J A ^ A o CO o c i s z 30 o O ■aP MOii£llr> UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY y^-" J / I / / ^^ ^~ U A TREATISE ON THE LAW OF INSURANCE FIRE, LIFE, ACCIDENT, MARINE With a Selection of Lp^adino Illustrative Cases AND AK APPENDIX OF STATUTES AND FORMS BT GEORGE RICHARDS 0? THE NEW YORK BAB AND J^ECTUHER ON INSURANCE UiW IN THE SCHOOL OF LAW OF COLUMBIA COLLEGE SECOND H^niTlON. THE BANKS LAW PUBLISHING COMPANY, 21 Murray Street, NEW YORK. 1 90() T COPYrviUriT. 1892, Sr GEORGE RTCHARXte Copyright, 1892. »V GEORGE RICHARm V) PREFACE This book was designed primarily for the class-room, and is the result of an effort to combine the advantages of the two more prominent methods in use for teaching law, commonly known as the text-book and case systems, the comparative merits of which have recently aroused wide-spread and thoughtful attention. The appearance of Langdell's Select Cases as a substitute for Parsons on Contracts, at Harvard Law School, in the year 1871, dnd the subsequent abolition of text-books from their curriculum by the law faculty of that great university, marked a conspic- uous departure from pre-existing methods of legal instruction, and gave impetus to an exchange of views among those interested in education which has continued with increased earnestness. By the old method, the student is expected to acquire a knowledge of the elements of the law by memorizing the pages of a general treatise, which, in the estimate and according to the views of its author, contains a compendium of the whole body of law upon the given subject. By the other method, the student is made acquainted with original sources of legal au- thority ; namely, leading decisions and opinions by the courts upon the given subject, together with the precise statement of facts upon which the opinion in each case is based, substantially as recorded in the official reports. These selected cases, edited, arranged, and printed in a book for this purpose, are put into the hands of the class, and are made the subject not only of study and recitation, but also of a free discussion in the class-room under guidance of an instructor, with a view to evolving, illustrating, and emphasizing the im- portant principles established by them, and also other analogous and closely allied principles which may at the same time be conveniently considered. The former method gives a synopsis or brief outline of many iv FSEFAOE. cases ; the latter sets forth with exact detail a few selected cases upon leading points illustrative of essential principles. The former method is more synthetic and abstract, the latter more inductive and concrete. The former is more theoretical, and, in a sense, more scientific ; the latter, while embracing a narrower range of decisions, is, with respect to the particular adjudications and principles which it includes, more definite, practical, and thorough. Each of these methods, no doubt, possesses points of superiority over the other ; and either is, in my judgment, for purposes of giving instruction in most branches of jurisprudence and for the average American stu- dent at law, immeasurably preferable to a lecture system. A scientific presentation of a subject in its entirety, by a competent master, must be of value to a student. "Within the b.*oad scope of a general treatise, principles can be concisely defined and conveniently arranged, not only for purposes of study in the first instance, but also for subsequent reference and review ; the relations of different cases to one another can be explained, decisions seemingly inconsistent can be harmon- ized, historical developments can be briefly but adequately summed up, and many particulars and distinctions of greater or less importance, which could not possibly be touched upon within the bounds of any selection of isolated cases, can be enumerated or brought within the reach of general rules. For example, within pages 133 to 196, inclusive, of this vol- ume, the meaning and legal efl'ect of every clause of the New York standard fire policy are considered with some degree of comprehensiveness, together with numerous citations of authori- ties. Little of this matter probably could be omitted to ad- vantage ; and yet, to enforce or illustrate all the propositions of the text contained in these sixty-four pages with actual cases reported in full would increase the length of the work to sev- eral volumes, making it altogether too bulky and expensive to meet the more immediate aim of the book. If, then, the student's memory were absolutely infallible, and if extent and variet}'^ of legal formulas were the only desidera- tum, and provided the general treatise were a sufficiently good one, the text-book system might well claim to be without a rival ; and, as it is, it oflfers, I think, characteristic advantages which nothing else can supersede. Preface. v But, on the other hand, it is to be observed, in the first place, that a good text-book upon a given subject is not always available, and especially is this apt to be the case if the branch of law to be considered — like insurance law, for instance — is one which is in process of rapid development. Owing to the large number of independent tribunals in the different States, and the enormous multiplication of reported cases, involving decisions more or less inharmonious with one another, it is a harder task to write a scientific treatise upon a general branch of American jurisprudence than it used to be in former years, when, with a limited field to traverse, the learned juridical author led rather than followed the courts. Accordingly, as is well known, the cautious practitioner of modern times uses his text-book as an index or digest of cases and subjects, rather than as a safe and final exposition of the law, and is seldom satisfied without supplementing its perusal with a resort to the more relia- ble sources of authority to be found in the reports themselves. But, in the second place, the solution of the question of ways and means how most effectively to inculcate legal principles may not turn altogether upon the excellence of the text-book that happens to offer itself for use ; since at best a text- book is only a reflection from the law, and not the law itself. It is, for the most part, as has been remarked, nothing but a collec- tion of actual decisions from manv cases. Here the abridg- ment is not in the number of cases, but in the form and sub- stance of every one ; and in order to bring the reports of all the adjudications cited in the text within the compass of a vol- ume, each case must be condensed to a point almost beyond recognition. Its title and individuality must be sacrificed. The exact and concise statement of material facts, prepared with all the experience and skill of the official reporter, without a careful examination of which no judge or lawyer would ven- ture to estimate or pass upon the validity or significance of the decision, must be seriously curtailed or altogether dropped, for lack of room. For the same reason the opinion of the court, although it may be a monument of legal learning and profound thought, and may offer a most concise model of sound and con- vincing logic, and although presumably it was deemed neces- sary for the elucidation of the decision or else it would not have been written, must likewise be omitted. vi Preface. In place of the statement of facts and the course of reason- ing by which the conclusion of the court is explained and sup- ported, the author of the text-book puts into a few words of his own what he considers to be the pith and point of the case; and this is all that is furnished to the student for his edification and instruction. Indeed, without a proper book of selected cases this is all that the instructor can furnish to his class, for it would be fruitless to refer them to a reported case without supplying copies of it, and without making it the subject of examination and discussion in the recitation room, since it is evident that a large class cannot all gain access to the same volume in the library on the same day, and experi- ence proves that they would seldom have the inclination to do so if they could. One difficulty with these summarized transcripts from ad- judicated cases, as they appear in the text-book, is that they must be more or less inaccurate as compared with the originals from which they are taken ; another conspicuous disadvantage inherent in them is that their meaning is frequently obscured by the mutilation which they have undergone, and especially to the apprehension of a student, for the reason that their abbre- viated form presupposes a much greater knowledge of the sul> ject than the ordinary reader possesses ; and a third cause for unfavorable criticism is their abstract character as compared with complete reports. An actual, well-established, never- changing case, the full details of which have been made familiar by private study and open discussion, appeals to the imagina- tion and fastens itself upon the memory ; but an abstract generalization, read from the pages of some particular edition of a text-book and recited by rote, produces an impression of uncertainty and dissatisfaction, and quickly fades out of remem- brance. The student who has chained all his knowledo^e of law from a perusal of general treatises, when he is subsequently con- fronted by practical problems in the course of his professional career, will often have a vague recollection that he has read or heard something or other upon the subject presented for his determination, but what the point of the decision was, or which way it went, or where it is to be found, he is unable to remember. What he wants to acquire from his two or three years irv the law school is a legal training of practical utility, and no Frefaoe. vi\ course of study is satisfactory that does not meet that require- ment ; for the practice of the law is an art as well as a science, and its success depentls not merely on a knowledge of rules, but still more on the ability to apply them to actual and ever- varying problems of fact. No system of legal instruction can be pronounced perfect that allows a student to wait until after graduation before being required to read any insurance cases, or to see the form of an insurance policy, or the written appli- cation for a policy, or the proofs of loss ; and yet, a few years ago, that was precisely the experience of many if not most of our law students, although insurance was made one of the re- quired subjects of study in every course upon contracts. There are two things, all will agree, in regard to which a law-student ought to make himself an adept before he can hope to become a successful practitioner — he must be able, upon a given statement of facts, to reach a correct legal con- clusion, or else he cannot give good advice to his clients ; and he must also be able to follow out a sound and logical course of reasoning to its legitimate result, or else he cannot win their cause before court or jury. From all this the inquiry arises whether in trying to teach these two lessons we can afford to discard altogether the leading cases of our great judges, which constitute the original and final standards of legal authority. Those of us who have had hereditary or long-standing pre- possessions in favor of the old and time-honored methods of teaching law, and who are indiined to defend them against a new-comer "with feelings of just gratitude and loyalty, must face the question fairly, whether, with all their merits, they are not susceptible of some improvement, and whether the wisest course to adopt is not a resultant of the advantages of both the systems which I have thus attempted to compare and contrast. The actual combinations of fact are so multifarious, legal dis- tinctions are so arbitrary, often having a historical rather than a scientific basis, that it surely nmst be more profitable for the student to limit his attention at first to fundamental and far- reaching principles, taking time to make these intelligible and familiar by working them out in a realistic way from the great masterpieces of forensic logic and learning given by illustrious judges in the performance of their professional duty, rather than to seek a wider and more indefinite survey of the entire field viii Preface. of the subject as mapped out by an individual and irresponsible author, of which at best only a faint impression can be per- manently retained in the memory. Finally, it may be objected, that to devote attention to an examination and discussion of actual cases will induce the stu- dent to pin his faith to isolated decisions rather than to rely upon general principles, and will encourage in him a habit of superficial disputation at the expense of hard study. However forcible this objection might be if directed against the exclu- sive use of the case system, it offers no adequate reason for neglecting to take advantage of the undeniable assistance to be derived from a collection of well-selected cases with which to illustrate the more general propositions of the text-book. And the great weight of testimony from those who have tried the experiment certainly favors the further use of selected cases for purposes of debate in the class-room. The collision of mind with mind among the students who take an active part in the argument is stimulating and instructive ; and the free and open discussion of principles, based upon definite statements of fact, brings the teacher into more vital and influential relations with his class, and affords him the better opportunity to discover and correct their difficulties and mistakes. With respect to the law of insurance, the more recent American text-books are, for the most part, elaborate digests of decisions, altogether too voluminous for the class-room. Moreover, much of their space is given up to a consideration of phraseology which does not appear in the later forms of policies, and consequently is more or less obsolete ; and no one of them treats specifically of the New York standard fire policy, which is now used exclusively within this State, and has been substantially adopted by several other of the largest States. English text-books on this subject, such as Porter and Bunyon, relate principally to English forms of policies and English statutes and decisions, which differ in important particulars from our own ; while no one of the books named treats of marine insurance, although in it, as the oldest branch, the first principles of insurance law were established. Having lately accepted an invitation from the Faculty of the Columbia Law School to deliver a course of lectures upon the law of insurance generally, including fire, life, accident, and Preface. ix marine, I find myself reluctantly compelled to prepare and print a book which can with propriety and convenience be put into the hands of the class. In the arrangement of its contents, after tracing the nature of insurance and the origin and growth of insurance and insurance law, I have adopted the method of considering, first, general principles of insurance law by them- selves, apart from the terms of the policies, and then the provis- ions of the policies clause by clause, following the phraseology and the order in which they occur in the several instruments. This, I think, is the most practical and convenient method, both for students and practitioners, and is one which the adop- tion of a standard form of fire policy has made quite feasible. The leading cases composing Part Second have been care- fully selected from the English and American reports, and are illustrative of the corresponding chapters of Part First, in con- nection with which they should be studied and discussed. In the Appendix will be found classified lists of references to the numerous statutes of American legislatures relating to the insurance contract, with a specimen of each class. These lists liave been made up from the original statutes of all the States, and are now, for the first time, presented in a text-book on insurance law. GEORGE RICHARDS. 62 Wall Street, ^ Mardi, 1882. TABLE OF CONTENTS. PART FIRST} CHAPTER I. 9AQK Natukb, ORiom, AND Growth of Insukance. § 1. Nature and Importance of Insurance. ... 1 § 2. Conditions Necessary to a Successful System 2 § 3. Insurance Companies 8 § 4. Statutory Safeguards 4 § 5. Origin of Insurance and Insurance Law 5 § 6. Lloyd's and Lloyd's Usages 8 § 7. Largest American Marine Company 11 § 8. Fire Insurance 11 § 9. Life Insurance 12 § 10. Real Estate Title Insurance 14 § 11. Classification of Risks ... 14 § 13. Mortuary Tables 16 § 13. Reserve 17 § 14. Different Kinds of Policies 18 § 15. Reinsurance 20 § 16. Authority of Insurance Agents to Bind the Companies. ... 20 § 17. Agents of Life Companies 21 § 18. Agents of Fire Companies , 24 § 19. Agents of Marine Companies , , 26 CHAPTER IL Nature of the Contract. § 20. Doctrine of Indemnity 27 ^ 21. Insurance does not always Grant Full Indemnity 28 § 22. Grants Indemnity for Results of Negligence 29 § 23. Rule of Indemnity Qualified in Marine : Insured a Co- insurer .... 30 § 24. Double Insurance Contribution 31 § 25. Doctrine of Subrogation 81 § 26. Insurable Interest : Fire 33 § 27. Insurable Interest : Life 36 > The Leading Cases of Part Second are Illustrative of the con-eepondins: cliapters of Part First. xji Table of Contents. PASS g 28. Insurable Interest : Marine 37 § 29. The Payee or Assignee of Life Policy need not have Insur- able Interest 38 § 80. When must Insurable Interest Exist 38 § 81. Temporary Suspension does not Avoid unless Policy so Provides 39 § 82. Insurable Interest as Related to Measure of Recovery : Fire and Marine 39 g 83. Insurance Contract is Personal, and does not Run with the Property 42 § 84. Insurance Contract is an Entirety 42 § 85. Assignment of Policies 42 § 86. Vested Interests : Life Insurance 43 t^ 87. Relations between Insurer and Insured : Life 45 § 88. The Contract is a Property Right : Life 46 CHAPTER III. CONBUMUATION AND CONSTRUCTION OF THE CONTRACT. § 89. Requisites of a Complete Contract 47 § 40. The Particulars are soraetiraes Understood . 48 § 41 . ( "ontract may be Closed by Parol 49 § 42. Contract to Issue Policy is Governed by Terms of Usual Policy 49 g 43. Certain Rules of Construction 50 § 44. What Law Governs the Construction of the Contract 54 § 45. Who Construes the Contract, Court or Jury 54 CHAPTER IV. ftKPBKSENTATIONS AND CONCEALMENTS. § 46. Concealment : Marine Insurance 58 § 47. Concealment : Fire and Life 57 g 48. Representations 59 § 49. Erroneous Statement of Opinion not generally Fatal 60 §60. Test of Materiality 61 g61. Refers to what Time 61 CHAPTER V. Warranties. I 52. What is a Warranty C3 § 53. Warranty must be Strictly Performed 62 § 54. Inability to Perform the Contract no Excuse 64 § 55. Papers Referred to in the Policy 65 § 56. Statement of Present Use 65 § 57. Questions Unanswered or Partially Answered 66 g 58. A Breach Avoids though not Connected with the Loss 66 g 69. Breach Avoids though only Temporary. 67 Table of Contents. xiii % 60. To Avoid Forfeiture, Contract made Sererable 67 § 61. Void means Voidable 67 § 62. Election once made is Final 67 CHAPTER VI. Waiveb and Estoppel. § 63. Nature of Waiver and Estoppel 68 § 64. What in General Constitutes a Waiver or Estoppel 68 § 65. What tlie Insured Seeks to Accomplish by Invoking this Doctrine 69 § 66. The Disturbance of Contract brought about by Parol Testi- mony 69 § 67. Effect of this Doctrine on the Ordinary Rule of Evidence. 70 § 68. Reasons in Favor of Doctrine of Waiver and Estoppel in Certain Cases 71 g 69. Reasons against Doctrine of Waiver and Estoppel in Cer- tain Cases 72 § 70. How this Doctrine has Operated in Practice 71 g 71. Cause of the Conflict of Opinion in Applying it 7t CHAPTER VII. Waiver and Estoppel — Continued. § 72. 'What cannot be Waived 78 § 73. What can be Waived : Stock Companies 79 § 74. New Subject of Insurance cannot be Introduced by Waiver 79 § 75. Rule as to Waiver in Massachusetts and New Jersey 79 § 76. What ( an be Waived : Mutual Companies 80 § 77. What Amounts to a Waiver 81 ^ 78. Knowledge of Breach : When a Waiver 88 § 79. Silence is not a Waiver 82 § 80. Proofs of Loss : Technicalities when Waived 83 § 81. Denial of all Liability when a Waiver 83 § 83. Demanding Proofs of Loss when a Waiver 83 § 83. Taking Part in Adjustment when a Waiver 84 g 84. Company may Defend on other Grounds than those first Named 85 § 86. A Retention of Proofs Waives Defects that might have been Remedied 66 CHAPTER VIIL Waitib and Estoppel by Agents. § 86. Ostensible Authority 87 g 87. Undisclosed Instructions not Binding upon the Insured. . . 88 § 88. Agency to be Determined by the Facts of each Case 88 § 89. Effect of Stipulations in the Contract itself as to who are, or are not, Agents of the Company 89 xiv Table of Contents. FAsa g 90. Effect of Stipulations as to the Manner of Exercising Autliority 92 I 91. Authority of Officers of the Company to Waive 94 § 93. Authority of Managers to Waive 95 § 93. Authority of Canvassing Agents : Life. 96 § 94. Stipulations Restricting the Authority of Canvassing Life Agents 100 § 95. Authority of Commissioned Agents : Fire 101 §96. Of Special Soliciting Agents : Fire 102 § 97. Of Other Special Agents 102 CHAPTER IX. Masine Insurance. § 98. What is Marine Insurance 108 § 99. Implied Warranties 103 §100. Warranty of Seaworthiness 103 § 101. Seaworthiness is What 106 § 102. Implied Warranty : Deviation 108 § 103. Deviation, when Proper 110 §104. Illegality 110 §105. Actual Total Loss 112 § 106. Constructive Total Loss 113 § 107. Constructive Total Loss : United States 114 § 108. Notice of Abandonment 115 § 109. Effect of Abandonment 116 § 110. Measure of Indemnity 118 § 111. Valuation Apportioned 118 § 112. Loss under an Open Policy 118 §113. Damaged Cargo 119 § 114. Labor and Expenses 119 § 115. Liability for General Average Losses 119 § 116. Insured may Claim whole Loss from Insurer, leaving lat- ter to enforce (ieneral Average Contribution 119 §117. One-third off New for Old 120 CHAPTER X. Qbstbbal Average : Marine. §118. General Average 191 § 119. General Average Losses 122 § 120. Sacrifices Enumerated 123 §121. Deck Load 124 § 122. Voluntary Stranding 125 gl23. Port of Refuge, and other Expenses 125 §124. The Adjustment 126 g 125. York Antwerp Rules 127 % 126. Contributory Value of Freight 182 Table of (\)Ntknts. X* CHAPTER XI. VANS I'hb New York Standard Fire Policy. § 127. In Consideration of the Stipulations and Premium ...... 184 § 188. Insures aj^ainst all Direct Loss by Fire 136 § 129. The Following Described Property 136 §130. Location 137 §131. Held in Trust 138 § 132. For whom it may Concern 138 § 133. Measure of Damages 139 § 134. Reinstatement Clause 140 § 1H5. This Entire Policy shall be Void 143 § 136. Interest of the Insured not Truly Stated 142 g 137. In Case of any Fraud or False Swearing 148 CHAPTER XIL Standard Fire Policy — Continded. §138. Other Insurance 146 §139. Factories 149 §140. Watchman 149 §141. Increase of Risk 150 §142. Mechanics 152 § 143. Interest of Insured 153 § 144. Leased Ground 154 §145. Chattel xMortgage 154 §148. Foreclosure 166 CHAPTER XIII. Standard Fire Policy — Continued. § 147. Alienation Clause : Change of InterMt 168 § 148. Assignment of Policy 161 § 149. Memorandum Clause . . 168 § 150. Vacancy Clause 164 § 151. Invasion, Theft, Neglect, Explosion, Lightning, etc 167 § 152. Falling Building 167 § 153. Memorandum Articles, Accounts, Bills, etc 168 CHAPTER XIV. Standard Fire Policy — Continued. § 154. Application or Survey is a Warranty , 169 § 155. Wh' ) are Agents of the Company 171 §156. Renewals 172 g 157. Cancellation 173 § 168. Mortgagee Clause ^. ... 174 XVI Table of Contents. CHAPTER XV. PA«a Standaed Fire Policy — fowcLUUED. g 159. Removal of Property for Safety 177 g 160. Notice and Account of Loss 177 § 161. Exhibit Remains ; Submit to Examinations ; Books of Account, etc 179 § 163. Appraisal or Arbitration 181 § 163. Enforcing Contract is no Waiver 183 § 164. Pro Rata Clause : Other Insurance 183 § 165. Reinsurance 187 §166. Subrogation 189 g 167. Proximate Loss: Spread of Fire 191 § 168. Limitation of Time to Sue 193 § 169. Mutual Companies 194 § 170. Last Clause of the Policy : Authority of Agents to Waive. 194 CHAPTER XVL Life Insurance Policy. § 171. The Beneficiary , 197 § 172. Application Incorporated into Contract 199 § 173. Statements as to Health or Freedom from Disease 199 § 174. Statements as to Medical Attendance 201 § 175. Statements as to Other Insurance 201 § 176. Statements as to Age 203 § 177. Statements as to Family Relationship 2C3 § 178. Statements as to Habits: Temperate, etc rJO'i § 179. Statements as to Occupation 203 § 180. Statements or Requirements as to Residence and Travel . . 203 § 181. Statements about Bodily Injuries 204 CHAPTER XVII. LiFB Policy — Concluded. § 183. Payment of Premiums 206 § 183. Assessments 206 § 184. Suicide 207 § 185. Exception of Death by the Hands of Justice or in Violation of Law 209 §186. Authority of Agents 210 §187. Errors in Age 211 §188. Assignments 211 gl89. Incontestable 218 CHAPTER XVin. The Accident Policy. g 190. Accident is what »18 § 191 Amount of Recovery and for what Accidents 214 g 192. Exception of Hazardous I'^mployment 215 Ta.blk of Contents. Xvii FASX § 198. Injuries excluded of which there is no Visible Mark on the Body 216 g 194. Poison, etc 216 § Ift.i. Pjxccption of Injuries Resulting^ from Violating Law. . . . 217 § 196. Voluntary Exposure to Unnecessary Danger 217 i 197. Entering Moving Conveyance Using Steam as Motive Power, etc 218 ^ 198. Due Diligence for Personal Safety and Protection 218 ^199. Insurance against Injuries Received while Traveling 218 CHAPTElt 2LUL 'j'BE MjmiNE Policy. g 200. Name of the Assured 890 g201. Lost or not Lost 221 §202. At and Prom 221 §'J03. The Voyage 22? g 204. The Subject of Insurance 223 g 205. Master's Name 225 g 206. Commencement of the Risk. 226 {^207. Termination of the Risk 227 fe 208. Touch and Stay 230 CHAPrER XX. MAftHfE Policy — Concluded. § 2U9. Perils of the Seas 231 §210. Foundermg at Sea ., 282 §211. Grounding 283 § 212. Collision , 233 § 213. Stress of Weather 234 g214. Fire 234 g 215. Perils of War , 236 g 216. Arrests, Hestraints, etc 237 ^ 217. Barratry of the Masters and Mariners 238 g 218. Jettison 239 g 219. All Other Perils, Losses, or Aiisfortunes 240 g 220. Proximate Cause 241 g 221. A Peril Excepted and Sea Peril, Combined 243 g 222. Proximate Cause as Limiting Insurers' Liability 243 g 223, Wear and Tear 244 g 224. Original Defect 246 g 225. Sea Damage and Ordinary Deterioration, Combined 847 ^ 226. Application of these Principles to Particular Average. . . 248 g 227. Limitation of the Liability of Underwriters. Losses not Covered 250 g 228. The Sue and Labor Clause 252 g 229. Exemption under Five Per Cent 253 § 230. Other Assurance 253 § 231. Warranted Free of Capture ... 26J B xviii Table of Contents. PASS K 282. The Memorandum Clause, Free of Average unless Gen- eral 256 § 283. What Constitutes Stranding 258 § 234. Cargo on Deck 261 §235. Blockade 261 § 236. Average Distinguished from Salvage Loss 262 §237. Riders 262 J$838. Adjustmeut 268 PART SECOND} LSADING ILLUSTRATIVE CASB8. CHAPTER I. T^o Rablt English Cases. p*«b Tyrie v. Fletcher. — Contract an entirety. Premium not appor- tionable 265 Smith V. Scott. — Insurance covers negligence 869 CHAPTER II. Nature of the Conteact. Dalby v. In dia & London lAfe Asa. Vo. — Insurance i how "far a contract of indemnity , 271 Rayner v. Preston. — A personal contract. Does not run with the property 278 Oastellain v. Preston. — Subrogation 283 CHAPTER III. OOMBUICMATION AND CONSTRUCTION OP THE CONTRACT. lliompson V. Adams. — Contract by parol or binding slip 295 Lipman v. Niagara Fire Ins. Co. — Terms of usual policy under- stood to govern contract closed by parol or by binding slip . 301 Merchants^ Mutual Ins. Co. v. Lyman. — Policy merges ante- cedent negotiations . . 305 Harper v. New York City Ins. Co. — Writing prevails over printed form 308 Winne v. Ntagara Fire Ins. Co. — Forfeitures are not favored. . 814 CHAPTER IV. Rrtbksentations and Concealments. Phoenix Life Ins. Co. v. Raddin. — Representations. Conceal- ments 318 'fbeae cMca sbould be read In connection with the corresponding chapters of Part Firet. Table of Contents. 3tiX PAOK i^oudfoot V. Montefiore. — Concealments by agents : principal held 324 Blackburn v. Vigors. — Concealments by agents : principal not held 880 CHAPTER V. (yABKANTIES. TJiomson v. Weems. — Warranty of temperate habits 889 Burleigh v. Gehhard Fire Ins. Co. — Interpretation of a war- ranty: fire 860 CHAPTER VI. Waivkb and Estoppel. Union Mutual Ins. (Jo. v. Wilkinson. — Waiver by act of agent . 854 Van Schoick v. Niagara Fire Ins. Co. — Waiver by agent's knowl- edge of cause of forfeiture 862 JDeweet v. Manhattan Ins. Co. — The opposing view, that parol evidence is inadmissible 369 CHAPTER VII. Waiver and Estoppel — Continued. Couch V. City Fire Ins. Co. ^Essential provisions of charter can- not be waived 877 Union Mutual Life Ins. Co. v. Mowry. — Oral promise before in- ception of contract no ground of waiver 881 Landers (erroneously reported Sanders) v. Cooper. — New subject of insurance cannot be introduced by waivei= 885 CHAPTER VIII. ftEBTRICTIONS ON AUTHORITY OF AgENTS. Kausal v. Minnesota Farmers' Mut. Fire Ins. Asso. — Stipula- tion that soliciting agent not agent of insurer 892 Messelbach v. Norman. — Stipulation prinm facie binding 397 Knickerbocker Life Ins. Co. v. Norton. — The real fact of agency will override the recital in the policy 899 Ryan v. World Mutual Life Ins. Co. — Negligence not to read the application , , 408 CHAPTER iX. iGlKNiciiAL Principles : Marine. Dixon V. Sadler. — Seaworthiness 416 Burgess v. Equitable Marine Ins. Co.— Deviation. , . 420 CHAPTER X. (j^ENERAL Average Sta/r of Hope. — Sacrifices, expenses, stranding 428 sx Table of (/ONtents. CHAPTER XI New York Standard Fire Policy. Scripture v. Lowell Mutual Fire Ins. Co. — Loss by fire 489 Lyons V. Providence Waxliington Ins. Co. — Location materiaL . 447 CHAPTER XIL Clauses of the New Yokk Standard Firk Policy — Continued. Landers v. Waterlown Fire Ins. Co. —Other insurance. . ..... 450 Williams v. People's Fire Ins. Co. — Increase of risk 453 Kyle V. Commercial Union Assur. Co. — Temporary breach avoids 457 CHAPTER XIII. Clauses of the New York Standard Fire Policy — Continued. Walton and Wife v. Agricultural Ins. Co. — Alienation. Change of interest. Shifting of interest 462 CHAPTER XIV. Clauses of the Nkw York Standard Fire Policy — Continued. Smith V. Agricultural Lis. 6't».— VVarranty against incumbrances. 471 CHAPTER XV. Clauses of the New York Standard Fire Poi.icy — Concluded. Chapman v. Pole. — Fraud and Overvaluation 475 Behrens v. Germania Fire Ins. Co. — Must be intentional to avoid. 479 Walsh V. Hartford Fire Ins. Co. — Stipulation as to agent's authority binding 480 CHAPTER XVI. CliAUSES OF THE LiFK I'OLICY. Cushman v. United States Life Lis. Co. — Warranty. Disease. Medical attendant 486 Cobb V. Covenant Mut. Ben. Asso. — Medical treatment. Con- sulting a physician 491 CHAPTER XVII. Clausbs OF the Life Policy — Concluded. CritchettY. The American Ins. Co. — Authority of agent to ex- tend payment of premiums 495 Mallory v. Travelers Ins. Co.— Death by drowning, accident or suicide 504 Murray v. New York Life Ins. Co. — Death from violation of law 508 Table of Contents. xzi PABB CHAPTRB, XVm. Clauses of the Accident Policy. Bacon v. U. *S'. Mat. Ace. Asso. — Accident or disease 614 Lawrence v. Accidentia Jus. Co. — Direct and sole cause of death 523 2'ntUe v. Traveller's Ins. Co. — Voluntary exposure to unneces- sary danger 528 Burkhard v. Travellers' Ins. So. — Walking or being on railway.. 528 Northrup v. Railway Passenger Assur. Co. — Traveling by public or private conveyance 583 CHAPTER XIX. Clauses of the Marfnk Policy. Parmeter v. Coudns. — Voyage : coiiimenceraent of risk 635 Williams v. Shee. — Voyage : continuance of risk 536 Lidgett v. Secretaii. — Voyage : termination of risk 538 CHAPTER XX. Clauses op the Marine Policy — Concluded. Thames tf- Mersey Marine Ins. Co. v. Hamilton. — Perils In sured against 643 Oreen v. Elmslic. — Capture : proximate cause 549 Brown v. 8t. Nicholas Ins. Co. — Loss by sea peril or cause (ice) excepted by policy 549 Magnus v. Biiitemer. —Sea peril or wear and tear 558 Great Western Lis. Co. v. Fogarty. — Total loss. Free of average unless general 660 APPENDIX. STATUTES AND FORMS. CHAPTER 1. Statutes Governing the Contract. I. Civil Codes 569 11. Agency 569 III. Annexation of Application to Policy 570 IV. Provisions of Application or By-Laws to be set forth in Policy 570 V. Technical Forfeitures 571 VI. By-Laws to Govern Claims under Policies 571 VII. Corporate Seal not Required on Policy 572 VIII. Limitation of Time for Suit 573 Statutes, Fihe Insurance. IX. Standard Policies , 573 X. Valued Policies 573 xxii Table of Contents. PASS XI. Notice and Proof of Loss 674 XII. Cancellation of Policy 574 XIII. Privilege of Insured to ( 'ancel Policy 676 XIV. Return of Unearned Premiums 576 Statutes, Life Insukance. XV. Protection of Wife and Children 576 XVL Protection of all Beneficiaries 577 XVII. Change of Beneficiary 677 XVIII. Discriminations 578 XIX. Discriminations against Colored Persons 579 XX. Non-forfeiture 580 XXL EffectofWar 581 XXIL Suicide 681 XXIII. Retaliatory Laws 681 XXIV. Anti-Compact Laws 683 I CHAPTER n. Forms. I. Standard Form of Fire Insurance Policy for New York State. 684 IL Form of Mortgagee Clause 688 III. Form of Co-insurance Clause 589 IV. Form of Percentage Go-insurance and Limitation Clause. . . . 589 V. Form of Average Clause 590 VL Form of Open Policy ; 590 VIL Form of Floating Policy 590 VIII. Form of Clause for Insurance of Rent 593 IX. Form of Clause for Insurance of Use and Occupancy 693 X. Form of Proofs of Loss 693 XI. Form of Life Application 594 XII. Form of Life Policy 596 XIII. Form of Accident Policy 598 XIV. Form of Marine Policy Cargo 600 XV. Form of Collision Clause 602 XVI. Examples of Adjustments , 803 TABLE OF LEADING ILLUSTRATIVE CASES. PASB Bacon V. United States Mut. Ace. Asso 514 Behrens v. Germania Fire Ins. Co. 479 Blackburn v. Vigors ^ 330 Brown v. St. Nicholas Ins. Co. . . 549 Burgess v. Equitable Marine Ins. Co 420 Burkhard V. Travellers' Ins. Co.. 528 Burleigh v. Gebhard Fire Ins. Co. ;:i50 Castellain v. Preston 282 Chapman v. Pole 475 Cobb V. Covenant Mut. Ben. Asso. 491 Couch V. City Fire Ins. Co 877 Critchett v. The American Ins. Co. 495 Cushman v. United States Life Ins. Co 486 Dalby v. India & London Life Ass. Co v/271 Dewees v. Manhattan Ins. Co . 369 Dixon V. Sadler ^. 4i5 Great Western Ins. Co. v. Fogarty 560 Green y. Elmslie. , 549 Harper v. New Yorlj; City Ins. Co. 308 Kausal v. Minnesota Farmers' Mut. Fire Ins. Asso i^ 392 Knickerbocker Life Ins. Co. v. Norton 399 Kyte V. Commercial Union Assur, Co 457 Landers v. Watertown Fire Ins. Co 450 Lawrence v. Accidental Ins. Co. . 522 Lidgett V. Secretan 588 Lipman v. Niagara Fire Ins. Co.V 301 Lyons v. Providence Washington Ins. Co 447 PA8B Magnus v. Buttemer 658 Maliory v. Travelers Ins. Co . . . 504 Merchants' Mutual Ins. Co. v. Ly- man .... 305 Messelbach v. Norman 397 Murray v. New York Life Ins. Co. 508 Northrup v. Eailway Passenger Assur. Co 533 Parmeter v. Cousins 535 Phoenix Life Ins. Co. v. Raddin.v 818 Proudf oot V. Montefiore " 324 Rayner v. Preston :* 276 Ryan v. World Mutual Life Ins. Co 408 (Sanders) Landers v. Cooper .... 885 Scripture v. Lowell Mutual Fire Ins. Co 439 Smith V. Agricultural Ins Co. . . 471 Smith V. Scott / 369 Star of flope r 428 Thames & Mersey Mar. Ins. Co. V. Hamilton 543 Thompson v. Adams 295 Thomson v. Weems 839 Tuttle V. Traveller's Ins. Co. . 626 Tyrie v. Fletcher 265 Union Mut. Ins. Co. v. Wilkinson 854 Union Mutual Life Ins. Co. v. Mowry 881 Van Scboick v. Niagara Fire Ins. Co 863 Walsh V. Hartford Fire Ins. Co. 480 Walton V. Agricultural Ins. Co. . 463 Williams v. People's Fire Ins. Co. 453 Williams v. Shee 536 Winne v. Niagara Fire Ins. Co. . 314 THE LAAV OF INSURAJSTCE. PART FIRST. CHAPTER 1. NATURE, ORIGIN, AND GROWTH OF INSURANCE. § 1. Nature and Importance of Insurance.— There are certain serious casualties or accidents, such as shipwreck, fires, and premature death or disability, to which exposure is very common among mankind, but which actually occur in comparatively few instances. It is dilBcult or impossible to predict or prevent the happening of these events, but it is often of the greatest consequence to those most intimately concerned to guard against the loss of property or future earnings which their occurrence entails. This result may be accomplished by means of a general fund obtained by the imposition of a small contribution or premium upon the many who are exposed to the common hazard, out of which the few who actually suffer may be indemnified. - Insurance is the system for distributing losses of this charac- 1 ter in the manner just described. Its principal branches are ; fire, life (including also accident), and marine insurance; and, as an institution, the development of these branches of insurance among civilized peoples of modern times has assumed a vast and increasing importance. It is not necessary to recite many statistics in illustration of this fact. A very few will suflice. For assistance in the preparation of Home Ins. Co. , and to Sheppard this chapter I am indebted to D. A. Homans, Esq., Pres. of Provident Heald, Esq., Ex-Pres. of Nat. Board Savings Life As. So., and to Mac- of Fire Underwriters and Pres. of Arthur on Mar. Ins. , and the Enc. Brit. 2 Insurance : Fire, Life, JViarine. § 2 For the last year, in this country alone, it is estimated that the value of outstanding risks carried by insurers against fire amounted to more than $12,000,000,000, and that the payment of premiums for life insurance for the same year nearly reached the sum of $200,000,000; while the loss by fire during the same period, of property insured and uninsured, is estimated to have exceeded $120,000,000. To the sufferers by the great Chicago fire of 1871, the fire companies paid over $90,000,000, by aid of which that city was enabled within a few months to regain its commercial activity and preeminence among the cities of the West. Fire insurance concerns a larger number of persons prob- ably than any other branch of insurance ; but, on the other hand, many persons who have made no great accumulations of capital insure their lives in large amounts. Marine insurance, from its nature, is somewhat restricted and localized as com- pared with the other departments, and both the business and the practice of the law of this branch of insurance fall into the hands of specialists to a greater extent than in the case of other classes of insurance. There are certain minor forms of insurance which do not fall within the scope of this book, as, for example, against light- ning, tornadoes, hail-storms, boiler explosions, injuries to plate glass, defaults or breaches of trust on the part of officers, trus- tees, agents, or employees, defects in real estate titles, death to live-stock, and to indemnify merchants for loss from giving credit. Insurance against accident to the body or health of per- sons may be considered a branch of life insurance, and subject to the same principles of law. § 2, Conditions Necessary. — The conditions which in general are necessary to the successful operation of a system of insurance are said to be these : There must be a risk of real loss which it ought to be beyond the power of either the insurer or the insured to avert or to hasten ; a large number of persons must be liable to the like risk ; the casualty contem- plated must be likely to fall on a comparatively small number of the persons exposed to the risk of it ; the probabilities of its occurrence must be capable of being estimated beforehand with § 3 Nature, Origin, and Growth of Insurance. 3 some approximation to certainty ; the loss apprehended raast be so consi(lerable when it does occur as to be worth providing against ; and the cost of that provision must be comparatively so small as not to be prohibitive. To this list of requisites may be added an honest adminis- tration, and some means of securing permanency and integrity to the general fund. § 3. Insurance Companies. — The bulk of the business of insurance is now transacted by corporations, which, on ac- count of their exemption from liability to natural death, and their facility for raising capital and extending their operations over wide areas of territory, are peculiarly well adapted to serve in the capacity of insurers. But a not inconsiderable fraction of life insurance business is in the hands of friendly organizations and benefit societies, guilds, orders, odd fellows, knights, and unions, of one sort or another, many of which are incorporated, and some of which are not. The members of these organizations are governed by their by-laws and other regulations, as well as by the statutes and common law of the land.i In this country insurance corporations are usually organized under general laws instead of special charters, and are divided into stock, mutual, and mixed companies. A stock or proprie- tary company has for its basis a capital stock, owned by stock- holders, who may be quite distinct from the insured. It ordi- narily insures at lower premium rates than those of mixed or mutual companies, and its profits over and above required ac- cumulations and the liabilities of the company are divided in the shape of dividends among the stockholders. In mutual companies there are no stockholders, but the insured themselves are the members of the company, entitled to the management of its affairs and to the receipt of any share of surplus premiums over and above those needed for the payment of losses and ex- penses. Mixed companies partake of the nature of stock and mutual companies, and in them a certain portion of the profits is paid to the stockholders, and the remainder distributed among the insured. Premiums in most companies are ])aid in - Treadway V. Hamilton Mutual Ins. ship Ins. Asso. v. VVyllie. L. R.. 22 Q. Cto., 29 Conn. 68. Great Brit. Steam- B. D. 710 (1889). 4 Insurance : Ftre, Life, Marine. § 4 cash in advance at stated intervals, but in other companies by means of assessments levied from time to time upon the insured of a certain class to meet the losses which have occurred in that class ; and the company is bound in good faith to lay an assess- ment by which it may meet a loss in accordance with the spirit of its contract.^ In mutual companies premiums are often paid in whole or in part by notes of the insured, which are held by the company, and from time to time assessed to pay losses and expenses. Premium notes are sometimes made a lien on the property insured. Life companies frequently offer to make loans to the insured, taking the contract of insurance as collateral. In this country the mutual plan has been much more suc- cessful in marine and life insurance than in lire. In the United States, as a general thing, in the laws gov- erning the organization and scope of insurance corporations, the business of ocean-marine, fire, and life insurance, respec- tively, is kept somewhat distinct and exclusive ; in New York and elsewhere life companies are forbidden to take marine or fire risks, but fire insurance companies are often organized to insure against inland marine disasters, lightning, and torna- does. In the West, fire losses to. crops, whether standing or cut, are an important item, § 4. Statutory Safeguards. — For the better protection of the insured, it has been customary throughout the States of this Union, as well as in England, to establish by law an insurance department, or superintendent or commissioner of insurance, or other official, with whom, as a rule, foreign insur- ance companies doing business within the State, and domestic life insurance companies, with certain exceptions, are required, upon organization or commencement of business within the State, to make deposits of money or equivalent securities, which are held as collateral b}^ the department for the security of the insured. This official, called by different names in dif- ferent States, has considerable discretionary power to decide whether under the laws of the State a foreign company is enti- tled to be admitted to transact business within the State.'' The insurance department receives stated reports from each ' Lawler v. Murphy, 58 Conn 294 ' Am. Casualty Co. v. Tyler, 60 (1890), by Seymour, J. Conn. 448 (1891), by Andrews, C J. § 5 Natuke, Okigin, and Gkowth of Insukance. 6 company, setting forth with some detail its business affairs and financial condition, including its assets and debts, amount of insurance, and other particulars. It also has a visitorial power over the companies, to see that their investments are made according to law, and to examine their books and papers in case of suspected misconduct or insolvency. In addition to these safeguards, there are laws requiring the companies, before paying out dividends or profits, to accu- mulate and reserve a certain amount of assets with which to meet any future liabilities ; also, laws directing foreign com- panies to appoint a representative within the State upon whoro service of papers can be made. The object of insurance is to compensate the insured for loss and not to prevent the occurrence of loss ; but in many of the cities the fire insurance companies have established a system of patrol with statutory powers, which does much to prevent the spread of fire, and to protect from unnecessary injury or theft ihe property exposed during and after the conflagration. Any State has the right to control the conduct of insurance business by the enactment of suitable statutory regulations. It may make a compliance with these by a foreign company the condition of doing business within the State, or it may ca- priciously shut its doors to a foreign corporation without any reason at all.^ Subject to such statutes, many of the insurance companies transact business throughout the country generally. § 5. Origin of Insurance and Insurance Law. — The origin of the business of insuring or underwriting is a matter of doubt. The practice of marine underwriting by individuals lays claim to great antiquity. Some suppose it to have existed under the early Roman emperors. But it is more probable that it was started in connection with the revival of commerce which took place in the twelfth or thirteenth cen- tury after Christ, especially among the flourishing republics of Italy. At that time the ocean commerce of Christendom was largely undertaken by merchants of the north of Italy, tlier, generally known by the name of Lombards, who had estab- lished trading companies in almost every country in Europe. ' Doyle V. Continental Ins. Co., 94 119 U. S. 110. Barron v. Bumside, U. S. 585. Phi>. ii'v-e Asso. v. N. Y., 121 U. S. 186. 6 Insurance : Firk, Life, Marine. §5 The Lombards appear to have carried the practice of marine insurance wherever they had mercantile deahngs, and thas to have gained for it a footing in most of the great European cen- ters of maritime trade. The name of the insurance contract, called a "policy," is of Italian derivation. It is said that a " chamber of assurance " was established in the city of Bruges as early as a. d. 1310, with various regulations for the government of the insurers and the insured. A form of policy, supposed to be the oldest extant, is given in the note, the original of which is in the Italian language, and was estab- lished by the statute of Florence, January 28, 1523.^ * " Be it known and made manifest to all persons, that of makes assurance on , merchandise belonging to him or his friends, or to whomsoever the same may belong, laden or to be laden for [such or such a port or road- stead in such a place] by the hands of , or his agent, or although others have laden it in the name of the aforesaid , or in some other name designated or not desig- nated on board the ship named , or howsoever named, commanded by . We begin the said insurance from the time when the said goods shall be, or shall have been, laden on board the said ship in [such a place], to continue until the said mer- chandise shall be discharged on land or in safety at [such a place], with liberty for the ship to touch at any other place, and to navigate forwards or backwards, to the right hand or the left, at the pleasure of the captain, and as he may require: The said assurers taking upon themselves in respect of the said goods the risk of all perils of the seas, fire, jettison, reprisals, rob- bery by friend or foe, and every other chance, peril, misfortune, disaster, hindrance, misadventure, though such as could not be imagined or supposed to have occurred, or be likely to occur, to the said goods, and barratry by the master, except as to stowage or custom- house. All the said risks the said in- surers are to run and take on them- selves until the said goods shall be safely discharged on shore at [such a place] ; and if they are not laden, the insurers are entitled to retain one and a half per cent. " And if the said goods shall sustain, or have sustained, any disaster (which God forbid), the insurers shall pay to the said the sum insured, within two months from the news reaching the city. " And i f within six months there shall have been no true news, the insurers shall pay to the said the sum insured ; and in case of subsequent arrival and safe discharge at the said place, the aforesaid shall pay back to each the sum he has received. In tbw event of shipwreck, it is allowed to make recovery without authority from the insurers, it being stipulated that the said insurers are not responsible for theft by the captain of the said ship. ' ' And the insurers are bound first to pay to the aforesaid the sums insured, and to litigate afterwards. And these are to bind themselves by suflicien': sureties (one or more as directed by the fire official deputies on insura/ic*) to pay back to each insurer the sums they have received, with damages of twenty per cent. The time allowed to § 5 Nature, Origin, and Growth of Insurance. 7 The provision of this pohcy, that, if the insurers wished to contest the Question of their hability, they must pay first and litigate afterwards, is worthy of notice. At the initial stage of its existence, the contract of insur- ance was underwritten by individuals and was regulated by mercantile custom, which became the foundation of all the laws and codes subsequently enacted upon the subject. A recorded mention of insurance in England in 1548 indi- cates that the practice of insuring had been in vogue there for some time, and somewhat later, on opening Queen Elizabeth's Urst parliament. Lord Bacon said : " Doth not the wise mer- chant in every adventure of danger give part to have the rest assured?" But for many years after its introduction into that country, the law of insurance was unknown to the courts of Westminster, and insurance disputes were as a rule settled by the arbitration of mercantile men. The first reported insurance case belongs to the year 1589, and is mentioned by Sir Edward Coke,^ in which it was held, " where as well the contract as the performance of it is wholly made or to be done beyond sea, it is not triable by our law, but if the promise be made in England it shall be tried." In 1601, to provide for the growing practice of resorting to litigation, a special tribunal for the trial of marine insurance cases was established in England,^ of which the recital was as follows : " Whereas it ever hathe bene the policie of this realme by all good means to com forte and encourage the merchante, therebie to advance and increase the generall wealth of the realme, her Majestie's customes, and the Strength of Ship- .pinge, which Consideracion is nowe the more requisite be- cause trade and traffique is not at this present soe open as at other tymes it hathe bene. And, whereas it hathe bene tyrae out of mynde an usage among the merchantes, both of this realme and of forraine nacyons, when they make any the insurers for proving is eighteen to every other judgment and court, months. whither the said shall please to "To the observance of this the in- summon them." surers bind themselves to the said ' Dowdale's case, Coke's Reports, , themselves, their heirs, and part (J, p. 476. goods present and future, submitting ^ 43 Eliz. c. 13. themselves to the office aforesaid, and 8 Insukamck : Fikk, Likk, Marine. § 6 great adventure (especiallie into remote parts), to give some Consideracion of money to other persons {which cominonlie are in no small numher), to have from them assurance made for their goodes, merchandize, ships and things adventured, or some parts thereof, at such rates and in such sorte as the parties assurers and the parties assured can agree, which course of deahnge is commonlie termed a pohcie of assurance, &c." This informal tribunal — which consisted of the Judge of the Admiralty, the Recorder of London, two doctors of the civil law, two common lawyers, and eight grave and discreet mer- chants, or any five of them — died a natural death within a cen- tury after its organization, and by degrees insurance disputes began to come within the jurisdiction of the common law courts of England. In 1Y56 Lord Mansfield was appointed Chief Justice of the Court of Queen's Bench, and during his illustrious career he was conspicuous in making the policy of insurance the subject of careful study. From the old sea laws, the foreign ordi- nances, the writings of jurists, and the usages of trade, he drew and shaped those principles which formed the nucleus of the present system of insurance law. § 6. Lloyd's and Lloyd's Usages. — The body of rules or trade customs under which the business of insurance had grown up was known as " the usages of Lloyd's." To these usages and the earlier maritime customs we must look to find an origin for such far-reaching and significant principles of in- surance law as the following : namely, that the contract is one uberrimce jidei, demanding a disclosure of all material facts affecting the risk ; that personal acts of the insured himself which materially change and enhance the risk during the pend- ency of the policy will avoid the contract ; that there must be no deviation under a marine policy from the usual voyage as prescribed by custom ; that the vessel must be seaworthy at the commencement of the risk in a voyage policy ; that goods stowed on deck are not protected by the policy in the absence of a general trade usage to the contrary ; and that expenditures and, if successful, intentional sacrifices of ship or cargo, made by the master of the ship for the benefit of al/ § 6 Nature, Okiqin, and Growth ov Insurance. 9 interests exposed to some extreme and impending peril, must be made the subject of general average or contribution from all such interests, whether ship, cargo, or freight. Lloyd's was originally a coffee-house in London, a cele- brated resort for seafaring men and those who were engaged in maritime business. It was started in the latter part of the seventeenth century, at a time when the coffee-houses of that metropolis were the fashionable centers for mercantile or social intercourse. An advertisement in the London " Gazette " of February 18 to 21, 1688, concerning a supposed theft " by a middle-sized man with pockholes in his face," indicates that Lloyd's coffee-house was then located in Tower Street. But within three or four years from that date, the establishment was removed from Tower Street to the corner of Lombard Street and Abchurch Lane, where it became the world-re- nowned center for commercial intelligence and for the business of marine underwriting. After several other removals, it ultimately took possession of its apartments in the new Royal Exchange. In 1696 the proprietor started a shipping and commercial newspaper, called '' Lloyd's News ; " the issue of which was afterwards suspended because the editor was guilty of printing some very harmless information about the proceedings in the House of Lords, but it was revived in 1726 in a greatly improved form under the name of '' Lloyd's Lists." In 1769, in order to put a stop to the illegitimate trans- actions which occasionally took place within their circle, the principal merchants and underwriters frequenting the coffee- houses formed themselves into a society under fixed rules. In 1779 the society adopted for exclusive use a definite form of policy thenceforward known as " Lloyd's Policy," which is the basis of the policies now in use in the United States, and which corresponds with the present Lloyd's policy, except that the words " Be it known that " have been sub- stituted for the opening asseveration " In the Name of God, Amen," which appeared in the earlier form, this change having been effected in the year 1850. Though Mr. Justice Buller characterized the instrument as "absurd and incoherent,"^ it possesses the merit of having had all its clauses explained by ■ ' Brough V. iVhitmore, 4 T. R, 206. lO Insurance : Fire, Life, Marine. § 6 many legal decisions.^ In its stability it is in striking con- trast with the fire policy, which during its history has exhibited a series of sliil'ting forms, which have given rise to much con- fusion and uncertainty both in the business and in the law of insurance. As the courts from time to time have adjudicated away by a strict construction the restrictions and exemptions from liability named in the fire policy, its phraseology has been altered by the insertion of a more and more explicit wording in favor of the insurers, until in many instances the legislatures of the several States have been provoked to interference by sweeping statutory enactments Avhich govern the contents and legal effect of the fire insurance contract within those States.' Classified references to these statutes are given in the appendix. One of the clauses of Lloyd's policy is as follows : " And it is agreed by us the insurers that this writing or policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London," which shows that, although at the time when this form was drafted, the connection between Lloyd's and Lombard Street had long been severed, the memory was still preserved. It was from early times the custom at Lloyd's rooms to pass around the proposed |X)licy of the applicant among the members, and each member underwrote or subscribed his name for such portion of the required amount as he wished to under- take, together with the date of subscription, until in this way, by successive subscriptions by different persons on the same policy, the desired amount was covered. In 18T1 the Society of Lloyd's was incorporated by special act of Parliament (34 Vict. c. xxi.), one of the express objects of incorporation being the " collection, publication, and diffusion of intelligence and information with respect to shipping." In the accomplishment of this object it has attained an unrivaled standard of perfection. Lloyd's members have developed a system of agency radiating everywhere throughout the mari- time world, by which they are enabled to receive the promptest and most rehable information of all departures from and arrivals at their ports, as well as of losses, casualties, and other useful shipping news. » Simond v, Boydell, Doug. 268. ' ReiUy v. Ins. Co., 48 Wis. 456. § 8 Nature, Origin, and Growth of Insurance, li " Lloyd's Lists " contain reports of mercantile intelligence of this character, whicii is classified and posted on different colored slips of paper for the benefit of members and subscrib- ers, and afterwards carefully sifted and recorded. The '' black book " contains a record of some 3,000 casual- ties per year, and the telegraph room is known as the " chamber of horrors." When a ship is " posted " at Lloyd's " as missing," the recognized time has come to make claim upon the insurers for the loss. '' Lloyd's Captains' Eegister " is a biographical dictionary of all of the certified commanders of the British mercantile marine. " Lloyd's Eegister of British and Foreign Shipping," pub- lished annually, gives full details of every British ship, respect- ing its ownership, construction, tonnage, and rating. Its symbol "A 1 " for the highest class of wooden vessels has passed i\Ho popular usage ; "100 A 1 " means the highest class of iron vt'ssels. A standard London periodical has recently said : " Towering head and shoulders above the crowd of institutions that have helped to win for England the maritime supremacy of the world, stands the corporation of Lloyds. Its collapse would be more widely felt than that of any other commercial institu- tion in the world." § 7. Largest American Marine Company. — Both absolutely and in relation to the other principal classes of insur- ance, ocean-marine insurance occupies a position of greater importance in England than in America. In the volume of its business the foremost marine company in the United States, second perhaps not even to British Lloyd's, is the Atlantic Mutual of New York. § 8. Fire Insurance. — Fire insurance as an organized system has had an origin comparatively recent, and it was not until after the great London fire of 1666 that it took any very practical shape, though back in Anglo-Saxon times there is evi- dence of attempts among friendly guilds to guarantee protection against fire and other calamities by mutual contribution. In X681 the first regular office for insuring against loss by fire 12 Insdkanoe : Fire, Life, Makine. § 9 was opened by a combination of persons at the rear of the Royal Exchange, and in 1710 the Sun Fire Office, the earUest mutual and stock company, was organized in London. The first fire company established in the United States was " The Philadelphia Contributionship for Insuring Houses from Loss by Fire," incorporated on the mutual plan in 1752. one of its early directors having been Benjamin Franklin. In the extent of risks undertaken, the largest fire companies in the world are the Royal, and The Liverpool & London & Globe, both incorporated in England, but having important branches in this country. Of the American companies, the Home, of New York, and the ^tna, of Hartford, stand at the head. It is said that to the enterprising city of Hartford belongs the credit of giving vitality to the agency system throughout the United States, and of exhibiting a larger investment of capital in insurance stock, in proportion to its size, than any other city in the country is able to show. § 9. Life Insurance. — The earliest practical embodiment in the direction of life insurance was the foundation in 1706 by royal charter in Great Britain of " The Amicable Society for a Perpetual Assurance Office." The scheme was simply to raise a fixed contribution from each member, and from the proceeds to distribute a certain sum each year among the representa- tives of those who had died during the year. No one was to be admitted under the age of twelve, nor above the age of fifty-five, but all were to pay the same rate of contribution. In 1'734 the Society made arrangements for guaranteeing that the dividend for each deceased member should not be less than £100, which was the first approach to an assurance of a definite sum at death, whenever that might occur. The Equitable Assurance Society of London, which was organized under a deed of settlement and commenced business in 1762, may be regarded as the pioneer of the modern system of life insurance. It issued policies for the assurance of fixed sums on single or joint lives, or on survivorships, and for any term. The premiums were regulated according to age. Lives were admitted with due regard to their state of health and other circumstances. § 9 Nature, Origin, and Growth of Insurance. 