01 Q w ^»PP- »90, 22 Misc. 14/, aftd 60
lenn. lo7, 30 L.R.A. 838, 31 S. W . ^ ^ g^^^^p ^^^g^ 53 ^p^ pj^,
493. rjoj
Texas.— ^xersherg v. Supreme '2 Ancient Order United Workmen
Tent Knights of Maccabees of the ^ Brown, 112 Ga. 545, 37 S. E. 890.
World, 33 Tex. Civ. App. 549, 77 3 ]\Xarshall v. Modern American
S. W. 246, 29 Cyc. 75n, 55, 82n, 75. Fraternal Order, 184 111. App. 231.
1 Coghlan V. Supreme Conclave Qn effect of adoption of by-laws by
Improved Order Heptasophs, 86 N. fraternal insurance order upon bene-
J. L. 41, 91 Atl. 132. See also: fit certificates already issued, see note
United States.— Uoyd v. Supreme in 1 L.R.A. (N.S.) 1065.
967
§ 379p JOYCE ON INSURANCE
though he agrees to comply with by-laws thereafter enacted.* So,
amendments made under a reserved power or agreement, apply to
prior contracts to the extent only that the conditions imposed arise
after the enactment and do not repudiate vested rights of existing
obligations, and such changes should not operate retroactively.*
And an amendment of the charter will not have a retroactive effect
where such intent, or an intention to acquiesce, does not appear.'
So, amendments to the constitution which imply a prospective op-
eration upon pre-existing policies are not retroactive and do not ap-
ply to policies already issued.' An amended by-law is also prosi)ec-
tive only and not retroactive where it does not expressly apply to
existing contracts even though the api)lication provides that the
constitution and by-laws then existing or thereafter adopted shall
form part of the certificate issued thereon.* It is further decided
, that an agreement in an application for a policy of insurance is-
sued on the assessment plan, to abide by the constitution, rules, and
regulations of the company, as they then were or might be con-
stilutiondly changed thereafter, does not amount to a consent to
such changes' which on their face indicated they applied only to
policies thereafter to be issued.^ And if a mutual benefit society
issues to a member a certificate of insurance, it cannot, by the sub-
sequent adoption of a by-law, modify or change the contract with-
out the member's consent,^" nor can by-laws be validly enacted
Avhich are retroactive and ex post facto." Again, a by-law which
acts retrospectively impairs the obligation of contract of a member
and the provisions of such by-law constitute no defense to an action
on the certificate even though it and the application obligated the
member as to future or amended by-laws.^^
* Shipman v. Protected Home Cir- * Iladley v. Queen City Camp No.
ele, 73 N. Y. Supp. 594, U(J Ajjp. Div. 27, Woodmen of the World, 1 Tenn.
448. Judgment modified in Sliipman Ch. Apj). 413.
V. Protected Home Circle, 174 N. Y. » Knights Templars' & Masons
398, 63 L.R.A. 347, 67 N. E. 83. Life Indemnity Co. v. Jarman, 187
5 Lloyd v. Supreme Lodge Knights U. S. 197, 47 L. ed. 139, 23 Sup. Ct.
of Pvtinas, 98 Fed. 66, 38 C. C. A. 108, 32 Ins. L. J. 57, s. e. 104 Fed.
654, 29 Ins. L. J. 744. 638, 44 C. C. A. 93, 30 Ins. L. J. 230.
6 Brown v. United Order True Re- i° Starling v. Supreme Council
formers, 28 App. D. C. 200. Royal Templars of Temperance, 108
'Knights Templars' & Masons' Mich. 440, 82 Am. St. Rep. 709, 66
Life Inderanitv Co. v. Jarman, 187 N. W. 340.
U S 197, 47 L. ed. 139, 23 Sup. Ct. " Kent v. Quicksilver Mining Co.
108, 32 Ins. L. J. 57, aff'g 104 Fed. 78 N. Y. 159; Pulford v. Fire De-
638, 44 C. C. A. 93, 30 Ins. L. J. partment, 31 Midi. 4.)8; Angell &
230; Jarman v. Knights Templars' Ames on Corporations (9th ed.) see.
& Mason.s' Life Indemnity Co. (U. 339 et seq.
S C C ) 95 Fed 70 ^^ Zimmerman Jr. v. Supreme Tent
968
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 379q
§ 379q. Same subject: instances. — By-laws are not retroactive
which ])rolnljit the de.-^ignation of heneficiarie;^ without an insurable
interest where such a beneficiary has been legally designated, and
this applies even though assured has agTeed to abide by thereafter
enacted by-laws.^' So, a by-law authorizing a change of beneficiaries
ha.s no retroactive effect.^* Nor are amendments retroactive which
exclude as risks certain hazardous occupations.^* And an amended
by-law which in form and terms is present and future and not in-
tended to be retroactive will be held to be prospective merely and
so not applicable to a contract with a mutual benefit association,
under a by-law, for benefits in case of certain injuries resulting from
accident, made prior to such amendment, especially so when the
changed by-law by fair intendment simply makes clearer the true
meaning of the former law.^^ Again, a subsequently enacted by-
law limiting liability in case a member dies by suicide, alcoholism,
etc., is not retroactive and cannot affect rights acquired under the
contract,^^ A subsequently enacted by-law limiting the time for
suing is also invalid as to pre-existing certificates.^^
But amendments with conditions precedent as to reinstatement do
not apply to existing certificates in the absence of a reserved right to
amend under the articles of association, by-laws or certificate.^^
And it is held that an agTeement in the application to be bound by
thereafter enacted by-laws is held binding although its terms are
not retroactive.^" Again, a change in by-laws may be retroactive
of the Knights of Maccabees of llie ^^ Bottjer v. Supreme Council
World, 122 Mo. App. 591, 99 S. W. American Legion of Honor, 79 N. Y.
817. Supp. 684, 70 App. Div. 740.
13 Grant v. Tndcpondcnt Order of As to retroactive effect of resolu-
Sons & Daughters of Jacob, 97 Miss, tion or by-law of mutual insurance
182, ry2 So. 098; see Ancient Order company changing period during
of United Workmen v. Brown, 112 Avliich policy may be contested for
Ga. 54.3, 37 S. E. 890. suicide, see note 12 L.R.A.(N.S.)
i*Pittinger v. Pittinger, 28 Colo. 504.
308, 89 Am. St. Rep. 193, 04 Pac On .subsequent by-law excluding or
ig-,^ reducing lia1)ility in case of suicide,
On retrospective by-law of benefit see notes in 40 L.R.A.(N.S.) 308, and
association in relation to beneficiaries, L.R.A.191.)D, 109.).
see note in L.K.A.19L')A, 204. is attorney General v. Supreme
iMIalevv. Supreme Court of Hon- Council American Legion of Honor,
or, 139 ill. App. 478. See § 379d 19(i Mass. 151, 81 N. K. 960.
\ieve\n. 19 McNeil V. Soutliern Tier Mason-
's Maynard V. Locomotive Engi- ic Relief A.s.soc. 5S N. Y. Supp. 119,
neers Mutual Life & Accident Ins. 40 App. Div. 58L
Assoc. 10 Utali, 145. 47 Am. St. Rep. ^o j^y^]^ y. Supreme Conclave Im-
602, 51 Pac. 259, 27 Ins. L. J. 208, proved Order of Heptasophs, 123
s. c. 14 Utah, 458, 47 Pac. 1030, 20 Md. 075, 91 Atl. 829.
Ins. L. J. .579.
969
§ 380 JOYCE ON INSURANCE
as to a member where he is afflicted with a disease of such a charac-
ter as to prechide it^^ application to him.^
§ 380. Change of by-laws, etc.; vested right. — It is the rule that
by-laws cannot disturb a vested right ;^ but members may assent
to a by-law which would not bind strangers or nondissenting mem-
bers, and such by-law would be good as a contract as to assenting
parties.^
But what constitutes a vested right is a question upon which the
courts differ. Supposing the contingency has arisen which the con-
tract provides against, and upon the happening of which the bene-
fit is to accrue or the loss to be paid. The contract is to be inter-
preted like one of insurance, and it would reasonably seem that a
power to abrogate the provision of the agreement would not exist,
for the express terms of a contract of insurance cannot be changed
by a by-law without the consent of the insured.* So where a provi-
sion of the charter and a by-law of an insurance company consti-
tute part of a contract of insurance, it is held that their alteration
without the consent of the insured cannot affect the contract.^
Again, it is decided that a by-law cannot be amended, after the
right to benefits has accrued, so as to reduce the amount it would
otherwise be obligated to pay.^
There are decisions, however, which not only hold that where a
member has no vested right in a fund the society may change the
disposition of the fund,'^ but also that a by-law in existence when
a member claims relief, and not the one in existence jat the time he
1 Grossraayer v. District No. 1, In- Odd Fellows' Mutual Life Ins. Co.
dependent Order B'nai B'ritli, 34 59 Wis. 162, 18 N. W. 13. Examine
Misc. 577, 70 N. Y. Supp. 393, 74 Reynolds v. Supreme Council Royal
N. Y. Supp. 1057, 70 App. Div. 90, Arcanum, 192 Mass. 150, / L.R.A.
174 N. Y. 550, 07 N. E. 1083. (N.S.) 1154, 7 Am. & Eng. Ann. Cas.
2MoiTison v. Wisconsin Odd Fel- 776, 78 N. E. 129; Connor v. Su-
lows' Mutual Life Ins. Co. 59 Wis. preme Commandery Golden Cro.ss,
162, 18 N. W. 13. But see Fugnre 117 Tenn. 549, 97 S. W. 306; Hicks
V. jMutual Society of St. Joseph, 49 v. Northwestern Aid Association, 117
Vt. 362. See next following sections Tenn. 203, 96 S. W. 262.
herein. ^ Morrison v. Wisconsin Odd Fel-
3 Stet.son v. Kempton, 13 Mass. lows' Mutual Life Ins. Co. 59 Wis.
282. "What may be bad as a by-law 162, 18 N. W. 13.
as against common right may be good ^ Becker v. Berlin Benefit Soc. 144
as a contract : " AnffcU & Ames on Pa. St. 232, 27 Am. St. Rep. 624, 22
Corporations (9th ed.) sec. 342. Atl. 699. See § 3/9 herein.
* (ireat I'alls Mutual Fire Ins. Co. On riglit of mutual benefit society
V. Harvey, 45 N. H. 292; Becker v. to decrease benefits, see note in 31
Farmers' Mutual Ins. Co. 48 Mich. L.R.A. (N.S.) 423.
610, 12 N. W. 874; Gundlach V. Ger- '^ ToiTey v. Baker, 1 Allen (83
mania Mechanics' Ass'n, 49 How. Pr. Mass.) 120. Compare § 379 herein.
(N. Y.) 190; Morrison v. Wisconsin
970
MUTUAL COMPANIES— CHxVXGE OF BY-LAWS, ETC. § 380
became a member, is the one under which he is entitled, as the so-
ciety has the right to amend such a by-law.^ It is further held that
if a member has deceased, the society may amend its by-laws limit-
ing the amount of recovery to which his widow would have been
entitled before the alteration.^ So, in a California case ^° it is de-
cided that a by-law limiting the amount of recovery, enacted after
the right to claim relief has accrued, does not impair vested rights,
since it is not retroactive. The commissioner's opinion adopted l^y
the court is as follows: "It is contended for the respondent that the
by-law giving a right to benefits constituted a contract, which could
not be changed, and the question presented is, whether the defend-
ant had power to change said by-law in the way it did. Undoubt-
edly, when the plaintiff complied with what was required of him as
a member, the by-laws constituted a contract; and unless the con-
tract itself otherwise provided, it could not be changed without the
consent of all the parties. But here the contract itself does provide
otherwise; .... there is an express provision that the l)y-
laws may be changed; .... the law provides that the by-
laws may be changed. This provision must be held to enter into
and form a part of tlie contract In view of this ])Ower
to alter the contract, it cannot be said that the defendant could not
alter its by-laws in any respect. The respondent argues, however,
that it had no power to alter them so as to impair a vested right.
This must be conceded, but we do not think that the new by-law
purported to impair a vested right. The term 'vested right' is of-
ten loosely used. In one sense every right is vested. If a man has
a right at all, it must be vested in him; otherwise, how could it be
a right? The moment a contract is made, a right is vested in each
party to have it remain unaltered and to have it performed. The
term, however, is frequently used to designate a right which has
become so fixed that it is not subject to be divested without tlie con-
sent of the owner, as contradistinguished from rights which are
subject to be divested without his consent. Now, a right, whether
it be of such a fixed character or not, must be a right to something;
and when a man talks vaguely of his vested right, it conduces to
clearness to ask: 'A vested right to what? ' In the present case the
plaintiff can have no right to liave the contract remain unchanged,
because, as we have seen, the contract itself provides tliat it may be
changed. Nor has he a right to remain unaffected by any change
* St. Patrick's Male Ben. Soc. v. ^"^ Stohr v. San Francisco Musical
MeVey, 92 Pa. St. 510. Fund Soc. 82 Cal. 557, 22 Pac. 1125.
^ Fugure v. Mutual Society of St.
Joseph, 46 Vt. 362. Compare § 379
herein.
971
§ 380 JOYCE ON INSURANCE
tliat may be made; for if sncli right be common to all the members,
it is merely another way of saying that no change can be made, and
if the right be not common to the other members, it would be to
assert a privilege or superiority over them, of which there is no pre-
tense. If the plaintiff has any right which is so fixed that it is not
subject to change, we think it can only be to the fruits which rip-
ened before the change was made; in order words, to such sums as
became due before the new by-law was adopted. To express it dif-
ferently, the change could not be retroactive. This is all that we
think can be meant by 'vested' right,' in a case like the present.
Now, nnder the contract, nothing was due before the sickness actual-
ly took jjlace. Benefits do not accrue for future sickness. The
right of the plaintiff to benefits for future sickness is not different in
its nature from tbe right of the well members to benefits for future
sickness. In the one case the members have a right to future pay-
ment in case they become sick; in the other, the plaintiff has a
right to future payments in case he continues sick, and if there was
no power to change the by-law in the one case, there was no power
to change it in the other; which is equivalent to saying that there
was no power to change it at all. The cases where a specific sum
becomes due upon the happening of a certain event, a.s upon death,
are not like the present. In such cases an alteration in the contract
cannot be made after the fact; for that would be to make that not
due which had already become due. It might, perhaps, be argued
that the foregoing would apply if the by-law under consideration
had specified that the weekly payments were to continue as long as
the sickness continued. But it does not so specify. The time dur-
ing which the payments were to continue is left indelinite. The
substance of tlie contract is, in our opinion, that, in case of sickness,
the member is to receive weekly payments for an indefinite period
of sickness, subject to the power of the defendant to change the pro-
vision authorizing such payments, so far as future payments are
concerned.'"' So in New York, articles of association which ]U'o\-ide
for the payment to widows of a certain sum a month may be amend-
ed so as to change the amount of benefits, but such change is not
retroactive, and the beneficiary will be entitled to the benefits under
the original provision. ^^ So a society may limit the payments of
l)enefits until there shall be a certain sum in the treasury by a by-
law enacted after tbe party claiming to be entitled to benefits had
become a member. ^^
^* Gundlaf h v. Geritiania Median- ^^ St. Patrick's Male Ben. Soc. v.
ics' Atisoc. 4 linn (N. Y.) 341. See McVey, 92 Pa. St. 510.
§§ 379o, 380a et se(]. herein.
972
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380a
§ 380a. Same subject. — T1)p rule undoubtedly is that vested
rights cannot be divested or the obligation of contracts l)e impaired
by amendments, changes, or repeal of the articles of association,
constitution, by-laws, rules, and regidations of companies, associa-
tions or orders of the nature or character here under consideration.
And this rule applies notwithstanding a reserved right or agreement
in the contract that such amendments, changes or repeal may be
made. The application of this rule ha.s however, been the sub-
ject of much discussion covering the vexed question of what, as
stated in the last preceding section, constitutes a vested right, and
also the construction of the terms of such a reserved i)owcr or agree-
ment and tiie extent to which it applies." The words of the court
in a Federal case are pertinent. They are: "I dissent entirely from
all the cases holding that the terms and obligations of a contract of
insurance between one of these fraternal corporations and one of
its members can in any manner be changed by an amendment to
its constitution or by-laws, unless the power is specified in and
granted by the law creating the corporation, under a general con-
sent in the contract to be bound by all by-laws then in existence or
that may thereafter be adopted."" It is also declared in a Con-
necticut case that a reserved poNver of amendment or re])eal and an
agreement with the members of a fraternal benefit society does not
authorize an adoption of a by-law which divests, impairs, or dis-
turbs vested rights as such a by-law woidd be unreasonal>le, as ex-
isting or future enacted by-laws should carry out the purposes of
the order or help fulfil its contract obligations.^* So, under an
Illinois decision the law does not undertake to make or modify
^3 Sehack v. Supreme Lodge of the oontrac-t riglits but only sudi as are
Fraternal Brotherhool, 9 Cal. App. in aid of contract) ; Iliiies v. Modern
584, 99 Pae. 989' (cannot impair con- Woodmen of America^ 41 Okla. 135.
tract rights without memher.s' consent L.K.A.1915A, 2(54, I'Ai Pac. G75 (an
although contract conditioned for amendment cannot impair the obli-
compliance with subsequently enacted gation of contract or impair vested
by-laws); Mathieu v. Matliieu, 112 rights).
I\id. 625, 77 Atl. 112, 39 Ins. L. J. As to change of beneficiary: vest-
1413 (vested rights must not be im- ed interest, see §§ 730, 731-743, 881
paired) ; Supreme Lodge Kniglils of herein.
Pvthias v. Stein, 75 Miss. 107, (15 Am. i* Smythe v. Supreme Lodge
St. Rep. 589, 37 L.R.A. 775, 21 So. Kniglits of Pythias (U. S. D. C.)
559 (a condition adopted by a benefi- 198 Fed. 967, 990, per Ray, Dist. J.,
dal a-ssociation after issuing a cerliti- case aff'd in Smytlie v. Supreme
cate of insurance cannot affect riglit Lodge Kniglit.^^ of Pythias, 220 Fed.
of the holder of such certilicate) ; 438, 137 C. C. A. .32.
Parks v. Supreme Circle Brotlu-rhood ^^ Kane v. Knights of Columbus,
of America, 83 N. J. Eq. 131, 89 Atl. 84 Conn. 96, 79 Atl. 63, 40 Ins. L.
1042 (power to amend does not an- ,]. 874.
tliorize material changes violating
973
§ 380a JOYCE ON INSURANCE
contracts, whether relating to insurance or to some other subject,
but it enforces contracts as tlie parties themselves have made them
and there is no presumption that a meijiber of a benefit association
contemplated a change in the terms of his contract, although he is
presumed to have contemplated such by-laws as are passed for the
purpose of regulating the business and general affairs of the associa-
tion.^^ And the existing constitution and by-laws and not subse-
quent changes therein depriving the member of his contract rights,
are within a provision in the certificate requiring compliance with
the constitution and by-laws a copy of which is attached to the cer-
tificate, and this applies even though the constitution provides for
amendment.^' In Iowa an insurance company has no power to
change any contract rights without the consent of the members or
policy holders and cannot, therefore, by amendment of its by-laws
introduce new terms and conditions into the original contract which
will have such an effect even though insured agrees to be governed
by the articles of incorporation and rules, in force when the policy
is issued or which might thereafter be made by the association and
the amendment is not of the articles or rules but of the by-laws. ^^
And a constitutional provision giving the right to amend the in-
strument by a certain vote at any time and a requirement of the
certificate that insured comply with the constitution and by-la\vs
does not constitute an assent to an amendment divesting contract
rights, but onlj' designates the manner of exercising the power
granted.-'^ It is decided, however, in that state that where a mem-
ber's contract requires compliance with by-laws then in force or
thereafter enacted he and his beneficiary became thereby obligated
by a subsequently properly adopted by-law especially so when under
the general power of the association to make contracts for death
benefits the power exists to insert certain clauses for forfeiture wlien
such clause was authorized by a by-law regularly adopted.^" In
New Jersey a subsequently enacted by-law, which by its terms is
prospective in its operation and which is not in aid of a pre-existing
^^ Covenant Mutual Life Assoc, v. 380c herein. Examine Seiverts v. Na-
Kentner, 188 111. 431, 440, 58 N. E. tional Benev. Assoc. 95 Iowa, 710, 64
966. N. W. 601.
1' Peterson v. Gibson, 191 111. 365, ^^ Peterson v. Gibson, 191 111. 365,
54 L.R.A. 836, 61 N. E. 127. 54 L.R.A. 836, 61 N. E. 127.
^^ Jordan v. Iowa Mutual Tornado ^^ Pold v. North American Union,
Ins. Co. 151 Iowa, 73, Ann. Cas. 261 111. 433, 104 N. E. 4, aff'g 180 111.
1913A, 266, 130 N. W. 177, 40 Ins. App. 448. Examine Norton v. Cath-
L. J. 1065. See also Wasson v. Amer- olic Order of Forresters, 138 Iowa,
ican Patriots, 148 Iowa, 142, 126 N. 464, 24 L.R.A.{N.S.) 1030n, 114 N.
W. 778. Fort v. Iowa Legion of W. 893. Considered under § 380b
Honor, 146 Iowa, 183, 123 N. W. 224, herein.
39 Ins. L. J. 3, quoted from under §
974
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380a
contract, cannot impair or avoid it even though there is an agree-
ment in the appHcation or certificate to comi)ly with future en-
acted law^;, etc.i It is said in a New York case that: "^Much has
been written in various jurisdictions upon the subject of amend-
ments to by-laws, but we shall confine our review to our own deci-
sions, which we regard as conclusive in principle. They show de-
termined and consistent progression. More than thirty years ago
it was held by this court, in a carefully considered case, that, even
when the power to amend is reserved by the charter of a business
corporation, a by-law could not be repealed so as to impair rights
which had been given and had become vested by virtue of such by-
law."" 2 It is also further declared and so held in that state that it
is well established by the authorities therein,^ " '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 reservation is made. It would be not reasonable and hence
not Avithin their contemplation, at leafet in the absence of stipula-
tions clearly specifying the subjects to be affected, that one party
should have the right to make a radical change in the contract, or
one that would reduce its pecuniary value to the other. A contract
which auihorizes 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
1 Sautter v. Supreme Conclave Im- American Legion of Honor, 174 N.
proved Order of Heptasophs, 72 N. Y. 266, 269, 66 N. E. 932; Weber v.
J L 325, 71 Atl. 232. Cited in Fort Supreme Tent, Knights of ^Maccabees
V. Iowa Leg-ion of Honor, 146 Iowa, of the World, 172 N. Y. 490, 65 N. E.
183, 123 n!; W. 224, 39 Ins. L. J. 3. 258 ; Deuble v. Grand Lodge Ancient
2 Wright V. Knights of IMaccabees Order United Workmen, 72 N. Y.
of the ^Vorld, 196 N. Y. 391, 31 Supp. 755, 66 App. Div. 323, 327,
L.R.A.(N.S.) 423, 89 N. E. 1078, 39 aff'd 172 N. Y. 665, 65 N. E. 1116;
Ins. L. J. 95, citing Kent v. Quick- Parish v. New York Produce Ex-
silver ]\Iining Co. 78 N. Y. 159, 182. change, 169 N. Y. 34, 48, 56 L.R.A.
^Citing: Evans v. Southern Tier 149, 61 N. E. 977; Englehardt v.
Ma.sonic Relief Assoc. 182 ^\ Y. 453, Fifth Ward Permanent Dime & Sav-
75 N. E. 317; Beach v. Supreme Tent, ings Loan Assoc. 148 N. Y. 281, 29*,
Knights of Maccabees of tiie World, 35 L.R.A. 289n, 42 N. E. 710; Mat-
177 'N Y 100 69 N E. 281; Ship- thews v. Associated Press of New
man V. Protected Home Circle, 174 York, 136 N. Y. 333, 342, 32 N. E.
N. Y. 398, 63 L.R.A. 347, 67 N. E. 981; Kent v. Quicksilvei- Mining Co.
83; Langan v. Supreme Council 78 N. Y. 159.
975
380a
JOYCE ON INSURANCE
situation.* Wliile the defendant may doubtless so amend its by-
laws, for instance, as to make reasonable cliances in the methods of
administration, the manner of conducting its business, and the like,
no change can be made which will deprive a memljer of a sul)stan-
lial right conferred expressly or impliedly by the contract itself.
That is beyond the power of the legislature as well as the associa-
tion, for the obligation of every contract is protected ■ from state
interference by the Federal Constitution.'" * So. under another deci-
sion in the same state a member's acquired rights under his con-
tract, consisting of the charter and by-laws, cannot be taken away
by a subsequent amendment of the by-laws, especially so as to bj'-
laws which are inconsistent with the charter.^ And an amend-
ment of laws enacted under an illegally adopted and invalid amend-
ment cannot operate to divest a member of his contract rights.'
In Kortli Carolina although a power is reserved in the policy to
change the by-laws it does not permit the corporation to change at
will its contract with its members; * nor can the value of a member's
contract be destroyed by a mere general consent that the constitu-
tion and by-laws may be amended.^ In Oregon a right to alter,
amend or repeal the laws of a mutual benefit society, exercised un-
der an agreement in the application does not authorize a repudia-
tion of obligations or work a forfeiture of rights previously granted
to its members.^" And in A\'isconsin a stipulation in a certificate
that a member shall be bound by future amendments to laws, etc.,
does not authorize a substantial change abrogating the existing con-
tract." But notwithstanding these decisions it is held that an
* Citing Industrial & General Trust,
Ltd. V. Tod, 180 N. Y. 21.5, 225, 73
N. E. 7.
5 Avres v. Ancient Order of Unit-
ed Workmen, 188 N. Y. 280, 80 N. E.
220, 36 Ins. L. J. 891, per Vann, J..
artg 9.5 N. Y. Supp. 1112, 109 App.
Div. 919 (U. S. Const, art. 1, sec.
10) quoted in Fort v. Iowa Legion
of Honor, 140 Iowa, 183, 123 N. W.
22-1, 39 Ins. L. J. 3.
^Sinclair v. Fitzpatrick, (8 Misc.
GO, 138 N. Y. Supp. 272, -12 Ins. L.
J. 227 (case of right to de.signate
beneficiaries). Citing: Wright v.
Knights of Maccabees of the World.
196 N. Y. 391, 31 L.R.A.(N.S.) 423.
134 Am. St. Rep. 838, 89 N. E. 1078,
39 Ins. L. J. 95; Roberts v. Cohen,
70 N. Y. Sup'V. 57, GO App. Div. 259;
Spencer v. Grand Lodge Ancient Or-
97
der United Workmen, 48 N. Y. Supp.
590, 22 Misc. 147.
' Deuble v. Grand Lodge Ancient
Order of United Workmen, 72 N. Y.
Supp. 755, 66 App. Div. 323, aff'd
172 N. Y. mb, 65 N. E. IIIG.
^ Bragaw v. Supreme Lodge,
Knights & Ladies of Honor, 128 N.
Car. 354, 54 L.R.A. 602, 38 S. E.
905.
^ Strauss v. Mutual Reserve Fund
Life Assoc. 126 N. Car. 971, 54
L.R.A. 605, 36 S. E. 352,
Car. 465, 39 S. E. 55.
^<' Wist v. Grand Lodge
Order of United Workmen,
271, 29 Am. St. Rep. 603,
610.
1^ Curtis V. Modern Woodmen of
America, 159 Wis. 303, 150 N. W.
417.
6
128 N.
Ancient
22 Ore.
29 Pac.
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380b
amendinont does not impair tlie oblio;ation of contracts where com-
pliance with future enacted law?, etc. is required l>y tiie certificate : ^^
and a certificate of a fraternal beneficiary association is held not to
confer vested rights and that where a certificate in a fraternal bene-
ficiary association creates no vested interest it may be validly agreed
that tlie terms thereof, may be changed ; " and that the contract or
vested rights of a member of a mutual benefit society who has
agreed to be bound by future by-laws are not impaired by a by-law
requiring that all claims against the society must be submitted for
adjustment to the tribunals established within the association.^*
§ 380b. Same subject: instances. — Trustees cannot exceed their
powers in ad(Ji)ting by-laws which affect prior contracts with mem-
bers ])y materially changino such by-laws.^* And members can-
not be deprived of vc^^led rights in a reserve fund by an amend-
ment which in effect makes an essentially new contract by changing
an absolute and definite one.^^ Nor, under an English decision,
can a company alter their regulations so as to abrogate the con-
tract rights of a policy-holder to have the entire profits of
the mutual life assurance department divided among those
holding ]:>olicies therein, where the company was registered with
unlimited liability under ihe companies act prior to assured's
application for a policy, and he was influenced so to do by the
terms of a prospectus guaranteeing such division of profits with-
out deductions, which was referred to as a part of the policy."
And amendments of by-laws are invalid which defeat the funda-
mental pur])0se of benefits or which are opposed to public policy,
or whicli are vexatious. ^^ Nor can a member be deprived of his
right to sick benefits without his consent by an amendment of by-
laws." And where changes in the articles of association are not
12 Fraternal Unirtn of America v. ^^ Gutlirie v. Supreme Tent
Zeigler, 145 Ala. 287, 39 So. 751. Knisflits of Macc-abee.s of tlie World,
13 Claudv v. Roval League, 250 4 Cal. App. 184, 87 Pac. 405.
Mo. 92, 168 S. W. rJ93. i^ Farmers Loan & Trust Co. v.
1* Monger v. New Era Assoc. l.')0 Aberle, 41 N. Y. Supp. 033, 18 Misc.
Mich. 645, 24L.R.A.(N.S.) 1027 (an- 25/, case raodiHed 46 N. Y. Supp.
notated on validity of retrospective 10, 10 App. Div. 79.
by-law or other rule of benefit associ- " Bally v. Brili.sli Equitable Assur.
ation as to manner of establishing Co. 1 1904J L. K. Ch. Div. 374.
claim) 121 N. W. 823. See Monger ^^ Chicago, Rurlinglon & Quincy
V. New Era Assoc. 171 Mich. 614, 137 IJy. Co., v. Hendiicks, 125 ill. App.
N. W. 631, 41 Ins. L. J. 1788. See 580.
§§ 352-352c, 372-372b herein. ^^ Zinna v. Saveria Friscia Soc. 88
When company, society or associa- N. Y. Supp. 404.
tion can chanse iilan of insurance:
Impairment of obligation of contract,
see § 350m herein.
Joyce Ins. Vol. T— 62. 977
§ 380b JOYCE ON INSURANCE
made in the manner expressly provided therefor they cannot oper-
ate to deprive a member of his contract right to sick benefits.'^" Nor
can restrictions as to liability for accidental injury, which are not
in the certificate, be imposed by a new law so as to imjDair a mem-
ber's contract.^ So, where a member is entitled to benelits for an
injury he cannot be deprived thereof by amendments to the con-
stitution adopted after said injury is sustained. ^ Again, the adoption
of a new article of incorporation by a mutual benefit association,
making certificates void where the holders engage in extra-haz-
ardous occupations, does not become part of the contract with a
member to whom a certificate had been previously issued, or de-
stroy a right which he previously had to change his occupation with-
out making his certificate void.^ But an amendment made under a
contract in which assured agrees to be bound by the laws, rules, and
regulations then in force or thereafter to be enacted, does not de-
prive him of an}^ vested right by a subsequent classification of a risk
as extra-hazardous, which risk was onlv classed as an extra-hazard-
ous one when the certificate was issued and was not then prohibited,
nor is such an amendment unreasonable when applied to switch-
men in railroad yards although brakemen who also do switching,
are not excluded, especially so where said change was made while
insured was still a brakeman, and after the occupation of switch-
man was placed in the prohibited class he voluntarily engaged
therein.* Again, a member holding an endowment certificate in
2° Mutual Aid & Instruction Soc. bound by the cliange. Hobbs v.
V. Monti, 59 N. J. L. 341, 36 Atl. Iowa Mutual Benefit Assoc. 82 Iowa,
666. 107, 31 Am. St. Rep. 460, 11 L.R.A.
1 Young V. Railway Mail Assoc. 299, 4< N. W. 983; Ross v. Brotber-
126 Mo. App. 325, 103 S. W. 557. hood of America, 120 Iowa, 692;
See Order of United Commercial (lilmore v. Kniglits of Columbus, 77
Travelers of America v. Smith, 192 Conn. 58, 107 Am. St. Rep. 17, 58
Fed. 102, 112 C. C. A. 442, clistin- Atl. 223. In Parish v. New York
guished and held not in point in Produce Exchanoe, 169 N. Y. 34, 56
Smythe v. Supreme Lodge Knights L.R.A. 149, 61 N. E. 977, relied upon
of Pythias, 198 Fed. 967, 987 and by appellants, it is held that a rea-
held not in point. sonable change in by-laws may be
2 Brotherhood of Painters, Deco- made, but not so as to destroy vested
rators & Paperhangers v. IMoore, 36 rights or make a new contract. There
Ind. App. 580, 76 N. E. 262. was no agreement for a change in
2 Hobbs v. Iowa Mutual Benefit that case, and the rule announced is
Assoc. 82 Iowa, 107, 11 L.R.A. 299, undoubtedly correct. In Tebo v. Su-
31 Am. St. Rep. 466, 47 N. W. 983. preme Council of Royal Arcanum, 89
* Norton v. Catholic Order' of For- .Alinn. 3, 93 N. W. 513, it was held,
testers, 138 Iowa, 464, 24 L.R.A. that a change in the by-laws without
(N.S.) 1030n, 114 N. W. 893. The actual notice to the insured was un-
court, per Sherwin, J., said : "We reasonable and void. No other point
are of the opinion that no vested was decided. Olson v. Court of Hon-
right was impaired, and that he was or, 300 :\Iinn. 117, 8 L.R.A. (N.S.)
978
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380b
a fraternal order is not, even tbono;h he has agreed to be governed
by thereafter enacted by-laws, bound by a by-law enacted without
his knowledge or consent, iii'iposing a condition of forfeiture for
engaging in active military service, it also appearing that the cor-
jjoration before its charter expired, obtained, without assured's
knowledge, a special charter from Congress and the old company's
iissets and obligations including said member's certificate were trans-
ferred to the re-incorporated company and dues were paid on such
certificate until the member died.^ Nor can the [)re-existing contract
rights of a member under the laws of the order concerning his oc-
cupation or business of selling liquor be arbitrarily destroyed by a
forfeiture amendment.® And a member cannot be deprived of his
rights under his certificate, and in the benefit fund, by the adop-
tion of a by-law, the terms of which do not apply to him ; as where
it prohibits engaging in a certain ])usiness thereafter and the mem-
ber had before its adoption and subsequently thereto been engaged
therein continuously.' Nor can a member be deprived of such
rights even though a by-law prohibits indulging in intemperate
habits before its adoption or thereafter, where, prior to the enact-
ment of such by-law he had been addicted to such habits and con-
tinued so thereafter.* And vested rights must not be impaired by
a reduction of the certificate amount in case of death from intox-
icating liquors even though there is a policy agreement to comply
with thereafter enacted by-laws.^ And a time limitation for suing
cannot be imposed by a subsequently enacted by-law where no no-
521, 110 N. W. 374, relates to the 429, 117 N. Y. Supp. 12.5. Examine
question of notice and follows the Supreme Lodge of Fralcnial Union
Tebo case. Wist v. Grand Lodge, 22 of America v. Leight, 195 Fed. 903,
Ore. 271, 29 Am. St. Rep. 603, 29 considered and e.i plained in Smyllie
Pac. 610, was determined on the point v. Supreme Lodge Knights of Pyth-
that by the language of the changed ias, 198 Fed. 967, 981.
law itself, it was prospective only." ' Grand Lodge Ancient Order of
See also House v. Modern Woodmen Union Workmen v. Haddock, 72 Kan.
of America, 165 Iowa, 607, 146 N. 35, 1 L.R.A.(N.S.) 1064 (annotated
W. 817. on effect of adojition of by-laws by
^ Richter v. Supreme Lodge fratei'nal insurance order upon bene-
Knights of Pythias, 137 Cal. 8, 69 fit certificates already is.sued) 82
Pac. 483. Pac. 583. Cited in Fort v. Iowa Le-
As to prohibition as to entering gion of Honor, 146 Iowa, 183, 123 N.
military or naval service, see § 2237 W. 224, 39 Ins. L. J. 3.
herein. ' Taylor v. I\rodern Woodmen of
® Deuble v. Grand Lodge Ancient America, 72 Kan. 443, 5 L.R.A. 283
Order of United Workmen, 72 N. Y. (annot.) 83 Pac. 1099.
Supp. 755, 66 App. Div. 323, aff'd ^ Llovd v. Supreme Lodge Knichts
172 N. Y. 665, 65 N. E. 1116. See of PytJiias, 98 Fed. (Hi, 38 C. C. A.
also Barrett v. Grand Lodg • Ancient 654, 29 Ins. L. J. 744.
Order United Workmen, 63 Misc.
979
§ 380e
JOYCE ON INSURANCE
tice of said enactment is given and the certificate contains no time
limitation within which suit may he brought.^" And pre-existing
relief fund certificates are not affected by by-laws prohibiting their
transfer and prescribing a limited time after their maturity for the
payment of the same." A by-law adopted by a mutual benefit so-
ciety that all claims against it must be adjudicated in its own tribu-
nal,^ applies to holders of existing certificates.^^ ^^(i where power
to alter, amend and repeal charters is reserved in a statute. mcm])ers
of a co-operative or asse.ssmont comi)any have no such vested rights
as will prevent such an association to reincorporate under the law
as a regular life insurance company. Therefore, the obligation of
contract existing between such members and the original company
is not impaired by such reincorporation ; ^^ nor can a member 1)0
deprived of vested, valuable statutory rights under a by-law chang-
ing venue contrary to statutory provisions.^* But the burden of
proof to show that the rights of one claiming under a benefit certif-
icate have been impaired is upon said party."
§ 380c. Same subject: changes in by-laws, etc.: increasing assess-
ments or dues or reducing amount payable. — Although there is an
irreconcilal)le confiict between the decisions in certain jurisdictions,
and although varying circumstances necessarily so aftect the adju-
dications that no absolutely governing rule can be applied to all the
cases, and although it is difiicult to determine what constitutes the
weight of authority, nevertheless the rule, outside of any statutory
provision to the contrary, seems to be settled that an amendment
or change in the constitution, articles of association, by-laws, rules
and regulations, which increases the dues or rate of assessment to
which a member is subject under his original contract with the so-
ciety, association, or order, or which reduces the amount payable
1" Rcsenstein v. Court of Honor,
122 jMinn. .JIO, 142 N. W. 331. FoU
loued in Ruder v. National Council
Knisjhts & Ladies of Security, 124
.Minn. 431, 145 N. W. 118.
^^ Wheeler v. Supreme Sittin2: Or-
der of Iron Hall, 110 Midi. 437, 3
Det. Leg. N. 446, G8 N. W. 229.
^2 Monger v. New Era Assoc. 156
Mich. 645, 24 L.R.A.(N.S.) 1027, 121
N. W. 823. See :Mouger v. New Era
Assoc. 171 Mich. 614, 137 N. W. 631,
41 Ins L. J. 1788.
As to conditions precedent to re-
sort to courts, see §§ 352-352c herein.
As to conditions excluding resort
to civil courts, see §§ 372-372b here-
in Polk v. Mutual Reserve Fund
Life Assoc. 207 U. S. 310, 28 Sup.
Ct. 65, 52 L. ed. 222, quoted from
and distinguished in Siuythe v. Su-
preme Lodi;e Knights of Pythias,
108 Fed. 9()7, flF6, but held not to
support defendant's contention in
that case.
^^Ealou v. International Travel-
ers' Assoc, of Dallas, — Tex. Civ.
App. — , 136 S. W. 817.
As to effect of stipulation limiting
action to particular forum, see
§§ 3194, 3195 herein.
^5 United Moderns v. Ratbbun, 104
Va. 736, 52 S. E. 552.
in.
980
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
under his certificate, impairs the obligation of said contract and di-
vests his vested riglits, notwithstanding a general reservation or
agi-eenient in the constitution, by-laws, etc., or in any or all of them,
that changes therein may thereafter be made. If a power is vested
by said general reservation or agreement to repudiate a part of the
contract by such an increase or reduction, logically the exercise of
the same power authorizes a repudiation in toto of all the insurer's
obligations and the insured would be bound thereby. It seems un-
reasonable that such a conclusion could be deduced as being the
intent of the parties in entering into the original contract of mem-
bership. If it was intended that changes increa.«ing assessments or
dues, or reducing the amount payable, or both, should l)ind the
member, it would seem that the terms of the consent should have
been so clearly and ex})licitly expressed that no room would be left
for construction. The reasoning and deductions of the courts are,
however, set forth in the following pages.^^
Under a Federal Supreme Court decision an agreement in the ap-
plication, made a part of the contract, to abide by changes in the con-
stitution, rules and regulations of the society, does not authorize
amendments of the constitution, reducing the amount of indemnity,
Avhich amendments imply a prospective operation, and not retroact-
ive." So it is decided, in the Federal Circuit Court of Appeals that
where a member of a fraternal beneficiary society contracted, upon
printed representations, that a constitution of a certain date was the
basis of the contract governing the amount of assessments to be paid
he is not bound by a constitution of a later date even though ado))ted
].rior to the contract, which increa.<ed the amount of assessments,
nor is he bound even though under a stipulation in the application
1he contract was to be governed by thereafter enacted l)y-laws.^^Vnd
it wa.'^ held in the same case in the court below that if power is re-
served to increase assessments, as such a beneficial association or
society has the right to do, it must be expressly, explicitly and clear-
18 As to vested rights and changes 44 C. C. A. 93, 30 Ins. L. J. 230.
in by-laws, etc. reducing Ijcnctits or But see Mutual A.ssnrauce See. v.
Jorli-iting them in case of suicide, Korn, 7 Cranch (11 U. S.) 39G, 3 L.
see §§ 2647 et seq. herein. ed. 383. Quoted from with ai)provaI
On riglit of mutual benefit societv in Whitfield v. vKtna Life Ins. Co.
to decrease benetits, see note in 31 205 U. S. 480, 493, 51 L. ed. 895, 27
L.R.A.(N.S.) 423. On right of mu- Sup. Ct. 578 (rev'g 144 Fed. 3.i0)
tual insurance company to increase where the same Missouri statute was
rates, see notes in 7 "L.1\.A.(N.S.) passed upon.