13 The creation of corporations in America with power to in- sure lives and grant annuities dates back beyond the Revohition, one of the earliest companies being chartered in tlie colony of Pennsylvania as early as 1769, for the benefit of the families of Presbyterian clergymen. But the business of life insurance did not assume much importance until within a period of less than fifty years. The first reported life insurance case in the United States ^ shows the existence of a contract of life insurance as early as 1809. It was in that case contended by the defendant that no valid contract of life insurance could be made within the State of Massachusetts, inasmuch as the law of England in that regard, it was said, had never been adopted in this country ; but the court sustained the contract on the ground that it Avas not repugnant to the general policy of the law or to good morals, and that no reason had been given for condemning such con- tracts, except by the French Courts which considered " that it is indecorous to set a price upon the life of a freeman which is above all price '' — a reason which was pronounced insufficient, especially as coming from France, " where," Chief Justice Parker remarked, " freedom had never been known." Accident insurance, which is a branch of life insurance, is a development of later growth. Ordinary life insurance protects against the pecuniary loss arising to a man's family, or cred- itors, or others, by his death, whether that is caused by old age, accident, or disease. But accident insurance protects only against losses caused by accident, whether resulting in death or not. An important company was established in London in 1849 for insuring against the consequence of railway accidents — The Railway Passengers Assurance Company. In 1856 its business was extended to embrace accidents of all kinds. The com- panies carrying the most extensive accident risks in the United States, and probably in the world, are the Travellers, of Hart- ford, and the Mutual Accident Association of New York City. In the United States, life insurance has attained a greater relative importance among financial institutions than in any other country. During the years which immediately followed the close of the civil war, it grew with unparalleled rapidity ; new companies were established in great numbers ; new features of ' Lord V. Dall, 13 Mass. 115. 14 Insukance : Fike, Life, Marine. § 10 insurance contracts were devised, and soliciting agents can- vassed the country from one end to the other. In the magni- tude of its transactions, no hfe insurance company in the world is able to make comparison either with the Mutual or the Equi- table, or the New York Life Insurance Company, all three of New York City. Each one of these colossal institutions ex- hibits an annual statement of assets greatly in excess of $100,- 000,000. It is to be observed that fire policies on the average are for a much shorter term than life policies, and that a life company is ordinarily obliged to accumulate for the payment of future losses a much larger amount of assets than is required in the conduct of the business of marine or fire insurance. § 10. Real Estate Title Insurance. — Passing notice must be given to a class of corporations which have of late years been organized in many large cities in the United States to insure real estate titles, and which generally unite with title insurance an extensive and rapidly increasing business of search- ing titles. Their policies obligate the insurers, in substance, to do three things for the protection of the insured : (1) to defend suits against the title at the expense of the insurers ; (2) to pay judgments rendered ; (3) and if the insured contracts to sell or loan, and the title is refused, to test its validity in court at the expense of the insurers, and if defeated to pay damages and also to take the property where the insured has contracted to sell it. Of this class of corporations the Real Estate Title Insurance and Trust Company of Philadelphia, organized in 18Y6, was the pioneer. The Title Guarantee & Trust Company of New York City, incorporated in 1882, does an immense business in guar- anteeing titles ; and the Lawyers' Title Insurance Company of New York City is also an important company, though it gives precedence to its department for searching titles. The facilities of such permanent organizations for utilizing, arrang- ing, and recording the past results of their extensive and raulti- phed examinations of titles are so great that it is becoming more and more difficult for individual attorneys to compete with their prices in this branch of legal work. § 11. Classification of Risks. — In fire and marine insurance, risks are classified according to the degree of hazard, § 11 Nature, Origin, and Growth of Insurance. 15 and the premiums graded accordingly. But in life insurance, as a rule, only healthy persons are accepted, and consequently the premiums are scaled according to age ; sometimes, however, special risks are taken involving a hazardous occupation, or an unhealthy location of residence, for which an extra premium is paid. In all branches of insurance the amount of the premium is made to depend more or less upon average results which have been arrived at after elaborate observations and careful col- lection of statistics bearing upon the subject. In accepting or rejecting a proposed risk, the insurers are governed by their familiarity with these general laws of aver- age. But it is also very important for them to gain a thorough acquaintance with the facts and circumstances relating to the particular case, to ascertain whether it falls within or outside the general law. The location ; the inherent nature and con- dition of the subject-matter ; the character of the insured for honesty or dishonesty, negligence or prudence ; the peculiar temptations to him in consequence of business embarrassment or over-insurance to cause the event insured against or be careless in preventing it — all these considerations are influential in induc- ing the insurers to accept or decline the proposal, or to accept it only at a special rate of premium. In life insurance the company desires to know the age of the applicant, his occupa- tion, residence, probable area of travel, his health present and past, and also the healthfulness and longevity of his parents and nearest relatives. An examination made by the company's medical examiner discloses with some degree of accuracy the condition of present health, but the other information is derived largely from the applicant himself, who is required to answer a series of printed questions detailed in a paper called an appli- cation, which he is required to sign. In fire insurance the com- pany generally desires to know — according to the subject-matter of the proposed insurance, whether dwelling-house, barn, store, factory, theater, church, railway cars, etc., or their contents — the location ; the materials and structure, whether wood, stone, brick, or iron ; whether the roof is slate, tin, tar, or shingles; the condition of flues and chimneys ; whether the building is fire-proof or not ; its relations and communications with adjoin- ing premises ; whether it has iron shutters and iron doors ; the inflammability of personal property ; the character of the use 16 Insurance : Fire, Life, Marine. § 12 and occupation of the premises and surroundings, whether unoccupied or subject to careful supervision ; the facilities for extinguishing fire; the efficiency of the fire department, and many other particulars from which they may determine whether the risk is a good one, or whether it is hazardous, extra hazardous, specially hazardous, or undesirable at any price. Formerly much of this information was obtained from the insured by means of the written application containing such interrogatories as were appropriate to give the desired facts. But now the use of a formal application is for the most part confined to Western farm property. In the East, and especiallv in the cities, the insurers have come to rely very much upon their own means of examination ; and for use in the larger cities they have prepared careful insurance maps showing the character of the risk involved in every building. In marine insurance the rating of ships and statistics regard- ing them are to a considerable extent a matter of record, but more or less- information is often required by the insurers from the insured in relation to the proposed risk. They must be advised from some source of the ownership, quality, and nationality of the vessel, the course of the proposed voyage, the character of the captain, the nature of the oommoditv carried, the state of political relations, and in time of wai whether the ship is to sail with convoy. In marine insurance the scale of premiums vaiies very greatly according to circumstances, and may sometimes well nigh equal the value of the insured property. The subject of insurance is sometimes insured "lost or not lost," provided neither party knows whether the risk has already terminated. § 13. Mortuary Tables. — The premiums to be charged for life policies are based upon calculations made from mor- tality tables, which are tabulated exhibits of the number of sur- vivors and the number of those dying each subsequent year among a given number of persons taken at various given ages respectively. A considerable number of such tables have been })repared at different times, the earliest of which are so rough and inaccurate that they possess only a historical interest. Of bhe more reliable tables which have been in use in recent times § 13 Nature, Origin, and Growth of Insurance. 17 may be mentioned the Northampton Table, which was con- structed by Dr. Thomas Price from the registers kept in the parish of All Saints, Northampton, England, for the forty- six years, 1735 to 1780. Another English table very exten sively used by insurance companies was the Carlisle Table, con- structed by JVIr. Joshua Milne from materials furnished by the labors of Dr. John Hey sham. These materials comprised two enumerations from the population of the parishes of Saint Mary and Saint Cuthbert Carlisle in 1780 and 1787, and the abridged bills of mortality of those two parishes for the nine years 1779 to 1787. Since then many mortuary tables have been prepared in England and the United States, based upon much more care- fully collected statistics and giving more accurate results. The mathematics of the business, of great practical consequence, are managed by actuaries. New York and other States have adopted the American Experience Table, with four and a half per cent, interest; while Massachusetts, Connecticut,- and other States use the Actuaries or Combined Experience Table, with four per cent, interest ; but in New York the liabilities of the life companies are now valued by both standards. A net premium is the rate at which, according to the table of mortality and interest, an insurance could be effected. But to this must be added in practice an important percentage which is called "loading," or " margin," in order to defray the expenses of the business, and to provide for a possible excess of mortality. A gross or oflBce premium is the net premium increased by the loading. § 13. Reserve. — That portion of the premiums of a policy with the interest thereon which is required to be reserved or set aside as a fund for the payment of the policy when it becomes due is called the " reserve." The mean or average duration of the life of an individual after any specified age, according to a given table of mortality, is called the " ex- pectation of life." Statistical observations on the duration of human life point to the conclusion that, after the period of extreme youth is passed, the death rate among any given body of persons increases gradually with advancing age ; and where the annual premium is fixed at a uniform rate during the life 9 18 Insubanoe : Fire, Life, Makine. § 14 of the policy, as is customary in life insurance, it is evident that if the policy is surrendered by the insured before its expi- ration, the insurers can generally afford to make a return of a portion of the premiums which have been paid. Of the reserve value w^hich the policy is estimated to have at the time of surrender, a part called " the surrender value," the company offers to pay to the insured in return for the cancellation of the policy before its natural expiration. From these same considerations it appears, also, that in the event of the insolvency and winding up of a life insurance com- pany, there is a basis for calculating the present value of the unexpired policies, by which an equitable distribution of assets may be made to all the policy holders in accordance with the laws of priority. The test of solvency is the rule which the insurance de- partment is required to apply to determine the ability of a company to pay all losses which, according to the standard table of mortality and rate of interest, may occur. The liabil- ities of a company consist of its actual unpaid losses, its expenses and contingent obligations, for the payment of which its assets are held liable. The whole amount insured is really a contingent obligation, but in testing the present solvency of a company, this is regarded as a liability only to the extent of the reserve on each policy. § 14. Different Kinds of Policies. — The forms of printed policies of insurance in use are varied and numerous. They are filled up in writing to suit each particular case, and are often further modified by special clauses, which may be pasted or attached in the shape of printed riders to the more general form. A valued policy is one which expresses on its face an agree- ment that the subject of insurance shall be valued at a specified sum ; for example, a policy upon " the ship Argus, valued at $10,000." Policies upon lives are almost invariably valued. Policies upon ships are generally valued, but other kinds of policies not so universally. Certain States have valued policy laws, but these are not to be commended, because they impose too arbitrary a standard, and may be used as an instrument of fraud. § 14 Nature, Origin, and Growth of Insurance. 19 An open policy is one in which the value of the thing insured is not agreed upon in the policy, but is left to be ascer- tained in case of loss ; for example, a policy upon a house for $10,000. The term " open policy " or " running policy " is also employed to indicate a very general form of insurance frequently used where the insured is likely to effect many suc- cessive insurances from the same company. It covers such goods, at such amounts of insurance, in such storehouses and places, or, if a marine policy, in such ships, and at such rates of premiums, as from time to time shall be agreed upon and indorsed on the policy or in a book attached thereto, the pur- pose being to obviate the necessity of executing a fresh policy for every transaction. A floating policy is also a general form of insurance, but usually upon goods belonging to the insured within a certain specified area of territory, or otherwise designated, and is intended to cover property which cannot well be described specifically because of its fluctuating quantity and location ; as, for example, merchandise in freight trains, warehouses, or lighters. The amount of goods covered by such a policy is ascertainable at the moment of loss only ; and if at the time of loss the amount of goods at the place of the fire exceeds the amount of insurance, it is generally provided, that, for the excess, the owner must be his own insurer, and share the loss jpro rata with the insurer. The terms " open policy," " floating policy," and " blanket policy," are sometimes used indiscrimi- nately. A time policy^is one in which the duration of the risk is defined at the beginning and at the end, by a fixed date ; as, for example, from noon of January 1, 1892, until noon of January 1, 1893. A voyage policy is one in which, irrespective of time, the duration of the risk is established by geographical termini ; as, for example, from New York to Liverpool, or from New York to Chicago. A life pohcy is one payable on the death of the person insured. A term policy is one taken for a limited number of years, the sum insured being payable only in case of the death of the insured during this period. A joint-life policy is one payable on the earliest death of either of two or more persons 20 Insurance : Fire, Life, Marine. § 16 insured. A survivoi-sliij) policy is one payable on the death of the survivor of two or more persons. An endowment policy is one which is payable when the insured reaches a given age, or upon his decease if that occurs sooner. A tontine policy is one in which it is agreed that certain profits of the business shall be apportioned among those of the insured of a certain class surviving, at certain intervals; for example, every ten, fifteen, or twenty years. The lapsed policies of the class forfeit their reserve and dividends to the survivors. A tontine dividend is the distribution of such profits among the survivors who are entitled to it after the given period. A semi-tontine policy is one in which it is agreed that the dividends only shall be apportioned among the sur- vivors of the class. In the case of a mutual company or benefit society, the policy or certificate is at once evidence of the contract and of the fact of membership, and generally refers to the by-laws and condi- tions subject to which it is received by the insured. A specimen of the form of a certificate of a benefit society, and of its by- laws and rules, will be found in one of the late Connecticut cases already cited.^ § 15. Reinsurance. — A feature of insurance business which has developed into great magnitude is the practice of reinsurance. Where a company finds itself in embarrassed circumstances, or for any reason desires to limit its liability, in certain classes of risks, or in certain localities, or under a particular policy, it secures, if possible, policies of reinsurance from other companies. The entire business of an insurance company is not infrequently absorbed in this way by some stronger competitor. § 16. Authority of Insurance Agents to Bind the Companies. — At least some general understanding of the agency system employed by insurance companies in the United States is a prerequisite to the intelligent consideration of the numerous legal questions to which it gives rise, and which, especially under the doctrine of waiver and estoppel, assume » peculiar importance in the law of fire and life insurance. • Lawler v. Murphy, 58 Conn. 294 (1890). § 17 Nature, Origin, and Growth of Insurance. 21 The phraseology used by the companies or current in the trade to describe an insurance agent is of little significance in the law. The significant fact to be ascertained is this, namely, the real scope of the authority which has been granted to him as defined by the requirements of the act or the business which he has been employed by the company to do for it. Within the jurisdiction of many courts this fact is deemed more con- trolling over the contract rights of the parties than any general stipulation regarding the limit of the agent's authority con- tained in the printed policy, because the policy in any event is not the best evidence of relations existing between the insur- ance company and the persons employed by it ; and, moreover, the terms of the policy are often settled by the agent himself, who cannot by his own acts fix the extent of his powers ; and, finally, the contract is frequently closed and the premium paid before the company executes and delivers the policy. The practice of different companies is so varied, and the authority given to the particular agent not only by his written commission but also perhaps by an extended correspondence be- tween himself and his superiors, or by a course of usage recog- nized by the company, is often so ill-defined, that any brief classification must be regarded as rough and only approximately correct. In view of this consideration it is clear that the facts of every case as it arises must receive careful attention. In this country the boards of directors of insurance companies do not as a rule take an active part in the management of the details of making, altering, cancelling, or renewing policies of insurance, or in adjusting losses, or in instructing or superintend- ing the cohort of agents who are located outside of the home office. Consequently such duties and powers, subject to the laws of the land and to charter and by-law restrictions, must become vested in the officers. Of the officers, the president and secretary more particularly are in most companies considered amply empowered with wide discretions in this regard, and are most frequently designated by the rules of the company as the proper officials to sign the policies of insurance. § 17. Agents of Life Companies. — Agents of Ameri- can life companies located outside the home office may for our present purpose be divided into two classes — general agents so 22 Insurance : Fire, Life, Marine. § 17 styled by the craft, and sub-agents. The first class are so called because they have the power to select and make contracts with sub-agents. General agents are employed by the company, and hold a contract from the home office authorizing them to can- vass for insurance. They periodically account to it for premiums collected. Their jurisdiction is generally more or less terri- torial. Their instructions do not permit them to pass upon applications or proposals for insurance, or to make, alter, or discharge policies, or to grant permits, or waive forfeitures, or compromise claims. So far as any control over the terms of the contract is concerned, the intention of the company evi- dently is to restrict their powers to those of a special agency. But the business of general agents, like that of other canvassing agents, is to solicit custom for the company ; and for this pur- pose they are furnished with blanks called applications, contain- ing a long series of questions relating to the risk, which are to be answered by the applicant over his signature. (See form of application in the appendix.) The agent is expected, on behalf of the company, to interview the probable applicant, to use all proper inducements to secure him, to explain what the com- pany requires, and also to write into the application the answers which the applicant almost always dictates orally. Sometimes through fraud, or carelessness, or error of judgment, the agent writes out the answers in form and substance materially differ- ent from the language used by the applicant ; and the applicant, not knowing the error, or supposing that the agent understands best what the compan}^ wants, signs the paper as it is prepared. The application is then forwarded by the agent to the home office, and though if accepted it becomes an essential part of the contract, and all its statements a,re warranted to be true, it is not before the insured at the time the contract is closed, nor does he have any opportunity of comparing it with the policy. Local medical examiners have no authority to pass upon applications, but these are submitted to the medical director at the home office. Pending the action of the company, the agent is allowed to give the applicant, on payment of the first premium, a pro- visional memorandum called a binding receipt, which simply amounts to an agreement on the part of the company, that if § 17 Nature, Origin, and (trowtii ok Insurance. 23 the application sliall be accepted the insurance is to be con- sidered binding under the terms of tlie usual policy as of the date of the binding receipt, and that if the application is rejected the premium shall be returned. This practically pro- vents the applicant meanwhile from negotiating for the desired insurance with another company. The policy (see form of policy in the appendix) often provides that the contract shall not be binding until the first premium is paid in cash ; but the company is sometimes aware that the agent has a habit of giving credit for special reasons in certain instances, on deliver- ing the binding receipt, thus making himself responsible for the payment of the premium to the company. The general agent pays his own expenses, and receives or retains a com- mission on all premiums collected through his instrumentality, whether first or renewal premiums. Sub-agents are often appointed by the general agents ; hold a contract from them ; have a narrower territory to canvass ; have blank applications the filling up of which they, like gen- eral agents, superintend ; are not generally supplied with bind- ing receipts, but report any applications and bring any cash collected to the managing agent, though their contract gener- ally provides that they may pay and report either to the general agent or to the home office. They pay their own expenses and receive a brokerage, but only on the first premium. This pre- mium is ordinarily paid by the insured not to the sub-agent but to the general agent, and is turned in by him to the com- pany. There is nothing in the usual course of business as trans- acted by local agents of life companies, whether so-called general agents or sub-agents, from which any one dealing with them has the right to infer that they possess any authority to make or alter voluntarily the terms of policies, except, as above noticed, in some instances in regard to the method of paying premiums. But if the local agent of either class misstates answers given to him to be written into the applica- tion, and if the applicant cannot read, or without carelessness of his own is prevented from correcting the misstatement by conduct of the agent, the alleged breach of warranty based upon the misstatement is really the act of the company, and therefore the company is estopped, by what its agent has done 24 Insurance : Fibe, Life, Marine. §18 within the scope of his actual authority, from claiming that the insured is responsible for the misstatement. § 18. Agents of Fire Companies. — In fire insurance the business intrusted to agents is more complex. Three classes of agents will answer our present purpose : general managers, commissioned agents, and agents for soliciting only — that is, for receiving and forwarding proposals. The business of general managers does not resemble that of the canvassing general agents of life insurance companies, though the latter are sometimes styled managers. Many foreign companies, fire and marine, have general managing agents in this country, and domestic companies sometimes have a managing agency in a large center like Chicago or Boston, though such agents may be advertised as special agents. The managers hold a contract from the home oflfice, have wide discretions, and in the matter of making, altering, cancelling, and renewing contracts of insurance, giving permits, and adjusting and compromising claims, are allowed to stand very much in the stead of oflBcers within the territory where they have jurisdiction. In case of large losses they usually ask for instructions from the home office. The agents under them, in some instances, report to them, and in others report direct to the home office. Commissioned agents hold a written commission from the home office, granting them " full power to receive proposals for insurance in a certain place and vicinity, to fix the rates of premiums, to receive moneys, and to countersign, issue, and renew policies of insurance signed by the president and attested by the secretary (or signed by the manager), subject to the rules and regulations of the company, and to such instructions as may from time to time be given by the officers." Policies and renewal receipts signed in blank by the proper officers are furnished them, and printed forms of riders, to enable them to fix rates and close contracts in their discretion, without con- ference with the home office. They often close a contract of insurance orally, it being understood that the usual policy is to be subsequently delivered, and they often take the responsi- bility of giving credit to the insured for premiums, making themselves responsible to the company ; and of this custom § 18 Katukk, Okigin, and Growth of Insdkanok. 25 the compan}^ has knowledge. The officers probably never give express instructions to their commissioned agents to waive conditions of the policy in any way, except as provided by the policy, to wit, by written agreement indorsed thereon (see form of policy in the appendix) ; but the courts generally hold that by virtue of their apparent authority, such agents may waive any of the provisions of the policy by parol, including the stipulation that prohibits waivers except in writing, unless a restriction upon their authority has been brought to the atten- tion of the insured. Where, however, by the written form of application, if one is used, or by the terms of the policy itself, notice is given to the applicant that the agents have no ■authority to waive conditions of the contract except by written agreement, it is evident that, at any rate, after such notice is received by the insured, neither the osten- sible authority nor the actual authority of the ordinary commissioned agent is sufficient to enable him to effect a parol waiver of the conditions of the policy. In such a case, as a general thing, any disturbance of the contract can be accomplished b}'^ him only by a positive act on his part, within the scope of his agency, and while engaged in the business of the company, upon which an equitable estoppel against the company can be predicated under a rule of law which overrides the contract. But to prevent any misap- prehension, it should be added here, that, in spite of such a recital or stipulation in the application or policy of alleged lack of power on the part of any of the officers or other representatives of the company, it may still be the fact that officers and managers really have an authority sufficiently broad to enable them to waive any o* the conditions of the policy inserted for the benefit of the company, including the very clause which purports to restrict their powers. The commis- sioned agents within the scope of the business intrusted to them are considered general agents, except as their power may be specifically restricted. Their commission does not usually, in express terms, authorize them to adjust losses or compromise claims, but as quick settlements, before the insured have thought or talked much about their damage, are best for the insur- ers, it is a fact that the commissioned agents are generally per- mitted to settle small losses in their discretion. They are paid 26 Instjkanoe : Fiee, Life, Makinb. § 19 by deducting a commission from the premiums which they collect. Agents for soliciting only are sometimes appointed by gen- eral agents, but as a rule must be approved by the manager or home office. They have no express poAver to issue or alter pol- icies, but they are to submit the proposals received by them to the superior authority. Sometimes, however, they are allowed to give binding or interim receipts, which protect the property of the applicant under the terms of the usual policy until the application is accepted or rejected, and often they are allowed to collect premiums and give credit. Where a written applica- tion is used, the applicant generally answers the questions orally, and the agent is expected to fill in the blanks, and is, in fact, intrusted with some power and discretion in this regard, like other agents engaged in canvassing for the benefit of their principal ; thus questions of estoppel may arise like those already suggested. After this paper is signed by the applicant, it is forwarded by the agent to the proper office. § 19. Agents of Marine Companies.^ — Some marine companies require that all proposals for insurance shall be passed upon at the home office. Others grant this authority to their outside agents. The applicant often fills up the blanks of a short printed form with a few essential particulars describing the subject of the proposed insurance, and sends it to the company as a note of inquiry, with a request to the company to name a rate, and the statements contained in the note of inquiry sometimes serve as the representations upon which the insurance is based. Marine insurances are generally closed in this country by binding-slips, and often through the intervention of agents or brokers, or both. In London and in many other places the custom is for the broker to give a credit to the insured for the premium, and for the company to give credit to the broker. In that event the policy becomes binding upon its delivery, irrespective of the actual payment of the premium. In Great Britain, by the Stamp Act, a valid marine insurance can be effected only by a written policy ; but in case of alleged error in the policy, the binding-slip is admissible in evidence to shed fight upon the probable intent of the parties. CHAPTEK II. GENERAL PKINCIPLK8. Nature of the Gonl/ract. % 20. Indemnity. — The controlling principle underlying the contract of insurance is indemnity. The agreement is aleatory or speculative in one sense ; that is, the parties may not know whether the event insured against will occur or not : but compensation and not profit must be aimed at, and consequently the party insured must have at least an appreciable pecuniary interest in the subject of insurance, or else the contract will be altogether void.^ Hence, it follows that the sum named in the policy is not the measure but the limit of recovery, and this is true whether there are successive losses or only one loss under the policy ; and if the property is injured without total destruction, no matter how large the amount of insurance, the recovery is limited to the loss actually sustained. The principle that the contract of in- surance is one of indemnity is in practice subjected to various modifications and limitations, which will presently be noticed. Such modifications have been engrafted upon the general rule largely out of regard to convenience. Thus the parties are per- mitted to agree in advance upon the value ^ of the subject of insurance by a valued policy, which in case of total loss is then conclusive evidence of the value, in the absence of fraud or an intent to evade the law, although in fact the estimated value may be erroneous ; but this infringement upon the strict theory of indemnity is of great practical convenience, for often the ' Halford v. Kymer, 10 B. & C. 725. » Irving v. Manning, 6 C. B. 391. Commonwealth Ins. Co. vv Sennett, 37 Valued policy conclusive unless fraud- Pa. St. 205; 78 Am. Dee 418. Eager ulent. Patapsco Ins. Co. v. Biscoe, T. Atlas Ins. Co.. 14 Pick. 141 ; 25 7 Gill. & J. 293; s. c. 28 Am. Deo. Am. Dec. 863. 219. 28 Insurance : Fire, Life, Marine. § 21 casualty which destroys the insured property destroys with it the best evidence of its value. Accordingly, some of the States have passed valued policy laws applicable to realty, which pro- vide that in the absence of fraud the value of the building writ- ten in the policy shall be taken to be its true value and the amount of loss where the building is wholly destroyed. These laws are not to be commended, however, although it is said that they are not intended to disturb the general doctrine of indemnity.' The rule requiring an insurable interest to give support to the contract is grounded upon the most important considera- tions of public policy, and has for many years been recognized as reasonable and expedient by all the courts. Wager contracts of insurance were at one time tolerated in England, but were forbidden by two statutes, applicable to marine and life policies respectively (19 Geo. II. c. 37 ; 14 Geo. III. c. 48). The preamble of the former statute is as follows : " Where- as it hath been found by experience that the making of assur- ances, interest or no interest, or without further proof of interest than the policy, hath been productive of many pernicious prac- tices whereby great numbers of ships with their cargoes have either been fraudulently lost and destroyed or taken by the enemy in time of war, and such assurances have encouraged the exportation of wool and the carrying on of many other prohibited and clandestine trades," etc. In most of the States of the Union there are statutes against wagering contracts, and no excuse can be found in our day for doing away with the wholesome rule that insurance must be for indemnity and not for betting, notwithstanding a recent writer advances the contrary view.'^ A wager policy is more to be condemned than an ordinary wager, for it is not only at variance with sound business ethics, but it also offers peculiar inducements to the insured to bring about fraudulently the event insured against. § 21. Insurance does not always Grant Full In- demnity. — Only such damages as are caused proximately by the specified perils are covered by the policy. This rule, * Ampleman v. Citizens Ins. Co. , 35 Ma App. 808k • Ckwke on Life Ins., §§ 58, 69. § 22 How Fab a Contract of Indemnitt. 99 also, is grounded upon considerations of utility, and ordinarily limits the scope of the contract because of the inconvenience of attempting to form an estimate after loss of the extent of remote, uncertain, and fluctuating elements of damage. Thus the incidental loss of trade, or of the use of a building or ship while being repaired, or of prospective profits, or Siixy pretiurr* affectionis attaching to the property destroyed, is too remote, and is not supposed to enter into the calculation of the con- tracting parties. Where, however, the parties do in fact ex- pressly take into their account these more remote items of damage, they may make them the subject of a valid insurance. Thus the loss of use and occupation or of expected profits may be specifically insured as such, and frequentl}'^ is. In marin? insurance profits are generally added in the shape of a per- centage to the value of the goods. What results of fire and marine casualties are proximate, and what are remote, will be considered under the clauses of the policies. § 33. Insurance Grants Indemnity for Results of Negligence. — Where the loss is caused proximately by the peril insured against, the fact that the negligence of the insured or his agent contributed to the disaster will not deprive him of the protection of his policy ; because it is of the nature and purpose of insurance to grant indemnity for the results of carelessness as well as of accident. This rule, as originally adopted by the courts, was somewhat arbitrary, but is also eminently just and sensible.* In the case of fire insurance, for example, the security oJBfered the insured by his policy would be seriously impaired if it were open to the insurers to plead in defense contributory negligence on the part of the insured or his servants ; for many if not most fires have their origin in some act of carelessness. Accordingly the insured has the right to look to the company for indemnity notwithstanding any amount of carelessness in occasioning the loss, provided it does not involve an element of evil design, or illegality, or a violation of some contract 'Mathews v. Howard Ins. Co., 11 Adams, 123 U. S. 67. Gore v. Far- N. Y. 21. Union Ins. Co. v. Smith, mers' Mut. Fire Ins. Co., 48 N. H. 41; m U S. 405. Orient Ins. Co. v. 87 Am. Dec. 573. 80 Insurance: Fire, Life, Makinb. § 2b obligation on his part, and provided tiie loss is the proximate result of the peril insured against. This consideration, however, will not avail to excuse a breach of warranty, imposed upon the insured by the contract, which has been brought about by the negligence of himself or his agent ; as, for example, a violation of the implied or express warranty that the ship must be seaworthy at the commence- ment of the voyage. Nor will it relieve the insured from the obligation of any other engagements of the contract; as where in the accident policy it is provided that the insurers shall be exempt for losses caused by voluntary exposure to unnecessary risk ; or where in the fire policy it is stipulated that the com- pany shall not be liable for loss caused by neglect of the in- sured to use reasonable means to save the property at and after a fire.^ § 33. Rule of Indemnity Qualified in Marine : Insured a Co-insurer. — In case of a partial loss, the rules of recovery apphcable to fire and marine insurance, respec- tively, differ in a very important particular. In fire the in- sured recovers his damage up to the amount of the policy; but in marine, when the insurance is short, the insured re- covers only such proportion of the amount insured as the loss bears to the value of the whole interest of the insured in the property. This limits a recovery unless the property is fully insured.' Thus if a man takes out an open fire policy for $5,000 on his furniture worth $10,000, and a loss of $2,500 occurs, he will recover his loss in full; but if he has an open marine policy for $5,000 on his cargo worth $10,000, to which a loss of $2,500 occurs, he will recover only $1,250. Sometimes by the attachment of a co-insurance clause the fire policy is made to resemble the marine contract in that respect. Otherwise in fire insurance where the property is only partially covered by insurance, the insured recovers in case of partial loss under the policy as much as though he had ' Richelieu & Ont. Navigation Co. ' Nicolet v. Ins. Co., 3 La. 866; 23 T. Boston Marine Ins. Co., 136 U. S. Am. Dec. 458. 408. Whitney v. Ocean Ins. Co., 14 La. 486; 83 Am. Dec. 695. § 25 Subrogation. 31 been paying premiums for full insurance, whereas in reality he has only been paying premiums for part insurance. § 24. Double Insurance Contribution,— Growing out of the doctrine of indemnity is another ; namely, that where different policies exist on the same insurance, subject and risk, the co-insurers stand somewhat in the attitude of co- sureties toward one another, to this extent, that each insurer in fire insurance must contribute ratably toward the loss with- out regard to the dates of the several policies — assuming, of course, that the policies are subsisting at the time of loss. Except for the usual contract limitation called the pro rata clause, the insured might recover his loss in full against any of the co-insurers, but not exceeding the amount of the policy, leaving the insurers to apportion the loss by subsequent con- tribution among themselves.^ The rule of double insurance contribution in marine insur- ance as applied in America is quite different, and is founded upon the theory that policies attach in the order of their date. This rule will be considered in discussing the clauses of the marine policy. § 35. Subrogation. — Another corollary incident to the doctrine of indemnity is that of subrogation. Upon paying the loss under a policy the insurer becomes subrogated pro tanto to such rights and remedies as the insured may have against any third persons who are primarily liable to him for his damage sustained. This rule likewise grows out of the principle that insurance is designed to protect the insured from loss, and not to be the occasion of gain to him. Otherwise the insured on pursuing his double remedy might be indemnified twice over,* The United States Supreme Court says : "• In fire insurance, as in marine insurance, the insurer, upon paying to the assured the amount of a loss of the property insured, is doubtless sub- rogated in a corresponding amount to the assured's right of • Wiggln V.Suffolk Ins. Co., 18 Pick. 381. Jackson Co. v. Boylston Mut. 145. Lucas v. Jefferson Ins. Co., 6 Ins. Co., 139 Mass. 510. Liverpool Cow. 635. Note in 28 Am. Dec. 121. & G. W. Steam. Co. v. Phenix Ins. ♦ Castellain v. Preston, 11 Q. B. D. Co., 129 U. S. 897. 82 Insurance : Fike, Life, Marine. § 25 action against any other person responsible for the loss. But the right of the insurer against such other person does not rest upon any relation of contract or of privity between them. It arises out of the nature of the contract of insurance as a con- tract of indemnity, and is derived from the assured alone, and can be enforced in his right only. By the strict rules of the common law, it must be asserted in the name of the assured. In a court of equity or of admiralty, or under some State codes, it may be asserted by the insurer in his own name ; but in any form of remedy the insurer can take nothing by subro- gation but the rights of the assured, and if the assured has no right of action none passes to the insurer." * Thus if a common carrier carelessly starts a fire by sparks from a locomotive, which burns the property of the insured, the insurer upon paying the loss under the policy becomes sub- rogated to the right of recourse which the insured had against the common carrier. The latter must not be exonerated or released without the consent of the insurer.^ A release given to the negligent party by the insured with- out the consent of the insurer will in such a case bar his right of action upon the policy.' If the w^rong-doer pays the assured after the insurers have made a payment under the policy, it is a fraud upon the latter, provided the wrong-doer has knowledge of the fact, and will not protect him from liability to the insurers. If the insurers, after payment of the damage by the wrong-doer to the insured, voluntarily pay the policy, they cannot maintain an action against the wrong-doer ; and if the assured receives his damages from the wrong-doer before payment is made by the insurers under the policy, the amount so received will be applied jpro tanto in discharge of the policy.* Inasmuch as the insurers are only entitled to such rights as are vested in the insured, there will be no subrogation in case the insured has stipulated in a bill of lading from the common carrier that the latter shall have the benefit of insurance ; and ' St. Louis, I. M. & S. Railway Co. ' Billing v. Draemel, 16 Daly, 104 r. Commercial Union Ins. Co., 139 (1890). Hall v. The Railroad Com- U. S. 235. panies, 13 Wall. 367. * Newcomb V. Cincinnati Ins. Co.. 22 * Conn. Fire Ins. Co. v. Erie Ry. Ohio State, 382 ; s.o. 10 Am. Eep. 746. Co., 73 N. Y. 399. § 26 Insurable Interest. 38 in case the insured has been so imprudent as to agree to give the insurers the benefit of subrogation, and has also made an inconsistent stipulation with the common carrier, he may find himself without security for his loss.^ Similarly, where a mortgagee has taken out a policy for his own benefit, and not for the benefit of the mortgagor, upon the property of the mortgagor covered by the mortgage, it is held by the better authority, that, even in the absence of an express provision to that effect in the policy, the insurer upon paying the mortgagee the insurance money becomes subrogated jpro tanto to the mortgage security as against the mortgagor.^ But where the mortgagor has any interest in the policy, either by payment of premiums or by agreement with the mortgagee, then there will be no subrogation in favor of the insurers, for the latter take only such rights as the assured can give.^ A mortgagee is not required to exhaust his remedy upon the mortgage before enforcing his policy, and he can maintain his action on the policy although the property after the fire is still equal in value to the amount of the mortgage debt.^ In case the insured under a life policy is killed, or in case property of the insured under a fire policy is feloniously de- stroyed, no right of subrogation exists in favor of the insurers.* § 36. Insurable Interest : Fire. — Every interest in property, or in relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insured, is an insurable interest. A learned justice of the New York Court of Appeals, who has made the subject of insurance law his profound study, states the rule in the following words: " It would seem, therefore, that whenever there is a real in- terest to protect, and a person is so situated with respect to the subject of insurance that its destruction would or might reason- ' Piatt V. Richmond. Y.R. & C. R.R. ' Kemochan v. N. Y. Bowery Fire Co., 108 N. Y. 358. Fayer weather v. Ins. Co., 17 N. Y. 441. Louden v. Phenix Ins. Co.. 118 N. Y. 324. Waddle, 98 Penn. State, 242. ^ Carpenter v. The Providence * Excelsior Fire Ins. Co. v. Royal Washington Ins. Co.. 16 Peters, 495. Ins. Co., 55 N. Y. 343. Contra, International Trans. Co. v. ' Ins. Co. v. Brame, 95 U. S. 704. Boardman, 149 Mass. 158. 3 34 Insurance : Fire, Life, Marine. § 26 ably be expected to impair the value of that interest, an insur- ance on such interest would not be a wager within the statute, whether the interest was an ownership in, or a right to the possession of the property, or simply an advantage of a pecuni- ary character having a legal basis, but dependent upon the continued existence of the subject. It is well settled that a mere hope or expectation, which may be frustrated by the hap- pening of some event, is not an insurable interest." ^ An insurable interest may be legal or equitable, vested or contingent.^ It may be an existing interest — as, for example, the ownership in fee, or for life, or for years, or a right by mortgage or other lien — or it may be merely an inchoate interest, like a ship-owner's riglit to freight on goods laden on his ship, or the equitable right to a title under an executory contract of pur- chase,^ or an interest in expected profits on goods consigned for sale.^ A tenant by curtesy or dower may insure.^ The interest may arise from some title to the property or from a mere liability in respect to the property. An insured owner of property does not lose his insurable interest by giving a lease or a mortgage,^ or making an executory contract to sell the property,'' or even by a foreclosure, so long as any title or equitable right to the property remains in him.^ And although his title to the insured property may be defective or voida- ble, it may still be the basis of a valid insurance.^ But a mere contingent or expectant interest in anything, not^Jounded upon an actual right to a thing, nor upon any valid con- tract for it, is not insurable. Lord Eldon illustrates this distinction in an elaborate opinion upon marine insurance, where the same general doctrine prevails. " Suppose A to be possessed of a ship limited to B in case A dies without issue ; ' Riggs V. Commercial Mut. Ins. " Franklin Fire Ins. Co. v. Drake, 2 Co., 125 N. Y. 12, by Andrews, J. B. Mon. (Ky.), 47. Williams v. Roger Williams Ins. « H ubbard v. Hartford Fire Ins. Co. , Co., 107 Mass 377. 33 Iowa, 825. ^ Fenn v. New Orleans Mut. Ins. ' Davis v. QuincyMut. Fire Ins. Co., Co., 53_Ga^578. Nat. Filtering Oil 10 Allen, 118. Co. V. Citizens Ins. Co., 106 N. Y. 535. "Strong v. Manufs. Ins. Co., 10 • Brogden v. Manufs. & M. Mut. Pick. 40. Essex Savings Bank v. Fire Ins. Co., 15 Can. L. J. 31. ^tna Meriden Fire Ins. Co., 57 Conn. 335 Fire Ins. Co. v. Tyler, 16 Wend. 385. -1889). * French v. Hope Ins. Co., 16 Pick. " Curry v. Commonwealth Ins. Co., 897. 10 Pick. 535. § 26 Insurable Interest. 36 that A has twenty children, the eldest of whom is twenty years of age ; and B is ninety years of age ; it is a moral certainty that B will never come into possession, yet this is a clear interest. On the other hand, suppose the case of the heir-at-law of a man who has an estate worth £20,000 a year, who is ninety years of age, upon his death-bed, intestate, and incapable from incur- able lunacy of making a will, there is no man who will deny that such an heir-at-law has a moral certainty of succeeding to the estate ; yet the law will not allow that he has any interest, or anything more than a mere expectation." ^ It would be dijBBcult to enumerate all the classes of persons who may have an insurable interest in property their own, or held by them for others, or to which they have some right. Among them may be named owners, trustees and cestuis que trusty executors and administrators, co-partners, consignees, factors, agents, mortgagors and mortgagees, lienors, vendors and vendees, lessors and lessees, sureties, indorsers, common carriers, warehousemen, wharfingers, innkeepers, pledgees, and depositaries generally, stockholders in property of the corpo- ration, and creditors and sheriffs in property attached.^ A mere trespasser or intruder, or one who has no color of title to property, has no insurable interest in it ; ^ and it has also been held that a creditor at large, having no specific lien upon the propert}'" of his debtor, has no insurable interest in such property.* Whether a judgment creditor has an insura- ble interest before an attachment or levy upon his debtor's property, is open to question. On principle, as well as on the authority of a New York case, it would seem that he has.^ But the question is probably of no great practical importance, for an insurer would not be apt to take such a risk. From the list just enumerated, the fact will be inferred that the same person may have different insurable interests in the same property, and also that different persons may have sepa- rate insurable interests in the same property.^ Where the ' Lucena v. Craufurd, 3 B. & P. N. * Grevemeyer v. Southern Mut. Ins. R. 324. Co., 62 Pa. St. 340 ' Strong V. Mfrs. Ins. Co., 10 Pick. ^ Rohrback v. Germania Fire Ins. 40 ; s. c, 20 Am. Dec. 507, note 510- Co., 62 N. Y. 47. 518. " Ins. Cos. V. Thompson. 95 U. S. ' Sweeny v. Franklin Ins. Co., 20 547. Carruthers v. Sheddon, 6 Taunt. Pa. St. 337. 14. 86 Insuranoi- : Firk, Ltfk, Marine. § 21 insured is jointly interested with others, as in the case of co- partners or trustees, or where he is intrusted with goods of other persons, as in the case of a common carrier or warehouse- man or factor, he may either insure his own interest, or his own habihty in respect to the property, or he may insure the property to its full value for the benefit of all concerned.^ § 27. Insurable Interest : Life. — Every person has an insurable interest in the life and health of himself, of any person on whom he depends wholly or in part for education or support, of any person under a legal obligation to him for the payment of money, or respecting property or services of which death or illness might delay or prevent the performance, and of any person upon whose life any estate or interest vested in him depends.'^ Thus a partner has an insurable interest in the life of a co-partner,^ a creditor of a co-partnership in the life of each co- partner,^ and all creditors in the lives of their debtors.^ This is true, although the debt is voidable,^ or not enforcible on account of the Statute of Limitations.'^ A clerk has ar insurable inter- est in the life of his employer, and a master m the life of his servant if he has a legal claim to his seivices.^ A woman in the life of her fiance.^ A surety on a bond in the life of the principal.^'' A creditor of an infant for necessaries sold to the infant has an insurable interest in his life." A voidable note given for a debt contracted during the minority of the debtor is sufl&cient to give an insurable interest, because the infant ' Fire Ins. Asso. v. Merchants, &c., * Goodwin v. Mass. Mut. Life Ins. Trans. Co., 66 Md. 339. Waters v. Co., 73 N. Y. 480. Assurance Co., 5 E. & B. 870. " Rivers v. Gregg, 5 Rich. Eq. 274. « Bevin v. Conn. Mut. L. Ins. Co , ' Rawls v. Araer. Mut. Life Ins. 28 Conn. 244. Morrell v. Trenton Mut. Co., 27 N. Y. 282 ; s.c, 84 Am. Dec. Ins. Co.. 10 Cush. 282. Baker v. 280. Union Mut. L. Ins. Co., 43 N. Y. 283. " Hebdon v. West, 3 Best & Smith, Thompson v. American, &c., Ins. Co., 578. 46 N. Y. 674. Warnock v. Davis, 104 " Chisholm v. National Capitol Life U. S. 775. Wright v. Mutual Ben. Ins. Co., 52 Mo. 213 ; s. c, 14 Am. Life Assn.. 118 N. Y. 237. Rep. 414. ' Conn. Mut. Life Ins. Co. v. Luchs, '" Ilebdon v. West, 3 Best & Smith, 108 U. S. 498. 579. Branford v. Saunders, 25 Weekly * Morrell v. Trenton Mut. L. and F. Reporter, 650. Ins. Co., 10 Cush. 282; s.c, 57 Am. "Rivers v. Gregg, 5 Rich. Eq. Dec. 92. 274. § 28 Insurable JiNtkrest. 37 alone can avoid the note.^ Ties of affection or kinship do not of themselves constitute an insurable interest. Thus an adult son has no insurable interest in the life of his father simply by virtue of the relationship.^ Nor a nephew in the life of an uncle.^ Noi a son-in-law in the life of a mother-in-law.^ Nor a brother in the life of a brother.^ But certain relationships are so apt to involve a legal claim to support or pecuniary ob- ligation or advantage that their existence is held to establish conclusively an insurable interest.^ Thus a wife has an insurable interest in the life of her hus- band, and the validity of the policy will survive a divorce.'^ And the illegality of the marriage will not defeat it.^ And, ordinarily, at least, a husband has an insurable interest in the life of his wife.® And a father in the life of his minor son.^" Any element of dependency coupled with the relationship will furnish the basis for an insurable interest. Thus where the brother had supported and educated his sister it was held that she had an insurable interest in his life." The interest which one has in his own life, being incapable of exact pecuniary estimate, may be valued at any amount which the parties agree upon, and so generally of all insurable interests which are founded upon relationship ; '^ but if a credi- tor takes out an insurance upon the life of the debtor greatly in excess of any loss that he could sustain by the death of the insured, the transaction may be held to amount to a wager. ^^ § 38. Insurable Interest : Marine. — The same gen- eral principles are applicable as in fire insurance. Thus the ' Dwyer v. Edie, Park on Ins. 433. " Equitable Life Ass. So. v. Pater- 2 Guardian Mut. L. Ins. Co. v. Ho- son, 41j&a. 338 ; s.c..5 Am. Rep. 535. gan, 80 111. 35 ; s. o. , 32 Am. Rep. 180. "Currier v. Continental Life Ins. » Mowry v. Home Life Ins. Co., 9 R. Co., 57 Vt. 496. I. 346. "> Mitchell v. Union Life Ins. Co., * Rombach v. Piedmont & A. Life 45 Me. 104 ; s. e., 71 Am. Dee. 529. Ins. Co., 35 La. Ann. 233; s.c., 48 Am. " Lord v. Dall, 13 Mass. 115 ; s. c, Rep. 239. 7 Am. Dec. 38. * Lewis V. Phojnix Mut. Life Ins "^ Bevln v. Corm. Mut. Life Ina. Co., 39 Conn. 10 ■ Co., 23-Conn. 241. •Corson's Appeal. 113 Pa. St. 438. " Fox v. Penn. Mut. Life Ins. Co., ' Conn. Mat Life Ins. Co. v. 4 Big. Ins. (.'as. 458. Grant v. Elline, Schaefer. 94 U. S. 460. Baker v. 115 Pa. St. 618. Union Mut. L. Ins. Co., 43 N. Y. 283. 88 Insurance: Fire, Life, Marine. §29 owner of a ship has in all cases an insurable interest in it, even when it has been chartered bv one who covenants to pay him its value in case of loss ; and he also has an insurable interest in expected freight which he would have earned but for the intervention of the peril insured against. And the charterer of a ship also has an insurable interest in it.^ The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry. The lender on bottomry may insure his interest in the ship to the amount of the loan.'^ § 29. The Payee or Assignee of Life Policy need not have Insurable Interest. — If the insured has an insurable interest to support the policy when it is taken out, he may make it payable to any one, or, according to the weight of authority, he may subsequently assign it to any one, whether such transferee has an insurable interest or not, unless the transaction from its inception is a mere cover to avoid the statute against gambling contracts.^ § 30. When must Insurable Interest Exist. — In fire and marine insurance the insurable interest must exist not only at the commencement of the risk, but also at the time of loss ; but in life insurance it may cease at any time after the making of the contract. A creditor, for example, who has taken a policy upon the life of his debtor, may, on the death of the insured, recover the full amount of the insurance, notwith- standing the debt may have been previously paid.'* Thus it will be seen that the contract of life insurance is not one of strict indemnity, but is sufficiently controlled by that doctrine to prevent it from being a wager in its inception. The lea-ding English case of Dalby v. India & London Life Assur. Co., 15 C. B. 365, which overruled Godsall v. Boldero, 9 East, Y2, unquestionably gives the sound and sen- » Oliver v. Greene, 3 Mass. 133. V Dalby v. The India & London Life Barber V. Fleming, L. K., 5 Q. B. 59. Assurance Co., 15 C. B. 365. St. 'Robertson v. United Ins. Co., 3 John v. Am. Mut. Life Ins. Co., 13 John. Cas. 49!). N. Y. 31. Scott v. Dickson, 108 Pa. St. • Olmsted v. Keyes, 85 N. Y. 593. 6; s. c, 56 Am. Rap. 192. Contra, Warnock v. Davis, 104 U. S. 77a. § 32 Insurable Interest, 39 sible rule, though Porter endeavors to defend the doctrine of the hitter case.^ The rate of premiums in Hfe insurance is based upon the supposition that the event upon which payment is to be made to the insured will certainly occur at some time or other, and if a creditor after paying premiums for a long term of years was likely to lose all the benefit of his insurance, it would practically prevent the use of this important kind of security. § 31. Temporary Suspension does not Avoid. — If there is no provision in the contract prohibiting a change of interest, a temporary suspension of the interest of the insured does not vitiate a policy of insurance, but only suspends its operation.^ § 32. Insurable Interest as Related to Measure of Recovery : Fire and Marine.^ — The general rule is indemnity to the insured commensurate with his insurable interest at the time of loss, as shown by proof, or by appraisal, or as previously established by agreement in a valued policy. If the insured is the owner of the property destroyed, he is entitled to recover its market value at the time of the loss, without making any deduction for the amount of mortgage or other incumbrances upon it, for these incumbrances are held to be of no concern to the insurers.* A mortgagee recovers the amount of the mortgage debt^ existing at the time of the loss without regard to the value of j the mortgage or other security which he may hold on account/ of the same debt.' Inasmuch as the right of subrogation which has ah'ead}^ been described does not arise until the loss occurs, tlie policy of in- surance will not be affected by any release or disposition which the mortgagee may make of his other securities before the fire. " Porter on Ins., p. 15. fire insurance law prepared for the ' Worthington v. Bearse, 12 Allen, Yale Law School. 382. Lane v. Maine Mut. Fire Ins. * Columbian Ins. Co. v. Lawrence, Co.. 12 Me. 44. 10 Pet. 507. ' In this section I have followed, to '' Sussex Co. ^tut. Ins. Co. v. Wood- some extent, the arrangement given by ruff, 2 Dutch. (N. J.), 541. Kernochan George M. Sharp, Esq., of the Balti- v. N. Y. Bowery Fire Ins. Co., 5 more bar, in his admirable synopsis of Duer, 1. 40 Insukanok: Fikk, Life, Makijme. §32 But after the loss has oucun-ed any release of such securities will discharge the insurers ^/ro tanto in case they are entitled to the right of subrogation.^ Where a common carrier, warehouseman, or other bailee, or a broker or factor, insures for his own benefit, he recovers the value of his interest in the subject of insurance, whether it be his commissions or profits or advances. If he has insured against his liability as bailee for the loss of the property, he will be entitled to recover its cash or market value at the time of loss ; and so, also, if he insures for the benefit of the owners of the goods intrusted to him as well as for his own benefit, he will be entitled to recover the full value of the property in- sured, holding any balance above his own interest as trustee for the owners.^ A lessee is entitled to recover for the value of his term.^ A lessor under a rent policy is entitled to recover the value of his rent, which is generally agreed upon in ad- vance by a valued policy, and such value in the absence of fraud is conclusive.^ A vendee under an executory contract of purchase is entitled to recover the full value of the property insured by him, for the purchase price of which he is obli- gated.^ A vendor under such a contract, having an insurable interest in the property of Avhich he still holds the title, has a right to recover its full value unless the policy limits his interest. The court cannot assume that the executory con- tract will be completed, and the rights of the insured become fixed, at the time of the fire.' But in England it is held that after the vendor has received the amount of his purchase price the insurers can recover back the insurance moneys under the doctrine of subrogation. This decision carries the doctrine of subrogation to an extreme limit, and it would appear that the views of Justice Chitty in the lower court '^ are more convincing than the opinion of the appellate court.^ The position of the ' Thomas v. Montauk Fire Ins. Co., western Ins. Co., 34 Me. 487. Kaive 43 Hun. !il8. v. Commercial Ins. Co., 8 Johns. 229. • De Forest v. Fulton Fire Ins. Co., ' Bartlett v. Looney, 3 Vict. L. R 1 Hall, 84. Home Ins. Co. v. Balti- Eq. 15. more Warehouse Co., 93 U. S. 527. ° Insurance Co. v. Updegraff, 21 Pa ' Niblo V. North Amer. Ins. Co., 1 St. 513. Sandf. 551. '8 Q. B. D. 613. * Carey v. London Frov. Fire Ins. " Castellain v. Preston, L. R., 11 (^ Co., 33 Ilun. 315, Cushmun v. North- B. D. 380 (1883). § 32 Insurable Interest. 41 latter is defended in learned and instructive opinions, delivered by Justices Brett, Cotton, and Bowen, of which the first two are given among the selected cases of the second part of this book, but it is not easy to find in thera any adequate reason for the conclusion at whicli the court arrived. Where a wrong-doer causes the loss to the insured, and the insurers pay it, their right to subrogation is plain. Where a mortgagee holds a mortgage as collateral security for the pay- ment of a debt, and the insurers pay the mortgagee under the mortgagee's policy, many courts, though not those of Massa- chusetts, regard the insurance and the mortgage as two securi- ties for the payment of the same loss in such a sense as to demand the application of the doctrine of subrogation in favor of the insurers ; though it ma}'^ not be clear, upon principle, why the insurers should be subrogated to the mortgage, rather than the mortgagor to the insurance. But it cannot be main- tained that the purchase price arranged for in an executory contract of sale is in any respect the subject of the insurance already existing upon the land. It is rather the fruits or profits incidental to the ownership of the property which is still vested in the insured. The contract of sale is altogether independent of the contract of insurance, and, unless prohibited by the terms of the policy, has no relation to it ; and this may be well illustrated by supposing that the purchase price under the executory contract is to be paid in services instead of money. In that event, it would seem almost grotesque to contend that, after a settlement and payment under the policy, from which the English court admitted there was no escape, the insurers may claim the benefit of future services to be ren- dered to the insured by virtue of a contract made subsequent to the policy. No such agreement of recoupment ought to be read into the contract of insurance by the court, unless equity or public policy imperatively demands it. If the contract to seU violates one of the conditions of the policy, the insurers will be exonerated. If it does not, then they ought to pay according to their promise, and whether the insurance money ultimately remains with the vendors or the vendees depends upon con- tract relations with which the insurers are not in privity. A re-insured is entitled to recover the amount which he is obligated to pay by the original insurance, and this he may 42 Insurance : Fire, Life, Marine. § 33 recover b}' reason of his liabilit}^ before he has actually made payment thereof to the insured.' Under a policy for loss of use and occupation of a mill or other building while undergoing repairs or ^yllile being rebuilt after the fire, the amount of re- covery is usually defined by the policy as so much per day ; and provision is often made for ascertaining by appraisal the amount of probable loss of time. § 33. Contract is Personal. — A contract of insurance on property is personal ; that is, it does not pass to the new owner by virtue of a transfer of the title of the property.* Hence, upon closing a sale or conveyance, it is of consequence to the vendee to see that new policies are taken out, or tiiat the proper indorsements consenting to the transfer are made by the insurers upon the old policies. This rule is reasonable ; for, as was explained in the intro- ductory chapter, the moral risk assumed by the insurers depends upon the character and circumstances of the insured. They have a right to know with whom they are contracting, and no new party can be thrust upon them without their consent. However important the policy of insurance may be to the owner, for the time being, of the property, it in no respects runs with the land or other property. § 34. Contract is an Entirety. — If the risk has not attached at all, the premium is returnable, unless the policy is avoided by fraud of the insured from the inception of the con- tract ; but, if the risk has once attached, the premium is not to be apportioned, unless by special agreement.^ § 35. Assignment of Policies. — Before loss a fire policy is not assignable without the consent of the insurer; but in case of a marine or life policy the rule is otherwise,* ' Hone V. Mutual Safety Ins. Co., 1 747. Joshua Handy Works v. Ins. Co., Sandf. 137. 86 Oal. 248; s. c, 21 Am. St. Rep. 33 'Powles V. Innes, 11 M. & W. 10. (1890). Ins. Co. v. Pyle, 44 Ohio St. Lett V. Guard. Fire Ins. Co., 125 19 ; s. c, 58 Am. Rep. 781. Heiuely N. Y. 82. Raynor v. Preston. 18 v. So. Tar. Ins. Co., 1 Mill, 153; s. c, Ch. D. 1. 12 Am. Dec. 623. • Blaeser v. Milwaukee Mut. Ins. * Earl v. Shaw, 1 Johns. Cas. 814; Co., 87 Wis. 31 ; s. c, 19 Am. Rep. s. c, 1 Am. Dec. 117. § 36 Insurable Interest. 4S Often, however, in the policy of life insurance an assignment is made ineffectual until after written notice thereof is given to the company. The assignability of the marine policy was early established by custom, and grew out of the demands of mercantile business, which overrotle the theory that the con- tract is strictly personal. The value of a life policy, too, would often be seriously diminished unless the owner of it were able to make it the source of immediate benefit. Inasmuch as it is payable upon an event which sooner or later is certain to occur, it very much resembles an ordinary chose in action, and in most cases no just reason could be given why it should not be assignable, provided the insured is also the beneficiary. Under the New York Act of 1840, chap. 80, designed to secure to the wife and children of the insured the benefits of life insurance free of creditors' claims, it was held that neither the insured nor his wife could assign or disturb the irrevocable interest thereby created.^ But by the Act of 1873, chap. 821, provision is made for surrendering the policy in favor of a married woman or of her and her children ; also, if she has no children or issue thereof, for disposing of such policy by will or deed.^ And by the Act of 1879, chap. 248, the wife or her legal representatives may, with her husband's written consent, assign any policy issued within the State upon his life for her benefit and use, to any person, or may surrender it to the insurer. The policy is assignable whether the wife have children or not, and the husband's assent is sufficiently shown by his joining with the wife in the assignment.^ Similar statutes have been passed in other States (see appendix). § 36. Vested Interests : Life Insurance. — Where the insured designates another person as beneficiary, the right of the latter, as a rule, at once becomes vested so that it cannot be disturbed by assignment or will or in any way without his consent, unless the right to make a new appointment is re- served by the terms of the policy itself, or by the regulations • U. S. Trust Co. V. Mutual Benefit "Frank v. Mut. Life Ins. Co., 103 Life Ins. Co., 115 N. Y. 152. Eadie N. Y. 266. V. summon, 26 N. Y. 9. Brick v. ' Anderson v. Goldsmidt 103 N. Y Campbell. 123 N. Y. 337. 617. 44 Insurance ; Fikk, Like, Makine. § 36 of the company subject to which tlie policy is issued, or by provision of law.' A different rule is adopted in Wisconsin, where it has lately been held that one who has procured a policy upon his own life for the benefit of another, and has paid the premiums thereon, may dispose of the insurance money to the exclusion of the beneficiary named in the policy, during the lifetime of such beneficiary.^ If a husband insures his life for his wife, and pays all the premiums with money embezzled from his firm, the proceeds of the policy will belong to it ; but if the first premium is honestly paid by him, and subsequent premiums with money stolen from his firm, the proceeds of the policy will belong to the wife, charged with a lien to the firm for the amount of its money used for premiums.^ If the beneficiary named in a policy of life insurance dies before the insured, the latter having taken out the insurance and paid the premiums, a new appointment may be made by the insured, provided the first appointment was purely gratui- tous, especially if the insured has kept possession of the policy.* This rule proceeds upon the principle that the intent of the insured to benefit the person of his selection having been defeated by death, he ought to have the opportunity of decid- '/n re King. 14 Ch. D. 179. Wash- dissenting justice wisely remarks: "The ington Cent. Bank v. Hume, 128 U. S. common law, as well as truth, is al- 195. Gamer v. Germania Life Ins. ways in harmony with itself. Assumed Co., 110 N. Y. 266. Fowler V. But- evidences of it in the shape of judicial terly, 78 N. Y. 68. Stilwell v. Mutual decisions may be in conflict, and some- Life Ins. Co.. 72 N. Y. 385. Lemon times are. It is more important to v. Phenix Life Ins. Co., 38 Conn. 294. preserve the law in its integrity than Unity Mut., etc., Assoc, v. Dugan, 118 an erroneous interpretation of it. The Mass. 219. Norris v. Mass. Mut. Life repetition of an exposed error is more Ins. Co., 131 Mass. 294. Ricker v. destructive than the original. No de- Charter Oak Life Ins. Co.. 27 Minn, cision should take rank as an evi- 193 ; s. c, 38 Am. Rep. 289. Glanz dence of law which is not in harmony T. Gloeckler, 104 111. 57;i ; s. c, 44Am. with the logic of the law, especially Rep. 94. Re Richardson, 47 Law when sanctioned by the great weight Times, N. S., 514. Butler v. State of authority." Mut. Life Assur. Co., 55 Hun. 296. » Holmes v. Davenport. 27 Abb. N. Phipard v. Phipard, 55 Hun. 4H3. C. 841 ; rev's'd, 19 N. Y. Suppl. 151. » Estate of Breiton, 78 Wis 33(1890). * Bickerton v. Jnques, 12 Abb. N. But this case is in conflict with many C. 25. Shields v. Sharp, 35 Mo adjudications by other courts, and the Appeals, 178. § 37 Insurable Interest. 45 ing whether the policy shall inure to the benefit of the repre- sentatives of the deceased, or shall go to some other benefici- ary. The decisions are somewhat inharmonious, but any rule depriving the insured of control, in such a case, over a policy taken out and kept alive by him, would not only be inequita- ble but also in many cases ineffective, for when the next pre- mium became due the insured might allow the policy to lapse. In case, however, a new appointment is not made by the in- sured before his death, the representatives of the deceased appointee, and not the representatives of the insured, will receive the proceeds of the insurance.* In case the insured, having an insurable interest in the life of another, takes out a policy upon that life, and pays the pre- miums for the benefit of himself, the policy belongs to him, and the life insured has no interest in it or control over it. The legislatures of some of the States have provided that a change of beneficiary may be made in certain . cases by the insured Avithout the consent of the payee first named, provided of course the first appointment was not founded upon any val- uable consideration moving from the payee (see appendix). §37. Relations between Insurer and Insured: Liife. — The policy holder is a creditor, and not a cestui que trust of the company, and hence he cannot call upon the com- pany, in the absence of fraud, to disclose to him their affairs in general, or to make an ;iccount to him for his share of divi- dends or profits ;^ and he is not a partner in the company.^ As soon as the risk attaches, the insured, under the usual form of policy, becomes debtor to the insurer for the first premium, if it has not been paid. But as to the future pre- miums payable in advance, the relation of debtor does not exist, for the contract does not contain a promise on the part of the insured to pay the premium, but the payment is simply made the condition of the continuance of the contract.^ * Walsh V. Mutual Life Ins. Co., 61 ' People v. Security Life Ins., &c., Hun. 91 (1891). Continental Life Ins. Co.. 78 N. Y. 114. Co. V. Palmer, 42 Conn. 60. * Goodwin v. Mass. IMut. Lifo Ins. « Uhlraan v. N. Y. Life Ins. Co., 109 Co., 73 N. Y. 48(1. Worthiiigton v. N.Y. 421. Matthew V. Northern Assur. Charter Oak Life Ins Co., 41 Conn. Co., 9 Law Rep. Ch. Div. 80. 372 ; s. c, 19 Am. Rep. 495. 46 Insurance: Fikk, Like, Marine. §38 § 38. The Contract is a Property Right : Life.— Being a chose in action, it is not subject to attachment or exe- cution, except as in New York by statute,^ but may be reached by proper proceedings in equity, unless it is by statute secured to the beneticiary free from the claims of creditors.^ Most of the States have passed statutes upon this subject, sometimes in protection of all classes of beneficiaries, and some- times for the benefit of the wife and children (see appendix). » Code Civ. Pro., sec. 648. " Bassett v. Parsons, 140 Mass. 16&. CHAPTEE III. GENERAL PRINCIPLES — CONTINUED. Oonsummatio7i and Construction of the Contract. The course of business in closing insurance contracts is oftentimes so far sui generis^ that it will be advisable to con- sider to what extent the ordinary rules of law are applicable to such a case. Many important classes of contracts have no validity at all unless evidenced by writing ; and whenever parties see fit to reduce their engagements to the form of a written instrument, whether required by law to do so or not, it is presumed that the contents of the document will correctly and conclusively record the final results of their negotiations, and that its execution and delivery will precisely define the time when the agreement goes into operation. But, in the act- ual conduct of their affairs, men do not always take the trouble to conform to any such preconceived notions, if their conven- ience or the exigencies of their business suggest a different course. Often a man wants to insure his house, or goods, or ship without delay. In most of the States of the Union there is no law preventing a valid oral contract of insurance, and so it frequently happens that fire and marine insurances are closed before the insured has seen his policy, or has been made acquainted with its conditions. In fact, the policy may never be delivered to him at all, or not until after the loss has occurred for which it was intended to grant indemnity ; * and, when the policy is received by him, he may find that its terms do not correspond with the oral agreement of insurance already entered upon. § 39. Requisites of a Complete Contract. — The requisites which must be specified to make a valid policy are ' Thompson v. Adams, L.R., 33 Q.B.D. 361 (1889). 48 Insurance : Fire, Life, Marine. § 40 the names or description of the parties, the rate of premium, the property or hfe insured, the risks insured against, and the term or duration of the insurance; ^ and to constitute a contract |bf insurance there must be, as in other cases, a meeting of the minds of the parties — that is, a mutual assent to all the terms of the agreement.^ Thus, if both parties intend that the insurance shall cover a certain ship or a certain house, the contract will not necessaril}'^ be invalidated because by mutual mistake they misname it in the policy ; but if one party has in mind one ship, and the other party has in mind another ship, although the two ships may have the same name, there is, speaking gener- ally, no contract.^ § 40. The Particulars are sometimes Under- stood. — It is not necessary, however, that all the partic- ulars of a contract should be made the subject of express negotiation between the parties ; for it may well be under- stood, in the absence of any express declaration to the con- trary, that the usual form of policy is acceptable to both parties.* Even the essentials of the contract may often be agreed upon, inferentially, by reference to a prior course of dealing between the parties.^ Thus if A, whose policy is about to expire, goes to the oflBce of the insurer, and requests a renewal for a year, and receives the answer from the proper representative of the company that he may consider his policy as renewed, and that the renewal receipt will be sent in the course of a few days, and that he may then pay the premium, the contract of renewal is complete and binding, whether the new policy or renewal receipt may chance to be delivered before the fire or not/ ' Boice V. Thames & M. Marine Ins. * DeGrove v. Met. Ins. Co., 61 N. T. Co.. 38 Hun. 246, 602; s.c, 19 Am. Rep. 305. ' Insurance Co. v. Lyman, 23 " Winne v. Niagara Fire Ins. Co., 91 Wall. 85. Goddard t. Insurance N. Y. 190. Boice v. Thames & M. Ma- Co., 108 Mass. 56; s.c, 11 Am. Rep. rine Ins. Co., 38 Hun. 246. Ruggles v. 807. Am. Central Ins. Co., 114 N. Y. 418. • Hughes V. Mercantile Mut. Ins. " Angell v. Hartford Fire Ins. Co., Co., 55 N. Y. 265. Sanders v. Cooper, 59 N. Y. 171 ; s. c, 17 Am. Rep. 322. 115 N. Y. 279. Eames v. Home Ins. Co., 94 U. S. 621. §42 Consummation of Contract. 49 § 41. Contract may be Closed by Parol. — An oral contract of insurance or an oral contract to issue a policy is valid, unless prohibited by statute as by the Civil Code of Georgia or sometimes by Stamp Laws, and will be binding from the time the oral contract is complete, although the loss occur before a policy is issued.^ The statute of frauds is not applicable;^ and, although the charter of a company provides that the contract of insurance must be in writing, this requirement is by most courts held to be a direction to the company, and not binding upon an inno- cent party who has parted with value to the company in good faith under an oral contract.^ But the representative of the company to bind it, by parol or otherwise, must be one having authority, and stipulations in the application or policy in restriction of his authority will, if true in fact, be binding upon the insured, at any rate after notice of them is received.* § 43. Contract to issne Policy is Governed by Terms of Usual Policy. — Whether the contract of insur- ance is closed by parol or by a preliminary binding receipt, the legal presumption is that the usual policy is to follow. Hence the stipulations and conditions of the policy are binding upon the insured from the moment of closing the contract, although the policy may not be received until after the loss, and although the insured, through ignorance of its conditions, may have forfeited his rights thereunder.^ So, also, after delivery of the policy the insured is conclu- sively presumed to be acquainted with its terms and is bound by ' Insurance Co. v. Colt, 20 Wall, State, 172. Palmer v. Hartford Fire 560. Fish V. Cottenet, 44 N. Y. .538 ; Ins. Co., 54 Conn. 488. 8. c, 4 Am. Rep. 715. Ellis v. Albany * Walsh v. Hartford Fire Ins. Co., City Fire Ins. Co., 50 N. Y. 402. Van 73 N. Y. 5. Ins. Co. v. Norton, 96 U. liOanv. Farmers' Mut. Fire Ins Co., S. 240. Kister v. Lebanon Mut. Ins. 90 N. Y. 280. Co.. 128 Pa. State, 553 ; s. c. , 15 Am. « Phoenix Ins. Co. v. Spiers, 87 St. Rep. 696. Ins. Co. v. Wilkinson, Ky 286. Wiebeler v. Milwaukee, 13 Wall. 222. &c., Ins. Co., 30 Minn. 464. Ala. ' De Grove v. Metrop. Ins. Co., Gold Life Ins. Co. v. Mayes, 61 Ala. supra. Lipman v. Niagara Fire Ins. 163. Co., 121 N. Y. 454. Sanborn v. Fire- • Parish v. Wheeter, 22 N. Y. 494. man's Ins. Co., 16 Gray, 448. Relief Lloyd V. West Branch Bank, 15 Pa. Fire Ins. Co. v. Shaw, 94 U. S. 574. 4 50 Insurance : Fire, Life, Marine. § 43 them, whether he has read the policy or not.* The deUvery of a pohcy is not in itself so significant and controlling as the delivery of a deed or ordinary written instrument.' § 43. Certain Rules of Construction. — The general rules of law must be invoked to arrive at a proper construction of the insurance contract, but the more important of these rules in their relation to insurance law demand special notice. (1) The written contract, including almost always the appli- cation or survey, if there is one, is the onlj'' evidence of what the contract is as to all matters which it purports to cover.* Thus, for example, a pamphlet or prospectus issued by the in- surance company is not admissible in evidence to disturb the terms of the policy, although the insured may have incurred a forfeiture in consequence of reliance upon its representa tions;^ for all prior and contemporaneous negotiations, prom- ises and statements, whether written or oral, become merged in the written contract. That is still ostensibly the rule, but under the doctrine of waiver and estoppel, to be hereafter discussed, as applied to insurance contracts, it may be ques- tioned whether it should not be called the exception rather than the rule. It is to be observed that the language of the policy is not in all cases conclusively binding and effective ; for grounds may sometimes exist for relief in equity. Thus, in a clear case of mutual mistake — that is, where it plainly appears by evidence outside the contract that the real agreement of the parties is not correctly evidenced by the policy — or where there is a mis- take on one side and fraud inducing it on the other, the w^ritten contract may in a proper case be reformed by equity to corre- spond with the real agreement." Similarly, either party may obtain in equity a rescission of ' Allen V. German Am. Ins. Co., 123 * Maher v. Hibernia Ins. Co., 67 N. Y. 6. Monitor Mut. Fire Ins. Co. N. Y. 283. Harris v. Columbiana V. Buflfum, 115 Mass. 343. County Mutual Ins. Co., 18 Ohio 116; ' Xenos V Wickham, L. R., 2 H. L. s. c, 51 Am. Dec. 448. But judgment 396. on insurance contract is a bar to an ac- ' Ins. Co. V. Mowry, 96 U. S. 544. tion to reform it. Steinbach v. Relief Ins. Co. V. Lyman, 15 Wall. 664. Fire Ins. Co., 77 N. Y. 498; 8. c, 89 * Fowler v. Metropolitan Ins. Co., Am. Rep. ^656. lie N. Y. 389. § 43 Construction of Contract. 51 the coRtract for fraud or mutual mistake with a njinstatement of the parties.^ But it is important to notice that after a fire or marine loss, or after a loss under a life policy, unless the life policy has run for a large part of its anticipated duration, this form of relief would be unsatisfactory. (2) A court must not use its discretion to modify the con- '' ditions or provisions of the contract entered into by the parties in order to effectuate what it might consider a more equitable arrangement than that resulting from an enforcement of the strict terms of the policy.'^ This elementary proposition of law is not peculiar to insur- ance, but in the construction of insurance contracts it is pecul- iarly apt to be disregarded by some tribunals. (3) If there is any inconsistency between the written and ^'^■ the printed words of the policy, the former prevail, because they are framed and inserted with reference to the particular con- tract, and the parties do not generally take the trouble to revise or alter the formal printed conditions.^ Thus, for example, where a furniture dealer insured his "stock in trade," the written description was held to cover paints, oils, and varnishes used to finish, though in answer to an inquiry it was stated that no explosive or highly inflamma- ble matter was kept on the premises.* In the same way, insurance "as a manufacturer of brass clock works " permits the use of all such articles as are ordi- narily employed in that manufacture, and the making of them for that purpose, if such be the ordinary course of the business, although the use of such articles be prohibited as extra- hazardous by the printed terms of the policy.^ In an English case where the Lloyd's form of policy was filled up as a time policy on the ship, it was argued from the various clauses not usually struck out, and in this case left standing, referring to a voyage, that certain conditions only ' Union Cent. Life Ins. Co. v. Pott- La. 66 ;s.c., 23 Am. Dec. 458. Robert- ker, 33 Ohio St. 459 ; s. c, 31 Am. son v. French, 4 East 130. Rep. 555. * Haley v. Dorchester Fire Ins. Co., "Allen V. German Am. Ins. Co., 12 Gray (Mass.), 546. 123 N. Y. 6. " Bryant v Poughkeepsie Mut. log. » Harper v. N. Y. City Fire Ins. Co., Co., 17 N. Y. 200. 82 N. Y. 443. Nicollet v. Ins. Co., 8 52 Insurance : Fire, I^ife, Marine, § 43 applicable to a voyage policy applied to the ship in the case of the policy, though in terms a time policy ; but the court held otherwise, and said : " It has been suggested, that, by reason of the policy having been drawn up on a printed form, the printed terms of which are applicable in a voyage policy to goods as well as to the ship, the policy is something less or something more than a time policy ; but the practice of mercan- tile men writing into their printed forms the terms by which they desire to describe and limit the risk intended to be insured against, without striking out the words which may be applicable to a larger or different contract, is too well known and has been too constantly recognized in courts of law to per- mit any such conclusion." ^ Hence it is that in the familiar instance of words written in the margin or at the foot of policies, and especially marine policies, such written words are considered as applying indefi- nitely to the whole of the policy, and as controlling the sense of those parts of the printed policy to which they apply ; so that by the word ship, or freight, or goods written in the margin, the general terms of the policy applicable to other subjects besides the particular one mentioned in the margin are considered as narrowed in point of construction to it.^ So it has been held that the words restricting the liability of the insurers " against actual total loss only," written upon the margin, prevail over any inconsistent printed provisions in the body of the policy.^ On the same principle, it is held that the special printed clauses or riders attached to the policy prevail over the more general terms of the ordinary printed form.* (4) If the language of the policy is ambiguous and fairly open to doubt, of which the court is judge, oral evidence is admissible to explain the real meaning of the parties.® (5) Evidence of a general and well-known custom of trade may be received in evidence as within the probable contempla- ' Dudgeon v. Pembrook, 2 App. Oas. * Gunther v. L. , L. & Globe Ins. Co., •^84. 34 Fed. Rep. 501. ' Chadsey v. Guion, 97 N. Y. 3 !3. ' Daniels v. Hudson River Fire Ins. * Burt V. Brewers and Maltsters Ins. Co., 12 Cush. 416; 59 Am. Dec Co., 9 Hun. 383 ; affirmed in 78 N. Y. 193. 400. L) § 43 Construction of Contbaot. 53 tion of the parties, provided the custom is not inconsistent with the express terras of the policy, and the language of the policy is not clear.^ Trade usage plays a particularly important part in the law of marine insurance. The law of merchants, consisting of certain principles which general convenience has established to regulate the dealings of merchants with each other in all countries, may be considered as a branch of public law. The courts take official cognizance of this where it has been established by a course of decisions. But a particular or local custom must be affirmatively estab- lished by evidence and shown to have been known to both parties and within the probable contemplation of the contract.'' (6) The contract of insurance having been framed by the insurers in their interest, and the insured being compelled to accept the form offered in order to secure insurance, any am- ^^ biguity as to the intent or meaning of its terms, or what prop- erty was intended to be covered, or where situated, will be construed in favor of the insured, and with the purpose of granting him an indemnity for his loss.^ (7) Forfeitures are not favored, and equivocal words or phrases, or provisions repugnant to one another, will be so construed as to give effect to the instrument rather than to --^ avoid it.* The adoption of a standard form of fire policy has not changed the rules of construction previously prevailing in this regard. The object of the New York statute is declared to be to provide a uniform contract or policy of fire insurance — not to prescribe terms which should seem to the legislature reason- able. When the act was passed, the form of policy had not yet been adopted. Its preparation was left to insurance men, to wit, the New York Board of Fire Underwriters, and by » Glendale Woolen Co. v. Ins. Co., v. ^tna Fire Ins. Co., 61 N. Y. 21 Conn. 19 ; s. c, 54 Am. Dec. 308. 571. Mooney v. Howard Ins. Co., 138 Mass. * Phenix Ins. Co. v. Tomlinson, 125 375 ; 52 Am. Rep, 277. Ind. 84 ; s. c, 21 Am. St. Rep. 203. 5 Walls V. Bailey, 49 N. Y. 464. Baker v. Homestead Fire Ins. Co., 80 ' Kratzenstein v. Western Assur- N. Y. 21 ; s. c, 36 Am. Rep. 570. ance Co., 116 N. Y. 54. Hoffman Statutes relieving the insured from V. ^tna Fire Ins. Co., 32 N. Y. forfeiture in certain cases will be found *05 ; s. c, 88 Am. Dec. 839. Foot referred to and classified in appendix. 64 Insurance ; Fire, Life, Marine. § 44 section 3 of the act it is provided that any policy made in terms inconsistent with the provisions of the act shall never- theless be binding upon the company.^ § 44. What Law governs the Construction of the Contract. — Ordinarily the laws and usages of the place where the contract of insurance is made are to be applied in its interpretation and construction.'^ This rule is applied because in insurance there may be sev- eral places where the contract is operative — one place for the payment of premium ; another for the payment of loss, and a third for the location of the subject of insurance. But if the policy provides that the loss and the premiums are to be pay- able at the home office, the latter place would seem to be the place of performance, and its law to prevail in the construction of the policy. It is often important to determine by what law the validity and effect of the policy are to be governed, because the stat- utory provisions relating to the insurance contract vary greatly in the different States. If the policy provides that it will not be binding until countersigned at a certain agency, the agency is the place of contract. So if the policy is sent to the agent for delivery on receipt of the premium ; ^ but if the application is accepted at the home office, and the policy mailed from there to the appli- cant in another State, the home office will be the place of contract.* As a general thing the contract is considered made where the last act necessary to complete it is done.^ The standard of seaworthiness of a ship is to be determined by the custom of the port and country to which the vessel belongs, rather than that of the place where the insurance is made." § 45. Who Construes the Contract, Court or Jury. — This is an intensely practical question, because a court ' L. 1886, c. 488. 59 Am. Dec. 192. Cook v. Johnson, * Equitable Life Assur. Society v. a Dutch (N. J.) 645; 72 Am. Dec. elements, 140 U. S. 226. 3:9. * Thwing V. Great Western Ins Co , '' Northampton Live Stock Co. v 111 Mass. 93. Tuttle. 40 N. J. L. 476. * Daniels v. Ins. Co., 12 Cush. 416; ' Titania, 19 Fed. Rep. 101. § 45 Construction of (\)ntract. 55 tries to enforce the contract according to its legal meaning and effect, whereas a jury is apt to consider an insurance an absolute contract of indemnity regardless of conditions, and will almost invariably find for the insured, unless his claim is characterized by some element of dishonesty or bad faith. The general rule is that the construction of the policy of insurance is a question of law for the court to determine, and warr-anties, as we shall see hereafter, must be strictly enforced regardless of their materiality ; but when the language employed to describe the thing warranted is not free from ambiguity, or when it is equivocal and its interpretation depends upon the sense in which the words are used in view of the subject to which they relate, the relation of the parties and the surrounding circumstances properly applicable to it, the intent of the parties becomes a matter of inquiry, and the interpretation of the language used by them is a mixed ques- tion of law and fact. Such a question is to be submitted to the jury under appropriate instructions.^ If the testimony is undisputed, whether it amounts to a breach of warranty or not is generally for the court.^ And if the facts are such that to the average mind only one inference is deducible from them, the court must make a decis- ion as matter of law ; but otherwise questions of mixed law and fact properly belong to the jury.^ Thus the question, whether the risk has been increased, whether a man is in good health, whether he is of temperate habits, or has used due diligence, or has exhibited good faith, whether his ship was seaworthy, whether the conduct of a duly authorized agent amounts to a waiver, and kindred issues, are usually for the jury, although the policy contains a warranty in respect to them. The Connecticut court says : " Extreme cases either way may be easily determined. Between them there is a wide belt of debatable ground, and cases falling within it are governed so much by the peculiar circumstances of each case that it is much better to determine the matter as a question of fact. " * * Kenyon v. Knight Templars, 122 729. Appleby v. Astor Fire Ins. Co., N. Y. 247. Northwestern Life Ins. 54 N. T. 253. Co. V. Muskegon Bank, l\-'2 U. S. 501. ' Donahue v. Ins. Co., 56 Vt. 880. * D wight V. Germania Life Ins. Co., * Lockwood v. Ins. Co., 46 Conn. H)8 N. Y. 341 ; s. c, 57 Am. Rep. 553. CHAPTEE IV. OENEEAL PRINCIPLES — CONTINUED. Representations and Concealments. The contract of insurance is preeminently one requiring good faith between the parties ; and fraudulent dealing at any stage, either before or after the issuance of the policj'^, is fatal to the rights of the party responsible for it. The principle caveat emptor does not apply. The party wishing to effect an insurance is in duty bound to make a frank and honest dis- closure of those circumstances which are likely to affect the insurer's estimate of the risk, and particularly is this true in the case of marine insurance, where the means of information are apt to be peculiarly and often exclusively within the reach of the applicant. Equity requires that the two parties should contract pari passu, which can only be the case when the knowledge of the assured is communicated. Hence, the question whether any fact should be communicated depends upon whether it is mate- rial, not upon the opinion of the proposer whether it is so. If he is himself ignorant of the material fact, he can of course be under no obligation to disclose it. Otherwise he would no longer contr sect pari passu with the insurers. § 46. Concealment : Marine Insurance. — In marine insurance a concealment of a material fact by a party or his authorized agent, whether innocent or fraudulent, avoids the contract.^- ^*-^^ "i > ^ Thus a policy was effected on goods on board ship or ships from the Canary Islands to London by an agent of the assured, ^ 'a ' Howe Machine Co. v Farrington, Ins. Co. v. Lloyd, 10 Exch. 523. "^ 83 N Y. 126. Proudfoot v. Monte- Blackburn v. Haslam, L. R., 21 Q. B fiore, L. R., 2 Q. B. 511. North British D. 144 (1838). § 47 Representations and Concealments. who at the time knew that a portion of the goods to be insured was on board the President, and also that the President had been reported at Lloyd's as at sea, deep and leaky. He did not inform the underwriter that the President was one of the ships connected with the proposed risks, so that the underwriter had no means of applying the intelligence existing at Lloyd's. The court held that the suppression of this fact by the assured vitiated the policy, notwithstanding it turned out that the intelligence at Lloyd's was unfounded, the President not having been deep or leaky on any part of the voyage insured, and that she was lost not by perils of the seas at all, but by capture which occurred three weeks after the period referred to in Lloyd's " Intelligence." ' To render the agent's concealment fatal he must be one who is so connected with the business at the time of closing the contract that his concealment can fairly be said to be the act of the principal within the scope of the employment and before the agency is terminated^.. (X^W •S "^ ^ § 47. Concealment : Fire and Life. — In regard to contracts of life and iire insurance it is generally laid down as the law in this country that the concealment of a material fact, when not made the subject of express inquiry by the insurers, must be i ntentional to avoid the policy ; and this is partly on the grountl that insurers have for a long time been in the habit of propounding questions upon all points except those in respect to which they are content to reh'' upon their own independent means of information, and partly because life and fire policies generally make a multitude of particulars material to the risk.^ But in England the rule is stated as applicable to all kinds of insurance, that the concealment of a material fact, whether intentional or unintentional, will avoid the contract.* Insurers are not generally inclined to press this matter of ' Lynch v. Hamilton, 3 Taunt. 37. Harmer, 3 Ohio St. 452 ; s. c, .59 Am. 'h-'^ ' * Blackbur n v. Vigors, L. H., 12 App. Dec. 684. Clark v. Union Mut. Ins. Cm- 531. Ruggles v. General Ins? Co., 40 N. H. 333 ; s. c , 77 Am. Dec. Co., 12 Wheat. 408. 721. • Washington Mills Mfg Co. v.Wey- * London Ass Oo. v. Mansel, L. R., mouth Ins. Co., 135 Mass. 503. Mai- 11 Ch. D. 363. Moens v. Heyworth, Jory V. Travellers Ins. Co., 47 N. Y. 10 M. & W. 155. Carter v. Boehm, 52. Hartford Protection Ins. Co. v. 1 W. Bl. 593 ; s. c. , Smith's Lead. Cas. 58 Insurance : Fike, Life, Marine. § 47 innocent concealment too far, nor would it be good policy for them to do so ; for the rule works both ways, and in reality it might appear that with his profound expert knowledge of the situation the insurer is acquainted with many important facts of a general character bearing upon the risk which he does not trouble himself to disclose to the insured. Neither party is bound to volunteer information of matters which the other knows, or which in the exercise of ordinary care the other ought to know, and of which the former has no .reason to suppose him ignorant, or those of which the other waives communication.' Each party is bound to know matters of general intelligence or of public notoriety, including general usages of trade which are open to his inquiry equally with that of the other.^ But the insurer is not presumed to know the contents of Lloyd's Lists.' Matters of mere opinion or belief need not be stated.* Where the insurer makes special inquiries, as by requiring the execution of an application, it may generally be assumed that the information asked for is all that is required.^ Other matters relating to the risk, and particulars about the title, not asked for, need not be volunteered.^ This, in practice, con- stitutes an important modification of the general rule requiring a full disclosure of all material facts, inasmuch as a written application is almost invariably made the basis of a life policy, and the fire policy by its own terms provides for certain dis- closures ; but even then the applicant must evince good faith, and would be guilty of a wrongful concealment if he withheld intelligence which would clearly affect the judgment of the insurer. As, for example, that serious attempts had lately been made to set fire to his house, or that his ship was already in distress.''' » Dilleber v. Home Life Ins. Co., 69 Ins. Co., 2 G. & J. 136; s. c, 20 Am. N. Y. 256 ; s. c, 25 Am. Rep. 182. Ar- Dec. 424. menia Ins. Co. v. Paul, 91 Penn. St. ' Browning v. Home Ins. Co. , 71 520; s. c, 3fi Am. Rep. 676. N. Y. 508. » Carter v. Boehm, 3 Burr. 1903. * Wytheville Ins. Co. v. Stultz, 87 » Morrison v. Universal Marine Ins. Vir. 629 (1891). See 132 N. Y. 133. Co., L. R., 8 Exch. 40. 'Green v. Merchants Ins. Co., 10 * Smith V. The Columbia Ins. Co., Pick. 402. Bebee v. Hartford Co. Mut. 17 Pa. St. 253; s. c, 55 Am. Dec. Fire Ins. Co., 25 Conn. 61; 8. O., 65 646. AUegre's Admrs. v. Maryland Am. Dec. 668. § 48 Representations and Concealments. 59 So if a person effected an insurance upon a building as a private house, but omitted to mention tliat its windows over- looked a petroleum store or floor-cloth manufactory, or some other equally dangerous structure, the policy would be void for concealment.^ § 48. Representations. — A representation is an oral or written statement of facts or circumstances made at the time of or before the contract relating to the proposed adventure, and upon the faith of which the agreement is made. A material misrepresentation of fact by a party or his authorized agent, whether innocent and unintentional or fraudu- lent, avoids the contract. Representations must be substantially, complied with._^ Thus positive representations of the day on which the ship has sailed, or will sail, or on which she was last seen in safety ; of the kind of armament she is to be fitted out with ; the num- ber of men with which she is to be manned, and the nature of the cargo she is to carry — will, if false, avoid the policy, unless the assured can show that the underwriter was in no respect influenced by them. For example, where an insurance was effected on ship and cargo at and from Genoa to Dublin, the adventure to begin from the loading to clear for the voyage. Lord Mansfield held that these words plainly implied a representation that the vessel had loaded or would load at Genoa ; and as it appeared she had not done so, but at Leghorn, his lordship considered the policy void for misrepresentation and concealment.^ So in case of an insurance on goods, where the words " to return five per cent for convoy and arrival " were inserted in the policy. Lord Eldon was of opinion that these words clearly amounted to a representation that it was probable the vessel would sail with convoy ; and as it appeared that the assured knew, when the policy was effected, that the ship had actually sailed without convoy, the contract was avoided.* A policy on ship and goods from Nassau to the Clyde was ' Wedderbum v. Bell, 1 Camp. 1. ' Hodgson v. Richardson, 1 W. Bl, » Smith V. ^tna Ins. Co., 49 N. Y. 463. 211. Continental Ins. Co. v. Kasey, * Reid v. Harvey, 4 Dow. 97. .85 Gratt 268 ; s. c, 18 Am, Rep. 681. 60 Insurance : Fire, Life, Marine. § 49 effected on the 18th of June, 1814. The broker showed the underwriters a letter, Warranties. »vf § 5^» What is a Warranty. — An express warranty is a statement of tact or promise of performance, relating to the sub- ject of insurance or to the risk, inserted in the policy itself, or by reference expressly made a part of it, which must be literally true or strictly complied withj or else the contract is avoided.* ^ A representation, as has been observed, is a collateral induce- ment outside the contract, and need be only substantially com- plied with; that is to say, if it is immaterial in the judgment of the jury its falsity will not constitute a forfeiture. The warranty may be inserted in the body, margin, or at the foot of the policy, but it must appear somewhere upon its face.'^ An indorsement upon the back is not sufficient, unless it is expressly made a part of the contract.^ No particular form of words is necessary to create a war- ranty, and it may relate to the past, present, or future. War- ranties form the basis of the insurers' obligation, and it is only upon condition of their complete fulfillment that they promise to make payment. § 53. Warranty must be Strictly Performed. — In case of a condition or warranty, it is of no consequence whether the fact stated or the act stipulated for be material to the risk or not, or whether the insured acted in good faith or not : the warranty must be strictly and literally performed.'* * Thomson v. Weems, 9 App. ("as. 671. Cushman v. U. S. Life Ins. Co , 63 N. Y. 404. Clark v. Union Mut. Ins. Co., 40 N. H. 333 ; s. c, 77 Am. Deo. 721. ' Wood V. Hartford Ins. Co., 18 Conn. 544 ; s. c, 85 Am. Dec. 92. ' Murdock v. Chenango Co. Mut. Ins. Co., 2 Comst. 310. * Pitch V. American Popular Life Ins. Co., 59 N. Y. 557. § 53 "Warranties. 68 Thus a broker, in offering a risk to the underwriter, showed the latter his written instructions, which comprised a statement respecting the vessel, that " she mounts twelve guns and twenty men : " in point of fact, the vessel had not this precise force on board ; but she had an armament of guns and swivels, with a crew of men and boys, which in both particulars were equivalent to, though not identical with, the force specified. It was held that the statement made to the underwriter, being a represen- tation, was satisfied by the substantial fulfillment, though had it been a warranty nothing less than a strict and literal fulfill- ment would have sufiiced.^ In another case, the words " in port 20th July, 1776," were written in the margin of the policy. The ship was proved to have sailed on the 18th of July, and Lord Mansfield held this to be a breach of warranty, though the discrepancy of two days might not make any material difference in the risk.^ In another case, the description of the vessel as " the good American ship called the Rodman " was held a warranty that the vessel was American.^ So if the insured by his fire policy warrants that there is no other insurance upon the property, the statement, if untrue, will avoid the policy, though made by the insured in ignorance of the fact, and though wholly immaterial in influencing the insurers.^ So, also, if he omit to state one of the incumbrances upon his propert}', in answer to a question in the application calling for them, the policy will be vitiated if the answer is warranted to be full, although the jury find the fact to be immaterial.* And if by his contract of life insurance he war- rants that he was not engaged in selling liquor, the validity of the policy will depend upon the truth of the statement.* If, however, the insured warrants that his building is " used for the storage of ice," that may be quite true, although at the time of the commencement of the risk there is no ice there.'' Many illustrations of this doctrine will be considered in con- nection with the clauses of the policies. ' Pawson V. Watson, Cowp. 785. ' Bowditch Mut. Ins. Co. v. Winslow * Bean v. Stupart, Doug. 12 (note). 3 Gray (Mass.), 415. ' Barker v. Phoenix Ins. Co., 8 John- ' Dwight v. Germania Life Ins. Co., son. 307. 1U3 N. Y. 341 ; s. c, 57 Am. Rep. 239. * Allen V. German-Am. Ins. Co., V^8 ' Dolliver v. St. Joseph's Fire and N. Y. 6. Marine Ins. Co., 131 Mass. 45. 64 Insurance : Fire, Life, Marine. § 54 "Warranties are in effect made representations by statutory provisions in some of the States, as shown in the appendix. It ought to be observed, however, that in making prac- tical application of the doctrine of warranty, it sometimes happens that the alleged breach consists in honest errors or misstatements in their character so trivial and irrelevant to the risk as to fall within the rule de minimis non curat lex. The court, perhaps, relied upon this maxim with more regard to common sense and justice than to the letter of the law in the following case, where a vessel was registered as captained by A, in order to comply with the requirements of the registry laws which forbid an alien to register ; but in point of fact the vessel was really under the management of another person, B, who was an alien, but a competent and experienced captain, whereas A had had no nautical experience : it was held that the representation of A's captaincy contained in the registry would not avoid the contract.^ Similarly, in another case, the same court held that a fire policy was not avoided by the existence of a small building within seventy-five feet of the storehouse insured, which did not aft'ect the risk, although the insured had warranted that the storehouse was detached at least one hundred feet on the east side of Lake Champlain.' § 54. Inability to Perforin the Contract no Ex- cuse. — The inability of the insured to comply with the requirements of his warranties offers no excuse, unless the insurers are in some way responsible for the omission. The insurers have promised to pay only upon condition that the insured shall fulfill the contract upon his part, not upon condition that he shall find it convenient or possible to do so.^ This rule is applicable to the payment of premiums when made a condition precedent, and also to all the other warran- ties in the policy. But the requirements of the policy regard- ing the form and particularity of the proofs of loss, while ' Draperv. Com. Ins. Co. , 21 N. Y. ;i78. ' School District m. Dauchy, 25 Conn, » Burleigh v. Gebhard Fire Ins. Co., 530. Evans v. U. S. Life Ins. Co., 64 90 N. Y 220. Baldwin v Citizens N. Y. 304. Fire Ins. Co., 60 Hun 389 (1891). § 56 W.\I{UANTIES. 65 imposing an absolute obligation upon the insured to furnish proofs unless the company excuses it, are held to mean only such reasonable proofs as the circumstances of the case will permit.^ Sickness, insanity, deatb,^ and, according to some authorities, even war^ will furnish no excuse for the violation of a condi- tion in the ])olicy. But the United States Su[)reme Court and ot her courts have adopted the rule, that a war overrides the ordinary obligations of tlu! policy, and simply suspends them until the war is terminated. However reasonable this rule may be, considered logically, it is inconvenient and difficult to apply, and the life policy may furnish some exception/ Various classes of statutes which have been passed by the legislatures of different States to relieve from technical forfeit- ures are given in the appendix. § 55. Papers Referred to in the Policy. — A state ment in a papei* merely referred to in the polic\' is not a war- ranty ; but if the polic}^ as it almost invariably does, makes the application plan or survey a part of the contract, then the statements of fact therein contained, whether relating to the past, present, or future, become warranties.^ § 56. Statement of Present Use. — A statement of the nature of the present use of the property, if it does not go to the essential nature of the subject of insurance, is not gen- eralh" considered a warranty of continuance. For example, in a late case the United States Supreme Court were of opinion that a warranty in a contract of fire in- surance, that smoking was not allowed on the premises, if true when the representation was made, would not be broken though the assured or others smoked afterwards on the prem- » Burastead v. Dividend Mut. Ins. Wall. 158. Cohen v. Mut. Life Ins. Co.. 12 N. Y. 81. Co., 50 N. Y. GIO. N. Y. Life Ins. Co. ' Thompson v. Ins. Co., 104 U. S. v. Statham, 93 U. S. 24. 252. Carpenter v. Centennial Mut. ^ Ciishman v. U. S. Life Ins. Co., 63 Life Ins. Co., 68 Iowa. 453. Howell N. Y. 404. Fitch v. Amer. Popular V. Knickerbocker Life. 44 N. Y. 277. Life Ins. Co., 59 N. Y. 557 ; s. c., 17 ' Worthington v. Charter Oak Life Am. Hep. 372. Dwight v. Germania Ins. Co., 41 Conn. Wl. Life Ins. Co., 103 N. Y. 341 ; s. c, 57 *Semmes v. Hartford Ins. Co., 13 Am. Rep. 729. 5 V 66 Insurance : Firk, Lifk, Marine. § 57 ises.^ So also where the polic}' of insurance described the property insured as being a two-story frame building used for winding and coloring yarn and for the storage of spun yarn, it did not warrant that such building was to continue to be thus used.'^ But a warranty that a house was of stone when in reality it was parti}" stone and partly wood, or that the building insured was a dwelling house, or occupied as a dwelling, when in fact it was not, would avoid the policy.^ If the warranty were simply that the house was a dwelling, that would not neces- sarily mean that it was occupied as a dwelling at that time.* I In marine insurance the rule is particularly strict that any I statement relating to the property insured appearing upon the ! face of the policy will be regarded as a warranty.^ §57. Questions unanswered or partially an- swered. — If a question in the appHcation is not answered at all, or if the answer is not false in any respect, but upon its \^ face is only incomplete, there is no breach of warranty, pro- \^ vided the insurer accepts the application without objection ; \^ for, if not satisfied, the company should demand fuller informa- it> tion. So, also, to avoid forfeiture, equivocal answers are con- ^ strued most strongly against the company, but notwithstand- ing this, the applicant must answer in good faith and not attempt to evade, conceal or mislead.* § 58. A Breach avoids though not Connected with the Loss. — ^Although the breach of warranty or the misrepresentation or intentional concealment of a material fact may not contribute to or cause the loss, nevertheless the policy is avoided, for the risk becomes a di£ferent one from that which the insurer undertook to bear.'' ' Hosford V. Germania Fire Ins. Co., ' London Ass. Co. v. Mansel, L. R., 127 U, S. 399. IK'h. D. 363. Phenix Life Ins. Co. 2 Smith V. Mechanics and Traders v. Raddin, m U. S. 183. Dilleber v. Fire Ins. Co.. 32 N. Y. 399. Home Life Ins. Co'.,' 69 N. Y. 256 ; s. ' Chase v. Hamilton Ins. Co., 20N. Y. c, 25 Am. Rep. 182. Carson v. Jersey 62. Alexander v. Germania Fire Ins. City Fire Ins. Co., 43 N. J. L. 306. Co., 60 N. Y. 464 ; s.c, 23 Am. Rep. 7G. Higgins v. Phoenix Mut. Ins. Co., 74 • Browning v. Home Ins. Co., 71 N. N. Y. 6. Y. 508. ' Bank of Balston Spa v. Ins. Co., 50 ' Thomson v. Weems, 9 App. C»s. N. Y. 45. Ripley v. Mtvidi. Ins. Co., (S84. 30 N. Y. 136 ; s. c, 86 Am. Dec. 362 § 62 Warranties. 6T ^ 59. Breach avoids tlioiijfli only Temporary.-- If a bi'cach oH warranty occurs during tlie life of a policy and continues temporarily only, by the weight of authority and reason it avoids and does not merely suspend the policy/ un- less the insurer or its duly authorized agents, with knowledge of the forfeiture, revive the contract by some unequivocal act of confirmation ; as, for example, by the acceptance of a pre- mium or assessment, or by the delivery of the policy or a renewal receipt, or by an express waiver of the forfeiture by consent.^ § 60. To avoid Forfeiture, Contract made Sev- erable. — Where several items of property are insured for /^« ^ separate amounts, either at separate rates or for a single pre- mium, and tlie breach of warranty affects a portion of the -^C^^ items only, then, according to the weight of authority, the con- tract is severable unless it contains words as in the case of the New York standard fire policy, showing distinctly that the entire contract is to be avoided by the breach.^ § 61. Void means Voidable. — Though the contract is said to be avoided by the violation on the part of the insured of any of the conditions or warranties inserted for the benefit of the insurers, this means that the contract is voidable at the option of the insurers.^ § 63. Election once made is Final. — If with knowl edge of the forfeiture the insurer elects to revive the contract. and evinces his election b}^ an unequivocal and positive act of confirmation, he cannot thereafter insist upon the past breach." v/' ' Kyte V. Commercial Union Ass. Ins. Co., TS N. Y. 459 ; s. c, 29 Am. Co., 149 Mass. 116. Fernandez v. Rep. 184. Contra Mtna Ins. Co. v. Great Western Ins. Co., 48 N. Y. 571. Resh, 44 Mich. 55 ; s. c, 38 Am. Rep. Coffin V. Newburyport Mar. Ins. Co., 9 2P8. See note at p. 230. Mass. 436. * Shearman v. The Niagara Fire Ins. i* Rice V. New Eng. Mut. Aid So., Co., 46 N. Y., 526 ; s. c, 7 Am. Rep. 146 Mass. 248. Weed v. London and 380. L. Fire Ins. Co., 116 N. Y 100. " Masonic Mutual Benefit Asso. v. " Schuster v. Dutchess Co. Ins. Co., Beek, 77 Ind. 203 ; s. c, 40 Am. R«p lOaN.Y. 260. Merrill V. Agricultural 295. CHAPTER YI. GENERAL PRINCIPLES — CONTINUED. Waiver and Estoppel. § 63. Nature of Waiver and Estoppel. — Waiver is the voluntary relinquishment of a known right.' Estoppel in pais is the bar which equity raises, in the interest of fair dealing, to prevent the one party from enforcing certain rights which it possesses under the 'letter of the contract to the detriment of the other party, where, by its declarations, agreement, or con- duct, it has induced the other party to rest secure in the belief that such rights have been relinquished.^ While waiver, prop- erly speaking, is the voluntary abandonment of a contract right, estoppel includes those cases where an abandonment is inferred or imposed by the court from the nature of the con- duct of the party who would otherwise be entitled to the right. The words waiver and estoppel, however, are often used interchangeably by the courts. The party that generally waives or is estopped in insurance law is the insurer. To support the doctrine of waiver and estoppel it is not necessary that any new or specific considera- tion be exchanged, because, except for rehance upon the belief induced by the conduct of the insurer in question, it is to be presumed that the insured would have taken out other insur ance for his protection ; but even in respect to the provisions of the contract to be performed by the assured after loss no new consideration need be shown to sustain a waiver or estoppel.^ § 64. What in General constitutes a Waiver or Estoi)pel. — Any unequivocal and positive act of the company ' Pinderson v. Metropole Fire Ins. ' Prentice v. Knickerbocker Life Ins. Co., 57 Vt. 520. Co., 77 N. Y. 483. ' Union Ins. Co. v. McGookey, 33 Ohio St. 555. § 66 Waivkr and Estoppel. 69 recognizing the policy as valid after a knowledge of its breach, or any act that puts the insured to unreasonable ex))ense or trouble in the justifiable belief tiiat the company still I'egards the policy as valid, will estop the company from taking advan- tage of the forfeiture.* By the higliest authority the rule is stated thus: " AnjTV agreement, declaration, or course of action on the part of an insurance company which leads a party insured honestly to believe that by conforming thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part, will and ought to estop the company from insisting upon the forfeiture, though it might be claimed under the express letter y/ of the contract." ^ ^ § 65. What the Insured seeks to Accomplish by invoking: tliis Doctrine. — As the question ordinarily arises in practice, the insured, when he claims a waiver or an estoppel, is not aiming at a reformation of the policy in equity, nor at a rescission for fraud or mistake, for generally it would, be difficult for him to establish good grounds for a reformation in such cases, and after loss a rescission would afford inadequate relief and would not come within the jurisdiction of a jury. Therefore the insured ordinarily brin gs his action o f contract _U£on__the_policj, and under the doctrine of waiver and estoppel may be allowed to recoverj_althou^h upon the face of the writ-] ten contract, in conjunction with the testimony of his own wit- nesses, no cause of action is established against the insurers.' 1 § 66. Tlie Disturbance of Contract brouglit about by Parol Testimony. — This fact is of grave import, and upon it turn many of the difficult questions which arise in the apphcation of the doctrine of waiver and estoppel to the insur- ance contract. Thus, to illustrate : The policy makes the state- ments of the written application warranties. The written application, vouched for by the insured, contains certain very important representations : for example, it states, perhaps, that ' Viele V. flermania Ins ('o., 26 la. Kenyon v. Knights Templar, 122 N. 9 ; s. c, 96 Am. Dec. 83. Titus Y. 26?. V. Glens Falls Ins. Co., 81 N. Y. Miowley v. Empire Ins. Co., 3C N. 410. Y. 5r)0 Van Schaiuk v. Niagara Fire " Ins. Co. V. Eggleston, 96 U. S. 572. Ins. Co., 68 N. Y. 434. 'TO Insurance : Fire, Life, Marine. § 67 his age was thirty -five, or that he never had consumption, or that he has taken out no other insurance, but on the trial of the action brought by the insured against the company on its pohcy the uncontradicted testimony shows that his age was forty, or that he had been afflicted with consumption, or that he had taken out other insurance. Under the doctrine of waiver and estoppel, however, the plaintiff is permitted to show by oral testimony' that the company or its agent, duly authorized, had knowledge of the truth of that which was mis- stated in the application, and issued the polic\^ in full possession of such knowledge, or that the applicant made a true statement to the compan}^ or its representative, and is not responsible for the erroneous answers, which, he tells the jury, were errors of the company's agent in filling up the application. Or, again, the policy says that the contract shall be void if mechanics are employed in making repairs for more than fifteen days at any one time, or if the building remains unoccupied for more than ten days without written consent indorsed on the policy. These warranties are broken ; but under the doctrine of this rule of waiver the plaintiff is allowed to testify orally in excuse for the breach of the written contract that, during the life of the policy and before he paid the last premium, he was told by the company or some one of its officials that he was relieved from the contract requirements as to these particulars.^ The leading case of Plumb v. Cattaraugus Ins. Co. is said to have changed the law for New York.^ And this was conceded by the New York Court of Appeals in a later case.' But the doctrine of oral waivers as adopted by New York received the high sanction of the Federal Supreme Court in the Wilkinson case, and has met with full approval in almost all of the States. § 67. Effect of this Doctrine on the Ordinary Rule of Evidence. — It is often said that the doctrine of waiver and estoppel does not contradict the terms of the policy, and is not repugnant to the rule that the written contract merges all ' Plumb V. Cattaraugus Ins. Co., 18 - Dewees v. Manhattan Ins. Co., 6 N. Y. 392. Richmond v. Niagara Fire Vroom. 374. Ins. Co., 79 N. Y. 230. Ins. Co. v. ' Rowley v. Empire Ina. Co., 38 N. Wilkinson, 13 Wall. 222. Baldwin v. Y. 550. Citizens' Ins. Co., 60 Hun. 889. § 68 Waivkr and Estoppel. 71 prior negotiations. This would be true if the plaintiff should bring his action to annul the contract;^ but where, as is usual, the action is brought to recover upon the policy, it would seem to be more sensible and accurate to concede, that, so far as this doctrine tolerates parol evidence of knowledge by the insurers / prior to the contract of facts at variance with its stipulations, and permits the insured to give his oral version of antecedent negotiations and transactions, it does constitute a substantial departure from the ordinary rule of evidence: for a doctrine which denies all force and effect to an unambiguous clause of a written contract, to all moral intents and purposes, expunges the clause from the contract altogether.^ § 68. Reasons in Favor of Waiver and Estoppel in Certain Cases. — The policy is prepared in the interest of the insurers. The applicant must take it or nothing. Its con- ditions are numerous and complex, and often the insured does not receive it until after the contract is closed. Hence he may have no opportunity to compare it with the application. It in fact is not the record of his intent, nor does it sum up his antecedent negotiations with the company, except with respect to those parts of the policy which are in writing. It would not be consonant with fair dealing to permit an insurer in return for the premium to deliver a pretended con- tract of insurance, while knowing all the time, from the very threshhold of the transaction, that a forfeiture is already incurred by reason of a violation of some printed condition, and that therefore the policy is of no more avail to the insured than a piece of waste paper. Again, it would not be right to hold the insured responsible for errors in the application, where their insertion was the act of the company or its representative, without any concurrent carelessness or fault on the part of the insured, for in such a case the alleged breach of contract really is not the act of the insured at all. Again, where the policy during its life or after loss becomes voidable at the election of the insurers, their unequivocal act of confirmation with knowledge of the forfeiture ousfht to be taken as con- elusive evidence of the exercise of their right of option to ' Pitney v. Glens Falls Ins. Co., '65 '^ Franklin Fire Ins. Co. v. Martin, N. Y. 25. . 