1154. and 31 L.R.A.(N.S.) 417. "Smythe v. Supreme Lodge
17 Knights Templars' & ?^lason.s' Knights of Pythias, 220 Fed. 438,
Life Indemnitv Co. v. Jarman, 187 U. 137 C. C. A. 32, atit'g Smythe v. Su-
S 197, 47 L. ed 139, 23 Sup. Ct. 108, preme Lodge Knights of Pythias, 198
32 Ins. L. J. 57, aff'g 104 Fed. 638. Fed. 907, 42 Ins. L. J. 6.
981
§ 380e JOYCE ON INSURANCE
ly stated in such a manner as to constitute a part of the contract so
as to fully inform and advise the memljer that such increase may be
made and the contract so changed. ^^ Again, contract obligations
cannot be impaired by a reduction of the amount specified as pay-
able in the certilicate of a member.^^
In California an association cannot even, though power is reserved
to amend, destroy witliout assured's special consent his cvintracl
rights by reducing death benefits.^ And a subsequent resolution
classifying risks and increasing assessments violates a.-^^sured's con-
tract.^
But it is also held in that state that an amendment, enacted after
a person becomes a member, providing that the balance of the
amount of certificates, over and above the number of members, shall
be payable out of the reserve fund only when there is a sufficient
excess over a specified sum to meet such further payment, is not
detrimental where such amendment was made in pursuance of a
by-law permitting changes to be thereafter made, and in addition
no reserve fund was created under any by-law or rule although all
the net assets were treated as belonging to that fund which was not
specially devoted to other purposes.^
In Georgia the agreement in the certificate to pay a certain sum
constitutes a contract which cannot be repudiated iDy the association
by a subsequently enacted by-law reducing said amount even though
the certificate made the payment conditional upon compliance with
all existing or future enacted by-laws.^
In Illinois a member's contract riglits cannot be impaired by a
change of by-laws increasing assessments where there was no agree-
ment to be bound by subsequent changes except such as might be
implied from his being charged with knowledge of by-laws provid-
^^ Smythe v. Supreme Lodse ^ Benjamin v. Mutual Reserve
Knights of Pythias (U. S. D. C.) Fund Life Association, 146 Cal. 34,
198 Fed. 967," 980, 42 Ins. L. J. 6, 79 Pac. 517, 34 Ins. L. J. 614, con-
aif'd Smythe v. Supreme Lodse sidered more fully under § 380c here-
Kniohts of Pythias, 220 Fed. 438, in.
137 C. C. A. 32. 3 Hass v. Mutual Relief Assoc, of
2° Supreme Council American I^e- Petaluma, 118 Cal. 6, 49 Pac. 1056,
gion of Honor v. Champe, 127 Fed. 26 Ins. L. J. 992. The point of vest-
541, 63 C. C. A. 282. ed interest, however, was not dis-
^ Bornstein v. District Grand cussed by the court, except in so far
Lodge No. 4, Independent Order as it was stated that the contention
B'nai B'rith, 2 Cal. App. 624, 84 Pac. was tluit the contract wa.s one for
271. the payment of an absolute, specified
As to right to sick benefits not be- sum.
ing subject to change of by-law re- * Supreme Council American Le-
ducing same, see Berlin v. Eureka gion of Honor v. Jordan, 117 Ga.
Lodge No. 9, Knights of Pythias, 132 808, 45 S. E. 33.
Cal. 294, 64 Pac. "'254.
982
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
ing therefor at the time of the issuance of his certificate.^ Assess-
ments may be increased by a change in by-laws under a provision
of the certificate obligating the member to comply with by-laws
thereafter enacted, as insured has no vested right to have the former
rate continued.^
In Indiana the amount of assessments may be increa.sed under
a reserved power or agreement that changes may thereafter be
made.'
In an lo-wa case the association by amendments to its constitu-
tion not only increased the annual assessments and made other
clianges therein but it also scaled down the amount of assured's
certificate, that is reduced the amount of his policy, said constitu-
tion when assured became a member provided that it could not be
amended except in a certain specified manner and a form of con-
stitution for the government of subordinate lodges contained a pro-
vision for the enactment and alteration or amendment of by-laws
and the mode for adoption and approval thereof, but a.'^sured's cer-
tificate did not expressly provide for any changes or amendments
of the articles of incorporation, constitution or by-laws nor did the
subordinate lodges of which assured was a member make any
clianges in the by-laws. Assured had ratified a prior change by
paying assessments thereunder without protest, l)ut under the later
amendments a claim of ratification, by the suljordinate lodge or
lodges of which he was a member sending a representative to the
grand lodge and who agreed to the amendment wa.s not sustained.
Other than as al)ove appears there was no consent by assured to
said changes and he elected to rescind the contract and ])rought
suit for its breach. It was held that by said unlawful amendments,
without assured's consent, the association repudiated the contract
and so justified rescinding it and bringing suit for its breach and
also that he was not obligated to tender assessments under the old
rate.^ The opinion of the court, per Deemer, .]., is of importance
and so much thereof as applies to the question here under consid-
eration is as follows: ''It will thus be seen that plaintiff nowhere
5 Covenant Mutual Life Assoc, v. C.) 108 Fed. 967, 983, case aff'd in
Kentner, 188 111. 431, 58 N. E. 960. Smvtlie v. Su])reme Lodue Kniuhts
See Covenant Mutual Life Ins. Co. of Pytliian, 220 Fed. 4:;8, 137 C. C.
v. Tuttle, 87 111. App. 309. A. 32.
^ Fullenwider v. Supreme Council ' Supremo Lod<i-e Kniijlits of Hon-
Roval Leao-ue, 180 HI. 621, 72 Am. or v. Bieler, 58 Ind. App. .5.50, 105
St." Rep. 239, .54 N. E. 485, 31 Cliic. X. E. 244. See opinion in tliis case
Leo^. N. 382, 73 111. App. 321, 30 un.lcr § 380d lierein.
Cliic. Leg-. N. 187, considered and * Fort v. Iowa Leaion of Honor,
qnoled from in Smythe v. Supreme 146 Iowa 183, 123 N. W. 224, 39
Lodsje Knights of Pythias (U. S. D. In.s. L. J. 3.
983
§ 380c JOYCE ON INSURANCE
expressly agreed, as in man^y of the cases cited and relied upon by
ap])ellant. to conform to and abide by any amendments that might
thereafter be adoi»tcd. Doubtless the association, in the absence of
such an agreement, had the right to change its by-laws.^ But such
amendments cannot be made of the by-laws as will in any manner
affect the promise of the society to pay a particular sum to a mem-
ber as an insured. As to this the member has the right to rely up-
on the terms of liis contract.^" As said by the Supreme Court of
Massachusetts " 'Most of the cases relied on by the plaintiffs, when
rightly analyzed, turn on the distinction between an attempted
amendment of the by-laws directly affecting the promise to the cer-
tificate holder, as an insured person and an amendment affecting
his duties as a member of the corporation bound to perform his part
in providing means or otherwise as one of the association of insur-
ers' — citing many authorities. The changes and amendments of
which plaintiff' complains were of the constitution itself, and they
not only increased the amount of the assessment which the member
was to pay, but they scaled down the amount which the association
was to pay him as an insured, and in legal effect reduced the amount
of his policy from $2,000 to $1,070 without his personal consent.
That this may not be done under an implied agreement to be bound
by subsequent amendments of the constitution, which is the funda-
mental law of the society, is well settled by authority.^^ Even
though the constitution contains provisions for amendment, this
does not authorize a change of the contract made with the assured
which affects his liability as such.^^ Moreover, many courts have
held that, even where there is an agi'eement on the part of the as-
sured to be bound by subsequent changes, the society cannot make
essential amendments affecting the rights of the insured as the hold-
^Ciiing: Durfee v. Old Colony & Royal Arcanum, 193 Mass. 158, 78
Fall Kiver R. R. Co. 5 Allen "(87 N. E. 129, reprinted in' 7 Am. &
Mass.) 230; Pain v. Soeiete St. Jean Eng. Ann. Cas. 7/9.
Baptiste, 172 Mass. 319, 70 Am. St. ^^Ciling: Hobbs v. Iowa Mutual
Kep. 287, 52 N. E. 502; Wrio-ht v. Benefit Assoc. 82 Iowa, 107, 11
Minnesota Mutual Life Ins. Co. 193 L.R.A. 299, 31 Am. St. Rep. 466, 47
IT. S. 657, 48 L. ed. 832, 24 Sup. Ct. N. W. 983 ; Farmers' Mutual Hail
549; Supreme Lodge Knights of Soc. of Iowa v. Slattery, 115 Iowa,
Pythias v.- Knight, 117 Ind. 489, 3 410, 88 N. W. 949; Field v. Eastern
L.R.A. 409, 20 N. E. 479. Building & Loan Assoc. 117 Iowa
^° Citing: Newhall v. Supreme 185, 90 N. W. 717, and cases cited.
Council American Legion of Honor, ^^ See eases above cited, and Po-
181 Mass. Ill, 63 N. E. 1; Langan krefky v. Detroit Firemen's Fund
V, Supreme Council American Le- Assoc. 121 Mich. 456, 80 N. W. 240,
gion of Honor, 174 N. Y. 266, 66 N. and Peterson v. Gibson, 191 111. 365,
E. 932. 54 L.R.A. 836, 85 Am. St. Rep. 263,
^^ Reynolds v. Supreme Council of 61 N. E. 127.
984
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
er of a benefit certificate," ** The court also said that the certificate
issued to plaintiff was a contract," that the amendment to the
constitution affected the amount to be paid plaintiff or his benefi-
ciary.^^ The court then continues as follows: "With practical
unanimity the courts seem to hold that the general power to amend
by-laws reserved to a society does not authorize an amendment
which impairs the vested rights of the members." . . . The
reason for this rule is so well stated in Ayres' case,"* . . .
that Ave quote the following therefrom : 'An amendment of
by-laws Avhich form part of a contract is an amendment of
the contract itself, and. when such a power is reserved in gen-
eral terms, the parties do not mean, as the courts hold, that the
contract is subject to change in any essential particular at the elec-
tion of tlie one in whose favor the reservation is made. It would
be not reasonable, and hence not within their contemplation, at
lea.st in the absence of stipulations clearly specifying the subjects
to be affected, that one party should have the right to make a radi-
cal 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 re-spect 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
" Citing: Morton v. Supreme Trotter v. Iowa Legion of Honor, 132
Council of Roval League, 100 Mo. Iowa, 513, 7 L.R.A.(N.S.) 569, 109
App. 76, 73 S. W. 259; Hale v. N. W. 1099.
Equitable Aid Union, 168 Pa. 377, ^^ Citing: Supreme Council of
31 Atl. 1066; Olson v. Court of Hon- American Legion of Honor v. Getz,
or, 100 Minn. 117, 8 L.I^A.(N.S.) 112 Fed. 119, 50 C. C. A. 153; Shep-
521, 117 Am. St. Rep. 676, 110 N. perd v. Bankeis Union of the World,
W. 374; Strau.ss v. Mutual Reserve 77 Neb. 85, 108 N. W. 188; Johnson
Fund Life Assoc. 128 N. C. 465, 39 v. Bankers' Union of the World, 83
S. e! 55; O'Neill v. Supreme Council Neb. 48, 118 N. W. 1104; Pokrefky
American Ledon of Honor, 70 N. J. v. Detroit Firemen's Fund Assoc. 121
Law, 410, 57 Atl. 463; Supreme Mich. 456, 80 N. W. 240.
Council of American Legion of Hon- ^''Citing: Scow v. Supreme Conn-
or V. Getz, 112 Fed. 119'; 50 C. C. A. oil Royal League, 223 til. 32, 79 N. E.
153. 42; Grand Lodge Ancient Order of
^^ Citing: Brown v. Towa Legion United Workmen v. Haddock, 72
of Honor, 107 Iowa, 439, 78 N. W\ Kan. 35, 1 L.R.A.(N.S.) 1064, 82
73; Smail v. Court of Honor. 136 Pac. 583; Ayres v. Grand Lodge An-
Mo. App. 434, 117 S. W. 117; Born- cient Order United Workmen, 188 N.
stein V. District Grand Lodge No. 4, Y. 280, 80 N. E. 1020; Sautter v.
Independent Order B'nai B'rith, 2 Supreme Conclave Independent Ord-
Cal. App. 624, 84 Pac. 271; Van er of Ileptasophs, 72 N. J. Law, 325,
Norman v. Modern Brotherhood of 62 Atl. 529.
America, 134 Iowa, 575, 111 N. W. "^ Avres v. Grand Lodge Ancient
992 ; Underwood v. Iowa Legion of Order U. W. 188 N. Y. 280, 80 N. E.
Honor, 66 Iowa, 134, 23 N. W. 300; 1020.
985
§ 380c JOYCE ON INSURANCE
place a person in that situation. ^^ While the defendant may doubt-
less so amend its by-laws, for instance, as to make reasonable
changes in the methods of administration, the manner of conduct-
ing its business, and the like, no change can be made which will
deprive a member of a substantial right conferred expressly or im-
pliedly by the contract itself. That is beyond the power of the Leg-
islature, as well a.s the association, for the obligation of every
contract is protected from state interference by the Federal Consti-
tution.^^ The courts are not agreed, however, as to what constitutes
an impairment of the contract. Some of them hold that an amend-
ed by-law which increases the amount annually assessed against a
member is not an impairment of vested rights,^" while other courts
hold exactly to the contrary.^ We need not pass upon this trouble-
some question now, for it seems to be universally held, as already
indicated, that a benefit society cannot diminish the amount pay-
able to a member or his beneficiary under his certificate by the en-
actment of a subsequent by-law, resolution, or amendment to the
constitution without the consent of the insured.^ Save, then, as
plaintiff' consented to or ratified the different amendments made by
the defendant, he is not bound thereby. That the subordinate
lodge or lodges of which he w^as a member sent a representative to
the Grand Lodge of which he wa.*^ a member, and Avho agreed to
the amendments, is of no moment. Such representative had no
right to bind the plaintiff or to agree to a change of his contract
rights."' 3
In Kansas a fraternal aid association has power to change the
benefits to accrue under the certificate especially so where they are
made to conform to the chai'ter of the association and state laws
where the member agrees in his application that his contract shall
be controlled by all orders, rules and regulations of the association
or order in force or which may be thereafter enacted by the general
council and to submit to all penalties therein contained, and that
iMndnstrial & flenoral Trust Ltd. Rep. 558, 95 N. Y. Snpp. 996; Hieks
V. Tod, 180 N. Y. 215, 225, 73 N. v. Northwestern Aid Assoc. 117
E. 7. Tenn. 203, 96 S. W. 962.
^^ Article 1, sec. 10. ^ Evans v. Southern Tier iMasonic
^^ Citing: Reynohls v. Supreme Relief Assoc. 182 N. Y. 453, 75 N.
Council Royal Arcanum, 192 Mass. E. 317. See also eases cited in note
150, 7 L.R.A.(N.S.) 1154, 78 N. E. to Gilmore v. Knights of Columbus,
129, 7 Am. & Eng. Ann. Cas. 776; 77 Conn. 58^, 58^A_tl. 223, 1 Am. &
Conner v. Supreme Commandery Eng. Ann. Cas. 717.
Golden Cross, 117 Tenn. 549, 97 S. ^Citing: Hill v. Mutual Reserve
W. 306; Gaines v. Supreme Couilcil Fund Life Assoc. 128 N. C. 463, 39
(C. C.) 140 Fed. 978. S. E. 56; Supreme Council Ameri-
^ Citing: Wright v. Kniglits of can Legion of Honor v. Jordan,
Maccabees of the World, 48 Misc. 117 Ga. 808, 45 S. E. 33; Supreme
986
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 3S0c
the application sliall constitute a part of the contract.^ And where
the certificate and by-laws construed together, show that tlie mem-
ber agreed to be 1)ound by subsequently enacted by-laws he is ob-
ligated by a new law which changes and increases his monthly as-
ses^-^ments provided such amendment is necessary to accomplish the
purpa«es of the society, and also reasonable.^
In Louisiana a clause in a membership certificate in an insurance
benefit society by which the member agTees to comply with all of
the by-laws of the society then existing or thereafter adopted, does
not authorize the society to reduce the amount stipulated in the cer-
tificate to be paid, without the consent of the member.^
In a Maryland case it is declared by the court, per Rurkc. •!.,
that: "There appears to be a general concurrence of authority in
support of these two propositions: First tliat a general power to
amend the laws reserved either by the constitution or by-laws of a
fraternal benefit society does not authorize an amendment wliicli
impairs the vested rights of the members. Secondly, that where a
member of a fraternal benefit society agrees in his application for
membership to be Ijound by the rules or laws then in force, or wliicli
might be thereafter adopted, the society after he has become a mem-
ber, may enact reasonable rules and amendments and bind him to
their observance." '
Council American Legion of Honor
V. Getz, 112 Fed. 119, 50 C. C. A.
.153.
* Kirk V. Fraternal Aid Assoc. 95
Kan. 707, 149 Pad 400.
5 Miller v. National Council of the
Knig-hts & Ladies of Security, 69
Kan. 234, 76 Pac. 830, followed as to
right to make reasonable changes and
construction of by-laws as part of
contract, in Moore v. Life & Annuity
Assoc. 95 Kan. 591, 149 Pac. 400.
^ Russ V. Supreme Council Ameri-
can Legion of Honor, 110 La. 588, 98
Am. St. Rep. 469, 34 So. 697.
' Supreme Conclave Independent
Order of Heptasophs v. Rehan, 119
Md. 92, 85 Atl. 1035, 42 Ins. L. J.
631.
Citing: Alabama. — Fraternal Un-
ion of America v. Zeigler, 145 Ala.
287, 30 So. 75.
District of C olumh ia .^Brown v.
Grand Fountain of U. O. of True Re-
formers, 28 App. D. C. 200.
Indiana. — Court of Honor v.
98'
Hutchens, — Ind. App. — , 79 N. E.
409.
Man/land. — Mathieu v. iVLithieu,
112 iMd. 625, 77 Atl. 112.
Minnesota. — Olson v. Court of
Honor, 100 Minn. 117, 8 L.R.A.
(N.S.) 521, 117 Am. St. Rep. 676,
10 Am. & Eng. Ann. Cas. 622, 110 N.
W. 374.
Missouri. — Zimmerman v. Supreme
Tent of Knights of Maccabees of tlie
World, 122 Mo. App. 591, 99 S. W.
817.
Nehraslm. — Lange v. Royal High-
landers, 75 Neb. 188, 10 L.R.A.
(N.S.) 660, 121 Am. St. Rep. 786,
106 N. W. 224, 110 N. W. 1110.
New Jersey. — Strang v. Camden
Lodge Ancient Order United Work-
men, 75 N. J. L. 500, 64 Atl. 9:5;
Sautter v. Supreme Lodge Independ-
ent Order Hepta.sophs, 72 N. J. L.
325, 62 Atl. 529.
New York. — Avers v. Grand Lodge
Ancient Order United Workmen, 188
N. Y. 280, 80 N. E. 1020.
§ 38Ge JOYCE ON INSURANCE
In Massachiisrfts, increasing the rate of assessment on a member
of a mutual benefit society by change of by-h\ws does not impair
his contract, where tlie by-laws to which he agreed required him to
conform to the hiws then in force, or which might thereafter be
adopted.^ In this case the court, per Knowhon, C. J., said: "An-
other question is whether the amendments are in violation of the
contract rights of members. It is stated in the record that 'the
agreements between the plaintiff and the defendants concerning
assessments and benefits are not contained in any one specific instru-
ment, but are found in the application for membership, the bene-
fit certificate, the laws of Massachusetts constituting the charter and
the constitution and laws of the order.' If there Avere no express
stipulation in regard to the by-laws in the application for member-
ship or in the certificate, all members of the corporation would be
bound by. by-laws regularly made or amended.^ iMery member of
this corporation, at the time of joining it enters into an express
agreement to Vonform to and abide by the constitution, laws, rules
and usages of the said council and order, now in force or which may
hereafter be adopted by the same.' The certificates promise pay-
ment only on condition that the member complies Svith the laws,
rules and regulations now governing the said council and fund, or
that hereafter may be enacted by the Supreme Council to goNern
the said council and fund,' etc. Here in the contract is full author-
ity to amend the laws, rules and regulations. In regard to a similar
provision under which a mutual fire insurance company changed
its by-laws, so as to increase the assessments upon certain policy
holders, the Supreme Court of the United States uses this language:
'The liability of members of this institution is of a twofold nature.
It results both from an obligation to conform to laws of their own
making as members of the body politic and from a particular as-
* Reynolds v. Supreme Council oisive except in so far as it interprets
Royal Arcanum, 192 Mass. 150, 7 those laws and determines the rights"
L.R.A.(N.S.) 1154, 7 Am. & Ens. of the parties under them.
Ann. Cas. 776, 78 N. E. 129, 35 Ins. ^Citing: Wright v. Minnesota Mu-
L. J. 673. Cited in Fort v. Iowa tual Life Ins. Co. 193 U. S. 657 ; Su-
Legion of Honor, 146 Iowa, 183, 123 preme Lodge Knights of Pvthias v.
N. W. 224, 39 Ins. L. J. 3. ConMd- Knight, 117 Ind. 489, 3 L.R.A. .409,
ered in Smythe v. Supreme Lodge 20 N. E. 479; Pain v. Societe St.
Knights of Pvthias, 198 Fed. 967, Jean Baptiste, 172 Mass. 319, 70 Am.
984 (case aff'd Smythe v. Supreme St. Rep. 287, 52 N. E. 502; Spilman
Lodge Knights of Pythias, 220 Fed. v. Supreme Council Home Circle, 157
438,' 137 C. C. A. 72) and held in :\rass. 128, 31 N. E. 776; Oliver v.
point "if good law," but "at variance Hopkins, 144 Mass. 175, 10 N. E.
with the New York eases" and to have 776 ; Durf ee v. Old Colony R. R.
been determined largely by force of Co. 5 Allen, 87 Mass. 230, 242.
Massachusetts statutes and "not de-
988
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
sumption or declaration which every individual signs on becoming
a member.' " The latter is remarkably comprehensive. "We will
abide by, observe and adhere to the constitution, rules and regula-
tions which are already established by a majority of the a.ssured
or which are or may hereafter be established by the presi-
dent and directors of the societv." ... As to what is contended
to be a material alteration in their charter, we consider it merely
as a new arrangement or distribution of their funds, and whether
just or unjust, reasonable or unreasonable, beneficial or otherwise
to all concerned, was certainly a mere matter of speculation proper
for the consideration of the society, and which no individual is at
liberty to complain of as he is bound to consider it as his ovyn in-
dividual act. Every member stands in the peculiar situation of
being party on both sides, insurer and insured. Certainly the gen-
eral submission which they have signed will cover their lial)ility to
submit to this alteration.^" Tliis part of the present case is covered
in principle by the decisions of this court in Messer v. Grand Lodge
Ancient Order United Workmen, ^^ and Pain v. St. Jean Baptiste,^^
in which cases changes similar to those made by the defendant were
upheld under like contracts. The same general doctrine has been
stated in many cases in other courts.^^ There are many cases in
which it is held that the amount expressly promised to be paid in
a certificate like those issued by the defendant cannot be cut down
by an amendment of the by-laws." r)ut in many of the.se, as in
the case from this court last cited, a distinction is made between the
^° Quoting from Korn v. Mutual
Assur. Co. () Cranoh (10 U. S.) 192.
" 180 Ma&s. 321, 62 N. E. 252.
12 172 Mass. 310. 70 Am. St. Rep.
287, Wl N. E. 502.
^^ Citing : United States. — Wri2:lit
v. Mitmesota Mutual Life Ins. Co.
193 U. S. 6r)7; Gaines v. Supreme
Council Roval Arcanum (U. S. C. C.)
140 Fed. 978; Gant v. Mutual Reserve
Fund Life Assoc. (U. S. C. C.) 121
Fed. 403, 409; Ilaydel v. Mutual Re-
serve Fund Life Assoc. 104 Fed. 718,
44 C. C. A. 169.
Georgia. — Barber v. IMutual l\e-
serve Fund Life Assoc. 100 Ga. 681,
28 S. E. 498.
Illinois. — Fullenwider v. Supreme
Council Roval Arcanum, 73 111. App.
321, 30 Chic. Le£?. N. 187, aff'd 180
111. 621, 31 Chic. Le^. N. 382, 72 Am.
St. Rep. 239, 54 N. E. 485.
Taylor, 99 Va. 208,
«89
Indiana. — Supreme Lod<4e Kniirlits
of Pvthias v. Kniyiit, 117 Ind. 489.
3 L.R.A. 409, 20 N. E. 479.
Missouri. — Riclunoud v. Supreme
Lo(l<ie Order of Mutual Protection,
10(1 'Mo. App. 8. 71 S. W. 736.
Vermont. — Fusyuro v. Society of
St. Jo.-^epli, 46 Vt. 362.
Virginia. — Mutual Reserve Fund
Life Assoc, v,
37 N. E. 854.
England.- Bartram v. Supreme
Council Roval Arcanum, 6 Ont. W.
R. 404.
^'^ Citing: Supreme Council of
American Legion of Honor v. Getz,
112 Fed. 119, 50 C. C. A. 153; New-
hall v. American I^esifion of Honor,
181 Mass. Ill, 63 N. E. 1, 31 Ins. L.
J. 389; Langan v. American Su])reme
Council Legion of Honor, 174 N. Y.
266, 66 N. E. 932.
§ 380c JOYCE ON INSURANCE
express stipulation of the corporation to pay a certain sum and oth-
er provisions relating to the methods of the corporation, and the
duties of the certificate holders, which properly may be a subject
for regulation of the by-laws, even though they affect the rights of
the parties under their contract. The assessments to be paid for
death benefits in this case are provided for by the by-laws, while the
promise in writing to pay a certain sum to a particular person is, as
to that person, a matter out«ide of those corporate rules which may
be expected to be changed by an amendment of the by-laws. This
promise on the one side is set over against the promise of the mem-
ber on the other. The promise of the member is to do what may be
called for by the by-laws then existing or that may afterwards be
adopted. The promise of the corporation is stated expressly, with-
out mention of the by-laws. The memljer occupies a dual posi-
tion, as an insurer and the insured. As one of the association
agreeing to provide for the payments that may become due to
members, he agrees to be subject to the by-laws. As the in-
sured person to whom a particular sum of money is promised,
he has a right to stand on the terms of the promise. That the
duties of members prescribed by the by-laws remain subject to mod-
ification has often been decided. ^^ Most of the cases relied upon by
the plaintiffs, when rightly analyzed, turn on the distinction be-
tween an attempted amendment of the by-laws directly affecting
the promise to the certificate holder as an insured person, and an
amendment affecting his duties as a member of the corporation
bound to perform his part in providing means or otherwise as one
of the association of insurers. ^^ Other cases cited by the plaintiff
^^Ciiing: Lawson v. Hewell, 118 Council, Roval Arcanum, 89 Minn. 3,
Cal. 61;?, 49 L.R.A. 400n, 50 Pac. 93 N. W. 513.
763; Gilmore v. Knights of Colum- New Jerseij. — Sautter v. Supreme
bus, 77 Conn. 58, 107 Am. St. Rep. Conclave Independent Order Hepta-
17, 58 Atl. 223; Ellerbe v. Faust, 119 sophs, 72 N. J. L. 325, 62 Atl. 529.
Mo. 653, 25 L.R.A. 149n, 25 S. W. New Tor/w— BeAch v. Supreme
390; Lansmeeker V. Grand Lodge An- Tent of Knights of Maccabees, 177
cient Oriler United Workmen, 111 N. Y. 300, 69 N., E. 281; Rol)erts v.
Wis. 279, 55 L.R.A. 185, 87 Am. St. Grand Lodge, Ancient Order United
Rep. 860, 87 N. W. 293; Loeffler v. AVorkmen, 173 N. Y. 580, 65 N. E.
Modern Woodmen of America, ]00 1122; Deuble v. Grand Lodge An-
Wis. 79, 75 N. W. 1012. cient Order United Workmen, 1^2
^^ Citing: 7Z//no/s.— Peterson v. N. Y. 665, 65 N. E. 1116; Weber v.
Gibson, 191 111. 365, 54 L.R.A. 836, Supreme Tent of Knights of Macca-
61 N. K. 127. bees, 172 N. Y. 490, do N. E. 258;
Michiqan. — Startling v. Supreme Fa)'go v. Supreme Tent of Knights
Council' Roval Temi)hir.>^ of Temper- of Maccabees, 89 N. Y. Supp. 65, 96
ance, 108 Mich. 440, 62 Am. St. Rej). App. Div. 491; Deuble v. Grand
709, 66 N. W. 340. Lodge Ancient Order United AVork-
Minnesota. — Tebo v. Supreme ment, 72 N. Y. Supp. 755, 66 App.
990-
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
nre clearly adverse to the views we take." ''On })riiici])le and on the
weight of authority we are of opinion that there is nothing in this
contract that prevents the corporation from amending its by-laws
in a reasonable way, to accomplish the purposes for which it was or-
ganized, even though the change increases the payments to be made
by certificate holders. Such changes necessarily involve some hard-
ship to certain individual members, but the corporation, under tlie
law, should do that which will bring the greatest good to the great-
est number."' In another decision in the same state it is also de-
cided that under a reserved right to change the by-laws no vested
rights are impaired by an amendment reducing sick benefits or the
time during which they might be received under the member's con-
tract, as such right could not be construed to cover a period contin-
uing as long as the disability, but merely a right to receive them
under such limitations and changes as the society might prescribe
by future enacted by-laws or amendments.^^ But it is also held in
tiiat state that the court cannot by an amended by-law cut down an
express promise to pay the amount stipulated to be paid although
the promise in the certificate was to comply with all existing and
tliereafter adopted by-laws, and that the words '•'full compliance with
all the by-laws" existing or thereafter to be enacted, specified as a
consideration in the certificate, mean doing what the by-laws may
require the member to do, not submission to a change in a by-law
after i.'^suance of the certificate diminishing the sum promised to be
paid thereunder." And where an attempt Avas made to reduce the
Div. ;52.3; Robert.s v. Cohen, 70 N. T. Assoc. 126 N. Car. 971, 54 L.R.A.
Su))).. :)7, m App. Div. 259; Spencer 605, 36 S. E. 352.
\. (xrand Lod^e Ancient Order Unit- ^* Pain v. Societe St. Jean Baptiste,
ed Workmen,^ 65 N. Y. Supp. 1146, 172 Mass. 319, 70 Am. St. Kep. 28/,
53 App. Div. 627. 52 N. E. 502.
Oregon. — Wist v. Grand Lodge An- " Newball v. Supreme Council
cicnt Order United Workmen, 22 Ore. American Legion of Honor, 181
271, 29 Am. St. Rep. 603, 29 Pac. Mass. Ill, 63 N. E. 1, 31 Ins. L. J.
610. 389. The court, per Holmes, C. J.,
Pennsylvania. — Hale v. Equitable said: "The ])laintifl's rights do not
Aid Union. 168 Pa. 377, 31 Atl. 1066. stand upon the by-laws alone. They
Tennessee. — Hadley v. Queen City stand also upon e.xpress contract.
Camp No. 27, W. 0. W. 1 Tenn. Ch. The promise to pay $5,000, is eon-
App. 413. ditioned by the by-laws only to the
Texas. — Grand Lodge Ancient Or- extent that has been .stated. Even
der United Workmen v. Stumpf, 24 if the 'full compliance with all the
Tex. Civ. App. 309, 58 S. W. 840. by-laws' which is mentioned as a con-
'^'' Citing: Benjamin v. Mutual Re- sideration for tlic promise is not in-
serve Fund Life A.ssoc. 146 Cal. 34, terpreted and limited by the more
79 Pac. 517; Ebert v. Mutual Reserve specific provisions of the express con-
Fund Life Assoc. 81 Minn. 116, 83 ditions, 'compliance' in this direction
N. W. 506, 834, 84 N. -W. 457; means doing what the by-laws may
Strauss v. Mutual Reserve Fund Life require the member to do, not sub-
991
§ 380c JOYCE ON INSURANCE
amount of l^enefit payable, and the certificate stipulated that amend-
ments might thereafter be made, and the society refused to receive
assessments for more than would be due as based upon the reduced
amount, it was held that, under the Massachusetts law, the refusal
to perform amounted merely to notice of an intended breach of the
contract in the future and therefore no present right of action ex-
isted.2"
mission to seeing his only induce- Council of the Royal Arcanum, 192
ment to do it destroyed. The case is INIass. 150, 7 L.R.A.(N.S.) 1154n, 7
not like Daley v. People's Building, Am. & Eng-. Ann. Cas. 776, 78 N. E.
Loan & Savings Association, 172 129 (which holds that assessments
Ma.ss. 533, 52 N. E. 1090, and Moore may be increased by amendment of
V. Union Fraternal Accident Assoc, the by-laws under provisions of the
103 Iowa 424, 72 N. W. 645, where statute Rev. Laws Mass. c. 119, sec.
the promise to pay a fixed sum was 6. The court also distinguishes Lan-
qualitied by reference to a fund from gan v. Supreme Council, American
whicli the payment was to come and Legion of Honor, 1*4 N. Y. 266, 66
which might turn out inadequate N. E. 932; Supreme Council, Ameri-
from causes over wliieh the defendant can Legion of Honor v. Getz, 112
had no control. Stating our opinion Fed 119) cited in Fort v. Iowa Le-
in a diti'erent form, whatever compli- a,ion of Honor, 164 Iowa, 183, 123
ance with by-laws may be construed N. W. 224, 39 Ins. L. J. 3; Tuttle v.
to mean, it does not mean absolute Iowa State Traveling Glen's Assoc,
submission to whatever may be en- 132 Iowa 652, 661, 104 N. W. 1031,
acted in good faith, and it "^does not 7 L.R.A.(N.S.) 222, 230; Morse v.
extend to permitting a direct dedue- Fraternal Accident Assoc. 190 Mass.
tion from the sum which, on the face 417, 419, 112 Am. St. Rep. 337, 77
of the certificate, any ordinary man N. E. 491 (holdinsc that the amount
would be led to suppose secure. With of insurance could not be reduced,
reference to him the by-law is a plain The policy was not in terms subject
abuse." Gaut v. American Legion of to future alterations in the rules);
Honor, 107 Tenn. 603, 55 Ij.R'.A. Porter v. Supreme Council American
465, 64 S. W. 1070; Langan v. Legion of Honor. 183 Ma^s. 326, 327,
American Legion of Honor, 34 Misc. 328, 67 N. E. 238.
629, 70 N. Y. Supp. 663, 665; ^o po^^pj. y Supreme Council
Knights Templars' & ^lasons' Life American Legion of Honor, 183
Indemnity Co. v. Jarraan, 104 Fed. Mass. 326, 67 N. E. 238.
638, 44 C. C. A. 92, 99; Pokrefky v. Fepudiation and rescission of con-
Detroit Firemen's Fund Assoc. 121 tract: anticipatory breach. Al-
Mich. 456, 80 N. W. 240; ^Yist v. though under the Massachusetts rule
Grand Lodge A. U. U. W. 22 Ore. as above stated it seems that there
271, 281, 29 Am. St. Rep. 603, 29 may be an anticipatory breach of an
Pac. 610. "Another bj^-law under- executory contract resulting from an
take.*; to deduct five per cent from absolute refusal to perform by one
the face value of certificates for an party and that the other party may
emergency fund. Whatever may be at his option treat the contract as
the right to assess for this purpose, terminated for all purposes of per-
it follows from what we have said formance and maintain action at once
that the attempt to cut down the for damages occasioned by such re-
amount to be paid by the defendant pudiation without awaiting the time
under its contract must fail.'' Dis- fixed by the contract for performance
tingiiished in Reynolds v. Supreme is well settled and is applicable to in-
992
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
In Michigan it is held that an amendment cannot have tlie effect
of changing a pre-existing contract by reducing the amount of ben-
efits and that the trustees under a general authority to change the
by-laws cannot adopt such a by-law against the member's protest.^
But it was subsequently decided in the same case that the assent
of a member to an alteration of the by-laws increasing certain ben-
efits and reducing others was not without consideration and thai
assent authorized a change, and that there was such consideration.
It appeared, however, that assured had paid his assessments and in-
creased dues without protest. The question of assent was held prop-
erly one for the jury.^
In Missouri it is decided that, although both the application and
policy contained an agTeement or reservation that assured abide by
subsequent changes in the constitution, rules and regulations a^
they might be constitutionally changed thereafter, that an assess-
ment association could not materially change the assured's contract
by increasing his assessments; and also that it could not in the ab-
sence of a reserved right so to do, levy additional assessments to
cover an obligation whereby assessments paid were to be added to
the policy amount to constitute the sum to be paid to the benefici-
ary ; ' and that the agreed upon compliance with thereafter enacted
laws and usages of the society reserved in the certificate referred
surance contracts, see Indiana Life 25 Sup. Ct. 841 (may rescind) ;
Endowment Co. v. Carnilhan (1915) Henderson v. Supreme Council
— Ind. App. — , 109 N. E. 851, a American Legion of Honor (IT. S.
case fully considering the authorities. C. C.) 120 Fed. 585; Supreme Coun-
See further as to right of member to cil American Legion of Honor v.
re-scind and sue on contract when Jordan, 117 Ga. 808, 45 S. E. 33;
benefits reduced. Supreme Coun- O'Neill v. Supreme Council Ameri-
cil American Legion of Honor v. Lip- can Legion of Honor, 70 N. J. L.
pincott, 69 L.R.A. 803, 134 Fed. 824, 410, 1 Am. & Eng. Ann. Cas. 422, 57
67 C. C. A. 650, rev'g Lippiucott v. Atl. 463; Makely v. Supreme Council
Supreme Council American Legion of American Legion of Honor, 133 N.
Honor, 130 Fed. 483; McAlarney v. C. 367, 45 S. E. 649 (may recover
Supreme Council American Legion of after repudiation) ; Supreme Council
Honor, 131 Fed. 538, 33 Ins. L. J. American Legion of Honor v. Batte,
906, rev'd 135 Fed. 72, 67 C. C. A. 34 Tex. Civ. App. 456. As to re-
546; Supreme Council American Le- scission and cancelation, see §§ 1634
gion of Honor v. Daix, 130 Fed. 101, ct .'seq. herein.
64 C. C. A. 435 (may rescind) ; Daix ^ Pokrefky v. Firemen's Fund As-
V. Supreme Council American Legion soc. 121 Mich. 452, 80 N. W. 240, 6
of Honor (U. S. C. C.) 127 Fed. 374; Det. Leg. N. 527.
Supreme Council American Legion of ^ Pokrefky v. Firemen's Fund
Honor v. Black, 123 Fed. 650, 59 Assoc. 131 Mich. 38, 96 N. W. 1057-
C. C. A. 414, aff'g Black v. Supreme ^ Pearson v. Knights Templars &
Council American Legion of Honor, Masons Life Indemnity Co. 114 Mo.
120 Fed. 580; Certiorari denied App. 283, 89 S. W. 588.
(mem.) 191 U. S. 568, 48 L. ed. 305,
Joyce Ins. Vol. I.— 63. 993
§ 380c JOYCE ON INSURANCE
only to future regulations governing assured's duties as member and
did not cover a reduction in the amount payable made under a sub-
sequently enacted by-law.* But it is also decided that a reduction
of the amount paj'able under the certificate conditioned upon the
amount of assessments paid in, would be sustained under a provi-
sion making the beneficiar3''s rights determinable by the charter,
constitution, laws, etc., in force when the sum, which was the
amount of one assessment not exceeding that specified in the certifi-
cate, became payable.*
In New Jersey a general reserved power to alter or amend the
laws of the order does not authorize an increase in dues beyond the
amount specified in the contract and so impair the obligation there-
of, especially so where the contract limited the amount up to which
they might be increased when the receipts were insuflicient thereby
impliedly precluding an additional increav^e. In the case so decid-
ing the court per Walker, V. C, said: " 'But it is very generally,
if not universally, held that these benefit certificates, like other con-
tracts, confer a vested interest upon the member which may not be
impaired by a subsequent amendment, even though the power to
amend be resened in general terms. If the member's stipulation
to comply with all by-laws thereafter enacted could be construed
to relate to a by-law that reduced the benefit from $5,000 to $2,000,
it must also relate to a by-law canceling the benefit certificate en-
tirely — a result wholly unjust and absurd. This stipulation must
be construed as referring only to reasonable by-laws and amend-
mentei adopted in furtherance of the contract, and not to such as
would overthrow it or materially alter its terms.' ^ ... If this
increase is to be held good, then it would appear that the complain-
ant and those in the class with him are at the mercy of the supreme
circle with reference to any impairment of tlieir contracts of mem-
bership in the death benefit fund which that circle may see fit to
make." '
In Ne-w York in a case decided in 1912. a change was made in
the rate of assessment to which assured agreed, subsequently another
change therein was made without notice to as.surcd, without his
consent and against his objection and protest. He had agreed in his
application and certificate to conform to and comply with thereafter
* Morton v. Supreme Council Council American Legion of Honor,
Royal League, 100 Mo. App. 76, 73 70 N. J. L. 410, 420, 1 Am. & Eng.
S. W. 259. Ann. Cas. 422, 57 All. 463, 467.
* Richmond v. Supreme Lodge, Or- ' Poole v. Supreme Circle Brother-
der of ]\Iutual Protection, 100 Mo. hood of America, 80 N. J. Eq. 259,
App. 8, 71 S. W. 736. 85 Atl. 821, 42 Ins. L. J. 482.
^ Quoting from O'Neill v. Supreme
994
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
adopted laws, rules, reg:ulations and usages. It was held that said
last amendment of the laws was not authorized. The Appellate
Division had decided that the contract had so effectually ravened
said right to amend as to bind the assured to such increa.se in rates.
"This conclusion was based upon the assumption that there is a
distinction between this case and the cases in which we have held
that a membership contract in a mutual benefit as.sociation in which
the member agrees to complj' with the laws of the order 'now in
force or that may hereafter be adopted,' does not authorize a sub-
sequent amendment of the by-laws without the member's consent
if the effect of such amendment is t« increase the rate of assessment
or to reduce the amount of the benefit, as fixed by the contract.
. . . We think there is no distinction." It was further declared
that the reservation in the certificate, if intended to bind the mem-
ber, should be explicit in providing that the jiayments therein
specified should be subject to such modification as to amount, terms
and conditions of payment and contingencies in which the same
were payable as the order might from time to time provide, and
that nothing less explicit would be binding. It was further decided
that the fact that the defendant was a Ma.ssachusetts corporation
did not authorize such an amendment under its statute, nor apply
to a member who had entered into and completed his contract in
New York with the association.^ It is said in another New York
case, per Rartlett, J., that: "There is a conflict of judicial decisions
in the various states on the point now presented, but a careful ex-
amination of the cases shows that the great weight of autliority is
in favor of the position that the original contract cannot be im-
paired. It would be quite impo.«sible to harmonize the conflicting
views of the learned judges, and it remains to be considered wheth-
er the decisions of this court have not laid down the rule of law
which must now govern, to the efl'ect that the contract of insurance
cannot be changed by any act of the defendant. We have on the
one hand the plaintiff' standing upon the plain letter and spirit of
his contract, and on the other the in.sistence of the defendant that
unless, under its construction of the contract, it is vested with the
power to increase the amount of a single assessment, as the exigen-
8 Green v. Supreme Council Roval Fed. 967, 987, but court declared that
Arcanum, 206 N. Y. 591, 100 N. E. "benefit certificate expressly stated
411, 42 Ins. L. J. 3, 335, rev'g 129 that the member should comply with
N. Y. Supp. 791, 144 App. Div. 701, the laws 'that might thereafter be en-
40 Ins. L. J. 414a, which rev'd 124 acted to govern the relief fund.' This
N. Y. Supp. 398, 39 Ins. L. J. 1087, the court construed as sufficiently
case in 129 N. Y. Supp. 791 is quoted providing for an amendment which
from in Smythe v. Supreme Lodce increiised the assessments to make the
Knights of Pythias (U. S. D. C.) 198 relief fund."
995
§ 380c JOYCE ON INSURANCE
cies of the company may require, it will be unable to continue its
financial life and pay its death losses." ^ And a general power to
amend without specifying in what respects, reserved in the appli-
cation and certificate does not authorize an amendment reducing
benefits or increasing assessments. So the power resented by a mu-
tual benefit society to amend its laws does not authorize it to de-
crease the benefits to which a member is entitled by the terms of
his contract, such as the right to relief from assessments upon reach-
ing a specified age or in case of disability, and to advance payments
on the ])olicy under certain conditions.^" The court considers at
length the several cases in New York and says: ''These cases estab-
lish the rule that l)enefits cannot be reduced, or new conditions
forfeiting the benefits added by an amendment of the by-laws, even
when the general right to amend is expressly reserved. They are
controlling, therefore, so far as all the amendments now in question
are concerned, except that providing for an increase in the rate of
assessments. Tollowing the authorities cited we hold that the
amendments which assume to cut down the benefits to which the
plaintiff became entitled by his contract with the defendant, are
void and of no effect. I am personally, of the opinion that the
amendment increasing the rate of assessments is also void, for I can
see no difference in principle between reducing 1)enefits and increas-
ing the amount to be paid for benefits. The plaintiff entered into
the contract on the faith of the promise by the association that he
should 'pay at the same rate thereafter so long as he remains con-
tinually in good standing in the order,' which he had the right to
assume and the defendant knew that he would assume, was a cove-
nant not to increase the rate. The certificate states that 'he is en-
titled to all the rights, benefits, and privileges' provided by the laws
of the order, which are thus made a part of the certificate. Hence
the right to pay at the old rate was one of the rights provided for
and that he contracted for. It was a vested right, immune from
change by amendment in the absence of a specific reservation of
power to amend in that particular. On the average, such contracts
9 Dowdall V. Supreme Council 112 N. Y. Suiip. 1150, 128 App. Div.
Catholic Mutual Benefit Assoc. 196 883 {quoted from in Sraytlie v. Su-
N. Y. 405, 31 L.R.A.(N.S.) 417n, 89 preme Lode^e Knio-hts of Pythias [U.
N. E. 1075, 39 Ins. L. J. 87, rev'g S. D. C] 198 Fed. 967, 977, 978)
122 N. Y. Supp. 1130, 123 App. cited in dissenting opinion in Hannes
Div. 913, 39 Ins. L. J. 87, rev'g 108 v. Nederland Israelitish Sick Fund,
N. Y. Supp. 11.30, 123 App. Div. 913. 136 N. Y. Supp. 742, 152 App. Div.
10 ^Yright v. Knights of Maccabees 140, 41 Ins. L. J. 1685, to point that
of the World, 196 N. Y. 391, 134 Am. law is well settled that subsequent
St. Rep. 838, 31 L.R.A.(N.S.) 423, amendments cannot decrease benefits.
89 N. E. 1078, 39 Ins. L. J. 95, rev'g
996
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 3S0c
would be impaired b}'^ doubling assessments to the same extent as
by cutting off one-half of the benefit. The price to be paid by the
plaintiff' for insurance is as essential a part of his contract as the
amount of insurance to be paid to him by the defendant on the
maturity of the policy. Whether the one is increased or the other
proportionately decreased makas no difference in principle, or in
the final result. By either method the pecuniary value of the
contract which is property, would be reduced one-half." ^^ So the
fact that in the application, upon which the certificate was issued,
the assured agreed to comply with all laws, regulations and require-
ments of the society which were then, or might thereafter be, en-
acted, there being no reservation in the by-laws of the specific right
to amend them so as to restrict the occupation, or business, of the
assured, did not permit an amendment in that respect without the
consent of the assured, and the attempt made without his consent
was beyond the power of the society and absolutely void ; since 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 engaging in any lawful business was a vested right
of which the assured could not be deprived without his consent. ^^
11 Wright V. Knights of INIaccabees comply with all the laws, rules, and
of the World, IDG N. Y. i)!)!, 31 requirements of the order. In his
L.R.A.(N.S.) 423, 89 N. E. 1078, 39 application for membership tlie in-
Ins. L. J. 95. surcd agreed Ho strictly comply with
^2 Ayres v. Grond Lodge Ancient the constitution, laws, and regulations
Order of United Workmen", 188 N. Y. which are, or may hereafter be, en-
280, 80 N. E. 220, all'g 109 App. Div. acted by the supreme, grand, or sub-
919. Principal case is quoted in ordinate lodge.' Sometime between
Smythe v. Supreme Lodge Knights of 1898 and 1902 the defendant adopted
Pythias, 220 Fed. 438, 441, 137 C. C. a by-law wliich provided, in sub-
A. 32, and in Smythe v. Supreme stance, that any member who should
Lodge Knights of Pythias (U. S. D. thereafter enter into the business or
C.) 198 Fed. 967, 980. . occujiation of selling by retail in-
This decision is considered in an- toxicating liquors as a beverage
other New York case, Dowdall v. Su- should be suspended from any and
preme Caholic Mutual Benefit Assoc, all rights to participate in the bene-
190 N. Y. 405, 31 L.R.A.(N.S.) 417n, ticiavy fund. Previous to January
89 N. E. 1075, 39 Ins. L. J. 87, rev'g 1, 1904, the insured had never en-
122 N. Y. Supp. 1130, 123 App. Div. gaged in the busine.ss of selling li-
913, where the court per Bartlett, J. <|Uors, but on that day, in connection
said: "In March 1885, one Emory D. with one Hanchctt, his copartner, he
Fuller, became a member of a local began to carry on a liotel at Weeds-
lodge of the defendant, a domestic port. The firm employed a bartend-
corporation, and was to participate er, who sold liquor in the usual way
in tlie beneticiary fund of the order over the bar. In June of the same
in the amount of $2,000 at the time year the insured died and the defend-
of his death. The insured agreed to ant refused to pay on the ground
097
§ 380c
JOYCE ON INSURANCE
And the amount of benefits specified in a member's certificate can-
not be reduced so as to take away vested rights by amendments to
the by-laws adopted after the issuance of the certificate even though
that he had engaged in the business Ltd. v. Tod, 180 N. Y. 215, 225, 73
of selling intoxicating liquors at re- N. E. 7. "While the defendant may
tail. The contract of insurance had doubtlass so amend its by-laws, for
been in force for more than twelve instance as to make reasonable
j'ears at the time of the amendment changes in the methods of adminis-
of the by-laws as to the sale of in- tration, the manner of conducting its
toxicating liquors. The defendant business, and the like, no change can
having refused to pay the amount al- be made which will deprive a member
leged to be due on the certificate, an of a substantial right conferred ex-
action was brought to recover the pressly or impliedly by the contract
same. The trial court and the Ap- itself. That is beyond the power of
peltate Division decided in favor of the Legislature as well as the associa-
the plaintiff, and this court attirmed tion, for the obligation of every con-
the judgment. Vann, J., writing, tract is protected from state inter-
stated: 'This case cannot be distin- ference by the Federal Constitution,
guished in principle from a long line Article 1, sec. 10. . . . The reser-
of cases decided by this court. . . . vation of a general power to amend
It is well establi.siied by these author- the by-laws, without reserving the
ities. "that a general power reserved specific right to so amend them as to
either by statute or by the const itu- restrict the occupation, did not per-
tion of a society to amend its by-laws mit an amendment in that respect,
does not authorize an amendment ira- and the attempt made without the
pairing the vested rights of mem- consent of the assured was beyond the
bers." ' An amendment of by-laws power of the defendant and absolute-
whieh form part of a contract is an ly void as to him. The etiort was not
amendment of the contract itself, and
when such a power is reserved in gen-
eral terms the ]^arties do not mean,
as the courts hold, that the contract
is subject to change in any essential
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 ])rivilege, allowed be-
particular at the election of the one cause not forbidden, of engaging in
in whose favor the reservation is any lawful business was a vested
made. It would be not reasonable right." Citing pages 285, 286, 287,
and hence not within their eontempla- of 188 N. Y. p. 1021 of 80 N. E.
tion, at least in the absence of sti])u- The court also said in the Dowdall
lations clearly specifying the subjects case just cited that it was much
to be affected, that one party should stronger in favor of the plaintiff than
have the right to make a radical the Avres ease in regard to the agree-
change in the contract, or one that
would reduce its pecuniary value to
the other. A contract which author-
ment in the application as to compli-
ance with existing and future by-laws,
rules, and regulations of the as-
izes one party to change it in any re- sociation and continues, after com-
spect that he chooses would in effect i^aring the same, in regard to the
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." as to affect the contract.
Citing Industrial & General Trust
998
Dowdall case that: "There is no sug-
gestion that the laws, rules, and re-
quirements could at any future time
be amended, or new ones enacted, so
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
the member had agreed in his application, upon which the certifi-
cate was issued, to comply with by-laws, rules, regulations in force
or thereafter adopted and this is so notwithstanding the certificate
of incorporation provided for the payment, under the certificates
issued to members, ''of such sum as the by-laws of such association
from time to time prescribe." " Finally as to New York, it is held
^' Evans v. Southern Tier Masonic
Relief Assoc. 182 N. Y. 453, 75 N.
E. 317, rev'g 88 N. Y. Supp. 162, 94
App. Div. 541, and following Beach
v. Supreme Tent of the Knights of
Maccabe&s, 177 N. Y. 100, 69 N. E.
281. The Evans case is cited in Han-
nes v. Nederland Israelitish Sick
Fund, 136 N. Y. S. 742, 152 A. D.
140, 41 I. L. J. 1685, in dissenting
opinion per McLaughUn J., to point
that "agreement to be 'guided' by the
by-laws which might thereafter be
adopted had reference to matters of
administration and not to his rights
which were then fixed and vested."
Evans case is also cited in Fort v.
Iowa Legion of Honor, 146 Iowa,
]83, 123 N. W. 224, 30 Ins. L. J. 3.
The Evans decision is also considered
in another New York case, Dowdall
v. Supreme Catholic Mutual Benefit
Assoc. 196 N. Y. 405, 31 L.R.A.
(N.S.) 417n, 89 N. E. 1075, 39 Ins.
L. .L 87, rev'g 122 N. Y. Supp. 1130,
123 App. Div. 913, where the court
per Bartlett J., said: "It was held
that the beneficiai'y named in a cer-
tificate issued by a fraternal benefit
or life insurance association to a de-
ceai?ed member thereof, upon which
all dues and assessments required by
the by-laws of the association, have
been paid, cannot be deprived of the
benefit specified in tlie certificate by
amendments to the by-laws adopted
subsequent to the issuance of the cer-
tificate, notwithstanding that the aji-
plication for membership, upon wliicli
the certificate was issued, contained a
clause in which the applicant agreed
to conform in all respects to the by-
laws, rules, and regulations of the as-
sociation then in force, or which
might thereafter be adopted by it«
board of directors. The fact that the
999
certificate of incorporation of the as-
sociation contains a clause to the ef-
fect that the payment to the benefi-
ciaries under the certificates of the
association shall be 'of such sum as the
by-laws of such association may from
time to time prescribe,' does not dis-
tinguish the present case from the
rule." The court also said, in the
Dowdall case just cited, tliat it was
much stronger in favor of the plain-
tiff than the Evans case in regard to
the agreement in the application as
to compliance with existing and fu-
ture by-laws, rules, and regulations of
the association and continues after
comparing the same in regard to the
Dowdall case that : "There is no sug-
gestion that the laws, rules, and re-
quirements could at any future time
be amended, or new ones enacted, so
as to affect the contract."
Other New York decisions are:
Beach v. Supreme Tent Knights of
Maccabees of the World, 177 N. Y.
100, 60 N. E. 281 {covs^idered and
quoted from in Dowdall v. Supreme
Catholic Mutual Benefit Assoc. 196 N.
Y. 405, 31 L.R.A. (N.S.) 417n, 89 N.
E. 1075, 39 Ins. L. J. 87; cited m dis-
senting opinion per McLaughlin, J.,
in Hannes v. Nederland Israelitish
Sick Fund, 136 N. Y. Supp. 742, 152
App. Div. 140, 41 Ins. L. J. 1685, to
point that ''agreement to be 'guided'
by the by-laws which might tliereaft-
er be adopted has reference to mat-
ters of administration, and not to his"
[the member's] "rights wliich were
then fixed and vested." Quoted from
in Smythe v. Supreme Lodge Knights
of Pythias [U. S. D. C] 198 Fed.
967, 980); Shipman v. Protected
Home Circle, 174 N. Y. 398, 63
L.R.A. 347, 67 N. E. 83; Langan v.
Supreme Council American Legion of
§ 380o
JOYCE ON INSURANCE
that the amount agreed to be paid under a certificate issued by a
fraternal beneficiary society cannot, by an amendment thereafter
made, be reduced, even under a reserved power to amend the by-
laws and although the insured paid the reduced assessment, where
it did not appear that sucli payments were made with knowledge
of said reduction amendment.^*
Honor, 174 N. Y. 266, 66 N. E. 932, York Safety R&serve Fund, 125 N.
rev'g 75 N. Y. Supp. 1127, 09 App. Y. Supp. 852, afi'd (mem.) 129 N. Y.
Div. 616 {cited in Fort v. Iowa Le- Supp. 1126, 69 Misc. 452; Rockwell
gion of Honor, 146 Iowa, 183, 123 v. Kniglits Templars & Masonic Mu-
N. W. 224, 39 Ins. L. J. 3) ; Weber v. tual Aid Assoe._119 N. Y. Supp. 515,
Supreme Tent Knishts of Maccabees 134 App. Div. 736, 39 Ins. L. J. 105
of the World, 172 N. Y. 490, 494, 92 (amendment of by-laws not stipulat-
Am. St. Rep. 753, 65 N. E. 258. (Tliis ed for. Case quoted from in Smythe
decision is considered in anotlier New v. Supreme Lodge Knights of Py-
York ease, Dowdall V. Supreme Cath- thias (U. S. D. C.) 198 Fed. 967,
olie Mutual Benetit Assoc. 196 N. Y. 979) ; Mock v. Supreme Council of
405, 31 L.R.A.(N.S.) 417n, 89 N. E. Royal Arcanum, 106 N. Y. Supp. 155,
1075, 39 Ins. L. J. 87, rev'g 122 N. Y. 12i App. Div. 474 (does not interfere
Supp. 1130, 123 App. Div. 913, where with vested rights) ; Wiedynska v.
the court per Bartlett, J., said: "An -Pulaski Polish Benev. Soc. 97 N. Y.
action was brought upon a certificate Supp. 413, 110 App. Div. 932 (can-
of insurance. The defense interposed not divest vested rights) ; McCloskey
Ava-s that the insured took his own v. Supreme Council American Legion
life, and hence a recovery could not of Honor, 96 N. Y. Supp. 347, 109
be had, because at the time of his App. Div. 309 (can reduce assess-
death, the by-laAvs and rules of the ments when power reserved case also
order provided that should an insured of waiver or estoppel) ; Williams v.
commit suicide within five years from Supreme Council American Legion of
the time of admission into" the order, Plonor, 80 N. Y. Supp. 713, 80 App.
whether sane or insane, the contract Div. 402.
should be void. Weber's contract of ^* Smith v. Supreme Council Auier-
insurance provided that it sliould be ican Legion of Honor, 88 N. Y. Supp.
void if the insured committed suicide 44, 94 App. Div. 357. The court, per
within one year whether sane or in- Hatch, J., said : "We think the learn-
sane. During Weber's lifetime, after ed court was correct in the conclusion
the issuance of the certificate, the de- which it reached. It is settled by in-
fendant amended its by-laws and dubitable authority that the reserved
rules so as to extend the time from right to amend the laws which consti-
one year to five in the suicide clause, tute a part of the contract between
The opinion of the court near the the insured and the defendant does
close states: 'This contract insured not confer authority to destroy vest-
Weber against unintentional self-de- ed rights, and without the consent of
struetion after one year, and defend- the holder of the certificate to such
ant had not the power to take away change it is inoperative and void,
the right thus secured without his This wa.s so held in respect to the
consent.' ") ; Parish v. New York Pro- amendment now under consideration.
duce Exchange, 169 N. Y. 34, 56 Langan v. Supreme Council Ameri-
L.R.A. 149, 61 N. E. 977; Hannes v. can Legion of Honor, 174 N. Y. 266,
Nederlaiid Israelitisli Sick Fund, 136 66 N. E. 932; Williams v. Supreme
N. Y. Supp. 742, 152 App. Div. 140, Council, 80 N. Y. Supp. 713, 80 App.
41 Ins, L. J. 1685; Heath v. New Div. 402. And also as applied to
1000
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
In a North Carolina ca.«e it se^ms to be settled that a member's
vested rights cannot be destroyed by changes or amendments of the
other similar contracts sought in like sumed to know them ; but it is evident
manner to be so changed. Parish v. from a reading of the entire section,
New York Produce Exchange, 169 N. to which reference is made, that it
Y. 34, 56 L.R.A. 149, 61 N. E. 977 ; has regard to laws, and by-laws exist-
Weber v. Supreme Tent Knights of ing at the time when the insured be-
Maccabees of the World, 172 N. Y. comes a member. By the provisions
490, 92 Am. St. Rep. 753, 65 N. E. of sees. 79, 80, which discuss the au-
258. We should not deem this dis- thority to make and change laws, it
cus.sion necessary were it not for a is shown that the laws, to be binding
decision of the third Department in upon all members, must be perfectly
Evans v. Southern Tier Masonic Re- adopted, and must be such laws as the
lief Association, 78 N. Y. Supp. 611, coritoration has the power to make.
76 App. Div. 151, decided by a divid- Tlierein it is said : *Tf the charter, or
ed court. Therein it was held, upon the fundamental agreement of the
a state of facts quite similar to the meml)ers prescribe the mode in which
present, that the payment of the re- the by-laws shall be made and adopt-
duced assessment was notice to the ed in order to insure their validity,
insured of a change in the by-laws that mode must be strictly pursued.'
and that by such payment he acqui- And further, 'No by-laws can be re-
esced therein. There, as here, such pealed so as to impair or affect vested
change operated to destroy vested rights, for the members have the right
rights. The decision proceeded upon to rely upon the by-laws, wliich, as
the ground that the insured was pre- between themselves, are contracts. A
sumed conclusively to have knowledge by-law that will destroy a vested
of the by-laws of the association, and, right is unreasonable.' The cases
eon.sequently, of this amendment, at cited fully support the text. There
the time when he was making the can be no presumption that a member
payment, and that, aside from this
presumption, the change, in the meth-
od of assessment was actual notice to
him of the change in the by-laws. We
hesitate in disagreeing with the learn
has notice of a law which is invalid
and which destroys his vested prop-
erty right. The member is only pre-
sumed to know of the existence of
such laws and rules as the corporation
ed court who made this decision, but, has authority to make. Indeed, the
with all deference thereto, we are of presumption is that the corporation
opinion that it is in conflict with the will not pass a law which is illegal,
law as announced in the Second De- unreasonable and void; otherwise, by
partment in Simons v. Supreme a presumption, a member would be
Council American Legion of Honor, bound by an illegal act which de-
81 N. Y. Supp. 1014, 82 App. Div. stroyed his property right. 11 is evi-
617, and with the law of the case, dent that surh a rule ot law does not
Nor do we think the authorities cited exist, and may not be invoked as a
by the learned court in support of its protection for an illegal act const it ut-
condusion decide the question as ing a breach of contract and which
therein announced. For the first
proposition, the court relies upon Ba-
con on Benefit Societies Life Insur-
ance, sec. 81, wherein it is stated as a
works a destruction of vested rights.
Nor do the case.s cited sujij^ort the
doctrine of acquiescence. In Koeth
V. The Kniglits Templars and Mason-
general proposition that the by-laws ic Life Indemnity Company, 55 N. Y.
of a society are binding upon all the Supp. 768, 37 App. Div. 146, the sole
members, and all are conclusively pre- question involved was whether it was
1001
580c
JOYCE ON INSURANCE
constitution and by-laws reducing the amount of indemnity even
though there is a general consent of a member that changes may be
competent for tlie defendant when worked a forfeiture of his contingent
sued upon its indemnity certificate, rights.' Therein it appeared that the
to show that an amendment was member had the right to participate
adopted to its laws without opposi- in the change in the constitution, and
tion, and tliat the certificate holder, the subject-matter of it constituted a
as a member of the organization, regulation having regard to a com-
voted in favor of such amendment, pliance by the member with the terms
This proof having been excluded on of his contract. The court held that,
the plaintiff's objection, who was as the member had failed to comply
.seeking to hold the certificates held with the term of his contract his ben-
by the person who had voted in favor eficiary ceased to have any interest in
of the amendment, the court held such the fund upon his death. Two things,
ruling to be error, sustained the de- therefore, concurred : One that the
fendant's exception, and ordered a amendment to the constitution was by
new trial. The court speaking the body it'^elf, had relation to a sub-
through Judge FoUett, said: 'It was ject over which it had the power to
competent for the defendant to show legislate, and in legislating it the ef-
that the insured expressly assented, feet which followed neglect upon the
January 14, 18f)6, to a change of the part of a member to comply with the
contract, existing between him and terms of his contract. In Bogards v.
the defendant, as to the manner of Farmers Mutual Insurance Company,
giving notices of as.sessments and 79 Mich. 440, 44 X. W. 8oG, the plain-
wlien such assessments became paya- lift was the holder of a policy of in-
ble.' Therein also the question pre- surance issued by the defendant
sented was not only to show the af- which wa.<^ organized under an act au-
firmative act and the express assent thorizing tlie incorporation of mutual
of the certificate holder to the change fire insurance companies. Policies
in the laws, but the law itself was were i.ssued to the members, and mem-
such a one as the society was author- bership was maintained by the pay-
ized to change. In McDowell v. Ack- ment of certain fees and 1 mill per
ley, 93 Pa. 277, the amendment to the cent, on the amount insured at the
law was made by all the members of time of i.'^suing the policy, with the
the association and provided that a assessment made therefor. In the
suspended member who should fail charter of the company power was
for three months to pay in full all expressly conferred upon the mem-
credits, dues, and assessments should bers to pass by-laws, at any annual
forthwith cease to be a full member or si)ecial meeting, which should be
of the association; that he might binding alike upon the corporation
thereafter be restored to full member- and the directors. The policy was
ship by favorable report of the stand- issued and received under an express
ing committee and by paying in full agreement to be subject to all changes
all arrears of gratuities, dues and as- which should thereafter be made by
sessments. The court held that the the charter and by-laws and the char-
members of the associations had the ter provided that at the annual meet-
power to make such a change in the ing members present might determine
laws, and that they were binding up- among other things, a single hazard,
on the members. The sole point in At a regular meeting the company
the case was whether the failure of adopted a by-law that it should not
the member 'to pay his dues and as- be liable for loss by fire from steam
sessments, and his second suspension, ]iower used on or about the premises
1002
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380c
made therein." The court per Douglas, J., declares after citing
prior decisions in that state that "with one exception the principles
governing the case at bar are so nearly identical and have l^een so
fully discussed in those cases that it seems useless for us either to
repeat or enlarge upon what we have said. We must adhere to what
may now be considered the settled ruling of this court, that 'what-
ever may be the power of a mutual association to change its l)y-laws,
such changes must always l>e in furtherance of the essential objects
of its creation, and not destructive of vested rights.' While relying
upon our own decided cases we are not without authoritias in well
considered cases in other jurisdictions'' and the claim will not be
sustained that a stipulation was not to pay a fixed sum but only an
agreement to pay some indefinite sum not exceeding said amount
as such a stipulation is in legal effect one for the full amount so
specified where the company receives premiums in full based on
said amount.
In Ohio tlie reservation of a right to alter or change a by-law does
not enable the society to repudiate a debt and reduce the amount
to which a member is entitled for benefits by a by-law enacted after
the right of the claimant has accrued. ^^
In Tennessee where the increase in rates is not unreasonal)le the
member is bound if the policy is conditioned for compliance with
the laws, rules and regulations thereafter enacted "by the supreme
commandery to govern said comniandery and fund, and that if the
of any member of tlie company, and tempted modification was field to be
a copy of tbis by-law wa.s given iin- a destruction of vested rigbts. Tbese
mediatefy to the plaintiff. It was are all tbe cases relied upon by tbc
lield tbai a loss suffered by reason oE learned court in announcing tbe doc-
tbe exception contained in this by- trine, save one which seems to be not
law created no liability ag'ainst the reported. These cases simply serve
company. This case was clearly well to slu)\v the distiiu-tioii which exists
decided, for tbe chartered power in between an authorized and unautbor-
express terms gave the right to make ized change in the laws governing
the limitation; the plaintiff had the such contracts, and as we recall them,
right to participate in its action; it instead of supporting tbe doctrine of
related to a subject which was clearly acquiescence and estoiipel, they con-
within tbe power of the corporation lirm the views which we have hereto-
to regulate. Notice was given, and fore expressed. See also Morawetz
consequently compliance was had with on Corp. (2d ed.) sees. 500, .")08;
the terms of the contract which had Smith v. Supreme Coiitu-il American
been made; and there was no inter- Legioji of Honor, 88 N. Y. Supp. 44,
ference with vested rights. The court 45, 4<, 48, 94 Ajjp. Uiv. 357.
took occasion to distinguish that de- " Makely v. American Legion of
cision from Becker v. Farmers Mu- Honor, 133 N. Car. 367, 45 S. E. 649.
tual Insurance Company, 48 IMich. ^6 Pellazino v. Ccrman Catholic St.
618, 12 N. W. 874, where, there being Josephs' Soc. 16 \Ykly. L. Bull,
no such reserved power and no au- (Cin.) 27.
tbority to make such a change, tbe at-
1003
§ 380<? JOYCE ON INSURANCE
member failed to pay his assessments when due he should ipso facto
stand disconnected with the order," and the rule was extended to
include one insane at the time the amendment was adopted. The
point, however, of waiver and estoppel existed.^''^ But it is also de-
cided in that state that an agreement by the holder of a mutual ben-
efit certificate to be governed by by-laws subsequently enacted does
not authorize the reduction of the benefit called for by his certifi-
cate, after he has for years paid assessments on its original value,
such a by-law is ultra vires and void. The reserved right is one of
preservation and not of destruction of the contract.^*
In Texas it is held that by-laws cannot be amended so as to in-
crease assessment rates. So rerating may apply to existing members
as well as to those becoming members thereafter and Avliere an as-
sociation which takes over meml>ers from another association, and
the certificate is conditioned that the member comply with the rules
and regulations thereafter enacted, existing members will be bound
by subsequent rerating by-laws increasing the assessments where it
is necessary for the association to meet certificate obligations and
such increa-^e of rates does not impair contract or vested rights of a
member.^^ .Vnd an amendment increasing the amount of benefits
and reducing dues, and also permitting certain members by declara-
tion in writing to remain under the former plan, binds members
not availing themselves of such permission, and also obligates ben-
eficiaries.^"
In Wisconsin even though the member agrees in his certificate
to comply with the laws, rules and regulations of the society or or-
der as they may be enacted or amended from time to time in the
future the society is not empowered to make changes which mate-
rially alter the contract relations between the society and its mem-
Ijcrs as expressed in the contract, in the absence of consent or waiver
or of some statutory rule of public policy to the contrary. Such
reservation or stipulation relates only to the conduct and govern-
ment of the society in relation to its members, and while it may
authorize a change in the details of transacting business with the
members it cannot thereunder force a different contract upon the
member from that entered into when the certificate was issued and
^"^ Conner v. Supreme Commanderv Mystic Circle v. Ericson, — Tex. Civ.
Golden Cross, 117 Tenn. 540, 97 S. App. — , 131 S. W. 92. Case where
W. 306. Cited in Fort v. Iowa Le- member was held to have consented
gion of Honor, 146 Iowa, 183, 123 N. to change of plan from assessment to
W. 224, 39 Ins. L. J. 3. one of periodical payment.
^^ Gaut v. Supreme Council Amer- ^^ Duer v. Supreme Council Order
ican Legion of Honor, 107 Tenn. 603, of Chosen Friends, 21 Tex. Civ. App.
55 L.R.A. 465, 64 S. W. 1070. 493, 52 S. W. 109.
^^ Supreme Ruling of Fraternal
1004
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380d
accepted.^ Nor can a fraternal benefit order by amendment to the
by-laws, even though assured agrees in his certificate to com[)ly with
subsequently enacted by-laws, charge a deficiency in dues or rates
created thereby against the member's certificate by advancing mem-
bers to their attained age at a certain dale and charging an advanced
rate up to said date from the time of initiation of a member.^ And
even though a power is reserved to make changes in the by-laws,
rul&s and regulations a mutual benefit order cannot by a subsequent
amendment of the constitution or by-laws change assured's contract
by making payable thereunder an indefinite sum probably much
less than that contracted for especially where the member has paid
assessment*! for a long time, contributed to meet maturing obhga-
tions of a specified sum for each member as the principle that vest-
ed interests cannot be disturbed by retroactive laws applies.'
§ 380d. Same subject: changes in by-laws, etc., to prevent finan-
cial disaster or dissolution, — Under a United States decision a right
of amendment reserved in the articles of association coupled with
a statutory authorization of a change of plan of insurance from a
fraternal co-operative assessment association to a policy with straight
premiums and a fixed indemnity does not impair any vested rights
of the original members, even though assessments are thereby in-
creased as there exists no vested right to a continuation of a plan of
insurance which would result disastrously to the company and its
members.* But in the Federal Circuit Court where reconstruction
was actually necessary to continue the existence of the corporation
and prevent a necessary dissolution and where, in order to render
more equitable the premium paid for insurance at different ages
bv different classes of members of a fraternal beneficiary association
it became necessary to change the system of assessment from one
based upon the age of admission of members to a system based upon
mi
1 Stirn V. Supreme Lodge of Bolie- 0S5 (case aff'd Smythe v. Supreme
iau Slavonian Benev. Soe. 150 Wis. Lodge Knights of Pytliias, 220 Fed.
13, 136 N. W. 164, 41 Ins. L. .1. 1130. 438, 137 C. C. A. 32), but declared
' 2 Jaeo-er v. Grand Lodge of Order not to sustain defendant's contention,
of Hermann's Sons, 149 Wis. 3.54, 39 that "on the contrary the facts show
L.R.A.(N.S.) 494, 133 N. W. 869. that every right of all the old niem-
3 Wuerfler v. Trustees Grand Giove bers was protected and preserved,
of Wisconsin of the Order of the and that, in effect, they were allowed
Druids, 116 Wis. 10, 96 Am. St. Rep. to continue to i)ay in the old way, and
340, 92 N. W. 433. that their beneticiaries were to be
* Wright V. Minnesota Mutual Life paid on the basis of the original plan
Ins. Co. 193 U. S. 657, 48 L. ed. 832, or contract. . . . The court re-
24 Sup. Ct. 549, 33 Ins. L. J. 542. peatedly states that the existing con-
Considered and qtiolcd from in tracts were not changed, and that
Smythe v. Supreme Lodge Knights of contract rights were not interfered
Pythias (U. S. D. C.) 198 Fed. 967, with."
1005
§ 380d
JOYCE ON INSURANCE
the actual attained age on a certain day, and such change increased
markedly the assessments against older members, and, as no fraud
or bad faith was charged or insisted upon, the question was whether
the new system impaired the obligation of the original contract with
the members and whether the certificate of membership completed
a contract for assessments on that basis during life. It was decided
on motion for preliminary injmiction that said question was not
sufliciently clear so as to justify a Federal court in another state
than that of the creation and domicil to interfere by injunction
with the internal management and operation of the association;
that the law of the state of domicil governs and should be
there interpreted. The injunction was denied and bill dis-
missed.^ In Connecticut it is held that it is neither unreasonable
5 Gaines v. Supreme Council of that the courts of the forty-three or
Royal Arcanum (U. S. C. C.) 140 forty-four different states where
Fed. 978, 35 Ins. L. J. 207. (Cited members may be, can exercise similar
in Fort v. Iowa Legion of Honor, 146 power and authority. If this were
Iowa, 183, 123 N. W. 224, 39 Ins. done, it would speedily bring about
L. J. 3). The court, per Clark, D. J., such a situation as would make em-
said: "It must be apparent that it is phatie the proposition that the court
an extremely delicale question for the of any state other than Massachusetts
court.s of any jurisdiction other than should only exercise authority to in-
Massachusetts, the state of defend- terfere by injunction with the inter-
ant's creation and the state of its nal manag'ement and operation of the
domicil, to interfere by injunction association ui)on the clearest and
with the internal regulation and man- most cogent grounds. For these rea-
agement of the affairs of this benevo- sons, and because in it.>^ last analysis,
lent association. The contract is, of as I have said, the single practically
course, found not only in the cer- determinative (juestiou is one of con-
lificate of membership, but in the tract impairment, in violation of the
))roperly adopted by-laws and regula- Constitution, and notwithstanding the
tions or the laws of Massachusetts un- magnitude of the case, its disposition
der which the association is incor- on the present occasion and for the
poratcd, and it is obvious enough that purjjose of the issue now presented
the law of Massachusetts furnishes does not seem to require any elabo-
the rule for the decision of the ques- rate oi)inion, although it has received
tion now up for disposition, and all careful and extended study. I con-
similar questions relating to this as- elude, as already plainly intimated,
sociation and its powers and authori- that tlie law of Massachusetts fur-
ty. If the court may interfere by in- nishes the rule for the decision of
junction in a case like this, it must be this question, and I farther conclude,
distinctly upon the closely drawn is- that under the law of Massachu-setts,
sue whether vested and constitution- in accordance with the exposition of
ally protected rights are being inter- its court of highest authority, the de-
fered with or impaired. If the courts fendant might, in view of its con-
of any state may exercise jurisdiction tract, make the change which it has
for such purposes outside of the state made, notwithstanding the question is
in which the defendant association close and that the change is quite
was created and has its principal of- fundamental, and has resulted to a
fice and domicil, it is equally true large extent, not merely in amend-
1006
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380(1
nor arbitrary to change a system of rates which would better promote
the society's ability to carry out its contracts where the plan was to
secure thereby surplus funds for paying death benefits thus adding
to the financial stability of the order even though a reserved power
to change or amend the laws of the society did not give it the right
to divest, impair or disturb vested rights.^ In Indiaiui it is decided
that if it became necessary to increase assessments to provide funds
to meet the society's obligations or prevent financial disaster it may
do so where the certificate agreement or contract stipulates that the
laws, rules, and regulations for its government may thereafter be
enacted.' In Massachusetts a mutual benefit society has power to
ment or modificalion, but in recon-
struction, by which a practically new
system is brought about. It seems
that such reconstruction as this was
actually necessary to continue the ex-
istence of this association, and to pre-
vent a necessary wind-up in the court
or otiierwise. At all events, it is not
sufficiently clear, under the law of
Massachusetts, that this plan of as-
sessment, and the effect on members,
impairs the obligation of the con-
tract, and unless it did so appear ob-
viously this court should not inter-
fere."
^ Kane v. Knights of Columbus, 84
Conn. 96, 79 Atl. 63, 40 Ins. L. J.
874.
' Supreme Lodge Knights of Honor
v. Bieler, 58 Ind.^App. 550, 105 N. E.
244. The court fully considers the
points involved and says: "(1) Coun-
sel for appellant contends that for
several reasons this complaint is in-
suflficient. The first of these is that
it airirmatively appears therefrom
that the insured had failed to pay the
assessment made in April, 1907, and
there is no averment tending in any
way to show that the assessment pro-
vided for by the amended by-laws and
the amount demanded after such
amendment was unauthorized or un-
reasonable, or that the society did not
have the right to demand the pay-
ment of such asses-sment, except that
portion of the pleading consisting of
a copy of applicant's by-laws in
force when the insured became a
1
member, which fixed the amount of
assessment of members of the same
age at $3.50 for each assessment, and
because he failed to pay the Apiil,
1908, assessment, which was for a
larger sum, appellee's decedent was
not a member of the order at good
standing at the time of his death, and
therefore no cause of action existed
in favor of any one on his certificate.
It is the evident theory of the plead-
er that, Avhen Thieme became a mem-
ber of appellant society, his rate of
assessment was fixed by its by-laws,
and that amount could not thereafter
be increa-sed, so as to affect him by
any change in the by-laws. Broadly
stated the contention is that, having
once fixed the rate of assessments re-
quired to be paid by him to remain in
good standing in the order, no power
existed in it to modify or change its
by-laws so as to affect the vested
rights of its pre-existing members
without their consent. Such is gen-
erally held to be the correct rule in
the absence of a provision in the
laws of the order or in the certificate
issued to the member, permitting the
increase of assessments. The (pies-
tion in this case is: What should be
the rule when there is an express pro-
vision in the certificate of insurance
by which the member agreed to abide
by laws, rules, and regulations of the
order after enacted.
"This particular question has never
been determined by the courts of
this state, and an examination of the
(107
§ 380d
JOYCE ON INSURANCE
amend its by-laws so as to increase the assessments on its members,
where the existing rate has proved inadequate, under charter author-
eases in other jurisdictions reveals contributing according to the risk as-
the fact that they are not in harmony, sumed in carrying each, witliout ar-
but follow two lines of decisions, one bitrary discrimination, and does not
holding that under a general reserva- affect any vested rights possessed by
tion of the right to change by-laws, any such members. Whether this
assessments may be raised, the other reasoning is strictly correct we need
denying that power, as an infringe- not decide, for here we have an ob-
ment of the obligation of contracts, jeeting member, who on his own ac-
We believe, however, that the cases count has agreed not only to conform
which support the right under such to the present laws of the order, but
provisions to raise assessments, are also to such future laws as may be
founded on the best reasoning and from time to time enacted by the
supported by the weight of authority. oCficial body governing the same, and
"Indeed there are some cases as to such contracts the better rea-
wliich go so far as to hold that, soned cases hold that assessments
when tlie purposes of an organiza- may be raised by such societies un-
tion such as appellant are con- der such reserved power to amend
sidered, the right to amend its by- by-laws. Fullcnwider v. Supreme
laws by fair and reasonable increase Council Royal League, 180 III. G21,
of assessment rates to enable it to 72 Am. St. Rep. 239, 54 N. E. 485;
accumulate funds out of which its Messer v. Grand Lodge Ancient Or-
legilimate contracts may be paid is der of United Workmen, 180 Mass.
but one of the powers incident to its 321, 62 N. E. 252; Reynolds v. Su-
corporate exi.stence. Else, it is rea- preme Council Royal Arcanum, 102
soned, how can the life of such so- Mass. 150, 7 L.R.A.(N.S.) 1154, 78
cieties be preserved when it becomes N. E. 129, 7 Am. & Eng. Ann. Cas.
evident that, by reason of the chang- 776; Ebert v. Mutual Reserve Fund
ing conditions of its membership, Life Assoc. 81 Minn. 116, 83 N. W.
previous methods of raising funds, 506, 834, 84 N. W. 457; Wineland v.
and at that time sufficient, have Knights of Maccabees, 148 Mich. 608,
proved inadequate? Before there 112 N. W. 696.
can be a fund out of which the death "These cases and many others
claims can be paid, there miist be which might be cited to support
such a rate of assessment against the the same doctrine are based upon
members as will produce such fund, the rule of necessity. Fraternal
A less amount can only result in a benefit societies are said to be mutual
dissolution of the society and serious in character, each member theroot:
damage to all its members. So that occupying the dual relation of insur-
in instances where the funds are in- er and insured, and the contracts
sufficient under present rates of as- which he has made with the society,
sessment to meet the death claims containing a reserved right to amend
against it, although considered suf- by-laws, will be construed in such a
ficient when made, there is an inher- manner as to enable the society to
ent power resting in such fraternal mature its contracts rather than to
benefit societies to so amend their cause them to be repudiated, upon
by-laws as to increase the rate of the ground that a change of the rate
assessment for the purpose of matur- of assessment is necessary to fulfill
ing its contracts so long as such rate the purpose of its organization. It
of interest is reasonable and propor- certainly is not the policy of the law
tional, the young and old members to create these beneficial societies and
1008
n
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380d
ity to provide for the payment of a certain death benefit, to be se-
cured by assessment, and to provide for the amendment of its by-
yet not to permit them, by reason- like those issued by the defendant,
able provisions of tlieir by-laws, to cannot be cut down by an amend-
acqnire the necessary funds honestly, ment of the by-laws. . . . But
fairly, and justly to administer Ihera in many of these ... a distinc-
so as to result in the greatest benefit tion is made between the express
to the greatest number of their mem- stipulation of the corporation to pay
bers. a certain sum and other provLsions
" (2) In opposition to this view, relating to the motliods of tlie cor-
appellee has cited a number of poration, and the duties of the cer-
cases, some of which hold that it is tificate holders, which properly may
an interference with contract rights be a subject for regulation by by-
for a fraternal benefit society by a laws, even thougli they affect the
subsequent by-law to raise tlie amount rigiits of the parties under their con-
of an assessment, others which hold tract. The assessments to be paid
that a subsequent by-law which re- for death benefits in this case are
duces the amount of the benefit cer- provided for by the by-laws, while
tificate is illegal and void. As we the promise in Avriting to pay a cer-
view the proposition, there is a clear tain sum to a particular person is, as
distinction between the cases wherein to that person, a matter outside of
the effect of the change in the by- these corporate rules which may be
laws is to entirely alter the promise expected to be changed by an amend-
of the society made with one of its ment of the by-laws . . . then
members so as to reduce t!ie promised existing or tliat may afterwards be
benefits, and those cases where the aflopted. The promise of the cor-
changes are made in the rate of as- poration is stated expressly, without
sessment for the express purpose of mention of the by-laws. The mem-
enabling such society to provide a ber occupies a dual position, as the
fund sufficient to pay the certificates insurer and the insured. As one of
which it has legally issued as each the association agreeing to provide
matures. So far as we are able to for the payments that may bwo'me
discover, all the courts are agreed due to members, lie agrees to be sub-
upon the proposition that, under a ject to the by-laws. As the insured
reserved power to amend by-laws person to whom a particular sum of
similar to that contained in the pres- money is promised, he has a right to
ent certificate, no amendment can stand on the terms of the promise.'
be sustained which will in any man- "An examination of many of the
ner affect the promise of the society cases relied on by appellee will dis-
to pay a stipulated sum to one of its close that they are those where the
insured members, for as to such a by-laws were amended so as to af-
promise the insured has a vested feet the fixed promise made to the
right and may rely upon its strict certificate holder as the person in-
performance. This sulriect is fully sured, and have no reference to his
discussed in the case of Reynolds v. duties as a member of the society.
Supreme Council Royal Arcanum, which had made the specific promise
192 Mass. 150, 7 L.R.A.(N.S.) ll.')4, to each certificate holder that the
78 N. E. 129, 7 Am. & Eng. Ann. several amounts called for therein
Cas. 776. In that case the court would be paid in full. In some of
said: 'There are many cases in which the cases which deny the right to
it is held that the amount expressly raise the assessments, the amount of
promised to be ]iaid in a certificate the assessment was provided for in
Joyce Ins. Vol. I.— G4. 1009
§ 380d JOYCE ON INSURANCE
laws. It cannot be limited to a plan of assessments that would bring
the certificate. However, it would
be useless to ignore the fact that there
are two lines of authority, and that
there is very respectable recent au-
thority which seems to liavo been fol-
lowed by the lower court, and we
would have to hold, were Ave to fol-
low it, that the raise in amount of
assessment by appellant was an in-
fringement of contract rights. The
law in New York seems to ))e settled
on tills point, and other states follow
the same rule. Wright v. Knights of
Maccabees, 196 N. Y. 391, 31 L.R.A.