40 N. J. L. 568. 72 Insurance: Fire, Life, Marine. §69 abandon the forfeiture, and to revive and continue the insur- ance for the benefit of both parties. § 69. Reasons against the Doctrine of Waiver and Estoppel in Certain Cases. — The written instru- ment is supposed to be the final and most truthful evidence of the result of the negotiations, and if not good for that is a meaningless formality. To go outside of it is to encourage falsehood and fraud, and in the adjustment of insurance rates must ultimately result either in disaster to the insurers and their stockholders, or in saddling upon innocent persons in some form the losses caused by unscrupulous claimants, who, if not concluded by the terms of the written contract, will suit their oral testimony to the exigencies of their case. The applicant knows, or ought to know, that the statements in the application, whether right or wrong, constitute all that the home office has before it in estimating and deciding upon the risk, and fixing the rate of premium. He knows, or ought to know, that the insurers have never given any authority to their agent to distort or secrete from them any facts bearing upon this subject ; and he knows, or ought to know, that the policy contains the complete and binding provisions of the con- tract. Under the doctrine of waiver and estoppel it sometimes happens that the insured is allowed to recover upon a policy in spite of the forfeiture which appears upon its face, where, if the facts disclosed for the first time at the trial had been made known to the compan}^ in advance, it would have declined the risk altogether. Thus there is sometimes thrust upon the insurers, by a doctrine of law, a contract which they have neither made, nor upon the testimony disclosed at the trial would have made if they had known it. Such a result would seem to be grossly inequitable ; but, on the other hand, to allow the admissibility of this doctrine to turn upon a mere speculation as to whether the insurers would or would not have accepted the risk, if they had known the truth, is to make confusion worse confounded. Furthermore, such a course might sometimes be unjust to the assured, if innocent, for mean- while he may have lost the opportunity of getting other insur- ance, and may be ignorant of any ground of forfeiturv3 until apprised of it in the course of a law-suit upon the policy. § 71 Waiver and Estoppel. . 73 § 70. How this Doetrino has operated in Prac- tice. — The doctrine of waiver unci estoppel by agents of insur- ance companies located outside the home office is largely a development of recent years, and covers one of the most per- plexing subjects to be found in the law books. It has often fostered the claims of unscrupulous men, it has been fruitful in litigations, and has had a tendency to drive the companies into an illiberal policy in framing their contracts and in adjusting their losses. Such action of the companies has stimulated the courts in turn to adopt a moi-e and more rigorous application of the doctrine against the insurers, and has called forth frequent and varied interference by the legislatures of most of the States. Thus this whole branch of the law has been thrown into confusion and uncertainty. The cases upon this subject constitute a considerable portion of the law of insurance in the United States, more so than in England, and many of the opinions of our courts of last resort set forth in them are hopelessly at variance with one another. Notwithstanding all this the doctrine is firmly established, and in many of its applications is just and salutary, and when wisely enforced may be consonant with principles which are now thoroughly recognized both here and in England.* Upon a careful review of the English and American authori- ties, Professor D wight, as one of the commissioners of the New York Court of Appeals, came to the conclusion that the doc- trine of waiver and estoppel by parol evidence as applicable to written contracts of insurance is not inconsistent with the gen- eral principles of the law.^ §71. Cause of the Conflict of Opinion in apply- ing tlie Doctrine. — The striking divei-gence of opinion to be found in the reports of American insurance cases upon the subject of waiver and estoppel is not due to indifference or care- lessness on the part of the judiciary in developing this import- ant branch of the law, but rather to certain embarrassing peculiarities of fact which appertain to the making and operation of insurance contracts. The insurers being corporations can act ' Morrison v Univeisal Marine Ins. '' Pitney v. Glens Palls Ins. Co., 65 Co., L. R., 8 Exeh 40. Piekard v. N. Y. 6. Pechner v. Phcenix Ins. Co. , Sears, 6 Ad. & Ell. 475. 65 N. Y. 195. 74 Insurance : Fire, Life, Marine. § 71 only through agents, and, as was exphuned in the first or intro- ductory ciiapter, tlie powers of these agents are varied and often ill-delined. Ver}^ few of them can strictly be called general agents in the sense in which that term is usually understood in the law, though the powers given to agents by American fire companies are apt to be broader than the powers of local agents of English companies in England. The applicant for insurance knows little about the scope of tlie agent's actual instructions. In making request for fire or life insurance he often signs a voluminous written application which is forwarded to the home office before he sees the ])olicy. The premium, too, is some- times paid and the contract closed before the policy is deliv- ered. The policy, when received, perhaps gives to the insured a notice, in the form of a stipulation, that the company, after it has taken advantage of its agent's acts, proposes to repudiate ex post facto all responsibility for tlieni. The policy states that tlie agent is to be deemed the agent of tlie insured in what has already ha])]iened, or that no one is to be deemed an agent for the company unless he has a written commission, or that no agent or officer or any representative of the company can waive provisions of the contract except in writing indorsed on the policy. If a life policy, it states, probably, that no payment of premium is valid unless paid in cash, and that no payment of premium can be made except in return for a written receipt signed by some desigiaated officer or officers. Meanwhile the home office may or may not have received the premium. A loss or death insured against may or may not have occurred. The recitals or stipulations in the policy concerning the author- ity of the agent may or may not correspond with the ostensible authority which the agent was held out by the company to pos- sess before delivery of the policy. They may or may not accord with the actual authority given to the agent by the company, of which, from the nature of things, the best and primary evi- dence must exist outside the policy. It will readily be seen that the distinctions likely to arise are many and nice ; that a conflict of opinion may oftentimes be apparent rather than real, and that it is not safe to take the remarks of a court in one case and apply them recklessl}' to the varying circum- stances of another case, or to jump to the conclusion that the comments of a judge in the course of some particular discussion § 7i Waiver and Estoppel. 75 are necessarily intended to sei've as tlu; eimnciationof a general rule. The necessity for such a warning may be well illustrated by reference to three very recent cases, decided within a single year by a court that perha{)S has given more successful study and learning to this branch of the law than any other court in the country. In the case of Arff v. Sun Fire Ins. Co., 125 N. Y. 57 (1890), the court advances the opinion that an ordinary agent of an insurance conipanv has the power to employ clerks empowered to discharge the ordinary business of his agency, and that a waiver of a character which the agent himself could make is to be attributed to liim when made by his clerk; that the maxim of delegatus non potest delegare does not apply to such a case, and that the knowledge of a clerk of the agent of the compan}^ that there was other insurance was the knowl- edge of the agent of the company, and, therefore, knowledge of the company itself, and sufficient to estop it from taking advan- tage of a clause in the policy under which, otherwise, the policy would have been avoided. The real point of the case, doubtless, was that the subagent was believed to have authorit}'' emanating by recognition from the company itself to receive notice of other insurance in pursu- ance of a provision of the policy. The inference ought not to be drawn from this decision that a solemn written contract, which to have any validity at all may perhaps require to be signed by the president and secretary of a corporation, and counter- signed by its general agent, is to be placed wholly at the mercy of an irresponsible subagent, who is neither selected, controlled, paid, or discharged by the company ; nor must it be inferred from the language of the learned justice who pro- nounced the opinion of the court, though it is suggestive of such an inference, that insurance companies are to be deprived of the equal protection of the law. The general rule relating to the authority of subagents and clerks is better stated in the recent case of Waldman v. North British, &c., Ins. Co., 91 Ala. 170, in which it was held that the maxim delegatus non potest delegare is applicable to the agents of insurance companies, and that any general discretion- ary powders granted to an agent, such as waiving or modifying the terms of the policy, cannot be by him transferred to a sub- t6 Insukance: Fire, Life, Marine. §71 agent. That case also, as well as the Arff case, had to do with waiving the clause about other insurance. In Wilber v. Williainsbucgh City Fire Ins. Co., 122 N. Y. 443 (1890), the court says: "It was entirely competent for the parties to agree that a third person ])articipating in the negotiations should, for the ])urpose of pi'ociiring the policy, be deemed an agent of the assured." Such agent "sliould be deemed the agent of the assured until after the inception of the contract. Whether he thereafter represent the assured is dependent upon actual authority conferred otherwise than by the contract of insurance." From this language it must not be understood that the court really intended to commit itself unqualifiedly to the proposition that the actual authority of an insurance agent is to be considered as conferred by a policy of insurance, a con- tract subsisting between the company and a third party, or that a stipulation declaring in effect that all agents in the transaction are to be deemed agents of the assured would be conclusively binding upon the assured until he had seen the policy, and that after he had seen the policy it would not be binding upon him. Curiously enough, the courts of Pennsylvania and Dakota, and other courts, have adopted as applicable to a similar stipu- lation in the policy the precise converse of the rule which might seem to be indicated by the case last referred to, and have held that the stipulation or notice of restriction as to agency contained in the policy has no binding force at all until it is received by the insured.^ In Kenyon v. Knight Templars, 122 N. Y. 267 (1890), the court says : " The mere fact that the agent had knowledge or information of the manner the assured was then selling liquors, did not necessarily affect the right of the defendant to assert and make available the defense that there was a breach of war- ranty, if the answer Avas untrue. That was provided against by a provision in the contract. The cases in which knowledge of the agent through whom insurance is taken may operate to defeat the right of the company to avail itself of the fact so * Kister v. Lebanon Mut. Ins. Co., 464. South Bend Toy Mfg. Co. v. 128 Pa. St. 653. Eilenberger v. Pro- Dakota F. & M. Ins. Co., 20 Ins. tective Mut. Fire Ins. Co., 89 Pa. St. L. J. 871 (South Dak., 1891). § 71 Waiver and Estoppel. 77 known, at the time it is taken, are those in which there is no apphcation signed by the assured, stating to the contrary of such existing fact, but rest upon a condition expressed in the poHcy merely. Then it may be presumed that the statement of it in the policy as required by the condition was omitted by mistake or waived. Such is not understood to be the rule when the alleged breach of warranty is founded upon a mis- statement by the assured in the application made and sub- scribed by him." Here the court seems to think that it does make a difference, after all, whether the insured has had actual or only construct- ive notice of restrictions upon the agent's power ; but, from the language of the court just quoted, it must not be inferred that a mere knowledge of forfeiture, without any positive act of con- firmation, as, for example, delivery of policy or receipt of pre- mium, will in any case avail to work a waiver of a breach of the policy ; ^ neither must it be inferred that a breach of a warranty contained in a policy may be waived by an agent where the policy says it cannot, but that a breach of a war- ranty contained in the application forming a part of the pohcy cannot be waived by any agent, no matter how broad his authority.^ ' Weed V. London & li. Fire Ins. N. Y. 315. ■ Tubbs v. Dwelling House Co. 116 N. Y. 118; Titus v. Glens Ins Co., 84 Mich. 646. Pollette v. Falls Ins. Co., 81 N. Y. 419. U. S^ Mut. Ace. Asso., 107 N. C. 240. Mns. Co. V. Norton, 96 U. S. 240. State Ins. Co. v. Gray, 44 Kan. 781. McGurk V. Met. Life Ins. Co. , 56 Conn. German Ins. Co. v. Gray, 43 Kan. 497. 528. Steenv. Niagara Fire Ins. Co., 89 Cont'l Ins. Co. v. Pearce, 39 Kan. 396. CHAPTER YII. GENERAL PRINCIPLES. Waiver and Estoppel — Continued. § 72. What cannot be Waived. — Parties to a con. tract of insurance made within a State cannot avoid the pro- visions of a general statute of that State, unless the statute authorizes it.^ The State has the right to prescribe the conditions on which either foreign or domestic companies may do business within its jurisdiction, and hence may prescribe conditions of the con- tract with reference to certain particulars, or may establish a standard form of contract.^ A corporation cannot in general do an act ultra vires or bej'ond its corporate powers as defined by its charter, and every one dealing with the corporation is presumed to be cog- nizant of the nature and extent of such powers.^ Thus if a fire insurance company organized in New York should attempt to make a contract of life or ocean-marine insurance, the contract would be void.* But any directions of the charter as to the internal manage- ment of the affairs of the corporation are not in general bind- ing upon outsiders.'^ Nor are charter provisions binding upon third persons which extend to the directors' discretionary powers to do a certain act ; ^ as, for example, where, by the regulations of the ' St Paul F. & M. Ins. Co. v. Shafer, ' Jemison v. Citizens Savings Bank, 76 Iowa, 283. Emery v. Piscataqua F. 132 N. Y. 140 (1890). & M. Ins. Co., 52 Me. 322. Chamber- * Re Arthur Average Assoc, 32 L. lain V. N. Fl. Fire Ins. Co., 55 N. H. 249. T. N. S. 525. '^ Continental Ins. Co. v. Chamber- ' In re Athenaeum Life Assur. Co., lain, 13 2 U. S. 304. Doyle v. Conti- 27 L. J. Ch. 829. nental Ins. Co., 94 U. S. 535. Reilly ' Ernest v Nicholls, 6 H. of L. V. Franklin Ins. Co., 43 Wis. 449. Caaes, 401 § 75 "Waiver and Estoppel. 79 company, insurance is to be made only to three-fourths of the value of property, but the officers of the company are to decide what is the value.' And, in general, for a deviation from the prescribed method of doing a valid corporate act, the corporation will not be dis charged from liability to an innocent person, and therefore in such matters of informality or of inaccuracy, directions whether of the charter or by-laws may be waived.^ § 73. What can be Waived : Stock Companies. — Any forfeiture or smy condition of the policj^ inserted for the benefit of the insurers, even those stipulations which provide that there shall be no waiver, or that no waivei* shall be made except in a certain manner as by writing, or that certain classes of persons shall be deemed to have no authority to waive, may be waived by the insurers through such representa- tives as in fact have the requisite authority. This is put upon the ground that parties having power to make a contract have power by mutual consent to abrogate or alter it to any extent at their pleasure, unless restrained by statute.^ § 74. New Subject cannot be Introduced by/ Waiver. — The doctrine ol' waiver and estoppel is not to be applied so as to effect a change in the subject-matter of the\ contract. Thus if by the terms of the policy a designated house is the subject of insurance, the insured will not be permitted to show by parol that in consequence of the representations or conduct of the insurers another house ought to be substitutedj— § 75. Rule in Massachusetts and New Jersey, — Massachusetts and New Jersey adhere more closely to the doc- trine of the common law, and hold that a waiver of a forfeiture ' Jones V. Bangor Mut. S. Ins. So., Co., 116 N. Y. 106. Insurance Co. v. 61 L. T. N. S. 727 (1890). Norton, 96 U. S. 240. Messelback v. " In re County Life Assur. Co., L. Norman, 123 N. Y. 578. Armstrong R.,5Ch. App. 388. First Bapt. Church v. Turquand. 9 Irish Com. Law, 33. V. Brooklyn Fire Ins. Co., 19 N. Y. Trustees of First Bapt. Cli. v. Brooklyn H05. Relief Ins. Co. v. Shaw, 94 U. S. Fire Ins. Co., 19 N. Y. 80"). Conover 574. V. Mutual Ins. Co., 1 Comstock, 390. ' Weed V. London & L. Fire Ins. ■• Sanders v. Co oper, 115 N. Y. 279. ^J^C* 80 Insurance : Fire, Life, Marine. § 76 existing at the inception of tiie contract cannot be established by parol testimony of what transpired at or before the closing of the contract.^ But in those States also a waiver occurring after the incep- tion of the contract may be shown by parol.^ § 76. What can be Waived : Mutual Companies. — By some courts, especially those of Massachusetts, it has been held that the officers and agents of a mutual insurance company have no authority to waive such of its charter regu- lations or by-laws as relate to the essential terms of the con- tract.^ This distinction is put upon the ground that policy holders in a mutual company are members of the company, and that the by-laws are binding upon all, and that the officers and other representatives of the company are special agents appointed to enforce the by-laws and mutual arrangements, and not to dis- regard them in favor of one of the members as against his associates. Even in Massachusetts the limitation extends only to pro- jvisions that are of the essence of the contract. Technical irequirements in regard to the form and the contents of the I proofs of loss, or limitation of time to sue, may be waived.^ ♦ And the tendency among the courts seems to be to deny the distinction between mutual and stock companies alto- gether, in respect to the power of the officers and agents to waive conditions and estop the company from insisting upon forfeitures ; for, as matter of fact, the applicant for insurance rarely knows anything about the charter or by-laws, and could hardly be expected to be acquainted with them at the time of making his application.^ ' Batchelder V. Queen's Ins. Co., 135 v. Shawmut Mut. Fire Ins. Co., 4 Mass 449. Dewees v. Manhattan Ins. Allen, 116 ; s. c, 81 Am. Dec. 689. Co.. 6 Vroom (N. J.), 366. Belleville Mnt. Ins. Co. v. Van Win- ' Oakes v. Manufrs. F. & M. Ins. kle. 1 Beasley, 333. Pitney v. Glens Co., 135 Mass. 248. Metropolitan Life Falls, 65 K Y. 21. Ins. Co. V. McTague, 49 N. J. L. 587. * Priest v. citizens' Mut. Fire Ins. Carson v. Jersey City Ins. Co , 43 N. <'o. , 3 Allen, 602. Jennings v. Met- J. Law, 300 ; s. c, 39 Am. Rep 584. ropolitan Life Ins. Co., 148 Mass. 'McCoy V. Metrop. Life Ins. Co., 61. 133 Mass. 85. Brewer v. Chelsea Mut. "• Relief Ins. Co. v. Shaw, 94 tJ. S. Fire Ins. Co., 14 Gray, 203. Mulrey 574. Kister v. Lebanon Mut. Ins. Co.. §TT Waiver and Estoppel. 81 Universally it is held that the acceptance of an assessment or premium by the home office is a- waiver by the company of all former grounds of forfeiture known by it.^ , % § 77. What ainoiiiits to a Waiver. — Any unequivo- cal and positive act by the insurers, or their duly authorized agent, recognizing the policy as valid — as, for example, the '-^^ receipt of a premium or assessment, the delivery of the policy ^ - or a renewal receipt, or the levying of an assessment — consti- *" tutes a waiver of all former known grounds of forfeiture, and the company is said to be estopped from setting them up in defense.^ But it is very important to notice that an oral consent or promise made to tlie insured at or before the execution of the contract, to tlie effect that he may in future violate the terms of the policy, is not binding, and cannot be shown by parol, because the oral promise becomes merged in the contract.^ Thus an antecedent promise by an agent, that a premium note need not be paid when ckie, cannot be shown by parol/ An oral consent by the insurers or their duly authorized agent, given to the insured after the execution of the contract, permitting him to deviate from the requirements of the policy, will operate as a waiver if the insured has relied upon it in such a way that he would sustain injury in case the consent were repudiated by the insurers, and no new consideration need be shovrn to support the waiver. The consent of the insurers may 128 Pa. St. 553. Conover v. Mutual Ins. Co., 1 Comstock, 290. Natl. Mut. Ben. Asso. v. Jones, 84 Ky. 110. Mil- ler V. Hillsborough Mut. Fire Assur. Asso., 44 N. J. Equity, 224 Eilen- berger v. Protective Mut. Fire Ins. Co., 89 Pa. St. 464, Olmstead v. Farmers' Mut. Fire Ins. Co., 50 Mich, 204. Shay v. Natl. Ben. Society, 54 Hun. 109. Stylow v. Wis. Odd Pel- lows' Mut. Life Ins. Co.. Wilber v. Williamsburgh City Fire Mar. Ins. Co. , 43 Wis. 108. North Ins. Co., 122 N. Y. 443. Ins. Co. v. Brit. & Mer. Ins. Co. v. Crutcnfield, Norton. 96 U. S. 234. 108 Ind. 518. Sullivan v. Phenix Ins. " Kister v. Lebanon Mut. Ins. Co., Co., 34 Kans. 170. Planters Ins. Co. 128 Pa. State, 553. Commercial Ins. v. Myers, 55 Miss. 479. Boetcher v. Vo. V. Ives, 56 lU. 402. Kausal v. Hawkeye Ins. Co., 47 Iowa, 258. Par- Minn. Farmers Mut. Fire Ins. Co., 31 tridgev Commercial Ins. Co., 17 Hun. Minn. 17. Gans v. St. Paul Fire & 95. 92 Insurance: Fire, Life, Marine. § 90 pleasure.^ Following a similar view the New York Court of Appeals has unanimously held in a recent case that an ag(3nt of an insurance company may be shown to have an actual author- ity to waive a forfeiture for non-payment of premiums, although the policv itself declare that he has no such authority.^ The same principle has lately been held by several courts to be applicable to proceedings antecedent to the closing of the con- tract, although the application shown to the insured contained a notice of a pretended limitation upon the powers of the agent to waive conditions or alter the written contract.^ So, also, if the agent has in fact an authority broad enough, he may by his acts, if done within the scope of his actual em- ployment, estop the company from claiming that an alleged violation of the letter of the contract really brought about by the agent himself shall constitute a defense.* Certain States, by statute, have adopted the rule that the solicitins: agfent shall be deemed the agent of the insurers, no matter what the polic}^ provides. Such statutes are constitu- tional and control the contract, but have the disadvantage of all unreasonably meddlesome legislation.^ § 90. Effect of Stipulations as to the Manner of Exercising Authority.— Where the policy by its terms permits a waiver of its conditions, it generally provides that such waiver shall be made only by written agreement, in- dorsed upon the policy. The New York standard fire policy also stipulates that no representative of the insurers shall he deemed to have authority to waive in any other manner, except by written agreement, indorsed upon the policy or attached to it. To provide that a waiver must be evidenced by writing is eminently reasonable and business-like, and full force and effect ought to be given to this clause.* ' Norton v.Jns. Co., 96 U. S. 234^ ' Continental Life Ins. Co. v. Chara- ~»^Wyman V. Phoenix Mut. Ins. Co".' berlain, 132 U. S. 304. McConnell 119 N. Y. 274 (18!)0) v. Iowa Mut. Aid Asso., 79 Iowa • Tubbs y. Dwelling House Ins. Co., 757. 84 Mich. 646 (1891). State Ins. Co. v. » Hill v. London Assur. Soc, 26 Gray, 44 Kans. li\ (1890). Abb. N. C. 203 (1890); s, c, 16 Daly ♦ Messelbach v. Norman, 122 N. Y. 120. 578 (1890). § 90 "Waiver and Estoppel by Agents. 93 But whether this prescribed method of effecting waivers is exclusive, or whether it may itself be waived or disregarded by any representative of the company empowered with actual authority to control the contract in his discretion, is a mooted question. The Massachusetts court, in a late case, seems to decide that it is exclusive. It uses the following language : " The defendant requested the court to instruct the jury, in sub- stance, that a local agent, with authority to receive premiums and issue policies, had no authority as such to waive the terras and conditions of the policy, or to waive the conditions in the policy which required the written or printed assent of the com- pany to any change in the situation or circumstances affecting the risk. To these instructions the defendant was entitled. They correctly state the law, and were called for by the evi- dence. An agent to receive premiums and issue policies is not, independently of evidence showing that he has a much larger authority than this, empowered to waive conditions so import- ant that parties have seen tit to incorporate them into their con- tract. Some additional evidence must be offered to show that he had been held out by the company as possessing such authority, or that the company had so I'atified similar acts, or had so conducted itself in regard to his other transactions that the insured was justified in believing that he had such author- ity. Nor even if the agent had the fullest authority could the conditions of the policy be waived, except in the manner in which they provide for such waiver. A company which has seen fit to prescribe that the terms and conditions of its policy shall only be waived by its written or printed assent, has pre- scribed only a reasonable rule to guard against the uncertain- ties of oral evidence, and by this the insured has assented to be bound." ^ Such reasoning as this is very cogent, but it aims a blow at the doctrine of waiver generall}^ as it has been applied by all the courts to the contract of insurance. In a later case, on the other hand, the New York Court of Appeals undoubtedly voices the prevailing opinion when it ■says : '' Notwithstanding the provisions of the policy that any- thing less than a distinct sjjecific agreement, clearly expressed » Kyte V. Commercial Union Assur. Co., 144 Mass. 46 (1887), Devens, J. 94 Insurance: Fire, Life, Marine. §91 and indorsed on the policy, should not bo considered as a waiver of any printed or written condition or restriction therein, the court recognize and affirm the law as settled in this State that such condition can be dispensed with by the company or its general agents by oral consent as well as by writing." ^ Inasmuch as the admitted purpose of a waiver or an estoppel is to subvert the terms of the contract, the New York rule seems to be more in harmony with the principles which under- lie the doctrine of waivers generally ; but it by no means fol- lows that this doctrine is altogether independent of the stipula- tions of the parties. It is an anomalous and exceptional rule of law, established only to prevent injustice or fraud, but is to be qualified by express agreement when fairly and intelligently made. § 91, Authority of Officers of the Company. — Unless restricted by charter or official action of the directors, officers have, in general, authority to make and alter contracts, to waive conditions and forfeitures, to give permits, to cancel policies, to adjust losses and compromise claims in their dis- cretion. Where a policy of insurance or other instrument emanating from them alone, or from their subordinates, states that neither they nor any other representative of the coi"poration have any such power, it simply amounts to the contradiction of a rule of law. Some companies define this matter by official action, of which they ordinarily give notice to those who deal with them.' The Equitable Life Insurance Company, for example, gives notice that certain of its officers, naming them, are the sole representatives of the company authorized to make, alter, and discharge contracts, and waive forfeitures. In that company one of the designated officers, if he had actual authority, could unquestionably waive any clause of the policy, although » Weed V. London & Lancashire Fire 625. Pechner v. PhcBnix Ins. Co., 65 Ins. Co., 116 N. Y. 117 (1889), per N. Y. 195. l^rown. J. Steen v. Niagara Fire Ins. ^ Ryan v. World Mut. Life Ins. Co., Co., 89 N Y. 315. Marcus v. St. 41 Conn. 168. Louis Mut. Life Ins. Co., 68 N. Y. § 93 Waiver and Estoppkl by Agents. 95 the policy should provide, as does the New York standard fire policy, that no representative of the compan}^ had such power ; and he could, witliin the prevailing rule of law, make an effect- ual oral waiver, although the policy provided that no waivers should be valid unless in writing.* § 93. Authority of Managers. — General managers of ; foreign insurance companies and of domestic fire or marine ' companies, with regard to the doctrine of waiver and estoppel, in the absence of express restrictions upon their authorityjnade know n to the insur ed, stand very much in the place of officers.* § 93. Authority of Canvassing Agents : Life. — Can- vassing agents of life insurance companies, whether the so called > general agents or sub-agents, have as a rule, as explained in j Chapter I., no express authority to make, alter, or discharge ■ contracts, or to waive forfeitures, or to grant permits. In this regard they are essentially special agents, whether the policy calls them so or not ; and there is no reason— though some of the courts do not agree to this — why in the ordinary course of business they should be assumed by those dealing with them to have any such authority, except as described and explained in the following instances. 1. Exception as to first premium. An agent of a life company who is intrusted with the business of closing the contract by delivering the policy is held to have an implied authority to determine how the premium then due shall be paid, whether by cash or, as is sometimes done, by giving credit, in which case the agent becomes the creditor of the insured, and debtor to the insurer. In that event, though the agent subsequently defaulted and the money never reached the company, the policy would still be binding.* By the weight of authority the agent is held to have this dis- cretionary power, although the policy in terms denies it ; but ' Dilleber v. Knickerbocker Life Ins. '^ Eastern R.R. Co. v. Relief Ins. Co., Co., 76 N. Y. 567. Baldwin v. Citizens 105 Mass. 570. McGurk v. Metropoli- Ins. Co.. 60 Hun, 389 (1891). Steen v. tan I>ife, 56 Conn. 528. Ins. Co. t. Niagara Fire Ins. Co., 89 N. Y. 315. Mahone, 21 Wall. 152. Church V. Lafayette Fire Ins. Co., 66 ' Miller v. Life Co., 12 Wall. 286, N. Y. 222. 9Q Insurance : Fire, Life, Marine. § 93 this is based upon his possession of the document for purposes of dehvery, and his instructions to dehver it, and consequently his power does not extend to subsequent premiums or premium notes. ^ It might, however, be necessary for the insured to give some evidence that such a custom was known and permitted by the company, if the pohcy expressly denied the agent this power, for it has been held that the soliciting agent has no authority simply by virtue of his position to accept anything but cash ; ^ and of course he would have no implied author- ity to take in payment personal property, as, for instance, a horse.^ 2. Where the application for insurance is filled in by the soliciting agent of the insurer, and true answers of the insured, given orally, to the interrogatories contained therein are errone- ously or improperly written by the agent at his own suggestion, without carelessness or fraud or collusion on the part of the assured, the insurer is responsible for the mistake, and is es- topped from seeking to convert its own act into a ground of defense against the insured for an alleged breach of contract. In such a case the courts are disposed to hold the company, no matter what the policy or the application may provide to the contrary, on the ground that the act is purely the act of the company, and that an estoppel derives its sanction from a rule of hiw and not at all from the contract itself, which indeed its ostensible object is to subvert.^ If, however, the erroneous statements in the application are the result of fraud on the part of the insured, or collusion with the agent, the equities of the insured are no better than those of the company, and the company is not estopped from insist- ing upon the letter of the written contract. Thus where the ' Critchett v. Am. Ins. Co., 53 Iowa, * Messelback v. Norman, 122 N. Y. 404: s.c, 36 Am. Rep. 230. Walsh v. 578. Tubbs v. Dwelling House Ins. Hartford Ins. Co., 73 N. Y. 5. Life Co., 84 Mich. 646. Continental Ins. Ass. Co. V. Ward, 17 C. B. 645. Roeh- Co. v. Pearce, 39 Kans. 396. O'Brien ner v. Knick Life Ins. Co., 63 N, Y. v. Home Benefit Society, 117 N. Y. 160. 310. Miller v. Phoenix Mutual Life « Raub V N, Y. Ins. Co., 14 N. Y. Ins. Co., 107 N. Y. • 93. Ins. Co. v. State l^cp. 573. Wilkinson, 13 Wall 23-'. Continental ■ HolTinaii v. John Hancock Mut. Ins. Co. v. Chamberlain, 133 U. S. Co., 9'? []. S 161. 804. § 93 Waiver and Estoppel by Agents. 97 insured told the agent that he could write the answer as he liked.^ The Maryland case,^ like others of a similar kind, is not to be commended ; for the insured in the Maryland case knew that the company was to be misinformed as to his age, and, although he was an ignorant man, the company ought not to have been held responsible for his moral degradation, whether the act of writing the erroneous answer was the act of the accent or not. If the mistake in the application constituting the alleged breach of warranty occurs because of the omission of the insured to read the application, and he is not reasonably deterred from reading it by affirmative representations of the agent, or by inability through blindness or ignorance, the in- sured ought unquestionably to be held responsible for the writ- ten statements which he has signed as the basis of the con- tract ; and clearly an omission to read the application is pru)ia facie carelessness ^ on his part. On this last point, however, the courts have divided, and in many cases it has been held that the company is bound by the act of its agent in writing the mistake into the application, although the error is perfected through the carelessness of the insured in neglecting to read what he signs. 3. If the statements of the application are what the insured intended them to be, and the mistake arose through ignorance of the meaning of the terms employed, which were used at the suggestion of the agent, the insured ought to be held to the written contract, and the policy avoided, if the agent is only an ordinary canvassing agent, although such agent be styled a general agent with power to select sub-agents; for, as we jjave seen, soliciting agents of life companies are in law nothing but special agents, without authority to alter policies by their rep- resentations or promises. They have no right to interpret the terms of the application or the policy. The law determines what the written language means, and an agent who has no ' Blooming Grove Mut. Ins. Co. v. ^ Keystone Mut. Ben. Asso. v. Jones McAnerney, 102 Pa. St. 335; s c, 72 Md. 363 {1S90). 48 Am. Rep. 209. Lewis v. Phoe- ' N. Y. Life Ins. Co. v. Fletcher, 11? nix Mut. Life Ins., Co., 39 Conn. U. S. 519. Ryan v. World Life Ins. 100. Co., 41 Conn. 168. 7 98 Insurance : Firk, Life, Marine. § 93 authority to make a contract has no authority to unmake one by expressing his opinion of its meaning.' It must be conceded, however, tliat in many cases the contrary view has been accepted by the courts; namely, that by allowing any representative, though only a special agent, to take an application for insurance, the company impliedly gives an authority to him to interpret the meaning and effect of the interrogatories contained in the paper, and also of such answers as may be made to them by the applicant : and this view has in certain instances seemed to receive the sanction of judges of the highest eminence. See, for example, the language of Chief-Justice Kuger in the New York case, and of Justice Hunt in the Federal case."^ Whatever may be the sound rule on this point, the com- panies, in consequence of divers decisions against them, are apt to give an express notice to the insured, in the applica- tion or premium receipt, of a restriction upon the agent's authority to interpret or otherwise change the terms of the contract; and by such notice of restriction, if true, the insured will be bound. Thus where in answer to the question contained in the application, " Are you now insured in any other company?" the applicant truthfully stated to the agent that he had certain other insurance, but the agent wrote " No,"" it was held that the company was not liable ; for on the back of the policy was a notice that no agent had the power to bind the company b}' receiving any representations or information not contained in the application. And this case has lately been affirmed on appeal by the New York Court of Appeals.* These cases are on the border line, and other courts upon sim- ilar facts are disposed to consider the doctrine of waiver as dominating the contract restrictions.^ Similarly if the assured knows or has agreed that the agent is a special agent, without ' Allen V. German Am. Ins. Co., Fund Life Asso., 54 Hun, 294. Ka- 12B N. Y. (>. Devens v. Mech. & bok v. Phcenix Mut. Life Ins. Co., 4 Traders Ins. Co., 83 N. Y. 168. N. Y. Suppl. 718. ' Miller v. Phoenix Mut. Life Ins. * Tubbs v. Dwellino: House Ins. Co., Co., 107 N. Y. -.'96. N. J. Mut. Life 84 Mich. (i46 (1891). Bushaw v, Ins. Co. V. Baker, 94 U. S. 010. W^omen's Mut. Co., 8 N. Y. Suppl. * McCoUum V. Mut. Life Ins. Co., 423. Baumgartel v. Prov. Wash. Ins 65 Hun. 103 ; s. c, l'>4 N. Y. 642 Co., 61 Hun. 118 (1891). (1891). Wilkins v. Mut. Reserve § 03 Waiver and Estoppel by Agents. 99 power of controlling the terms of the contract, the knowledge bv such agent of a forfeiture at the time the contract is closed will not bind or estop the company. This is clearlj' sound.' If, however, the agent is in fact a general agent, with authority like an officer of the company to make and modify contracts in his discretion, his interpretation of the questions and answers in the application, if relied on by the applicant, will bind the company, as will also knowledge on his part of a cause of forfeiture at the time the contract is closed.^ The Mahone case has been made an authority, but improperly, for the extension of the rule announced in it to cases where the agent had in fact no such extensive authority. Knowledge by the soliciting agent of facts constituting a ground of forfeiture at the time of the inception of the con-i tract ought not to avail to estop the company, even in' conjunction with the receipt of premium or delivery of the policy, unless the agent communicate the knowledge of forfeit- ure to one having discretionary power to waive the conditions of the contract. The acquisition of such knowledge does not in any way enlarge the powers of the special agent, though if he already had the authorit\' to alter the terms of the contract it might then become a factor in operating an estoppel. If the know;l- edge by the special agent of a ground of forfeiture could work an estoppel simply because he was doing something for the company w^hen he acquired it, then the knowledge of his clerk or office boy might accomplish the same result, and the conclu- sion would be reached that the binding obligation of a solemn written contract may be destroyed by the casual information acquired or said to be acquired b}'^ a wholly irresponsible per- son doing some trivial act for the company without the conniv- ance or knowledge of the company or any of its commissioned agents. Estoppel is a doctrine to prevent fraud. Knowledge/ to operate as a waiver of contract rights should only be imput-l able to the company when possessed by some one w^ho is fairly' a substitute for the companyJn_tba.premisfiai_ The reasoning of the Iowa court in Boetcher v. Hawkeye ' Kenjon V. Knights Templar, etc., patrick v. Hartford Annuity Co., r)6 Asso., 122 N. Y. 247. But see Fitz- Conn. 116. ■' Ins. Co. V. Mahone, 21 Wall. 152. 100 Insukance : Fiee, Life, Marine. § 94 Insurance Company, that the soliciting agent of the company should not be deemed the agent of the assured, though the policy provided that he should be, is weighty ; but their con- clusion, that knowledge of forfeiture by the special agent should bind the company, is not so satisfactory.^ This case, however, is only one of a large class, and serves to illustrate the proposition that some of the judges have enforced the doctrine that notice to an insurance agent is notice to the principal in a manner unknown to the general law of agency. There can be no question that some of the courts have gone too far in this direction ; and for confirmation of this view the re- cent and carefully considered opinions of the House of Lords should be consulted.^ A distinction may perhaps be made between the case where it is sought to destroy a condition of the contract altogether by knowledge possessed by the agent, and the case in which the agent is held to be a suitable representative for receiving a notice pursuant to the terms of the policy. In an English case where the policy provided that notice must be given to the directors and their consent obtained for non-residence, and the assignee of the assured gave notice to the local agent of the company that the assured had left the country, and there- after paid his premiums for several years upon the policy, it was held that the insurers, who had received these premiums in the regular course of business, were liable, although in fact the agent had no authority to give such a permit.^ § 94. Effect of Stipulations in the Policy in Re- spect to the Authority of Canvassing Life Agents. — Where the application gives truthful notice to the insured that the agent of the company has no authority to waive con- ditions or forfeitures, or where the assured expressly stipulates that the written statements of the application shall be the only statements upon which the contract is made, any errors of the agent in transcribing the answers will not estop the company, ' except as the assured is able to make out a clear case of estop- pel by reason of acts of the agent within the actual scope of ' Boetcher v. Hawkeye Ins. Co., 47 ' Wing v. Harvey, 5 De G. M. & G. Iowa, 253. 265. ^ Blackburn v. Vigors, L. R., 12 App. Cas. 631. § 95 Waiver and Estoppel by Agents. 101 his authority.* But where the error in the a])phc;itioii was solely the act of the company's agent, the assured being unable to read and having given true answers to the agent orally, it was held that phe company could not set up the breach of warranty in defense, although the application contained the warranty that tlie answers of the applicant were full, complete, and true, whether written by his own hand or not.^ § 95. Commissioned Agents : Fire. — The commis. sioned agents of fire insurance companies are more properly general agents, and except as restrictions upon their authority are inserted in the application or policy, or otherwise made known to the insured, they are held to have power to waive conditions and forfeitures.^ This conclusion is based upon the fact that they have authority to make, cancel, and renew con- tracts, being furnished with blanks for that purpose. The principles laid down in the last two sections are also applicable to the representatives of fire and marine companies as well as to life. The fire policy, however — and this is true of the marine policy also — does not ordinarily make the payment of the premium a condition precedent to the validity of the contract, and a general agent may of course extend credit to the insured, or not, as he chooses. The general custom where credit is given is for the agent to do so on his own responsibility. But in case the agent should make default in accountinof to the com- es o pany the policy will nevertheless be valid. And though the policy provide that it shall not take effect until the premium is paid in cash, the general agent lias power to waive the provis- ion, and will be held to have waived it if he delivers the policy without enforcing payment."* If at the time of receiving the premium or delivering the policy the general agent has knowledge of a ground of forfeit- ' Ins. Co. V. Wolff, 95 U. S. 329. ' Walsh v. Hartford Fire Ins. Co., Messelbach v. Norman. 1-33 N. Y. 578. 78 N. Y. 5, Ins. Co. V. Norton, 96 U. S 240. Wil- * Bodine v. Exchange Fire Ins. Co., kens V. Mutual Reserve Fund Life 51 N. Y. 117. Boehen v. Williams- Asso,, 54 Hun, 294. Wa'sh v. Hart- burgh City Ins. Co., 35 N. Y. 131. ford Fire Ins. Co., 73 N. Y. 5. Walsh v. Hartford Fire Ins. Co., 78 * O'Brien v. Home Benefit Soc. 117 N. Y. 11. N. Y. 310, 102 Insurance : Fike, Life, Makine. § 96 lire already incurred, the company will be held to have waived it, because it would not be right for the company to accept a premium in return for a contract which it knew would be worthless to the other party. ^ A stipulation tiiat the commissioned agent has no authority to waive except by written agreement is binding, unjess^the in- sured is able to show that the commissioned agent had an actual authorit}'', either by instructions or recognized practice, to waive orally, and this it is not so easy to do as before the adoption of the standard fire policy. § 96. Special Soliciting Agents : Fire. — They have no authority to waive conditions or forfeitures, but only to re- ceive proposals and forward them.^ If they are intrusted with the closing of a contract of insurance, and allowed to make a delivery of the policy, it has been held that they have implied authority to determine how the premium shall be paid, and if they give credit the policy will still be binding, though in con- tradiction to its terms.^ § 97. Other Special Agents. — A special agent ap- pointed to investigate or adjust a loss has no implied authority to waive an essential condition of the contract or a forfeiture."* The authority of clerks of agents or of insurers is, as a rule, limited to the performance of ministerial and clerical acts, and they are not to be allowed to disturb or alter the terms of the policy, unless such a result is naturally involved in the proper performance of the particular act which they are employed to do.« ' Bennett v. North British & M. Ins. ' Bodine v. Exchange Fire Ins. Co., Co., 81 N. Y. 273. Van Schoick v. .51 N. Y. 117. Boehen v. Williams. Niagara Fire Ins. Co., 68 N. Y. 434. burgh City Ins. Co., 35 N. Y. 131. Short V. Home Ins. Co., 90 N. Y. " Weed v. London & L. Fire Ins. 16. Co., 116 N. Y. 106. Marvin v. Uni- • Tate V. Citizens Mut. Ins. Co., 13 versal Life Ins. Co.. 85 N. Y. 278. Gray, 79. Lohnes v. Ins. Co. of N. A., ' Waldman v. North British & M. 121 Mass. 439. Ins. Co., 91 Ala. 170. / CHAPTER IX. GENERAL PRINCIPLES CONTINUED. Marine Insurance. The law of marine insurance is in so many particulars peculiar to that branch of insurance that it will be convenient to present by themselves some of the principles relating to it. The subjects of insurable interest, concealment, and representa- tions have already been touched upon. § 98. What is Marine Insurance. — Marine insurance is an insurance against risks, connected with navigation, to i which a ship, cargo, freight, profits, or other insurable interest in movable property may be exposed during a certain voyage or a fixed period of time. § 99. Implied Warranties. — There are three war- ranties which are understood in every contract of marine insur- ance, and are as efficacious as though they were written upon the face of the policy. These are in respect to seaworthiness, deviation, and the legality of the adventure. § 100. Warranty of Seaworthiness. — In every voyage policy upon ship, freight, cargo, or other interest a warranty is implied that the ship is sea worth}' at the time of the commencement of the risk»J^ After much discussion it has been settled by the English courts that no warranty of sea- worthiness is to be implied in a time policy.^ This distinction is placed by those courts upon the ground that the warranty of ■ Dixon V. Sadler, 5 M. and W, 4Q5.. ' Gibson v Small, 24 Eng. Law and Richelieu Nav. Co. v. Boston Ins. Co., Eq. 17. Thompson v. Hopper, 34 Eng. 136 U. S. 408 (1889). Walsh v. Wash- Law and Eq. 266. Dudgeon v. Pem ington Ins. Co., 32 N. Y. 427. broke, L. R., 2 App. Cas. 284. 104 Jnsukanuk: Fire, Life, Marine. §100 seaworthiness attaches, if at all, at the time of the commence- ment of the risk, and that to imply such a warranty in a time policy, which might begin to run when the vessel was in mid- ocean, would be inconvenient and unreasonable. But if the assured knowingly send the vessel to sea in an unseaworthy condition, and she is lost in consequence thereof, the loss will not be recoverable under the policy, though directly occasioned by a peril insured against, because it resulted from the wrong- ful act of the assured.* / In the United States a warranty of seaworthiness is always I implied in a voyage policy, but with reference to time policies \ the decisions of the different courts are not in harmony. The Connecticut court has decided for that State that no distinction exists between the two classes of marine policies,' but the opinion of the court in that case can hardly be said to have considered or disposed of all the difficulties attaching to such a rule. By the weight of opinion in this country, the war- ranty is at any rate to be implied in those cases where the ves- sel insured by the time policy is, at the time of the commence- ment of the risk, at a port where repairs could be made. This is the conclusion at which the Massachusetts court arrived in an ably considered case, beyond which the court was not will- ing to commit itself at that time.^ In a more recent case, how- ever, the Illinois court has decided to abide by the English rule.* In a still later case, the Federal Supreme Court uses the follow- ing language with regard to this subject : " In the insurance of a vessel by a time policy, the warranty of seaworthiness is com- plied with if the vessel be seaworthy at the commencement of the risk; and the fact that she subsequently sustains damage, and is not properly refitted at an intermediate port, does not discharge the insurer from subsequent risk or loss, provided such loss be not the consequence of the omission. A defect of seaworthi- ness arising after the commencement of the risk, and permitted to continue from bad faith or want of ordinary prudence or dili- gence on the part of the insured or his agents, discharges the in- * Thompson v. Hopper, 6 El. & B. ' Hoxie v. Pacific Mutual Ins. Co., 172, 937. 7 Allen, 211 (1863), by Bigelow, ' Hoxie V. Home Ins. Co., 32 Conn. C. J. 21 (ls64i. So, also, Merchants Mut. * Merchants Ins. Co. n. Morriaon, Ins. Co. V. Sweet, G Wis. 67U. 62 111. 242. (1871). § iOO Implied Wakranties : Marine, 105 surer from liability for any loss which is the consequence of such bad faith or want of prudence or diligence, but does not affect the contract of insurance as to any other risk or loss covered by the policy and not caused or increased by such particular defect.y The effect of this rule, if indeed it was intended to de- fine an itrvpUed warranty, would seem to make our law in sub- stance not very different from the English law, after all, except in the matter of classification; for, so far as the general obli gation of the insured to refrain from misconduct is concerned, the English court was of opinion in one case, that, if a vessel insured under a time policy should sail in an unsea worthy state, and incur loss in consequence of such unseaworthiness, without the intervention of a peril insured against as the direct cause of the loss, such loss would not be recoverable under the policy.' But it would seem that the English classification is better than that of the TTnited States Supreme Court, because the funda- mental notion of a warranty is that it imports an obligation of such a character that a breach of it will cause an absolute avoidance of the whole contract irrespective of its relation to the loss. It is in harmony with the general purpose of insurance to make a contract of insurance, as far as may be, one of absolute indemnity against loss by the specified perils, regardless of unintentional negligence on the part of the assured or his agents, and this doctrine has received the high sanction of the Federal Supreme Court itself.^' The New York court, without however citing any of the late cases, has recently stated the rule in the following words : " In every case of marine insurance by a general policy cover- ing all perils of the sea, where the vessel insured is in port, there is an implied warranty that the vessel is seaworthy at the inception of the policy. It is a condition precedent to the risk, and if the vessel is not seaworthy the policy does not attach. In an action to recover for a loss upon such a policy, where the fact of seaworthiness at the time of issuing the policy is shown, it is immaterial what the vessel's condition is ' Union In s. Co. v. Smith, 124 U. S. ^ Orient Ins. Co. v. Adams. 123 U. S. 405 (1887), Biatcliford, J. 67 (1887). » Fawcus V. Sarsfield, 6 EI. &. Bl, 192. 106 Insurance: Fire, Life, Marine. § 1<>1 thereafter during the voyage, as loss from unseaworthiness is among the perils insured against. The plaintiffs, under such a policy, make out a prima facie case by showing seaworthiness at the inception of the risk. But in time policies there is implied a warranty that the vessel will be kept in repair and made seaworthy at all times during the continuance of the risk, \,so far as that is reasonably possible, and this implied covenant imposes upon the insured the duty of active diligence to keep the vessel in good order and in a seaworthy condition."' This language, probably, must be understood in a sense somewhat similar to that employed by Mr. Justice Blatchford in the case of the Union Ins. Co. v. Smith, just cited, for it is not to be supposed that the court could spell out of a policy that insures even against barratry an absolute and continuous warrant}^ obligatory upon the assured and his agents during the voyage and in foreign ports to keep the ship as seaworthy as possible. Where at the time of the commencement of the risk a ship was not in port, but off on a distant voyage, it was held that the implied warranty of seaworthiness Avas not applicable.' § 101. Seaworthiness is what. — A ship is seaworthy when reasonably fit to perform the services and to encounter the ordinary perils incident to the voyage.^ This requires that the ship on sailing should be tight and staunch in hull, properly rigged and laden, provided with a competent master, a sufficient number of competent officers and seamen, as well as with a pilot when required by law or custom, and with the requisite appurtenances and equipments such as ballast, cables, anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and imple- ments for the voyage.'* Her cargo must be properly stowed, and the weight of it not in excess of the vessel's safe carrying capacity. In the case of an insurance being effected on cargo which is ' Berwind v. Greenwich Ins. Co., 114 Q. B. 596. Thebaud v. Phoenix Ins. N. Y. 234 (1889), Brown. J. Co. , 52 Hun. 495 (1889), by Van Brunt, « Jones V. Ins. Co., 2 Wall, Jr. 278. P. J. • Merchants Trading Co. v. Univer- * M'Lanahan v. Universal Ins. Co., sal Marine Co.. referred to in L R., 9 1 Pet. 170. § 101 Implied Wakkanties : Marine. lOT of such a nature or so stowed as to I'ender the vessel unsea- worthy, it will be no extenuation to show that in case of need the cargo can be readily jettisoned, for the warranty of sea- worthiness is to be considered in relation to the subject-matter insured, and cannot be taken to contemplate the destruction of that ver^^ cargo which it is designed to protect.^ Neither the ignorance nor the innocence of the insured will avail to relieve him from the consequence of a breach of tlu> warranty, though all reasonable precautions were taken to secure the seaworthiness of the vessel on sailing, and her unsea- worthy condition arose from a latent defect. For an actual fulfillment of the implied condition is indispensable. Upon the same principle, an insurance on cargo is invalidated if the vessel sail unseaworthy, though the assured be ignorant of her state, or powerless to alter it.^ The implied condition of seaworthiness is to be confined to the ship by which the insurance is effected, and cannot be extended to lighters employed to land the cargo.^ There is no implied warranty that the cargo itself is seaworthy.* The standard of seaworthiness required to satisfy the war- ranty is not uniform in every case, but variable according to circumstances. Thus, if the voyage comprises several distinct stages, each of which requires a different degree of seaworthi- ness, the warranty will at least be sa.tisfied if the vessel is sea- worthy for each stage alone at the commencement of it. For instance, in a policy " at and from," the risk is divisible into two distinct parts, the risk in port and the risk at sea, and a differ- ent degree of seaworthiness is required at the commencement of each of these sections. The vessel on sailing must be fit for the voyage, but for the risk to attach in port it is only neces- sary that she should have arrived there Jn a state of sufficient seaworthiness to lie in reasonable security until properly repaired and equipped for the voyage.^ So where the voyage consists partly of river and partly of ' Daniells v. Harris, 2 Asp. Mar. L. " Koebel v. Saunders, 17 C. B. N. S. C. 413. 71. * Oliver v. Cowley Park Insurance, ' Parmeter v. Cousins, 2 Camp. 235. 470. Haughton v. Empire Marine Ins. Co., » Lane v. Nixon, L. R., 1 C. P. L. R., 1 Exch. 306. 413. 108 Insurance : Fike, Lifk. Marine. § 102 sea navigation, and requires a different state of equipment for each stage.' If the vessel be unseaworthy for any distinct stage of the adventure on entering upon it, the poHcy, it has been held, w^ill be avoided, and no subsequent loss will be recoverable, though the defect may have been r-emedied before loss, and the loss have occurred irrespective of it.^ The warranty of seaworthiness in general only attaches at the inception of the risk ; so that in the case of an insurance out and home, if the risk be one and indivisible, the starting of the vessel outward in a seaworthy state will satisfy the war- ranty, and there will be no breach though the vessel should be unseaworthy upon sailing on her homeward passage or from any intermediate port. The standard of seaworthiness may, also, have a relation to the character of the ship insured, and if an insurer agrees with full knowledge of the facts to insure a vessel incapable, from size or construction, of being brought up to the ordinary stand- ard of seaworthiness, the implied warranty will be satisfied if the vessel is made as seaworthy as her capacity will admit oV But, as a rule, the character of the voyage, rather than the purpose for which the ship was originally constructed, must determine the question whether this warranty has been kept." Where the nationality or neutrality of a ship or cargo is an express warranty, it is implied by the warranty of seaworthi- ness that the ship will carry the requisite documents to show such nationality or neutrality.^ § 10!3. Implied Warranty : Deviation. — There is a second implied warranty in marine insurance; namely, that when the voyage contemplated by a polic}'^ is described by places of beginning and ending, there shall be no voluntary • Bouillon V. Lupton, 33 L. J. C. P. * Thebaud v. Phoenix Ins. Co., 52 87. . Hun, 495. » Quebec Marine Ins. Co. v. Com. ' Christie v. Secretan, 8 T. R. 199l Bank of Canada, L. R., 3. P. C. 234. Elting v. Scott, 2 Johns, 157. • Burgas v. Wiclcham, 33 L. J. Q. B. 17. § 102 Implied Warranties : Marine. 109 deviation or departure from the course fixed by mercantile usage, and no unreasonable delay in the commencement or prosecution of the voyage.^ /; -^ "^ ^ If the course of sailing between the places named is not fixed by mercantile usage, such a course must be pursued as would appear reasonably direct and advantageous to a master of ordinary skill and discretion.^ A deviation is a variation, and not necessarily an increase of the risk insured.^ "Where a policy of insurance was efi'ected on a ship, at and from Montreal to Montevideo, and a delay occurred in the arrival of the vessel at Montreal, which, by converting the voy- age from a summer into a winter one, materially affected the risk*and rate of premium, it was held that the policy would not attach.* An alteration in the vessel's port of destination is fatal to the contract. ' If a vessel is insured to several ports of discharge not men- tioned by name in the policy, she must visit them in the geo- graphical order in which they occur from the port of departure ; but, if the ports are designated by name, they must be visited in the order in which they are mentioned in the policy. It is not, however, essential that a vessel thus insured should pro- ceed to all the ports named. She may go to one or more and omit the rest. But such ports as she does call at must be visited in the order above described, and it is not lawful for her to re-visit any. This rule is binding unless the departure is warranted by recognized usage.^ A deviation from the direct course of the voyage insured, though in conformity with usage, will not be covered unless made in furtherance of the adventure to which the policy relates.^ ; ' Burgess v. Ec[uitable Marine Ins. < 'ranch. 26. Snyder v. Atlantic Mu- f\. , 1'26 Mass. 70. ^ tual Ins. Co., 95 N. Y. 196 ; s. c, 47 ' Hearne v. Marine Ins. Co., 20 Am. Rep. 29. Wall. 488. Turner v. Protection Ins. ■* De Wolf v. Archangel Mar. Bank Co.. 25 Me. 51") ; s. c, 43 Am. Dec. & Ins. Co., 2 Asp. Mar. L. C. 273. 294. Reads v. Commercial Ins. Co., ^ McCall v. Sun Mutual Ins. Co.. 66 8 Johns. 352; s. c. 3 Am. Dec. N. Y. .i05. 495. " Pearson v. Commercial Union * Maryland Ins. Co. v. Leroy, 7 Assur. Co., L. R., 1 App. Cas. 498. 110 Insurance : Fire, Life, Marine. § 103 § 103. Deviation, wlieii Proper. — A deviation is justifiable, and does not exonerate the insurers, if it is necessi- tated either by jphysical or by moral force.