(N.S.) 423, 143 Am. St. Rep. 838,
89 N. E. 1078; Green v. Supreme
Council Roval Arcanum, 206 N. Y.
591, 100 N". E. 411; Smythe v. Su-
preme Lodge Knights of Pythias (D.
C.) 198 Fed. 967; Ericson v. Su-
preme Ruling Fraternal Mystic Cir-
cle, 105 Tex. 170, 146 S.'W. 161;
Poole V. Supremo Circle Brotherhood
of America, — N. J. Ch. — , 85 Atl.
821.
"All the authorities are agreed on
tAvo general rules: First, that un-
der the reserved power to amend
laws, rules, and regulations, the bene-
tit societies may not make an amend-
ment which will impair vested con-
tract rights; second, that under said
reserved power, the benefit societies
may make reasonable and necessary
ameiulments to its by-laws, rules, and
regulations. The conflict arises in
the class of cases to which one court
the laws, rules, and regulations now
governing this order or that may be
hereafter enacted for its government.'
This provision, we believe, distin-
guishes the case from some of those
relied upon by appellee. See Norton
V. Catholic Order of Foresters, 138
Iowa, 464, 24 L.R.A. (N.S.) 1030, 114
N. W. 893. Quest ion.s analogous in
general i^rinciple to the case under
consideration have been passed upon
by the Supreme Court of the Unit-
ed States, and its decisions support
our conclusions. See Covington v.
Kentuckv, 173 U. S. 231, 43 L. ed.
679, 19 Sup. Ct. 383, and eases cited.
That portion of the constitution
and laws of the order in force wlien
deceased became a member, which
provides, 'each and every member,
except honorary members, upon pre-
senting himself to receive the Third
or Degree of Manhood, shall pay to
the financial reporter the following
rates into the widows and orphans'
benefit fund, and the same amount
on each assessment thereafter, whilst
he is a member of this order,' means,
in our view, that the specified assess-
ment siiould remain the amount to
be paid by the member on such cer-
tificate so long as he remained in good
standing in the ordei', provided that
assessment should be sufdcient to en-
able the society to pay to the bene-
ficiary of the members the amounts
stipulated in their contracts as they
applies one of the above rules, whde matured, not in part, but in full. If
other courts apply the other rule;
that is, the courts do not agree as to
what are vested rights under bene-
fit contracts, or as to wdiat are rea-
sonable amendments to by-laws. The
cases which we have cited to support
our position all hold that a reason-
able, necessary, and impartial in-
crease in rates is a reasonable amend-
ment of by-laws, under the reserved
power of amendment. The certificate
sued on contains an express stipula-
tion that it is 'payable upon condi-
tion that said member complies with
conditions arose in the future which
clearly made it impossible 1o meet
such demands, then the meud)ers had
consented that the by-laws miglit be
so amended as to enable the society
to realize sufticient funds from all
the members to pay all obligations
resting on it as expressed in the
several certificates which had been
properly issued. In this case the
society was not limited as to the
numlier of assessments, and even if
we were to hold that it had no right
to increase the amount of assess-
1010
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380d
about its ppecdy dissolution.* P>ut a pcrccntae;e cannot, by subse-
quently enacted by-laws, be directly deducted from tbe face of ex-
istino- certilicates for an emergency fund, even tbougb the statute
authorizes the creation of such a fund by assessment companies.^
Under a Mlchigmi decision it appeared that a fraternal insurance
association organized under the laws of the Dominion of Canada,
and a mnuber of years after the issuance of the certificate in ques-
tion, obtained a new charter from the parhament of Canada chang-
ing its name and authorizing it to make a change against policies
issued prior to a certain date and affecting the policy in suit. The
ments, it might afoomplish the same must appear that there was an abuse
results by increasing- the number of of power, or tliat the by-laws as
assessments. It may also be well to amended were, .so unieasonable as to
remember that from the assessments be \oid, before an amendment is un-
levied by benefit associations no re- authorized. Supreme Lodge Knights
serve is created to take care of an in- of Pythias v. Knight, 117 Ind. 489,
creasing risk, that the member simply 497, 3 L.R.A. 408, 20 N. Vj. 479.
pays for insurance from assessment (4) Although the complaint shows
to assessment, and if he fails to pay that deceased was paying a \ery high
an assessment, is entitled to no ex- rate of assessment, and discloses a
tended insurance from a reserve ere- sudden very large increase in that
ated by former payments, that each rate, in the absence of an averment
assessrnent is merely a payment for that they were unreasonable, we can-
protection for the time for which not say, from these facts alone, that
the assessment is levied, and that, the increase in rates was unreason-
having lived ]iast that time, the mem- able as a matter of law. These facts
ber has no right in the proceeds of would be circumstances for tiie con-
any past assassment. Tiierefore, if side-ration of the jury in determining
assessments become higher than a whetiier the increase was unreason-
member cares to pay, lie, having re- able. It is a que'^tion of fact to be
eeived the full consideration for his determined from all i lie circumstances
past payments, may at any time re- of the case as to whether the increase
sign from the order without losing was reasonable and necessary, and
anything. He who contracts for as- therefore binding- on ap])ellce's de-
sessment insurance must be consider- cedent, if he wished to remain insured
ed to have had in mind when the under his certificate issued by appel-
contract was made that there are dis- hint."
advantages as well as advantages in * Reynolds v. Supreme Council
this form of insurance as contrasted Koyal Arcanum, 192 Ma.ss. l.'iO, 7
with other forms. (3) There is no L.]x.A.(N.S.) 1154, 7 Am. & Eng.
averment in the comi)laint that the Ann. Cas. 77(5, 78 N. E. 129, 35 Ins.
amendments of appel hint's by-laws L. J. 673. Under Rev. Slat. IMass.
increasing the rate of assessment of e. 125, sec. 6, c. 119, sec. 2. Cited in
deceased were not adojited legally Fort v. Iowa Legion of Honor, 14G
and honestly, nor is there any aver- Iowa, 183, 123 N. W. 224, 39 Ins. L.
ment that the increase was not a rea- J. 3.
soiiable one to carry out the purposes ^ Newhall v. Supreme Council
and olijects of the society, or lliat American Legion ^ of Honor, 181
there was an abuse of the power re- Mass. Ill, 03 N. E. 1, 31 Ins. L. J.
served to it in the certificate issued 389.
to deceased. In cases such as this it
1011
§ 380d
JOYCE OX INSURANCE
insured agreed in his certificate that amendments might be made
in relation to the constitution and laws of the order fixing the pre-
miums and rate of asses^^ments. It was decided that it was not
against public policy or an infringement upon vested rights, to
agree that such changes might be made as to assessments as would
enable the association to carry out its insurance agreements. The
assessment was ])roportioned to a valuation deficiency existing as to
the class of policies in question, which were paying less than the
cost of insurance.^" In New Jersey an increase cannot be made in
assessments even under a general raserved power to alter or amend
or a stipulation to comply with thereafter enacted by-laws, as the
members contract rights cannot be imi)aired and ''It is not an an-
swer to say that the increase is necessary to the prosperity of the
order. The plea of necessity is never, as I understand it, a valid
defense against the performance of a contract." " In a New York
case it is declared by the court that: ''Referring to the statement
of defendant's counsel that unless it is invested with the power to in-
crease the amoimt of a single assessment, as the exigencies of the
situation may require, it will be unal)le to continue its financial life
and pay its death losses. . . . This court said, under a different
state of facts, in Vought v. Eastern l^uilding & Loan Association: ^^"^
^It is contended that if the construction we have given this contract
is to prevaiL it will affect the responsibility of the defendant, if it
does not result in its bankruptcy. If that be true, yet it affords no
proper reason why we should disregard the plain and unqualified
terms and provisions of the contract. Nor does it furnish any ex-
cuse for us to disregard well established principles of law to liold it
unenforceable.' " The court then considers certain reports concern-
ing the company's status and concludes: "This very severe arraign-
ment of the business methods of the defendant coming as it does
from its officials in high position, goes far to establish the fact that
the peril of coming insolvency is due to a failure to ol)serve the
fundamental principles of life insurance." ^^ In another case in
that state it is also said: "The defendant seeks to sustain its action
in increasing .the rate of assessment by invoking the general power
to amend and pleading that the exercise thereof was essential to
its existence. The court did not find, as matter of fact or law, that
a reduction of benefits was necessary, nor did it find as a fact that an
increase in the rate of assessments was necessary, but found that 'the
i°De Graw v. Supreme Court
Independent Order of Foresters, 182
Mich. 366, 148 N. W. 703.
11 Poole V. Supreme Circle Brother-
hood of America, 80 N. J. Eq. 259, 85
Atl. 821, 42 Ins. L. J. 482, quotation
from opinion, per Walker, V. C.
"a 172 N. Y. 508, 518, 92 Am. St.
Rep. 761, 65 N. E. 496, 499.
12 Dowdall V. Supreme Catholic
1012
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 3S0d
increase in the rate, or the number of assessments, was necessary
for tlie continued existence of the defendant.' Necessity bears only
on the question whether the amendments are reasonable. While
they were desirable as a matter of policy, they were not necessary,
for the old by-laws gave the defendants power to raise all the money
needed for every purpose by simply increasing the number of assess-
ments. It is true that a great increase in this respect might reduce
the membership, still that did not make an increase in the rate of
assessments necessaiy, for it cannot be necessary for a corporation
to violate its contract in order to preserve its existence." Moreover
the existence of the defendant, according to the findings, is not now
threatened, nor will it be until after the lajDse of from eighteen to
twenty-five years, and no one can foresee the changes that will take
place in the meantime. If the wonderful growth of the defendant
as stated by its counsel continues, the danger now apprehended as
to what may take place a quarter of a century hence, may wholly
disappear before that period expires." " Again, an amended by-
law which discriminates against female members by reducing their
weekly sick benefits is illegal and void even though their dues are
correspondingly reduced. Nor is such an amendment justified by
the claim that the society would become bankrupt by payment of
the benefit, and there is no possible legal ground for sustaining such
amendment as against one who refuses to acquiesce.^^ In Tennessee
where an increase in rates was held binding upon a meml)er under
a reserved power or agreement to amend it ai)pearod that the old
plan was a failure and that some change was necessary to accom-
plish the purposes of the order and save it from dissolution.^* So
in Texas an increase of assessments which was necessary to enable
the society to meet its obligations was held not unrea.sonable. The
change of plan was, however, consented to by the member."
Mutual Benefit Assoc. 196 N. Y. 405, prenie Cor.it I. O. F. 130 N. Y. Supp.
31 L.R.A.(N.S.) 417n, 89 N. E. 803, 71 Mise. 535 rev'd 136 N. Y.
1075, 39 In.s. L. J. 87, rev'g 122 N. Snpp- 527, 152 A pp. Div. 892; Rock-
Y. Supp. 1130, 123 App. Div. 913, ^vell v. Knights Templars & .Alason-
l-er Baltic tt, J. i«- -"^•i^t. Aid Assoc. 179 N. Y. Supp.
^^ Citing Vought v. Eastern Build- 515, 134 App. Div. 736, 39 Ins. L.
ing Loan Assoc. 172 N. Y. 508, 92 J. 105; Mock v. Supreme Councd
Am. St. Rep. 761, 65 N. E. 496. Royal Arcanum, 106 N. Y. Supp.
"Wright V. Knights of Maccabees 155, 121 App. Div. 474.
of the World, 196 N. Y. 391, 31 i6 Conner v. Supreme Coramandery
LRA (NS.) 423, 89 N. E. 1078, 39 Golden Cross, 117 Tenn. 540, 97 S.
Ins. L. J. 95. W. 306.
iSFeldblum v. Coneresation Bikur "Supreme Ruling Iraternal My.s-
Cholim of Brooklvn, il6^N. Y. Supp. tic Circle v. Ericson, — Tex. Civ.
289, 131 App. Div. 854. See further App. — , 131 S. W. 92.
on this point Simmerbuick v. Su-
1013
§ 380e JOYCE ON INSURANCE
§ 380e. Same subject: classification of risks: discrimination. —
Wliore amendments to by-laws classify members and provide for a
aradiiation of dues, a division of funds between said divisions and
for sei)arate trusts limited to each division, said amendments cannot
be enforced where the contract rights of members are violated.^*
Nor can a member's contract on which he has paid large sums of
money be destroyed in value without his consent by a resolution
which j)laces him in a class and assesses that class in a manner dif-
ferent from the rule applied to newer members.^^ And where the
contract of a meml)er of a co-operative or assessment company calls
for the payment of assessments for existing death claims and said
contract and t,he company's constitution provides that the ratio,
upon which the assessment shall be based, shall be upon the entire
membership in force when the liability of the assessment accrued,
it constitutas a violation of said contract to provide by a subsequent
resolution that members be classified and assessments apportioned
among them according to the age of each member and to assess
him at his attained age, and other members, of the same age. as of
the age of their entry, and said resolution is therefore void.^" So
an amended by-law which discriminates as to weekly sick benefits
by depriving female members thereof contrary to their original
contract is illegal and void, especially so as to a female menil)er
who protested against enactment of said by-law.^ Again, where
there was a new classification as to hazardous occupations under an
accident policy it was held that the association could not thereby
cut down or reduce the amount of indemnity contracted for, al-
though if the original contract had provided as it did not in terms
so provide, that changes might be made in the rules or by-laws
which would have bound the assured.^
But it is also held that the classification of members of a mutual
benefit society according to age, in a by-law readjusting methods of
18 Parks V. Supreme Circle, Broth- ^o Benjamin v. ]\Iutual Reserve
erhood of America, 83 N. J. Eq. l;!l, Fnud Life Assoc. 146 Cal. 34, 79
89 Atl. 1042, s. c. 81 N. J. Eq. 330, Pac. 517, 34 Ins. L. J. 614. See
86 Atl. 432. Gaines v. Supreme (.'ouncil (U. S.
On validitv of retrospective by- C. C.) 140 Fed. 978, 35 Ins. L. J.
law or other 'rule of benetit associa- 207; Kane v. Knights of Columbus,
tion excluding certain class of mem- 84 Conn. 96, 79 Atl. 63, 40 Ins. L.
bers from benefits or reducing ])ene- J. 874.
fits of that class, see note in 24 L.R.A. ^ Fef(ff)fum v. Congregation Bikur
(N.S.) 1030. Chofim of Brooklyn, 116 N. Y. Supp.
19 Strauss v. IMutual Reserve Fund 289, 131 App. Div. 854.
Life Assoc. 126 N. Car. 971, 54 2 ^^f^rse v. Fraternal Accident
L R A. 605, 36 S. E. 352, 128 N. Assoc. 190 Mass. 417, 112 Am. St.
Car. 465, 39 S. E. 55. Rep. 337, 77 N. E. 491.
1014
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380f
a-si^c-sment, is not illegal.^ And a mutual }>enefit society wliose laws
bind a member to those thereafter enacted may, after the death of
a member whose certificate was payable out of the general mortuary
fund, reclassify or create a new class of members and a separate
mortuary fund from receipts from their certificates, without im-
pairing the obligation of contracts or interfering with a benefi-
ciary's vested riglits.'* x'\gain, a recla.ssification of risks as to hazard-
ous occupations is held not to impair vested rights.^ And under a
Texas decision a rerating and increase of assessments under [i new
by-law, the insured having agreed to comply with rules and regu-
lations thereafter enacted, is not an arbitrary change, where such
change imposes an equal l)urden on meml)crs of the same cbiss.^
Where, subsequent to a change in a merchants exchange charter,
the members are divided into participating and nonparticipating
classes, an amendment of the by-laws authorizing members in tlie
former class to change to tlie latter is within the power of the cor-
poration where its charter of incorporation authorized changes in
the by-laws and it was stipuhited in the application for member-
ship that future ameiiduienls might be made.'
§ 380f. Right of member or beneficiary to object to amendments:
waiver or estoppel. — The doctrine of waiver and of estojtpel ap-
plies in determining the riglits of members or their beneficiaries
under amended constitutions, by-laws, etc., of the company, associa-
tion or society. The following decisions sufficiently illustrate the
principle: A member who continues to pay aa-;cssments after a
change in the by-laws in relation thereto is generally estopped to
deny the power to amend such by-laws.* And a member joining a
beneficial association before the adoption of a new cliartcr is bound
by the later charter and the constitution and by-laws thereunder
where assured had knowledge that it was obtained and that it acted
under the same for years, where the subordinate lodges had like
knowledge, and assured had also agreed in his application to comply
with subsequent regulations.^ 80 a member of a mutual benefit
3 Rewiolds v. Supreme Council, Mvstic Circle v. Ericson, — Tex. Civ.
Royal" Aminnm, 192 I\Iass. I.IO, 7 App. — 131 S. W. 92.
L.R.A.(N.S.) ll.')4, 78 N. E. 120. ' Frencli v. New York Mercantile
* Ellison V. District Grand Lod^e Exchange, 80 N. Y. Sui^p. 312, 80
No. 23, United Order of Odd Fel- App. Div. l-U.
lows, 11 Ala. App. 442, (iO So. 872. * Slnive v. Grand Lodue Ohio An-
5 Norton v. Catholic Order of For- cient Order of United Workmen, 5
rasters, 138 Iowa, 404, 24 L.R.A. Oiiio C. C. 471, 2(i Week. L. Bull.
(N.S.) 1030n, 114 N. W. 893. Con- 471.
sidered more fully under § 380b ^ Boll man v. Supreme Lodire
herein. Knii^lit.^ of Honor, — Tex. Civ. Ap[».
^Supreme Ruling of Fraternal — , 53 S. W. 722,
1015
§ 380f JOYCE ON INSURANCE
society is bound by a new by-law, by estoppel, where he makes per-
sonal inquiry concerning the same of the society's secretary, and
acquiesces by paying new assessments thereunder for over two years
without protest and with the understanding that the society's lia-
bility would be reduced by th^ reduction of assessments under said
new laws.^° It may also be shown, upon the point whether a pre-
existing policy or contract is within the terms of an amendment to
the constitution of the company, that the member whose policy is in
quCvStion voted therefor and that it was adopted unanimously.^^
And an estoppel arises from knowledge by the member of the adop-
tion of the amended by-laws of the circumstances under which
adopted, and by paying assessments thereunder without dissenting. ^'^
And this applies to an amendment of the constitution of a mutual
benefit order on the assessment plan.^^ There is also a waiver or
estoppel where the member has knowledge of an amendment to the
constitution providing that sick benefits should not be paid in excess
of a certain sum and also increasing death benefits, and said mem-
ber had received such benefits up to the specified amount, had at-
tended the meetings of the association and had acquiesced therein
for several years.^* So a member who surrenders his original cer-
tificate and takes a new one under amended by-laws submits to said
amendments and accepts them as they then existed.^* So assured
assents to an amendment reducing the certificate amount where
he changes his beneficiary thereafter and accepts a policy payable
to such newly designated beneficiary.^^
Again, in case of a reduction of benefits by an amendment to a
by-law a settlement with the beneficiaries, acceptance of a reduced
lOAnkele v. Workin -men's Relief 146 Iowa, 183, 123 N. W. 224, 39
Societies, A. U. V. 0. 182 111. App. Ins. L. J. 3.
470, citing Clymer v. Supreme Coim- ^* Berg v. Badenser Understuetz-
cil American Legion of Honor (U. S. "»gs Verein von Rochester, 86 N. Y.
C. C.) 138 Fed.^470; Supreme Coun- Supp. 429, 90 App. Div. 474.
cil American Legion of Honor v. Breslow y. Southern Tier Ma-
McAlarney, 135 Fed. 72, 67 C. C. A. f J"^" ^V'^'^f ^^''?^'- ^\^o \ ^"E^"
-.^ e n -1 \ • T /86, 10^ App. Div. 123. S*e Su-
d46; Supreme Council American Le- ' ^ ' ^1^ * -n ^i •
. r. TT T •■ 4.^ en preme Lodge Knights oi Fythias v.
f^A «n. ?';?'t.'i t'FT'r /^ f Clement, 113 Tenn. 40, 81 S. W.
LR.A. 803, 134 Fed. 824, 6/ C. C. A. -^..^g. ^(^^^^^ ^. q^.^^^ ^^^^^ United
S^- , , ^ Workmen, 180 Mass. 321, 62 N. E.
" Koeth V. Knights Templars & 252, considered in Smvthe v. Supreme
Masons' Life Indemnity Co. 55 N. L^dge Knights of Pvthias (U. S. D.
Y. Supp. 768, 37 App. Div. 146. c.) 198 Fed. 967, 984, but held not
^2 Allen V. Merrimack County Odd in point.
Fellows' Mutual Relief Assoc. 72 N. 16 jaeger v. Grand Lodge Order of
H. 525, 57 Atl. 922. Hermann's Sons, 149 Wis. 354, 135
"Fort v. Iowa Legion of Honor, N.'W. 869, 39 L.R.A.(N.S.) 494.
1016
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 380f
amount and a release obligates them." Consent to amended by-laws
reducing the amount payable under the certificate is al^o held to
have been given where the member had agreed to fully comply with
thereafter enacted by-laws of the supreme council and had paid a
number of the reduced assessments.^^ And a right to object to
amended by-laws increasing dues is waived where the member is
present when such laws are read, pays increased dues without dis-
sent, and also expresses himself as satisfied with the change.^^ And
where the contention was that a separate plan of assessment under
an amended by-law was not legally adopted it did not appear that
there was any provision of the laws of the order requiring notice,
but it was held that even if such a provision had exi^^ted laches es-
topped complainants from seeking the aid of a court of equity where
they had continued their membership for several years, actively
shared in such new plan and had done nothing in denial of it except
to enter an occasional ]!"()test for the failure to ap])orlion the reserve
funds in reduction of assessments.^" So where payments have been
made of assessments on an illegally reduced amount of a certificate
under an invalid by-law the effect as an estoppel is not avoided by
the fact that insured was ill at the time- the by-law was enacted.^
" Simons v. Supreme Council
American Lesion of Honor, 178 N.
Y. 263, 70 xr E. 776.
^^ McCloskey v. Supreme Council
American Lesion of Honor, 96 N. Y.
Supp. 347, 109 App. Div. 309. But
examine Gaut v. Supreme Council
American Lesion of Honor, 107
Tenn. 603, 55' L.R.A. 765, 64 S. W.
1070.
As to right to increase assessments
or reduce amount of benefits, see
§§ 380c, et seq. herein.
^^ Pokref ky v. Detroit Firemen's
Fund Assoc." 131 Mich. 38, 90 N. AV.
689, 96 N. W. 1057.
2° Kane v. Knislits of Columbus,
84 Conn. 96, 79 Atl. 63, 40 Ins. L. J.
874. See also Voss v. Northwestern
National Life Ins. Co. 137 Wis. 492,
118 N. W. 212 (prompt election
necessary : delay of four years cou-
pled with knowledge and payment of
increased premiums without protest-
ing estops member).
Association estopped to assert by-
law not properly adopted, see § 365e
herein.
^ Attorney General v. Supreme
Council American Lesion of Honor
(Hackett, In re) 207^.Ma.ss. 586, 93
N. E. 797, 40 Ins. L. J. 444. See
further as to this litigation Attorney
General v. Supreme Council Ameri-
can Legion of Honor (Newton, In re)
206 Mass. 193, 92 N. E. 151, 39 Lis.
L. J. 1212; Same v. Same (Weiss, In
re) 206 Ma.ss. 190, 92 N. E. 150, 39
Ins. L. J. 1209; Same v. Same (Cor-
(iehl, in re) 206 Mass. 186, 92 N. E.
148, 39 Ins. L. J. 1205; Same v.
Same (Law, In re; ]\landeville, In
re) 206 Mass. 183, 92 N. E. 147, 39
Ins. L. J. 1202; Same v. Same (Drey-
lus. In re; Jolmson, In re) 206 Mass.
180, 92 N. E. 145; Same v. Same
(Doleac, In re; Bullock, In re; Skin-
ner, Jn re; Stone, In re) 206 Mass.
175, 92 N. E. 143; Same v. Same
(Uunlavy, In re; Clement, In re;
Osterhout, In re; Tuska, In re) 206
Mass. 168, 92 N. E. 140; Hackett v.
American Legion of Honor, 206
Mass. 139, 92 N. E. 133.
1017
§ 380g JOYCE ON INSURANCE
In the case of a member of a benefit society who is bound by a
new by-law by estoi)pel, the reduction of the society's liability, and
llie reductions of his assessments are held to constitute a sufficient
consideration for a new agreement that the new by-laws should be
binding.^
§ 38bg. Same subject: when waiver or estoppel not applicable. —
In the following decisions it is determined that there is no waiver
or estoppel although some of said decisions are not in harmony with
those considered under the last preceding section. So a payment
of illegal assessments to avoid a risk of forfeiture constitutes no es-
toppel against a member or his beneficiary to assert the illegality of
a subsequently attempted invalid assessment.^ Nor is a member
estopped from claiming his rights under his original contract, even
though he makes payments of assessments under a changed plan in-
creasing them, where said contract does not authorize any amend-
ment of the by-laws of such a character, as such payments are il-
legally exacled.'* And where the contract rights of a member are
violated by a subsequently enacted resolution classifying members
and assessing tlicm thereunder, and said amendment is therefore
void, a claim that an estoppel arises to assert the invalidity of a call
for assessments under such amendment, by reason of payments
without complaint for several years prior thereto of similar calls
which were subject to the same claim of invalidity will not be sus-
tained.^ It is also determined that assured in a mutual benefit order
2 Ankele v. Workin,2men's Relief wliich would be tlie result if its claim
Societies, A. U. V. 0. 182 111. Ai)p. of estoppel were sustained. All
470. these prior calls, if levied upon the
3 Covenant Mutual Life Assoc, v. same theory and at the same ratio as
Tuttle, 87 111. App. ;!09. See also that of call !)8, were equally illegal
Covenant Mutual Life Assoc, v. with it, and it was wrong for the as-
Kentcr, 188 111. 431, 58 N. E. 966. .sociation to have levied them, or to
* Rockwell V. Knights Templars' & have insisted upon their payment.
Masons' Mutual Aid Assoc. 119 N. They were demanded under an im-
Y. Supp. 515, 134 App. Div. 736. ])lied threat that, unless paid, his
See also Williams v. Sui)reme Conn- i)olicy would be forfeited, and were
oil American Legion of Honor, 80 N. paid under a moral compulsion.
Y. Supp. 713, 80 App. Div. 402. And, as said in Duggans v. Covenant
As to right to increase as.sessments Mutual Life Assoc. 8/ 111. App. 41(i,
or reduce amount of benefits, see quoting approvingly from a prior
§§ 380c, et seq. herein. decision of that court : 'It certainly
5 Benjamin v. Mutual Reserve cannot be said that Tuttle, in pay-
Fund Life Assoc. 146 Cal. 34, 79 ing previous illegal assessments, act-
Pac. 517, 34 Ins. L. J. 614. The ed fraudulently, or that he wilfully
court per Lorigan, J., said: '-'It af- did anything calculated to mislead
fords no ground for invoking an others to their injury. When he
estoppel, for at least two reasons. ])aid illegal as.sessments he did so
In the first place, the appellant can- under a moral compulsion and a
not take advantage of its own wrong, threat implied, at least, that if he did
1018
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC.
380g
on the assessment plan is not estopped to assert the invahdity of sul>
sequently enacted illegal bv-huvs even though he has consented to
prior amendments by paying assessments.^ So where a change in
the by-laws decreases the amount payable and so repudiates the con-
tract a continued payment of assessments after the enactment of
said amendment made with the expectation of the repeal of the
amendment does constitute an election to treat the contract as in
force and preclude rescission by estoppel.''^ And a mcmljer who pro-
tests against the reduction, by amendment of the by-laws, of death
benelits with a reduction of premiums or assessments, and continues
to pay the old rates for a year is not estopj^ed to recover back sucli
part of the amount so paid as represents the canceled insurance.'^
And if a benefit society arljitrarily reduces the amount of insurance
stipulated in a membership to be paid, payment of the assessments
on the reduced Ijasis cannot be construed as a consent by the mem-
ber to the reduction when made under protest and with tender of
the full amount due without such reduction.^ It is further deter-
mined that an estoppel cannot be based upon the mere fact of pay-
ing reduced assessments without knowledge or notice of or consent
to or ratilication of tlie by-law reducing the amount of the certificate
not pay his certifieate would be for- v. Mutual Keserve Fund Life Assoc,
feited, and the provisions made for 146 »Cal. 34, 79 Pac. 517; Covenant
his wife in ease of his death he there- Mutual Life Assoc, v. Kentucr. 188
by lost. Can appellant he i)eriuitted 111. 431, 38 N. E. !)tiU; Schultz v.
to take advantage of its own wrong? Citizens Mutual Life Ins. Co. 59
We sav it cannot.' In the second ]\Iinn. 308, (il N. AV. 331.
place, and independent of the propo-
sition that the association could not
take advantage of its own wrong, the
rule is general that the fact of prior
"^ Supreme Council American Le-
gion of Honor v. Ratte, M Tex. Civ.
App. 456. 70 S. W. 629. Compare
\'oss V. Northwestern National Life
illegal demands having been i)aid im- Ins. Co. 137 Wis. 492, 118 N. W.
poses no legal obligation to continue 212 (where there was held to be an
to pay theni. The doctrine of estop- estoppel to deny validity of amend-
pel has no application to such a case: ment increasing premiums).
Schultz v. Citizens' Mutual Life Ins. ^ ;\j.,)^,.ipy ^ Supreme Council
Co. 59 Minn. 308, 315, 61 N. W. American Legion of Honor, 133 N.
331; Farmers' Mutual Fire Ins. Co. Car. :)67, 45 So. 649. See also Su-
of Palmyra v. Knight, 162 III. 470, jireme Council American I^egion of
44 N. E.834." Honor v. Champe, 127 Fed. 541, 63
^ Fort V. Iowa Legion of Honor, C. C. A. 282.
146 Iowa, 183, 123 N. W. 224, 39 Ins. As to return of premiums and as-
L. J. 3. "That plaintiff agreed to sessmeuts, see SS 139(1 et .seq. herein,
prior amendments is no evidence ^ Russ v. Supreme Council Ameri-
that he agreed to subsecjuent ones, can Legion of Honor, 110 La. 588. f>8
and having agreed to prior ones does Am. St. Hep. 469, 34 So. 697. See
not estop hiin from challenging the Williams v. Supreme Council Ameri-
validity of illegal subsequent ones." can Legion of Honor, 80 App. Div.
Id. per Deemer, J., Citing Benjamin 402, 80 N. Y. Supp. 713.
1019
§ 380h JOYCE ON INSURANCE
or death benefit.*" And where a power is reserved in the certificate
to amend or change the constitution, etc., the assured does not there-
by consent to a change in his certificate, because he continues to
pay his assessments for many years after he had notice of a change
in the by-laws especially where the answer to a complaint contains
no such allegation of consent, but on the contrary admits on its face
that he never consented to such change. In addition assured had a
right to continue said payments of assessments in order to keep the
certificate in force and was under no obligation to surrender it for
cancelation.^^ Nor is acquiescence to be deduced from the facts
that a member remains silent although he has notice of an amended
by-law, providing for suspension of members for delinquency in
meeting assessments where such notice does not mention his suspen-
sion, and no condition of that character was in the by-laws when he
became a member, and this is so held even though the articles of
association expressly conferred upon the directors the power to enact
by-laws, and he had agreed to be bound by changes in the latter.^^
Again, a representative of the subordinate lodge or lodges who is
sent as a representative to the grand lodge has no power to bind a
member of the former by agreeing to illegal amendments to the con-
stitution changing his contract rights. ^^
§ 380h. Waiver by or estoppel against association, society, etc.,
or officers thereof: amendments. — An association waives the enforce-
ment of a by-law and is estopped from enforcing it against the ben-
eficiary by receiving assessments at the rate rec[uired at the time the
certificate was issued, where the insured has no information of the
terms of said amendment." And a society which wrongfully re-
fuses to accept assessments from a member on the ground that he
was engaged in the prohibited occupation of selling liquor waives
the right to a tender of further assessments and to forfeit the cer-
tificate for nonpayment thereof.^* So the knowledge and acts of a
^•^ Smith v. Supreme Council Amer- Supreme Council of American Le-
iean Lesjion of Honor, 94 App. Div. gion of Honor v. Jordan, 117 Ga»
357, 88^N. Y. Supp. 44. 808, 45 S. E. 33; Hill v. Mutual Re-
^^ Stirn V. Supreme Lodge of Bo- serve Fund Life Assoc. 128 N. Car.
hemian Slavonian Benevolent Soe. 463, 39 S. E. 56. See also Farso v.
150 Wis. 13, 136 N. W. 164, 41 Ins. Supreme Tent of Knishts of lAlacea-
L. J. 1130. bees of the World, 96 App. Div. 491,
^2 Farmers' Mutual Hail Assoc, v. 89 N. Y. Supp. 65.
Slatterv, 115 Iowa, 410, 88 N. W. " Boman v. Bankers' Union of the
949. World, 76 Kan. 198, 11 L.K.A.(N.S.)
13 Fort v. Iowa Legion of Honor, 1048, 91 Pac. 49.
146 Iowa, 183, 123 N. W. 224, 39 ^^ Barrett v. Grand Lodge Ancient
Ins. L. J. 3. CUing Supreme Coun- Order of United Workmen, 63 Misc.
cil of American Legion of Honor v. 429, 117 N. Y. Supp. 125.
Getz, 112 Fed. 119, 50 C. C. A. 153 ;
1020
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 3801i
local union of a fraternal order, and of the president and financial
secretary and all the officers and members of said union, that an in-
tending member was about to change his occupation to a more haz-
ardous one, and that such change was made, constitutes, when
coupled with the receipt of assessments and dues thereafter, a waiver
by said association of any nghts it might otherwise have had.^^ In
Kansas a fraternal beneficiary association on the lodge system was
organized prior to the statute of 1909 rehiting to such societias."
Tlie members application stipulated that it was subject to amend-
ments which miglit thereafter be made to the constitution and by-
laws of the order. Subsequent to the issuance of the certificate
amended by-laws provided for a plan less favorable to members and
beneficiaries, but did not refer to or provide for outstanding certifi-
cates, and the association continued to accept unconditionally and
without objection, payments as provided for in one of the old cer-
tificates, until it became fully paid up and the holder under the
terms thereof became entitled to a new paid-up certificate. A year
and a half after said completion of payments tlie association for the
first time adopted a by-law providing a new plan for the old out-
. standing certificates reclassifying them and materially reducing the
benefits stipulated for therein. The association was held estopped
from making such changes and reduction and that the holder was
entitled to the paid-up certificate according to his contract under the
certificate and by-laws in foree when it was issued although amend-
ments were stipulated for and that delay in suing did not i)reclude
maintaining the action, even though the plan was found imprac-
ticable, as the contract was not unconscionable.^^
16 Brotherhood of Painters, Dec-o- Neu- Jersei/.—0'^oi\\ v. Supreme
raters & Paperhatigcrs v. Moore, 30 Council, American Legion oi; Honor,
Ind. App. 580. 70 N. J. L. 410, 1 Am. & Eng. Ann.
On waiver of provision as to Cas. 422, 57 All. 1()3.
change of occupation by continued New To r/r.— Wright v. Knights of
receipt of dues, see notes in 27 L.R.A. Maccabees of the World, 106 N. Y.
(N.S.) 440, and L.R.A.IOIGF, 755. 391, 31 L.R.A. (N.S.) 42:5, 134 Am.
"Stat. 1909, sees. 4303-4318. St. Rep. 838, 89 N. E. 1078; Langan
18 ILirt V. Life & Annuity Assoc, v. Supreme Council American Legion
82 Kan. 318, 120 Pac. 303. Citinu of Honor, 174 N. Y. 200, 06 N. E.
or considering : 932.
Kansas.— Boman v. Bankers Un- Oregon.— ^yist v. Grand Lodge An-
ion, 76 Kan. 198, 11 L.R.A. (N.S.) cient Order United Workmen, 22
1048, 91 Pac. 49; Grand Lodge An- Ore. 271, 29 Pac. (ilO.
eient Order United Workmen v. Had- Pennsijlvania.—hcvkuT v. Berlin
dock, 72 Kan. 35, 1 L.R.A.(N.S.) Beneficial Soc. 144 Pa. St. 232, 22
1064, 82 Pac. 583. Atl. 099.
M/.s,soMr/.— Smith v. Supreme Tennessee.— Gaut v. American Le-
Lodge Knights of Pythias, 83 Mo. gion of Honor, 107 Tenn. 003, 55
App. 512. L.R.A. 465, 64 S. W. 1070.
1021
§ 381 JOYCE ON INSURANCE
But a receipt of assessments by the recorder of insured's local
lodge does not operate as a waiver of a forfeiture of membership for
engaging in the liquor business contrary to the provisions of an
amended law, or e^stop the society from claiming a forfeiture where
it is expressly provided by a by-law, that receipt of assessments after
forfeiture shall not constitute a waiver. In addition it was no part
of said recorder's duty when not engaged in oflicial duties to concern
himself with the matter of annulment of contracts or the business
of the jnember, nor w^as it any part of his duty to record the fact or
to notify the grand recorder that the member was engaged in the
prohibited busiriess.^^ And the officers of a mutual benefit associa-
tion cannot waive provisions of by-laws relating to the substance of
the contract between the individual memljer and his associates, in
their corporate capacity, where the appointment of officers and the
scope of their powers and duties is limited by the constitution and
by-laws which forbid the alteration and amendment thereof except
by the governing body in the mode provided, and where the mem-
bers of the association have agreed as part of their membership eon-
tract to strictly comply with its laws, rules and regulations.^
If the enforcement of a new by-law is waived it cannot be availed
of against a surviving member under a joint certificate even though
both members have agreed to be bound by subsequently adopted by-
laws.'^
§ 381. Construction of by-laws, — In construing by-laws, they
will be given effect as far a.s possible.^ They should also be con-
Wisconsin. — Wuerfler v. Trustees, As to waiver where agent fails to
Grand Grove of Wisconsin of the take advantage of forfeiture, see
Order of Druids, 116 Wis. Ifl, 96 § 541 herein.
Am. "St. Rep. 940, 92 N. W. 233 and As to waiver and estoppel and
notes 31 L.R.A.(N.S.) 417; 83 Am. isnowledge iiot obtained in course of
St. Rep. 706; 10 Am. & Eng. Ann. cmph^vnient ; or what agent might
Cas. 62."); 1 Id. 427. liave learned; or knowledge obtained
^' Grand Lodge Ancient Order in individual capacity, see §§ 544-
United Workmen v. Burns, 84 Conn. 546 herein.
356, 80 Atl. 157, 40 Ins. L. J. 1676. On waiver by subordinate lodge of
The court per Hall, C. J. said : "But right of benefit association to insist
the general law by wliich an officer upon forfeiture of benefit because of
of a corporation in the transaction violation of laws of a.ssociation, see
of official business may be treated as note in 10 L.R.A.(N.S.) 136.
the ])rincipal does not apply with the ^ Kocher v. Supreme Council Cath-
same force to the oHicers of tlie de- olic Benevolent League, 6'i N. J. L.
fendant corporation under its consti- 649, 52 L.R.A. 861, 48 Atl. 544.
tufion aiul laws as it does to officers ^ Boman v. Bankers Union of the
of ordinary corporations." World, 76 Kan. 198, 11 L.R.A. (N.S.)
As to payment of dues and assess- 1048, 91 Pae. 49.
ments to officers, etc., see § 1278 ^ Elsev v. Odd Fellows' Assoc. 142
herein. ^lass. 224, 7 N. E. 844. They should
1022
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 381
strued in connection with the certilicate or policy.* They will also
be construed to sustain the contract, rather than ui)hold a forfei-
ture; * and a reasonable construction will be given, due regard being
had to the rights of members and the purpose of such enactment;
trivial reasons will not warrant tlieir being held invalid, nor will
they be closely scrutinized with tliat intent.^ Again, laws of mutual
benefit societies will not be construed so as to render it impossible
to comply with their requirements where such a result can be avoid-
ed, especially so where such a construction would operate to com-
pletely destroy member's rights and also as a repudiation of the so-
ciety's obligations and this npi)lies likewise to changes, etc., in said
laws.'' Tbey nmst be liberally and reasonably interj>rcted, and if
susceptible of two interpretations that construction should be adopt-
ed which will effectuate as nearly as possible the objects or purposes
of the association or society and in favor of a.ssured as forfeitures of
rights of members or of their beneficiaries are not favored.' And
be construed liberallv: Morawetz on PaeiHe Coast v. Bristol, 17 Cal. App.
Corporations (ed. 1882) sec. 369; 1 576, 120 Pac. 787, 41 Ins. L. J. 704.
Id. 2d ed. sec. 497. Georgia. — Starnes v. Atlanta Po-
* Brashears v. Pen-y County Far- lice Assoc. 2 Ga. App. 2:!7, ."iS S. E.
mers' Protective Assoc. 51 Ind. App. 481.
8, 98 N. E. 889. IlUnols.—Kuh-hts Templars' & Ma-
Construction: What is part of the sons' Life Indemnity ("o. v. Vail, 206
policy: Efl'ect of sub.sequent amend- 111. 404, 68 N. E. 1103; Su])remc
ment of by-laws or enactment or new Lodge Order of Mutual Protect idu v.
by-laws. 'See §§ 189, 189a herein. Meister, 105 111. App. 471, all'd 68
5 Evans v. Plinmix Mutual Relief N. E. 454.
Assoc. 9 Lane. Law Rev. (Pa.) 59; Kansas. — Grand Lodge Ancient
49 Leg. Intell. 15; Schmick v. Ge- Order United Workmen v. Smith, 76
genzeiter, 44 Wis. 369; Erdmann v. Kan. 509, 92 Pac. 710.
Mutual Ins. Co. 44 Wis. 376. See Mississippi.— Masonic Mutual
§ 220a herein. Benetit Assoc, v. Hoskins, 99 Mis.>^.
6 St. Marv's Beneficial Soc. v. Bur- ll-> ^6 So. 169, 40 Ins. L. J. 1671.
ford, 70 Pa. St. 321; Genest v. New York —Graxes x. Kuighis ot
L'Union St. Joseph, 141 Ma.s. 417, ^^/-^^'^ m' ^J '-no ST ' T T ^r^M"
6 N. E. 380; Fritz v. Mu.-k, 62 How. ^^i:,f,^- ^- '?,f '^ ' ^"^- ^- 'l ^^^,^-
P /\r V \ ro ^9 Oidahoma. — Woodmen ot the
t},..\ > 7^' '"", T 1 A • . World V. Gilliland, 11 Okla. 384, 67
' \\ ist v. Grand Lodge Ancient p , _,q-
Order United Workmen. 22 Ore. 271, ^^al' CaroVnm.-l.a^-one v. Tim-
29 Am. St. Re]). 603, 29 Pac. 610. n^erman, 46 S. Car. 372, 3 Am. &
8 Maynard v. Locomotive Engineers i.^,,^^ (-^j-p e^s. N. S. 510, 24 S. E.
Mutual Life & Accident Assoc. 16 200, 26 Ins. L. 15.