^ Thus a deviation is proper when caused by circumstances over which neither the master nor the owner of the ship has any control, or when necessary to comply with a warranty or to avoid a peril whether insured against or not, or when made in good faith and upon reasonable grounds of belief in its neces- sity to avoid a peril, or when made in good faith for the pur- pose of saving human life or relieving another vessel in distress. If a vessel is forcibly diverted from her course by stress of weather, the compulsion of an enemy in time of war, or the violence of a mutinous crew, such a deviation is excusable. If a vessel put into a port outside the ordinary course for r^airs or necessary supplies, or to set her cargo in order, or to procure fresh hands required for the navigation, or if she remain in her port of lading to avoid a capture, or depart from the usual course from the same motive, or, in short, if she commit any deviation the adoption of which is so urgently demanded by the force of circumstances as to become imperative to a reason- able mind, the divergence will not invalidate the policy. A departure from an ordinar}'' course of the voyage with the object of saving persons whose lives are in jeopardy is allowed on the ground of humanity, but the same immunity will not be extended in favor of a deviation made solely for the purpose of saving property.^ A departure to learn whether a port not of destination is blockaded is a deviation.^ Unreason- able delay amounts to a deviation.^ In time policies, especially on voyages in inland waters, a deviation from the permitted course has been held to suspend and not to avoid the policy.^ § 104. Illegality. — There is a third implied warranty, that the adventure shall be a legal one both as regards its nature and the mode in which it is prosecuted.." ' Burgess v. Equitable Marine Ins. " Audenreid v. Mercantile Mut. Ins. Co.. 126 Mass. 70. Co., 60 N. Y. 482. ' Co. of African Merchants v. Brit- ' Wilkins v. Ins. Co., 80 Ohio St. ish & Foreign Marine Ins. Co., Ij. R., 317. Greenleaf v. St. Louis Ins. Co., 8 Exch. 154. 37 Mo. 25. Hennessey v. Manhattan = Maryland Ins. Co. v. Woods, 6 Fire Ins. Co., 28 Hun, 98. Cranch, 39. ' Redmond v. Smith, 7 M. & G. 467 § 104 Implied Warka.nties : Marine. Ill Some authorities say that illegality avoids the contract be- cause of its concealment rather than because it involves any violation of an implied warranty. Smuggling voj^ages, trading adventures to an enemy's port, and all other entei'})rises prohibited by the law of the land or by the law of nations, being illegal, no policy of insurance will be upheld if effected with the intent to cover them; but this prohibition has been held in England not to apply to trading adventures undertaken in violation of the revenue laws of other nations.^ Smuggling or other illegal conduct by the master or crew, without connivance of the ship-owner, would not suffice to vitiate the contract ; for such acts would amount to barratry, which the polic}^ expressh'' covers. Policies upon risks which contravene either the statutes enacted to regulate trade and navigation, or the commercial treaties entered into with other countries, are void equally with those which run counter to the revenue laws, subject however to the exception, that, if the adventure can be carried on with- out violating the law, an illegal act performed in tbe prosecu- tion of it will not invalidate the policy unless committed by or with the concurrence of the assured.^ Thus in a case where the master of a vessel in the timber trade stowed a portion of the cargo on deck during the winter season, and, contrary to statute, sailed without a clearance cer- tificate that the cargo was below deck, it was held that the illegality did not vitiate the policy, it having been committed without the knowledge or privity of the owner.-^ Again, where a ship not licensed by the board of trade to carry passengers did carry them, it was held, that, inasmuch as such carriage was the unautiiorized act of the master alone, without the knowledge of Ihe owners, and contrary to their intentions, the policy was not vitiated by it.* There are risks which it is illegal to insure not because they are at variance with the permanent law of the land, but because they are opposed to public policy, especially in times of war, ' Lever v. Fletcher, Park on Ins., p. ' Wilson v. Rankin, L. R , 1 Q. B. 237. 162. ' Waugh V. Morris, L. R., 8 Q. B. * Dudgeon v. Pembroke, 2 Asp. Mar. 202. L. C. 323. 112 Insurance: Fire, Life, Marine. §105 Such, for example, are insurances effected on behalf of alien enemies, or to cover trading adventures to an enemy's port, which in both cases are wliolly void and inoperative. The case is different with respect to insurances effected upon the property of neutrals against war risks which are not invalid in tiie neutral country, though the adventure to which they attach may be liable to capture by a belligerent. For instance, in the event of a ])ort being blockaded, a trading ad- venture by neutrals to run the blockade, though liable to con- fiscation under the laws of war, is not illegal, and may therefore be made the subject of a valid insurance in the neutral country.' As, however, the ordinary risk is much enhanced by such an enterprise, the intention of the assured must be disclosed to the underwriter at the time when the insurance is effected ; other- wise the policy will be void on the ground of concealment. § 105. Actual Total Loss. — -An actual total loss occurs when the subject insured wholly perishes, or its recovery is rendered irretrievably hopeless.^ Thus, for instance, when a vessel founders in a gale, or is captured by an enemy ^ and is condemned as a prize. When- ever the thing insured is by the operation of a peril insured against reduced to such a state as to be incapable of use under its original denomination, there is an actual total loss. For example, if a ship is so injured by the pei'ils of the sea as to be incapable of repair, the loss is actual, though her materials sur- vive either in fragments or bound tocjether in the original form. And again, if goods are so badly damaged as to become in- capable of use for the purpose intended, there is an actual total loss.* If a ship is sold and so lost to the owner under a decree of a court of competent jurisdiction in favor of salvors and in consequence of a peril insured against, it is an actual total loss, and therefore the person insured is entitled to payment without notice of abandonment.^ ' Arnould on Insurance, p. 640. * Roux v. Salvador, 3 Bing. N. C. ' Carr v. Insurance Co., 109 N. Y. 281. Great West. Ins. Co. v.Pogarty, 504. 19 Wall. 640. 'Rhinelander v. Ins. Co., 4 Cranch, ' Cossman v. West, L. R., 13 App. 29. Cas. 160. § 106 Constructive Total Loss. 113 An insurance confined in terras to a total loss covers a loss which deprives the insured of the possession at the port of des- tination of the entire thing insured, or which renders it entirely worthless, and also covers a general average loss.^ § 106. Constructive Total Loss. — A constructive total loss occurs when the subject insured, though still existing in specie, is justifiably abandoned on account of its destruction being highly probable, or because it cannot be preserved from actual total loss unless at a cost greater than its value would be if such expenditure were incurred.^ The right to an abandonment is to be determined by the situation at the time of abandonment.^ To exist in specie is to be capable of utilization as the thing insured. The difference between an actual and a constructive total loss is that in the former case the loss of the thing in- sured to the owner thereof is ascertained and permanent, while in the latter case it is inferential or temporary."* For instance, where a ship is so damaged as to be incapable of repair, the loss, as we have already seen, is actual; but, where the damage is susceptible of repair only at a cost exceeding the value of the ship when repaired, the loss is constructive. Again, where the vessel founders in deep water, so as to leave no reasonable hope of recovery, the loss is actual ; but where the vessel sinks in shallow water, so as to admit of a reason- able hope of raising and restoring her only at a cost exceeding her value when raised or restored, the loss is constructive. Upon the same principle, where goods are so damaged by sea perils that they cannot be brought to their destination in specie, the loss is actual; but where, though damaged, it is possi- ble to bring them to their destination in specie only at a cost exceedino: their value when so broufjht, the loss is constructive.* ' Mayo V. India Mut. Ins. Co., 152 * Maggrath v. (^hurch, 1 Caines, 196; Mass. 172 (1890). Benson v. Chap- s. c, 3 Am. Dec 173. man, 6 M. & G. 810. Chadsey v. ' Irving v. Manning, 1 H. L Cas. Guion. 97 N. Y. 333. 304. Rodocanochi v. Elliott, 2 Asp. ' Hugg V. Augusta Ins. & Banking Mar. L. C. 399. Aranzamendi v. La. Co.. 7 How. (U. S.), 595. Ins. Co. v. Ins. Co., 2 La. 432 ; s. c, 22 Am. Dec. Fogarty, 19 Wall. 640. 136. Rosetto v. Gurney, 11 0. B. ' Orient Ina. Co. v. Adams, 123 U. 196. 8 i4 Insurance : Fire, Life, Marine. § 107 § 107. Constructive Total Loss : United States.— In the United States a somewhat arbitrary rule has been adopted in order to make it easier to determine whether the insured is entitled to claim a constructive total loss. It is here held that a person insured by a contract of marine insurance may abandon the thing insured, or any particular portion there- of separately valued by the policy or separately insured, and recover for a total loss thereof in the following cases : (1) If more than half thereof in value is actually lost or would have to be expended to recover it from the peril: (2) if it is injured to such an extent as to reduce its value more than one-half ; (3) if the thing insured being a ship, the contemplated voyage can- not be lawfully performed without incurring an expense to the insured of more than half the value of the thing abandoned or without incurring a risk which a prudent man would not take under the circumstances ; or (4) if the thing insured being cargo or freight, the voyage cannot be performed nor another ship procured b}^ the master within a reasonable time and with reasonable diligence to forward the cargo without incurring the like expense or risk. Subdivisions (3) and (4) would cover, for example, the case of interruption by embargo.' With respect to freight, in case it is impossible to earn that subject owing to a total loss of ship or cargo, the loss is actual and can be recovered without notice of abandonment. Where, however, the loss though probable is not ascertained, but depends upon chances of recovery or estimated expenditure, the claim falls within the category of constructive total loss, and requires the same kind of proof as in the case of similar claims upon ship or cargo.^ Thus if the ship be damaged so far as not to be worth re- pairing, but cargo which was on board be saved under circum- stances which leave it doubtful whether such cargo might or might not be forwarded in a substituted ship, or if the cargo be lost and the ship may or may not earn some freight by carry- ing other goods on the voj'^age insured, in order to make certain of his right to recover as for a total loss on the policy on freight ' McConochie v. Sun Mut. Ins. Co., v^_AdamSi_123_IL_S^7. DePeyster 2GN. Y. 477. Bradlie v. Md. Ins. Co., v. Sun Mut. Ins. Co., 19N. T. 272. 12 Pet. 378. Peele v. Merchants Ins. « HubbeJl v. Great West. Ins. Co., Co., 3 Mason, 27-85. Orient Ins. Co. 74 N. Y. 246. § 108 Abandonment. 115 the assured should give notice of abandonment of the chance of earning such substituted freight.^ The same rule will apply in case the contract of affreight- ment is justifiably terminated by a delay resulting from the operation of the perils insured against. Thus a ship which was bound from Liverpool to ISTewport, where she was to load a cargo of iron rails for San Francisco, got ashore in Carnarvon Bay, and although ultimatel}^ floated and repaired was detained for so great a length of time in consequence of the accident that the charterers threw up the charter and hired another vessel to carry the rails which were wanted for the construction of a railway to their destination. In an action by the assured on the policy of insurance to recover for a loss of the chartered freight, the jury found that the time necessary for getting the ship off and repairing her V7as so long as to put an end, in a commercial sense, to the speculation entered into by the ship-owners and the charterers; and upon this finding it was held by the Exchequer Chamber, affirming the decision of the court below, that, the adventure having been frustrated by perils of the seas, there was a con- structive total loss within the policy for which the assured was entitled to recover.^ § 108. Notice of Abandonment. — Whenever a claim . is made for a constructive total loss, a timely notice of aban-l donment by the assured to the underwriters is a condition! precedent to the right to recover, unless the assured is excused! from the obligation to give notice of abandonment by the cir-i cumstances of the case.^ The only occasion in which notice of abandonment is not necessary is where, at the time the assured elects to treat the claim as one of constructive total loss, there is no possibility of the underwriter deriving any advantage from such notice, either because there is nothing to abandon or because the ' Rankin v. Potter, 2 Asp. Mar. L. v. Mass. Fire & Marine Ins. Co., C. 67. 2 Pick 104 ; s.c, 20 Am. Dec. ' Jackson v. Union Marine Ins. Co., 400. L. R., 10 C. P. 125. Allen v. The ' Kaltenbach v. Mackenzie, 4 Asp. Mercantile Mutual Ins. Co., 44 N. Y. Mar. L. ('. 39. MeConoehie v. Sun 437; s.c, 4 Am. Rep. 700. Clark Mut. Ins. Co., 26 N. Y. 477. / 116 Insurance : Fire, Life, Marine. § 109 disposal of the projjerty was justiliably determined before the opportunity to give notice occurred. For instance, where the news of the loss of the ship and of her sale reached the assured at the same time, it was held that the underwriters were liable for a total loss without notice of abandonment ; ' and the same conclusion was arrived at under similar circumstances in an action upon a policy of insurance on cargo.^ In all other circumstances, however, the giving of a notice of abandonment is a necessary preliminary to a right to recover for a constructive total loss. There is a difference between an abandonment and a notice of abandonment. If a marine insurer pays for a loss as if it were an actual total loss, it is held in England that he is entitled to whatever may remain of the thing insured or its proceeds or salvage as if there had been a formal abandon- ment.' A notice of abandonment is a notification by the assured to the underwriters that he elects to treat the case as one of total loss made while the happening of the loss is prospec- tive. An abandonment must be made within a reasonable time after information of the loss, and after the commencement of the voyage, and before the party abandoning has information of its completion. It is reasonable that the assured should, on deciding to claim for a total loss, promptly give notice of his intention to the underwriters in order that the latter may be given the opportunity to take any steps which they may deem advisable for the recovery of the property or for the realization of salvage if the property is recoverable. No specific form is necessary for giving notice of abandonment, nor is it essential that it should be made in writing, though it is customary and advisable so to give it. But the abandonment tendered must be neither partial nor conditional.^ § 109. Effect of Abandonment. — The abandonment, if accepted by the underwriters, or if justified by the facts of ' Farnworth v. Hyde, 2 Mar. L. R. ' Stewart v. Greenock Mar. Ins. Co., 187 and 429. 2 H. L. Cas. 183. ' Roux V. Salvador, 3 Bing. N. C. * Bosley v. Chesapeake Ins. Co., 8 366. Gill & J. 450 ; S.C., 23 Am. Dec. 337. § 109 Abandonment. 117 the case, is equivalent to a transfer of his interest by the insured to the insurer with all chances of recovery and indemnity.' An acceptance of an abandonment is not to be presumed from the mere silence of the insurers upon receiving the notice, but may be inferred from their acts as well as their words,^ as where the insurers take possession and do not return within a reasonable time.^ If the insurers accept the notice of abandonment, the rights of the parties are fixed by the acceptance, and neither of them can draw back, whatever may be the event.^ If an insurer refuses to accept a valid abandonment, he is liable as upon an actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured. After an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured subsequent to the loss are at the risk of the insurer and for his benefit. A freight earned previous to the loss belongs to the insurer thereof, but freight subsequently earned belongs to the insurer of the ship.^ Whenever a loss is paid, whether total or partial, the under- writer who has paid it acquires a right by subrogation to what- ever may be recovered by the assured from third parties with respect to the loss ; but in the absence of an abandonment the right is limited to the recovery by the underwriter of the sum which he has paid.* This right of subrogation, which in the case of partial loss operates merely to the extent of his loss, is made absolute by abandonment, so that the insurer is entitled to whatever may be recovered with respect to the thing insured, though it exceed the amount paid by him.'' If there are several underwriters, they share in the transfer of the interest in proportion to the amount of their several ' Eagle V. Bucher, 6 Ohio St. 295 ; * Stewart v. Greenock Mar. Ins. Co. , B.C., 67 Am Dec. 343. 2 H. L. Cases, 159. ' Provincial Ins. Co. v. Leduc, L, ' Burnand v. Rodocanachi, L. R., R., 6 P. C. 224. 7 App. Cases, 339. * Copelin v. Ins. Co., 9 Wall. 461. ' North of England Iron Steamship * North West. T. Co. v. Continental Ins. Asso. v. Armstrong, L. E., 5 Ins. Co., 84 F. R. 171. Q. B. 244. 118 iNstiRANOE: Fire, Life, Marine. § 110 Bubscriptions.* By an abandonment the insurer can have no gi-eater rights than the insured had." § 110. Measure of Indemnity. — A marine insurer, as has been previously stated, is liable upon a partial loss only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the prop- erty insured.^ But in a valued policy the value of the interest is agreed upon in advance, and is conclusive in the absence of fraud.* Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover in case of loss the proportion of such profits equivalent to the proportion which the value of the property lost bears to the value of the whole. § 111. Valuation Apportioned. — In case of a valued policy of marine insurance on freight or cargo, if a part only of the subject is exposed to risk the valuation applies only in pro- portion to such part.^ Where profits are valued and insured by a contract of marine insurance, a loss of the profits is presumed from a loss of the property out of which they were expected to arise, and the valuation of the policy fixes their amount.* § 112. Loss under an Open Policy. — A loss under an open policy of marine insurance is ascertained as follows : (1) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its perma- nent value or which are necessary to prepare it for the voyage insured. (2) The value of cargo is its actual cost to the insured w^hen laden on board ; or, where that cost cannot be ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on ' Stewart v. Greenock Mar. Ins. * Griswold v. Union Mat. Ins. Co., Co., 2 H. L. Cases, 183 H Blatch. 231. Sturm v. Atlantic » Delaware Mut. Safety Ins. Co. v. Mut. Ins. Co.. 63 N. Y. 77. Gossler, 96 U. S. 645. " Davy v. Hallett, 3 Caines, 16; s.c, * Lamar Ins. Co. v. McGlashen, 2 Am. Dec. 241. 64 111. 513; s. c, 5 Am. Rep. ° Patapsco Ins. Co. v. Coulter, 8 lOa. Peters, 222. § 116 Measure of Liability. 119 board, but without reference to any Jcwses incurred in rai!-ing money for its purchase, or to any drawback on its exportation, or to the fluctuations of the market at the port of destination, or to expenses incurred on the way or on arrival. (3) The value of freight is the gross freight exclusive of primage, with- out reference to the cost of earning it.' And in each case the cost of insurance is to be added to the value then estimated. § 113. Damaged Cargo. — If cargo insured against partial loss arrives at the port of destination in a damaged con- dition, the loss of the insured is deemed to be the same propor- tion of the value which the market price at that port of the thing so insured bears to the market price it would have brought if sound.^ § 114. Labor and Expenses. — A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired ; and, where it is agreed that the insured may labor for the recovery of the property, the insurer is liable for the expenses incurred thereby, such expense in either case being in addition to a total loss if that after- wards occurs.^ § 115. Liable for General Average Losses. — A marine insurer is liable for a loss falling upon the insured through a contribution in respect to the thing insured required to be made by him toward a general average loss called for by the peril insured against.* § 116. Insured may Claim whole Loss from In- surer, leaving Latter to enforce General Average Contribution. — Where a person insured by a contract of marine insurance has a demand against others for general average contribution, he may claim the whole loss from the ' Stevens V. The Columbian Ins. Co., * Orrok v. Commonwealth Ins. Co., 8 Caines, 43 ; s. c, 2 Am. Dec. 247. 21 Pick. 456; s. c, S2 Am. Dec. 271. 2 Pars. Mar. Ins., 406-412. * Dunham v. Commercial Ins. Co., ' Lamar Ins. Co. v. McGlashen, 54 11 Johns. 315; s. c, 6 Am. Dea lU. 513 ; fl. c, 5 Am. Rep. 162. 874. '^ 120 Insurance : Fire, Life, Marine. § 117 insurer, subrogating him to his own right of contribution; but no such chiim can be made upon the insurer after the separa- tion of the interests liable to contribution, nor when the insured, having the right and opportunity to enforce contribu- tion from others, has neglected or waived the exercise of that right.^ § 117. One-third off New for Old In the case of a partial loss of a ship or its equipments, the old materials are to be applied toward payment for the new, and a deduction of one-third from the cost of repairing or replacing the damage is made after deducting the value of the old materials, and the marine insurer is liable for the two-thirds of the cost of the repairs.^ But certain exceptions to this rule are allowed by custom, and as inserted in the policies the rule is generally modified in certain particulars. Anchors, cannon, and sometimes other articles which are supposed to incur no depreciation in value up to the time of loss are allowed for in full ; for metal sheathing a deduction of one-fortieth from the expense of repairing or replacing (after first deducting the value of the old metal and nails) is gen- erally made for every month since the vessel was last sheathed until the expiration of forty months, after which time the cost of remetaling or repairing the same is borne by the assured. The deduction of one-third off new for old does not gener- all}^ apply in England in the case of a new ship on her first voyage, and a deduction of one-sixth is sometimes applied to chain cables.^ It is difficult to give an authoritative definition of the ex- tent of a first voyage, and this may be explained by mercantile usage. The charter party may be so worded as to make the outward and homeward passage only one voyage.* This point is sometimes regulated by special provisions of the policy. ' Maggrath v. Church, 1 Caines, Johns. 315; s. c, 6 Am. Dec, 374. 196; s. c, 2 Am. Dec. 173. Orrok v. Commonwealth Ins Co., 21 « Eager v. Atlas Ins. Co., 14 Pick. Pick 456; s. c, 82 Am. Dec. 277. 141. * Fenwick v. Robinson, 3 C. & P, * Dunham t. Com. Ins. Co., 11 323. CHAPTER X. GENERAL AVERAGE: MARINE. This subject belongs more properly to admiralty law than to insurance ; but it is so intimately connected with insurance adjustments, and with the rights of the contracting parties under a policy of marine insurance, that it cannot well be altogether omitted. § 118. General Average. — The rule of general aver- age has its basis in the community of interest existing between the owners of ship and cargo, by reason of which losses inten- tionally incurred for the common safety ought to be equitably apportioned among the interests thereby benefited. General average is a contribution made by the parties to a marine adventure to defray the cost of extraordinary expenses or sacrifices incurred for the preservation of the ship and cargo. The distinction between a general and a particular^ average lies in the fact that in the former case there is a general distribution of the loss among the parties to the adven- ture, while in the latter case there is a special application of the^ loss to one or more of the parties. Every partial loss is partic- ular average in relation to the party who first sustains it, whether that loss is ultimately to be made good by a general contribution or to remain where it falls. The right to general average and its co-relative obligation are not founded necessarily upon contract, but arise from the common law of the sea, which is applicable to all who are engaged in maritime commerce.^ The earliest trace of this ancient rule of maritime law is to be found in an extract from the Rhodian law which was incorporated in the Roman civil law. Thence it found its way into the common law of England, and became an implied » Burton v. English, L. R., 12 Q. B. D. 218. 122 Insurance : Fike, Life, Marine. § 119 term both in the contract of affreightment and the policy of marine insurance. § 119. General Average Losses. — A carrier by water may in case of extreme peril to the ship and cargo, when it is necessary for the safety of the adventure, throw overboard any or all of the cargo or appurtenances of the ship, or other- wise sacrifice the whole or any part of the cargo of the ship, or incur expenses for such purpose.^ Thus goods or parts of the ship may be cast away to save the ship from foundering in a storm, or to float her when stranded, or to facilitate her escape from an enemy. Throwing property overboard for such purpose is calledj[et- tison ; and the loss caused thereby, or by any other sacrifice or expense voluntarily made for such a purpose, is called a general average loss, and is the subject of general average contribution by the interests (whether ship, cargo, or freight) which are thereby saved. ^ If the jettison is successful at the time, and the ship continues on her course but is afterward wrecked, whatever is saved from the Avreck must contribute to the original jettison ; but if the goods jettisoned be afterward recovered, and the ship proceed- ing on her course be afterward lost, the goods need not con- tribute toward the loss of the ship. In the case of general average expenses properly incurred under the circumstances as then existing, it has been said tlint the ratable contribution is due from the different interests intended to be benefited, whether the experiment is itself the cause of the benefit or not ; and on principle it would seem as though this were the better rule to apply to all such justifiaMo sacrifices made for the common benefit.'' A jettison must be made in good faith and with prudence, and ought, so far as possible, to begin with the most bulky ami least valuable articles. But of necessity the master of the shi[) must be left free to take such steps as he deems necessary for the preservation of the interests intrusted to his care. ' Sweeney v. Thompson, 30 Fed. R. s. c, 86 Am. Dec. 375. Scudder v. 121. Hobson v. Lord, 93 U. S. 397. Bradford, 14 Pick. 13 ; s. c, 25 Am. ■ Star of Hope . 9 Wall. 203. Dec. 355. » Harris v. Moody, 30 N. Y., 866 ; * Spofford v. Dodge, 14 Mass. 6ft. § 120 Generai- Average, 123 In early times the pei'formance of a general average act was usuall}'' preceded by a consultation between the master and the merchants, who frequently accompanied their wares upon the voyage, with respect to tlie necessity for an extraordinary sacri- fice for the common safety, and the best means of attaining that end. Althoug-h such a conference has long since been dis- continued in practice, there is a sense in which it is still held in theory, inasmuch as the master becomes agent for the owner of the cargo as well as for the ship-owner in times of emer- gency, with authority to bind both parties in the adoption of such measures as are expedient in the common interest.^ The general average act, then, must be judicious. Its start- ing point is danger, and its objective point is safety. If the master is disabled, whoever is in active command of the ship may, in case of necessity, make the jettison or other sacrifice.^ It is one of the commonly accepted rules in the law of gen- eral average, that the party whose negligence has made the sac- rifice necessary cannot claim contribution in general average.^ § 130. Sacrifices Enumerated. — The sacrifices recov- erable under the principles above stated include the following : The cutting away of masts, spars, or sails to right a vessel which is on her beam ends or to rescue her from other immi- nent peril ; * the shipping of her anchors and chains to avoid stranding or collision ; the breakinof of bulwarks to relieve the vessel of water which floods her decks ; the jettison of cargo materials or stores for the common safety ; the extraordinary use of materials and stores in moving a stranded ship off the ground, such as the setting of the sails for that purpose in case of a sailing vessel, the breaking of the engines in the case of a steamer, or the use of anchors, chains, bolts, hawsers, etc., in either case ; the scuttling of a vessel for the purpose of admit- ting water to extinguish a fire ; ^ the use at sea of spare spars, sails, ropes, or other materials and stores for the purpose of ' Gratitudine, 3 Chas. Robinson. ' Robinson t. Price, L. R.,2 Q. B. 240. D. 91. The Parana, L. R., 1 Prob. »Ralli V. Troop, 87 Fed. Rep., p. Div. 453 Portsmouth, 9 ^'\'all. 682 888. Lawrence v. Minturn, 17 How. ■* Margareta Blanca, 14 F. R. 59. UO. Price v. Noble, 4 Taunt. 123. ' Ralli v. Troop, 37 F. R. 886. 124 Insurance: Fire, Life, Marine. § 121 stopping a leak, rigging jury masts, fishing sprung masts, or for any other purpose where the common safety appears to necessitate the sacrifice ; the sale of ship or cargo or part thereof,^ and in the United States the jettison of deck load when its stowage on deck is warranted by custom ; ^ and also damage from voluntary stranding of the ship, and repairs there- by necessitated.^ The principal sacrifices of cargo other than jettison and its consequences which come into general average are as follows : Any loss or damage which cargo may suffer through being dis- charged on to the shore, dragged through the surf, landed in rafts, placed in lighters, put on muddy ground, or otherwise treated in an unusual way to float a stranded ship ; •* but when goods once reach a place of safety, they cease thereafter, according to the English rule, to be at the risk of the general interest.*^ Any loss or damage to cargo necessarily arising from a forced discharge when the cost of the discharge is allowed in genera] average is itself allowable.^ Any loss or damage to the cargo, whether suffered by water on board, or otherwise admitted into the ship's hold to ex- tinguish a fire. Any loss or damage to cargo caused by water entering the ship's hold through holes made by the fall of a mast cut away for the common safety, provided such loss or damage was the proximate result of the cutting away.' The loss of cargo consumed as fuel to work a steamer's engines or a donkey engine in time of peril, provided the supply of fuel was originally sufficient. Passengers' baggage, though itself not liable to contribute.^ § 131. Deck Load. — In the United States and England, in the absence of an express prohibition in the policy, the ' Nelson v. Belmont, 5 Duer, 310. ' Gregory v. Orrall, 8 Fed. Rep. » Taunton Co. v. Ins. Co., 22 Pick. 287, 108. ' Maggrath v. Church, 1 Caines R. •N. W. Transfer Co. v. Cont. Co., 196. Saltus v. Ocean Ins. Co., 14 24 Fed. Rep. 171. Johns. 188. * Lewis V. Williams, 1 Hall, 430. ' Heye v. North German Lloyd, 83 • Svendson v. Wallace, 10 App. Cas. Fed. Rep. 60. 404. §123 General Average. 135 courts allow a jettison of deck load to be included in general average, provided a custom of the trade can be shown justi- fying the loading of the goods on deck.' But, if no such custom is proved, a claim for jettison of deck load cannot be allowed in general average,^ although if a deck load is saved by a general average act, it must itself contribute. There must be an actual intention to throw the deck cargo overboard in order to constitute a general average act.^ § 133. Voluntary Stranding. — In the United States the voluntary stranding of a ship when in peril is held to be a general average act, and that irrespective of the question whether the vessel ultimately becomes a total wreck or not.* But general average is not allowed in favor of the ship-owner if „the voluntary stranding was made necessary by negligent navigation of the ship.^ A voluntary stranding is not allowed as a general average act by English practice in the absence of express agreement, and the rule there is said to be defended mainly upon two grounds : (1) that the stranding is not a sacrifice at all, nor the result of any selective discrimination between different interests, but on the contrary is an attempt to put both ship and cargo into a situation of less peril ; and (2) that in practice it is impossible to distinguish between i damages received by the ship and cargo prior to stranding, I which are admittedly particular and not general average, and losses sustained after or in consequence of stranding, which it is claimed should come into g-eneral averaofe. The York Antwerp rules, it will be noticed, on this as on some other points, have struck a compromise between conflict- ing views. § 133. Port of Refuge, and other Expenses. — The most frequent cause of general average expenses occurs where a vessel in peril puts into a port of refuge for repairs to enable 1 Harris v. Moody, 30 N. Y. 266 ; * Barnard v. Adams, 10 How. 270. 8. c, 86 Am. Dec. 375. Wood v. Columbian Ins. Co. v. Ashby, 13 Phoenix Ins. Co., 8 Fed. R. 27. Peters, 381. Fowler v. Rathbones, 12 ■' The Milwaukee Belle, 2 Biss. 197. Wall. 102. Star of Hope, 9 Wall. 20-1 'The Adele Thackera, 24 Fed. R. Emery v. Huntington, 109 Mass. 481. 809. * Snow V. Perkins, 39 Fed. R. 384. 126 Insurance : Fire, Life, Marine. § 124 her to continue the voyage. The general average practice in such a case in the United States differs in some particulars from the rules prevailing in England.^ By the law of this country, wages and provisions of the crew are allowed, in general average, from the time of deviat- ing from the voyage for the purpose of putting into a port of refuge, until the voyage is resumed, or until the cargo and vessel are separated, or until there is no longer a reasonable prospect that the voyage will be continued.^ The expenses of entering the port, and of unloading, ware- housing, and reloading the cargo, are allowable, provided the voyage is resumed, or so long as there is a fair prospect of its continuance.^ Before dealing with the cargo, however, in a port of refuge, the master is bound to communicate with its owners if it is possible, in order to take their instructions "^ Goods or money paid for ransom or salvage, or for other services rendered for the common benefit, are also allowed in (general average. But if the expense is not incurred for the /common safety, then it is chargeable, in particular average, I to that interest which it was intended to benefit.^ § 124. The Adjustment. — The proportions in which a general average loss is to be borne must be ascertained by an adjustment, in which the owner of each separate interest is to be charged with such proportion of the value of the things lost as the value of his part of the property affected bears to the value of the whole.^ An adjustment made at the end of the voyage, if valid there, is valid anywhere. The first port reached subsequent to the general average act, where any or all the interests are sep- arated, may be the end of the voyage for this purpose.''' ' Svendsen v. Wallace, 10 App. Cas. McAndrews v. Thatcher, 3 Wall. 347. 404. McGraw v. Ocean Ins. Co., 23 Piek. '^ Hobson V. Lord, 92 U. S. 397. 405. Ocean St. C. Co. v. Anderson, The Star of Hope. 9 Wall. 80;; . 13 Q. B. D. 651. ' The Joseph Farwell, 31 Fed. Rep. ^ Wheaton v. China Mut. Ins. Co., 844. 39 Fed. Rep. 879. ' The Julia Blake, 107 U. S. ' Barnard v. Adams, 10 How. 270. 4ls. Bradley v i argo of Lumber, 29 Fed ' Douglas V. Moody, \) Mass. 548. Rep. G48. § 125 General Average. 127 Inasmuch as a lien exists upon the cargo in favor of the ship to secure general average contribution, it is customary for the consignees of the cargo, in order to secure an immediate delivery of their cargo, to give an undei'taking or to make a deposit to cover any amount for which they may be ultimately liable in general average. The I'ules of practice for the adjustment of general average losses vary greatly in detail in different countries and in differ- ent ports. The regulations most frequently used by agree- ment are the York Antwerp rules, adopted by the Association for the Reform and Codification of the Law of Nations, at Antwerp, in 1877, and amended at their Liverpool conference in 1890. These as amended are as follows : § 135. York Antwerp Rules. Rule I. Jettison of Deck Cargo. — No jettison of deck cargo shall be made good as general average. Every structure not built in with the frame of the vessel shall be considered to be a part of the deck of the vessel. Rule II. Damage by Jettison and Sacrifice for the Common Safety.— Damage done to a ship and cargo, or either of them, by or in consequence of a sacrifice made for the com- mon safety, and by water which goes down a ship's hatches opened or other opening made for the purpose of making a jettison for the common safety, shall be made good as general average. R^de III. Extinguishing Fire on Shipboard. — Damage done to a ship and cargo, or either of them, by water or other- wise, including damage by beaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average ; except that no compensation shall be made for damage to such portions of the ship and bulk cargo, or to such separate packages of cargo, as have been on fire. Rule IV. Cutting away Wreck. — Loss or damage caused b}^ cutting away the wreck or remains of spars, or of other things which have previously been carried away by sea-peril, shall not be made good as general average. Rrde V. Voluntary Stranding. — When a ship is inten- tionally run on shore, and the circumstances are such that if that course were not adopted she would inevitably sink, oi- 128 Insurance : Fire, Life, Marine. § 126 drive on shore or on rocks, no loss or damage caused to the ship, cargo, and freight, or any of them, by such intentional running on shore shall be made good as general average. But in all other cases where a ship is intentionally run on shore for the common safety, the consequent loss or damage shall be allowed as general average. Rule VI. Carrying Press of Sail; Damage to or Loss OF Sails. — Damage to or loss of sails and spars, or either of them, caused by forcing a ship off the ground or by driving her higher up the ground, for the common safety, shall be made good as general average ; but where a ship is afloat, no loss or damage caused to the ship, cargo, and freight, or any of them, by carrying a press of sail, shall be made good as general average. Rule VII. Damage to Engines in Refloating a Ship. — Damage caused to machinery and boilers of a ship, which is ashore and in a position of peril, in endeavoring to refloat, shall be allowed in general average, when shown to have arisen from an actual intention to float the ship for the common safety at the risk of such damage. Rule VIII. Expenses Lightening a Ship when Ashore, AND Consequent Damage. — When a ship is ashore and, in order to float her, cargo, bunker coals, and ship's stores, or any of them, are discharged, the extra cost of lightening, ligiiter hire, and reshipping (if incurred), and the loss or damage sus- tained thereby, shall be admitted as general average. Rule IX. Cargo, Ship's Materials, and Stores Burnt FOR Fuel. — Cargo, ship's materials, and stores, or any of them, necessarily burnt for fuel for the common safety at a time of peril, shall be admitted as general average, when and only when an ample supply of fuel had been provided ; but the estimated quantity of coals that would have been consumed, calculated at the price current at the ship's last port of de- parture at the date of her leaving, shall be charged to the ship- owner and credited to the general average. Rule X. Expenses at Port of Refuge, etc. — (a) When a ship shall have entered a port or place of refuge, or shall have returned to her port or place of loading, in consequence of accident, sacrifice, or other extraordinary circumstances, which render that necessary for the common safety, the ex- § 125 General Average. 129 penses of entering such port or place shall be admitted as general average ; and when she shall have sailed thence with her original cargo, or a part of it, tlie corresponding expenses of leaving such port or place, consequent upon such entry or return, shall likewise be admitted as general average. (h) The cost of discharging cargo from a ship, whether at a port or place of loading, call, or refuge, shall be admitted as general average, when the discharge was necessary for the common safety or to enable damage to the ship, caused by sacrifice or accident during the voyage, to be repaired, if the repairs were necessarj'' for the safe prosecution of the voyage. (c) "Whenever the cost of discharging cargo from a ship is admissible as general average, the cost of reloading and stor- ing such cargo on board the said ship, together with all storage charges on such cargo, shall likewise be so admitted. But when the ship is condemned or does not proceed on her original vo\^age, no stoi'age expenses incurred after the date of the ship's condemnation or of the abandonment of the voyage shall be admitted as general average. (d) If a ship under average be in a port or place at which it is practicable to repair her, so as to enable her to carry on the whole cargo, and if, in order to save expenses, either she is towed thence to some other port or place of repair or to her destination, or the cargo or a portion of it is transhipped by another ship, or otherwise forwarded, then the extra cost of such towage, transhipment, and forwarding, or any of them (up to the amount of the extra expense saved), shall be payable by the several parties to the adventure in proportion to the extraordinary expense saved. Eule XI. Wages and Maintenance of Crew in Port OF Refuge, etc. — When a ship shall have entered or been de- tained in any port or place under the circumstances, or for the purposes of the repairs, mentioned in Rule VII., the wages pay- able to the master, officers, and crew, together with the cost of maintenance of the same, during the extra period of deten- tion in such port or place until the ship shall or should have been made ready to proceed upon her voyage, shall be admitted as general average. But when the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers, and crew, incurred after the date of 9 130 Insurance: Fikk, Life, Marine. 125 the ship's condemnation or of tiie abandonment of the voyage, shall not be admitted as general avei'age. Rule XII. Damage to Cargo in Discharging, etc. — Damage done to or loss of cargo necessarily caused in the act of discharging, storing, reloading, and stowing, shall be made good as general average, when and only when the cost of those measures respectively is admitted as general average. Rule XIII. Deductions from Cost of Repairs. — In ad- justing claims for general average, repairs to be allowed in general average shall be subject to the following deductions in respect of " new for old," viz. : In the case of iron or steel ships, from date of original register to the date of accident, — Up to r All repairs to be allowed in full, except 1 year old \ painting or coating of bottom, from which one- (A). I third is to be deducted. One-third to be deducted off repairs to and renewal of wood- work of hull, masts and spars, furniture, upholstery, crockery, metal Between 1 and 8 years " (B). rigging, ropes, and glassware, also sails, sheets, and hawsers (other than wire and chain), awnings, covers, and painting. One-sixth to be deducted off wire rigging, wire ropes and wire hawsers, chain cables and chains, donkey engines, steam winches and connections, steam cranes and connec- ^ tions ; other repairs in full. Deductions as above under Clause B, except that one-sixth be deducted off iron-work of masts and spars, and machinery (inclusive of boilers and their mountings). r Deductions as above under Clause C, except Between that one-third be deducted off iron-work of 6 and 10 years i masts and spars, repairs to and renewal of all machinery (inclusive of boilers and their mount- ings), and all hawsers, ropes, sheets, and rigging. One-third to be deducted off all repairs and renewals, except iron- work of hull and cement- ing and chain cables, from which one-sixth to be deducted. Anchors to be allowed in full. Between 3 and 6 years (C). (D). Between 10 & 15 years (E), § 125 Geneeal Average. 131 Over / One-third to be deducted off all repairs and 15 years -| renewals. Anchors to be allowed in full. One- (F). ( sixth to be deducted off chain cables. The deductions (except as to provisions and stores, machinery, and boilers) to be regulated by the age of the ship, and not the age of the particular part of her to which they apply. Generally ^o painting bottom to be allowed if the bottom (Q\ I has not been painted within six months previ- ous to the date of accident. No deduction to be made in respect of old material which is re- paired without being replaced by new, and pro- visions and stores which have not been in use. In the case of wooden or composite ships : When a ship is under one year old from date of original register, at the time of accident, no deduction new for old shall be made. After that period a deduction of one-third shall be made, with the following exceptions : Anchors shall be allowed in full. Chain cables shall be sub- ject to a deduction of one-sixth only. No deduction shall be made in respect of provisions and stores which had not been in use. Metal sheathine: shall be dealt with, bv allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus the proceeds of the old metal. Nails, felt, and labor metaling are subject to a deduction of one-third. In the case of ships generally : In the case of all ships, the expense of straightening bent iron-work, including labor of taking out and replacing it, shall be allowed in full. Graving dock dues, including expenses of removals, cartages, use of shears, stages, and graving dock materials, shall be allowed in full. Itule XIV. Temporary Repairs. — No deductions " new for old " shall be made from the cost of temporary repairs of damage allowable as general average. Rule XV. Loss of Freight — Loss of freight arising from damage to or loss of cargo shall be made good as general 132 Insurance : Fire, Life, Marine. § 126 average, either when caused by a general average act, or when the damage to or loss of cargo is so made good. Rule XV r. Amount to be made Good for Cargo Lost OR Damaged by Sacrifice. — The amount to be made good as general average for damage or loss of goods sacrificed shall be the loss which the owner of the goods has sustained thereby, based on the market values at the date of the arrival of the vessel or at the termination of the adventure. Rule XVII. Contributory Values. — The contribution to a general average shall be made upon the ^ctual values of the property at the termination of the adventure, to which shall be added the amount made good as general average for property sacrificed ; deduction being made from the ship- owner's freight and passage-money at risk, of such port charges and crew's wages as would not have been incurred had the ship and cargo been totally lost at the date of the general average act or sacrifice, and have not been allowed as general average ; deduction being also made from the value of the property of all charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average. Passengers' luggage and personal effects, not shipped under bill of lading, shall not contribute to general average. Rule XV HI. Adjustment.- — Except as provided in the fore- going rules, the adjustment shall be drawn up in accordance with the law and practice that would have governed the ad- justment had the contract of affreightment not contained a clause to pay general average according to these rules. § 136. Contributory Value of Freight. — As has been observed, the law prevailing in the United States does not conform in all respects to these rules. In respect to the contributory value of the freight interest, which cannot always be easily ascertained, an arbitrary rule has been adopted in New York. While the full amount of freight is contributed for in general average, only fift}'^ per cent, of that amount is called upon for contribution.^ That is supposed to be a rough estimate of its net value nt the end of the voyage, after expenses have been deducted from the gross freight. ■ Rathbone v. Fowler, 6 Blatch. 296. D CHAPTER XL THE NEW YORK STANDARD FIRE POLICY. The dissimilarities existing in numerous forms of fire poli- cies resulted in inconveniences and uncertainties, especially in cases where the same property was insured by policies in differ- ent companies, which often thus furnished inconsistent pro- visions for the adjustment of the same loss. This and other considerations influenced the legislatures of certain States to pass statutes for the adoption of standard forms of fire policies. A list of references to these statutes will be found in the appendix. The actual framing and adoption of the standard ]wlicy by the several States was sometimes separated by a con- siderable interval of time from the enactment making provision for its adoption. In framing a standard form of fire policy Massachusetts was the pioneer State. Under the act of 1886, Chapter 488, passed prior to the Massachusetts act. New York followed with the preparation of a standard form differing in many particulars from that previously drafted by the Massachusetts authorities. The other States mentioned in the list already referred to have accepted either substantially or precisely the New York stand- ard form." This was drafted under the provisions of the New York statute ostensibly by a committee of the New York Board of Fire Underwriters, but actually by that committee in con- ference with a committee of the National Board of Fire Un- derwriters, and all that legal knowledge and business experience could furnish was brought to bear upon the careful construc- tion of this important instrument.^ The aim, among other things, was to avoid giving occasion for novel questions of con- troversy by making it accord in its phraseology with the decisions of the court of last resort in this State. ' The work was superintended by William Allen Butler, Esq., of the New York bar. " Except New Plampshire, 134 Insurance: Fire, Life, Marine. §127 ^ V/\ The use of the standard form is made by the statute obliga- ■"-> tory in New York upon all fire companies doing business within the State, and a penalty is imposed for violating the act, but it /ois provitled that any policy in form inconsistent with the pro- / -^visions of the act shall nevertheless be binding upon the com- V pany issuing the same. It is hardly necessary to remark that the policy is not an absolute agreement to grant indemnity to the insured at ali events for the loss occasioned by the casualty insured against, ijut is made dependent upon the fulfilment on his part of cer- tain provisions of the contract which are called conditions. If any one of these is violated or unperformed, the policy is avoided, and there can bo no recovery unless the policy is sub- sequentl}' confirmed by the insurer. The conditions for the most part are expressed in the contract itself, and to solve their proper meaning, force, and effect must be the chief concern in the study of fire-insurance law. An inspection of the New Fork standard policy, given in the appendix, will show that some of its conditions are precedent to the effectual making of the contract ; others pre-suppose the contract made, but are precedent to a right of action thereon. Others declare events in which all right under the contract is forfeited, or otherwise define the obligations of the parties, or restrict the liability of the insurers. Others deal with the mode of settling disputes, and others limit the period for bringing suit. The conditions may also be divided into three classes ; those precedent to a Talid inception of the contract, those relating to the contract during the pendency of the risk, and those which appertain to the presentation of the claim of the assured and the proofs of his loss. Before the standard policy was adopted, much com- plaint was made regarding the fine-print conditions ordinarily inserted in a fire policy. The chief justice of the New Hamp- shire court made the character of these conditions the subject of a forcible but unjudicial tirade against insurance companies generally.^ We shall examine the clauses of the New York standard policy in the order in which they occur in the policy. § 137. In Consideration of the Stipulations and Premium. — The insurei- is entitled to payment of premium > De Laney v. Ins. Co., 53 N. H. 681. § 128 Standard Fire Policy : Loss by Fire. 135 upon the inception of the risk or closing of tlie contract unless ^^r> otherwise agreed, but ordinarily the payment of the premium '- ^ is not made a condition of the policy, nor is its non-payment - made a ground of forfeiture. It is generally paid in cash or "^ check, but may be paid by notes or credit. Premium notes in mutual companies are generally made a lien upon the property insured.^ If the risk attaches, the premium is not returnable ex- ~^^ cept as provided by the terms of the agreement or by statute. If the contract is rescinded, the premium is returnable;^ but if ""^^ void for fraud it is not returnable.^ O* § 128. Insures against all Direct Loss by Fire. — Loss by fire means the result of the ignition of the property insured or some substance near to it. For example, where sugar was spoiled by great heat from a fire in ordinary use be- cause of the closing of a register, the company was held not^ liable, and so also where the heat of the sun contracted timber o- withoutany actual fire ;* and similarly where the interior of a 'X) boiler was damaged by overheating from regular furnace fires owing to absence of water in the boiler;^ but the proximate results of fire within the rule of law establishing the liability of the insurer may include other things than combustion ; as, for example, injuries to the insured property by water from the fire-engines, or exposure of goods during the fire, or during their reasonable removal, and the loss of goods by theft dur- ing the fire, or during a reasonable removal to a place of safety.' If a policy were silent upon the subject, loss by fire would include loss by a gunpowder explosion, but not loss by a r? steam explosion or by the wind^ It would not include loss by ^^^^^^ ' Wood fin V. Asheville Mut. Ins. Atkinson v. Newcastle & G. W. W. ^o Co., 6 Jones'(N. C.) 558. Co., L. R. 6 Ex. 404. 132 N. Y. 298. ^ " Ins. Co. V. Pyle, 44 Ohio St. IJ ; * American Towing Co. v. Ger. Fire 8. c, 58 Am. Rep. 781. Ins. Co.. 20 Ins. L. J. 402 (Md. 1891). * Blaeser V. Milwaukee Mut. Ins. • Stanley v. Western Ins. Co., L. R., Co., 37 Wis. 31 ; s. c, 19 Am. Rep. 3 Exeh. 74 ; s. c, 37 L. J. Q. B. 73. 747. Eabcock v. Montgomery Co. Mut. Ins. * Babcock v. Montgomery Co. Mut. Co., 6 Barb. 637. White v. Republic Ins. Co., 6 Barb. 637. Austin v. Fire Ins. Co., 57 Maine 91 ; s c, 3 Drewe, 6 Taunt. 436. Scripture v. Am. Rep. 22. Lowell Mut. Fire Ins. Co., 04 Mass. " Waters v. Merchants' Louisville (10 Cush.) 356 ; s. c, 67 Am. Dec. 111. Ins. Co., 11 Peters 318. Scripture v. 136 Insurance: Fire, Life, Marine. § 129 lightning unless ignition resulted, but a lightning clause may be attached to the policy.^ Fire originating in spontaneous combustion is within the risk. Damage caused by concussion caused by an explosion of gunpowder in another building is not within the risk.^ But the special provisions of the contract govern. The policy includes loss by the incendiary act of the insured if insane, and includes the unintentional or careless acts of third persons, whether his agents or not, as well as their criminal acts ; but if the fire is caused by the willful act of the insured himself, or of some one acting with his privity or con- sent, the insurer will be exonerated. Arson by the wife of the , insured without his connivance would be no defence to the Ijf company.** % Arson by an officer of an insured corporation, unless sorae- V thing like a conspiracy could be shown among those interested in the corporation, would be no defence to the insurer, because a corporation does not impliedly authorize its representatives to commit a crime.'* The word "direct" is not in the corresponding clause of the Massachusetts policy. § 139. The Following Described Property. — The description of the property is written into the printed form, usually in brief but comprehensive terms. Hence, if the lan- guage of the description leaves it doubtful what goods or buildings or other property it was intended to cover, the courts construe the ambiguity liberally in favor of the insured, with a view to give a full indemnity for all that might reason- ably be considered included in the description. Accordingly, the description of the policy covers not only what is specifically Lowell Mut Firelns. Co., 10 Cash, gomery Co. Mut. Ins. Co., 4 N. Y. "SSeTs'.T,' 67 Am" i)ec. 111. Brown 326. 'v. St. Nicholas Ins. Co.. 61 N. Y. 3:32. '■' Everett v. The London Assurance, Millandon v. New Orleans Ins. Co., 4 19 C. B. N. S. 12(). Caballerov. Home La. Ann. 15 ; s. c, 50 Am. Dec. 550. Mut. Ins. Co., 15 La. Ann. 217. Transatlantic Fire Ins. Co. v. Dorsey, ' Midland Ins. Co. v. Smith, 6 Q. B. 56 Md. 70 ; s. c, 40 Am. Rep. D. 568. Karow v. Cont. Ins. Co., 57 403. Wis. 56; s. c, 46 Am. Rep. 17. ' Everett v. The TiOndoii .\ssurance, * Commonwealth v. Wachendorf, 141 19 C. B. N. S. 126. Bubcock v, Mont- Mass. 370. § 130 Standard Fire Policy : Location. 137 enumerated but also whatever is necessarily appurtenant to it or included in it.^ As we have had occasion to notice, evidence of usage is admissible to show the meaning of ambiguous words as employed in any trade. Thus, in an action upon a fire policy described to cover a junk dealer's stock of "rags" and "old metals," evidence was admitted to show that by trade custom those terms had acquired a broader signification than belongs to them in common usage.^ A policy upon merchandise in a store applies to the stock successively in the store from time and time.^ § 130. Location. — While located and contained as de scribed herein and not elsewhere. Place is ordinarily material to the contract and of the very essence of the risk, and a change of locality without consent of the insurers removes the goods from the protection of the policy, though it contain no special provision to that effect. With varying location the risk is apt to vary, and whether it does or not is immaterial, for the insurers have the right to know what risk they are assuming, and often decline an insur- ance because of the amount of risk already placed by them- selves or others upon the same building or property.* If consent to removal is obtained, goods are not protected in transit unless the policy so provides, but are protected in the old place until removed.^ But it has been held that where the clause in the policy is ' Buchanan v. Exchange Fire Ins. * Lyons v. Providence Washington Co., 61 N Y. 26. Lovewell v. West- Ins. Co., 14 R. I. 109 ; s. c, 51 Am. Chester Fire Ins. Co., 124 Mass. 418 ; Rep. 364. London and Lancashire s. c, '-'6 Am. Hep. 671. Phoenix Ins. Ins. Co. v. Lycoming Fire Ins. Co., Co. V. Favorite. 49 111. 259. Medina v. 105 Pa. State 424, 432. Theobald v. Builders' Mut. Fire Ins. Co. 120 Mass. Railway Passengers' Assur. Co., 10 225. Clarke v. Firemen's Ins. Co,, 18 Exch. 45. Bradbury 7. Fire Ins. La. 431. Hannan v. Williamsburgh Asso., 80 .Me. 396. Sampson v. Secur- City Fire Ins. Co., 81 Mich. 560. ity Ins. Co., 133 Mass. 49. Wall v. « Mooney v. Howard Ins. Co., 138 East River Mut. Ins. Co. , 7 N". Y. 370. Mass. 375 ; s. c, 52 Am. Rep. 877. English v. Franklin Fire Ins. Co., 55 ^ Hooper v. Hudson River Fire Ins. Mich. 273 ; s. c, 54 Am. Rep 377. Co., 17 N. Y. 424. Am. Cent. Ins. ' Kunzze v. Amer. Exch. Fire Ins, Co. V. Rothchild, 82 III. 166. Hoff- Co., 41 N. Y. 412. Sharpless t. Ins man v. ^tna Ina. Co., 32 N. Y. 405. Co., 140 Pa. St. 437 (1891). 138 Insurance : Fire, Life, Marine. § 131 simply in the words, ''the following described property con- tained in" a certain building, the location is not material, if the nature of the property makes it clear that it must have been the intention of the parties to protect it by the policy whether in the particular place or not. In that event a designation of place is looked upon as merely descriptive and to be controlled by the necessary use of the thing insured. For example, where a horse, described as in a barn, was insured against fire or lightning, the court was of opinion that it was not the inten- tion of the parties to retain the protection of the policy only in the event that the horse was kept in the barn all the time waiting for a fire or a stroke of lightning.^ Where an oil-tank was carried away by a flood to another part of the tract named in the policy and took fire there, the company vs^as heid.^ But in the case of furniture or stock de- scribed as contained in a certain building, the designated loca- tion is without doubt an essential element of the contract^ The form of the standard policy eliminates all ground for contention. This clause is not a part of the Massachusetts standard policy. § 131. Held in Trust. — Their oicn, or heldly them in irvM or o?i cominission, or sold hut not delivered. Such special phrases are often employed to show that per- sons holding the property of others may secure the protection of the policy though the title to the property may or may not be in them. Held in trust means simply that the goods or property are in the custody of the insured. The phrase is not used in its strict technical meaning.* § 1.33. For Whom it may Concern. — These words, which are seldom used in a fire policy, protect all those who ' Haws V. Fire Asso., 114 Pa. State j Lyons y. Pro y. Wash. Ins^Co., 14 431. Trade Ins. Co. v. Barraeliff, 45 R. I. 109 ; s.c, 51 Am." Rep. ^64^ /t/^ N. J. L. 543. Longueville v. West. ^ Lucas v. Ins. Co!, 23 W. Va. 258; Ass. Co., 51 Iowa, 558 ; s. c, 33 Am. s. c, 48 Am. Rep. 383. Snow v. ('arr, Rep. 146 Towne v. Fire Asso., 27111. 61 Ala. 363. Home Ins. Co. v. Balti- App. 433. more Warehouse Co., 93 U. S. 527. * Western, &c., Pipe Lines v. Home Hough v. People's Fire Ins. Co., 36 Ins. Co., 21 Ins. L. J. 24 (Penn. 1892). Md. 398. § 133 Standard Fire Policy : Damages. 139 have any insurable interest in the property, but are held, like other general descriptions of the insured, to include only tliose who are within tiie contemplation of the parties at the time the contract was made. Who these were may be shown by parol. ^ The owners who wei'e intended to be covered may ratify the insurance and take the benefit of it, though iofnorant of its existence at the time of the issuance of the policy.^ It has been held that they may ratify even after losSj|«' If the insured col- ' %, lects the whole amount of the policy, he will hold as trustee <^ the portion of the proceeds belonging to the others.* iT^^ § 1 33. Measure of Damages. — Not liable beyond actual cash value of the property at the time of loss, with proper deduc- i^onfor depreciation however caused. -^ This in express terms excludes remote damages, such as \ loss from interruption of business, prospective rent or profit, a|^ except as these are specificalh^ insured ; it also excludes any ^ pretium affectionis. The market or cash value at the time of ' the fire rules, and the cost price is relevant, if at all, only as bearing upon that.* Experts familiar with property similar to that described or injured may testify as to values.® And the difference between the actual cash value of the property just before the fire and its value after the fire is the measure of indemnity where the property has been injured and not destroyed. If, during the pendency of the risk, there has been more than one loss under the policy, the recovery in the aggregate is limited to the face of the policy. 1 Pacific Ins. Co. v. Cattell, 4 Wend. Selw. 485. Protestant Ins. Co. v. 76. Newson v. Douglass, 7 Bar. & J. Wilson, 8 Ohio St. 553. 417. See lyy JN. Y. 237. ' Waynesboro Mut. Fire Ins. Co. v. ** Waring v. Indemnity Ins. Co., 45 Creaton, 98 Pa. St. 451; s. c, 42 Am. N. Y. 606. Rep. 618. Birmingham Fire Ins. Co. » Herkimer v. Rice, 27 N. Y. 163. v. Pulver, 126 lU. 329. Snell v. Del- Bobbi tt V. Liverpool^ &c^, Ins. Co., 66 aware Ins. Co , 4 Dalla'*, 430. Brown N^C. 70. I Hooper v. Robinson. 98 v. Quincy Ins. Co., 105 Mass. 396. " p. S. 528.' Fire Ins. Asso. v. Mer- • (lark v. Baird. 9 N. Y. 183. Teer- chants', &c., Trans. Co., 66 Md. penning v. Cora. Exch. Ins. Co., 43 N. 839. X. ':79. Reed v. Washington F. & M. * Hagedom v. Oliverson, 2 Maule & Ins. Co. , 188 Mass. 573. 140 Insurance: Fike, Life, Marine. § 134 In case the insurer exercises its option to rebuild or repair, the rule of damages here defined is superseded by the contract of building, which amounts to a new and independent agree- ment.^ But, if the insured refuses to permit the insurer to rebuild, the latter having seasonably elected to do so, the former can maintain no action upon the policy.^ If the policy is valued, and the loss is total, as has been noticed heretofore, the face of the policy fixes the amount.^ The extent of the insurer's liability is often modified by particular clauses ; as, for example, one of the various forms of co-insurance clauses or average clauses of which specimens are given in the appendix. The object of the co-insurance clause is to compel the insured to take out insurance to the full value of his property, or else to become a co-insurer to the amount of the deficiency ; and the average clause applies where property is insured as an entirety, though located in several places or buildings in pro- portions unknown to the insurers, and its object is to compel the insured to consider the property as ratably distributed where there is a loss in one place or building, and not in all. The amount of recovery to which different classes of persons are entitled, as dependent upon the extent of their insurable interest, the form of the policy, and whether they insure for themselves alone or for the benefit of others also interested in the property, has been sutficiently explained under the discussion of general principles. The word "cash" is omitted from the Massachusetts form. § 134. Reinstatement Clause. — Optional with com- pany to take all or any part of the articles at ascertained or appraised value^ or to rebuild or replace property lost or damaged within reasonable tiine^ on giving notice within thirty ^ days after receipt of proofs^ but there can be no abandonment I to the company of the property. This option is reserved by the company to protect itself • Wynkoopv. Niagara Fire Ins. Co., ' Deals v. Home Ins. Co., 36 N. Y. 91 N. Y. 478. Morell -^. Irving Fire 522. Ina. Co., 33 N. Y. 429. ' PhcEnix Ins. Co. v. McLoon, 100 Mass. 475. C- § 134 Stand AJiD Fike Policy : Restoration. 141 against extravagant claims, and to prevent disputes as to the amount of damage. If the company once elect to do so, they must reinstate, and cannot afterwards repudiate their election. And the con- verse is also true, for the selection of one alternative constitutes an abandonment of the other. ^ The election to restore or rebuild involves not only the rejec- tion of the right to pay the cash value to the insured, but also the waiving of all those provisions of the contract having reference to that method of performance. From the time of such election the contract between the parties becomes an undertaking on the part of the insurers to build or repair the subject insured, and to restore it to its former condition, and the measure of damages for a breach of this substituted contract of building does not necessarily depend on the amount of damage inflicted by the peril insured against.^ If the insurers, in the attempt to restore the property, do more than their contract obligates them to do, they cannot claim allowance for the excess of value.^ If, without fault of the insured, the company either neglects to complete the work or is prevented from doing so by the in- terference of the public authorities, the loss will fall upon the insurers.^ So, also, if during the rebuilding or repairing the property is again burned ; for here, too, through no fault of the insured, the insurers have failed to fulfill their contract. Whether the work of repairing or rebuilding is done prop- erly and within a reasonable time, must generally be a question for the jury,^ and for any breach of their obligations the insurers will be held responsible, according to the ordinary rules of damage. The rebuilding clause has been held to have no application to a mortgagee's policy. The Massachusetts standard policy has a similar provision allowing the company to restore upon giving notice within ' Times Fire Assur. Co. v. Hawke, ' Brinley v. National Ins. Co., 11 1 Fost. & F. 406. Met. 195. " Wynlioop V. Niagara Fire Ins. Co., ■* Brown v. Royal Ins Co., 1 EI. & 91 N. Y. 478; s. c, 43 Am. Rep. 686. EI. 853. Morell V.' Irving Fire Ins. Co., 33 N. ^Raskins v. Hamilton Mut. Ins. Y. 429. Co., 5 Gray, 432. 142 Insurance : Life, Fife, Marine. § 135 fifteen days after the proofs of loss are submitted, and the company is declared not liable for more than the sum insured with interest. § 135. This Entire Policy shall be Void Before this phrase was inserted in the policy, tlie better opinion was that the contract of insurance was severable in those cases where it covered several items of property which were insured in separate amounts either at separate rates or for a single premium which could be mathematically apportioned or approximately so, and provided the breach of warranty af- fected only a portion of the items.^ But the phraseology of the standard policy admits of no ambiguity.^ The word " entire " is omitted from the similar clause of the Massachusetts form. § 136. Interest of the Insvired not Truly Stated in the Policy. — Except for this requirement the insured might describe his interest in the most general terms, and if he had any insurable interest at all it would avail to sustain the contract.® He might describe the property as his or say that he was the owner, and if that were true in any substantial sense he could recover to the extent of his insurable interest ; * as, for example, where the insured called the property his but in real- ity had only a life estate.' But under this clause he is bound to disclose the character of his insurable interest ; whether, for example, he is owner, trustee, consignee, factor, agent, mortgagee or lessee, and make sure that the description of his interest is truly noted in the policy. It is only right that the insurers should know the nature and extent of his insurable interest. ' Loomis V. Rockford Ins. Co., 77 * Dacey v. Agricultural Ins. Co., Wis. 87. Schuster v. Dutchess Co. 21 Hun, 83. Trade Ins. Co. v. Barra- Ins. Co., 102N. Y. 260. cliff, 45 N. J. Law 54:'.; s. c, 46 - Smith V. Agricultural Ins. Co., 118 Am. Rep. 792. Wainer v. Milford N. Y. 518. Geiss V. Franklin Ins. Co. Mut. Fire Ins. Co., 153 Mass. 835 123 Ind. 172. (1891). ' Huffum V. Bowditch Mut. Fire Ins. ' Allen v. Charlestown Mut. Fire Co., 10 Cush. 540. Ins. Co 5 Gray, 384. § 137 Fraud : False Swearing. 143 This clause, however, does not require him, unless particu- larly interrogated on the subject, to state the circumstances which relate to the value or permanency of his interest. For example, if the character of his title is a fee simple and the property is consequently described as his, he need not state that he is only a part owner ; ' or that there are mortgages or other incumbrances outstanding upon his property;^ or that he has made an agreement to part with the title in the future;' or that his property has been seized on execution but not yet sold/ Any obligation which may rest upon him to make such disclosures does not come by virtue of this particular clause. The word " interest " has been appropriately used in the standard form in place of the words " title or possession," for the reason that there are some insurable rights, like that of mortgagee or surety or stockholder, to which the attributes of title and possession are not necessarilj^ incident. But it is apprehended that the substitution of this broad word does not impose an obligation upon the insured to make any fuller or other disclosure in respect to his title or possession than is required by the other form of words, although the ruling in the following cases might lead to a different conclusion.^ If the policy is made payable to one " as his interest may appear," the interest need not be stated. The written words overrule the requirement of the printed form.^ This clause does not appear in the Massachusetts form. § 137. In Case of Any Fraud or False Swearing. — This provision is perhaps only the express declaration of a doctrine understood to be applicable to insurance contracts. But it makes clear the extension of the rule in full force to intentional misstatements made after the loss, as well as those ' Peck V. New Lond. Co. Mut. Ins, ' Davis v. Quincy Mut. Fire Ins. Co., Co.. 22 Conn. 575. Turner v. Bur- 10 Allen, 113. rows, 5 Wend. 541. * Strong v. Manuf'rs Ins. Co., 10 ' Dolliver v. St. Joseph F. & M. Pick. 40 ; s. c, Am. Dec. 507. Ins. Co., 128 Mass. 315 ; s. c, 35 ' Edmunds v. Mut. Safety Fire Ins. Am. Rep. 378. Judge v. Conn. Fire Co., 1 Allen, 311. Abbott v. Hampden Ins. Co., 132 Mass. 521. Carson Mut. Fire Ins. Co., 80 Me. 414. Lee V. Jersey City Fire Ins. Co., 43 a\ Agricultural Ins. Co., 79 Iowa, 379. N. J. L. 300; s. c, S9 Am. Rep. " Dakin v. Liverpool, L. & G. Ins 584. Co., 77 N. Y., 600. 144 Insurance: Fire, Life, Marine. §137 made to induce the insurers to accept the risk. In fact, it is by the statements contained in the proofs of loss that the insured, if unscrupulous, is most tempted to deviate from strict honesty in order to svvell the amount of his recovery. False swearing in the proofs of loss, to vitiate the policy, must be intentionally false, whether b}' a fraudulent overvalu- ation of the goods destroyed, or a statement of items which really have no existence, or by an undervaluation of what is saved, or in any other particulars.^ An innocent mistake,^ or an innocent though exaggerated estimate of value, will not avoid the policy.^ The overvaluation, in order to work a for- feiture, must be so plain that it cannot be accounted for upon the principle that every man is naturally prone to put a favor- able estimate upon the value of his own property.'* The question of fraud or false swearing is generally for the jury, and the company does not receive much consideration at their hands unless a clear case of dishonesty is established. But if it appears b}' the plaintiff's own showing^ that his state- ment of value was knowingly and intentionally exaggerated, a forfeiture ought to be found by the court.® Where the discrepancy between the representation of the insured and the finding of the fact by the jury is very great, a limit will be reached where the court will intervene and decide as matter of law that the amount of the error is consistent only with bad faith. To illustrate, where a house was valued at $1,400, and the evidence showed its value to be about $1,000, it was held that this difference did not estabhsh as matter of law that there had been a breach of warranty against overvaluation.''' ' Chapman v. Pole, 23 L. T. N. S. Am. Rep. 635. Susquehanna Mut. 307. Claflin v. Commonwealth Ins. Fire Ins. Co. v. Staats. 10'3 Ptnn. St. Co., 110 U. S. 81. Sternfeld v. Park 529. Towne v. Springfield Fire, &c.. Fire Ins. Co., 50 Hun, 262. Mullin v. Ins. Co., 145 Mass. 582. Vt. Mut. Fire Ins. Co., 58 Vt. 113. " Sturm v. Atlantic Mut. Ins. Co., Watertown Fire Ins. Co. v. Grehan, 63 N. Y. 77. Franklin Fire Ins. Co. 74 Ala. 642. Titus v. Glens Falls Ins. v. Vaughan, 92 U. S. 516. Co., 81 N. Y. 410. * Carson v. Jersey City Fire Ins. Co., 5 Thierolf v. Universal Fire Ins. 14 Vroom. 300 •. s. c, 89 Am. Rep. 584. Co., 110 Penn. St. 37. " American Ins. Co. v. Gilbert, 27 * Maher v. Hibernia Ins Co., 67 N. Mich. 429. Y. 283. Jersey City Ins. Co v. ' Smith v. Home Ins. Co., 47 Hur, Nichol, 85 N. J. Eq.' 291; s. c, 40 80. § 137 Fraud : False Swearing. 145 Putting the value of $2,000 upon goods worth $1,200 was held not to prove a fraudulent intent.^ Also, where a value of $5,000 was given to property worth $2,000, a finding of no fraudulent intent was not set aside. But there was also a find- ing that the actual value of the property destroyed exceeded the amount of insurance.^ But in another case a rule nisi for a new trial was made absolute where the claim sworn to was £1,085, and the amount found by the jury was only £500, the court concluding that this finding of fact ought to be considered in effect a verdict for the defendant.^ And where the proofs made the loss three times as large as the amount found by the jur}^ and no reason being disclosed for supposing that the misstatement arose inadvertentl}'', the court was of opinion that fraud was shown as matter of law and that the policy should be held forfeited, notwithstanding the jury's verdict for the plaintiff.* It will be observed that in the matter of innocent misrepre- sentations of fact a clear distinction is made between those antecedent statements. which, if material, form the inducement for the contract, and, whether material or not, are generally incorporated in the contract as warranties, and those state- ments, on the other hand, which are made after the loss, in an attempt to give to the insurers such information as may be available respecting the origin, character, and extent of the loss already accrued. But statements intentionally false in the proofs of loss amount to perjury.^ The corresponding clause in the Massachusetts standard policy is as follows : " This policy shall be void if any material fact or circumstance stated in writing has not been fairly rep- resented by the insured." This does not refer to statements in the proofs of loss, but only to the inducing representations upon which the contract is based, and the wording of the clause makes the question of fairness one for the jury." The Mas- sachusetts statute is also pertinent upon this point. ' Behrens v. Germania Fire Ins. Co., * Stern f eld v. Park Fire Ins. Co., 50 64 Iowa. 19. Hun, 262. ' Dogge V. Northwestern Nat. Ins. ' Avery v. Ward, 150 Mass. 160 Co., 49 Wis. 501. (1H89). ' Levy V. Baillie, 7 Bing. 349. ' Waiiur v. Milford Mut. Fire Ins. Co., 1;.3 Mass. 335 (1891 \ 10 CHAPTER XII. STANDARD FIRE POLICY CONTINUED. § 138. Other Insurance. — If the insured now has o^ shall hereafter inake or proGure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy without agreement indorsed or added thereon. Other or double insurance exists wiiere there are two or more pohcies on the same interest and subject, and against the same risk. Insurers need to know the amount of other insur- ance to enable them to calculate their share of the loss under ihQ pro rata clause, and they also generally desire a disclosure on this same point in advance to enable them to determine whether they will accept the risk or not ; because a substantial over-insurance of tl^e property might offer a temptation to the insured eitlier to bring about the fire or to be careless in preventing it. The requirement of the contract is quite reasonable and must be complied with.^ It must be noticed that insurances of different interests, aa for example the })olicy of a mortgagor and another policy by a mortgagee, are not within the operation of this clause, because they do not constitute double insurance. So also the interests of different morto:aoees are distinct,^ and the different interests of joint-owners ; ^ but where warehousemen, common carriers, or bailees generally, and agents, trustees, or co-partners, take out insurance for the benefit of the owners or others interested, and the owners or other parties in interest take out insurance for themselves upon the same subject and against the same > Sanders v. Cooper, 115 N. Y. 279, » Fox v. Phenix Fire Ins. Co., 53 Landers v. Watertown Fire Ins. Co., Me. 333. 86 N. Y. 414; s. c, 40 Ara. Rep. 554. ' Woodbury Sav. Bank v. Charter Liverpool, I.. & G. Ins. Co. v. Verdier, Oak F. & M. Ins. Co., 31 Conu. S5 Mioh. 895. 518. § 138 Other Insurance, 14Y risk, this constitutes double insurance.' Such other insurance for another person would not avoid the owner's policy, unless it appeared that it was taken out by his authority or c(3nsent : otherwise it really would not constitute a contract, because the element of mutual assent would be wanting, and the courts are very reluctant to vitiate a policy unless the intent on the part of the insured to procure double insurance is established ; for if the insured is not aware of the existence of other insur- ance, one of the reasons for inserting this clause of the policy is wanting. No temptation to commit arson could be inferred from a fact of which the insured is ignorant.^ In one case it was held that where the consignor effected an insurance with the warranty "no other insurance,'' and unknown to him the consignees also insured the same goods, the first policy was not avoided.^ But the warranty in the policy being absolute, principle would seem to require, that, if the double insurance really exists by legal authority of the insured, the policy in suit must be held avoided, whether the existence of the double insurance was known to the insured or not.'^ Policies in which the clause against other insurance does not contain the additional words " valid or invalid " have given rise to much difficulty in cases where two or more policies con- stituting double insurance contain the same provision. Shall both policies be avoided, or only one, and if only one, which one ? There is in each a condition b}^ which the policy con- taining it ought to be avoided, and yet the moment that either policy is held void, the reason for vitiating the other has ceased to exist. And substantially the same difficulty arises where the other insurance is in fact voidable at the option of the insurers upon some other ground of forfeiture which renders the policy invalid. The opinions of the courts upon these questions are varied ' Home Ins. Co. v. Bait. Warehouse ' WilJiamsv. Crescent Mut. Ins. Co., Co., 93 U. S. 527. Sturm v. Atlantic 15 La. Ann. 652. Mut. Ins. Co., 63 N. Y. 77. Mussey * Phoenix Ins. Co. v. Copeland, 86 V. Atlas Mut. Ins. Co., 4 I^ern. 79. Ala. 551. Van Alstyne v. ^tna !* London & L. Fire Ins. Co. V. Turn- Ins. Co., 14 Hun, 360. London & bull, 86 Ky. 230. Doran v. Franklin L. Fire Ins. Co. v. Turnbull, 86 Ky, Fire Ins. Co., 86 N. Y. 635. 230. 148 Insurance : Fire, Life, Marine. § 138 and irreconcilable. A full presentation of the subject may be found in the last edition of May on Insurance, chapter 18.^ Mucii of this difficulty would seem to be removed by the insertion, as in the standard form, of the words "valid or invalid," to which force must be given ; and when the policy in suit contains them, it should be held vitiated by other insur- ance, whether void or voidable.*^ If, however, a case should arise where the other policy is upon its face absolutely null and void, so as to be no policy at all, but a piece of waste paper, or where the policy, though still existing as a document, has been canceled, or where it has been irrevocably avoided at the election of the insurer issuing it, then, in either case, the conclusion seems to follow that there is within the meaning of this clause no other or double insur- ance.^ The case of Stevens v. Citizens Ins. Co., 69 Iowa, 658, is thus referred to at page 807 of May on Insurance : " It has been held that the clause against other insurance, valid or not, is not violated by a prior policy which had become absolutely void by its terms. It is difficult to see why the words ' valid or not' do not in all common sense cover a void policy." This criticism of the Iowa case by the learned editor of May would be just, if the case had been decided on the ground men- tioned by the reporter in the head note. But the reported facts in evidence disclose the important consideration, that, before the policy in suit had been taken out, the property had been removed from the locality in which it was situated when insured by the other policy ; and the court was of opinion that this removal without the requisite consent of the insurer took the property altogether out of the operation of the first policy, so that when the second policy was issued there was no double insurance existing upon the property in question. It is clear that, in the absence of the words " valid or in- ' Hubbard v. Hartford Fire Ins. Co., '■' jPhcenix Ins. Co. v. Copeland, 90 33 Iowa, 325 ; s. c, 11 Am. R. 125. Ala. 386. Phenix Ins. Co. v. Lamar, Thomas v. Builders Mat. F. Ins 106 Ind. 513. Allen v. Merchants Co., 119 Mass. 121 ; s. c, 20 Am. R. Mut. Co., 30 La. Ann. 1386; s. c. 31 317. Fireman's Ins. Co. v. Holt, 35 Am. Hep. 243. Ohio St., lf^9; s. c, 35 Am. R. 601. "Phenix Ins. Co. v. Lamar, 106 Lackey v. Ga. Home Ins. Co., 42 Ga. Ind. 513. Am. Ins. Co. v. Replogle. 456. 114 Ind. 6. § 140 Factories. 149 valid," the prohibition of this clause would extend only to valid other insurance. The corresponding provision of the Massachusetts policy is as follows : " This policy shall be void if the insured now has or shall hereafter make any other insurance on the said property with- out the assent in writing," etc. § 139. Factories. — Or 'if the sxibject of insurance he a manufact I lining establishment^ and it he operated in whole or in part at night later than ten o'clock, or if it cease to he operated for more than ten consecutive days. Exactly what constitutes an operating of a factory ma}^ not be very easv to define; but, in general, the evident meaning of the clause is that the active working of the business of the factory must be suspended, to constitute a cessation. Such continuation of the furnace fires, or even of the running of machinery, as could not from the nature of the business be temporarily suspended, is not to be considered prohibited. The mere running of the main shaft at night without any further operation has been held permissible.^ Running the factory at night after the limit named in the policy avoids it.^ Stopping work without permission even for repairs falls within the prohibition of this clause.^ The Massachusetts policy contains a similar clause, naming nine o'clock p. m. instead of ten o'clock, and thirty days as the limit for cessation of operations. § 140. Watchman. — It is sometimes provided that a watchman shall be kept. What is a reasonable compliance with such a provision must often be a question for the jury. Where the clause of the polic}^ required that a watchman must be kept day and night, it was held in a very recent case that the policy was voided because only one watchman was kept in the building. The court concluded that the intent of the 1 Whitehead v. Price, 2 Cr. M. & R. ' Day v. Mill Owners Mut. F. Ins 447 ; s. c, 5 Tyrwh. 825. Co., 70 Iowa, 710. ' Reardon v. Faneuil Hall Ins. Co., 186 Mass. 121. ^ 160 Insurance : Fire, Life, Marine. § 141 iristrument was that a watchman must be awake, and if there was only one watchman, there would be some portion of the time, presumably, when he would be asleep.^ The warranty to keep a watchman must be observed.' § 141. Increase of Risk.— 6>/' if the hazard he increased hy any means within the control or knowledge of the insured. So far as the conduct of the insured himself is concerned, an obligation is said to rest upon him by general principles of insurance law not to enhance the risk.^ This important clause of the policy must receive a reason- able construction. The hazard is of necessity a variable quan- tity. It constantly changes from day to day, though perhaps imperceptibly, from the operation of the laws of nature and various circumstances beyond the control of the insured. Such influences, and also the acts of persons other than the insured upon or in respect to property other than the insured property, are in general, unless unusual or extraordinary, to be considered as a necessary part of the risk which the insurer has under- taken to sustain. It is not to be supposed that the insured has guaranteed that no improvements or changes shall be made anywhere in the vicinity of the insured property, but it is reasonable to exact an obligation from the insured that he shall not allow himself, or permit others in control of the in- sured property with his consent, to change its nature or its use m such a way as to make the risk of the insurers materially different from that which they agreed to undertake. Trivial variations in the risk necessarily incident to the use of the insured property are presupposed by the contracting parties to be likely to occur ; other changes are not. This clause binds the assured to make no alteration or change in the structure or use of the property which will sub- stantially increase the risk, and it prohibits him from introduc- ing any practice, custom, or mode of conducting his business which would have the same effect, and also from discontinuing any precaution already used or represented in his application ' Rankin v. Amazon Ins. Co., 89 ' Hoffecker v. Newcastle Co. Mut Cal. 210 (1891). Ins. Co., 5 Houst. (Del.), 101. ' Bank of Ballston Spa v. Ins. Co., fiON. Y.45. § 141 Increase of Risk. 151 to have been adopted and practiced with a view to diminish risk.^ Erection of new buildings upon the ])i'operty insured or ad- jacent thereto, or any change in the structure of the buildings which makes them more inflammable, or the introduction of new and more hazardous employments or machinery, are hkely to avoid the policy unless a disclosure is made to the company, and its consent obtained by written permit.^ The introduction of electric lighting should be disclosed to the company, but the making of ordinary and necessary repairs does not fall within the prohibition of this clause.^ Whether the change amounts to a material alteration in the risk must generall}'^ be a question for the jury/ In Iowa it has been held that giving a chattel mortgage amounted to an increase of risk as matter of law;^ but this decision is very questionable, and in general the creation of encumbrances, whether voluntary as in the case of mortgages, or involuntary as in the case of tax liens, is not to be consid- ered as increasing the risk within the meaning of this clause, although they might result in increasing the inducement to the insured to destroy his projierty.® It must be noticed that the requirements of this clause impose upon the insured an obligation which in terms might seem to cover all material changes in the surrounding or adjoining premises ; but inasmuch as nothing is specifically said about the adjoining premises, and the word " knowledge " is connected with the word "control," it is doubtful how far the courts would hold the insured responsible for not disclosing changes made by others upon adjacent premises. The only 1 Houghton T. Manufrs. Mut. F. Ins. Co., 18 N. Y. 168. Lyman v. State Co., 8 Met. 114 ; s.c, 41 Am. Dec. 489. Mut. Fire Ins. Co., 14 Allen, 329. Diehl V. Adams Co. Mut. Ins. Co., * Shepherd v. Union Mut. Fire Ins. 58 Penn. St. 443 ; s.c, 98 Am. Dec. Co., 38 N. H. 231. Ritter v. Sun Mut. 302. Ins. Co., 40 Mo. 40. Insurance Co. v. ' xMurdock v. Chenango Co. Mut. McDowell. oO 111. 120 ; s.c, 99 Am. lias. Co., 3 Comst. 210. Long v. Dec. 508. Schmidt v. Peoria M. & F. Beeber, 106 Penn. St. 466 ; s.c, 51 Ins. Co., 41 111. 295. ^m. Rep. 532. Williams v. People's " Lee v. Agricultural Ins. Co., 79 F. Ins. Co., 57 N. Y. 274. Cole v. Iowa, 379. Germania Fire Ins. Co., 91) N. Y. 36, 'Judge v. Conn. Fire Ins. Co., 132 Stokes V. Cox, 1 H. & N. 320. Mass. 521. Hosford v, Germania Fire » Townsend t. Northwestern Ina. Ins. Co., 127 U. S. 399. 162 Insurance: Fire, Life, Marine, § 14^ safe plan, however, is to bring to the attention of the insurers any alterations in the situation which might affect their esti- mate of the risk. Sometimes policies contain an express pro- vision in regard to an increase of risk by adjacent buildings or in the use of surrounding premises. It has been held that in such a case no obligation is imposed upon the insured to dis- close changes of risk unless they are known by him to increase the risk.^ Of course, after receiving notice of the change of circum- stances, it is optional with the company, under the cancellation clause, to terminate the insurance or not, and after exercising an election the insurer will be bound thereby. Where the warranty against increase of risk without permis- sion is absolute, the insured is responsible for alterations made by his tenant on the insured property, though without his knowledge or consent.^ If the change of risk is such as to fall within the ban of this provision of the contract, the question is quite immaterial whether or not it was the cause of the loss; for the risk has become other than that which was contracted for, and the con- tract is void at the option of the insurers.^ According to the weight of authority and reason, then, a temporary increase of risk vitiates the policy and does not simply suspend its operation;^ but a contrary rule has been adopted in Illinois.^ The clause in the Massachusetts policy is substantially the same. § 143. Mechanics. — Or mechanics more than fifteen days at any one time. The limit of time which has wisely been inserted in this clause tends to make it much more free from ambiguity, and if the insured allows any building or repairing operations to go on ' Rile V, Lebanon Mut. Ins. Co., 115 * Kyte v. Commercial Union Assur. Pa. St. 531. Co., 149 Mass. 116. Jennings v. ' Longv. Beeber, lOG Penn. St. 466. Chenango Co. Mut. Ins. Co., 2 Den. Liverpool & L. Ins. Co v. Gunther, 75. 116U. S. 113. ^ North British & Mercantile Ins. ' Daniels v. Equitable Fire Ins. Co., Co. v. Steiger, 13 111. App. 482. 48 Conn. 105. § 14:3 Unconditional and Sole Ownership. 153 for more than the required time, without a permit, he will of course vitiate his policy.^ In the Massachusetts policy this subject is not specifically covered, but repairs fall within the operation of the general clause in regard to an alteration in the situation or circum- stances affecting the risk. § 143. Interest of Insured. — Or if interest of the in- sured he other than unconditional and sole ownership. This provision is reasonable and valid. ^ If the character of the title of the insured to the property is a fee, but he is only a part owner, the policy, of course, is void unless he discloses the fact. Or if, though invested with the legal title, the equitable estate and the right to the legal estate are in another, the policy is voided unless the fact is stated.^ A surviving partner is not the sole and unconditional owner of the undivided partnership estate.* But as a rule any encumbrances or liens upon the property of the insured need not be disclosed under this clause.'* And a lease from the insured need not be mentioned ; ® but under a policy which by its terras required that the " true title and interest" of the insured must be stated, it was held that a mortgage must be disclosed.'' A vendee in possession, with an equitable right to the whole title unencumbered, is considered the unconditional and sole owner, although he may not yet have received his deed.^ If it is equitably true that the insured is the unconditional and sole owner, the clause will not be held to have been violated.^ So where two agreed to carry on a cotton plantation, one to furnish stock, money, and supplies, ' Mack V. Rochester German Ins. Fire Ins. Co., 132 Mass. 531. Clay Co., 106 N. Y. 560. Fire & M. S. Ins. Co. v. Beck, 43 Md. ' Barnard v. National Fire Ins. Co., 358. 27 Mo. App. 26. « Ins. Co. v. Haven, 95 U. S. 242. ' Clay F. & M. Ins. Co. v. Huron ' Bowditeli Mutual Fire Ins. Co. v. Salt & L. M. Co., 31 Mich. 346. WMnslow, 3 Gray, 415. * Crescent Ins. Co. v. (amp, 64 " Bonham v. Iowa Central Ins, Co., Tex. 521. 25 Iowa, 328. ' Woodward v. I^epublic F. Ids. Co., ° Lebanon Mut. Ins. Co. v. Erb, 113 32 Hun, 365. DoUiver v. St. Joseph Penn. St. 149. Martin v. State Ins. F. & M. Ins. Co.. 128 Mass. 315 ; s.c, Co., 44 N. J. Law, 485; s.c, 43 Am 86 Am. Rep. 378. Judge v. Conn. R. 397. 164 Insurance: Fire, Life, Marine, § 145 the other to furnish the plantation and superintend the business, the former to be indemniiied for his advances out of the pro- ceeds of the cotton, and the stock and implements used to be equally divided at the end of the year, it was held, that, the cotton not being worth enough to pay the advances, the partner who had made them was the sole and unconditional owner of the cotton but not of the stock and implements ; ^ but one who held only a quit claim deed from a second mortgagee was not unconditional and sole owner ; ^ and a purchaser at a sheriff's sale who has not paid the purchase money, there being an out- standing right to claim the premises, has not such an ownership.^ A person in possession of property, with a reservation of title in the seller until payment of the notes given for the purchase price, is not sole and unconditional owner.^ Where the use of real estate was contributed as a partner's share of the capital, there being no deed directly or in trust, the firm cannot truly describe the property as belonging to them by an entire, unconditional, and sole ownership.^ This clause is not in the Massachusetts policy. § 144. Leased Ground. — Or if building on ground not i y^ owned by the i?isured in fee simple. If the insured owns only part of the fee, it has been held that the clause would be violated unless as provided an agree- ment giving necessary consent is indorsed upon the policy ; ' or if he has only a life estate ; ''' but if he has the equitable right to a fee simple it has been held that the clause would not be violated, though the special written permission had not been obtained.^ This clause is not in the Massachusetts policy. , § 145. Chattel Mortgage. — Or if personal property be '^ or become encumbered by a chattel mortgage. ' Noyes v. Hartford Fire Ins. Co., * Citizens' Fire Ins. S. & L. Co. v. 54 N. Y. 668. Doll.. 35 Md. 89; s.c, 6 Am. Rep. 360. " Southwick V. Atlantic F. & M. ' Scottish Un. & Nat. Ins. Co. v. Ins. Co., 133 Mass. 457. Petty, 31 Fla. 399. •Security Ins. Co. v. Bronger, 6 ' Garver v Hawkeye Ins. Co., 69 Bush. 146. Iowa, 203. ♦ Geiss V. Franklin Ins. Co., 133 " Swift v. Vt. Mut. Fire Ins. Co., 18 Ind. 173. Vt. 305. -V ,^ 146 Unconditional and Solk Ownership. 165 Except for this restriction, or some provision of the policy ex- pressly indicating that incumbi'ancos must be disclosed, it would not be necessary to state the existence of a chattel mortgage. By the weight of authority it does not constitute a change of interest, title, or possession, or an increase of risk.' The dictum to this effect in a recent Iowa case is not to be approved.^ But the giving of a chattel mortgage has been held to be an " alter- ation of ownership,'" ^ and has also been said to be an " alien- ation in part." * But this could not be held to be so under the New York standard policy. This provision also is absent from the Massachusetts policy. §146. Foreclosure. — Or if with the knowledge of the insured foreclosure proceedings he G. Co., 1 Va. 629 (1891). Hennessey v. Manhat- Comst. 29 '. Judge v. Lonii. Fire Ins. tan Fire Ins. Co., 28 Hun, 98. Orrell Co., 133 Mass. 521. Bishop v. Clay V. Hampden Fire Ins. Co., 13 Grray, 431. F. & M. Ins. Co., 45 Conn. 430. Shep- ' Lee V. Agricultural Ins. Co., 79 herd v. Union Mut. F. Ins. Co., 38 Iowa, 379 (1890). N. H. 232. Smith v. Monmouth Mut. * Edmunds v. Mut. Safety Fire Ina. F. Ins. Co., 50 Me. 96. Byers v, Co., 1 Allen, 311. Farmers Ins. Co., 35 Ohio St. 606 ; 35 * Abbott V. Hampden Mut. Fire Ins. Am. Rep. 623. Co., 30 Me. 414. ' Western Mass. Ins. Co. v. Riker, ' Quinlan V. Providence Washington 10 Mich. 279. McL'ulloch v. Indiana Ins. Co., 39 N. Y. St. Rep.S.'O. Titus Mut. Fire Ins Co. , 8 Blackford (Ind.), V. Glens Falls Ins. Co., 81 N. Y. 410. 50. t W f^U//oy '>.. CHAPTEK XIII. STANDARD FIRE POLICY CONTINUED. § 147. Alienation Clause. — Or 'if any change other than by the death of (Di, insured fake jplace in the interest, title, or possession of the subject of insurance {except change of occu- pants without increase of hazard), whether by legal process or judgment, or by voluntary act of the insured or otherwise. This clause is perhaps not altogether free from ambiguity. It is known as the alienation clause, of which fifty different forms are collected in the last edition of May on Insurance (pp. 552-556), most of which provide for the case of a sale, transfer, conveyance, or alienation of the property under divers forms of prohibitory stipulations. In the earlier policies, like the present Massachusetts standard form, the declaration gen- erally was, that a sale or alienation without written assent should avoid the policy. Under that form of prohibition it was held in many cases that to effect an avoidance of the policy there must be a sale or transfer of the entire interest. The New York court said : '' So long as the insured re- tains such an interest that he may be a sufferer by the loss, the policy remains valid to protect that interest." ^ To avoid the effect of such adjudications, which really nulli- fied the clause altogether, some policies were modified so as to prohibit any sale or transfer or change of title or possession, in whole or in part, without written consent. Under such a clause the rule is, that while there cannot be a conveyance of title, or parting with possession in whole or in part, yet an incidental change relating to the title or interest, if it does not alter the character of the interest or ownership of the insured, will not avoid the policy. For instance, giving a real estate ' Hitchcock V. North-western Ins. Co., 26 N. Y. 68. Locke t. North Am. liu. Co. 13 Mass. 61. § 147 Alienation. 157 mortgage is not a cause of avoidance under such a form of alienation clause,' or giving a ciiattel mortgage,'^ or placing or incurring other liens upon the property.^ A contract to sell is not a sale under a clause prohibiting alienation;^ and, although the new phraseology of this im- portant clause in the standard policy is unfortunately indefi- nite, the rule understood and acted upon b\^ the companies and the legal profession generally is that a contract to sell unaccompanied by delivery of possession is not "a change of interest." Consequently, until the deed of conveyance passes the legal title, it is not customary to alter the policies of insur- ance in such a case.^ If the prohil)ition were simply against a sale, a sale in fore- closure before being consummated by the delivery of the deed would not avoid ; ^ ijut a transfer or assignment in bankruptcy or insolvency, whether voluntary or involuntary, is a change of interest, and unless consented to by the insurer will vitiate the policy.'' A deed, though absolute in form, if given only as collateral security, is regarded only as a mortgage under this clause of the policy, and consequently does not avoid it, though given without any written permission of the insurers.^ But except as the standard policy provides otherwise, the death of the insured would operate as a change of interest.' And a devise by will is also a change of interest or title.'" ' Conover v. Mutual Ins. Co., 1 Clinton v. Hope Ins. Co., 45 N. Y. Comst. 290. Jackson v. Mass. Mut. 454. P. Ins. Co., 23 Pick. 418; s. c, U ' Ayres v. Hartford Fire Ins. Co. , 17 Am. Dec. 09. Phillips v. Merrimack Iowa, 176. Hill v. Cumberland Valley Mut. Fire Ins. Co., 10 Cusbing, 350. M. P. Co.. 59 Pa. St. 474. Washing- Judge V. Conn. Fire Ins. Co., 133 ton Ins. Co. v. Kelley, 33 Md. 421. Mass. 521. ° Haight v. Continental Ins. Co., 92 ' Hennessey v. Manhattan Fire Ins. N. Y. 51. Co., 28 Hun, 98. Rice v. Tower, 1 ' Hine v. Woolworth, 93 N. Y. 75. Gray, 426. Birdseye v. City Fire Ins. Co., 26 Conn. ' Baley v. Homestead Fire Ins. Co., 165. Young v. Eagle Fire Ins. Co., 80 N. Y. 21 ; 36 Am. Rep. 570. Hos- 14 Gray, 150. ford V. Hartford Fire Ins. Co., 137 * Barry v. Hamburg- Bremen Fire U. S. 404. Ins. Co., HON. Y. 1. * Browning v. Home Ins. Co., 71 " Hine v. Woolworth. 93 N. Y. 75. N. Y. 508 ; 27 Am. Rep. 86. Pitney '" Sherwood v. Agricultural Ins. Co., ^. Glens Falls Ins. Co., 65 N. Y. 6. 73 N. Y. 447; s. c, 29 Am. Rep. 180. 158 Insurance : Fire, Life, Marine. § 147 The phrase " change of title " has been many times con- strued, and cannot be held to cover the giving of a mortgage.' But in the New York standard policy two very broad words are used in conjunction with each other, "change of interest." It has been said that these words mean " every con- ceivable change of title or interest." ^ And, also, in another case it was said that these words were broader than the phrase "sold or conveyed," and must be held to cover a contract to sell which had been partly performed, though the legal title had not passed from the insured.^ A somewhat similar distinction was made in several other cases.^ And a standard author, in construing the meaning of the alienation clause, says : " But it must be remembered that this depends entirel}^ upon the language of the policy. If the policy stipulates against any change of title, or alteration therein, or against an alienation in whole or in part^ a mortgage is held within the prohibition."' It will be found, however, upon an examination of the forms of the policies in respect to which the opinions just cited were given, that they contained nothing which by implication indicated that the disclosure of mortgages was not required ; whereas, taking the New York standard policy in its entirety, the rule must be considered clear, that the giving of a mortgage or other incumbrances which are not by terms forbidden, Avill not avoid the policy though no written consent be indorsed thereon.^ To convey the property and take back a mortgage amounts to a sale and a change of interest.'' This clause must be construed in connection with the char acter of the property insured, and has no application to a fluctuating stock of goods in a store or factory, which it must be presumed is intended to be sold and replaced from time to ' Commercial Ins. Co. v. Spank- Abbott v. Hampden Mut. Fire Ins. neble, 52 111. 53; 4 Am. Rep. Co., 30 Maine, 414. 582. ' Wood on Fire Ins., 2d ed., p. 719 ' Lappin v. Charter Oak F. & M. (note). Ins. Co , 58 Barb. 325. ° Commercial Ins. Co. v. Spankneble, " Germond V. Home Ins. Co., 2 Hiin, swpra. Judge v. Conn. Ins. Co., 132 540. Mass. 5->l. Barry v. Hamburg-Bremen * Western Mass. Ins. Co. v. Riker, Fire Ins. Co., llO N. Y. 1. 10 Mich. 279. Edmunds v. Mutual ' Savage v. Howard Ins. Co., 5S Safety Fire Ins. Co., 1 Allen, 311. N. Y. 502 ; s. c, 11 Am. Rep. 741. § 147 Alienation. 169 time, but the policy usually uttaclies only to such property as is in the designated locality at the time of loss.^ Where the insured are joint owners of the property or jointly interested in it, as, for example, in the case of partners or trustees, a transfer from one to another without the intro- duction of any now pei'son has been held to be no violation of the prohibition of the alienation clause which was formerly in use. This conclusion was put upon the ground that the com- pany having exhibited its willingness to grant insurance to those named in the policy, a mere shifting of interest among them would not be objectionable to the company. The reason for this rule would seem to admit of its application to the case where the parties named in the policy are not joint owners but onl}^ jointly insured.^ Whether, under the alienation clause of the New York standard policy, the permission of this rule is applicable at all, or is confined to a case where joint ownership or joint interest exists, or whether it is applicable as between part owners or tenants in common, who have not, strictly speaking, a joint ownership, is not altogether clear, and especially since the recent case of Walton v. Agricultural Ins. Co., 116 N. Y. 326. In that case the policy was issued to Walton and his wife upon a barn the title to which was in Walton at the time of the issuance of the polic\^, but which Walton told the soliciting agent of the company he was about to convey to his wife. Subsequently, without the written consent of the company, which the terms of this clause of the policy required, Walton conveyed the title through a third person, as a conduit, to his wife. It was held by the Second Division of the Court of Appeals, four justices to three, that the policy was void, on the ground that there had been a breach of " the warranty against a conveyance of the property without the written consent of the company." It is, perhaps, a misfortune that the majority of the court, in their concise opinion, do not state the grounds ' Wolfe V. Security Fire Ins. Co., 39 Peck v. New London Co. Mut. Ins. N. Y. 49. Co., 33 Conn. 575. Lockwood v. Mid- ' Hoffman v. ^tna Fire Ins. <'o., dlesex Mut. Assur. Co., 47 Conn. 553. 32 N. Y. 405 ; s. c, 88 Am. Dec. 337. Walton v. Agricultural Ins. Co., 116 Powers V. Guardian Fire & Life Ins. N. Y. .■>26. Allemania Fire Ins. Co Cq., 136 Mass. 108; 49 Am. Rep. 20. v. Peck, 133 111. 820. 160 Insurance : Fire, Life, Marine. § 147 of their decision with as great particularity as is exhibited by the dissenting opinion of Mr. Justice Bradley. Whether the court based their conclusion upon the words, " if the interest of the parties therein be cluinged in any manner," or upon the fact that there was no joint interest between the vendor and the vendee, or upon the fact that an intermediary was called in to effectuate the transfer between husband and wife, is not made clear by the prevailing opinion. The change introduced into this clause by the phraseology of the New York standard policy certainly does not tend to the elucidation of this par- ticular question. A leading author is of the opinion that when the policy provides that any " change of interest " shall void the policy, a sale even by one co-partner or other joint owner to another, will produce a forfeiture.^ But the ruling was otherwise by the Alabama court.^ Another court was of opinion that a division on petition for partition, by one co-tenant against another, was a change in the title, though not strictly an alienation.* A careful reading of the New York standard policy in its entirety would seem to indicate that there was no intention of restricting the liability of the insurers by the phraseology adopted for this particular clause of the policy ; and a distinc- tion may be made between those policies in which the words " change of interest " are added to the ordinary alienation clause, for the purpose of enlarging its meaning, and the case of the New York standard policy, in which the one word " inter- est " is used as a brief and appropriate substitute for the longer phrases which had previously been employed. Whatever may be the rule in the case of different part own- ers, who are not joint owners but are insured jointly, there is no doubt, of course, that the introduction of a new in- terest or person without permit voids the policy under this clause.* After the loss has occurred, and the risk has terminated, the ' Wood on Fire Ins., sec. 357. ■* Malley v. Atlantic F. & M. Ins. ' Burnett V. Eufaula Home Ins. Co., Co., 51 Conn. '<;22. Savage v. How- 46 Ala. 11 : 7 Am. Rep. 581. ard Ins. Co., 52 N Y. 506 ; s. c, 11 ' Barnes V. Union Mut. Fire Ins. Co., Am. Rep. 741. 61 Maine, 110 ; s. c, 81 Am. Dec. 502. § 148 Assignment of Policy. 161 insui'ed may sell or transfer his interest without the consent of the company. Some policies provide for forfeiture in case the property shall become encumbei'ed in any way without the written con- sent of the insurer. This has been held to be confined to such encumbrances as the insured voluntarily puts upon his property, and not to tax liens or judgments.^ A morto'ao'e made on the farm exclusive of the house will not avoid the policy, although the description of the policy in terms covers the farm as well as the house.^ Possession under the alienation clause means, in general the right to possession, rather than the physical occupancy o the propei'ty. The construction of this clause is generally for the court, though if the material facts bearing upon the question of the interest of the insured are in dispute, the difference of fact may of course raise a question for the jury. The Massachusetts policy is simpler. It forbids a sale of the property without written assent of the company. \ § 148. Assignment of Policy. — Or if this policy he assigned hefore loss. Without express prohibition in the policy, it has been held that a fire policy is not assignable except with the consent of the insurer, for a fire policy is peculiarly a per- sonal contract, and does not run with the title to the prop- erty.'^ In a dissenting opinion in the last case, James, L. J., was of opinion that the contract should be held to run with the title to the land to the extent of inuring to the benefit of the vendee under an executory contract of sale. Marine policies at common law were considered assignable without express consent of the insurers, because of custom and commercial convenience, which made it important that cargoes should pass freely from one owner to another without con- > Baley v. Homestead Fire Ins. Co , "^ Phenix Ins. Co. v. Hart, 39 111. 80 N. Y. 21 ; 3(1 Am. Rep. 570. Hos- App. 509 (1890). ford V. Hartford Fire Ins. Co., 127 ^ Lett v. Guardian Fire Ins. Co., U. S. 404. 125 N. y. 82. Rayner v. Preston, 18 \ Ch. Div. 1. II 162 Insurance : Fikk, Life, Marine. § 148 sultation with distant insuratice companies.' But this con- sideration has never been extended to a fire pohcy. A pledge or deposit of the pohcy as collateral security is not prohibited by this clause.^ By the better opinion it is held that an assignee of a policy need have no insurable interest in the subject of insurance if the policy is originally taken out in good faith, *and not issued to the original insured as a mere cover to avoid the statute against wagers.^ But the United States Supreme Court, and some others, have said that the assignee of a policy, as well as the assignor, must have an insurable interest.^ It is important, however, to notice, that if the policy is a fire policy, and is assigned without a transfer of the interest or property which it covers, the assignee is merely the designated payee, and he would simply have an equitable lien upon the proceeds of the insurance to which the original insured might be entitled. Where the property or subject of the fire insurance, as well as the policy, are transferred to the assignee with the assent of the company, a new contract is thus formed between the com- pany and the assignee which will not be disturbed by any subsequent breach of condition on the part of the assignor.^ As to the past, however, the assignee simply steps into the shoes of the assignor. No one except the company can make objection to the assignment from the original insured to the assignee, on the ground that the company's consent was not obtained.^ After the risk has terminated by fire, the interest of the insured becomes a chose in action^ which he has a right to assign, in spite of this clause, without asking permission of the company.'' Some of the courts have expressed the opinion that the insurers cannot, by their contract, prevent a transfer of this right of action after the loss has occurred.^ ' Pellas V. Neptune Marine Ins. Co., ' Mellen v, Hamilton Fire Ins. Co., 5 C. P. D. 34. 17 N. Y. 609. Hall v. Dorchester Mut. ^ Griffey v. N. Y. Central Ins. Co., Fire Ins. Co., Ill Mass. 53. Imperial 100 N. Y. 417 ; s. c, .-,3 Am. Rep. 202. F. Ins. Co. v. Dunham, 117 Pa. St. 460. ' Olmsted v. Keyes, 85 N. Y. 59;J. " Goit v. Natl. Protection Ins. Co., * ^^ arnock v Davis, 104 U. S. 775. ','5 Barb. 189. West Branch Ins. Co. ' Fogg V. Middlesex Mut. Fire Ins. v. Helfenstein, 40 Pa. State. 289 ; s. c, Co., lOCush. 337. 80 Am. Dec. 573 Carroll v. Charter ° Leinkauf v. Caiman, 110 N. Y. 50. Oak Ins. Co., 38 Barb. 402. § 149 Memorandum : Gas, Benzine, etc. 163 The Massachusetts policy forbids an assignment without written assent of the company. § 149. Memorandiiin Clause. — Or if an illuminat- ing gas OP vapor^ etc, or, if there he kept, xised, or allowed henzine, dynamite, etc. These clauses contain memorandum articles, that is, a list of inflammable substances, themselves peculiarly liable to de- struction by fire, or likely to involve a loss so extensive that its results cannot easily be made the subject of calculation. The restrictions are proper and must not be infringed except as provided in the contract by written agreement indorsed upon the policy/* Where the memorandum clause does not contain the phrase which here appears, " any usage or custom of trade or of manu- facture to the contrary," it is permissible to the insured to use the articles prohibited by this general printed clause, provided they were such as naturally jjertain to the stock of goods or property described in the written part of the policy. And this is put upon the ground that the written words must control the printed form. Custom may be shown to aid in the application of this rule.^ Thus where a stock of fancy goods was insured with privi- lege to keep fire-crackers on sale, it was held by the New York court that keeping fireworks would not avoid the policy, although by the printed memorandum clause fireworks were prohibited.^ But the Federal Supreme Court came to the opposite conclusion on the same facts.'* And where privilege was given to use the property for a printing office, the keeping of camphene was held to appertain naturally to the permitted business, although camphene ap- peared in the printed memorandum of prohibited articles.' Similarly in the case of a photographer's stock.* ' United Life, Fire & Marine Ins. ' Steinbach v. Lafayette Fire Ins. Co. V. Foote, 22 Ohio State, 340 ; s. Co., 54 N. Y. 90. c, 10 Am. Rep. 735. Barnum v. 'Steinbach v. R. F. Ins. Co., 13 Merchants Fire Ins. Co., 97 N. Y. Wall. 188. 188. Williams v. People's Fire Ins. ' Harper v. N. Y. City Ins. Co., 23 Co., 57 N. Y. 274. N. Y. 444. - Carrigan v. Lycoming Fire Ins. " Hall v. Ins. I'o. of North Amer., Co., 53 Vt. 418 ; s.c, 38 Am. Rep. 6s7. 58 N. Y. 292 ; s. c, 17 Am. Rep. 255 164 Insurance : Fiee, Life, Marine. § 150 It is permissible to show by parol evidence what articles naturally appertain to the property which is the subject of insurance.^ / In spite of the attempt in the standard form to limit this Tule of construction, the rule will still prevail, and the only ; effect of the clause, " any usage or custom of trade to the con- ; trary," will be to impose upon the insured tlie burden of show- ing with perhaps greater clearness that the written description fairly covers the prohibited articles in question.^ If the insured allows his tenants, or other persons lawfully in possession of the premises insured, to violate the provisions of the memorandum clause, the policy will be avoided.^ But the requirement of the memorandum clause does not ex- tend to such insignificant quantities of the prohibited articles as one would use for medicine or for cleaning clothes, or for any similar use which must be presumed to be allowed by the con- tract of insurance in view of the character and use of the property/ The elaborate classification of risks which was formerly indorsed upon many of the policies has been omitted in the standard form. The memorandum clause of the Massachusetts policy is more liberal to the insured. § 150. Vacancy Clause. — Or if a huilding, whether in- tended for ocGuimncy hy owner or tenant, he or become vacant or unoccupied and so remain for ten days. The addition of a definite length of time, "ten daj^^s," is an improvement upon the old form. This provision is quite reason- able and must be observed, inasmuch as the insurers have a right to know whether the subject of insurance is receiving ordinary supervision or is being neglected.^ ' Pindar V. Kings Co. Fire Ins. Co., ^Liverpool & L. Ins. Co. v. Gun- 36 N. Y. 648 ; s. c, 93 Am. Dec. 544. ther, 11(5 U. S. 113. ' Birmingham l". Ins Co. v. Kroe- * Wood v. North-western Ins. Co., gher, 8-3 Pa. State, 64 ; s. c. 24 Am. 46 N. Y. 421. Williams v. People's Rep. 147. Whitmarsh V. Charter Oak Fire Ins. Co , 57 N. Y. 274. Carlin F. Ins. Co., 2 Allen, 581. Cobb v. Ins. v. Western Assur. Co., 57 Maryland, Co. of North Amer. , li Kansas, 98. 515 ; s. c, 40 Am. Rep. 440. Western Assnr. Co. v. Rector, 85 Ky. ' Hill v. Equitable M. F. Ins. Co.. ZU. 58 N. H. 82. § 150 Vacancy. 165 In brief, the meaning of this clause is that if the property insured is a (Iwelling'-house it must have an occupant living in it. And in tlie case of other property it must have that kind of care and superintendence which naturally belongs to the character of the occupancy and property described in the policy.' Holding the keys of a house is not occupancy, and this is true though some of the furniture remains in the house.^ The word " unoccupied " has been added to the word " va- cant," to give the restriction a broader effect in favor of the in- surance company. By a technical construction, " vacant " has been held in New York to mean empty of everything but air, and " unoccupied " to mean that no person is in use or posses- sion of the property.^ Where the building was described as "a store and dwelling," ceasing to use it as a dwelling does not make it unoccupied.^ As different classes of property naturally require different kinds of occupancy, the question w^hether the building is occu- pied oi' not may be a question for the jury.^ If the property is a factory or mill, it is not necessary that any one should be residing in it at night ; but it must be put to some practical and actual use, and not treated simply as a store- house.* "Where a trip-hammer shop was not in operation, but a man visited it almost every day to inspect it, it was held that the policy was avoided, and that such visits did not constitute an occupancy.'' But where a schoolhouse was left vacant during the time of the ordinary vacations, and the furniture was not removed, it was held that the provisions of the vacancy clause were not violated.^ ' Halpin v. Phenix Ins. Co., 118 N. v. Adriatic Fire Ins. Co., 85 N. Y. Y. 172. Poor V. Humboldt Ins. Co., 162. 125 Mass. 274; s. c, 28 Am. Kep. 228. * Burlington Ins. Co. v. Brockway, Rockford Ins. Co. v. Wright, 39 111 39 111. App. 43 (1890). App. 574 (1890). ' Rockford Ins. Co. v. Storig, 31 III. - Corrigan v. Conn. Fire Ins. Co., App. 486 (18S8). 122 Mass. 298. Liteh v. North Brit. ' Halpin v. ^tna Fire Ins. Co., 120 & Mer. Ins , 136 Mass. 491. N. Y. 70. " Herrman v. Merchants Ins. Co. ' Keith v, Quincy Mat. Fire Ins. Co., 44 N. Y. Superior Ct. 444 ; s. c . 10 Allen, 228. on appeal, 81 N. Y. 1«4. Herrmau " Am. Ins. Co. v. Foster, !J2 III. 334; s. c, 34 Am. Rep. 134. 166 Insurance -. Fire, Life, Marine. § 150 In another case, where a saw-mill was insured, the learned judge who pronounced the opinion of the court held that this could not be intended to be occupied like a domicile, and that a vacancy clause must be construed in view of the situation and character of the property insured, and the contingencies affect- ing its use, to which property of like character to that insured and similarly situated is ordinarily subject ; and that interrup- tions of business and discontinuance of active use were in such a case to be anticipated, and would no more avoid the policy than would the omission to use a church building during week days.^ Where a house is only used for taking meals, and a barn only for storing hay, both are unoccupied,^ In the case of a saloon, it is enough if a clerk lives in the building and sleeps there.^ Where a ten tenement frame block had two of its tene- ments occupied, the court was of the opinion that it was not vacant or unoccupied.'* But if buildings are separate the con- dition of the policy is to be applied distributively to them, and the occupancy of one of the buildings named in the policy will not excuse a vacancy in the others.^ Vacancy is not per se an increase of risk,* and need not be stated unless the policy requires it, or insurers make inquiry upon this point.'^ If a violation of this clause occurs, the policy is absolutely voided and not merely suspended ; but, as in all similar cases, it may be revived by the insurers by some act of confirmation after discovery of the forfeiture.^ Before the time limit was added to this clause considerable uncertainty existed as to the length of disuse which would constitute a vacancy, and the conclusion was that a temporary absence from a dwelling-house where the occupants left the ' Whitney v. Black River Ins. Co., ' Herrman v. Adriatic Fire Ins. Co., 72 N. Y. 117, by Andrews, J. ; s. c, 28 85 N. Y. 163. Herrman v. Merchants Am. Rep. 116. Lockwood v. Middle- Ins. Co., 81 N. Y. 184. sex Mut. Assur. Co., 47 Conn. 55:>. * Becker v. Farmers' Mut. Fire Ins. "^ Ash worth v. Builders Ins. Co., 112 C^o., 48 Mich. 610. Mass. 422. ' Browning v. Home Ins. Co., 71 N * Stensgaard v. Natl. Fire Ins, Co., Y. 508 : s. c, 27 Am. Rep. 86. 36 Minn. 181. ' Moore v. Phenix Ins. Co.. 62 N. fl. * Harrington v. Fitchburg Mut. Fire 240. Wainer v. Milford Mut. Fire Ins. Co., 124 Mass, 126. Ins. Co., 153 Mass. 335 (1891). § 152 Invasion, Theft. Neglect, etc. 167 fni'riiliire and household goods would not avoid the policy or require a, written consent.' A permit by the company to leave the house vacant for the summer will be liberally construed as meaning the season broadly rather than the summer months.^ It is not permissible to call experts and ask them whether it increases the risk to leave a house unoccupied;^ and the unambiguous time limit contained in this clause cannot be dis- turbed by evidence of custom to the contrary in the case of the same or similar property.^ By the Massachusetts policy a vacancy for thirty days is permitted without the written assent of the company. § 151. Certain Restrictions, — This company shall not he liable for loss caused directly or indirectly hy invasion, insur- rection, riot, civil war, etc., or by theft, or by neglect of the insured to use all reasonable m,eans to save the property at and after a fire, or by explosion of any Mnd, or lightning. Some of these exceptions to the liability of the insurers may not be at all likely to happen, but if they should happen their results might be so disastrous as to remove them from the oper- ation of any rule of average. " Usurped power " means an armed rebellion. Except for the provision relieving the com- pany from liability for loss " by order of any civil authority," the company would be liable if a building near to that insured were blown up by direction of the authorities to stay the spread of fire.' Theft and explosion have been previously adverted to in § 128. Whether the insured uses reasonable means to save his prop- erty is a question for the jury." § 153. Falling Building. — Or if a building or any part thereof fall except as the result of fire, etc. ' Cummins v. Agricultural Ins. Co. * Stone v. Howard Ins. Co., 153 07 N. Y. 260 ; s. c, 23 Am. Rep. 111. Mass. 4T5 (1891). .