Utah, 145, 47 Am. St. Rep. 602, 51 Te.ra.s.— Havwood v. Grand Lodge
Pac. 259, 27 Ins. L. J. 208, 26 Ins. of Texas Knights of Pvthia.'^, — Tex.
L. J. 579. Civ. App. — , 138 S. W. 1194; Su-
See also the following cases: preme Ijodge National Reserve Assoc.
California. — Journeymen Butchers' v. Alondrowski, 20 Tex. Civ. App.
Protective & Benevolent Assoc, of the 322, 49 S. W. 919.
1023
§ 381 JOYCE ON INSURANCE
a provision- for forfeiture will be construed strictly against the asso-
ciation.^ And this applies to waiver of forfeitures.^" So a by-law
enacted by a fraternal benefit a.ssociation subsequent to the issuance
of a fraternal bcnetit certificate will be strictly construed against the
dissociation. ^^ But such liberal construction does not mean that the
obvious or plain intent should be controlled by a strained construc-
tion ; ^2 for a liberal construction in view of the common and ordi-
nary use of words should be given. ^^ So a by-law which attempts
to prohibit proximity of risks should clearly state such intention,
and a by-law which is meaningless and unintelligible as to such pro-
hiljition will be rejected.^*
Where the pohcy and by-laws conflict the latter govern, since a
corporation cannot contract in violation of its laws but this rule does
not apply where the policy as required by statute specifies the exact
amount of indemnity in which case a conflicting recital in the policy
controls the by-laws. ^^ And a provision in the certificate as to the
time of payment will control a dift'erent stipulation in a by-law
where the charter provides for payment as specified either by the
certificate or by-laws.^^ So an amendment to a by-law as to acci-
dental injury may be so construed as to make the true meaning of
the original by-law clearer or more apparent instead of conflicting
therewith.^'' And if tliere is any doubt as to which of two benefi-
ciaries is entitled to the fund the interpretation should favor the
one having the natural right as legal heirj
18
9 Bri?2:s V. Royal ' Highlanders, 84 ^^ Courtney v. Fidelity Mutual Aid
Neb. 83I, 122 N. W. 69. Assoc. 120 Mo. App. 110. 91 S. W.
"Montano v. jNIissanellese Society 768, Rev. Stat. 1899, see. 7903.
of Mutual Aid, 72 Misc. 515, 130 N. On conflict between by-laws and
Y. Supp. 155. certificate or policy, or mutual benefit
"Lange v. Royal Highlanders, 75 society or insurance company, see
Neb. 188^ 10 L.R*.A.(N.S.) 1066, 121 note in 4< L.R.A. 681.
Am St. Rep. 786, 108 N. W. 224, i^ Failey v. Fee, 83 Md. 83, 32
no N: W. 1110. L-R-A. Sll, 34 Atl. 839.
12 Grand Lodge Ancient Order i' Maynard v. Locomotive Engi-
United Workmen v. Crandall, 80 neer's Accident Assoc. 16 Utah, 145,
Kan 332, 102 Pae. 843. 47 Am. St. Rep. 602, 51 Pac. 259, 27
i3Mund V. Rehaume, 51 Colo. 129, tns. L. J. 208, 26 Ins. L. J. o/9.
Ann. Cas. 1913A, 1243, 117 Pac. 159. ^^ Journeymen Butchers' Protec-
Graves v. Knights of Maccabees of tive & Benevolent Assoc, of the Ra-
the World, 199^ N. Y. 397, 92 N. E. cific Coast, 17 Cal. App. 576, 120
792. 39 Ins. L. J. 1664. Pac 787, 41 Ins. L. J. 704. See
1* Boulware v. Farmers' & Labor- Mund v. Rehaume, 51 Colo. 129, Ann.
ers' Co-operative Ins. Co. 77 Mo. Cas. 1913A, 1243, 117 Pae. 159.
App. 639, 2 Mo. App. Repr. 128.
1024
MUTUAL COMPANIES— CHANGE OF BY-LAWS, ETC. § 381
The reasonableness of a by-law is a question of construction for
the court.^^ Although it may become a question of mixed law and
fact where the intention must be discovered by the aid of extrinsic
evidence.^"
^^ People V. Tbroop, 12 Wend. (N. ^^ Montano v. Missanellese Society
Y.) 186; Commomvealtli v. Wor- of Mutual Aid, 72 Misc. 515, 130 N.
cester, 3 Pick. (20 Mass.) 462; An- Y. Supp. 455.
gell & Ames on Corporations (9th
ed.) see. 357.
Joyce Ins. Vol. I.— 65, 1025
CHAPTER XXII.
AGENTS OF INSURER— APPOINTMENT, ETC.— POWERS.
§ 386. Corporations act through agents.
§ 387. Charter provisions concerning agents.
5^ 388. Who are insurance agents.
§ 389. Classification of agents.
§ 390. Appointment of agents.
§ 391. Appointment of agents: statutes.
§ 391a. Statute confining business of agent or broker to certain class, un-
constitutional.
§ 392. Appointment of agents: territory: contract with principal.
§ 393. Relative power of agents of stock and mutual companies.
8 394. Same subject: powers after completion of contract.
S 395. Who is general agent. ^
§ 395a. Same subject.
§ 396. Power of agents to delegate authority.
§ 397. Officers of insurance corporations and associations and their pow-
ers.
§ 398. Powers of officers of mutual benefit societies.
§ 399. Powers of president.
§ 400. Powers of vice-president.
§ 401. Powers of secretary.
§ 402. Powers of assistant secretary.
§ 403. Powers of treasurer.
§ 404. Powers of directors.
§ 405. Powers of superintendent.
§ 406. Powers of general managers. ,
§ 407. Agency of subordinate lodges.
§ 407a. Same subject.
§ 408. Agency arising from necessity or emergency.
§ 409. Agent delegated for special purpose.
§ 410. Agency: person referred to by company.
§ 411. Powers of clerk.
§ 412. Powers of medical examiner.
§ 413. Whether one is agent or broker.
§ 414. Whether broker is agent of insured or insurer.
1026
AGENTS OF INSURER §§ 380, 387
§ 415. Partnership as agent: joint agents.
§ 416. Powers of adjuster.
§ 416a. Fidelitj' bond: when not obligor's agent.
§ 386. Corporations act through agents. — Insurance corporations
must act thrciugh agents, especially so in case of corporations doing
business in foreign territory. Every member of a corporation or
association is therefore presumed to agree, on becoming such
member, that the organization shall act through such agents as
are reasonably necessary for the transaction of its business, and
imless the charter or act of appointment provides otherwise, that
they shall possess or exercise all such powers as the nature of their
appointment shall require.-^
§ 387. Charter provisions concerning agents. — We have already
given some consideration to the question of limitations imposed
upon insurance corporations and associations by the charter or
articles of association.^ There are certain class agents, such as
general officers and boards of directors, managing officers, and the
like, who derive their authority, directly or impliedly, from the
charter. Although their general authority permits the exercise
of a wide discretion, nevertheless, if the charter prescribes the mode
of exercise of their authority, and it is apparent that the Icigislature
intended such mode as exclusive of all others, the prohibition must
be obsen^ed.^ An agent has apparent authority to insure in the
1 Woodbury Savings Bank v. Char- corporations necessarily act through
ter Oak Ins.' Co. 31 Conn. 517, 528, their agents as a legal entity the only
per Dntton, J.; Lattomus v. Farm- knowledge or information it can ac-
ers' Mut. Fire Ins. Co. 3 Houst. quire must come through its agencies.
(Del.) 404; Protection Life Ins. Co. Funk v. Anchor Fire Ins. Co. 171
V. Foote, 79 111. 361, per Scholtield, Towa, 331, 153 N. W. 1048, 1051, per
J. ; Insurance Co. of New York v. Oaynor, J. "Defendant being a cor-
Cibson, 72:\Iiss. 58, 64, 17 So. 13, per poration could act only through
AVhillield, J; Imperial Fire Ins. Co. agents." Sternaman v. Metropolitan
V. Dunham, 117 Pa. St. 460, 12 Atl. Life Ins. Co. 170 N. Y. 13, 19, 57
668. L.R.A. 318, 88 Am. St. Hep. 625, 62
See Angell & Ames on Corpora- N. E. 763. 31 In.«^. L. J. 276, 282.
tions (9th"^ed.) sees. 231, 276 et seq.; ^ See U 35, 36, 53, and chapters
Bliss on Life Insurance (ed. 1872) 13, 17 herein.
sees. 273 et seq. As to the powers of As to appointment of agents :
corporate agents generally, see charter provisions, see § 390 licrein.
Thompson on Corporations (ed. As to powers of mutual companies
1895-96) e. civ. sees. 4873 et seq. and ultra vires, see §§ 350 et seq.
When acts of agents binding, when herein.
not binding, see Id. (2d ed.) .sees. As to charter provisions coneern-
159 et seq. See also Clark & Mar- ing by-laws, see § 366 herein,
shall on Corp. (ed. 1905) pp. 459 et ^ See § 35 herein. Examine An-
geq_ gell & Ames on Corporations (9th
Insurance companies like other ed.) sees. 231, 280, 291.
1027
§ 388
JOYCE ON INSURANCE
modes authorized by the company's charter, and upon the terms
and conditions inserted in their policies in ordinary use.* Insur-
ance companies are bound by the acts of agents not prohibited by
their charter and within the limits wliich may reasonably be pre-
sumed by the public from the character of the business and tlie
general mode of transacting it.^ It is held in an Illinois case ^
that an authorized agent has power to sign an agreement giving
permission for an enhanced premium which was paid to remove
property, although the charter required that agreements relating
to insurances should be signed by the president and secretary.'
§ 388. Who are insurance agents. — Insurance agents are persons
expressly or impliedly authorized to represent either the insurer
or insured in matters relating to insurance. Agents may directly
represent the principal, or they may belong to the class designated
as subagents, who are employed by the principal agent, and fre-
quently brokers are thus employed.' A person was held to be an
agent of the company where it appeared that a circular signed by
the general agent was addressed to such person as ''agent," referring
to his "agency," and fully instructing him as to his duties in that
capacity. He thereafter acted as agent, informed the general
agent of the loss, and received a reply and instructions from him.^
And the possession by an insurance agent of blank policies, to
*De Grove v. Metropolitan Ins. 2 Rem. & Bal. Code Wash. sec. 6191
Co. 61 N. Y. 594, 19 Am. Rep. 305, {construed in :\Iiller v. Spring Gar-
and note, 309. See Reynolds v. Con- den Ins. Co. 202 Fed. 442, 120 C. C.
tinental Ins. Co. 36 iVIicli. 131. A. 548, 42 Ins. L. J. 715. See § 512
5 Kenton Ins. Co. v. Shea, 6 Bush herein.
(69 Ky.) 174, 99 Am. Dee. 676. "An agency is created by contract
6 Farmers' & Merchants' Ins. Co. express or implied. It 'is a legal re-
V. Chestnut, 50 111. Ill, 99 Am. Dec. lation by virtue of which one party
492. (the agent) is employed and author-
■^ See §§ 35, 36 herein, for a con- ized to represent and act for the
sideration of this question. other (the principal) in business
' See Ewell's Evans on Agency, c. dealings with third persons. The
i. for definitions of the different kinds distinguishing features of the agent
of agents and distinctions between are his representative character and
them. See also 1 Words & Phrases, his derivative authority.' Meehem,
pp. 261 et seq.; Id. (2d series) pp. Ag. .sec. 1; Story, Ag. sec. 3. 'To
154 et seq. constitute agency there must be eon-
Agent defined under statutes: sent both of principal and agent;'
Code Ga. 1911 (Civ.) sec. 2443. Whart. Ag. sec. 1." Sternaman v.
(see. 2054) ; Mo. Rev. Stat. 1909, see. Metropolitan Life Ins. Co. 170 N. Y.
7052 (Rev. Stat. see. 8000); 2 Lord's 13, 19, 57 L.R.A. 318, 88 Am. St.
Ore. Laws (1910) sec. 4641, p. 1767 Rep. 625, 62 N. E. 763, 31 Ins. L.
(defined and construed). Tex. Rev. J. 276, 282, per Vann, J.
Civ. Stat. 1911, art. 4961 (applied in ^ Hamilton v. Home Ins. Co. 94
Austin Fire Ins. Co. v. Savles, — Mo. 353, 7 S. W. 261. See § 718
Tex. Civ. App. — 157 S. W. 272) herein.
1028
AGENTS OF INSURER
§ 389
which the signatures are affixed of the company's president and
secretary, afford snfiicient evidence of a general agency to justify
a person's contracting for insurance with liini, and to accept a
policy delivered by him.^° So a party employed as a watchman by
the owner of the property may issue a policy thereon as agent of
an insurance company.^^ AMiere a soliciting agent solicits one to
become a member of a mutual benefit association, pretending to
be its agent, and produces and fills out the ajiplication which is
sent to the association, acted on by it in. issuing a certificate, and
said certificate is sent to the apparent agent, who delivers it to
assured and collects the premium, an agency is established.-^^
§ 389. Classification of agents. — In classifying agents a distinc-
tion has been made as to their powers, between the different kinds
of agents, and between those representing the different kinds of
insurance, such as life, fire, and marine. ^^ This distinction may be
of some importance where third parties dealing with such agents
have knowledge of whatever limitations such distinction may im-
port. But the main questions are. What authority was the agent
held out by the principal to possess? Were the agent's acts within
the scope of his real or apparent authority? Did the person deal-
ing with such agent have knowledge of restrictions or limitations
upon the agent's authority?^* As a general rule, the general
^^ Howard Ins. Co. v. Owens, 94
Ky. 197, 21 S. W. 1037, 13 Ky. Law
Rep. 237.
^^ Northrup v. Gerraania Fire Ins.
Co. 48 Wis. 420, 33 Am. Rep. 815, 4
N. W. 3.30.
^2 Whitney v. National Ma.sonic
Accident Assoc. 57 Minn. 472, 480,
59 N. W. 943, per Collins, J.: dis-
tinguishing Glide V. K.xfliano-e Fire
Ins. Co. 53 Minn. 220, 54 N. W. 1117 ;
and citing:
United States. — Abraham v. North
German Ins. Co. 40 Fed. 717.
Illinois. — Pierce v. People, 100 111.
11, 46 Am. Kep. 683; Goscli v. State
Mutual Fire Ins. Assoc. 44 111. App.
263.
Iowa. — Stone v. Hawkeye Ins. Co,
68 Iowa, 737, 28 N. W. 47.
Maine. — Packhard v. Dorchester
Mutual Ins. Co. 77 Me. 144.
Oregon. — Hahn v. Assurance Co.
23 Ore. 576, 37 Am. St. Rep. 709, 32
Pac. 683.
Ohio. — Insurance Co. v. Williams,
39 Ohio St. 584, 48 Am. Rep. 474.
West Mrginia.—Deitz v. Provi-
dence Washiiiiiton Ins. Co. 31 W. Va.
851, 13 Am. St. Rep. 909, 8 S. E.
616, s. c. 33 W. Va. 526, 25 Am. St.
Rep. 108, 11 S. E. 50.
^^ See Richards on Insurance, pp.
20-2(), sec8. 16-19; Id. (3d e'd.)
sec. 155, p. 188. "There seems to be
no very well defined distinction be-
tween the powers of general agents,
local agents and subagents:" 1 May
on Insurance (3d ed.) 221, sec. 126.
"The distinction between .special and
general agents is of little or no prac-
iticfd value, so far at least as regards
the principal and third partie.^:"
Ewell's Evans on Agency, 2. See §
395 herein.
^* See chapters, post, on Agents;
Ewell's Evans on Agency (ed. 1879)
c. i. pp. 2 et seq.; Story on Agency,
sec. 127, note; Union Mutual Life
Ins. Co. v. Wilkinson, 13 Wall. (80
1029
§ 390 JOYCE ON INSURANCE
principles of agency applicable to all agents govern the acts of
insurance agents. ^^
§ 390. Appointment of agents.— An agent's authority may arise
by virtue of a valid express appointment by deed, or writing under
seal, or it may rest in parol." It may be implied from usage, from
custom, or from a course of dealing sanctioned by the principal;
or it may exist under an express ratification by the principal; or
the implied authority may arise where the party's own acts are
such as to constitute him an agent, or the agency may be created
by a necessity justifying immediate action." So a presumption
exists that a person does not act for another for a long time as
agent unless he is so authorized." And this is true not only of
agents of the insurer, but also of agents of the insured."
Where the charter and by-laws prescribe the performance of
certain formalities as conditions precedent to the agent's authority
to act, such matters relate to the management of the internal affairs
of the company. Therefore, a party who deals with such agents
has, in the absence of notice to the contrary, the right to assume
that such formalities have been complied with, and may deal with
the agent within the scope of his apparent authority. The cor-
poration is also estopped from setting up noncompliance by the
U. S.) 222, 235, 20 L. ed. 617, 2 Co. 14 Wis. 318, and numerous otlier
Wood on Fire Ins. (2d ed.) 800, sec. cases.
416. ^^ Ewell's Evans on Agency, 22-
"See Markev v. Mutual Benefit 32, *16-*23; Swazey v. Union ]Mi>
Ins. Co. 103 ISiass. 78, 93. ''There Co. 42 Conn. 556; Perkins v. Wasli-
are no principles which belong ex- ington Ins. Co. 4 Cow. (N. Y.) 646.
c-lusively to agency in insurance mat- As to appointment of agents under
ters; none, that is, which are not rec- statutes, see S 391 lierein.
ognized as a part of the general law " See Mechem on Agency (ed.
of agency. But there are some pe- 1889) c. iv. sees. 80 et seq.; Story on
culiarities in the application of these Agency (9th ed.) c. v. sees. 45 et seq.;
principles:" 2 Parsons on Marine Wharton on Agency, sec. 134; Union
Ins. (ed. 1868) 416. "The same Gold Mining Co. v. Rocky Mountain
rules ap]dy to insurance comi-)anies National Bank, 2 Colo. 248.
as apply in the case of individuals, If relations exist which will con-
and a pei-son who is clothed with stitute an agency, it will be an
power to act for tliem at all is treat- agency, whether the parties under-
ed as clothed with authority to bind stand it to be such or not. Their
them, as to all matters within tlie private intentions will not affect_ it.
scope of his real or apparent an- Bradstreet Co. v. Gill, 72 Tex. 115, 2
thority:" 2 Wood on Fire Ins. (2d L.R.A. 405, 9 S. W. 753.
ed.) 822, sec. 408, citing Bodine v. "Russell v. Palentine Ins. Co. 106
Exchange Fire Ins. Co. 51 N. Y. Miss. 290, 63 So. 644.
117, 10 Am. Rep. 566 ; Eclectic Fire " See Barlow v. Leckie, 4 Moore,
Ins. Co. V. Fahrenkrug, 68 111. 463; J. B. 8; Ewell's Evans on Agency.
Warner v. Peoria Mutual & Fire Ins. (ed. 1879) 22-32, side pp. 16-23.
1030 '■
AGENTS OF INSURER § 391
agent with the prescribed conditions.^" But so far as the appoint-
ment itself is concerned, it is not valid unless made in conformity
with such formalities as the charter prescribes, where the charter
sets forth the requirements,^ although an irregular or informal
appointment may be ratified, either expressly or impliedly, by
acts of the corporation.^ In regard to special or class agents, the
charter may prescribe who shall act a? agents in transacting and
managing certain affairs of the corporation; such charter agenU>s,
therefore, must look to the charter as the source of their authority.'
Where an agent's written commission expressly excludes authority
to insure manufactories and other special hazards, it cannot be
assumed merely from the fact that he is the company's local agent,
that his authority is unlimited as to risks and terms. Nothing more
can be implied therefrom than an authority to insure in the mode
required by the company's charter, and to take only such risks as
the policies ordinarily used by the company would warrant.'*
A person may by his own acts become an agent where he had
no prior authority. So where a third party collects and holds
premiums, he thereby becomes a bailee of the company, and must
account, to it or its agent for money so received and held.* An
agent's authority may also arise from a habit and course of busi-
ness acquiesced in by the principal.®
§ 391. Appointment of agents: statutes. — In the case of foreign
insurance companies, the statutes of many states impose certain
conditions upon them in relation to the appointment of agents act-
ing within the state.®"* The failure to comply with such require-
20 Bank of United States v. Dand- Evans on Asjonrv (ed. 1879) c. iv.
ridge, 12 Wheat. (25 U. S.) G4, 70, p. 192, side pp. 136 et seq.
6 L. ed. 552, per Storv, J.; In re ^ i^ee Bank of U. S. v. Danbndg
County Life Assur. Co. L. K. 5 Cli. 12 Wheat. (25 U. S.) 113, L. e
293, per (iirtard, L. J.; Insurance Co. 552, per iMarsliall, C. J.; Beatty v.
V. McCain, 96 U. S. 84, 24 L. ed. Marine Ins. Co. 2 Johns. (N. Y.)
653; 2 Morawetz on Private Corp. lOit, 3 Am. Dec. 401; Washinirton &
(2d ed.) sees. 637 et secj. Pittsburgh Turnpike Co. v. Cullen &
iHenning v. United States Ins. Crane, 8 Serg. & R. (Pa.) 517, 521,
Co. 47 Mo. 425, 4 Am. Rep. 332; 522; Angel! & Ames on Corp. (9lh
Head v. Providence Jns. Co. 2 ed.) sec. 279.
Cranch (6 U. S.) 127, 2 L. ed. 229. ^ Reynohls v. Continental Ins. Co.
See Commercial Mutual Marine Ins. 36 Mich. 131.
Co. V. Union Mutual Ins. Co. 19 Ilow. ^ Pagan & Trezevaut v. N. Mis-
(60 U. S.) 318, 15 L. ed. 636; Badg- souri Ins. Co. 31 Ark. 54.
er V. American Popular Life Ins. Co. ® Franklin v. Globe Mutual Lite
103 Mass. 244, 4 Am. Rc}). 547. Ins. Co. 52 Mo. 461; Putnam v.
2 Farmers' Mutual Ins. Co. v. Tay- Home Ins. Co. 123 Mass. 324, 25 Am.
lor, 73 Pa. St. 342; 2 Morawetz on Rep. 93.
Corp. (2d ed.) sec. 637; Ewell's s* See §§ 327 et seq., 512 herein.
1031
d.
§§ 391a, 392
JOYCE ON INSURANCE
ments goes to the question of the validity of acts done by such
agents.' Where a person, as "inspector"' of risks for a foreign com-
pany not authorized to do business in a certain state, solicits in-
surance therein, assuming to act as an agent, and reports a risk
to the company, which issues in consequence a poHcy and receives
the premium, he is an agent of the company, and is within the
prohibition of the statutes relating thereto.^ But the insurance
commissioner has no power to prescribe requirements in addition
to those prescribed by statute concerning licensing agents of com-
panies or associations organized for the insurance of each others
property.^
§ 391a. Statute confining business of agent or broker to certain
class, unconstitutional. — A statute, the purpose of which is to con-
fine the business of broker in procuring insurance to those who
should make that their principal business, or who should be real
estate agents or brokers is unconstitutional as confining the busi-
ness of agents or brokers to a certain class. ■'°
§ 392. Appointment of agents: territory: contract with principal.
— If a person secures an appointment for an insurance company as
'' Ca.ses where faihire to comply in- pp. 376-7, sees. 1-4 (commissioner
validates: (annot prescribe additional eondi-
lUiiiois. — Cincinnati Mutnal Health tions),
As.siir. Co. V. Rosenthal, 55 111. 85,
8 Am. Rep. 626.
Pennsylvania. — Thornton v. West-
ern Reserve Fire Ins. Co. 31 Pa. St.
Kentncly. — Franklin Ins. Co. v. 529
Louisville & A. Packet Co. 9 Bush
(72 Ky.) 590.
As to actions against ag'ents of
foreign companies, see §§ 713, 715
Massa-chusetts. — Williams v. Chen- herein,
ey, 8 Gray ( 74 JNlass. ) 206. On effect of agent's failure to pro-
New Hampshire. — Haverhill Ins. cure license, see note in 1 L.R.A.
Co. V. Preseott, 42 N. H. 547, SO Am. (N.S.) 1159.
Dec. 123. ^ List v. Commonwealth, 118 Pa. Su
Pennsylvania. — Thorne v. Travel- 322, 12 Atl. 277, under Pa. act,
ers' Ins. Co. 80 Pa. 15, 21 Am. Rep. April 4, 1873.
89, 5 Ins. L. J. 169. Statute requiring certificate on ap-
Cases contra: plication to agent of foreign com-
United States.— The Manistee, 5 pany selling stock of the corporation
Biss. (U. S. C. C.) 381, Fed. Cas. and taking- notes. Hughes v. Four
No. 9027. See Crutcher v. Kentuck, States Life Ins. Co. — Tex. Civ.
141 U. S. 47, 35 L. ed. 649, 11 Sup. App. — , 164 S. W. 898.
Ct. 851. ^ Guy L. Wallace & Co. v. Fergu-
Massachusetts. — Provincial Ins. son, 70 Ore. 306, 140 Pac. 742.
Co. V. Lapsley, 15 Gray (81 Ma.ss.) i° Hauser v. North British Mercan-
262. tile Ins. Co. 206 N. Y. 455, 42 L.R.A.
Missouri.— Clark v. Middleton, 19 (N.S.) 1139n, 100 N. E. 52, aff'g 136
Mo. 53. X. Y. Supp. 1015, 152 App. Div. 91,
Oregon. — Guy L. Wallace & Co v. sec. 142 Ins. Law, first inserted in
Ferguson, 70 Ore. 306, 140 Pac. 742, 1911, c. 748, as am'd by Laws 1912,
aff'd 141 Pac. 542, under Laws 1911, c 1, is unconstitutional.
1032
AGENTS OF INSURER § 393
district agent for a certain territory, under a contract -vvliich does
not stipulate for an exclusive right to act a^ sole agent therein, it
is not a breach of the contract to appoint another agent in the
same territory where the contract aJso provides that commissions
shall be divided between him and other agents on business obtained
by them acting conjointly in the given district.^^ A general agent's
commission to act for the insurer within certain territory should
be liberally construed in favor rather than in derogation of his
authority especially so in \\e\\ of the fact that the jurisdiction
of local offices is customarily extended in fact and in practice to
the immediate neighborhood and the language of his commission
is consistent with such authority. ^^ It is also held that where an
agent is appointed to act in a certain locality and its vicinity, the
word ''vicinity"' will include a village within ten miles of such
locality.^^ And where one is appointed as a manager of a certain
department, embracing the whole of one state and such portions of
two other states as are "'acceptable to the association," the principal
may terminate the contract, and is not Kable in damages where
the agent fails to secure a certain amount of new business pro-
vided for in the contract, nor is the company unconditionally
obligated to keep open the two other states. ^^
The company may validly stipulate that the agent shall serve
on its i)resident or secretary a written statement of his claim a cer-
tain number of days before bringing an action thereon against
the company, and such an agreement is binding on the agent in
the absence of fraud. ^^
§ 393. Relative powers of agents of stock and mutual companies.
— iSome discussion has' been hud upon the point whether any dis-
^^ Lester v. Now York Life Ins. Co. "but in that case tlie aj?ent's commis-
84 Tex. 87, 19 S. W. 3515. See In- sion expressly (]e<'lar('(i tliat 'all pul-
suranee Company of North America icies shall be null and void and of no
v Thornton, 330 Ala. 222, 55 L.R.A. binding effect u})on this company it!
547, 89 Am. St. Rep. 30, 30 So. 614. issued upon i)r()perty not situated
^^ Sun Insui'ance Ol'lice of London within the district (Dotliani and \ icin-
V. Mitchell, 186 Ala. 420, 65 So. 143. ity) in Avhicli the agent issuing the
The court notes a prior decision as same shall reside and for whicli he is
contrary to the recognized rule which ajipointed.' "
decision holds that territorial restric- ^^ Howard Ins. Co. v. Owens, 94
tions upon even a general agent's au- Ky. 197, 21 S. W. 103 <, 13 Ky. L.
thority are effect ual even as to unin- Rej). 237.
formed persons, so that the company ^* Sibley v. Mutual R<>serve Fund
is not bound by the agent's accept- Life Assoc. 87 Oa. 738. 13 S. E. 838.
ance of risks outside of restricted ter- ^^ Better v. Providential Ins Co.
ritory. Insurance of North America 16 Daly (N. Y.) 344, 32 N. Y. 686,
v. TlKirnton, 130 Ala. 222. .')5 L.R A. 11 N. Y. Supp. 70.
547, 89 Am. St. Rep. 30, 30 So. 614,
1033
§ 393 JOYCE ON INSURANCE
tinction exists between the powers of agents of stock and mutual
insurance companies. It is held by some courts that the agents of
stock companies are invested with larger powei-s, in matters relating
to completion of the contract and waiver of its terms, than are pos-
sessed by agents of companies formed on the mutual system, where
the rights of all the members are alike regulated and governed by
the by-laws which enter into and form a part of the contract with
every member.^^ This distinction may be im[)ortant, so far as,
concerns the authority of the agent to act on matters relating to
the contract subsequent to its completion. But it is well settled
that an applicant for insurance in a mutual company is a stranger
to the by-laws, nor does the presumption of knowledge thereof arise
against him until he becomes a member.^'^ And the fact that one
becomes a member of a mutual insurance company cannot operate
to convert the previous acts of examination and description by the
agent of the company into the acts of the insured, and change them
into representations made by him,^^ although it is held that all
persons applying to become members of an incorporated insurance
16 Pitney v. Glens Falls Ins. Co. 65 N. Y. 292. But see Susquehanna
N. Y. (5. See Brewer v. Cliclsea Mu- Ins. Co. v. Perrine, 7 Watts & S.
tual Fire Ins. Co. 14 Gray (80 Mass.) (Pa.) 348, 331, per Gibson, C. J.
203; Kausal v. Minnesota Farmers' ^^ See Lycoming Fire Ins. Co. v.
:\!utual Fire Ins. Assoc. 31 Minn. 17, Woodwortli, 83 Pa. St. 223, per Gor-
47 Am. Rep. 776, 16 N. W. 430, per don, J. Examine next following
Mitchell, J.; Susquehanna Ins. Co. chapters.
V. Perrine, 7 Watt.s & S. (Pa.) 348; See aL^o the following cases:
Bacon on Benefit Societies and Life Connecticut. — Beel)e v. Hartford
Ins. sec. 147; 1 May on Ins. (3d ed.) Mutual Fire Ins. Co. 25 Conn. 51, 65
sec. 127. Am. Dec. 5.33.
^■^ Meyers v. Lebanon Mutual Ins. Illinois. — LTnion Ins. Co. v. Chipp,
Co. 150 Pa. St. 420, 425, 27 Atl. 39, 93 111. 96 ; Commercial Ins. Co. v
per Williams, J. See Kausal v. Min- Jves, 56 ill. 402.
nesota Farmers' ^lutual Fire Ins. Maryland. — Lycoming Fire Ins.
Assn. 31 Minn. 17, 47 Am. Rep. 776, Co. v. Langley, (52 Md. 196.
779, 16 N. W. 430; Fi-anklin Fire Minnesola. — Kausal v. ^Minnesota
Ins. Co. y. Martin, 40 N. J. L. 579, Farmers' Mutual Fire Assoc. 31
11 Yroom, 368, 29 Am. Rep. 271, Minn. 17, 47 Am. Rep. 776, 16 N.
280, per Depue, J.; Eilenberger v. W. 430.
Protective Mutual Fire Ins. Co. 89 Mississippi. — Planters' Ins. Co. v.
Fa. St. 464; Columbia Ins. Co. v. Myers, 55 Miss. 479, 30 Am. Rep.
Cooper, 50 Pa. St. 331, 340, per 521, 531.
AVoodward, C. J.; In re County Life Pennsi/lvmiia. — Kister v. Lebanon
Assur. Co. L. R. 5 Cb. 288, 293. Mutual Ins. Co. 128 Pa. St. 553, 15
"There is no general rule compelling Am. St. Hep. 696, 5 L.R.A. 646, 18
persons dealing with a corporation at Atl. 447 ; Eilenberger v. Protection
their peril to take notice of its by- Ins. Co. 89 Pa. St. 464; Cumberland
laws." 2 Morawetz on Private Corpo- Valley ^Mutual Protective Ins. Co. v.
rations (2d ed.) sec. 593. See Con- Scliell, 29 Pa. St. 3L
over V. Mutual Ins. Co. of Albany, 1
1034
AGENTS OF INSURER § 394
company must be presumed to have known the terms of its charter
and by-lavws.^^ 'J'hough there are many decisions to the contrary
upon the general proposition in courts of last resort.^" So it is
declared in an Illinois ca.se.^ "It has been held by this court that
the doctrine of waiver applies not only to insurance companies
having a ca])ital stock, insuring for pecuniary profit, but also to
mutual benefit associations. . . . The nature and objects as
well as the organization and government of such associations,
render the application of general rules of law in most cases the same
as mutual benefit associations not organized for pecuniary profit." ^
The better opinion, however, would seem to be that by-laws as to
persons not members of tlie company, in so far as they limit an
agent's apparent authority, are substantially secret restrictions there-
on, and, in the absence of actual or constructive notice, are not
binding on those dealing with such agent.^ At least such a rule
ought to govern upon analogous principles with those from which
a like rule is deduced in cases of agents of stock companies, es-
pecially where the by-laws Contain conditions of which the applicant
had no knowledge prior to the completion of the contract, and
which he could not, imder the law, be presumed to have had in
contemplation in negotiating for insurance.
§ 394. Same subject: powers after completion of contract. — If,
under the by-laws of a mutual insurance company, its agent in a
certain place havS authority to take aj)plications and receive ])re-
miums, and to deliver the same to the company, and no application
or renewal is binding upon the company until approved by the
secretary, and such agent only receives a specified sum, in case of
acceptance, he ceases to be the company's agent immediately the
contract is comj^leted, and has no authority after the contract is
completed to waive any of its conditions.* ^Miere the contract
^' Belleville Mutual Tn.s. Co. v. Van Bhode Island. — Wilson v. Conwav
Winkle, 12 N. J. Eq. [VSA. Mutual Fire Ins. (^o. 4 IJ. T. 141.
^^ See the following oases: ^ I)roni<>()ld v. Royal Noisjlihors of
Massachusetts. — McCoy v. IMetro- America, 2G1 111. GO, 103 N. E. 584.
politan Life Ins. Co. 1.!.'] ]\lass. 82, ^ Id. per Carter, J.
85; Kibbe v. Ilaniilton Mutual Ins, ^ ^ec In re Countv Life Assur. Co.
Co. 11 Gray (77 Mass.) 1(53. See L. R. 5 Ch. 288, 293; Fay v. Noble,
Mulrey v. Sliawmut Fire Ins. Co. 4 12 Cusli. (GG Mass.) 1, IG et seq.,
Allen "(86 Mass.) IIG, 81 Ara. Dec. per Shaw, C. J.; Union Mulual Lilc
689. Ins. Co. v. Whitfe, lOG 111. G7. and
New Jersei/. — Franklin Fire Ins. other cases cited in 2 Moiawet/. on
Co. V. Martin, 41 N. J. L. 7)08, 29 Private Corporal ion.s, (2d cd.) sees.
Am. Rep. 271. 593, 594. See also cases in note 18
Ohio. — Smith v. Farmers' Mutual al)ove.
Ins. Co. 19 Ohio St. 287. * Bourgeois v. Mutual Fire Ins. Co.
Pennsi/lvania.—iiuiiquehauna Ins. 8G Wis. 402, 407, 57 N. W. 38, per
Co. V. Perrine, 7 Watts & S. (Pa.) Cassaday, J.; citinfj Hankins v.
348. Roekford Ins. Co. 70 Wis. 4, 35 N.
1035
§ 394 JOYCE ON INSURANCE
has been completed and a person has become a member of a
mutual insurance company, the above considerations become
merged in the fact that as such member such person is, as already
stated, charged with notice of whatever restrictions on the agent's
authority are imposed by the charter and by-laws. The question
then resolves itself into that of whether such inhibitions are con-
clusive or not. The determination of this point must necessarily
involve the kindred ones, viz.: 1. To what extent, if at all, can
the company itself, or through its agent, enter into contracts which
are not strictly warranted by the charter? or 2. To what extent
can it in a particular case waive by-law^s Avhich are applicable alike
to all members by reason of the mutuality of the system of insur-
ance? In the case of Kausal v. Minnesota Farmers' Mutual Fire
Insurance Association ^ the court considers the question of whether
any distinction exists between agents of stock and mutual com-
panies, and holds that such a distinction did not exist in that
case, for there the stipulations claimed to bind the assured were
only in the policy, and the court adds-: "We fail to see any dis-
tinction between the two kinds of companies, and we feel confident
that the average applicant for ijisurance is rarely aware of any."
But the force of this statement is somewhat modified as to dealings
with the agent subsequently to effecting the policy, for it is evident
that the court had in mind only negotiations concerning the appli-
cation; that is, acts and representations of the agent before com-
pletion of the contract. The court concludes as follows: ''But in
applying and contracting for insurance the applicant and the com-
pany are as much two distinct persons as in case of a stock company,
and we see no reason for holding the agent who takes the applica-
tion any less the agent of the insurer in the one case than in the
other. The membership does not begin until the policy is issued.
As to all previous negotiations the agent acts only for the com-
pany." Many courts of high authority have held to a strict con-
struction in such matters in favor of the insurer, and have declared
unequivocally that officers and agents of mutual insurance com-
panies have no authority to waive its by-laws ; ^ although it is
W. 34; Kinidson v. Hekla Fire Ins. Colorado. — Modem Woodmen of
Co. 75 Wis. 198, 43 N. W. 954; Bos- America v. Interuatioiial Trust Co.
worth V. Merchants' Fire Ins. Co. 80 25 Colo. App. 26, 130 Pae. 806.
Wis. 393, 49 N. W. 750; Stevens v. Indiana. — Leonard v. American
Queen Ins. Co. 81 Wis. 335, 51 N. Ins. Co. 97 Ind. 299; Behler v. Ger-
W. 555, 29 Am. St. Rep. 905. man Mutual Fire Ins. Co. 68 Ind.
6 31 .Alinn. 17, 47 Am.' Rep. 776, 347, 354.
16 N. W. 430. Massachuselts. — Evans v. Tremon-
6 See §§ 34 et seq., 53, 509 herein, tain Mutual Fire Ins. Co. 9 Allen (91
Examine the following cases: iMass.) 329; Brewer v. Chelsea Mut.
1036
AGENTS OF INSURER
§ 394
held that the directors of a mutual company or tlieir ofTicers, by
their direction or approval, may so act as to entitle a person to
become a member who, by their fault, has been prevented from
depositing his note, and as to authorize a court of equity to comi)el
his being received, or to give the same relief he would be entitled
to if he was.'^ We have seen, howeve.r, that the courts will, in
certain cases, uphold contracts, even though made in excess of the
charter powers of corporations,* although the general rule is to the
contrary,^ and that by-laws may likewise be waived, especially
where the matter is not mandatory nor of the essence of the con-
tract.^o It is said in a Minnesota case that there is no difference
Fire Ins. Co. 14 Grav (80 INfass.) J r/.««sa.s. — Peebles v. Eminent
203, 209; liale v. Mechanics' Mutual Household of Columbian Woodmen,
Fire Ins. Co. 6 Gray (72 Mass.) 169, 111 Ark. 435, 1(34 S. W. 29().
66 Am. Dec. 410. Cotwecticut. — Peck v. New London
New J^-r.se//.— Miller v. Hillsbor- County Mutual Fire Ins. Co. 22
ough Fire Assoc. 42 N. J. Eq. 459, Conn. 575.
7 Atl. 895. Illinois. — Dromgold v. Royal
New York. — Mesereau v. Phoenix Neighbors of America, 261 111. 121,
Mutual Life Ins. Co. 66 N. Y. 274. 103 N. E. 584, 43 Ins. L. J. 176.
Examine 1 Morawetz on Private Joira.— Ke.sler v. Farmers' Mutual
Corp. (2d ed.) sec. 50L Fire &_ Lightning Ins. Assoc. 160
Oklahovia.— Modern Brotherhood Iowa, 3/4, 141 N. W. 954.
of America v. Beshara, 42 Okla. 684, Jvm/McA//.— Masonic Life Assoc, v.
142 Pac. 1014 (power was limited by Robinson, 156 Ky. 371, 160 S. W.
by-laws). 1078.
Tea;as.— Sovereign Camp Wood- Minnesota. — Dougherty v. Supreme
men of the World v. Wagnon, — Court of Independent Order of For-
Tex. Civ. App. — , 164 S. W. 1082 esters, 125 Minn. 142, 145 N. W. 813.
(but so held under Rev. Stat. 1911, Missouri.— VjvxWWh v. Supreme
sec. 4847). Council of Royal Arcanum, 182 Mo.
On waiver by officer of subordinate App. 644, 166 S. W. 324; Keys v.
lodge of forfeiture for nonpayment National Council Knights & Ladies
of a.ssessments, see notes in 4 L.R.A. ^i Security, 174 Mo. App. 671, 161
(N.S.) 421; 38 L.H.A.(N.S.) 571;
and L.R.A.1915E, 152.
'Belleville Mutual Ins. Co. v. Van
Winkle, 12 N. J. Eq. 340, per Elmer,
J.
* o .»-
.J-),
36 herein.
9 See §§ 35, 36 herein ; Head v.
Providence Ins. Co. 2 ("ranch ((i U.
S.) 127, 2 L. ed. 229; Leonard v.
American Ins. Co. 97 Ind. 299;
Brewer v. Chelsea Mutual Fire Ins.
Co. 14 Gray (80 Ma.-^s.) 203; Bor-
S. W. 345; Wallace v. Prudential
Ins. Co. 174 Mo. App. 110, 157 S.
W. 1028.
Nebraska. — Krecek v. Sujireme
Lodge of Fraternal Union of Amer-
ica, 95 Neb. 428, 145 N. W. 859.
New Hampshire. — Union iNIutual
Fire Ins. Co. v. Keyser, 32 N. H. 313,
64 Am. Dec. 377.
Pennsijlvania. — Cumberland Val-
lev Mutual Protective Ins. Co. v.
graefe v. Sujireme Lodge Knights & Schell, 29 Pa. St. 31.
Ladies of Honor, 22 Mo. App^ 127. Texas.— Splawn v. Chew, 60 Tex.
1° See §§ .35, 36, 407, 515 herein. 532.