^tna Ins. Co. v. Meyers, 63 Ind. " City Fire Ins. Co. v. Corlies, 21 238. Wend. 867 ; s. c. 34 Am. Dec. 258. '^ Vanderhoef v. Agricultural Ins. Field v. City of Des Moines, 39 Iowa, Co., 46 Hun, 328. 575 ; s. c, 18 Am. Rep. 46. ^ Luce V. Dorchester Mut. Fire Ins. ° Ellsworth v. ^tna Ins. Co., 89 N. Co., 105 Mass. 297 ; s. c, 7 Am. Rep. Y. 186. Briggs v. North Amer. & M 523. Ins. Co., 53 N. Y. 446. 168 Insurance: Fire, Life, Marine. § 153 Without this restriction the company would be Hable for a conflagration caused by a collapse of the building or a part of it, unless before the fire started the building had lost its character as a building and had become a mere congeries of materials.^ Where seven days elapsed between the fire and the fall of the building it was held that the loss by the latter was not the proximate result of fire.^ The Massachusetts standard policy contains no similar pro- vision. § 153. Memorandum Articles. — This company shall not he liable for loss to accounts, hills, ciorrency, deeds, etc., or for froperty held on storage or for repairs, etc. If the property enumerated in this memorandum clause were covered by the policy the insurers would be subjected to claims of uncertain amount and very difiicult of verification. "Storage" means keeping for safe custody to be delivered again in the same condition substantially as when received, and as employed in this clause of the policy the prohibition is applicable only when the storing or safe-keeping is of mer- chandise for trading purposes and when the storing is the sole or principal object of the deposit. If the goods are merely kept for consumption or sale, the prohibition of this clause does not apply. For example, wine kept in a cellar either to be sold or consumed is not on storage.^ And raw material kept in a factory to be manufactured is not stored.* So if any material is casually or temporarily left in a room.^ The Massachusetts policy contains a list of memorandum articles, " bills of exchange, notes, accounts, evidences of prop erty, plate, money, jewels," etc., but differs widely from the New York clause under consideration. ' Nave V. Home Mut. Ins. Co., 37 ' N. T. Equitable Ins. Co. v. Lang- Mo. 430 ; s. c, 90 Am. Dec. 394. Fire- don, 6 Wend. 623. Hynds t. Sche man's Fund Ins. <'o. v. Congregation neetady Co. Mut. Ins. Co., 11 N. Y. Rodeph Sholom. 80 111. C58. Huck 554. O'Niel v. Buffalo Fire Ins Co.. V. Globe Ins. Co , 127 Mass. 306 ; 3 Comst. 1'22. s. c.,34Am. Rep. 373. * Vogel v. People's Mut. Fire Ins. ' Gaskarth V. Law Union Ins, Co., 6 Co., 9 Gray, 23. Ins. L. J. 159 (Manchester (Eng.) Civil ' Hynds v. Schenectady Co. Mut. Court). Ins. Co., 11 N. Y. 554. CHAPTER XIY. STANDARD FIRE POLICY — CONTINUED. § 154. Survey is a Warranty. — Application., survey.^ plan, etc., shall he a part of this contract and a vmrranty. The statements of the application are thus incorporated into the contract, and must be construed as a part of it.^ A mere reference to the application, however, would not be suffi- cient to make it a part of the contract in such a sense as to incorporate its statements as a warranty.^ And if there is any phraseology in the policy which gives the court an excuse for construing the statements of the application as representations rather than as warranties, it is pretty certain to avail itself of it.^ A mere expression of opinion will not be construed as a warranty.'* The phraseology of the application, where it is made a part of the contract, may itself limit the conditions of the policy in favor of the insured.^ But, as a general rule, as we have already seen, in considering the subject of warranty, all the statements of the application must be literally true, or exactly fulfilled, or the entire contract will be avoided. Whether the fact stated, or the act stipulated for, is material or not is of no consequence.® Any statements in the application, however, which have nothing to do with the subject of the contract, or with the risk, will be held to be immaterial, and will be regarded ' Cushman v. U. S. Life Ins. Co., 63 v. New Eng. Mut. Life Ins. Co., 98 N. Y. 404. Phoenix Ins. Co. v. Ben- Mass. 381. ton, 87 Ind. 132. ■• Clapp v. Mass. Benefit Asso., 146 ''Vilas V. N. Y. Cent. Ins. Co., Mass. 519. Wheelton v. Hardisty. 8 72 N. Y. 590 ; s. c, 28 Am. Rep. El. & B. 232. 18r>. ' Washington Life Ins. Co. v. ° Houghton V. Manufacturers' Mut. Haney, 10 Kas. 525. Fire Ins. Co., 8 Met. 114 ; s. c, 41 ° Bennett v. Agricultural Ins. Co., Am. Dec. 489. Phoenix Life Ins. Co. 50 Conn. 420. Ripley v. .^tnalns. Co., V. Raddin, 120 U. S. 183. Campbell 30 N. Y. 136 ; s. c, 86 Am. Dec. 363. lYO Insurance : Fire, Life, Marine. § 154 as having been gratuitously volunteered. For an innocent error in making them the policy will not .be avoided.' So, also, in the case of a promissory warranty, circumstances may so change that the warranty will be held to be inappli- cable; for example, if a loss occurs before the time for the fulfillment of the warranty has arrived, the loss will, never- theless, be covered b}' the policy.'^ A warranty of the exist- ence of a force pump on the insured premises, at all times ready for use, implies that there is sufficient power to work the pump.^ Where the insured, in answer to the question whether • his title to the property was absolute, said " his deceased wife held the deed," it was held that there was a breach of war- ranty, because the answer was not full and true ; the fact being that his wife, in whose employ he had been prior to marriage, had executed in his favor, after marriage, an instrument acknowledging an indebtedness, and stating that it should be a lien upon her property.* Where the insured described his building as " two stories high," the main part of the building in fact being two stories, but a small rear addition being only one story, the inaccuracy was held to be no breach of warranty.^ And where the applicant stated that the building to be insured was detached not less than one hundred feet, and the fact was that there was a barn about sixty feet distant from it, the court held that there was no breach of warranty.® A war- ranty that a room is warmed by a stove, and that the pipe is well secured, means that the room is so warmed, and the pipe so secured, when the stove is in use ; but not at other times.' Although the courts have been disposed to relieve the insured, as far as possible, from the consequences of a technical viola- tion of warranty, the legislatures of some States have also interfered by statute, and have provided that misrepresenta- tions, unless material to the risk, shall not avoid the policy. ' Anderson v. Fitzgerald, 4 fl. L. * Rohrbach v. Germania Fire Ins. Cas. 484. Hartford Protection Ins. Co., 62 N. Y. 47 ; s. c, 30 Am. Rep. Co. V. Harmer, 2 Ohio St. 452 ; s. c, 451. 59 Am. Dec. 684. ' Wilkinsv. Germania Fire Ins. Co., ' Gloucester Mfg. Co. v. Howard 57 Iowa, 529. Fire Ins. Co., 5 Gray, 497; s. c, 66 "Baldwin v. Citizens' Ins, Co., 60 Am. Dec. 376. Hun, 389 (1891), by Barnard, P. J. ' Sayles v. N. W. Ins. Co., 2 Curtis ' Loud v. Citizens' Mut. Ins. Co., 2 (Circuit Court), 610. Gray, 221. § 155 Standard Fire Policy : Who are Agents. 171 By a Massachusetts law, any provisions of the apphcation, or of by-laws of the company to become part of the contract, must be set forth in the body of the policy. This clause is not in the Massachusetts form of policy. § 155. Who are Agents of the Company. — In any matter relating to this insurance, no person^ unless duly author- ized in writing, shall he deemed the agent of this company. This clause has already been discussed in a previous chap- ter, under the subject of waiver and estoppel. The stipulation is not void or against public policy, and force must be given to it.' If the company makes it true, they can have the benefit of it. The clause is tantamount to a notice in respect to the method the company adopts to give authority to its agents ; and if not true, or if in fact the agent has an authority broad enough to waive it, the fact may be shown.^ The true doctrine of waiver and estoppel is expounded in two recent cases in l^QVf York.^ Agency involves a relation existing between the company and the agent, independent of the policy, which is res inter alios acta, and hence the relation may be shown by evidence outside the policy.* The editor of the last edition of May says : " It makes no difference that the policy declares the agent to be the agent of the assured, not of the company. For whom a person is acting is a matter of law on the facts of every case. The application precedes the policy*; and to hold that a provision in the after- coming policy, unknown to the assured at the time of applica- tion, could turn the insurance agent into his agent, when he thought all the time he was dealing with him and accepting his advice as agent of the company, would be an outrage." Logically speaking, this stipulation should have been ' Marvin v. Universal Life Ins. Co., Ins Co., 60 Hun, 389. Kausal t. 85 N. Y. 278. Minn. Mut. Fire Ins. Assoc, 31 Minn. » Insurance Co. v. Norton, 96 U. S. 17; s. c, 47 Am. Rep. 776. Par- 234. tridge v. Commercial Fire Ins Co., 17 ' Wyman v. Phenix Ins. Co., 119 Hun, 95. Wilkinson v Ins. Co., 13 N. Y. 274. Messelbach v. Norman, Wall. 222. Williams v. Hartford 122 N. Y. 578. Ins. Co., 54 Cal. 452 ; s. c, ^5 Am. * Commercial Ins. Co. v. Ives, 5() Hep. 77. May on Ins. p. 272 (3d ed. IlL 403. Baldwin v. Citizens Fire 1891). 172 Insurance : Fike, Life, Marine. § 156 omitted from the conditions of the New York policy, as it is from the Massachusetts standard poHcy ; but, practically speaking, it is an eminently appropriate provision if it is regarded simply as a notice to the insured that it is unsafe to deal with any pretended representative of the company unless he can show his written credentials.^ Certain States have legislated upon this subject fas, for ex- ample, Iowa, the statute of which provides that the soliciting agent shall be held to be the agent of the insurance company, " anything in the application or policy to the contrary notwith- standing." And such statutes are constitutional and control- ling, but perhaps unreasonably interfere with the freedom of the parties to settle the terms of their contracts.^ § 156. Renewals. — This policy may hy a renewal he con- tinued under the original stipulations^ etc., provided that any increase of hazard must he made known, etc. A pohcv is often renewed by a short form of receipt which obviates the necessity of issuing a new policy. The company may make a valid renewal by parol,^ even though the policy should stipulate that a renewal must be in writing.* The renewal constitutes in effect a new contract based upon the same terms and conditions as the old, but for some pur- poses may be regarded as a continuation of the old.^ By mutual consent the new contract may be modified in respect to any of its provisions, as where, for example, the com- pany consents to a change of location.* If the compan}^, knowing of the change of location without express consent, issues the renewal receipt and receives the 'Allen V. Germau Am. Ins. Co., 'First Bapt. Church v. Brooklyn 123 N. Y. 6. Ins. Co. v. Norton, 96 Fire Ins. Co., 19 N. Y. P,05. 0. S. 234. Walsh v. Hartford Fire U'ohen v. Continental Fire Ins. Co., Ins. Co.. 73 N. Y. 5. Bill v. Lon- 67 Tex. 325 ; s. c, (iO Am. Rep, 24. don Assiir. Corp., 26 Abb. N. C. • Peacock v. New York Life Ins. 203. Co., 20 N Y. 293 Hay v Star Fire « Continenta,' Life Ins. Co. v. Cham- Ins Co., 77 N. Y. 235 ; s. c, 33 Am. berlain, 132 U, S. 304. McConnell v. Rep. 607. Iowa Mut. Aid Assoc, 79 Iowa, 757. " Kathbone v. City Fire Ins. Co., 31 Phil. Fire Assoc, v. New York, 119 Conn. 193 Kunzze v. Amer. Exch, U. S. 110. Fire Ins. Co., 41 N. Y. 412. § 15T Standabd Fire Policy : Cancellation. 173 premium, this amounts to an implied consent to the change of location.^ But if the terms of the renewal contract are under negotia- tion and have not been definitely settled, the promise to give a renewal is not yet binding upon the company.^ A parol agreement of or for renewal may be made with the same freedom as a parol agreement for original insurance. This provision is omitted from the Massachusetts policy. § 157. Cancellation. — This policy shall he canceled at any time at the request of the insulted or hy the company^ hy giving Jive days' notice of such cancellation. If this policy shall he canceled as hereinhefore provided.^ or hecome void, or cease, the premium having heen actually paid, the unearned portion shall he returned on surrender of this policy or last renewal, this com- pany retaining the customary short-rate premium, except that when this policy is canceled hy this company hy giving notice it shall retain only the pro rata prem,iiini. There are statutory provisions in New York and elsewhere requiring the companies to cancel on request, and to return the premium less the customary short-rate (see appendix). Such a statute is compulsory upon the company, and when request has been made to it, this of itself terminates the insur- ance without any formal cancellation or physical defacement of the policy ; but the request to terminate the contract of in- surance must be made by the insured or his authorized agent to the insurer, or to one having adequate authority to act in the matter in its belialf ; and the request must be actually j received. (When the request is sent by mail, until it reaches the insurer or its agent the cancellation is incomplete and the policy remains in force.^ The demand for cancellation must be unconditional.^ Where, as in the Massachusetts standard policy, it is pro- vided that the insurance is terminable by the company on ' Ludwig V. Jersey City Ins. Co. , ^ Crown Point Iron Co. v. ^tna Ins. 48 N. Y. 379; s. c, 8 Am. Rep. Co., 127 N. Y. 608 (1891). 556. * Goit V. National Protection Ins. ' O'Reilly V. Corporation of London Co., 25 Barb. Ib9. Griffey «^. N. Y. Assurance, 101 N. Y. 575. Johnson v. Central Ins. Co., li N. Y. 417 ; s. c, Conn. Fire Ins. Co., 84 Ky. 470. 53 Am. Rep. 202. 174 Insurance : Fiee, Life, Marine. § 158 giving notice and refunding a ratable proportion of the pre- mium, giving tlie notice of cancellation is not of itself sufficient, but the policy continues in force until after payment or tender of the return premium.^ I An agent employed merely for the purpose of procuring insurance has no implied authority to cancel.^ Kotice by the company to a special agent of the insured appointed to procure insurance is not sufficient.^ But notice given to the general agent of the assured is sufficient/ The insertion in the New York policy of the words " by giving five days' notice " is a wise one, and has the advantage of fixing definitely the time at which the policy ceases to be in force after the notice is given, which heretofore has been a vexed question. By the Massachusetts form the company must give a ten days' notice to the insured. § 158. Mortgagee Clause. — If tdth the ecmsent of this company an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the. interest of the irv- sured as described herein, etc. A form of mortgagee clause is given in the appendix. It is attached to the policy in the form of a rider, and it consti- tutes a new contract between the company and the mortgagee under the terms and conditions of the policy itself as modified by the provisions of the mortgagee clause.^ Where without the mortgagee clause the policy is made payable to a mort- gagee, the latter stands in the position of the mortgagor, and can recover only when the latter has incurred no forfeiture.* In case of loss insurers cannot compel the mortgagee to ' Van Valkenburgh v. Lenox Fire ^ Stx)ne v. Franklin Fire Ins. Co., Ins. Co., 51 N. Y. 465. Lyman v. 105 N. Y. 543. State Mut. Fire Ins. Co., 14 Allen, ^ Hastings v. Westchester Fire Ins. ?39. Co., 73 ^'. Y. 141. - Insurance Cos. v. Raden, 87 Ala. ° Hine v. Homestead Fire Ins. Co., 311 ; s. c, 13 Am. St. Rep. 36. Young 29 Hun, 84. Harrington v. Fitchburg V. Newark Fire Ins. Co., 59 Conn. 41 Mut. Fire Ins. Co., 134 Mass. 126. (1890). Grosvenor v. Atlantic Fire Ins. Co.. 17 ' Hermann v. Niagara Fire Ins. Co., N. Y. 391. Bates v. Equitable Ins. 100 N. Y. 411. Co., 10 Wall. 3S. § 158 Mortgagee Clause. 175 have recourse to any remedy against the mortgagor before calhng upon them to pay under the pohcy.^ That the prop- erty still held by the mortgagee as collateral security for his debt is ample security furnishes no defense to the insurers.^ In spite of a mortgagee clause the mortgagor may still avail himself, as between himself and the company, of the re- instatement clause if the company elects to rebuild.^ Sometimes, instead of taking advantage of the mortgagor's policy and attaching to it a mortgagee clause, the mortgagee effects an independent insurance upon his own interest as mortgagee. If he does this without any agreement between himself and the mortgagor, the latter has no interest in the insurance moneys, and cannot compel the mortgagee to apply them toward payment of the debt."* But if the insurance has been procured by the mortgagee on account of the mortgagor, or at his cost, the rule is otherwise.^ It has been held that the rights of the mortgagee to the benefits of his insurance become fixed at the time of loss, and that he niay recover the insurance though the debt is dimin- ished or paid subsequent to the fire.^ The English courts are disposed to enforce more strictl}^ the doctrine of indemnity, and allowed an insurance company to recover back the insurance money which had been paid to the vendor of real estate while still the owner of the building which he had contracted to sell, and before he had received the purchase price. This decision was put upon the ground that the company became subrogated pro tanto to the purchase price of the land," though unpaid at the time of the fire. This case has already been commented upon in the treatment of subrogation. Although the interesting and learned opinions by Justices Brett, Cotton, and Bowen, pronounced in its sup- port, exhibit some vagueness of thought, it would appear to be the doctrine of that case, that, upon paying the loss under the ' Excelsior Fire Ins. Co. v. Royal * Mclntire v. Plaisted, 68 Me. 363. Ins. Co., 55 N. Y. 343 ; s. c, 14 Am. Foster v. Van Reed, 70 N. Y. 19 ; s. c. Rep. 271. Foster v. Equitable Mut. 26 Am. Rep. 544. P. Ins. Co.. 2 Gray. 216. " Waring v. Loder, 53 N. Y. 581. '^ Kernochan v. N. Y. Bowery Fire * Foster v Equitable Mut. Fire, 2 Ins. Co.. 17 N. Y. 428. Allen (Mass.), 216. Heilmann v. Westchester Fire ' Castellain v. Preston, L. R., 11 Q. Ins. Co., 75 N. Y. 7. B. D. 380. 176 Insurance : Fire, Life, Marine. § 158 policy of the vendor, the company took, by subrogation, a vested rignt in the executory and unperformed contract exist- inof between the vendor and vendee, of the benefit of which it could not be deprived by any action of the parties to that contract. Sucli a doctrine seems to be unreasonable and incon- venient, and uncalled for by any serious consideration of public policy. The contract of sale was wholly independent of the policy of insurance, and did not affect the company in any way, provided the terms of the policy did not prohibit it. Subrogation could not apply, for the vendee was not a wrong- doer primarily responsible for the loss, nor was his contract made to insure a preservation of the property. It was a mere incident to the property, the legal title and insurable interest in which still resided in the vendor. Any possible future proceeds from the executory contract of sale, if the parties thereto should ultimately decide to carry it out, could not be brought into an estimate of the amount of loss, for the reason that the measure of damages established by the policy was the cash value of the propert}' destroyed at the time of the fire. It often happens that a fire ultimately turns out to be a source of profit to the insured, but this consideration offers no argument in favor of disturbing an insurance adjustment already settled. The general policy of the courts in passing upon questions of insurance law has been not to allow the doctrine of indemnity to obtrude itself inconveniently, pro- vided the contract of insurance is free from suspicion of being a wager at the time of its inception. The English court con- ceded that the executory contract of sale furnished no defense to the insurers either in full ov pi'o tanto. In the Massachusetts standard a mortgagee clause is in- serted in the body of the contract. If a mortgagee is a mere payee, the proofs of loss must be made by the mortgagor,' but under a mortgagee clause the mortgagee may make and verify the proofs, at all events after refusal of the mortgagor to do so." > State Ins Co. v. Maackens, 38 N. ' Graham v. Firemen's Ins. Co., 8 i. L. 564. Ayres v. Hartford Fire Daly, 421. A Conn, statute gives relis' Jns. Co., 17 Iowa, 176. to the mortgagee, Gen. Stat. § 2839. CHAPTER XV. STANDARD FIKE POLICY CONTINUED. § 159. Removal of Property for Safety. — If prop i^ty covered hy this policy is so endangered hy fire as to require '*'einoval to a place of safety^ and is so removed, etc. A wise provision, making more definite an obligation of considerable uncertainty ; for the general principle obtains, that where a removal is reasonably necessary under the cir- cumstances of the case on account of impending danger b}'^ fire, damages resulting from removal are recoverable against the insurer as proximate loss.^ This provision is not inserted in the Massachusetts form. § 160. Notice and Account of Loss. — If fire occur, the i7isured shall give immediate notice of any loss therehy, in tvritiiig, to this company, protect the property from further damage, forthwith separate, etc. *^, This clause is the result of a careful revision of the pro- visions previously existing in other forms of policies. It is incumbent upon the insured to pay strict attention to the requirements of the contract in this regard, to limit the loss so far as it lies within his power to do so, to give an opportunity to the company to take such measures with promptness as may seem wise to them to effect the same result, and to furnish them with all reasonable evidence to enable them to determine the nature and extent of their loss.^ An "immediate" written notice of loss is required; then afterwards, " forthwith," the damaged and undamaged per- ' Whitehurst y. FayetteviUe M ut. 71. Balestracci v. Firemen's Ins. Co., Ins. Co., 6_ Jones (N. C.) Law, 35'i. 34 La. Ann. 844. ^hite vTllepublic Fire Ins. Co., 57 ' Bumstead v. Dividend Mut. Ins. Me. 91 ; s. c, 3 Am. Rep. 22. Stan- Co., 12 N. Y. 81. ley V. Western Ins. Co., L. R., 3 Ex. 13 ^^ 178 Insurance : Fire, Life, Marine. § 160 sonal property must be separated and arranged and inven- toried, and within sixty days the verified statement must be furnished, giving the required particulars of the property and the loss. The terms "immediate notice" and "forthwith" mean witli due diligence under the circumstances of the case, of which the jury will ordinarily be the judge, unless the delay seem to the court so great as to be inexcusable.^ In one case the court decided that a delay of forty-eight hours in giving the notice of the fire was without excuse, and a non-suit was directed.^ In another case, where the policy required immediate proof and notice of loss, a delay of thirty- five da3's in sending an inventory of loss was considered excus- able.^ But, in another case, a delay of eleven days without sufficient explanation was held to be unreasonable.^ The policy is, by a previous clause, made payable sixty days after due notice, ascertainment, estimate, and satisfactory proof of the loss have been received. " Satisfactory proof " means proof which ought to be satisfactory.^ But it is essential that the proofs should be furnished within the specified time, unless the company waives the requirement.^ A proper mailing of a notice of loss is a sufficient com- pliance with the requirement of the policy, that immediate notice of loss must be given in writing.''' Whether the written proofs constitute a compliance with the warranty of the policy, is properly a question for the court.^ In regard to the essential conditions of the contract of insurance, we have noticed that insanity or other disability furnishes no excuse for a violation, but this rigid rule is relaxed 'Bennett v. Lycoming Co. Mut. Ins. ' Walsh v. Washington M. Ins. Co., Co., 67 N. Y. 274. Kimball v. Howard 32 N. Y. 427. London Guarantee & Fire Ins. Co., 8 Gray, 33. People's M. Ace. Co. v. Fearnley, 43 L. T. N. S. Ace. AsfiO. V. Smith. 126 Pa. St. 317. 390. Kingsley v. New England Mut. Fire " Underwood v. Farmers Joint Stock Ins. r'o., 8 Cu.sh. 393. Rokes v. Am- Co., 57 N. Y. 500. azon Ins. Co., 51 Md. 512 ; s. c, 34 ' Susquehanna Mut. Fire Ins. Co. t. Am Rep. 323. 133 N. Y. 394. Tunkhannock Toy Co., 97 Pa. State, ^ Brown v. London Assur. Co., 40 424; s. c, 39 Am. Rep. 816. Badger Hun, 101. V. Glens Falls Ins. Co., 49 Wis. ' Knickerbocker Ins. Co. v. McGin- 389. nis. 87 111. 70. " Travellers Ins. Co. v. Sheppard, * Trask v. State F. & M. Ins. Co., 29 85 Ga. 802 (1890). Pa. St. 198; s. c., 72 Am. Dec. 622. 1>> § 161 Proof of Loss. 179 somewhat in respect to the pi'ovisions requiring proofs of loss after the risk has terminated ; and insanity has been held to constitute a sufficient excuse for the omission to serve a pre- liminary notice of loss upon the company.^ Furnishing proofs of loss is a condition precedent, and the loss of the policy is no excuse for not performing it.^ If the insured is out of the country, and cannot make the required proofs as stipulated by the policy, it has been sug- gested that the court might grant relief, at any rate, to the extent of holding that sufficient proofs by an agent constitute a compliance/ In general the insured must make the oath. If the company entertains any objection to the proofs on account of technical defects, it must make an objection upon .^"^ that specified ground, or it will be held to have waived them, provided they relate to matters which upon notice could bo " remedied by the insured ; and a refusal to pay the policy based J upon other grounds is held to imply a waiver of the formal and technical defects in the proofs.^ If demanded, plans and specifications must be furnished.' And so also must the required certificate of the nearest magistrate. But the court will not go into a very nice cal- culation to determine whether one magistrate is a little nearer to the place of the fire than another.® Upon this subject there has been legislation (see appendix). The requirements of the Massachusetts policy are not so detailed. § 161. Exhibit Remains ; Svibmit to Examina- tions ; Books of Account, etc. — The insured, as often as required^ shall exhibit to any person designated hy this com- ' Insurance Cos. v. Boykin. 13 Wall. ' Fawcett v. Liverpool, London & 433. Wheeler v. Conn. Mut. Life Ins. Globe Ins. Co., 37 U. C. Q. B. 225. Co., 82 N. Y. 543 ; s. c. 37 Am. Rep. « Daniels v. Equitable Fire Ins. Co., 594. But see Conn. Gen. Stat. § 2839. 50 Conn. 551. Araer. Cent. Ins. Co. v. ^ Blakeley v. Phoenix Ins. Co., 30 Rothchild, 82 111. 166. Tinley v. Wis. 205 ; s. c. 91 Am. Dec. 388. North Am. Fire Ins. Co., 25 Wend. • Walsh T. Vt. JMut. Fire Ins. Co., 874. Williams v. Niagara- Fire Ins. B4 Vt. 351. See 112 111. 68. Co., 50 Iowa, 561. Dolliver v. St. * Priest V. Citizens Mut. Fire Ins. Joseph Fire & Marine Ins. Co., Co., 85 Mass. (3 Allen), 601 Brink v. 128 Mass. 315; s. c, 35 Am. Rep. Hanover Ins. Co., 80 N. Y. 109. 378. 180 Insukance : Fikk, Life, Marine. § 161 pany all that remains of any property herein described^ and submit to examinations under oath^ etc.^ and produce for examination all books of acoourit, etc. Those pi-ovisions confer great privileges upon the insurers, and ought to be enforced by the latter only within bounds of reason -awX propriety. They are binding upon the insured so far as it lies within his power to comply with them.* Under tliis clause the courts do not require the production of proofs which cannot be produced because they have been destroyed by the fire, or for any reason are beyond the control of the insured.^ And if, by diligent effort, duplicate bills, in- voices, or vouchers cannot be obtained, their production will be excused.^ But, otherwise, they must be produced.* The company seldom requires the insured to submit to a personal examination, except in those cases where fraud is sus- pected. But in such cases this provision of the policy is some- times of great value to the company, and especially if it is ob- tained before the insured employs legal advice. If the insured gives false testimony in detail upon his examination had under the terms of the policy, it is generally a source of great embar- rassment to him upon the subsequent trial of his law-suit. Upon this preliminary examination the representative of the company finds it particularly desirable to cross-examine the insured in regard to the location of the various pretended items of prop- erty said to be in the building at the time of the fire, and also to compel him to state in detail where and when he purchased them. If the property is fictitious, it is very difficult for him to tell a plausible stor3\ and he soon finds himself obliged to have recourse to the suspicious response, that he cannot remem- ber. If he locates the fictitious property in detail, and does not have a copy of his testimony at the subsequent trial months or perhaps years afterwards, he will be very apt, when in the witness chair, to tell an entirely different story. If he states the times and places of purchases from other 1 O'Brien v. Comm'l Fire Ins. Co., Council Bluffs Ins. Co., 65 Iowa, 308. 63 N. Y. 108. Titus v. Glens Falls People's Fire Ins. Co. v. Pulver, 127 Ins. Co., 81 N. Y. 410. Claflin v. 111. 246 Commonwealth Ins. Co., 110 U. S. ^Miller v. Hartford Fire Ins. Co., 81. 70 Iowa, 704. ■^ Mech. Fire Ins. Co. v. Nichols, 1 ■* O'Brien v. Commercial Fire Ins. Harr. (N. J.), 410. Eggleston v. Co., 63 N. Y. 108. § 162 Appraisal 181 merchants, the books of the latter will often furnish a check upon his statements. If the insured absents himself so that he cannot with due diligence be found, this amounts to a refusal to be examined on oath, and after a partial examination, a refusal to continue will have the same effect.^ But if the company concludes its examination it cannot give a fresh notice, and open up a new hearing.^ Whether the conduct of the insured, upon the examina- tion, amounts to a disobedience of the injunction of this clause, may be a question of fact for a jury.^ The company must demand an examination within a reasonable time, and must not wait until an action has been brought against it under the policy.* In the examination the insured is only bound to answer such questions as have a material bearing upon the insurance and the loss.^ Logically, the sufficiency of the examination, and the rele- vancy of the questions asked, should be for the court.® But, in practice, the courts are very reluctant to dismiss the com- plaint on such grounds, and generally leave the question of reasonable compliance to the jury, provided the insured has submitted to any sort of an examination. The Massachusetts policy contains no such provision. § 163. Appraisal. — In the event of disagreement as to the aTnount of loss, the same shall, as above provided, he ascertained hy two competent and disinterested appraisers, etc. This is called the appraisal or arbitration clause, and is very important to the companies in many instances to relieve them from extravagant or fraudulent claims. Courts are the legally appointed tribunals for determining controversies, and are jealous of interference with their prerog- ' Bonner v. Home Ins. Co., 13 Wis. * Aurora Fire Ins. Co. v. Johnson, 677. Harris v. Phoenix Ins. Co., 35 46 Ind. 315. Conn. 310. ^ Titus v. Glens Falls Ins. Co., 81 5 Moore v. Protection Ins. Co., 29 N. Y. 410. Ins. Co. v. Weides, 14 Maine, 97 : s. c, 48 Am. Dec. 514. Wall. 375. " Phillips V. Protection Ins. Co., 14 ' North Am. Life & Ace. Ins. Co. v. Mo. 220. Burroughs, 69 Pa. State, 43 ; s. c, 8 Am. Rep. 212. 182 Insurance : Fire, Life, Marine. § 169 atives. Any agreement to refer to arbitration the general question of the liabihty of the insurers under the pohcv, or all matters of dispute under the policy, is void ; for it is held to be against public policy to oust the courts altogether of their iurisdiction.' An arbitration clause providing that there shall be two arbitrators and an umpire, without specifying expressly who shall appoint them, has under a strict construction l)een held invalid. But the provision of the New York standard policy which simply refers to appraisal tlie question of the amount of loss, leaving any dispute in regard to the company's liability to be determined by the courts, is valid, and a compliance with it is a prerequisite to any right of recovery in an action upon the policy.* A statute in Vermont provides otherwise. By strict construction against the company, it has been held that an arbitration clause somewhat similar to that in the standard policy is only applicable to property partially injured and cannot be held to cover property totally destroyed.^ Of course the framers of the policj'^ did not intend to have such a distinction made. Evidence relating to property totally de- stroyed can be presented to arbitrators as well as to courts ; with the difference, that juries are generally prejudiced in favoi of the insured, and arbitrators are likely to be fairly disinterested. If the arbitrators go outside the matters submitted to them for determination, their appraisal will not be binding.'* If the two appraisers agree, they may act without calling in the umpire.^ The Massachusetts standard policy has an appraisal clause substantially the same, except that it is silent as to the expenses of the appraisal, and provides that neither party shall be re- ' Delaware & H. Canal Co. v. Penn. Uhrig v. Williamsburgh City Fire Coal Co., 50 N. Y. 250. Reed v. Ins. Co., 101 N. Y. 362. Hamilton Washington Ins. Co., 138 Mass. 575. v. Home Ins. Co., 13? U. S. 370, Clement v. British Am. Assur. (*o., 386. Morley v. Ins. Co., 85 Mich. 210, 141 Mass. 298. Hurst v. Litchfield, but see Vermont R. L S 3626 39 N Y. 377. Scott v. Avery, 20 = Rosenwald v. Phoenix Ins. Co., 50 English Law & Eq. 327; s. c , 5 H. L. Hun, 172. Cases, 811. * Skipper v. Grant, 10 ('. B. N. S. « Seward v. City of Rochester, 109 287. N. Y. 164. Hamilton v. Liverpool, " Enright v. Montauk Fire Ins. Co., L. & G. Ins. Co., 136 U. S. 242. 40 N. Y. State Rep. 642. § 164 Pko Rata Ci.ause. 183 quired to choose or accept any person as referee who has served as a referee in any hke case within four months. § 163. Enforcing Contract is ho Waiver.— This company shall not he held to have waived any 'promsion or' con- dition of this policy, or any forfeitui^e thereof^ hy any require- ment, etc., relating to the appraisal or examination / and the loss "^ shall not become payable tmtil sixty days after the notice of -c* ascertainment., estimate., and satisfactory proofs have been ^___^ received., including an award by appraisers when appraisal has been reguired. As has been noticed, the courts in some instances have been disposed to construe as a waiver of a known cause of forfeiture any demand for an appraisal or examination of the assured or the appraisal ;^ but this clause of the policy allows the company to pursue the contract methods for ascertaining the character and extent of the loss before exercising its option to decide whether or not it will contest the claim of the insured. And the provision that the loss is not payable until after the award by the appraisers makes it clear, under the decisions of the courts, that a compliance with the appraisal clause is not simply directory, but is a condition precedent to any right of action under the policy. The Massachusetts standard form does not contain this clause. § 164. Pro Rata Clause : Other Insurance. — Shall not be liable for greater proportion of any loss than the amount hereby insured shall bear to whole insurance., whether valid or — not., or by solvent or insolvent insurers ; and the extent of the C*" application of the insurance under this policy., or of the contri- \ bution to be made by this company., may be provided for by — agreement attached hereto. This provision relates to double or other insurance which has been already defined, and not to insurances of different interests though upon the same property.^ 1 Morley v. Ins. Co., 85 Mich, 310 55 N. Y. 222; s. c, 14 Am. Rep. 239. (1891). Hamilton v. Home Ins. Co., Acer v. Merchants Ins. Co., 57 Barb. 137 U. S. 870 (1890). - 68. Titus v. Glens FaUs Ins. Co., 81 » McMaster V. Ins, Co. of North Am., N. Y. 415. 184 Insurance: Fire, Life, Marine. § ^^4 Thus, if a mortgagor insures his interest, and a mortgagee, either by a separate policy or by a mortgagee clause attached to the mortgagor's policy, insures his interest on the same property, there is no double or other insurance. But if the mortgagor's policy is simply made payable to the mortgagee without a mortgagee clause, and the mortgagor should take out another policy upon the same property and against the same risk, it would constitute a case of double insurance.' The object of this clause of the policy is to prevent circuity of action. Without it, in any case of double insurance, as we have seen, the insured might bring his action against any one company for the whole amount of loss up to the extent of the policy, leaving the co-insurers to settle their respective obliga- tions under the equitable doctrine of contribution. But under the limitation of this clause, the insured can sue one company only for its ratable proportion of the loss, and therefore the right of contribution among the co-insurers becomes available to them only in case of over-insurance. If one company pays to the insured either more or less than its proper share, the other companies are still liable to the insured for the amount of their respective obligations as fixed by their own contracts respectively.^ When the different policies contain similar terms, and are concurrent, there is little difficulty in dividing the loss propor- tionately among them ; but when the policies cover in part the same, and in part different property, and contain different and inconsistent provisions applicable to the one loss, it may readily be seen that it is simply impossible to adjust the loss in strict conformity to the requirements of their repugnant condi- tions. The problem of adjusting such losses often becomes one of grave perplexity and difficulty, and is not always understood by the judges, who, no matter how learned they may be in the law, are often insufficiently familiar with the business of insur- ance and the science of mathematics to be able to master the situation even to their own satisfaction. The Missouri court, in a case of this character, summed up ' Hine v. Woolworth, 93 N. Y. 75. ' Conn. Fire Ins. Co. v. Mer. & Van Alstynev. Mtna Ins. Co., 14 Hun, Mech. Ins. Co., 15 Ins. L. J. 6:5 (Va. 360. Hastings V. Westchester Fire Ins. Apl. 15, 1886). Co., 73 N y. 141. § 164 Pko Kata Clause. 185 the reasons for the conclusion at which it had arrived in an apportionment of loss between insurance companies, in the fol- lowing Avords : " We are strengthened in this conclusion by the fact that F. L. Ridgely and George K. McGunnegle, who have very great experience in the business of underwriting in St, Louis, having heen consulted in reference to this case, concurred in recommending the same adjustment." ^ A practical insurance man has given a number of rules, more or less inconsistent with one another, which have been prepared by various persons in the trade to aid in arriving at a proper adjustment by contribution.'^ The same writer says : '' The contribution clause, like con- tribution under the old form, is held to be operative only between the companies in case of double insurance, and between policies containing it ; and then only when the con- current insurance exceeds the general loss. . . . The lia- bility of co-insuring companies under this clause is based upon the degree of concurrency of the policies, and is restricted, to the ratable proportions of the loss, within the amount of the concurrent insurance ; though some of the policies may cover other propert}' in addition to that destroyed, or protect specific items not embraced in any of the others."^ The questions arising under this clause are so frequently settled by the companies in an amicable adjustment that the scope of this book will not admit of an elaborate discussion of the subject; but certain principles may be named which the courts have endeavored to apply in the settlement of inconsist- ent provisions contained in the various policies. 1. The different policies are placed as far as possible upon an equality, and special conditions and limitations in one policy are not brought over into another ])olicy.* 2. The object of the contribution clause is construed to be the restriction of the amount recovered from each insurer to its equitable contributory share, and must not be permitted to operate so as to reduce the aggregate amount of indemnity which the insured mio^ht otherwise recover. No arrangreraent ' Angelrodt v. Del. Mut. Ins. Co., ' Gris wold's Fire Underwriters' Text 31 Mo. 598. Book, p. 713. ' Griswold's Fire Underwriters' Text * Howard Ins. Co. v. Scribner, 6 Book, pp. 745 et seq. Hill, 298. 186 Insurance : Fire, Life, Marine. § 164 of the clauses in the pohcy shall be used to the disadvantage of the insured. He must be paid, and the dispute, if any, settled among the underwriters.^ Lord Mansfield said ', "In no case must the contribution clause be construed in such a manner as to throw loss upon the insured, against which he would have been fully protected had the policies been free from that clause." '^ In an interesting apportionment by the arbitration commit- tee of the New York Board of Fire Underwriters, growing out of a recent fire in the Rossiter stores in New York City, the arbitrators laid down three principles which they considered fundamental. "(1) That the insured shall not suffer by non-concurrence of policies, if the aggregate of the insurance exceeds the loss. (2) That a co-insurance clause serves its purpose if it is a guar- anty that at least the benefits of full insurance are secured. (3) That a floating policy, with condition that it shall not attach until all specific insurance is exhausted, cannot be held by reason of non-concurrence of specific policies, save for the excess of the aggregate amount covered by all such non-concurrent policies.'" ^ But to constitute double insurance it is not necessary that the persons insured under the different policies should be named by the same description. For example, if a warehouseman takes out insurance upon the goods stored with him as a bailee, not only for his own benefit but on account of whom it may concern, or by any designation for the benefit of others in- terested in the same property, provided such other persons have either given original authority for the procuring of the insurance or have subsequently ratified it, the policy covers their interest as well as the interest of the warehouseman, it being shown that such other persons were within the contem- plation of the parties to the contract at the time when it was ' Lucas V, Jefferson Ins. Co., 6 Cow. Mercantile Tns. Co. v. L., L. & G. Ins. 635. Co., ry Ch. Div. 569. 111. Mut. Ins. « Godin V. London Assurance Co, , 1 Co. v. Hoffman, 133 111. 522. Balto. Burr. 489. Fire Ins. Co. v. Loney, 20 Md. 20. ' Ogden V. East River Ins. Co., 50 Haley v. Dorchester Mut. F. Ins. Co., K. Y. 388 ; s. c, 10 Am. Rep. 492. \2 Gray, 545. Sloatv. Royal Ins. Co., Lowell Mfg. Co. V. Safeguard Fire Ins, 49 Pa. State, 14; si. c, 88 Am. Deo. Co., 88 N. Y. 591. North British & 477. § 1(>5 Standard Fire Policy : Reinsurance. 187 made ; and in that case a policy by the owners or the other persons in interest will constitute other or double insurance.^ § 165. Reinsurance. — LioMlity for reinsurance sTiall he as specifically agreed hereon. "When an insurer finds it prudent or convenient to protect himself from loss by reason of any liability he has assumed under a policy, he may contract with another company to re- lieve him from that liability by a policy of reinsurance. Except as to the matter of premium, which may be more or less than that paid on the original policy, the insurer takes upon himself the rights, duties, and obligations of the original insurer. A company sometimes has all its risks reinsured by another company or other companies. A preliminary contract is gen- erally exchanged providing that the policy of insurance shall issue on a certain date, and meanwhile a schedule of the risks is prepared which is to be attached to the policy of reinsur- ance. "With the exception of this schedule, which may cover in brief form thousands of policies, the policy of reinsurance is generally like an ordinary policy of insurance. It constitutes a new contract, and is to be governed by the law of the place where it is made ; but it is based upon the representations made at the time of the original insurance.^ The original insurers are governed by the ordinary rules relating to concealment, and must make a fair disclosure to the reinsurers of material facts concerning the risk.^ The statute of frauds is not applicable to the contract of reinsurance, nor is it an agreement to answer for the debt of another,^ The contract of reinsurance is an indemnity against liability for loss, and consequently, as soon as the liability of the first insurer has actuall}^ accrued, it may bring suit against the reinsurer before an actual payment of the loss. And so also the reinsurer may be obliged to pay the original insurer the amount of its liability, although the latter may have become ' Home Ins. Co. v Baltimore Ware- Co., 107 U. S. 485. N. Y. Bowery- house Co., 93 U. S. 527. Fire Ins. Co. v. N. Y. Fire Ins. Co., 5 Cohen v. Cont'l Life Ins. Co., 69 17 Wend. 359. "N. Y. 300. * Bartlett v. Fireman's Fund Ins. * Sun Mut. Ins. Co, v. Ocean Ins. Co., 77 Iowa, 155. 188 Insurance : Fike, Life, Marine. § 165 insolvent, and although it may ultimately be unable to pay its indebtedness to the insured.' But ir, before having recourse to the reinsurer, the first insurer pays or adjusts its loss, or compromises it so as to fix its araouni, this amount will limit its riglit of recovery against the reinsurer.'^ If the original insurer through mistake pays to the insured a larger amount than it was bound to pay, the liabilit}^ of the reinsurer will not be thereby increased unless the form of the contract of reinsurance permits it, or unless the amount paid was fixed by a judgment. The original insured cannot bring suit against the reinsurer unless the contract of reinsurance stipulates that he may, for otherwise no privity exists between the original insured and the reinsurer.^ Any defense which is available to the original insurer may also be raised b}'^ the re- insuring company.^ The provision of the policy in respect to other insurance is held to mean other reinsurance.^ Sometimes policies of reinsurance cover risks as existing on a certain date, and in other policies the reinsurers are not care- ful to insert such a limitation. The difference between these two forms of contracts may be very important. For under the first form, if the original insurers or their agents change the risk, as frequently happens, by an express or construct- ive consent, for example, to a removal of the property to a new locality, or a change of partners, or an assignment of the policy, the reinsurers will be discharged from liability. Whereas without such limitation the reinsurers would be liable, notwithstanding such waivers or privileges as the orig- inal insurers might see fit to extend to the insured under the policies.® The practice is for the original insurer, if sued by the in- ' Mutual Safety Ins. Co. v. Hone, Protection Ins. Co., 1 Story, 458. 2 Comst. '^35. Blackstone v. Aleman- Eagle Ins. Co. v. Lafayette Ins. Co., 9 nia F. Ins. Co. , 56 N. Y. 104. Gantt Ind. 443. V. Amer. Cent. Ins. Co , 68 Mo. ' Mutual Safety Ins. Co. v. Hone, 2 503. Comst. 235. " Insurance Co. v. Insurance Co , 38 ' Manufacturers Fire & Marine Ins. Ohio State. 11 ; s. c, 43 Am. Rep. 418. Co. v. Western Assur. Co., 145 ' Glen V. Hope Mut. Life Ins. Co., Mass. 4l9. Faneuil Hall Ins. Co. 56N. Y. 379. v. L., L. & Globe Ins. Co. 153 ' N. Y. State Marine Ins. Co v. Mas,s. 63. § 166 Subrogation. 189 sured, to give the reinsurer an opportunity to come in and de- fend the suit at the expense of the latter. If the reinsuring company dechnes to do this, it will be liable for the reasonab/e costs of the suit.^ The provision of the policy, requiring an appraisal and limitino- the time within which a suit mav be brouo^ht, has been held to have no application to a contract of reinsurance.'' The Massachusetts policy is silent upon this subject. § 166. Hnhrog'tition.—S'ibrogation of rights to the extent of paymeyit shall be assigned to the company. The common law right of subrogation has been already -^s considered. It grows out of the principle of indemnity, and has an equitable basis in that the negligent person who caused the loss and who is primarily liable ought to be made ultimately responsible for the damage sustained.^ The insured in the first instance has his option between two forms of remedy. If he pursues his remedy against the wrong- doer and recovers compensation, the insurance company will escape. But if he chooses first to enforce his claim against the insurance company, the latter is entitled, by way of sub- rogation, to have recourse over against the guilty party for compensation.^ Consequently, the wise course for the insured to adopt ordi- narily is to recover his insurance moneys in the first instance before instituting any suit against the wrong-doer. Inasmuch as the insurance company is entitled to the right of subrogation, the insured will not be permitted to defeat that right by releasing the wrong-doer or compromising with him to the prejudice of the insurance company without the consent of the latter.^ The provision of the policy requiring the insured to make a formal assignment pro tanto of any rights that he may have ' N. Y. State Marine Ins. Co. v. Pro- * Liverpool & G. W. Steam Co. v. tection Ins. Co., 1 Story, 458. Phenix Ins. Co., 139 U. S. 397. Insur- ' Jackson v. St. Paul F. & M. Ins. anee Co. of N. A. v. Fidelity, &c. Co., Co., 99 N. Y. 134. Eagle Ins. Co. v. 123 Pa. State, 533; s. c.. 10 Am. St. xJafayette Ins. Co., 9 Ind. 446. Rep. 546. ^ Liverpool & G. W. Steam Co. v. ^ Conn. Fire Ins. (o. v. Erie Ry. Co., Phenix Ins. Co., 129 U. S. 397. 73 N. Y. 399 ; s. c., 29 Am. Rep. 171. 190 Insurance : Fire, Life, Marine. § 16f^ against the negligent person or corporation enables the insur- ance company without any question, under the codes of pro- cedure, to institute action against the wrong-doer in their own name. Insurance companies, however, having regard to the prejudice which juries are apt to exhibit towards corporations, sometimes make an arrangement with the insured whereby it is agreed that a suit shall be brought in the name of the insured against the wrong-doer for the whole amount of damage sus- tained, and that the proceeds of the suit and expenses shall be apportioned between the insured and the insurers under some stipulated arrangement. Sometimes the insurance money k paid before the suit, and sometimes not until after its termina- tion. In such a case the insurance company does not take any assignment. It has been held that the wrong-doer who is sued for negligently causing the fire cannot make a defense out of the payment of the insurance money to the insured by the insurance company, because the policy is res inter alios acta} Except as varied by express agreement, the insurer has no rights against the wrong-doer other than those vested in the insured, and the company cannot enforce those until it has admitted its liability under tlie policy.^ The insurers can recover only what they have paid under the policy.^ Sometimes the insurers take an assignment of the whole amount of the claim for damages belonging to the insured, al- though this exceeds the amount paid on the policy. This is not equitable, and no company would be apt to insist upon such a form of assignment if the insured made objection to it. A common carrier may, by agreement with the owners, secure to himself the benefit of any insurance effected by the owner of the goods, and in the absence of fraud such an agree- ' Conn. Fire Ins. Co. v. ErieRy. Co., Weber v. Morris & Essex R. R. Co., 73 N. Y. 399 ; s. c, 29 Am. Rep. 171. 35 N. J. Law, 413 ; s. c, 10 Am. Rep. Monmouth Co. Mut. F. Ins. Co. v. 253. Hutchinson, 21 N. J. Eq. 107. Hard- '^ Midland Ins. Co. v. Smith, 6 Q. B ing V. Townshend, 43 Vt. 536 ; s. c, D. 561. Phoenix Ins. Co. v. Erie & W. 5 Am. Rep. 304. Hayward v. Cain, Tr. Co., 117 U. S. 312 ; s. c, 118 U. 8. 105 Mass. 213. Monticello v. Molli- 210. pon, 17 How. 152. Clark v. Wilson, ' Holbrook v, U. S., 31 Ct. of Claims 103 Mass. 221; 4 Am. Rep. 582. 434. § 16'7 Proximate Loss : Sprkad of Fire. 191 ment defeats any right of subrogation whicii otherwise the in- surers might have.^ If the bill of lading provides that a common carrier on / • ./» incurring liability shall have the benefit of the insurance on the i% goods, the insurer will have no right of suit by way of subro- c^a -* gation, for the insurer can only take such rights as belong to / 3 ^ •• the insured at the time of loss.^ An agreement in a bill of lading that the carrier, if he incurs liability by loss or damage to goods, shall have the benefit of any insurance on them is not within the prohibition of a clause in the policy against selling, transferring, or pledging the inter- est of the insured in the policy.^ The mortgagee clause gives to the insurer a right of sub- rogation. If the insured has a contract right against his lessee to make good the damage for which he receives payment from the insurers, the latter, according to the English view, will be sub- rogated to that right.* The Massachusetts policy contains a subrogation clause. § 167. Proximate Loss : Spread of Fire. — It not infrequently happens that the fire which causes the loss to the property of an insured person is negligently started by a com- mon carrier or other person on premises more or less distant from the property of the insured. The insurers, upon paying the loss, thereupon become subrogated to the rights of the insured against the wrongdoer, under the doctrine which has just been explained. The prosecution of these rights often involves the difficult question, in respect to the spread of the fire, how far the dam- ages caused thereby are to be attributed to the negligence of the wrong-doer as a proximate cause. The proximate cause is the efficient, controlling cause which produces the effect with- out the intervention of any new and extraordinary agency. ' Mercantile Mut. Ins. Co. v. Calebs, ' Jackson Co. v. Boylston Mut. Ins. 20 N. Y. 17:3. Co., 139 Mass. 508 ; s. c, 52 Am. Rep. •> Piatt V. Richmond Y. R. & C. R. 728. R. Co.,108N. Y. 358. Jackson Co. v. ♦ Darrell v. Tibbetts, 5 Q. B. D. Boylston Mut. Ins. Co. , 139 Mass. 508 ; 560. s. c, 62 Am. Rep. 728. 192 Insurance: Fire, Life, Marine. § 167 It is to be determined not so much by any relationship of propinquity in time or space, as by the intimacy of connection between the negligent act and the resulting consequences. Thus, results are proximate, whether to be foreseen or not, which follow the cause without any unusual disturbance in the operation of the laws of nature. If an efficient, adequate cause is found to account for the result, it must be deemed the true cause, unless some other, not incidental to it but indepen- dent of it, is shown to have intervened between it and the result. It is natural for fire to spread so long as there is anything near at hand to burn, and the dangerous character of this ele- ment presents no excuse for imprudence in its use. Though the number of sutferers from a conflagration may be very many, and the extent of the damage very great, this offers no reason for shirting the burden of loss from those who are guilty to those who are innocent. The extent of proximate loss ought not to be bounded by any limits of ownership, nor confined within any arbitrary walls, unless such boundaries are of such a character that they must be expected to prevent its extension. Whether the extent of the loss, under all the circumstances of the case, is remote or reasonably proximate is ordinarily a question for the jury.i In Ryan v. N. Y. Central R. R. Co.,^ it was held that where a house in a populous city takes fire through the negli- gence of the owner or his servant, and the flames extend to and destroy an adjacent building some one hundred and thirty feet distant, the owner of the first building is not liable to the owner of the second buiiding for the damage sustained thereby. So far as the Ryan case stands for the proposition that where the facts, with resoect to the question of proximate cause, are sufficiently plain they present a question of law for the court, its doctrine has been very recently approved by the Court of Appeals.^ But as an exposition of the law, applicable in general to the question of proximate loss by the spread of fire, it is opposed by the current of judicial opinion, and has been so far > Milwaukee &c., R. R. Co. v. Kel- -' 35 N. Y. 210. , 94 U. S. 469. " Read v. Nichols, 118 JST. T. 239. y % 168 Limit of Time to Sue. 193 distinguisned by the courts of the same State as to have lost much of its author! t3^^ The course of reasoning exhibited in the opinion of the court must have ha Griswold v. Sawyer, 125 N. Y. 411. * Martin v, ^tna Life Ins. Co., 78 * Hannigan v. Ingraham, 55 Hun, Me. 25. 257. " U. S. Trust Co. v. Mut, Ben. Life •McDermott v. Centennial Mut. Ins. Co., 115 N. Y. 152. Life Asso., 24 Mo App. 73. '" Sanger v. Rotlischild, 133 N. Y. * Koehler v. Centennial Mut. Life 577. Marsh v. Amer. Legion of Ins. Co., 66 Iowa, 325. Honor, 149 Mass. 515. Britton v. • Jackman v. Nelson, 147 Mass. 300. Royal Arcanum, 46 N. J. Eq. 102. • Thomas v. Leake, 67 Texas, 469. " Luhrs v. Luhrs, 123 N. Y, 367. ' Conn. Mut. Life Ins. Co. v. Bald- '« Bishop v. Grand Lodge, 112 N. Y, win. 16 R. I. 106. 627. § 173 Life Policy : VVakuanties. 199 irregular, or may altogether fail, the court will enforce the con- tract if possible and not allow it to fall.' Statutory provisions permitting the insured to make a new appointment are not applicable where the interest of the jBrst-named beneficiary has become vested for value paid.^ § 173. Application Incorporated. — In consideration of the statements in the ajpplication Tnade a part of this contract, etc. This form of words incorporates the representations of the application into the contract and makes them express war- ranties.^ If the alleged warranty were contained in the application alone, and that were not expressly made a part of the contract, it would simply amount to a representation, inasmuch as the pohcy would in that case supersede it. § 1 73. Statements as to Health or Freedom from Disease. — Health is a relative term, for probably no one is altogether free from ailments. To violate a warranty of good healtli it must appear that the sickness was one having a tendency to shorten life or permanently impair the health ; in fact, that it amounted to a vice in the constitution.* In answer to the question, " Have you ever had any diffi- culty with your head or brain ?" the applicant said " No ; " and the court decided that the question called for a functional or organic derangement, and that periodic headaches though severe did not constitute a ground for forfeiture.^ Good health is consistent with a touch of dyspepsia ' and with a mere cold.'' A congestion or disorder of the liver is not necessarily a disease of the liver within the meaning of the policy ; and in 1 Addison v. New Eng. Comml. N. Y. 292 ; 36 Am. Rep. 617. Ban- Travellers' Assoc, 144 Mass. 591. croft v. Home Ben. Asso., 120 N. Y. '^ Smith V. National Ben. Soc, 123 14. N. Y. 85. ' Higbie v. Guardian Mut. Life Ins. • Cushman r. U. S. Life Ins. Co., 63 Co., 53 N. Y. 603. N. Y. 404. • Morrison v. Wis. Odd Fellows Mut. * Peacock v. New York Life Ins. Co., Life Ins. Co., 59 Wis. 162. 20N. Y. 293. Grattanv. Metropolitan ' Metrop. Life Ins. Co. v, McTague, Life Ins. Co., 92 N. Y. 274 ; s. c, 80 49 N. J. Law, 587. 200 Insurance : Fire, Life, Marine. § 1 7?, these and similar cases, if the testimony leaves it in doubt whether the disorder is a slight attack or a permanent or serious disease, the question is for the jury.' So in a case of pharyngitis,"^ gastritis,^ bronchitis,'* Bright's disease,^ consumption,® gout ; '^ and the jury must determine "whether a slight attack of pneumonia or sunstroke is a disease ;^ but in one case an attack of vertigo was so slight that the court refused to send the issue to the jury.^ The fact that the applicant was afflicted with dyspepsia six months or more before the application was signed did not make untrue his statement that he was not subject to dyspepsia at the time of the policy.'" Where the testimony is undisputed that the applicant was affected with a certain disease or disorder — as, for example, rupture or tonsilitis — his statement to the contrary in the appli- ^ cation is a breach of warranty, and it would be error to submit w the question to the jury." ^ If the warranty is that the assured has not had spitting of 2 blood, and the testimony shows that this statement is not true, a*' there is no question for the jury.'^ S The insured said in her application that she was in sound health. She died of phthisis nine months after the policy was issued, and was sick three years before her death. Held error in refusing to instruct for the company.'^ The answer " never sick," made by a German unfamiliar with our lanofuaofe, was construed to mean that he had never 1 Cushman v. U. S. Life Ins. Co., 70 Co., v. Trefz, 104 U. S. 197. Moulor N. Y. 72. V. Ins. Co., 101 U. S. 708. Conn. " Mutual Ben. Life Ins. Co. v. Wise, Mutual Life Ins. Co. v. Union Trust 34 Md. 582. Co., 112 U. S. 250. • Price V. [^hoenix Mut. Life Ins. Co., "Mutual Benefit Life Ins. Co. v. 17 Minn. 4!»7. Daviess, 87 Ky. 541. • Campbell v. New England Mut. '° World Mut. Life Ins, Co. t. Life Ins. Co., 98 Mass. 381. Schultz, 73 111. 586. ' C'ontl. Life Ins. Co. v. Yung, 113 " Glutting v. Metropolitan Life, 50 Ind. 159. N. J. L. 287, ^tna Life Ins. Co. v. • Vose V. Eagle Life & Health Ins. France. 91 U. S. 510. Pratt v. Dwell- Co., 6 Cush. 43. ing House Mut. Ins. Co., 53 Hun, 103. ' Fowkes V. Manchester & L. Life ^'^ Smith v. ^tna Life Ins. Co., 49 Ins. Co.. 3 Fost. & F. 44i». N. Y. vll. " Boos V World Mutual Life Ins. Co., ''Metropolitan Life Ins. Co, v 64 N. Y, 236. KuicLerbocker Life Ins, Dempsey, 72 Md, 288. :J § 175 Life Policy : Warranties. ^Ol had any of the hst of diseases enumerated in the apphca- tion.' § 174. Statements as to Medical Attendance. — If the applicant names a doctor as his attending physician, this may not avoid the policy although the physician is not the usual medical attendant, for the statement may still be true.'^ And the question as to the truth of the statement in regard to the medical attendant or usual medical attendant or family physician, if the testimony is in doubt, is for the jury.