Examine the following eases ;
Wisconsin. — Morrison v. Wiscon-
103/
§ 395 JOYCE ON INSURANCE
between agents of stock and mutual companies,^^ and it would
seem, in go far as their acts within the apparent scope of their
authority are concerned, that there can be no difference. If an
agent of a stock company can waive express provisions of the
policy, where his authority is broad enough, why should a con-
tract with a mutual company be peculiarly protected? The by-
law^s, though a part of a member's contract, ought not to impose
greater obligations than the express stipulations of a policy in a
stock company; and if the power to waive a by-law, which is neither
mandatory nor of the essence of the contract, rests in the company,
why not, then, in an agent having the requisite authority? Cer-
tainh', if the company is empowered to vest discretionary powers
in its agents in such matters, it cannot be said to abrogate the prin-
ciple of mutuality. Thus in a New York case ^^ the court declares
that it is the duty of incorporated companies to see to it at their
peril that their officers and agents understand their powers and
duties, and that they do not habitually transcend such powers. We
believe the above expressions are in accord with the conclusions of
other Avriters and with the tendency of opinion at the present time.^^
§ 395. Who is general agent. — A distinction is made under the
law of agency, as to the extent of their authority, between general
and special agents.^* This distinction Evans, in his work on
Agency, asserts to be of little or no practical value, and this is
true, so far at least a-s regards tlie principal and third parties, since
the question in case of dispute as to the agent's powers does not
sin Odd Fellows' Atutnal Life Ins. ^* Crusan v. Rmitb, 41 Ind. 288,
Co. 59 Wis. 162, 169, 18 N. W. 13. Lattomus v. Farmer.s' IMntual Fire
The courts of Ma.s.sachusetts dis- Ins. Co. 3 Houst. (Del.) 404. See
tinguish as to these by-laws which also 2 Wood on Fire Insurance (2d
are not of the essence of the con- ed.) 873, sec. 421; Richards on Ins.
tract: Brewer v. Chelsea Mutual Fire (ed. 18!)2) p. 21, sees. 17 et seq., p.
Ins. Co. 14 Gray (80 Mass.) 209; 95; sec. 93, p. 101; sec. 95. "Therp
Priest V. Citizens' Mutual Fire Ins. seems to be nD very well-defined dis-
Co. 3 Allen (85 Mass.) 602. tinction between the powers of gen-
^^ Kan.>^al v. Minnesota Farmers' eral agents, local agents, and sub-
Mutual Fire Ins. Assoc. 31 Minn. 17, agents." 1 May on Ins, (3d ed.)
47 Am. Rep. 776, 16 N. W. 430. sec. 126, p. 221.
^2 Conover v. Mutual Ins. Co. 1 Who are general and who special
Comst. (N. Y.) 290. agents, see Great West Mining Co. v.
^3 TTnion Mutual Life Ins. Co. v. Woodmas of Alston Mining Co. 12
Wilkinson, 13 Wall. (80 U. S.) 222, Colo. 46, 13 Am. St. Rep. 204, 90
20 L. ed. 617; Peck v. New London Pac. 77; Union Stock Yards & Tran-
Mutual Fire Ins. Co. 22 Conn. 575. sit Co. v. Mallorv Son, & Zimmerman
See 1 May on Ins. (3d ed.) sec. 126, Co. 157 111. 664, 48 Am. St. Rep. 341,
p. 220; sees. 127, 139, 140, 145-49; 41 N. E. 888.
Bacon on Benefit Societies and Life Special agent defined, see Thomp-
Ins. (ed. 1888) sees. 147, 151, 156- son v. Michigan Mutual Life Ins. Co.
58, 171, 307, 426. 56 Ind. App. 502, 105 N. E. 780.
1038
AGENTS OF INSURER § 395
rest alone upon whether the authority is general or special, but
inquiry is necessitated as to whether the agent's acts are within
the scope of his real or apparent authority. ^^ and this is especially
applicable to insurance agents. So it is declared in a Minnesota
case that: "The designation of agents as 'general," 'special,'
'local' and 'soliciting' agents in a rough way serves to indicate
their powers, but it is of little importance as between the prin-
cipal and persons who deal with the agent. It is commonly
said that a general agent is one who ha.s power to transact all the
business of his principal of a particular kind, or in a particular
place, and a special agent is one who is authorized to act only in
a s])ecific transaction.^^ The mere fact that an agent's authority is
limited to a particular business does not make his agency special,
if the authority is general and gives him power to perform all acts
necessary for the transaction of that business and he is so held out
to the world." Locality or extent of territory is not the test of
general or special agency.'' ^^ In Iowa there is also no distinction
between soliciting and recording agencies.^^ AVe will consider,
however, some of the decisions relating to general agents. A general
agent is one who is authorized to transact all the business of his
principal, or all of his business of some particular kind, or at some
particular place, but an agent's authority is not made special by
being limited to a particular business it may be as general in
regard to that as though of unhmited range.^" An agent who is
required to write policies, and is authorized to settle the terms of in-
surance and investigate losses, is a general agent, with authority to
waive preliminary proofs of loss.^ So agents are general agents;
where they fully represent the company within a certain district,
are authorized to solicit insurance, receive moneys and premiums,
issue and renew policies, appoint subagents, and adjust losses;'^
15 Swell's Evans on Agency, p. 21. ^^ Funk v. Anchor Fire Ins. Co. 171
See Id. p. 134, side pp. lOi et seq. Iowa, 331, 153 N. W. 1048, 1051,
See also Thompson on Corp. (ed. Code 1897, sees. 1749, 1750.
1895-96) sees. 4878, 4879. 20 Thompson v. Midiigan Mutual
^^ Citing Lord Ellonborough, Life Ins. Co. 56 Ind. App. 502, 105
Whitehead v. Trickett, 15 East 400; N. E. 780: Cruzan v. Smith, 41 Ind.
Story, Agenev', sec 17; ]\lechem, 291, 297, 298, quoting from 1 Wait's
Agencv, sec. ^6; Clark & Skiles, Law & Pract. p. 215. See 5 Words
Money, sec. 193. & Phrases, p. 4202.
^T Citing Crain v. First Nat. Bk. 1 Travelers' Ins. Co. v. Harvey, 82
114 111. 519. Va. 949, 5 S. E. 553. See Painter v.
iSRilborn v. Prudential Ins. Co. Industrial Life Assoc. 131 Ind. 68,
99 Minn. 176, 108 N. W. 861, 35 Ins. 73, 30 N. E. 876 (held general agent
L. J. 844, citing Butler v. Maples, without regard to extent of teiTitory
9 Wall. (76 U. S.) 766: Continental or scope of powers).
Ins. Co. V. Ruckraan, 127 111. 364. 2 German Ins. Co. v. Gray, 43 Kan.
1039
§ 395a
JOYCE ON INSURANCE
where they have power within a certain territory to receive proposal
of insurance, to fix rates of premium, receive moneys, countersign,
issue, and renew policies of insurance;^ where they solicit and re-
ceive applications, countersign and issue policies ; * one who has
control at times of the local agencies in the state, approves risks,
attends to the details of the company's business, and at the request
of the secretary examines the same, signs his name to letters, and
uses letterheads with his name thereon as general agent:* a per-
son employed to negotiate and complete contracts of insurance,
accept risks, receive premiums and premium notes, and renew
policies ; ^ and where one writes up and delivers a policy to the
assured indorsed with his name thereon as ''agent," he is a general
agent, with authority to waive conditions in the policy.' So an
agent intrusted with blank policies and renewal receipts h.as im-
pliedly a general authority to do everything necessary to their
issue.'
§ 395a. Same subject.— An agent authorized to issue policies,
to fix rates and premiums, and to countersign, renew, and sign the
transfer of policies in a certain locality is a general agent within
that district,^ and as such agent he may take risks outside of the
locality to which his agency is limited where the insured has no
knowledge of such limitation." So a party is a general agent
Avho acts in a certain locality under a written connnission author-
izing him to receive proposals for insurance, countersign, issue, and
renew policies, and consent to the transfer of the same, although he
is subject to the instructions of the company's officers and to the
rules and regulations of the company,^^ and the local agents of
497, 503, 504, 19 Am. St. Rep. 150, ' Millville Mntnal IMarine & Fire
8 L.R.A. TOn, 23 Pac. 637, per John- Ins. Co. v. Mechanics' & Working-
ston, J. men's Bldg. & Loan Assoc. 43 N. J.
3 Pliopnix Ins. Co. v. Hunger, 49 L. 052.
Kan. 178, 33 Am. St. Rep. 360, 30 « Carroll v. Charter Oak Ins. Co.
Par. 120. 40 Barb. (N. Y.) 292. See Little v.
*Sun Insurance Office of London Plioenix Ins. Co. 123 Mass. 380, 25
V. Mitchell, 186 Ala. 420, 65 So. 143. Am. Rep. 96, where it was held that
5 King V. Council Blutfs Ins. Co. ^.gent was general agent with author-
72 Iowa, 310, 315, 33 N. W. 690. ity to settle loss and waive formal
6 Hartford Fire Ins. Co. v. On-, 56 preliminary proofs.
111. App. 629 ; Pitney v. Glens Falls ^ West v. Norwich Union Fire Ins.
Ins. Co. 61 Barb. (N. Y.) 335, 65 N. Co. 10 Utah, 442, 448, 37 Pac. 685,
Y. 6, 21 : Post V. ^tna Ins. Co. 43 per Bortch, J.
Barb. (N. Y.) 351; Devendorf v. 1° Lightbody v. North American
Beardslev, 23 Barb. (N. Y.) 056; Ins. Co. 23 Wend. (N. Y.) 18.
South Bend Toy Mfg. Co. v. Dakota " Howard Ins. Co. v. Owens, 94
Fire & :\larine Ins. Co. 2 S. Dak. 17, Ky. 197, 21 S. W. 1037, 13 Ky. L.
52 N. W. 866, affirming s. c. 48 N. W. Eep. 237; Phoenix Ins. Co. v. Mun-
310.
1040
AGENTS OF INSURER § 395a
a foreign insurance company appointed by a general agent, located
without the state, are general agents, and may bind the company
by acts within the scope of their general authority, though in vio-
lation of limitations thereupon not brought home to the knowledge
of the party cleahng with them.^^ So a local agent of a foreign
company is h general agent where he is empowered to effect con-
tracts of insurance, fix rates of premiums, consent to change in and
increase of risks, and generally to exercise supervision over tlie
property covered by the company's policies issued through him.
As such agent he may, in the absence of known limitations on his
authority, dispense with conditions and waive forfeitures.^^ Again,
a person is a general agent who has charge of the company's busi-
ness for a state, and who acts under general instructions to such
{igents and without special limitations upon his authority.^* An
agent authorized to make contracts of insurance, collect premiums,
and issue and renew policies, and to that end is furnished with
printed forms of policies signed in blank by the president and
secretary, to enable him without conference with them to counter-
sign and issue policies, is the general agent of the company.^* But
an agent of a foreign life insurance company who has autliority to
solicit risks, take applications, issue and deliver policies, receive
premiums, and deliver receipts, is not necessarily a general agent
in point of law, and as such empowered to waive payment of pre-
miums,^^ nor is one a general agent who has merely authority to
w^ork a certain territory and to receive applications under instruc-
tions from the company." And the fact that a person is a local
agent does not determine whetlier he is a general or a special
agent for a local agent may be either as the term "local" limits
the territory and not the authority in the particular business within
said territory.18 So the term ''agent" embraces general agents and
also agents' whose authority is limited or sjtecial.^^ The tenn
''general agent" does not imply that a rei>rescntative of a cor|)ora-
tion is an officer thereof-^" Again, a statute may make foreign in-
ger, 49 Kan. 178, 33 Am. St. Rep. i« IMesereau v. PlKPnix Ins. Co. 60
360, 30 Pae. 120. N. Y. 2/4.
12 Miller v. Phoenix Ins. Co. 27 i' Martin v. P\irmers' Ins. Co. of
Iowa, 203, 1 Am. Rep. 202. Cedar Rapids, 84 Iowa, 510, 51 N.
i^Viele v. Germania Ins. Co. 20 W. 29.
Iowa, 9, 90 Am. Dec. 83, and note, ^^ xhompsson v. Mu'liisfan Mutual
112. Life Ins. Co. 50 Ind. App. 502, 105
i* Southern Life Ins. Co. v. Book- N. E. 7S0.
er, 9 Heisk. (56 Tenn.) 000, 24 Am. ^^ Queen of Arkansas Ins. Co. v.
Rep. 344. Malone, 111 Ark. 229, 103 S. W. 771.
"Maciiiiie Co. v. Insurance Co. 50 20 Yai.(](.n,an v. Perm Mutual Life
Ohio St. 558, 22 L.R.A. 768, 35 N. E. Ins. Co. 125 Gu. 117, 5 Am. & Eng.
10, 00, per Williams, J. Ann. Cas. 221, 54 S. E. 00.
Joyce Ins. Vol. L— 06. 1041
§ 396 JOYCE ON INSURANCE
surance companies responsible for the acts of those who assume to
aid them in the transaction of their business, and this is the effect
of the statute of the state of Ilhnois declaring that "'the term 'gen-
eral agent' used in this section shall include an acknowledged
agent, surveyor, broker, or any other person or persons who shall
in any way aid in transacting the insurance business of any in-
surance company not incorporated by the laws of this state." ^
§ 396. Power of agents to delegate authority. — Authority is either
original or derivative. \\'henever a person possesses the power in
himself of his own right to do an act, he may delegate that power
to another, for, in general, whatever a man can do by himself he
can do by another, provided, of course, that the act is not illegal. ^
This consideration is of importance in connection with the right of
agents of insurance companies to waive conditions of a policy,
since in case of insurance corporations their powei-s are limited by
charter.^ If the authority is derivative, as where a person is ap-
pointed to act as the agent of another, and no express power to
delegate exists, the maxim, "'Delegatus non potest delegare." applies
as a general rule since the authority of the agent is exclusively per-
sonal,'* upon the ground that the principal may rely upon the
experience, skill, and integrity of the particular person whom
he has appointed as his agent. There are, however, important
exceptions to the rule ; noticeably, in cases where usage or custom
or the particular nature of the employment warrant an implied
authority to delegate. So in cases where the power delegated does
not involve the exercise of discretion, or in case the employment of
subagents is necessitated to carry out the instructions of. the prin-
cipal, or where the act of substitution is ratifie(i by the principal.*
The following authorities will illustrate the above points: Thus,
where the authority conferred on the agent is such as to require
the exercise of skill and discretion, and no power of substitution is
given, the authority is exclusively personal, and the principal would
not be bound by the act of a subagent.^ So an adjuster selected
1 Continental Ins. Co. v. Ruckraan, * See EwelFs Evans on Agency
127 111. 364, 11 Am. St. Rep. 121, 20 (ed. 1870) 57.
N. E. 77. That authority to employ subagent
2 See Ewell's Evans on Agency may be implied from circumstances
(ed. 1879) c. vi. p. 47, side pp. 35 et or usages of trade, see Appleton
seq., for rule and exceptions thereto. Bank v. McGilvray, 4 Gray (70
3 But see §§ 35, 36 herein. Mass.) 518. 64 Am. Dec. 92.
* See Smith v. Soublett, 28 Tex. ^ See remarks of the court in
163; Bocock v. Pavev, 8 Ohio St. 270, Brown v. Railway Pass. Assur. Co.
32 Am. Dec. 707n ; Ewell's Evans on 45 Mo. 221 ; Saj-re v. Nichols, 7 Cal.
Agency (ed. 1879) c. vi. p. 51, sees. 535, 68 Am. Dec. 280; Lyon v. Je-
2 et seq.; Story on Agency (2d ed.) rome, 26 Wend. (N. Y.) 485, 37 Am.
sees. 13-34a. Dec. 271.
1042
AGENTS OF INSURER § 396
because df his special ability, skill, and fitness cannot delegate bis
autliority by the appointment of a subadjusler willioul the com-
jjany ratifies the act.'^ So an agent in whom is vested discretionary
power cannot delegate his authority except under an express grant
of authority.® Therefore, a general agent, whose power in issuing
policies of insurance calls for the exercise of discretion, cannot dele-
gate the same to another,^ nor can an agent delegate the power to
countersign policies where he is agent to issue policies which are
not to be valid till countersigned.^" But an act of the agent's clerk
in signing the policy is a mere ministerial act when done in
pursuance of the slip which the agent himself had signed under a
power of attorney, the act of the clerk being held not to rcrpiire
the exercise of any discretion or judgment. Another factor entered
into this case which strengthened the ruling, and that was, that the
evidence showed no adoption of the policy by the underwriter.^^
An agent, without express authority to appoint a subagent, can-
not make another an agent of the company by agi-eeing, without
the company's knowledge, to divide commissions with him on in-
surance procured. ^^ But a general agent of a life insurance com-
pany, with authority to employ subagents, may make a contract
with a subagent as to salary, which will bind the company, and
in such case it, and not the agent, is responsible therefor; ^^ and
an agent may employ a suljagent to procure aj^plications which he
himself acts upon and forwards to the company.^* And the ads
of a subagent employed by a duly authorized agent to solicit
insurance are as binding as those of the agent himself,^^ as such
subagent's power to bind the insurer is coextensive with that of
his principal within the limits of the authority delegated. ^^ It
may also be generally staled that an agent with general powers,
such as the authority to make contracts, deliver policies, and
collect premiums, may appoint subagents, clerks, surveyors, and
'Rnthven v. American Fire Ins. the firm: Kemiebec Co. v. Augusta
Co. 92 Iowa, 31(5, 60 N. W. 663. Ins. & Banking Co. 6 Gray (72
* Farmers' Fire Ins. Co. v. Chase, ]\Iass.) 2(N.
56 N. H. 341. But .see ]\Iorawetz on ^^ Phn-nix Ins. Co. v. Spiers, 87
Private Corp. (ed. 1882) sec. 249. Ky. 285, 10 Ky. L. Kep. 254, 8 S. W.
^^VlcClure v. Mississippi Valley 453.
Ins. Co. 4 Mo. App. 148. • "Cotton States Life Ins. Co. v.
i»I;ynn v. Bnroovne, 13 B. Mon. :\rnllard, 57 Ga. 64.
(52 Ky.) 400. See Copcland v. Mei- i* Rossiter v. Trafalgar Life As-
cantile Ins. Co. 6 Pick. (23 .Mass.) siir. Assoc. 27 Beav. 377.
198, 203. 15 .ArcGoniclf v. Aurora Fire Ins.
"Mason v. Joseph, 1 Smith (N. Co. 168 Pa. St. 1, 31 Atl. 868.
T.) 406. One member of a partner- ^^ Au.«tin Fire Ins, Co. v. Brown,
ship Avho are the agents of an insur- — Tex. Civ. App. — , 160 S. W. 973.
ance company lias all the powers of
1043
§ 396 JOYCE ON INSURANCE
other subordinates to exercise similar powers." So a general agent
may delegate his power to a clerk, assistant, or subagent to the
extent of authorizing the latter to agree that a policy to be issued
shall obtain a condition permitting the buildings insured to remain
vacant for a period not exceeding thirty days w^ithout notice to the
insurer. ^^ An agent of an accident insurance company, with
absolute power to effect insurances, may appoint a subagent where
the skill and discretion are not required and the tickets are made
out and signed at the company's ofiices and sent to the various
agencies to be sold indifferently to all who apply. ^^
If an insurance company specially authorizes its agent to cancel
a policy, he cannot delegate such power, but where all necessary
acts to effect a cancelation have been performed by him, he is not
personally obligated to deliver the notice and tender the premium
to the insured; these acts may be performed by anotlier acting for
such agent.2° Ai^local agent may appoint a subagent with the
knowledge of the company.^
If one acts as agent for the original agent, with the knowledge
and consent of the company, the latter is bound. ^ It is held that
if the general agent employs a subagent to procure risks, the com-
pany is bound, unless the subagent knew the general agent to be
without authority to employ him.^ If the power of substitution is
exercised by an agent acting without full power, and the act is
ratified -by the principal, the agent is not liable for the loss conse-
quent upon such substitution.^ But it is also held that an agent
cannot bind his principal by ratifying the act of a subagent which
said agent had no power to appoint.^
It is another general rule, applicable as well to a contract of
insurance as to any other, that the original agent is not responsible
for the acts of his subagent where his employment is expressly or
impliedly authorized, whether by usage or express authority to sub-
stitute, or by instructions of the principal or otherwise, unless the
ol'iginal agent was guilty of fraud or gross negligence in the ap-
1' Maver v. Mutual Life Ins. Co. 38 ^ Van Schoick v. Niagara Fire Ins.
Iowa, 304, 18 Am. Kep. 34; Eclectic Co. 08 N. Y. 434.
Life Ins. Co. v. Falirenkrug, 68 ]11. ^ ]^q^itable Life Assur. Co. v.
463. • Brobst, 18 Neb. 526, 26 N. W. 204.
"Continental Ins. Co. v. Ruck-' * Smith v. Cologan, 2 Term Rep. .-
man, 127 111. 364, 11 Am. St. Rep. 188 n.
121, 20 N. E. 77. ^ Thompson v. Michigan Mutual
^^ Brown v. Railway Passenger As- Life Ins. Co. 56 Ind. App. 502, 105
sur. Co. 45 Mo. 221. N. E. 780. See Trudo v. Anderson,
20Runkle v. Citizens' Ins. Co. 6 10 Mich. 357, 81 Am. Dec. 795.
Fed. 143, 149.
^ Goit V. National Protective Ins.
Co. 25 Barb. (N. Y.) 189.
1044
\
AGENTS OF INSURER § 396
pointment or substitution, or unless the subagent's damaging acts
and omissions were co-operated in by him. By force of the author-
ity to substitute, a privity is estabhshed. between the latter and
the principal, and the responsibility is directly to him.^ This
general rule would seem, perhaps, to be more broadly stated by
the court in a New York case, Mhere it is said, in substance, that
the ordinary course of business frequently necessitates the employ-
ment of clerks by the agents to assist them. In agencies doing a
large business, it is presumed that clerks may be employed to
attend to the details of the business. An agent can authorize the
clerk to contract risks, deliver policies, collect premiums, and other
matters of like import, and the act of the clerk in such mattei-s
binds the company, and the maxim, "Delegatus non potest dele-
gare," does not apply in such cases,'^ but from an examination of
the case and an application of these words to the facts, it might be
reasonably assumed that the court did not evidently intend to
enlarge the general rule, since the acts of the subagent were in
accordance with a general course of dealing sanctioned by the com-
pany. He had procured pohcies and renewal certificates from the
company, and frequently delivered them to the insured waiving
prepayment of the premiums.*
An authority to employ a subagent may impliedly arise from
the character of the agency, or where the instructions are such as
to require the appointment of a subagent to execute them, or
where it is indispensable to accomplisli the purpose of the agency; *
the principle underlying this rule being analogous to the rule
that an agent may employ the usual and necessary means to execute
his authority,^" and there is no reason why the rule should not be
equally applicable to agents of insurance companies as well as to
those of other companies. So the general agent of a foreign insur-
6 2 Duer on Ins. (ed. 181U) sec. 4, ()6. But i<ce Waldman v. North Brit-
p. 187, citifig Story on Agency (2d isli Mercantile In?- Co. 01 Ala. 170,
ed.) sees. 201, 217-33. See generally 8 So. 06(), 24 Am. St. Kep. 88.?.
Mechem on Agency (ed. 188!)) sees. ' Bodine v. Insurance Co. 51 N. Y.
197, 728; Strong v. Stewart, 9 Heisk. 117, 123, 10 Am. Rep. 560, o71, per
(56 Tenn.) 137; Louisville & Nash- Karl, J.
ville R. R. Co. V. Blair, 4 Baxt. (63 « See Kuney v. Amazon lus. Co. 3<i
Tenn.) 407; Equitable Life Ins. Co. Hun (N. Y.) 66.
V. Brobst, 18 Neb. 526, 20 N. W. 204; ^ Ewell's Evans on Agency, p. o9,
Langdon v. Union Mutual Fire Ins. side p. 44; Morawetz on Private
Co. 14 Fed. 272; IVlound City Life Corp. (ed. 1882) sec. 248.
Ins. Co. v. Huth, 49 Ala. 529; Maver i° See Owen v. Brockschmult. .>4
v. Mvrtual Life Ins. Co. 38 Iowa, 304, Mo. 285; Mernck v. Wagiier, 44 111
18 Am. Rep. 34; Eclectic Life Ins. 266; Strong v. Stewart, 9 Heisk. (50
,Co. v. Fahrenkrug, 68 111. 463; Kuney Tenn.) 147. per "^'i^^^''" J- ^ ^^L'^""
V. Amazon Ins. Co. 36 Hun (N. Y.) hecker v. Lowell, 32 Barb. (N. Y.) 9,
1045
§ 397 JOYCE OX INSURANCE
ance company is presumed to have power to appoint subagents.^^
.Vnd a general insurance agent authorized for several counties to
receive applications, fix premium rates, receive money, countersign,
issue, renew, and consent to the transfer of policies does not exceed
his authority by appointing a subagent to receive applications and
forward them to him.^^ So the territory to which an agent is ap-
pointed may be such as to impliedly authorize the appointment of
suljagents and their acts done within the limits of their power will
be l)inding upon the principal. -^^
The power conferred u[)ou an agent by a fraternal order may be
such that it may be delegated.^*
§ 397. Officers of insurance corporations and associations and
their powers. — We have seen that corporations are presumed to
act through agents,^^ and that in the absence of charter provisions
therefor there is an implied consent on the part of those becoming
members of mutual companies that the necessary officers and agents
shall be employed. ^^ It is a settled, general rule of agency that oth-
cers of a corporation or association are special agents, whose powers
are limited and prescribed by the" charter or articles of association
and by-laws, and that persons dealing with them are chargeable
with notice of these limitations.^^ But the acts of the officers of a
society within the lawful scope of his authority are binding on the
company,^^ for an insurance company must act by its ofhcers, and
their acts and statements as such, done and made in the discharge
of their duty in that capacity and in relation thereto, are evidence
against the company.^^ Although an agent's powers are limited
by the by-laws, yet if such agent belongs to a pai'ticular class, the
functions and duties of which are settled by general custom, such
agent may be legally assumed to possess such powers as are usually
exercised by the class within the category of which his agency
17; Ewell's Evans on Agency (ed. ^^ Protection Life Ins. Co. v. Foote,
1879) 59, *44; 1 Wait's Actions and 79 111. SCJl ; § 38G herein.
Defenses 221 see. 2. ^^ Alexander v. Cauldwell, 83 N. Y.
11 Keenev" v. Aumzon Ins. Co. 36 -^80 ; City Fire Ins. Co. v. Carrugi, 41
Hun (N Y) 06 ^'^- ^^^ ' Silliman v. Fredericksburg,
12 T- ' ' j' (f TTi- T«„ ri^ Orange & Chariot t^sburg R. R. Co.
1-^ Krumm V. Jeiierson lire Ins. Co. „_ r-, .^ ,^^ x nn o ^r ^
A(\ ni • Qt 9o- 2' Cratt ( \ a.) 119; 2 ^lorawetz on
4U Ulno bt. _^o. . Corp. (2d ed.) sec. 591; Angell &
"Insurane Co. of North America ._^„ „t, ^ /OfU ^a ^ i^.. ooi «f
Ames on Corp. (9th ed.) sees. 291 et
seq.
V. Tliornton, 130 Ala. 222, 55 L.R.A.
547, 89 Am. St. Rep. 30, 30 So. 614. ""Is Hacknev v. Alleghanv County
1* Supreme Lodge Knights of Pj-th- Mutual Ins. Co. 4 Pa. St. 185, 187.
las V. Connelly, 18o Ala. 301, 64 So. i9 ^ij^^ Baptist Church v. Brook-
362. lyn Fire Ins. Co. 18 Barb. (N. Y.)
15 § 309 herein ; Angell & Ames on 69 ; Muhlman v. National Ins. Co. 6
Corp. (9th ed.) sees. 276 et seq. W. Va. 508.
1046
AGENTS OF INSURER § 397
falls. 2° But tlie officers and directors may not ratify acts of tlie
jjresideut which they themselves could not have originally done.^
It is held that the officers of mutual insurance companies have no
authority to waive the by-laws and provisions adopted by tlie mem-
bers of the company for their mutual protection.^ But where the
waiver is of some matter which relates rather to the remedy than to
the substance of the contract, the officers of the company luivr
power to waive the by-laws,^ and where the affairs of a mutual
company are managed by a board of directors, who select all the
officers of the company, such officers have power to waive defects
and ratify invalid policies of insurance.* But the officers cannot
waive a condition of the policy in a mutual company which jh-o-
vides that in case of any change in the facts or in the condition of
the premises the policy should he void, except upon written notice
to and written consent of the directors signed by the secretary, and
the payment of an additional premium or deposit.^ So where a
by-law of a mutual company provides thai: consent to other insur-
ance may be given only by the president and secretary, it is error
to charge the jury that it may be given by a director or the secre-
tary.^ The officers of the company may waive a breach of conditioti
of an insurance policy by neglecting to cancel the policy and
thereafter collecting an assessment with knowledge of the fact.«.'^
So the company may waive its right to have the values stated in
detail by its oHicers accepting an aggregate valuation of all the
property covered by the application ; ' and if officers of a com-
pany, with knowledge of tlie actual condition of the title of the
applicant, choose to accept the risk, the policy is not voided becaui=e
the interest of the assured is other than that of an entire, uncon-
20 See Commercial Ins. Co. v. Conway Mutual Fire Ins. Co. 4 K. I.
Union Ins. Co. 19 How. (60 U. S.) 141.
318, 1.3 L. ed. 636; Union Mutual Life ^ Brewer v. Chelsea In.'^. Co. 14
Ins. Co. V. White, 106 III. 67; Minor Gray (80 ^Nlass.) 203, 209. See §§
V. Mechanics' Bank, 1 Pet. (26 U. S.) 35 36, 407 heroin.
46 7 T pH 47 * Pratt v. Dwollinir-house Mutual
i Crimm's Appeal, 66 Pa. St. 474. J^^ ^^<^ ^f^/- Y- "-^Oe, 29 N. K.
See §J^ 455 et seq. herein. i\^ ^ ' ' ' „,' ' , • nr * i
2 TiV 1 en i. nr i 1 T7.- * Evaus V. 1 romountain Mutual
T ^ Y lu ZT\\ " T . «f Fire Ins. Co. 9 Allen (91 Mass.) 329.
^*°'- S""- t^!^'^ ^f^ ^^"^-^ ^^^;/^ 'Stark County Mutual Ins. Co. v.
Am. Dec. 689; Behler v. German Mu- jj^„.^| yj q,,j^ ^49 gee §§ 401, 404
tual Fire Ins. Co. 68 Tnd. 347, 354; jieroin.
Lyon V. Supreme Assembly, 153 7 Ostorloh v. New Denmark Tns. Co.
Mass. 83, 26 N. E. 236; Baxter v. 60 Wis. 126. 18 N. W. 749. Examhie
Chelsea Mutual Fire Ins. Co. 1 Allen Ware v. Millville Fire Ins. Co. 45 N.
(83 Mass.) .294, 79 Am. Dec. 730 and J. L. 177.
note 733; Westchester Fire Ins. Co. ' Residence Fire Ins. Co. v. Hanna-
V. Earle, 33 Mich. 150; Wilson v. wold, 37 IMicli. 103.
1047
§ 397 JOYCE ON INSURANCE
ditional, and sole ownership as required by the policy.' So parol
evidence is admissible to show that a misdescription contained in
the policy arose from the mistake of the officer of the company, to
Mhom the building was accurately described.^" But an officer's
knowledge acquired by rumor or in his individual capacity does
not operate as constructive notice to the company. ^^ And where
the question was whether a policy had been forfeited for breach
of condition as to the building being unoccupied, it was held imma-
terial that the officers knew of the vacancy.^^
Where the president and director of the company go at once
upon the ground after the fire, for the purpose of examining into
the circumstances, tliis is sufficient evidence of notice, although
the policy provides that notice of loss be given forthwith. ^^ So the
company waives the right to demand formal proofs of loss where
the officer to whom such proofs should be made visits the ground
subsequent to loss, and agrees with the insured as to the valuation
of the property destroyed ; ^* but if the personal examination be
made by the officer subsequent to the thirty days' limit it does not
constitute a part of the proofs,^* although the agreement of an
officer of the company and the insured to adjust a loss does not
necessarily raise an estoppel against the company to claim a for-
feiture for breach of conditions. ^^ It is a sufficient compliance
W'ith a condition requiring that preliminary proofs of loss be deliv-
ered at the office, if there be an actual delivery there to any officer
in charge; such officer may also waive further proofs than those
submitted." It is held in California ^^ that the officers of an
insurance company had no power to bind the company for the
payment of the premium on a policy by acting as agents of an
applicant in procuring insurance from another company.
In a suit by a bank upon a surety bond, in the nature of a
fidelity insurance contract, an instruction that the officers of the
bank ai-e required to give the same supervision and care over the
9 Union Ins. Co. v. Chipp, 93 111. Ala. 436, 24 So. 399, 28 Ins. L. J. 199.
96. See §§ 575 et seq. herein.
i^Moliere v. Penn In.s. Co. 5 Rawle i* Susquehanna Mutual Fire Ins.
(Pa.) 342, 28 Am. Dec. 675. See §§ Co. v. States, 102 Pa. St. 529. See §§
505-507 herein. 575 et seq. herein.
^^ Keenan v. Dubuque Mutual Fire ^^ Winnesheik Ins. Co. v. Sehueller,
Ins. Co. 13 Iowa, 375. See §§ 544- 60 111. 465. See §§ 575 et seq. herein.
546 heroin. 16 Colonius v. Hibernia Fire Ins.
12 Hermann v. Adriatic Fire Ins. Co. 3 Mo. App. 56. See §§ 575 et
Co. 85 N. Y. 162, 39 Am. Rep. 644. seq. herein.
See §§ 565, 566 herein. " Edgerly v. Farmers' Ins. Co. 48
I'Roumage v. Mechanics Fire Ins. Iowa, 644.
Co. 13 N. J. L. (1 Green) 110; ^^ Hutchinson v. State Investment
Georgia Home Ins. Co. v. Allen, 119 & Ins. Co. 53 Cal. 622,
1048
1
AGENTS OF INSURER §§ 398, 399
management of the affairs of the bank as an ordinarily prudent
business man would give is corrett.^^
§ 398. Powers of officers of mutual benefit societies. — Committees
and officers of mutual benefit societies, in so far as the management
of the affairs of such organization devolve upon them, are clothed
to a certain extent Avith the powers of general agent?, while in
other respects they occupy no other footing than that of agents
with special authority, defined and limited largely by the laws
governing the body for which they act. They resemble, in many
particulars, directors and officers of corporations, so far as their
authority is concerned. But the rule of limitation of their powers
is flexible to the extent that the authority which they are held
out to the world to posse,«s cannot be held to yield to restrictions
and limitations which are unknown to the parties with whom they
deal. Their principals are bound by their ostensible authority,
subject to those limitations upon the power of the principal and
upon their own powers, which are in the charter or constitution
or by-laws,2° and we see no reason why they should not be bound,
subject to the above limitations, by the same rules a.s like agents
in other companies.^ Again, the by-laws, articles of association,
and certificates of membership of mutual benefit associations deter-
mine the rights of the members and of the association, and may be
enforced by the parties and beneficiaries according to their respec-
tive rights as therein provided. ^ And while a member of such a
society is bound to comply with the requirements of the valid by-
laws of the association, the officers cannot defeat his claim by
arbitrarily rejecting his proofs as unsatisfactory, or by wrongfully
declaring that he had not done what his contract and the by-laws of
the association required of him.^ So a local ofiPicer of a benefit
association, required by its by-laws to collect dues from members,
is the agent of the association, and a member discharges his obliga-
tion to the association when he pays his dues to such agent. lie
has a right to rely upon their proper application.*
§ 399. Powers of president. — in insurance companies a wide dis-
cretion is usually vested in the president, and he, as well as the
18 Bank of Tarboro v. Fidelity & erv, 70 Mich. 587, 14 Am. St. Rep.
Deposit Co. 128 N. C. 366, 83 Am. St. 510, 38 N. W. 588.
Rep. 682, 38 S. E. 208. 3 Supreme Council of the Order of
^^ See Bacon's Benefit Societies and Chosen Friends v. Forsinger, 125 Ind.
Life Ins. (ed. 1888) sees. 133, 134, 52, 21 Am. St. Rep. 196, 9 L.R.A.
145; Niblack on Mutual Benefit Soc. 501. 25 N. E. 120.
c. vi. sec. 311. ■* Supreme Tribe of Ben Hur v.
'As to agencv of subordinate Hall, 24 Ind. App. 316, 79 Am. St.
lodges, see.§ 407 herein. Rep. 262, 56 N. E. 780.
2 Union Mut. Assoc, v. Montgom-
1049
§ 399 JOYCE OX INSURANCE
secretary, may generally, in all matters relating to the transaction
of the company's business at its office, bind the company by acts
which are within the legitimate scope of the business and of his
ostensible authority.^ The president of an insurance company may
indorse its notes although the charter requires that all contracts
and other agreements made by the company in the necessary
course of business shall be in writing or in print, and signed by the ,
president and secretary, or by such other officer or officers as the
directors may appoint therefor, and in such case it is not necessary
to prove a formal vote of the directors.^ 80 if the president is
authorized to adjust and pay losses, he may indorse notes and deliver
them ; '^ and an ex-president acting as president may by indorse-
ment pass title to a promissory note payable to the company,
especially where the company accepts the benefit thereof by con-
verting the proceeds to its use.^ The president may also validly
transfer a premium note in payment of a loss where the act is in
the ordinary course of business, and in conformity with a usage
and a standing by-law of the company, although the charter pro-
vides that the corporate business shall be transacted by trustees
and agents whom they may appoint, and although the act was
not expressly authorized by the board of trustees.^ But it is held
that if the president is not authorized by the charter or l)y-laws to
indorse and negotiate the company's notes, that he has no au-
thority as such officer to do so,^° and if he gives a promissory note
5 See Dilleber v. Kniokerbocker "^ Baker v. Cotter, 45 ^Nle. 236. See
Life Ins. Co. 76 N. Y. 567, aff'g 7 Bank of Attica v. Pottier & Styrans
Dalv, 540: Cotton State.s Ins. Co. v. Mfg. Co. 1 N. Y. 483, 49 Hun, 606, '
Edwards, 74 Ga. 220; Smith v. Smith, 17 N. Y. St. Rep. 32/ : Fifth Natioji-
62 111 493, per "Walker, J.; Bacon v. al Bank v. Navassa Phos|)liate Co.
Mississippi Ins. Co. 31 ]\ris.s. 116; St. 119 N. Y. 256, 23 N. E. 737.
Nicholas Ins. Co. v. Howe, 7 Bosw. ^ Patten v. Moses, 49 Me. 255. See
(N. Y.) 450. Tuscaloosa Cotton-Seed Oil Co. v.
See, generally, as to powers of Perry, 85 Ala. 158, 4 So. 635.
president and other oflicers and ^ Howland v. ilyer, 3 Comst. (N.
agents of corporations. Sparks V. Dis- Y.) 290; affirming Aspinwall v.
patch Transfer Co. 104 Mo. 531, 24 IMeyer, 2 Sand. (N. Y.) 180. See in
Am. St. Rep. 351, 12 L.R.A. 714n, 15 connection with this case the statute
S. W. 417; Ceeder v. H. M. Loud & of New York (1 Rev. Stat. 722, sec.
Sons Lumber Co. 86 Mich. 541, 24 8) in regard to act to prevent the in-
Am. St. Rep. 134, 49 N. W. 575; solvency of moneyed corporations, it
Sherman Center Town Co. v. Swigart, being held that a transfer of a note
43 Ivan. 292, 19 Am. St. Rep. 137, 23 for more than one thousand dollars,
Pac. 569; Thompson on Corp. (ed. without a resolution of the board of
1895-96) sees. 4613 et seq., 4697 et tru.stees, was not in violation of that
seq., 4716 et seq., 4846 et seq., 4873 act, as the charter was granted sub-
et seq. sequently to the passage of the act.
6 Topping V. Beckford, 4 Allen (86 ^° Marine Bank v. Clements, 3
Mass.) 120. Bosw. (N. Y.) 600.
1050
AGENTS OF INSURER § 399
as president of ihe company, it is not the company's not<?, but his
own;^^ and if he issues forged certificates of slock for an indi-
vidual loan the company is not bound. ^^ Where the general super-
vision of the affairs of a company are vested under its by-laws in the
president, and a poUcy upon a special risk, signed, as required
by the by-laws, by the president and secretary, is issued, and such
officers have full knowledge of all facts material to the risk, the
policy is valid and enforceable, although the rules of the company
provide that such sjiecial risks shall be ai>proved by the executive
committee and three directors before the policy is issued, and the
rule is not complied with.^^
The president has authority to employ counsel.^* He may waive
a forfeiture for nonpayment of premiums, as in ca.«e the insured
rches upon his statements that the company would give liim what-
ever accommodation was necessary, and the company thereafter,
for several years, receives overdue premiums. ^^ So it is held that
lie may make a contract with a special agent, whose life is insured
l)y the company, to charge the premiums, although a by-law pro-
vides that all i)remiums shall Ijc paid in ca.<h, and this although the
agent was indel)ted to the company when such agreement was made
by him with the president.^^' He may waive a deviation from the
risk where such act is in accordance wnth q, uniform practice of tlie
company and there is an extra compensation paid therefor. In
such ca.se an indorsement written across the policy without any
new signature and recorded by the secretary is sufficient." And
it is held that knowledge of the president is knowledge of the com-
pany." So the president alone, or with concurrence of any director,
may settle a loss where the charter and by-laws give him specifically
such authority, although its charter and by-laws also provide that
the company's affairs shall be managed by a board of directors, who
may appoint sucli other officers as are necessary for the transac-
tion of its business.i^ Where the president is held out as having
"Barker v. Mechntiirs' Fire Ins. is jjiHeber v. Knickc-rboeker Life
Co. 3 Wend. (N. Y.) 94. 20 Am. Dec. Ins. Co. 7 Daly, 'yW, 70 X. Y. 567.
f)fi4. But see as to same principle, ^^ Mi.ssouri Valley Life Ins. Co. v.
Thompson v. Bell, 10 Ex. 10, 123 L. Dunklee, 16 Kan. LIS.
J. Ex. 321. ^^ Warren v. Ocean Ins. Co. 16 Me.
12 Manhattan Life Ins. Co. v. 430, 33 Am. Dee. 674.
Fortv-Second St. & Grand St. Ferry " Pomeroy v. Rocky Monntani
Co. 46 N. Y. St. Rep. 130, atfd 139 Ins. & Savings Inst. 9 Col. 290, o9
N. Y. 146, 34 N. E. 776. Am. Rep. 144, 12 Pac. 153.
"Merchants' & Manufacturers' i^ Mercer County Mutual Ins. Co.
Ins. Co. V. Curran, 45 Mo. 142, 100 y. Strauahau, 104 Pa. St. 246.
Am. Dec. 361.
1* Oakley v. Workingman's Bene-
fit Soc. 2 Hilt. (N. Y.)'487.
1051
§ 399
JOYCE ON INSURANCE
authority to make oral contracts for insurance, third persons are
not affected by secret limitations on his authority where they deal
with him in good faith and without notice of such limitations.^"
But where the by-laws require the written consent of the presi-
dent to other insurance, and the by-laws are attached to the policy,
it is held that in such case his oral consent is insuihcient. It was
also provided in the policy in this case that the by-laws could not be
altered except by a vote of two-thirds of the stockholders or direc-
tors.^ And where the act incorporating an insurance company pro-
vides that no losses shall be settled or paid without the approbation
of at least four of the directors, Avith the president or assistants,
or a plurality of them, the acceptance of an abandonment by the
president and assistants alone will not be binding on the company.^
So it is held that the president of a mutual company has no au-
thority to waive conditions of an insurance policy dependent upon
the by-laws, and make a difl'erent contract from that authorized by
such by-laws.^ It is also held that he has no power to waive or dis-
pense with any of the conditions of the policy, unless authorized
thereto by the charter or by-laws or the board of directors ; ^ that
he cannot wtiive full preliminary proofs of loss;* that he has no
power to waive a by-law requiring prepayment of the premium
^^ Commercial Mutual Marine Ins.
Co. V. Union Mutual Ins. Co. 19 How.
(60 U. S.) 318, 15 L. ed. 636, 2 Curt.
(C. C.) 524, Fed. Cas. 14372).
Cited in United States. — Ball &
Sage Wagon Co. v. Aurora Fire &
Marine Ins. Co. 20 Fed. 232, 235;
Constant v. Allegheny Ins. Co. 20
Fed. 235.
Colorado. — Union Gold Mining
Co. V. Kocky Mountain National
Bank, 2 Colo. 257; Oro Mining &
Milling Co. v. Kaiser, 4 Colo. App.
219, 226, 35 Pae. 677.
Indiana. — St. Joseph Hydraulic
Co. V. Globe Tissue Paper Co. 156
Ind. 665, 675, 59 N. E. 995.
Maine.- — Walker v. Metropolitan
Ins. Co. 56 Me. 371, 378; Sanborn v.
Firemen's Ins. Co. 16 Gray (82
Mass.) 448, 454.
Missouri. — Huggius Cracker &
Candy Co. v. People's Ins. Co. 41
Mo. App. 530, 545.
Neiv Jersey. — Fifth Ward Savings'
Bank v. First National Bank, 48 N.
J. Law, 513, 528, 7 Atl. 318.
New York. — Ellis v. Albany City
Fire Ins. Co. 50 N. Y. 402, 405, 10
Am. Rep. 495; Perry v. Council
Bluffs City Waterworks Co. 67 Hun
(N. Y.) 466, 22 N. Y. Supp. 151;
Post V. MhvA Ins. Co. 43 Barb. (N.
Y.) 351, 363.
North Dakota. — MeCabe Bros. v.
.^tna Ins. Co. 9 N. D. 19, 23, 47
L.R.A. 644, 81 N. W. 426.
^ Hale V. Mechanics' Mutual Fire
Ins. Co. 6 Gray (72 Mass.) 169, 66
Am. Dee. 410; Worcester Bank v.
Hartford Fire Ins. Co. 11 Cush. (65
Mass.) 265, 59 Am. Dec. 145.
2 Beatty v. Marine Ins. Co. 2
Johns. (N. Y.) 109, 3 Am. Dec. 401.
3 Piiest V. Citizens' Ins. Co. 3 Al-
len (85 Mass.) 602; Brewer v. Chel-
sea Fire Ins. Co. 14 Gray (80 Mass.)
203. See §§ 35, 36 herein.
* McEvers v. Lawrence, 1 Hoff Ch.
(N. Y.) 172.
* Dawes v. North River Ins. Co. 7
Cow. (N. Y.) 462.
1052
AGENTS OF INSURER §§ 400, 401
as a condition precedent to the validity of the policy.^ In this
last case it was also held that the company was not bound by the
representations of the president to a mortgagee that the mort-
gagor had procured insurance upon the mortgaged property, pay-
able to the mortgagee, when in fact the policy had not been deliv-
ered, because of the failure of the mortgagor to pay the premium.
And the sufficiency of preliminary proofs of loss is not admitted,
nor further proof waived, by the statement of the president that
"the policy will show," on inquiry being made of him, as to "what
further preliminary proof of loss was required."' And where sucli
notice of loss is not given witliin the time required by the by-
laws, no waiver arises from the remark of the president, made
seventeen months after the loss, that the comi)any knew when the
fire occurred that it was its loss, that it would do what was right.
and was not surprised that they were not notified.^ But the president
and secretary may, by a statement made in the course of their
duties after the loss and when notice of it is received, bind the
company, as in case they admit that they liad agTced to insure
the property or keep it insured, such statement binds the com-
pany as much as a certificate of renewal or of payment of the
premium.^
§ 400. Powers of vice-president.— The vice-president of a corpora-
tion may, in certain cases, such as the absence of the ])rcsident or a
vacancy in the office, act in his place and stead, and i)ei-form tlie
duties wliich would have devolved upon the president.^" A\'here
the title of the assured was not truly stated, Imt the existence of a
mortgage was known to the agent and to the vice-pr&sidenl of the
insurance company, it was held that there was no such conceal-
ment of the true title as to invalidate the policy, notwithstanding a
provision therein that it should be void if tlie interest of the assured
be not stated in the policy where it was not absolute."
§ 401. Powers of secretary. — Where the powers and duties of the
secretary are not prescribed by the charter or by-laws, tlie ]n-esuin].-
tion arises that he possesses and may exercise all such powers as
6 Baxter v. Chelsea Mutual Fire i" Smith v. Smith. 62 111. 4ii;!, per
Ins. Co. 1 Allen (83 Mass.) 294, 79 Walker, J.; Mil.liell v. Deeds, 49 111.
Am. Dee. 730. 417, 424, 95 Am. Dee. 621, cited in
'SprinV Garden IMutual Ins. Co. Morawetz on Private Corp. (ed.
V. Evans,^9 Md. 1, 66 Am. Dee. 308. 1882) sec. 252.
8 Smith V. Haverhill Mutual Fire "Home INIntual Fire Ins. Co. v.
Ins. Co. 1 Allen (83 Mass.) 297, 79 Garfield, 60 111. 124, 14 Am. Rep. 27.
Am. Dee. 733. As to the power of the vice-president
^ First Baptist Church v. Brookivn to fill vacancies in a committee, see
Fire Ins. Co. 18 Barb. (N. Y.) 69. Burton v. St. George's Society, 28
See §§ 575 et seq. herein. Mi<'h. 161.
1053
to
§ 401 JOYCE ON INSURANCE
the duties of the office reasonably and necessarily require. ^^ Such
officer of an insurance company is its official agent to carry into
effect the votes and directions of the managing body, unless the
contrary appears.^^ The secretary of the company is one of its
general managing agents, and when in the discharge of the duties
of his office represents the corporation. The test of his authority is
not whether he acted in the general office of the company or in
another state, but Avhether, at the time, he was engaged in the
general duties of his office.^* The secretary has authority to bind
the company by his acts done in the usual course of business, and
in such case his consent to an assignment of the policy indorsed
thereon is presumptively the consent of the company, although the
policy provided that such consent must be in pursuance -of the
by-laws, and although there was no resolution of the board of
directors authorizing the secretary's action.^^ So evidence is not
competent of the admissions of the secretary to prove that the
property was insured at the time of the fire, when he was not then
engaged in any act connected with his agency. Such evidence is
not a part of the res gestic. nor is such testimony competent to
disprove the agent's denial of such claimed admission. ^^ A secre-
tary who has authority to collect assessments may waive a for-
feiture for nonpayment of premiums.^''' So a secretary of a mutual
benefit association may bind it by a statement to the insured that
he need not pay his dues until certain cliarges, then pending
against him, were determined, where such charges, if true, would
operate to forfeit the policy, and such statement is not ultra vires ; ^^
and it is held that where a policy has lapsed for nonpayment of
premiums, it may be extended by the oral agreement of the secre-
tary, made out of the state, where the home office is located. ^^
And notice to the com))any of a sheriff's sale of the property, and
of an equitable title thereto in the assured, may be established by
proof that the assured had conversed with the secretary of the com-
pany in relation to the sale, and had told him that the property
Avas his the same as before the sale, although it was shown, in
12 Ree § 387 lierein. ^^ First Baptist Church v. Brook-
i^Leary v. Blanchard, 48 Me. 269. lyn Fire Ins. Co. 28 N. Y. 153.
1* Hastings v. Brooklyn Life Ins. ^"^ Lonohbriclae v. Iowa Life En-
Co. 138 N. Y. 473, 34 N.E. 289, revV dowment A.ssoc'. 84 Iowa, 141, 50 N.
53 N. Y. St. Rep. 63, 63 Hun, 624, W. 568.
17 N. Y. Supp. 333. is Jones v. National Mutual Bene-
i^Conover v. :\rutual Ins. Co. of fit Assoc. 8 Kv. Law R. 599, 2 S.
Albany, 3 Denio (N. Y.) 254; afif'd W. 447.
1 N. Y. 290; Durar y. Hudson Ins. ^^ Hastings y. Brooklyn Life Ins.
Co. 24 N. J. L. (4 Zab.) 171. But Co. 138 N. Y. 473, 34 N. E. 289,
see Loring y. ]\Iannfacturers' Ins. rey'g 44 N. Y. St. Rep. 37, 63 Hun.
Co. 8 Gray (74 Mass.) 28. 624," 17 N. W. Supp. 333.
1054
AGENTS OF INSURER § 401
connection with this testimony, that there was also a public notice
of the sale;'^° though knowledge of the couipany doe.-- not an^e,
as a matter of law, from the fact that an agent of the company
told the secretary of the use of cotton-gins, which increiu^^ed the
risk, where such information was given the secretary on the street
and in another town, and he forgot the fact.^ But knowledge of
the secretary of a county mutual lire insurance C()m])any, coupled
M^tli his consent and the receipt of assessments by the board of
directors constitutes a waiver of a condition, even though written
consent of the company is required to bind it.^ And a mutual
company is not estopped from chiiming the violation of a by-law
not set out in the policy, although the treasurer of tlie company,
upon being a.'^ked by the holder, in the presence of the secretary,
if the policy expressed all the conditions and he replied that it did,
the secretary remaining silent.^ So a change of beneliciaries is not
valid, although consented to by the secretary, where such act is
not within the scope of his authority, and the provisions of the
constitution relating to such changes are not complied with.* It
is decided that the secretary cannot issue a policy to himself so
as to bind the company without its actual knowledge of the facts.^
If the secretary undertakes to act in tilling out the application,
the presumption arises that the company waives inquiry into mat-
ters concerning which information is not requested. Statements
of facts in the application may l^e waived by the failure of the
secretary who fills it out to insert them therein. ^ Where the proofs
of loss \vere pronounced insufficient by the company, and the
evidence is contradictory upon the question whether there was a
waiver or not by the secretary, the question of waiver is for the
jury.'' And the a^^^isnee of a policy is justified in inferring that
it had been canceled by the company where he receives a letter
from its secretary stating tnat all policies were canceled by tlie
company for failure to pay assessments within thirty days.^ But
the secretary of an insurance company has no authority, by virtue
20 Elliott V. Asliland Mutual Fire Fire Ins. Co. 130 N. Y. 20G, 2!) N.
Tns. Co. 117 Pa. St. 548, 2 Am. St. E. 117, rev'g 53 Hnn (N. Y.) 101, 6
Hop. 703, 12 Atl. 676. N. Y. Supp. 78. 25 N. Y. St. Kep.
^ Texas Baiikint? Co. v. Hutchin.s, 784.
53 Tex. 61, 37 Am. Rep. 750. ^ Tiefenthal v. Citizens' Mutual
2Kesler v. Farmers' IMutual Fire Fire Ins. Co. 53 ^licli. 306, 19 N.
& Li.2:litning Tns. Assoc. 160 Iowa, W. 0.
374, 141 N. W. 954. ' Susquehanna Mutual Fire Tns.
3 Miller V. Hillsboroush Mutual Co. v. llallock (10 Sadler, 386, Pa.
Fire Assoc. 42 N. J. Eq. 459. 1888) 14 Atl. 167, 22 Wkly. Not. Cas.
* Wendt V. Iowa Learion of Honor, 151.
72 Iowa, 682, 34 N. W. 470. * Columbia \ns^. Co. v. Masonheim-
6 Pratt V. Dwelling-House Mutual er, 76 Pa. St. 138.
1055
§ 401 JOYCE ON INSURANCE
of his ofRce alone, to bind the company by any arrangements which
he may choose to make with an insured in the adjustment of the
loss.^ Where it is the duty of the secretary of a mutual insur-
ance company, under its by-laws, to keep records of the doings
of the directors and of the companj', and to receive notice of loss,
his admissions made in letters addressed to the assured are admis-
sible in evidence in a suit upon the policy where they acknowledge
notice of loss or refer to the acts of the directors in connection
therewith.^" So the secretary's letter to the assured constitutes a
waiver of defects in the proofs of loss, when written upon the
receipt thereof, and objecting to the magistrate who signed the
certificate, but not to the form of the certificate.^^ So the secre-
tary may bind the company by his admissions, made in the
course of correspondence, as to the sufficiency of proofs of loss,
where he is generally authorized to answer all communications
of the insured ; ^^ so where the policy requires that notice and
preliminary proofs of loss be sent to the secretary, he is the agent
of the company, fully empowered to acknowledge the receipt
thereof and to determine their sufficiency, and his admissions relat-
ing thereto will bind the company ; ^^ and it is sufficient if such
notice of loss be transmitted to the secretary by a local agent of the
company, upon knowledge thereof, given the latter by the assured.^*
The company is bound by an oral agreement to pay the loss within
a certain time, made by the secretary in the presence of the
president of the company, who did not dissent, where the assured
also receives a writing, signed by the company's secretary and
general agent, notifying him of the acceptance of the proofs of
loss.^^ Again, orders for the payment of the loss, signed by the
secretary, constitute, if he knew all the facts, a conclusive waiver
in writing within the terms of a by-law, providing that there
could be no waiver of any conditions of the policy except by in-
dorsement on, or specific acknowledgment in, the policy.^® Where
two companies, doing business under one name, issued a policy
which provided that proofs of loss should be given to the com-
panies, it is a sufficient compliance with the conditions if such
* Cohimbian Ins. Co. v. Ashby, 4 ^* West Branch Ins. Co. v. Hel-
Pet. (29 U. S.) 139, 7 L. ed. 809. fenstein, 40 Pa. St. 289, 80 Am. Dec.
^° Lewis V. Monmouth Mutual Fire 573.
Ins. Co. 52 Me. 492. ^* Farmers' & Merchants' Ins. Co.
" Bailey v. Hope Ins. Co. 56 Me. v. Chesnut, 50 111. Ill, 99 Am. Dec.
474. 492.
12 Troy Fire Ins. Co. v. Carpenter, ^^ Farmers' Mutual Fire Ins. Co.
4 Wis. 20, 32. V. Gargett, 42 Mich.. 289, 3 N. W.
13 Trov Fire Ins. Co. v. Carpenter, 594.
4 Wis. 20.
1056
AGENTS OF INSURER §§ 402, 403
proofs are given to a person who acted as secretary for both com-
panies, and by him given to. one who acted as president of both
companies, and had charge of tlieir loss department.^''' But the
secretary has no authority to bind the comi)any bv a statement
in a letter- written to a broker that the company would see that
certain policies issued b}^ other ofliccs were adjusted satisfactoi-ily.
In this case the company had sent its own policy for part of the
amount of insurance requested and those of three other companies
for the balance.-^*
The mere fact tliat an insured did not demand of the secre-
tary Of the insurance company in which he held a policy, to show
his authority to enter into an arrangement for the seltleuient of a
loss, is not suflicient, as matter of law, to show an admission on his
part of such authority. ^^
§ 402. Powers of assistant secretary, — it is held in Virginia^"
that an assistant secretary of a life insurance comi)any may waive
the forfeiture of a ])olicy arising from tlie nonpayment of pre-
miums when due. and that he has authority to reinstate the policy.
§ 403. Powers of treasurer. — The treasurer of an insurance coin-
]iany, from the nature of his office, is-authorized to receive moneys,
and it becomes his duty to account for the same.^ But boiTowing
money to ])ay benefits in the association is not an act within the
scope of his oflicial duties; ^ no-r does the fact that he received assess-
ments from the insured, after knowledge of his misrepresentation
as to his age, validate the contract.' He may, however, ])ind the
company by all acts within the usual course of his business,* and
if the treasurer of a corporation has been accustomed, with the
knowledge and consent of the company, to pursue a certain course
of business for a number of years, such as signing and indorsing
business paper in its name, and a person, with knowledge of such
custom, becomes a purchaser of an accommodation note indorsed
to him for value, the company is estopped to deny the authority
of the treasurer to perform such act.^ The last two decisions,
iminnock v. Eureka Eire & Ma- l^ibber Co. 4 Blaldif. (U. S. .C. C.)
rine Ins. Co. 90 Mich. 236, 51 N. W. 1, Fed. Cas. No. 10153.
307_ 2 ScrewiiKMi's I'ciicvolcnt Assoc, v.
^8 Constant v. AUeo-liany Ins. Co. Smith, 70 Tex. I(i8, 7 S. W. 79:1.
3 Wall. Jr. (U. S. C. C.) 313, Fed. ' g^^ett v. Citizens' Mutual Relief
Cas. No. 3i:?6. Soc. 78 Me. 541, 7 Atl. 394.
"Columbian Ins. Co. v. Ashley, 4 * Stark Bauk v. Cniled States Pot-
Pet. (29 U. S.) 139, 7 L. ed. 809. I cry Co. 34 Vt. 144.
2° Piedmont & Arliusiton Life Ins. 5 c-j,^o,,,| Nj,tional P.ank v. Pother
Co. v. McLean, 31 Gratt. (Va.) 517. & Stymus Mfg. C„. 18 N. Y. St. R.
iSee Portaoe County Mutual Ins. 954, 2 N. Y. Supi). 044, 50 N. Y.
Co. V. Wetraore, 17 Ohio, 330; N. Sup. Ct. 216, annotated case.
E. Car Sprina: Co. v. Union India
Joyce Ins. Vol. I.— 67. 1057
§ 404 JOYCE ON INSURANCE
while not those relating to insurance, would, however, by analogy
be applicable to the acts of treasurers of insurance companies, since
the principles underlying them are those applicable to all agents in
general.
§ 404. Powers of directors.^ — It is a general rule that where a
body is intrusted by the charter with the management of the affairs
of the corporation, and the mode of action is prescribed therein,
the company can act only through the designated parties and in
the manner specified.' But in the absence of provisions in the
statutes or by-laws limiting the authority of directors, their powers
are supreme.® The relation which directors sustain to the cor-
poration or stockholders is fiduciary in its character, and there is
an implied rule of law, applicable to all trustees, that they will
not abuse the confidence or trust reposed in them.^ A director
cannot vote upon a matter in which he is personally interested.^"
Individual directors cannot act validly in a matter which the charter
requires to be done by the board ; ^^ but the board may act through
others by virtue of a statutory authorization, as where they appoint
a committee to act.^^ xhe directors may by their acts, done with
full knowledge of the facts, waive conditions in the policy. So if
the policy provides that all claims under it shall be forfeited for
fraud of the assured in making proofs of loss, and the assured, in
good faith, includes therein articles not her own, and such act
is done with the knowledge of an officer of the company, and the
directors thereafter, knowing all the facts, order the policy paid,
they thereby waive the forfeiture. ^^ In an Iowa case the by-law of
a mutual company provided that the directors might recover the
6 Under the general corporation ^ Hoyle v. Plattsburg & Montreal
law of New York the term "diree- R. R. Co. 54 N. Y. 314, 13 Am. Rep.
tors," used in relation to corpora- 595, per Johnson, C; Brinkerhotf v.
tions, includes trustees or other per- Bostwick, 88 N. Y. 52; Chase v. Van-
sons by whatever name known, duly derbill, 62 N. Y. 307.
appointed or designated to manage ^^ Beers v. New York Life Ins.
the affairs of the corporation: Laws Co. 49 N. Y. 182; Gamble v. Queens
1892, e. 687; Laws 1909, c. 28, Co. Water Co. 123 N. Y. 91, 9 L.R.A.
Consol. Laws, c. 23; Parker's N. Y. 527, 25 N. E. 201.
Ins. Law (ed. 1915) with "General ^^ People's Mutual Ins. Co. v.
Corp. Law;" Jones on Business Cor- Westcott, 14 Gray (80 Mass.) 440;
poration Law, 88. Monmouth Mutual Fire Ins. Co. v.
' See Union Mutual Ins. Co. v. Lowell, 59 Me. 504.
Keyser, 32 N. H. 313, 64 Am. Dec. ^^ Sheridan Electric Light Co. v.
375. Chatham National Bank, 52 Hun (N.
SBeveridge v. New York Elevated Y.) 575, 580, aft'd 127 N. Y. 517, 28
Ry. Co. 112 N. Y. 1, 2 L.R.A. 648, N. E. 467.
19 N E. 489; Gamble v. Queens ^^ farmers' Mutual Fire Ins. Co.
County Water Co. 123 N. Y. 91, 9 v. Gargett, 42 Mich. 289, 3 N. W.
L.R.A. 527, 25 N. E. 201. 954.
1058
AGENTS OF INSURER § 404
Avliole premium note, and annul the policy at tbfeir option, upon the
nonpayment of an assessment. A member was delinquent in
makinji; {)ayment, and the directors voted that he should lose all
the benelit under his policy during the period of such default, but
that he should be liable for future assessments, and it was decided
that the directors bad not exceeded their authority by such con-
ditional annulment.^* So the directors, or an agent authorized by
them, may rescind, by mutual agTcemcnt with the insured, a con-
tract of insurance, for it is essentially necessary to the safe and
proper conduct of the company's business that such a power should
exist in its board of directors. ^^ The acts of the directors of a
mutual company in a.ssessing a premium note are not judicial,
and they are obligated in making such assessment to comply with
the requirements of the comi)any"s charter, or tlieir acts are in-
valid.^® So evidence is ad)nissil)le, in an action on the policy in
a mutual company, that an assessment was levied at a meeting
where only five directors, out of thirteen, were present, if such a
nimiber constitutes a quorum under the by-laws of the company, ^"'^
and the authority of the directors of a mutual company to lay an
assessment after a certain date is not taken away by a vote of the
board that all outstanding policies shall be canceled on such certain
date.^8 But a minority of the directors cannot legally make an
assessment to meet losses and expenses for a certain term : ^^ nor
can the insured bind the company, by giving notice of loss to a
director, where the policy provides that such notice must be given
to the company's secretiU'y or other authorized oflicer.^" But it is
held that the directors' acts in consenting to an assignment of a
])olicy constitutes a w-aiver as to prior insurance, effected contrary
to a charter provision that the application shall state the existence
of prior insurance or the policy shall be void.^ Again, the trustees
of a mutual benefit society have no power to vote back jiay to them-
selves.2 And it is held in Connecticut that the knowledge of a
director must have been obtained by him while acting officially
in the course of his business in order to bind the company, unless
he is acting under some special authority other than that merely of
1* Coles v. Iowa State Mutual his. i^ Monmouth County Mutual Fire
Co. 18 Iowa, 425. Ins. Co. v. Lowell, 59 Me. 504.
15 Roland v. Whitman, 33 Ind. 64. ^o |„iand Insurance & Deposit Co.
16 Herkimer County Mutual Ins. v. Staufier, ."53 Pa. St. 397.
Co. v. Fuller, 14 Barb. (N. Y.) 373. ^ Barnes v. Union Mutual Fire In.';.
" Susquehanna Mutual Fire Ins. Co. 45 N. H. 21.
Co. v. Tunkliannock Toy Co. 97 Pa. ^ state v. People'.s Mutual Benefit
St. 424, 39 Am. Rep. 816. . • Assoc. 42 Ohio St. 579.
1* Fayette Mutual Fire Ins. Co. v.
Fuller, ^8 Allen (90 Mass.) 27.
1059
§ 404 JOYCE ON INSURANCE
a director.^ Parsons,* however; denies that tins case is a correct
statement of the law, and asserts that if the director had the knowl-
edge ''in mind when he acted in the company's business," the com-
pany would be bound. While this might l)e true, if the fact were
conceded on the trial, we apprehend that otherwise there might be
some dithculty in proving thM the director ''had it in mind when
he acted in tlie company's business." Exactly how late must the
knowledge be acquired so as to "be presumably ]iresent in the mind
of the agent at the time he acts in the business to which it relates?"
While the nearness in time when the information was acquired to
the time when the director acted "in the company's business" might
perhaps afford an inference of knowledge on his part while so act-
ing, it Avould seem, in the absence of other proof, too nearly hypo-
thetical to justify, as against the company, a deduction of actual
knowledge, at such meeting, on the part of the agent. The true
test ought always to be, Was the knowledge acquired by the agent
under such circumstances as to justify a fair and reasonable pre-
sumption that he was acting within the apparent scope of his
authority at the time? If so, the company should be bound ;^
and we might add that if the proof is clear that at the time of
acting for the princii)al such knowledge was present to the agent's
mind, the princi|ial would be bound. Ijut the evidence ought
certainly to be clear and satisfactory.^ The levy and collection
of assessments by the board of directors of a county mutual fire
insurance company, coupled with -the knowledge and consent of
the secretary will constitute a waiver of a condition notwithstanding
no written consent of the company is given as required by the
policy.'
It is not optional with the directorate of mutual life companies
not purely stock cori)()rations whether they will declare dividends
or to what extent of the so-called surplus such companies are bound
to treat the accounts of its policy holders as if they were cestuis
que trust and they must keep accurate accounts with their policy
3 Farrell Foundrv v. Barb, 26 wliich it relates. ... It would
Conn. 376. See Stennett v. Pennsyl- be ridiculous to hold that a board
vania Fire Ins. Co. 68 Iowa, 674, 28 of directors might act as tliough ig-
N. W. 12; General Ins. Co. v. United norant of a fact tliat came to them
States Ins. Co. 10 Md. 517, 69 Am. on the street or othenvise before the
Dec. 174; Shafer v. Phrenix Ins. Co. hour of board meeting." He cites
53 Wis. 361, 10 N. W. 381. the two first cases in the last note.
*Mav on Insurance (Parsons ed.) ^ S§ 544, 545 herein,
see. 133d. He says : "Time of ac- ^ ggg Satterfield v. Malone, 35 Fed.
quiring knowledge is immaterial if 445, 1 L.R.A. 35.
present or so late as to be presum- ' Kesler v. Farmers' Mutual Fire
ably present in the mind of the agent & Lightning Ins. Assoc. 160 Iowa,
at the time he acts in the business to 374, 141 N. W. 954.
1060
AGENTS OF INSURER §§ 405, 406
liolders as classes failing which no presumi)tion will ho indulged
in the company's favor when it conies to valuing and applying '"sur-
plus" or "dividend additions" to lapsing policies.*
§ 405. Powers of superintendent.-;— The power of a superintendent
to represent or bind the company may be expressly conferred or
may arise by imi)li(ation from the acts and declarations of the
company; and if an insurance company is responsible for the acts
of its sui)erintcndent in making such representations, evidence is
admissible that delay in bringing an action was caused by such
agent's assurances that the company would pay the claim, if just.
If such assurances were acted upon, they will estop the comi)any,
notwithstanding a ])r()vision of the policy that agents of the
comi)any are not authorized to waive forfeitures.^ It further ap-
peared, however, in this case that there had been several communi-
cations between the company and the claimant, that tlie superin-
tendent had received the proof of death, and had put his certificate
thereon, and the answer of the company to the claim and proofs
were made through him. There Avas no evidence of his authority
other than that given by himself, which was that he had solicited
insurances and forwarded ap])lications, and had authoiily to receive
and deliver the amount paid in settlement of just claims. It
would seem, therefore, that he was held out by the comyjany as
possessing the authority exercised."
§ 406. Powers of general managers. — Where agents of foreign
companies represent them as general managers or managers, they
have generally large discretionary powers in regard to making
insurances and transacting business relating thereto. Their i)Owers
are similar to those of officers of the company. A resident agent,
designated officially as ''manager," has authority to employ an-
other to solicit risks, contract therefor, to deliver policies, and
collect premiums, and the acts of the agent so appointed, done
within the employment, will bind the company." Ho may also
waive conditions in the policy, and estop the company by his acts
w^ithin the scope of his authority.^'^ And wliere he has entire
control of the company's aHairs, he may bind it by acts warranted
ninited States LifV, Jns. Co. v. lo See §§ 42r)-427, 31):?, :m herein.
Spinks, 126 Kv. 405, 13 L.K.A. " Kclectic Life Ins. Co. v. Fahren-
(N.S.) 10r)3, fKf S. W. 880. Case kru-. (i8 111. -Kii!.
seems to be first to deMne "dividend ^^ s,.(. Mcdnrk v. Metroiudilan Life
additions" under statutes providing: Co. .')(! Conn. 528, 1 L.R.A. 563, 16
as,'-ainst forCeilure for I'ailure to pay Atl. 263; Fastcrn K. K. Co. v. Re-
preniiums (note, Id. 1033) statutes lief Ins. Co. lO.") Mass. 570; Ameri-
are also considered. <'»" Life Ins. Co. v. Malione, 21 Wall.
9 Jenninus v. Metropolitan Life (88 U. S.) 152, 22 L. ed. 593.
Ins. Co. 148 Mass. 61, 18 N. E. 601.
1061
§ 407 JOYCE ON INSURANCE
by an established course of business recognized by Uic members,
although no express authority so to act may be conferred on him.^^
§ 407. Agency of subordinate lodges. — In certain nuitual benefit
societies which do what is substantially an insurance business on the
lodge system, the contract of insurance, or the contract for the pay-
ment of money upon the decease of a member, is made through the
local lodge with tlie supreme or grand lodge, while the contract for
sick benefits is made with the local lodges, and the payment thereof
is made out of the funds of the local lodge. These local lo.dges may,
however, be authorized by the constitution and by-laws to act in
the matter of receiving applications for re-admission to the society
and restoration to membership therein. Again, membership in
such organizations is frequently made dependent by the by-laws
upon the continuance of membership in the subordinate society,
and where such membership ceases in the subordinate organization,
it is terminated in the society. ^^ Many questions have arisen from
this complex system. Tlie difiiculty of formulating any j)0sitive
and certain rule concerning the exact status of such subordinate
or local lodges, as to the meml)er and the society, is also greatly
increased by the fact that the provisions of various cliarters or
articles of association are so diverse and the l)y-laws themselves are
frequently so ambiguous; moreover, the decisions in ai)i)arently
analogous cases are often so widely divergent and conflicting, as
to be irreconcilable on any common ground or })rincii)le of the
law of agency. The starting [xtint in tlie determination of the
extent of authority of such subordinate lodges must be, and neces-
sarily is, the constitution, the charter or articles of association, and
the by-laws which govern their action and are the source of their
authority, as well as by the law of the land affecting such associa-
tions.^^ Another factor to be considered is this that a fraternal
benefit association, as required b\' the Nebraska statute iiuist have a
representative form of government. This requires that the direc-
tors or other oflicers who have general charge and control of the
business and proj)ei'ty of the society and the management of its
affairs shall be chosen by the membership thereof either directly
or through representatives chosen by the membership for that
purpose and the company must not exceed its powers or conduct its
business fraudulently and must comply with the state statutes. And
the managing oflficers are trustees for the members. ^^ Again, the
presumption exists that applicants for membership have acquainted
^' Topeka Primary A.ssoe. Univer- ^^ See Lucli v. Harris, 2 Brewst.
sitv Builders v. Martin, 39 Kan. 77A), (Pa.) 571; Dolan v. Court Good Sa-
18 Pac. 941. niaritan. 128 i\tass. 4;}9.
i*See Burbank v. Boston Relief ^^ t^tale v. Bankers' Union of the
Assoc. 144 Ma.ss. 434, 11 N. E. 691. World, 71 Neb. 622, 99 N. W. 531.
,1062
AGENTS OF INSURER § 407
themselves with the extent of the authority of such lodges," and
members at least are avssumed to be cognizant of the provisions of
the charter and by-la\v<, which the contract embodies, and to have
assented thereto.^* It would also seem that in so far as these soci-
eties do an insurance l)usincss, they should be governed by the
same principles as apply to other mutual life insurance companies.^'
The general rule may be stated that in societias of the character
under consideration the local lodges may be principals in matters
relating to the payment of benelits to sick members, wliore the
contract is Avith Ihcm and depends upon their constitution and
by-laws. When the contract for tlie payment of moneys on the
death of a mem})cr is made, however, with the supreme or highest
lodge, acting tluouuli the subordinate or local lodge, and the
certificate of insurance is issued by the former and the assessments
collected by the latter, then the former is the principal, and its
constitution and by-laws govern the contract, and the latter act in
these matters as the agents of the former, and are subject to their
direction and control.^" The subordinate lodges may also act
through their ministerial oflicers, who then become their agents.
The decisions are clearly not reconcilable u[)on the doctrine of
waiver by mutual l)cnefit societies. It has, however, l)ecn held
that neither subordinate lodges nor their ministerial ofiic-ers can
set aside or waive the positive requirements of the rules of the
order, and that therefore the doctrine of waiver by subordinate
lodges has no api)licalion to forfeitures of membership in such
order. In this case dues were payable to the subordinate lodge for
local purposes, and also to the supreme lodge for insurance benefits.
The member at his decease stood suspended for nonpayment of
assessments. The subordinate lodge had treated him, however,
as a member, and credited his insurance dues as money payable
to the supreme lodge by it ; ])ut the court held that no recovery
could be had by the beneficiary.^ In such cases of failure to pay
assessments, where the by-laws provide that the delinquent shall
cease to be a member, the law is said to be self-executing and the
" Supreme Lodo:e Kniohts & La- ^ Borgraefe v. Supreme Lodge
dies of Honor v. Grace, (iO Tex. nO!). Knights of Honor, 22 Mo. App. 127,
^8 Hclleiil)erii- v. Di.slrict No. 1 of per Tlioinpsou, J. See Swett v.
Independent Order B'uai Berith, 94 Citizens' Miilual Kolief See. 78 Me.
N. Y. 580; Schenck v. Gegenzeiter, 541, 7 Ati. 394; Splawn v. Chew,
44 Wis. ;J69. 00 Tex. 5.'32.
^^ See Erdmann v. Mutual Ins. Co. On waiver by subordinate lodge of
44 Wis. 376, 379, per Cole, J. right of benefit association to in.sLst
20 See Bacon's Benefit Societies and upon forfeiture of benefit because of
Life Insurance, sees. 11, 118, 144, violation of laws of as.-^ociation, see
146, 148-50, 266. note in 10 L.R.A.(N.S.) 136.
1063
§ 407a JOYCE ON INSURANCE
nonpayment of itself works a forfeiture.'^ But a forfeiture may,
it is held, be waived wliere the local lodge receives and the supreme
lodge retains, with knowledge, assessments made after the death
of a member.^ ^A'hen the laws of a relief fund association provided
that on notice of the disability of a member a board of physicians
should examine him and report to the supreme council, that all
proofs for death or disability benefits should be approved In' the
subordinate council, and that, upon approval of satisfactory proofs
of a member's disability, he should be entitled to a benefit, it was
held that the subordinate council could not finally reject a claim.*
§ 407a. Same subject. — T>ocal lodges are agents of the supreme
or governing body so that their acts within their jurisdiction are
binding upon said body.^ So it is held in an Illinois case ^ that :
''Notwithstanding the declarations of by-laws of mutual benefit
societies to the contrary, under the decisions in this state the
subordinate lodge or council is the agent of the supreme lodge or
council.''' ''This is practically conceded by appellee, but it is insisted
that it has never been held by this court that the agency of
the subordinate ' lodge cannot be limited by the by-laws of the
association. This court has recently had occa.sion to consider
this question in I.ove v. Modern Woodmen of America,' and
there stated that, while the local camp was the agent of the head
camp, as to some things, it was not a general agent authorized to
do everything that the head camp or its officers could do, but further
stated: '■* 'The subordinate lodge of a benefit astsociation, authorized
to receive or collect dues and transmit them to the association, is
2 Rood V. Railway Passengers' & ^ United Moderns v. Pike, — Tex.
Freight Conductors' Mutual P.enelit Civ. App. — , 76 S. W. 774.
Assoc. 31 Fed. 62. See Mandego v. ^ Dromgold v. Roval Neighbors of
Centennial Mutual Life Assoc. 64 America, '2til Til. 60, 103 N. K. 584.
Iowa, 134, 17 N. W. 656, 19 N. W. ' Citing Johnson v. Royal Neigii-
877. bors of America, 253 111. 570, 97 N.
^ See Manning v. Ancient Order E. 1084; Jones v. Knights of Honor,
United Workmen, 86 Kv. 136, 9 Am. 236 111. 113, 127 Am. St. Rep. 277,
St. Rep. 270, 5 S. W. 385, 9 Ky. L. 86 N. E. 191 ; Court of Honor v.
Rep. 428; Erdmann v. Mutual" Ins. Dinger, 221 111. 176, 77 N. E. 557;
Co. of the Order of Hermann's Sons, Grand Lodge Ancient Order United
44 Wis. 376 ; Schenck v. Gegenzeiter, Workmen v. Lachmann, 199 111. 140,
44 Wis. 369; Schen v. Grand Lodge, 64 N. E. 1022; Royal Neighbors of
17 Fed. 214. America v. Boman, 177 111. 27, 69
On waiver by otifieer of subordinate Am. St. Rep. 201, 52 N. E. 264;
lodge of forfeiture for nonpayment Independent Order of Forresters v.
of .assessments, sec notes in 4 L.R.A. Schweitzer, 171 111. 325, 49 N. E.
(N.S.) 4'21; 38 L.R.A. (N.S.) 571; 506.
and L.R.A.1915E, 152. « 259 111. 102, 102 N. E. 183.
4 Albert v. Order of Chosen Friends «* Id. p. 106.
(U. S. C. C.) 34 Fed. 721.
1064
AGENTS OF INSURER § 407a
the agent of the a.'^sociation for that purpose, and its acts witliin the
scope of the agency are binding on the association. So, if a subordi-
nate lodge, with full knowledge of a fact which would render a cer-
tificate void, continues to receive dues from a member, the right to
forfeit the certificate on account of tliat fact is waived. A sulmrdinate
lodge receiving dues and ])aying them over to the principal lodge
necessarily treats the insurance as in force.' The by-laws of this
organization require the members to make their payments to the
local camp. They cannot lemit directly to the su))reme recorder.
The officers of the supreme lodge may have had no actual knowl-
edge of what the local recorder had done, but these local lodges are
the agents of the order, clothed with autliority to act for it in
receiving the payment of dues, and with them, alone, the member
must deal. If the order permits the subordinate lodge and its officers
to act in such a manner that the holder of a certificate is justified in
believing that the reasons for forfeiture specified in the by-laws have
beeii waived, it cannot set up a forfeiture incurred by relying
upon such action as a defense against the certificate."* ^ But the
knowledge and acts of an officer of such a society obtained in the
exercise and within the scope of his duties is that of the order which
he represents, there being no fraud. ^° And the knowledge of ofiicers
of a fraternal benefit society as to the business over which they
have charge and control will be deemed to be that of the society."
So a subordinate lodge clothed with authority under its charier
as to the collection of assessments, and the suspension of members
for nonpayment is, with its financier, an agent of said lodge and it
may waive strict compliance of the requirement as to said pay-
men ts.^^ And a grand lodge vested by the supreme lodge with the
power to perform certain duties and services and with the direction
of certain benefit matters within a designated territory is the agent
of said supreme lodge, even though the collection and disbursement
of its monies is subject to state laws." And the negligence of a sec-
retary of a local lodge in not forwarding dues received is chargeable
to the order of whicli he is an agent and will prevent a forfeiture for
nonpayment of dues.^* So the acts of the grand recorder of a lodge,
after a forfeiture, in requesting further special proofs of loss con-
^Dromjrold v. Royal Neighbors of ^2 jo],p.4on v. Grand Lodge Ancient
America, '261 111. 60 j 103 N. E. 584. Order United Workmen, 31 Utah, 45,
lOHendrickson v. Grand Lodge, 8(i Pae. 404.
Ancient Order United Workmen, 120 " Grand Lodge Ancient Order
Minn. 36, 138 N. W. 946. United Workmen v. Connecticut
"Griffith V. Supreme Council Grand Lodge Ancient Order TTnited
Royal Arcanum, 182 Mo. App. 644, Workmen, 83 Conn. 241, 76 Atl. 533.
166 S. W. 324. See § 515 herein. ^* Supreme Lodge Knights of
1065
§ 408 JOYCE ON INSURANCE
stitutes a waiver.^^ But while the officers of a sovereign camp are
its agents for certain purposes they cannot bind their principal
when dealing with the members by acting within merely the
apparent scope of their authority as that rule does not apply where
the party dealing with such agent knows or is bound to know the
extent of the agent's powers with reference to a particular matter
especially so where powers and duties of such officers are prescribed
and regulated by the constitution and by-laws adopted by the
sovereign assembly and are a part of his contract and accessible
to him.^^
But it is also held that the collector of a local council is neither an
agent nor officer of the society.^''' And a member of a subordinate
lodge is held not the agent of the supreme lodge, after the former
has received its charter and its officers are elected, so as to bind
the society for said members alleged tortious acts while participating
in an initiation. ^^ And the relation of agency sustained by a
local lodge to the governing body has no application where a
member of said lodge enters into a contract with the governing
body and it cannot waive any stipulation thereafter in favor of
the member in the absence of acquiescence therein by the supreme
lodge.^^ And the rule that the acts of an agent must be within the
scope of his authority in order to bind the principal applies to
statements made to a lodge physician in his professional capacity
and not otherwise. 2° False reports and forgeries by the financier
of a local lodge does- not charge the grand lodge with notice of
such acts as said agent's knowledge of his own wrong does not bind
the principal.^
§ 408. Agency arising from necessity or emergency. — It some-
times hapi)ens that an agent is called upon to exercise an authority
in cases of necessity or special emergency which will justify the
act. In such cases the duration and extent of the authority is
measured by the necessity or emergency. Thus, if an agent of an
insurance company makes a demand upon the insured during a
Pythias v. Witliers, 177 U. S. 260, ^^ Qj-and Temple of Tabernacle of
44 L. ed. 7G2, 20 Sup. Ct. Gil, 30 Knights & Dau<>liters of Tabor of
Ins. L. J. 30. the I. 0. T. v. John.son, — Tex. Civ.
15 Hendriekson v. Grand Lodge App. — , 135 S. W. 173.
Ancient Order United Workmen, 120 ^^ United Moderns v. Pike, — Tex.
Minn. 36, 138 N. W. 946. Civ. App. — , 76 S. W. 774.
1^ Bennett v. Sovereign Camp, ^o \Yijjg.|j^fjj ^ Supreme Court In-
Woodmen of the World, — Tex. Civ. dependent Order of Friends, 51 Ore.
App. — , 168 S. W. 1023. 489, 94 Pac. 968.
1"^ Attorney General v. Supreme ^ Grand Lodge Ancient Order
Council American Legion of Honor United Workmen v. State Bank of
(Blair, In re) 206 Mass. 188, 92 N. Winfield, 92 Kan. 876, L.R.A.1915B,
E. 149. 815, 142 Pac. 974, 144 Pac. 257.
1066
AGENTS OF INSURER § 409
fire to remove his goods, such act of the agent, while it may have
been outside his authority, and though it may not fix the liability
of the insurer for loss by theft during the removal, it is nevertheless
a powerful and significant fact to establish the propriety of the re-
moval,^ although in such case the insurer would probably be liable
on the ground that goods were damaged ex necessitate to protect
them.^ Generally, it is a rule of agency that if the act of the agent
is warranted by the necessity or emergency, and is done in good
faith, the principal is bound, otherwise the object and purposes of
the agency might be defeated.*
§ 409. Agent delegated for special purpose. A waiver or estoppel
may arise against, or knowledge Ijc imputed to, the company in
cases where it specially delegates an agent to act in a particular
matter, or where it gives special instructions to the agent in relation
to the insurance or to the execution of some act concerning the
apf)lication, the policy, or the loss.^ Thus, if the company does not
rely upon the statements of the applicant, but sends ils own agent
to examine the premises, and the agent does so, and inserts a mis-
description of the building in the policy, the company is liable for
the amount of the insurance in case of loss, even thougli (bore is
a warranty, and the insured, although acting in good faith, aided
in the erroneous description.^ no an agency may be implied from
the acts of an agent of other insurers in matters concerning the loss
and adjustment in l)ehalf of said insurers.'' An imidied agency
may also arise by the insurer's acts in sending a policy to a person
for delivery to insured so as to warrant insured offering to return
the same to him.^ So a, subagent, with authority to represent the
company in a parliculai- line of its business, becomes, in relation
thereto, the com[)any"s direct representative, so as to bind it by a
notice to him, or by any acts which the nature of the })usiness
2 Leiber v. Liverpool, London & Johns. Cas. (N. Y. ) 17-'), 17!)n; Jer-
Glol)e Ins. Co. 6 Bush ((iOKy.) G39, vis v. lloyt, 2 llim (N. Y.) 037;
Of) Ani. Dec. 695. Dusar v. Perit, 4 liinii. (I*a.) Mil.
3 See Gordon v. liemington, 1 ^ See Cumherhmd N'aHey Ins. Co.
Camp. 12;5; Independent Mutual Ins. v. Schell, 29 Pa. St. 31; H«)th v. City
Co. V. Ao-new, 34 Pa. St. 9tj, 7.') Am. Ins. Co. 6 McLean, 32-4. Ked. Caa.
Dec. 638; Witherell v. Maine Ins. Co. No. 12084; Conunercial Kire lii.s. Co.
49 Me. 200 ; Newmai U v. Liveii)ool v. Ives, 56 111. 402.
Fire & Life Ins. Co. 30 Mo. 160, 77 6 Continental Ins. Co. v. Kasey,
Am. Dec. 608. 25 Gratt. (Va.) 268, 18 Am. Hep.
*See Greenleaf v. Moody, 13 Al- 681.
len (95 Mass.) 363; See also Wil- "'Stockton Coml>ined Harvester &
liams v. Sluxckeliord, 16 Ala. 318; Agricultural \Vorl<s_ v. Glens Kails
Judson V. Sturges, 5 Day (Conn.) Ins. Co. 121 Cal. l(u, 56 Pac. 565.
556, 560; Good^ivillie v. McCarthy, « Kuhlman v. Adkins, 180 111. App.
45 III. 186: Lawler v. Keaquick, 1 611.
1067
§ 410 JOYCE ON INSURANCE
intrusted to his care maj' warrant.® And if the company sends two
agents at different times to ascertain the loss, and invests them
with authority to compromise and settle the same, it thereby waives
objection to delay in sending the notice, and is estopped from de-
fending on the ground that the notice was not sent "forthwith ;'' ^*
and where a clerk in another office than that of the company is
requested by the general adjuster to go to a certain city and see
about a loss, and examine the business, he has authority to adjust
the same.-^^ Again, if the company places the claim of the insured
in the hands of an agent for adjustment, his demands in the course
of the business may constitute a waiver of the conditions of the
policy in relation to the loss.^^ But it is held that where a general
agent is sent to examine into the circumstances surrounding the
death of the insured, that the company is not bound by his expres-
sion of opinion as to the advisability of a settlement by the com-
pany, ^^ and where a broker is sent by the agent of whom the
company had sought the required information to ascertain the
ownership of the property insured, and the broker returns false
information, though the assured told him the truth, the company
is res]:)onsible.^*
§ 410. Agency: person referred to by company. — Where a party
is referred to by the company for information or for coiiduct of a
particular matter, or as a person to exercise certain authority in
reference thereto, the powers of such agent, although limited to
the subject of reference, is nevertheless co-extensive therewith, and
his acts and declarations concerning the same bind the company,
although it is held that if he volunteers information not called for
where he is to answer certain questions, that the principal is not
obligated thereby. ^^ Where a party is formally referred to an
general agent by the company, in regard to exchanging a paid-up
policy, and in consequence of the agent's advising him not to
exchange and giving him time to decide, a default is made in the
payment of the premium by the assured, tlie company is bound
by the waiver arising from such affirmative act of the agent, ^^ and
9 Ma.s.sacbusetts Life Ins. Co. v. hone, 21 Wall. (88 U. S.) 152, 22 L
Eshelman, 30 Ohio St. 647. ed. oOS.
1° Lyeomin.ii- Ins. Co. v. Schreffler, ^* Mullin v. Vermont Mutual Fire
42 Pa. St. 188, 82 Am. Dee. 501. Ins. Co. 58 Vt. 113, 4 Atl. 817.
See Lycoming County Mutual Ins. 15 ggg Swett v. Fairlie, 6 Car. &
Co. v. Sehollenberger, 44 Pa. St. 259. P. 1, per Lord Deninan, C. J.; Rawls
11 Swain v. Agricultural Ins. Co. v. Ameiican Mutual Life Ins. Co. 27
37 Minn. 390, 34 N. W. 738. N. Y. 282, 294, 84 Am. Dee. 280.
12 Brown v. State Ins. Co. 74 Iowa, i^ Wyman v. Pbonnix Mutual Life
428, 7 Am. St. Rep. 495, 38 N. W. Ins. Co. 119 N. Y. 274, 29 N. Y. St.
135. R. 567, 23 N. E. 907.
13 American Life Ins. Co. v. Ma-
1068
AGENTS OF INSURER § 411
if the company, on receiving notice of loss, refers the insured to
its resident agent for settlement, who is instructed to procure a
statement of the loss, he is invested with authority to extend the
time for furnishing the proofs.^'' Again, if the secretary and man-
ager refers a person to a clerk of the company, as to the validity
of the policy, any important information given by the former to
the latter, although not reported to the manager, operates as notice
to the 'company.^*
§ 411. Powers of clerk. — There is no doubt concerning the right
of an agent to employ clerks, since it cannot be presumed that an
agent will attend personally to all the details of his business. So
he may employ them to attend to his ofiice during his absence or
sickness: ^^ to contract for risks, collect premiums, receive payment
thereof in cash, give credit therefor, or take securities; 2° to receive
applications, fill out policies and renewals, and attend to whatever
business ''is transacted behind the counter;"^ and the act of the
clerk is in all such cases the agent's act, and binds the company the
same as if done by the agent personally.^ Acts done and informa-
tion given by an agent's clerk or employee of an agent in the line
of his duty bind the company. The following from the opinion of
the court in the case so liolding is important: 'Tt was suggested in
argument, and some reliance seems to be placed on the suggestion,
that inasmuch as the statement that the policy in controversy had
been renewed was made by William B. Shepard, who was an em-
ployee of Benson & K lit land, the defendant company is not affected
or bound by that representation. The facts with reference to this
contention seem to be that Shopard was a confidential employee
and book-keeper of the firm of Benson & Kirtland, and had been
in their service some years, lie was fully posted as to the details
of the business carried on bv the firm, and in their absence had
full charge of the ofiice, and was undoubtedly authorized hy them
to give information as to whether a particular policy that had been
registered on the books of the agency had or had not been removed.
. . . The evidence in the case at bar shows that the statement
"Lycoming County Miilual Ins. Ins. Co. 3:{ W. Va. .')2G, 25 Am. St.
Co. v. Scliollenberger,"44 Pa. St. 259. Rep. 908, 11 S. E. oO.
See Lvcominii' Ins. Co. v. Schrefller, ^o Bodine v. Exchange Fire Tn.s.
42 Pa.' St. 188, 82 Am. Dec. 501. Co. 51 N. Y. 117, 10 Am. Hep. 50(5.
^8 Fitzgerald v. Hartford Life An- * See Cooke v. 2E[ird Ins. Co. 7
nuitv Ins. Co. 56 Conn. 110, G N. Dalv (N. Y.) 555.
Eng. Rep. 180, 7 Am. St. Rep. 288, 2^^,11,1,1 chy Life Ins. Co. v.
27 Cent. L. J. 336, 13 Atl. 073, 17 Hutli, 49 Ala. 529; ArfT v. Starr Fire
Atl. 411. Lis. Co. 125 N. Y. 57, 21 Am. Si.
i^Deitz V. Providence Wastiington Rep. 721, 10 L.R.A. 609, 25 N. E.
1009
§ 411 JOYCE ON INSURANCE
made by Shepard to Gibson, that the policy in question had been
renewed, waa^ made in the company's office wliile Shepard had
charge of the same, and Avhile he had custody of the poUcy register.
The statement was made in the line of his duty, not in answer to
an idle inquiry, but in response to a question asked by a policy
holder, who was interested in knowing if a certain policy had been
renewed and continued in force. It does not follow that because
a person is employed by an agent of an insurauce company, rather
than by the company itself, none of such person's acts or repre-
sentations are binding on the company. It is customary for agents
having charge of important agencies to employ persons to per-
form clerical and much other work in their office, and to assist
them generally in the discharge of the various duties which such
agents have to perform. The business of insurance could not well
be transacted without such assistants, and all insurance companies
are doubtless well aware of the practice of employing them. It
results from this w-ell-known business usage that acts done and in-
formation given by such subordinate employees in the line of their
duty should be held binding upon the companies which they repre-
sent. We think, therefore, that presumptively Shepard had author-
ity to inform Gibson wliether the policy now in question had or
had not been renewed, and that the statement made by him should
be given the same effect as if it had been made by either Benson
or Kirtland." ^
The insurer is responsible not only for acts of its agents within
the scope of their agency, but also for the acts of the agents' clerks,
when the company knew or ought to have known that other persons
would be employed by and to act for the agents.* So the insurer
is responsible for not only the acts of its agents within the scope
of their authority, but also for the acts of the clerks of such agents
where knowledge of the necessity of employing clerks ought to be
charged to them.^ So an insurer is responsible for the acts of, and
is affected by notice given to, the clerks and employees of his gen-
eral agents, who are known to assist such general agents in the
1073 ; Bodine v. Exchange Fire Ins. * Duluth Nat. Bank v. Knoxville
Co. 51 N. Y. 117, 10 Am. Rep. 566; Fire Ins. Co. 85 Tenn. 76, 4 Am. St.
Kuney v. Amazon Ins. Co. 30 Hun Rep. 744, 1 S. W. 089.
(N. Y.) 66; Houghton v. Ewbank, 4 * Thompson v. Michigan Mutual
Camp. 88. Life Ins. Co. 56 Ind. App. 502, 105
3 International Trust Co. v. Nor- N. E. 780, 783; Duluth National
wich Fire Ins. .Soe. 71 Fed. 81, 17 Bank v. Knoxville Fire Ins. Co. 85
C. C. A. 608, 014, 36 U." S. App. 277, Tenn. 76, 4 Am. St. R«p. 744, 1
per Thayer, C. J. S. W. 689.
1070
AGENTS OF INSURER § 411
dif=eharge of their duties.^ The fact that the pohey provides that
no persons shall be considered the company's agent except snch
"as shall hold the commission of this company," does not operate
to prevent such employment being validJ Where a clerk is
deputized to examine and report upon certain property, and to
write out a policy thereon, the right to recover on such policy is
not defeated by a clerical error of the clerk in writing in the name
of another than that of the true owner, and such mistake may be
corrected in an action on the policy.^ A clerk may by virtue of
his employment be authorized to bind the company by a parol
contract;^ to receive notice of and consent to other insurance;^"
to bind the company by a material alteration of the terms of the
policy, where he is a clerk in the company's otiice and makes the
same alteration in the insurer's records, although it is proven that
he had no authority to make or alter contracts for them,^^ and he
may contract with the insured after a fire to repair the building
insured. ^^ So the company may be bound by his knowledge of
the existence of other insurance on the property where he solicits
the risk and takes the a])plication, and the agent employing him
therefor issues the policy, and in such case the condition making
the policy void for prior insurance without notice is waived. ^^
But it is held that a person einployed to fill out and issue policies
as mere clerical work cannot consent to additional insurance nor
waive a forfeiture therefor, and is not an agent to receive notice
of additional insurance.^* It is also held that a clerk in an insur-
ance office cannot bind the company by receiving overdue premi-
ums.^* But it is also decided that the company is not relieved from
liability where the clerk of a local agent fails to note the fact of
^ Goode V. Georgia Home Ins. Co. Fire Insurance, 109. The question,
92 Va. 392, 53 Am. St. Rep. 817, 30 however, turned on the point whether
L.R.A. 842, 23 S. E. 744. the party receiving tlie notice was a
' Arff V. Starr Fire Ins. Co. 125 clerk of the agent's or a mere broker,
N. Y. 57, 21 Am. 'St. Rep. 721, 25 and he wa-s hdd to be a clerk.
N. E. 1073, 10 L.R.A. 609. i* Wasliington Fire Ins. Co. v.
' Deitz V. Providence Washington Davison, 30 Md. 91.
Ins. Co. 33 W. Va. 526, 25 Am! St. ^^ Hilton v. Newman, 6 Mo. App.
Rep. 908, 11 S. E. 50. See Deitz v. 304.
Providence & Washington Ins. Co. ^^ Bennett v. Council Bluflls Ins.
31 W. Va. 851, 13 Am. St. Rep. 909, Co. 70 Iowa, 600, 31 N. W. 948.
8 S. E. 616. i*Waldman v. North British ]Mer-
8 Cooke V. Minn Ins. Co. 7 Dalv caiitile Ins. Co. 91 Ala. 170, 24 Am.
(N. Y.) 555. St. Rep. 883, 8 So. 666.
^° Artf V. Starr Fire Ins. Co. 125 ^* Koelges v. Guardian Life Ins.
N. Y. 57, 21 Am. St. Rep. 721, 10 Co. 2 La^s. (N. Y.) 480, 58 Barb.
L.R.A. 689, 25 N. E. 1073. See 185, 9 Abb. Prac. N. S. (N. Y.) 91.
criticism on this case in Ostrander on
1071
§ 412 JOYCE ON INSURANCE
other insurance in the apphcation which he had written, it appear-
ing that other risks^ upon the property were held hy said agents,
and that the clerk was so informed at the time by the assured.^^
So a clerk in the employ of a firm acting as general agent of the
company, said clerk being empowered to solicit insurance for the
firm, receive premiums, fill out and deliver policies, has power to
waive a condition in an accident policy providing against death
by intentional injuries.^''^ Where one who was either a clerk for
or member of a firm of insurance agents promised the assignee of
a policy, holding it as mortgagee of the property, that he would
either buy the mortgage or obtain a purchaser therefor, such state-
ment is not a waiver of delay in bringing suit where the agents
jiad from the first denied their liability on the ground that the
insured had burned the property.^*
Again, a person who, while not belonging to the class which,
bv the rules of a benefit insurance societv and the statute resulatirm
such associations, is entitled to become' a beneficiary, has his name
inserted in a benefit certificate, has no right to receive any part
of the benefit fund, and the acceptance of assessments paid, after
his name has been so inserted, even if with full knowledge of the
existing relations, does not confer such rights, as a clerk of the
order cannot waive the provisions of a statute which expressl}^
prohibits the payment of benefit funds to any person who is not
within the class designated as "beneficiaries." ^^
§ 412. Powers of medical examiner. — A medical examiner is an
agent with limited powers, but, nevertheless, his acts in and about
the business intrusted to his care are binding within the scope of
his authority, and to this extent the same general rules of agency
are applicable to him as to other special agents. Where he is
required to jjersonally write in the answers to questions in the
certificate, and not to allow them to be dictated by any person, and,
after the applicant signs the certificate, such agent, without his
knowledge, erroneously fills in an answer as to the cause of death
of the applicant's sister, the responsibility for the error rests upon
the company.^" And where the examination blanks are sent to
^^ Steele v. German Ins. Co. 93 notice to eompanv, see Phoenix In.s.
Mich. 81, 18 L.1?.A. 85, o3 N. W. Co. v. Ward, 7 Tex. Civ. App. 13, 20
514. S. W. 763.
^"^ Henderson v. Travelers' Ins. ^^ Corveon v. Providence & Wash-
Co. t)9 Fed. 762, 16 C. C. A. 390, 65 ington Ins. Co. 79 Mich. 187, 44 N.
Fed. 438. 24 Ins. L. J. 351, s. c. 163 W. 431.
U. S. 708, 41 L. ed. 312, 16 Sup. Ct. " Modern Woodmen of America v.
1207. That notice to clerk of general Comeaux, 79 Kan. 493, 25 L.R.A.
agent with power to solicit insurance (N.S.) 814, 101 Pac. 1.
and issue policies, except signing, is 2° Gi'attan v. Metropolitan Life
1072
AGENTS OF INSURER § 412
the medical examiner, with directions to complete the same, and
he has to some extent acted as and represented himself to be the
company's general agent, and occupied its oflice, the principal is
estopped to set up the falsity of the answers, though erroneously
written by such agent ;^ and the same ruling obtains where such
physician assumes to write in the answers upon his own knowledge
of the facts, instead of relying upon the answers given by the
applicant.^ So the certificate of the medical examiner is con-
clusive upon the company as to its recitals in the absence of fraud
of the applicant in making the representations or in conceaHng
material facts ;^ and in answering the questions of the medical
examiner the applicant has the right to rely upon his construction
of them at the time, and may answer them in the light of such
interpretation.* So if such agent, knowing the facts, suggests
answers which are made in accordance therewith, the company is
bound.^ Again, an insurance company is bound by the act of its
medical examiner in reporting an applicant to be a fit subject for
insurance, unless he was puiposely " misled by the applicant, and
inveigled into recommending him as a fit subject for insurance
Avhen but for such deception he would not have done so.^ But
where the answers of the applicant given to the medical examiner
are false and material and are known by him to be so, his conduct
in writing them down and in not communicating his knowledge
to his principal constitutes a fraud upon the insurer who is not
chargeable with notice thereof and is not estopped to set up their
falsity.' Such examining physician is the insurer's agent even
though the application makes him the applicant's agent and his
acts within the scope of his authority are binding upon the associa-
tion,* and the company is estopped to show incompetency of its
medical examiner.^
Ins. Co. 80 N. Y. 281, 36 Am. Rep. * Connceticut General Life Ins.
617, 92 N. Y. 274, 44 Am. Rep. 372. Co. v. McMurdy, 89 Pa. St. 363.
iFlynn v. Equitable Life Ins. Co. » Higgins v. Plurnix Mutual Life
78 N. Y. r,68, 34 Am. Rep. 561, Earl, Ins. Co. 74 N. Y. 6. But soe Flynn
J., dissented. But see the same case, v. Equitable Life Assoc. 67 N. Y. 500,
67 N. Y. 500, 23 Am. Rep. 134. 34 Am. Rep. 561.
2 Pudritzky v. Supreme Lodge ^ R^e v. National Life Ins. As.soc.
Knio-hts of ilonor, 76 Midi. 428, 43 37 Iowa, 696, 17 L.R.A.(N.S.) 1144,
N. W. 373. ll-^ N. ^Y. 500
Mlolloman v. Life Ins. Co. 1 'Mutual Life Ins. Co. v. Powell,
Woi.ds (tJ. S. C. C.) 674, Fed. Ca.'^. 217 Fed. 565, 133 C. C. A. 41/, 4o
No. 6623. See llogle v. Guardian Ins. L. J. 127.
Life Ins. Co: 4 Abb. Pr. N. S. (N. » Turner v. Modern Woodmen of
Y.) 346; Valton v. National Fund America, 186 111. App. 404.
Life As.snr. Co. 17 Abb. (N. Y.) 268, On medical examiner a.«5 agent of
aff'd 4 A 1)1). Dec. 437. insurer or of insured and estoppels
Joyce Ins. Vol. I.— 68. 1073
§§ 413, 414 JOYCE ON INSURANCE
§ 413. Whether one is agent or broker. — Whether one is an agent
or broker is a qH-iestion necessarily dependent upon the particular
facts of each case. Thus one employed to solicit applications for
insurance, and to fill up and issue policies, is not an insurance
broker, within the terms of a city ordinance providing for the pay-
ment of a license fee by such broker.^" Again in a New
York case ^^ it appeared that one R. who was the agent of sev-
eral insurance companies, but not of the defendant, whose
agent was one J. R. wrote his own name on an application
as "general agent," and took a premium note for the regular
premium and another note for a portion of the premium payable,
at a certain date thereafter, conditioned that the policy should
become void in case of nonpayment of the note when due. The
policy also contained a like condition. Thereafter, the insured
delivered to R. another note for a larger sum, payable to his order,
which he discounted and retained the proceeds. The two prior
notes were delivered through J. to the defendant. Receipt of the
payment of the first premium was acknowledged in the policy.
There wa.-* no claim nor proof that the insured understood that
R. was the agent of the defendant company. The second note was
not paid when due, except as above stated. In an action on the
policy it was held that R. was merely a broker, and delivery of the
last note to him did not operate as a payment, and that the policy
was forfeited. A local agent to whom application is made for
insurance and who obtains it through the agent of another com-
pany, said local agent paying the premiums through the other
agent, is only a broker, the policy stipulating that agents must
be authorized in writing to act as such.^^ g^ ^ firm of insurance
agents is held not insurer's special agents but brokers under the
Missouri statute which declares who are insurance brokers, but
excludes as such ai)pointed agents or officers of the insurer.^^
§ 414. Whether broker is agent of insured or insurer.— In Eng-
land, an insurance broker represents the insured in effecting the
policy, and in other matters relating thereto, but is the under-
arisino- by his acts, see note in 41 Mutual Life Ins. Co. 134 Fed. 732,
L.R.A:(N:S.) 506. 67 C. C. A. 636.
9 Holloman v. Life Insurance Co. ^^ How v. Union Mutual Lite ins.
1 Woods (U. S. C. C.) 674, Fed. Ca.s. Co. 80 N. Y. 32.
j^Q 5623 ^^ Wisotzkey v. Hartford Fire Ins.
10 Bernlieimer v. Leadville, 14 Col. Co. 98 N. Y. Supp. 763, 112 App.
518, 24 Pac. 332. See East Texas Div. 596.
Fire Ins. Co. v. Brown, 82 Tex. 631, ^^ Edwards v. Home Ins. Co. 100
18 S. W. 713. When person is brok- Mo. App. 695, J3 _S. W. 881, Rev.
er and not insurer's agent ; fraud of Stat. 1899, sec. 7997. i
aerent, see Mahon v. Royal Union
1074
AGENTS OF INSURER § 414
writer's agent in regard to the premium.^* The custom of having
such broker is declared to have arisen from the fact that the person
desiring insurance was frequently at a distance, and was unknown
to the underwriter.^* It is not our purpose, however, to consider
in this section the question of agency in connection with the insured,
but only the point whether the broker is the agent of the insurer
or insured in this country. It is said that "what is understood
under the designation of an 'insurance broker' is one who acts
as a middleman between the insured and the company, and who
solicits insurance from the public under no employment from
any special company, but, having secured an order, he either places
the insurance with the company selected by the insured, or, in the
absence of any selection by him, then with the company selected
by such broker. ".^^ In the United States an insurance broker does
not, in the absence of a special agreement, differ from any other
broker or agent. ^"^ It has been held that a broker employed to
procure insurance is the agent of the employer.^^ This is also
declared to be the rule not only in such case, but also where he
is employed to procure the modification of the terms of the policy. ^^
And one whose services are performed for a foreign insurer is
such company's agent.^" In another case it was declai-ed that
the broker was the agent of the insurer where it appeared that he
was paid by commissions received from the company for his serv-
ices,^ and the same ruling was made in a case where he received
commissions from another agent of the company.^ But it is also
held that an insurance agent to whom a person makes a request for
insurance, and who, acting as broker, procures all or part of such
insurance through agents of other companies not represented by
him may be agent of the insured and the mere fact that he receives
a commission from a company which he does not represent for
i^Minett v. Forrester, 4 Taunt. i^ Standard Oil Co. v. Triumph
541n, per Mansfield, C. J.; East Tex- Ins. Co. 3 Ilun (N. Y.) 591, 5 Ins.
as Fire Ins. Co. v. Brown, 82 Tex. L. J. 594. See lis to completing con-
631, 18 S. W. 713. tract, Marland v. Royal Ins. Co. 71
15 Power V. Butcher, 10 Barn. & C. Pa. St. 393; Union Ins. Co. v. Chipp,
329, 340, 13 Eng. Rul. Cas. 407, per 93 111. 96 (case of notice to soliciting
Bayley, J. broker, being held notice to com-
i^Arff V. Starr Fire Ins. Co. 125 pany).
N. Y. 57, 21 Am. St. Rep. 721, 10 ^o Commercial Union Assur. Co. v.
L.R.A. 609, 25 N. E. 1073. State, 113 Ind. 331, 15 N. E. 518;
^■'^1 Phillips on Ins. (3d ed.) 274, Indiana Insurance Co. v. Hartwell,
sec. 508. 123 Ind. 177, 24 N. E. 100.
" Hamblet v. City Ins. Co. 36 ^ Indiana Ins. Co. v. Hartwell, 123
Fed. 118; Pottsville Mutual Fire Ins. Ind. 177, 24 N. E. 100.
Co. V. Minnequa Springs Improve- ^ ]\feadowcraft v. Standard Ins.
ment Co. 100 Pa. St. 137. Co. 61 Pa. St. 91.
1075
§ 414 JOYCE ON INSURANCE
placing the insurance does not make him the agent of the com-
pany.^ In a Michigan case * he is held to be the agent for the
insured so far as he acts "as an insurance broker." ^ Where one
solicited insurance and turned over the order to a firm of "brokers,"
who sent a written statement of application to the defendant com-
pany, whom, however, they did not represent, and had no rela-
tions with them, they were held agents of the plaintiff and not
of the company.^ But in another case it is held that if such
broker procures the policy for the insured, he is his agent, as to
subsequent instalments of premiums paid to the broker, where
the policy provides that in transactions relating to the insurance
all persons other than the insured who procure the policy shall
be the agent of the insured, and not of the insurer."^ Substantially
the same ruling, viz., that the broker is agent of the assured under
similar provisions in the policy, has been made in other cases.*
Brokers who obtain a policy for insured after cancelation of a
former one procured by them are insured's agents.^ Again, it is
3McGraw Wooden Ware Co. v. Virgrm'a.—Untual Assur. Sop. v.
German Fire Ins. Co. 126 La. 32, 38 Scottish Union & National Ins. Co.
L.R.A.(N.S.) 614, 52 So. 183, 39 84 Va. 116, 10 Am. St. Rep. 819,
Ins. L. J. 1036. -i S. E. 178.
On insurance broker as auent for ^ IManhattan Fire Ins. Co. v. Har-
insured, see note in 38 L.R.A.(N.S.) lem River Lumber & Wood Co. 56
614. N. Y. Supp. 186, 26 IMisc. 194.
* Hartford Fire Ins. Co. v. When broker is agent of insurer
Reynold, 36 Mich. 502. and not of insured and knowledge of
5 See also Lycoming Fire Ins. Co. agent is insurer.^ knowledge, see
V Rubin, 79 "ill. 402, 403, 404, 8 Lehmann v. Hartford Fire Ins. Co.
Chi. Leg. News, 150. 183 i\Io. App. 696, 167 S. W. 1047.
^Fromherz v. Yankton Fire Ins. Whether broker agent of insurer
Co. 7 S. Dak. 187, 24 Ins. L. J. 672, or insured : prepayment of premium,
63 N. E. 748. see § 73 herein.
'Wilbur v. Williamsburg City When broker agent for insurer,
Fire Ins Co. 122 N. Y. 439, 25 N. E. see Western Ins. Co. v. Ashby, 53
926, 34 N. Y. St. R. 48. See § 512 Ind. App. 518, 102 N. E. 45; I\Iary-
herein land Casualty Co. v. Gaffney Mfg.
8 ^Zabawa.— Sellers v. Commercial Co. 93 S. Car. 406, 76 S. E. 1089
Fire Ins. Co. 105 Ala. 282, 24 Ins. (under Civ. Code 1902, sec. 1810
L. J. 354, 16 So. 798. [Civ. Code 1912, sec. 2712]).
Connecticut. — Young v. Newark When broker agent for insured,
Fire Ins. Co. 59 Conn. 41, 22 Atl. 32. .see Lvnch v. Travelers' Ins. Co. 200
Massac/mse^s.— Wood V. Firemen's Fed. 193, 118 C. C. A. 3/9, 42 Ins.
Ins. Co. 126 Mass. 316; Abbott v. L. J. 453 (application was signed by
Shawmut Mutual Fire Ins. Co. 3 Al- agent as "broker, solicitor, agent or
len (85 Mass.) 213. . subagent") ; Travelers' Ins. Co. v.
New JorA-.— Sargent v. National Thome, 38 L.R.A.(N.S.) 626, 180
Fire Ins. Co. 86 N. Y. 626, 10 Ins. Fed. 82, 103 C. C. A. 436, 39 Ins.
L. J. 852; Devens v. Mechanics & L. J. 1638 (signed same a.s above);
Traders Ins. Co. 83 N. Y. 168. Commonwealth Mutual Fire Ins. Co.
1076
AGENTS OF INSURER § 414
held in Illinoi.-: ^° that it might be shown that the broker acted
for the company in delivering the policy and collecting the pre-
mium, notwithstanding a provision that a broker procuring a
policy or its renewal should be the agent of the insured in all
transactions relating to the insurance. So where, at the time of
making the application, the agent was acting as an insurance
broker, although he had not been employed by the company prior
thereto, he was held to be the agent of the insured in procuring
the policy, and only the agent of the company to collect the pre-
mium and deliver the policy, and that the company would not be
bound by notice to him of an encumbrance on the property or
notice that it stood on leased ground.^^ It is held in New York "
that there must be some evidence of an authorization, or some fact
from which a fair inference of an authorization by the company
might be deduced, to make an insurance broker the agent of the
company. It is also declared that a broker who affects an insur-
ance policy is the agent of both parties, and that an indorser might
be charged by notice to him of abandonment." And in Washing-
ton it is held that an insurance broker who is employed to place
insurance is the agent of his employer, and not of the insurer,
but where a person applies to an insurance com]:>any for a gross
amount of insurance, without giving instructions to place any por-
tion of such insurance with other companies, and receives there-
after from such company policies for the entire amount of the
insurance, signed by several other companies, and indorsed with
a statement that the company applied to is the agent of the compa-
nies issuing the |)olicies, the company applied to must, for the
purpose of defining the relative rights of (he applicant and the
insurers, be regarded as the agent of the latter, and not of the
former.!* In a Connecticut case where a broker procured insurance
for another but by his fraud procured them to be canceled and
other policies taken out for his financial advantage, it was held
that such fraud did not change his relations with the assured as
the fraud was practised upon the insurer. It was also decided that
V Wm Knabe & Co. Mfg. Co. 171 "Allen v. German-American Ins.
Ma.ss. 265, 50 N. E. 516; Condon v. Co. 123 N. Y. G, 33 N. Y. St. R.
Exton-Hall Brokerage & Vessel 216, 25 N. E. 309.
Ao-enev, 80 Misc. 369, 142 N. Y. ^^ Cronsillat v. Ball, 3 Yeates
Rupp. 548, 42 Ins. L. J. 1351; Mor- (Pa.) 375, 4 Dall. 294, 1 L. ed. 840,
ris V. Home Ins. Co. 78 Misc. 417, 2 Am. Dec. 375.
139 N Y Sudd 674, 42 Ins. L. J. i* INIesterman v. Home Mutual Ins.
513. ^' ^ t'^ ' Co 5 Wash. .524, 34 Am. St. Rep.
1° Newark Fire Ins. Co. v. Sam- 877, 32 Pac 458.
mons, 110 111. 166.
" East Texas Fire Ins. Co. v.
Brown, 82 Tex. 631, 18 S. W. 713.
1077
§ 414 JOYCE ON INSURANCE
notice of cancelation to a broker employed to procure insurance
was not effective after the insurance was procured as his agency
then ceased, although the policies had not been delivered, and that
he had no power to waive or receive said notice.^* The court, per
Thayer, J., said: "The conclusion of the court that the defendant
did not cancel the policies is equally conclusive against a recovesy
by the plaintiff. It is found that the policies were duly procured,
and that there was an attempted cancellation of them prior to the
fire, but that for want of the five days' notice required by the poli-
cies the attempted cancelation was ineffective. The plaintiff's claim
that upon the facts found the defendant after the insurance was pro-
cured continued to represent the plaintiff, so that his attempted can-
celation of the policies was a waiver by the plaintiff of the five
day's notice cannot be sustained. The general rule is that, where
an insurance broker or agent is employed by a person to procure
insurance for him, the broker or agent becomes his agent until
the insurance is procured, so that any knowledge of facts by the
agent or false statements made by him when procuring the insur-
ance are imputable to the insured; but, after the insurance has
been procured, he ceases to be the agent of the insured, and has
no authority to waive or to receive notice of the cancellation of
the policies in behalf of the insured.^^ The course of business
between the parties may be such as to warrant the inference tliat
the broker still has authority to receive or waive the notice. But,
in the absence of facts from which such an inference may be drawn,
the i*ule is as stated. The complaint in the present case alleges,
and the court has found, that the defendant was employed to pro-
cure insurance upon the plaintiff's property to a specific amount
for the specified term of one year. This he did. Under the deci-
sions, he then ceased to be the plaintiff's agent. The case shows
no course of iDusiness between the parties from which it can be
inferred that the defendant still represented the plaintiff', so that he
had authority to waive the notice of cancellation provided for in
the policies."
It will be seen, therefore, that the decisions are far from unani-
mous. They, however, present two important questions for con-
sideration, and these are : Was the broker, at the time of effecting
the insurance, acting for himself, independently of any employ-
ment by the company; or was he then ostensibly or actually con-
is Cheshire Brass Co. v. Wilson, 86 Ins. Co. 109 U. S. 278, 283, 27 L.
Conn. 551, 86 Atl. 26, 42 Ins. L. J. ed. 932, 3 Sup. Ct. 207; Hermann v.
677. Niagara Fire Ins. Co. 100 N. Y. 411,
16 Citing 1 May on Ins. (4th ed.) 415, 53 Am. Rep. 197, 3 N. E. 341.
see. 67g; Grace v. American Central
1078
AGENTS OF INSURER § 415
nected with the company and employed by it? The determination
of these facts must be of weight in arriving at a conchision upon the
question concerning whose agent he was, and this distinction was
made by the court in one of the cases above noted." We beUeve
tfiat the inquiry should, in addition to the distinction just made,
resolve itself into these questions: 1, From whom did the broker's
express or implied authority to do the act relied on originally
proceed? 2. Was the act one which the broker was expressly
authorized to do, or did it arise as a usual and necessary means
to accomplish the execution of the authority conferred? 3. Was
the act done independently of the original employment, and if
so, for whom or at whose instance? 4. Which party could the
broker hold directly responsible for his remuneration at the time
the act in question was done? 5. Was there any limitation upon
the broker's ostensible authority of which the person dealing with
him was, or ought to have been, cognizant? 6. Was there any
ratification by the ostensible principal of the claimed unauthorized
act?
§ 415. Partnership as agent: joint agents.— One of a firm of in-
surance agents has all the powers of the firm in efiecting insurances,
and one partner may execute the agency for the firm." Where
one D.' was the ostensible and commissioned agent of the company,
and he and one L. were in partnership in the business of soliciting
insurances, and L., with the consent of D., acted as the company's
agent in procuring an application, which fact the company knew,
but did not disapprove, and a joint commission had been promised
to these two as the company's agents, which was delayed, but finally
issued before the policy was delivered, it was held that L. was the
company's agent.^^ But in case of dissolution of the partnership
by death or otherwise, and the assured has knowledge thereof, he
is obligated at his peril to ascertain the extent of the authority of
the surviving partner or partners,'^" although a ppwer given to sev-
eral to jointlv and severally sign policies in their discretion, may,
after the death of a part ojf the number, be executed by a part of
the survivors, where such appears to be the intent of the mstra-
ment.^ Under a New York decision an authority conferred by a
principal upon two or more agents is presumed to be joint, but
"Arff V. Starr Fire Ins. Co. 125 20Martine v. Tntornational Life
N Y 57, 21 Am. St Rep. 721, 10 Assur. Soc. Co. 62 Barb. (N. \.)
L.R.A. 609, 25 N. E. 1073. 181. . n i
18 Kennebec County v. Augusta ^ Guthrie v. Armstrong, 1 Do^^\.
Ins. & Banking Co. 6 Gray (72 & R. 248.
Mass.) 204.
19 Van Schoick v. Niagara Fire
Ins. Co. 68 N. Y. 434.
1079
§ 416
JOYCE ON INSURANCE
the rule is not inflexible as it yields to indications to a contrary
intent dependent upon the course of dealing, the terms of the power
and the surrounding circumstances. If partners are appointed
agents either member of the firm can do any act within the scope
of the agency the same as in other partnerships and it would be
implied from such appointment that the authority was joint and
several.^
§ 416. Powers of adjuster.— A.n adjuster may occupy such a
relation to the company, either by virtue of a long-continued
employment and his long-continued custom in relation to the con-
duct of certain matters, that his acts will bind the company, as
in case of his statement of the insurer's grounds for refusing to
adjust a loss whereby a waiver may arise.' And although an adjust-
er may not be a general agent with power to settle losses finally,
yet if he is authorized by the corporation to carry blanks to prepare
proofs, the jury may be warranted in finding an agency for such
purpose, and may extend the time within which such proof could
be formally made, and make such time dependent upon his own
convenience in preparing the same.* But an offer to compromise
a loss for half the amount due on a policy of insurance made by
a general adjuster, without authority to waive or alter any of the
^Unterberg v. Elder, 211 N. Y. defendant, and in tliis case such a
499, 105 N. E. 834, 44 Ins. L. J. 271. notice was sent him on the visual
^Rockford Ins. Co. v. Williams, blank, and he went to Watseka in
no 111. App. 338. The court said in pursuance of it, and investigated the
this case: "It is contended that Do- title to the property in question. He
Ian did not sustain such a relation to found the mortgage which apparent-
the defendant as authorized him to ly rendered the policy void, and made
speak for it on that subject, so as to his report to defendant of that fact,
make a refusal to pay on the ground and did nothing further in the mat-
stated a waiver of other grounds. The
evidence was that Dolan had been in
the employ of the defendant for
about twenty years. He was work-
ing on a salary as agent of defend-
ants, looking after agents, visiting
them, making contracts with them
ter. It seems that he was an ad-
juster of defendant, and had been
engaged as such in this matter. We
think that his statement of defend-
ant's ground for refusal to adjust
the loss would bind defendant." Per
Cartwright, J. See Anthony v. Ger-
looking over their accounts, adjusting man-American Ins. Co. 48 Mo. App.
losses, and making collections, etc. 65 (case where after notice of loss
He had adjusted a great many losses by local agent adjuster was wired
covering a good many years. He to give prompt attention, and short-
had cards for use furnished by de- ly thereafter appeared and made ef-
fendant, on which he was designated fort to settle). See also ^tna Ins.
as special agent and adjuster for de- Co. v. Shryer, 85 Ind. 362.
fendant. The method adopted to As to waiver by acts of adjuster:
set him to work as adjuster in any proofs of loss, see §§ 584-586 herein,
case, was to send him 'notice of the * Searle v. Dwelling-House Ins.
loss on a printed blank prepared bv Co. 152 Mass. 263, 25 N. E. 290.
i080
AGENTS OF INSURER § 416
terms of policies, is not such an exercise of authority as will bind
the company, and constitute of itself a waiver of the right to forfeit
the policy for breach of condition.* A refusal of an adjuster to
settle because of his doubts as to the cause of the fire may operate
to bind the company as a waiver of proofs.^ If by the conditions
of the policy the assured may be required to submit to an examina-
tion under oath, and an adjuster, claiming to represent the com-
pany, conducts such examination apparently for them, and subse-
quently writes to assured in relation thereto upon one of the com-
pany's letterheads, wherein he is advertised as adjuster, it may
be ])roperly found that he is the insurer's agent.' A professional
adjuster who, by reason of his technical skill and knowledge is
employed generally by any and all companies as they may need
him, has a right to follow his business wherever he may deem
it necessary, and the fact that he goes to another state to adjust
a loss there, at the request and under the employment of an
unlicensed foreign company, does not make him its agent, and
subject to a penalty under a statute prescribing a penalty on agents
of unlicensed foreign companies adjusting losses in the slate.^ An
authority to adjust a loss occurring on the British coast cannot be
presumed from the fact that the agents in Boston of a British
company ^vere authorized to issue policies, receive the premiums,
and represent the principal in legal proceedings in Massachusetts.'
5 Richards v. Continental Ins. Co. tution of the United States; and any
83 Mich. 508, 21 Am. St. Rep. 611, hiw abridging or re.s|ri(ting- that
47 N. W. 350. right would tje void," per Keed, P.
6 Mix V. Royal Ins. Co. 169 Pa. St. J., citing numerous eases on the gen-
639, 32 Atl. 460. era! proposition as to legislative
' Enos V. St. Paul Fire & Marine power and linutations, and citing on
Ins. Co. 4 S. Dak. 639, 46 Am. St. the point that appellant was not the
Rep. 706, 57 N. W. 919. agent of the Chicago coni|)any for
8 French v. People, 6 Colo. App. any purpose within the statute;
311, 24 Ins. L. J. 678, 40 Pae. 463. Union Mutual Life Ins. Co. v. Wil-
The court said in this case: '^\p- kinson, 13 Wall. (80 U. S.) 222, 20
pellant was not the agent of the Chi- L. ed. 617; Weed v. London &
cago company. By reason of his Lancashire Fire Ins. Co. 116 N. Y.
technical knowledge and ability in 106, 22 N. E. 229;_Marvin v. Life
his particular department he was Ins. Co. 85 N. Y. 2<8, 283, 39 Am.
employed by any and all companies Rep. 657; Peehner v. The Phenix Ins.
needing him. The calling with him Co. 65 N. Y. 195,^ 207 ; People v.
was his business and profession, be- Gilbert, 44 Hun (N. Y.) 522.
ing a legal business. He had a right ' Monroe v. British & Foreign Ma-
to follow it in any state where his rine Ins. Co. 3 C. C. A. 280, 5 U. S.
employment called 'him— a right de- App. 179, 52 Fed. 777.
«lared and guaranteed by the Consti-
1081
§ 416a JOYCE ON INSURANCE
*
§ 416a. Fidelity bond: when not obligor's agent. — If a fidelity
bond for indemnity against an employee's dishonesty is signed by
the obligor and it is delivered to the employee he is not thereby
constituted the obligor's agent with authority to bind the latter
by a waiver of such signature. Such contracts were distinguished
from those of insurance.^"
^^ United States Fidelity & Guar- But fidelity guaranty bonds or
anty Co. v. Ridgely, 70 Neb. 622, 97 contracts constitute insurance, see §§
N. W. 836. 339a, 339b herein.
1082
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