^ But medical consultation or treatment means for the pur- pose of procuring or furnishing medical aid, and not necessarily for a specific disease ; and giving medicine by a physician to relieve suffering is prescribing medicine within the meaning of an application.* And if on the undisputed testimony the answer is untrue, the court must dismiss the complaint.^ In one case the question was, " Name and residence of fam- ily physician ? " and the answer was, " Refer to Doctor Corn- ing." The proofs showed that Doctor Corning was not the physician of the insured, but the court held that upon this ambiguous form of response it was proper to leave the question of forfeiture to the jury.^ The insured stated in the application that he had had no medical attendance within the year. A physician testified that he had attended him and prescribed for him within that time in the presence of certain members of the family, who testified that they had no recollection of it. Held, that the question of breach was for the jury.'' § 175. Statements as to Other Insurance. — In- quiry is sometimes made in the application upon this point, and ' Knickerbocker Life Ins. Co. v. * Cobb v. Covenant Mutual Benefit Trefz. 1(14 U. S. 197. Assn., 153 Mass. 176 (1891). 2 Cushman v. U. S. Life Ins. Co., 70 ' Phillips v. New York Life, 9 N. N. Y. 72. Y. Suppl. 839. " Gibson v. Amer. Mut. L. Ins. Co., ' Hi^gins v. Phoenix Mut. Life Ins. 87 N. Y. 580. O'Hara v. U. B. Mut. Co., 74 N. Y. 6. Aid Soc, 134 Pa. St., 417. Edington ' O'Hara v. United Brethren Mut- V. Mutual Life Ins. Co., 67 N.Y. lyS. ual Aid Society, 134 Pa. State, Huckman v. Fernie, 3 M. & W. 505. 417. 202 Insurance: Fire, Life, Marine. § 176 it is a matter of special importance to tiie company wliere the character or financial condition of the applicant is suspected. A deceptive or misleading disclosure or concealment upon this subject will be fatal.* § 176. Statements as to Age. — The rate of premium being based upon the age of the insured, it is quite mate- rial that the response to this question should be correct. The policy was held void where the applicant erroneously represented his age to be fifty-nine instead of sixty-four.* And where the true age was thirty-five and the application represented it to be thirty, it was held to be a material vari- ation.^ But this requirement, like all others, may be waived, or the company may be estopped from taking advantage of the mis take." § 177. Statements as to Family Relationship. — The untrue statement of the applicant that he was a widower was held to be fatal to a recovery under a policy.^ A breach of the warranty that the insured was a single man, when in reality a married man, forfeited the policy, al- though the risk was not thereby increased.® But the erroneous statement by the applicant that the person named in the policy as beneficiary was a cousin of the applicant, was considered too trivial to vitiate the con- tract.' § 178. Habits. — The statement that the applicant is of temperate habits does not mean that he totally abstains from drinking wines or liquors.^ ' London Assurance v. Mansel, 11 Co., 107 N. Y. 292. O'Brien v. Home L. R., Ch. Div. 363. Clapp v. Mass. Ben. Soc, 117 N. Y. 310. Ben. Assoc, 146 Mass. 519. Edington * United Brethren Mut. Aid Soc. v. V. ^tna Life Ins. Co., 77 N. Y. 564 ; White, 100 Pa. State, 12. 8. c, 100 N. Y. 536. ' Jeffries v. Life Ins. Co., 22 Wall. " Swett V. Citizens' Mut. ReUef So- 47. ciety, 78 Me. 541. ' Britton v. Royal Arcanum, 46 N. * ^tna Life Ins. Co. v. France, 91 J. Equity, 102. U. S. 510. * Van Valkenburgh v. Amer. Popu- * Miller v. Phoenix Mut. Life Ins. lar Life Ins. Co , 70 N. Y. 605. § 180 Life Policy : Warrajjties. 203 A statement of habits is of a fact, and not of an opinion.^ In any case of doubt, the question of habits must go to the jury.' try And the United States Supreme Court, with what would seem to be an over-indulgence to the insured, expressed the opinion that a man might have the delirium tremens once, without necessarily violating this warranty.^ The English court thought this was too liberal.'* § 179. Statements as to Occupation. — Where the applicant warranted that he was a soda-water maker, and was, in fact, a soda-water seller, it was held to be no breach of "Warranty.^ But the statement being a warranty, it must be in effect true, or the policy will be avoided.® § 180. Statements or Requirements as to Resi- dence and Travel. — If these are restrictions contained in the policy, they must be complied with ; ^ and if statements in the application, they must be true. The settled limits of the United States, means within the bounds of the Union, and not the portions of the country that are thickly settled.^ If a permit is given to travel by a particular route or to remain in a hazardous region for a particular time, the limitation must be strictly obeyed.* An inability to return will be no ex- <3use.^° And a subsequent receipt of the money by the company, without knowledge of the forfeiture, will not revive the policy." ' Thomson v. Weems. 9 App. Cas. Co., 80 N. Y. 292; s. c, 36 Am. Rep. 686. 617. Kenyon v. Knights Templar & ' Meacham v. N. Y. State Mut. Ben. M. Mut. Aid Assoc, 122 N. Y, 247. Assoc, 120 N. Y. 237. Pelton v. ° Dwight v. Germania Life Ins. Co., Westchester Fire Ins. Cc, 77 N. Y. 103 N. Y. 341. 605. ^tna Life Ins. Co. v. Davey, ' Nightingale v. State Mut. Life Ins. 123 U. S. 739. Northwestern Life Ins. (^o., 5 R. I. 38. Co. V. Muskegon Bank, 122 U. S. 501. ' Casler v. Conn. Mut. Life Ins. Co., Miller v. Mutual Ben. Ins. Co., 34 22 N. Y. 427. Iowa. 222. » Hathaway v. Trenton Mut. L. & F. • Insurance Co. v. Foley, 105 U. S. Ins. Co., 11 Gush. 448. 850. •» Evans v. TJ. S. Life Ins. Co., 64 • Thomson v. Weems. 9 fApp. Cas. N. Y. 3U4. 886. " Beunecke v. Insurance Co., 105 • Grattan v. Metropolitan Life Ins. U. S. 355. 204 Insurance: Fire, Life, Marine. §181 But the company or its representative may waive the re- quirements of the policy.^ Where an EngHsh poHcy required notice to the directors, and written consent to visit a foreign country, it was held that notice under the policy to an agent of the company was suffi- cient, where the agent, for several years afterwards, collected the premiums and remitted them to the company, although he had not express authority to waive the contract conditions.^ § 181. Statements about Bodily Iiyuries. — The rule of construction is very similar to that applicable to state- ments concerning health. A temporary or trivial injury, of which no permanent effects remain, is not a serious personal injury, and what is serious under the testimony of most cases would be made a question for the jury.^ A cut from which a little blood flows, is not a hurt or a wound.^ And the omission to recollect a temporary injury to an eye, caused by sand which was thrown into it and inflamed it, was not considered necessarily fatal to the policy where the appli- cant had answered in the negative the question whether he had ever had any illness, local disease, or injury in any organ.^ ' Bevin v. Conn. Mut. Life Ins. Co., * Bancroft v. Home Ben. Assoc, 120 23 Conn. 244. N. T. 14. ■^ Wing V. Harvey, 5 DeG. M. & G. " Fitch v. Amer. Popular Life Ins. 265. Co., 59 N. Y. 557. • Ins. Co. Y.Wilkinson, 13 WaU. 223. CHAPTER XYII. LIFE POLICY CONTINUED. § 182. Payment of Premiums. — The policy to cease unless premiums paid, when due, at the home office, and upon production of receipts signed l)y president or treasurer, and policy not to take effect until first premium actually paid. The payment of the premium is of the essence of the contract, and, in fact, constitutes all that the company receives under the contract, and a failure to pay on or before the days named will avoid the policy unless the company is in some way responsible for the omission, or waives it.^ Punctuality in payment is essential.* So, also, if the premium is paid by a note, and the policy provides for forfeiture upon non-payment of the note, no relief can be granted in case of breach.^ A local agent has no authority, simply by virtue of his position, to receive anything but cash.^ But if he is intrusted with the closing of the contract by delivering the policy, accord- ing to the better opinion he has an implied authority to decide how the premium then due may be paid.^ This authority to waive contract provisions as to the method of paying the first premium does not extend to sub- sequent premiums, except as the plaintiff can show authority in the agent emanating from the insurers, either express instructions, or a known practice of the agent sanctioned by the company.* ' Klein v. Ins. Co., 104 U. S. Y. St. Rep. 573. Acey v. Femie. 7 88. M. & W^. 151. 5 Holly V. Metrop. Life Ins. Co., 105 " Critchett v. Am. Ins Co., 53 Iowa N. Y. 437. 404; s.c. 36 Am. Rep 2;50. Boehenv. •Knickerbocker Life Ins. Co. v. Williamsburgh Ins. Co.,35N. Y. 131. Pendleton, 112 U. S. 696. " McAllister v. New Eng. Mut. Life « Raub V. N. Y. Life Ins. Co., 14 N. Ins. Co . 101 Mass. 558. "^V 20() Insurance : Fire, Life, Marine. § 183 The president or secretary of the company, however, may waive a forfeiture for non-payment of premium, or give credit, although the terms of the pohcy forbid it.^ And the plaintiff is at liberty to show, as matter of fact, if he can, that the company has given the agent sufficient authority to waive this or any condition of the contract.^ If the previous course of dealing between the company and the insured warrants it, payment may be by check instead of cash.^ Where the beneficiaries named in a life policy had no knowledge of the existence of the policy, which had been fraudulently surrendered to the company by the insured before his deatli, the court decided that there was a valid excuse for the non-payment of premiums/ But, in general, as we have already seen, sickness, paralysis, or other inability to comply with the terms of the contract furnishes no excuse,^ but the receipt and retention of the pre- mium at the home office constitutes a waiver of any informal- ity in the method of payment, and also of all known breaches of the policy.^ § 183. Assessments. — In mutual companies the pre- miums are often paid in the form of assessments, and it is customary on the happening of the loss to call for an assess- ment with which to meet it. Notice of the time and place of payment is given by the company." The jury determines whether or not the notice has been received. If not received there is no forfeiture,^ unless the policy provides that sending or mailing of the notice is suffi- cient.'' ' Dilleber v. Knickerbocker Life ^ School District v. Dauchy, 25 Ins. Co., 76 N. Y. 567. Church v. Conn. 530. Lafayette Fire Ins. Co., 66 N. Y. " Rice v. New Eng. Mut. Aid So., 222. 146 Mass. 248. McGurk v. Met. Life ^ Wyman v. Pliojnix Mut. Life Ins. Ins. Co., 56 Conn. 528. Co., 119 N. Y. 274. Van Schaick v. 'Covenant Mut. Ben. Assoc, v. Niagara Fire Ins. Co., 68 N. Y. at Spies, 114 111. 463. 439. " McCorkle v. Texas Ben. Assoc., 71 ' Kenyon v. Knights Templar & M. Tex. 149. Mut. Aid Assoc, 122 N. Y. 247. " Union Mut. Ace. Assoc, v. MUler, * Whitehead v. N. Y. Life Ins. Co., 26 111. App. 230. Yoe v. Howard, 102 N. Y. 143. &c., Ben. Assoc, 63 Md. 86. § 184 Suicide. 207 § 184. Suicide. — Exemption of insurers froin liahility for suicide^ sane or hisane. The insurer is still liable, in spite of this clause, where the death is purely accidental without any intent to commit suicide.^ Where the insured is named as beneficiary, a criminal act of suicide or a death by hanging would vitiate the contract without any express provision, inasmuch as a contract of insur- ance presupposes good faith. ^ Though a recent writer on life insurance suggests the contrary view.^ But if the interest in the policy is vested in other benefici- aries, and the contract is valid at the time when it was entered into, the guilty act of the insured does not vitiate it to the prejudice of the beneficiaries.* If, however, the insured took out the policy with the guilty intent of committing suicide, the contract would be void ah iiiitio.^ So, also, if the beneficiaries intentionally compass the death of the insured after the policy is taken out, they can recover nothing upon it.^ Frequently in life policies, and almost invariably in accident policies, there is a provision that the companj^ shall not be liable in case the injuries named are self-inflicted, or, as it is often worded, if the insured dies by " suicide," or " by his own " -^ hand," or " takes his own life," which have been held to be equivalent forms of expression,'^ The proper meaning of the suicide clause, where the words " sane or insane " do not form a part of it, has been the subject ' Phillips V. La. Equitable Life Ins. ' Cooke on Life Ins., Sec. 41. Co., 26 La. Ann 404 ; s. c, 21 Am. * Darrow v. Family Fund Society, Rep. 549. Equitable Ijife Assur. Soc. 116 N. Y. 5y7 ; s. c, 15 Am. St. V. Paterson, 4 1 Ga. 33 8. Knights of Rep. 430. Fitch v. American Popular Golden Rule v. Ainsworth, 71 Ala. Life Ins. Co., 59 N. Y. 557 ; s. c, 17 436. Lawrence v. Mutual Life Ins. Am. Rep. 372. Co., 5 Bradw. (111.) 280. ' Smith v. National Benefit Soc, 2 Knights of Golden Rule v. A ins- 123 N. Y. 85. worth, 71 Ala. 436. Hartman v. " Prince of Wales, &c , Assoc, v. Keystone Ins. Co., 21 Pa. State, 466. Palmer. 25 Beav. 605. Manhattan Life Ins. Co. v. Brough- ' Accident Ins. Co. v. Crandal, 120 ton, 109 U. S. 121. LT. S. 527. O «rt 208 Insurance: Fire, Life, Marine. § 184 of much discussion b}^ the courts, which is traced historically at great length in May on Insurance.^ Where the exemption from liability is simply death from suicide or other equivalent form of expression, without the words "sane or insane," it has been held that tlie exception does not avail the insurers as a defence if it appears that the assured was devoid of reason when he took his life. This con- clusion is put upon the ground that an act beyond the control of the assured is, in effect, nothing but an accident. As to the degree of insanity which will operate in such a case as an / excuse to the insured to prevent the application of the excep- \^ tion, two rules have been laid down. The English, New n York, and Massachusetts courts, and others, have adopted the view that to take a case out of the proviso of the policy on the ground of insanity the assured must have been so mentally disordered as not to understand that the act he committed would cause his death, or he must have committed it under the influence of some uncontrollable insane impulse. These courts hold that it is not sufficient to show that his mind was so im- paired that he was not conscious of the moral obliquity of the <^ act.2 «^ The United States Supreme Court and others following its ^ authority have, on the contrary, defined the rule as follows : ^^^ " This court on full consideration of the conflicting authorities \ upon that subject has repeatedly and uniformly held that such a provision, not containing the words ' sane or insane,' does not include a self-killing by an insane person, whether his un- •y soundness of mind is such as to prevent him from understand- ^t^ ing the physical nature and consequences of his act or only s5 such as to prevent him, while foreseeing and premeditating its physical consequences, from understanding its moral nature and aspect."/ The distinction between these two rules of law is probably too metaphysical to make it of any practical consequence whether the jury is charged in terms of the one or in terms of the other, ' Chapter XV. Ins. Co., 103 Mass. 227 ; s. c, 3 Am. » Van Zandt v. Mutual Benefit Life Rep. 451. Ins. Co., 55 N. Y. 169 ; s. c, 14 Am. ' Ac e. Ins. Co . v. CrandaL 12Q U. S. Rep. 215. Borradaile v. Hunter. 5 M. 531, Bigelow v. Berkshire L. Ins. Co., & a. 639. Cooper v. Mass. Mut. Life 98 U. S. 284 ; s.c, 19 Am. R. 628, note. § 185 YioLATioN OF Law. To secure the benefit of the restriction, which it is hardly necessar}' to say was really intended to be secured by the earliei- forms of expression, tlie insurers have generally added to the suicide clause the words "sane or insane," and with this addition the exemption covers all cases of intentional self- destrucLioii. The insurers are thus relieved from responsibility, unless the death of the insured was purely accidental.^ In one case it was held, by a strict construction against the insurers, that the taking of poison through mistake or igno- rance would not avoid the policy, although the words of the suicide exception clause were, whether " voluntary or other- wise," instead of "sane or insane" ; which forms of expression the court regarded as synonymous.^ If the compan}'' sets up the defence of suicide, the burden of proof rests upon it, and if the facts are equally susceptible of either construction, it will be presumed that death was the result of an accident and not of a criminal intent.^ But, on the other hand, every man is presumed to be sane, and the burden of proving insanity is on him who alleges it, and the fact of suicide is not of itself sufficient to establish it.* Missouri has adopted a statute that suicide will not avail as a defense. § 185. Exception of Death by the Hands of Jus- tice or in Violation of Law. — This, though similar to the last clause, is considered distinct from it.^ In the Cluflf case it was held that a forcible taking of property under the ill-founded claim of legal right was not a violation of this clause, which is generally confined to those cases in which the act is known to be a violation of law ; and by the better view the clause is further confined to cases of vio- lation of criminal law% in which the violation of law and the ' De Gogorza v. Knickerbocker Life * Weed v. Mutual Benefit Life Ins. Ins. Co., 65 N. Y. 232. Co., 70 N. Y. 561. McChire v. Mutual ' Penfold V. Universal Life Ins. Co., Life Ins. Co., 55 N. Y. 651. MeachanA 85 N. Y. 817; s. c, 39 Am. Rep. 660. /V. N. Y. State Mutual Benefit Assn., J • Malloiy V. Travellers' Ins. Co., 47\120 N. Y. 2;!7. N. Y. 52 ; s. c, 7 Am. Rep. 410. " Clufif v. Mutual Benefit Life In$. TraveUers' Ins. v. McConkey, 137 U. S. Co., 13 Allen, 308. 661. 14 210 Insurance : Fire, Life, Marine. § 1?'^ act causing death are a part of one and the same continuous transaction. Thus where the insured met his death by being shot by a person with whose property he was interfering, it was held that this clause of the policy would not avail the insurer as a defense.* But where the insured was killed by a shot fired in provo- cation caused by an affray that had ended, a judgment in favor of the insurer was sustained on the ground that if the acts of the insured were such as to produce in his slayer a high degree of passion, and while he was in such a state he shot and killed the insured, the death was the natural consequence of the assault.* Where the insured was engaged in the lawful defense of his person, there being reasonable cause to apprehend a design to do him personal injury, the exemption clause was held to furnish no defense to the insurers.' But the death was held to be " in the known violation of the law" where the insured died within a few hours from wounds inflicted by the husband of a woman upon whom he was committing assault and battery.* § 186. Authority of Agents. — Agents not mithorized to make^ alter, or discharge this or any other contract in rela- tion to the matter of this hisurance, or to waive aiiy forfeiture hereof., or to grant jpertnits., or to receive for cash due for pre- miums anything hut cash. The effect of this clause has been discussed under the sub- ject of general principles, in Chapters YII. and VIII. As was observed in the introductory chapter, there is ordi- narily nothing in the usual course of business, as transacted by the local agents of life insurance companies, from which any one dealing with them has the right to infer that they possess any authority to make or unmake a policy, or to alter its terms, except in some instances in regard to the method of ' Bradley v. Mutual Benefit Life Ins. ' Overton v. St. Louis Mutual Life Co., 45 N. Y. 433; s. c, 6 Am. Rep. Ins, Co., 39 Mo. 122; s. c, 90 Am. 116. Dec. 455. « Murray v. N. Y. Life Ins. Co., 96 * Bloom v. Franklin Life Ins. Co., 97 N Y. 614 : s. c, 48 Am. Rep. 658. Ind. 478 ; s. c, 49 Am. Rep. 469. § 188 Assignments. 211 paying premiums.' But, as we have also seen, the agent may, by his conduct in connection with the execution of the written application, estop the company where the misstatement is in reahty his act, within the scope of his authority, and without fault on the part of the insured.^ Neglecting, however, to read the application without sufficient excuse is fault on the part of the insured.^ § 187. Errors in Age. — Any error made in understat- ing the age of the insured will he adjusted hy paying such amount as the jpremiurns paid would imrehase at the table rate. This provision is liberal to the insured, and more reasonable than a stipulation providing for absolute forfeiture in case of an error in stating- the ao^e. This clause illustrates the disposition on the part of insur- ance companies to make an equitable arrangement with the insured, so far as they can do so without exposing themselves to unscrupulous and fraudulent claims. § 188. Assignments. — Ifo assignment of this pelicy shall take effect until written notice thereof shall he given to the company. This provision, be it observed, does not prohibit an assign- ment of the policy. It is desirable that the insured should have the opportunity of making free use of this form of prop- erty, for it may often be convenient to secure money, by loan or otherwise, upon it. Unlike the case of a fire policy, as we have seen, a life policy was considered assignable at common law. And, by the better opinion, if the policy is valid when taken out, it may be assigned or made payable to one who has no insurable interest ; though in the Federal Supreme Court a different rule has been suggested. A pledge or deposit of the policy is not of itself an assign- ment.* Where, with the consent of the insurers, an assignment ' Critchett v. American Ins. Co., ' N. Y. Life Ins. Co. v. Fletcher, 53 Iowa, 404 ; s. c, 36 Am. Rep. 230. 117 U. S. 519. Ryan v. World Life Boehenv. WilliamsburghCitylns. Co., Ins. Co., 41 Conn. 168; s. c, 19 Am, 35 N. Y. 131 ; s. c, 90 Am. Dec. 787. Rep. 490. « Ins. Co. V. Wilkinson, 18 Wall. ♦ Griffey v. N. Y. Central Ins. Co., 222. Miller v. Phenix Mut. Life Ins. 100 N. Y. 417 ; s. c, 53 Am. Rep. Co., 107 N. Y. 292. 203. 212 Insurance : Fire, Life, Marine. § 189 has been consummated, this amounts to a new contract be- tween the company and the assignee.^ As to the past, however, the assignee simply steps into the position of the assignor, and can only recover under the policy in case the assignor has not been guilty of any breach. No one except the company can, in any event, make objec- tion to the assignment from the original insured to the assignee, unless the policy is payable to other beneficiaries, who have a vested interest therein.^ After the death of the insured, the interest in the policy is a chose in action which can be assigned without consent of the insurers, and without regard to the provisions of the policy.' y § 189. Incontestable. — This policy^ after two yea/ra, will he incontestable, except for fraud or non-payment of pre- mium. Insurers have been somewhat stimulated, no doubt, by the statutory requirements, which will be found in the appendix, to insert this liberal provision. ' Fogg V. Middlesex Mut. Fire Ins. ' Mellen v. Hamilton Fire Ins. Co., Co., 10 Cush. 837. 17 N. Y. 609. Hall v. Dorchester • Leinkauf v. Caiman, 110 N. Y. Mut. Fire Ins. Co., Ill Mass. 53 ; s. o., 60. 15 Am Rep. 1. CHAPTEK XYIIL THE ACCIDENT POLICY. Accident insurance is a branch of life insurance, and is governed by the same principles. The latter protects against loss by death, whether caused by old age, disease, or accident. -.^ The former is limited to loss caused by accident, whether o^ occasioned by a bodily disability or fortuitous death. \p § 190. Accident. — An accidental injury is one that hap- pens to the insured without the concurrence of his will or intent, but it may be the result of his intentional act provided ^ only such result was not foreseen ; thus in case of an injury to the ^/'^ insured caused by intentionally jumping from the platform of a train of cars under such excusable circumstances that no harm could have reasonably been expected to follow.^ So of an injury to the insured caused by a blow from the handle of a pitchfork slipping through his hands while he was loading hay, which produced peritoneal inflammation and ultimately death, the beneficiary was allowed to recover on the ground that the loss was by accident.^ So of a sprain caused by lifting heavy weights.* So of an unintentional draught of poison.* Unless expressly excluded by the terras of the policy, an accident covers an injury intentionally inflicted upon the in- sured by another ; as, for example, in an affray.^ But where the terms of the policy expressly exclude an injury of that character, the restriction of the contract will prevail.' • U. S. Mutual Accident Asso. v. App, 509 (1890). But see Bavliss v. Barry, 131 U. S. 100. But see Southard Travellers Ins. Co , 6 Ins. L. J. 109. V. Railway Pass. Assur. Co., 34 Conn. Preferred Mut. Ace. Asso. v. Beidel- 574. man, 1 Monaghan (Pa.), 481. ' North Am. Ins. Co. v. Burroughs, ' Order of Chosen Friends v. Gar- 69 Pa. St. 43. rigus, 104 Ind. 133. ' Martin v. Travellers Ins. Co., 1 F. ' DeGraw v. National Ace. Society, & F. 505. 51 Hun, 142. Travellers Ins. Co. T. * Mut. Ace. Asso. V. Tuggle, 39 111. McConkey, 127 U. S. 661. 214 Insukanob : Fike, Life, Marine. § 191 Sunstroke, when not expressly excluded from the opera- tion of the policy, is generally considered to be a disease rather than an accidentJ*^ In regard to negligence of the insured, where the policy is silent, the rule is the same as in other branches of insurance ; but, as we shall soon see, the usual conditions of the policy modify the insurer's liability in this respect.^ Accidental injury is a phrase of such broad scope that, as might be expected, the insurers have limited its application by many restrictive provis- ions, differing some^fhat in the forms of policies adopted by the different companies. § 191. Amount of Recovery and for What Acci- dents. — The sum of dollars per week against loss of time not exceeding twenty-six consecutive weeks, resulting from hodily injuries effected through external violent and accidental means which shall, independently of all other causes, immedi- ately and wholly disable hirn from, transacting any and every kind of business pertaining to his occupation above stated, or if loss by severance of one entire hand or foot, etc., or if death results from such injuries alone within ninety days. Death by accidental drowning is by external, violent, and accidental means.^ Death during a plunge bath, in the house, was held not to be within the policy.^ But where a boat was overturned by the waves and the insured was drowned, the death was covered by the policy.^ Where an accident produced a weakened condition of the system, from which cold and pneumonia resulted, it was held that the whole chain of events was caused by the accident as a proximate cause;® and within the same princi'ile of law was classed an accident which caused physical injuries which, in turn, resulted in apoplexy and death ; '^ but where disease is $o^ • Sinclair v. Maritime Passengers' * Tennant v. Travellers' Ins. Co., 31 '^'^ AssnTCoTTsi Ellis & El. 478. Dozier Fed. Rep. 322. V. Fidelity & Casualty Co., 46 Fed. 'Tucker v. Mutual Benefit Life Rep. 446. Co., 5U Hun, 50 ; s. c, 121 N. Y. ' Schneider v. Providential Life Ins. 718. Co., 24 Wis. 28 ; s. c. , 1 Am. Rep. 157. • Isitt v. Railway Passengers' Assur. * Trew V. R'y Pass. Assur. Co., 6 H. Co., L. R. 22 Q. B. Div. 504. & N. 839. Mallory v. Travelers' Ins. ' National Benefit Assn. v. Gxau* Co., 47 N. Y. 62 ; 8.c., 7 Am. Rep. 410. man, 107 Ind. 288. § 192 Accident Policy. 215 specially excepted from the chain of causation, the rule is otherwise.^ So, also, where intentional injuries, inflicted by the insured or any other person, are expressly excepted from the operation of the policy, the wider liability of the insurers must be limited by the terms of the contract."^ The provision that the injury insured against must be effected by the specified means, '' independently of all other causes," is so unreasonable, indefinite, and repugnant to the main purpose of the contract, that the courts construe it very strictly against the insurers, and sometimes really seem to dis- regard it altogether. Thus, though the policy excepted death arising from fits, acting directly or jointly with accidental injury, the insurance was held to cover a case where the in sured was seized with a fit and fell under the wheels of an engine which caused his death.^ And in another case, although the polic}'^ expressly excepted " injuries from taking poison in any manner," the Illinois court allowed a recovery for death from an overdose of laudanum taken by mistake.^ The insured was shot in the back, causing a paralysis which involved the loss of the use of his feet. It was held to be a loss of "two entire feet."^ The meaning of total disability is considered in Young v. Travelers' Ins. Co.,® and depends very much upon the wording of the particular policy. By a strict construction of the policy against the insurers, the same court allowed a recovery where the immediate cause of death was fright.^ § 192. Exception of Hazardous Employment. — Whether one occupation is more hazardous than another ' Smith V. Accident Ins. Co., 23 L. * Sheanon v. Pacific Mutual Life T. N. S. 861. Ins. Co., 77 Wis. 618 (1890) ; s. c, 30 ^ De Graw v. National Accident So- Am. St. Rep. 151. ciety, 51 Hun, 143. Phelan v. Trav- • 80 Me. 244. See also Lyon v. Rail- elers'Ins. Co., 38 Mo. App. 640. way Pass. Assur. Co., 46 Iowa, 631. ' Lawrence v. Accidental Ins. Co., Hooper v. Accidental Death Ins. Co., 7 Q. B. D. 216. Fitton v. Acciden- 5 H. ousius 2 (amp. 2. 5, § 204 The Subject of Insurance. 223 From first to last there must be no unreasonable delay or divergence from the usual mode of conducting the adventure, otherwise the policy will be void from the moment of commit- ting the deviation, though not antecedently.^ ^ There are three ways of describing a voyage : Either every\ port which the ship is to visit may be named, or general words may be used which cover a certain range, and leave room for variations within it ; or, lastly, where there is a clear known custom as to the track, and that custom is intended to be fol- lowed, it may suffice to name the termini only, and rely on the/ custom. If the insurance is from or to a district comprising several ports, these ports must be visited in their natural or geograph- ical order, unless there is an established custom of the trade to vary this order, in which case the customary order must be observed.'^ But a clause is often inserted in the policy giving permission to touch and stay at certain ports without prejudice to the insurance. Whether liberty to call at a port gives liberty to land or load cargo there, must depend on whether such an intention may naturally be inferred from the description of the voyage in the policy taken in conjunction with the customs of the particular trade ; ^ and wherever a ship has liberty to call at a place, she may always land or load goods there, provided this can be done without additional delay.* Sometimes a deviation clause is inserted, providing that the property is covered in the event of a deviation, at a premium to be agreed upon. § 304. The Subject of Insurance. — Upon the hody^ tachle, ajpjparel^ and other furniture of the good ship, or upon all kinds of lawful goods and merchandise laden or to he laden on hoard the good ship, or upon the freight of all kinds of lawful goods and merchmidises laden or to he laden, etc. This phraseology covers the descriptions of ship, cargo, and freight in the three classes of American policies, respectively. ' Burgess v. Equitable Marine Ins. * Urquhart v. Barnard, 1 Taunt. Co., 126 Mass. 70 ; s. c, 30 Am. Rep. 450. 654. * Raine v. Bell, 9 East. 195. » Beatson v. Haworth, 6 T. R. 533. 224 Insurance : Fire, Life, Marine. § 204 Lloyd's English policy covers ship and cargo in one general form, which is lilled in to suit the particular case. This general description in the printed form is controlled by the written description of the particular interest which it is intended to insure. The terms of the description in the policy of insurance upon ship are evidently not to be confined to the bod}^ or hull of the vessel, but extend to her materials and outfit ; and it has been decided that the provisions of the crew are included under the word "furniture." A policy on "ship" in the ordinary form will cover hull, materials, machinery, boilers, coal, and engine stores ; in the case of a steamer, the provisions for the crew and all the appurtenances necessary, suitable, or usual, or that may be presumed to belong to a vessel of such description for the purposes of navigation on a voyage such as that described. The scope of an insurance on the ship is limited by the usage of the trade to such an outfit as is necessary to make the vessel seaworthy for the voyage insured, to the exclusion of that further portion which may be supplied to fit her for a particular trade. Thus, in the case of a vessel ens^aofed in the Greenland trade, it was held that the fishing tackle and stores, such as harpoons, lances, etc., for catching whales and seals, as well as the casks, cisterns, etc., for receiving the oil and blubber, were not covered by a general policy on ship, as it was the custom to insure such articles in express terms.' But permanent passenger fittings are allowed as appertain- ing to the ship where the vessel is regularly employed in the passenger trade; permanent cattle fittings, where she is in the cattle trade; a permanent grain ceiling, where slie is in the grain trade, etc. Temporary fittings or ballast, such as is supplied for the voyage only, dunnage, provisions for the pas- sengers, and provender for live stock are excluded. " Goods " or " merchandise " denotes whatever is carried on board ship for purposes of traflic. Here, again, the usage of trade enters to restrict the full meaning of the term, by excluding therefrom, in the absence of established custom, goods laden on deck, and also live stock with the provender for their maintenance, master's clothes, and 1 Hoskins v. Pickersgill, 3 Dougl. 232. § 205 Master's Name. 225 the ship's provisions. Money or jewels, if carried to trade with, are insurable under the name of goods. In insuring freight it matters little whether the interest is described as freight, freight per charter party, or the like. Freight must be either a ship owner's profit from carrying goods of his own, or the price of working for others under a contract. The former kind is recoverable under the ordinary policy on freight.^ As to the latter, the actual contract must necessarily in case of loss be referred to, in order to ascertain what was insured. Speaking generally, a policy on freight must be taken to cover all the ordinary stipulations of the con- tract of affreightment, whether bill of lading or charter party. Where the interest consists of a ship owner's profit by carrying his own goods, though this, as has been said, may with perfect propriety be insured separately as freight, yet generally speak- ing the method most advantageous to the owner is to insure it in the same policy as the goods, and to value both together, describing them as goods including freight. It is usual to insure passage money under a distinct name, since the incidents of this risk are in many respects different from that of the freight or merchandise.'^ § 205. Master's Name. — Provision is made in the policy for the insertion of th(3 master's name, partly as a means of distinguishing the ship insured from others of the same name, and partly because the personal character and professional reputation of the captain are not infrequently taken into ac- count by the underwriters in their estimation of the risk. But in practice the blank left for that purpose is often left unfilled. In immediate sequence to this blank are the words, " or whoever else shall go for master in the said vessel, etc." In case the person originally mentioned to the underwriter as the master of the vessel is prevented from going in her, and an- other is substituted for him, the insurance is not vitiated, even though the original name may have been inserted in the policy, and may never have been altered, provided the assured has acted throughout in good faith. Again, if the master resign his command, or become incapacitated during the voyage ' Flint V. Plemyng, 1 Barn. & Ad. ^ Denoon v. Home & C. Assor. Ca, 46. L. R., 7 C. P. 341. 15 \ 226 Insurance: Firk, Life, Marine. §200 througli sickness and another is appointed in his place, the validity of the insurance is not compromised by the change. A mistake in the ship's name, however innocently made, will vitiate the policy if it materially mislead the underwriter as to the cliaracter of the risk, but otherwise not.^ Sometimes, especially in insuring consignments from abroad, the ship is not named, the goods being insured per ship or ships. The usual course tin such cases is to " declare " the interest by an indorsement on the policy as soon as the ship they are to come by is known.^ Declarations made on the policy are always subject to rec- tification in case it shall subsequently appear that the advices have come forward, and that the declarations in fact have therefore been made in an order* different from that of the actual shipment of the goods. The shipments declare them- selves, so to speak, and take rank under the policy in the order in which they occur ; so that the declaration written on the policy is merely provisional, and must be set right in case of need.' § 306.. Commencement of the Risk. — Beginning the adventure upon the said goods and tnerchandises from and immediately following the loading thereof etc. Goods are not insured under the general form of policy until they are loaded aboard the ship. If, therefore, the mer- chant desires to cover the risk in boats or lighters from the shore to the ship, he should insert the clause, " to include all risk of craft whilst loading." If property in the goods does not pass to the insured until a certain point in the process of shipment, the policy will not attach until that point is reached ; as, for example, where, by the terms of a contract for the purchase of a cargo of rice, no Interest in the rice passed to the buyers until the ship- ment of the cargo was completed, it was held that the latter had no insurable interest in the cargo while in course of ship- ment.* If it is to cover goods shipped at some place other ' lonides v. Pacific, F. & M. Ins. Co., ' Stephens v. Australasian Ins. Co., L. R, 6 Q. B. 674. L. R, 8 C. P. 18 ' Snowden v. Guion, 101 N. Y. * Anderson v. Morice, 3 Asp. Mar. 458. L. C. 391. § 207 Termination of Eisk. 227 than the port of departure, that intention ought clearly to appear by the terras used. § 207. Termination of the Risk. — Until the ship hath moored anchor twenty-four hours in good safety, until the goods and 77ierchandises shall he safely landed. Between the termini designated the policy protects the goods during the whole time, not on ship-board merely, but while they are in the warehouse at an intermediate port, always supposing that they are put there legitimately, as from some enforced necessity, or because a landing and transship- ment falls within the regular course of the voyage insured.^ The ship continues protected at port before the voyage is com- pleted, during all time properly taken in discharging cargo, effecting needful repairs, or otherwise making ready for the voyage.^ The policy likewise covers all delay occasioned by accidental causes during these operations, such as being frozen in for the winter, or the like.^ It is important to understand clearly what is meant by moor- ing in good safety, after which the ship is no longer covered by the policy.* In the first place, these words presuppose the ar- rival of the vessel at the terminal point of the voyage, which is, in the case of a cargo-laden ship, the usual place of discharge ; ' and, secondly, they provide that she shall have been securely anchored at that spot for the period described. The term " good safety '' does not mean absolute immunity from danger, for that would be a condition impossible of attain- ment at any stage of a marine adventure, but such a measure of securit}^ as will suffice to enable the vessel to discharge her cargo and accomplish the other ordinary purposes of a stay in port. Two kinds of security are included in the term " good safety ; " namely, physical and political safety. Good physical safety means not the safety of the moorings, but of the ship ; not absolute freedom from damage, for then the loss of a rope or sail or spar would prevent the vessel from being considered in safety : but, on the other hand, she must not be in a sink- ' Harrison v. Ellis, 7 B. & B. 465. * Leeds v. Mechanics Ins. Co., 8 N. « Phillips V. Irving. 7 M. & G. 328. Y. 351 . "Brown v. St. Nich. Ins. Co., 61 ^ Samuel v. Royal Exchange Assur N. Y. 332. Co., 8 B. & C. 119. 228 Insdkance : Fire, Life, Marine. § 207 ing condition, as was the case witii a vessel which arrived at her port of destination a complete wreck, and after being kept ajfloat for a few days, lashed to a hulk, sank in the harbor.' Good political safety means immunity from capture or arrest; thus a British vessel, which the day after her arrival at a French port was laid under an embargo then existing against all Brit- ish ships, was held to have never moored at anchor twenty-four hours in good safety.^ A cargo-laden ship must be moored at her usual place of discharge before the twenty-four hours will commence to run, and accordingly in the case of a vessel which arrived at her moorings in the Thames, but the same day was ordered into quarantine, and was subsequently destroyed by fire before ob- taining her release, it was held that the policy was still running at the time of loss because the vessel had not been moored at anchor twenty-four hours in good safety.^ Though it is necessary that a vessel should have arrived at her place of discharge, it is not necessary that the discharge should have actually commenced ; for if the vessel has arrived at her moorings and remained there the specified period, await- ing her turn to unload, tiie risk is off. Policies on outward bound vessels are sometimes so framed as to continue in force for thirty days after arrival at port of destination.* With regard to time policies, the precise date of commence- ment and termination is named in the policy. The day, unless otherwise expressed, begins and ends at midnight. The risk on carmj continues until the ci:oods have been de- posited upon the wharf or their customary place of discharge. It then ceases, for the underwriter is not liable for loss arising from theft, fire, or any other perils to which the goods may be subjected while lying on the wharf or in dock, unless an express clause to that effect has been inserted in the polic}'. In order that the policy may continue to protect the goods while in course of landing, they must be taken from the ship to the shore in the mode which is usual in the trade at the port where the discharge takes place. If it is customary in the trade to convey goods from the ship to the shore in lighters, launches, ' Shawe v. Felton, 2 East, 109. » Waples v. Eames, 2 Str. 1243. ' Minett v. Anderson, Peake's R. * Lidgett v. Secretan, L. R., 5 C. P 211. 190. § 207 Termination of Risk. 229 or other small craft, they are protected by the policy during such transport.^ If, however, the assured depart from the usual course of trade by taking charge of the goods at an earlier period than they would have been delivered to him under ordinary circumstances, the underwriters will be dis- charged from responsibility.^ The policy only covers goods while they are at the risk of the assured ; and consequently, if cargo be sold afloat, without an assignment of the policy, and the buyers take delivery of the cargo in lighters sent alongside, the risk of lighterage from ship to shore will not be covered, as the underwriters' risk would, under such circumstances, cease on delivery.^ Cargo should be landed within a reasonable time after the ship's arrival ; otherwise it will cease to be covered by thei policy. What is a reasonable time in any particular case] depends upon the usages of the trade. * When goods are insured by vessel bound to several ports in succession, the risk ends at the final port of discharge named in the policy. But the insurance may be prolonged by the addi- tion of the words " the risk to continue until arrival of the goods at a market at their final port of discharge." ^ The underwriters' risk upon the bill of lading freight may be considered coincident with the risk on goods, since it does not commence until the cargo is shipped, and then only applies to such portion of it as may be actually on board, unless cargo has been contracted for under a valid agreement, and is lying in readiness to be placed on board, the ship also being ready to receive it. The termination of the risk on cargo and freight respectively is in general simultaneous. For concurrently with the landing of the goods in safety the ship-owner earns the freight upon them, and the risk of the underwriter on freight is proportionately reduced ; so that, in the event of the ship being lost after a part of her cargo has been discharged, the loss on the freight policy will be limited to the freight on the cargo remaining on board. In the case of cha.rtered freight, however — ^that is, money payable for hire of a ship under a >Matthie v. Potts, 3 Bos. & P. Archangel M. Ins. Co., L. R.. 10 Q. B. 23. 249. ' Sparrow V. Taruthers, 3 Str. 1236 * Richardson v. London Assurance ' North of England P. O. C. Co. v. Co., 4 Camp. 94. 230 Insurance : Fire, Life, Marine. § 208 charter party — the risk commences as soon as there is an incep- tion of performance under the charter party {i. «., when the owner or hirer has incurred expenses and taken steps toward earning freight) irrespective of the question whether any cargo has been placed on board or is in readiness to be so placed, and continues until the vessel has performed her contract. But the words " from the loading thereof " in a freight policy exclude the goods not actually loaded, and also the freight for them.' § 208, Touch and Stay.— ^w(? it shall he lawful for said vessel in her voyage to proceed aiid sail to^ touch and stay at, any po7'ts or places if thereunto obliged hy stress of weather, etc., without prejudice to this insurance. The words " if obliged by stress of weather, etc.," practi- cally nullify the important privilege which would otherwise be extended to the insured by this clause. If such a privilege is given to touch and stay at any ports or at certain ports named, it is understood in the case of a voyage policy that the ports visited must lie within the ordinary track of the voyage, and that they must be visited for some purpose connected with the object of the adventure.^ Where steamers or sailing vessels of a particular line or in a particular trade habitually follow a specific route or call at certain ports, the usage so to do will be tacitly incorporated in a policy in the ordinary form without the addition of any special clause. * Jones V. Neptune Marine Ins. Co., Bragg v. Anderson, 4 Taunt. 290, L. R., 7 Q. B. 702. Williams v. Shee, 3 Camp. 469. • Lavabre t. Wilson, 1 Dougl. 284. CHAPTER XX. MABINE POLICT CONCLUDED. § 309. Perils of the Seas. — These denote all marine casualties resulting from the unusual or violent action of the elements as distinguished from their natural and silent influence upon the fabric of the vessel. But they do not, as has been already observed, include the deterioration of a vessel's hull and materials, commonly called wear and tear, which is incidental to her employment in navigation and her exposure to the or- dinary action of the elements ; nor do they include injuries to the machinery incident to its ordinary operation. V Vessels cannot be navigated without encountering the action of wind and wave, and are often liable to be on the ground or to come into contact with piers without the happening of any- thing abnormal. At the same time, it is to be remembered that any ordinary occurrence Avill become extraordinary if qualified by unusual conditions, but there must be something fortuitous to constitute a peril of the sea. Thus a transport in government service was ordered into Boulogne, where there is a dry harbor, and was moored near one of the quays. The vessel took the ground on the ebb of the tide, as was inevitable; but, owing to the presence of a considerable swell in the harbor, she struck the ground with unusual violence, and subsequently eighteen of her knees were found to be broken. The court held that this damage was the result of a peril of the sea.'^ Ill another case, the ship, which was insured under a time policy, proceeded in the course of her trading to Sunderland, where she was moored head and stern, and took the ground in the usual way at the ebb of the tide. The beach was hard and ^jV^ lThaBxes& Mersey Marine Ins. Co. « Fletcher v. Inglis, 2 B. & Aid. i^*? v. Hamilton, L. R., 12 App. Cas. 484. 315. 232 Insurance: Fire, Life. Marine. §210 steep, and the ship la\^ with a slight list toward it. She ap- peared to strain in this position, especially when taking the ground and floating, and after remaining some time in the place it was found that she was hogged. The Court of Com- mon Pleas held that the damage received under the above cir- cumstances was not caused by perils of the seas, but fell within the designation of wear and tear. Here the vessel on her arrival at Sunderland went up the river, and, in consequence of the rising and falling of the tide, rested upon the river's bed and received damage. There was nothing fortuitous, no peril, no accident.^ Where live cattle carried between decks were thrown violently together and killed by the tremendous rolling of the sea, though not touched by the water, this was held to be a loss " directly by the sea." ^ Sails split by the wind or blown away while set, unless oc- casioned by the ship's grounding or coming into collision, or in consequence of damage to the spars to which the sails are bent, are not, according to the general practice, chargeable to under- writers, although the weather may have been stormy at the time of the occurrence. This custom is to be supported rather on grounds of ex- pediency than of principle. A sail which is blown away in a hurricane is as truly lost by the operation of sea perils as a mast which is carried overboard by the same cause. On the other hand, if the splitting or carrying away of sails in use were to be allowable whenever they were subjected to an extraordinary strain, there would be much practical diflBculty in the endeavor to discriminate between ordinary and extraor- dinary weather, especially in view of the fact that the resistance which a sail is capable of offering to the wind depends to a considerable extent upon its quality and condition. There is a similar rule of practice relative to rigging, which is, that rigging injured by straining or chafing is not charged to underwriters, unless such injury is caused by blows of the sea, grounding, or contact, or by displacement through sea perils of the spars, channels, bulwarks, or rails. § 210. Foundering at Sea. — Foundering at sea is included among the ])erils of the sou if caused by the violence ' Magnus v. Buttemer. 11 C. B. 876. '■' Snowden v. Guion, 101 N. Y. 458. § 212 Grounding — Collision. 233 of the winds or waves or anv other accidental occurrence, but not so if caused by overloading, defect, or inherent weakness. If a ship has not been heard of for so long a time after sail- ing that there remains no reasonable hope of her safety, she is })resumed to have foundered at sea. There is neither in this country nor in England any fixed rule as to when that pre- sumption arises. In England, after an interval of time sup- posed to be sufficient to cover the reasonable chances of arrival, the ship is posted at Lloyd's as missing, and then the under- writers are expected to pay, § 311. Grounding.— Grounding, whether arising from stress of weather, ignorance of the locality, blunder or stupidity, the desire to avoid some approaching vessel or other danger, in short, for any reason out of the ordinary course of things in the voyage, is considered one of the perils of the sea. § 312. Collision. — Collision is also a peril, and this whethei* it be the result of inevitable accident or fault on the part of the ship insured, or of fault on the part of the other ship ; for, on the principle of causa proxima, the underwriter must j)ay, be the fault whose it may. What he pays for is the damage to the thing he has insured. As for the liability of the owner of the ship in fault to pc<,y for the damage suffered b}'' the other, that is a matter with which his underwriter has, under the body of his policy, nothing at all to do. It is usual however, to provide for this liability by a distinct contract called the collision clause, a specimen of which will be found in the appendix.^ The principle of the collision clause is that the underwriters will relieve the insured of three-fourths of his liability to pay damages for loss of property in and on board the other ship. He is to take one-fourth himself, as a check upon carelessness in the choice of servants ; and his responsibility in respect of loss of life and personal injury, as well as for damage to the cargo in his own ship, is left untouched. There is a difference to the insured in the language of dif- ferent collision clauses in respect to the matter of costs, a pro- ' London Steamship, &c., Ins. Co. v. Grampian S. Co., L. R., 24 Q. B. D. 663 (1890). 234 Insurance : Fire, Life, Marine. § 213 vision for which is sometimes omitted from the clause, in which case the underwriters are not responsible for their share of costs. The liability under the collision clause is not particular average ; consequently is not subject to the limitation of five per cent. § 213. Stress of Weather. — Under the head of sea perils is damage suffered through stress of weather; as by blows of the seas which carry away bulwarks, boats, deck houses, and the like ; by losing masts and yards in a gale ; springing of a leak through violent straining ; shifting of the cargo, or becoming water-logged. The only difficulty in such cases consists in distinguishing between sea peril and wear and tear. § 314. Fire. — Fire may arise from a variet}"^ of causes — from lightning, the spontaneous combustion of the cargo, the negligence of the master or crew, the acts of enemies, or the precautionary measures of rulers (as in case of a vessel burned by the municipal authorities for fear of being infected). The underwriter is liable for loss occasioned by fire, whether its origin is inexplicable or whether it can be assigned to one of the above-named or some other kindred cause, with the ex- ception of combustion generated through the inherent defect of the subject insured, or in consequence of the goods having been shipped in a damaged state. But if the combustion is originated by sea damage sustained by the goods after ship- ment, it is covered by the policy ; and however the fire may have been occasioned, if it extend to other goods which are un- connected with the cause of the disaster, or to the ship herself, the underwriter is responsible.' Damage to cargo caused by pouring water into the hold, scuttling the ship, or taking other extraordinary measures to extinguish a fire, is recoverable in general average ; ^ or it may be claimed direct in the first instance under the policy if the latter include the risk of particular average. If, however, a package is on fire, and water is poured upon > Amould, Mar. Ins. 760. * Whitecross Wire & Iron Co. t Savill, L. R., 8Q. B. D. 653. § 215 Perils of War. 235 it to extinguish the fire, no allowance is made in general aver- age for any damage by water to the package so aJffected, but the loss is particular average. The reason for this exception in practice appears to be, that an article which is ignited is deemed to be virtually lost, so that the action of pouring water upon it involves no sacrifice, but is intended to reduce the loss or effect a salvage.^ The risk of fire is covered during the whole of the transit of goods, on shore as well as on shipboard, provided the transit is for one entire or unbroken voyage, as with insurance on goods it almost always is. It was held in one case that an explosion of steam caused by the bursting of a marine boiler, though not identical with fire, is a peril of a sufficiently like kind to be covered by the clause comprehending " all other perils, losses, and misfor- tunes." ^ But that case was subsequently criticised by the House of Lords and substantially overruled.^' v tu:"-'-, § 315. Perils of War. — The common feature in this list of perils is violence at the hands of man. The underwriter takes upon himself the burden of all loss or damage thus occasioned, whether it consist of injury to the vessel's hull, spars, and rigging, b}' an enemy's shot or shell, or by other hostile acts, or the total destruction of the property insured bj' the operation of the same causes. As, however, merchant vessels are not, in general, able to offer a successful resistance to the attack of an armed ship, the casualty which most frequently results from hostilities is capture. Capture, in the proper signification of the term, is the forcible appropriation of property by an enemy or belligerent with intent to keep it ; * and also covers all losses directly occasioned by capture or seizure, whether legal or illegal, by mutinous passengers or slaves, regularly commissioned vessels of war, privateers, or pirates, with the single exception of capture of Americans' property by American ships in time of war. ' Amould Mar. Ins., 722. * Thames & Mersey Marine Ins. Co., rA-^ » West India & P. Tel. Co. v. Home, v. Hamilton, L. R., 13 App. Cas. 484 __'^ &c., Marine Ins. Co., 4 Asp. Mar. L, C. (1887). 841. * Cory v. Burr, 8 App. Cas. 405. 236 Insurance: Fire, Life, Marine. § ^15 The words " men-of-war " and "enemies" obviously refer to tiiose who, authorized by a prince or sovereign state, make war in the mode sanctioned by tlie law of nations as dis- tinguished from "pirates," "rovers," and "thieves," who are unauthorized depredators. " Letters of mart " are commissions granted by the sovereign power to those persons whose property has been seized by sub- jects of other states, authorizing the former to indemnify them- selves for the loss sustained by making reprisals. "Letters of countermart " are letters issued in favor of those threatened by such reprisals, authorizing them to resist the privateers furnished with letters of mart. Captured property is not considered to have been divested from its orio^inal owner until it has undero^one sentence of con- demnation in a legally constituted court of the enemy. But the assured may abandon to the underwriter, and claim for a total loss, on first hearing of the capture. If the abandonment is accepted bv the underwriter, the matter is settled. If it is declined, the assured may take legal proceedings, and will recover, provided the property is not restored before action is brought. Necessary expenses incurred in the redemption or recovery of captured property are, in general, recoverable under the policy. The word " thieves," as used in the English policy, has been held to be applicable only to persons proceeding from outside of the ship, not to the crew or passengers. The robbery con- templated, according to that rule, is that which is committed with violence, and does not extend to mere theft which it is considered might be prevented by the exercise of ordinary vigilance on the part of those in charge of the vessel. Conse- quently the master or owner is alone responsible for this species of loss, which is not attributable to accident, but to the negligence of those who were bound to take proper care of the property. The same interpretation has been given by the English court to the word "thieves" in the bill of lading as in the policy of insurance.^ A different rule, however, has been followed in America, and the word "thieves" as used in the marine policy here is ' Taylor V. Liverpool & G. W. Steam Co., 3 Asp. Mar. L. C. 277. § 216 Arrests, Restraints, etc- 237 not confined to assailing thieves, but extends to thefts by mariners, passengers, or others.* § 316. Arrests, Restraints, etc. — This clause refers only to acts of state, or acts authoi'ized by the sovereign authority in the country. An unauthorized seizure or detention, as by a mob in a meal riot, does not come within the clause, though the underwriter would be liable for it as a loss by pirates or thieves.^ Capture is taking possession with intent to change the property ; arrest is taking with intent ultimately to restore to the owner ; restraint is a prevention of the goods from going. The species of arrest to which shipping has been most fre- quently subject is an embargo, which is a decree issued by the government of a state to prohibit the departure of vessels lying within its jurisdiction. An embargo laid upon any ves- sel entitles the assured to give notice of abandonment, and, if the embargo continues to the time action is brought, to recover as for a total loss ; unless, in the first place, the arrest is only temporary, without occasioning any permanent loss of control over the ship, or unless the assured is a foreigner and the em- bargo is imposed by his own government in contemplation of hostilities with this country. The acts and restraints of princes and rulers mentioned in the policy and bill of lading have reference to a forcible inter- ference, and do not extend to legal proceedings conducted in a constitutional manner.^ A blockade operates as a restraint of princes with respect to property detained within its compass ; but, according to an English decision, exclusion from a port is not restraint, and, accordingly, a loss resulting from the aban- donment of the voyage owing to the blockade of the port of destination was not recoverable under the policy, such a loss being excluded by the rule oausia j)r ox i ma nonremota spectatur} The term " people " is to be understood not in the sense of ' Am. Ins. Co. v. Bryan. 1 Hill, 25. W. Steamship Co.. 23 L. T. N. S. Spinetti v. Atlas Steamship Co., 80 251. N. Y. 71. * Rodocanoehi v. Elliott, 28 L. T. ' Nesbitt V. Lushington, 4 T. R. N. S. 845. See Richardson v. Maine 783. F. & M. Ins. Co., 6 Mass. 10? ; s. c, • Finlay v. The Liverpool & G. 4 Am. Dec. 91 238 Insurance : Fire, Life, Marine. § 217 a mob or multitude, but as the ruling power, however it may be composed.^ Sometimes vessels are seized and detained, ami avGn confis- cated, by the authorities under whose jurisdiction they are lying in consequence of some violation of the law having been com- mitted by the persons connected with them. This, however, is not an arrest, restraint, or detainment of princes, though it may amount to barratry of the master or mariners. r § 317. Barratry of the Masters and Mariners.^ This term signifies any wilful misconduct, either fraudulent or in violation of the law, which is committed by the captain or crew without the connivance of the ship-owner, and which tends to the ship-owner's prejudice, either as injuring or expos- ing to risk of injury his property or the property intrusted to his care, or as exposing it to the risk of forfeiture or seizure for penalties on account of the breach of law. Barratry is a crime, and therefore no mere error of judg- ment can amount to it;^ but a willfully improper stowage of cargo on deck, instead of under deck as instructed, will consti- tute barratry by a master.^ The act of barratry need not be intended for the private benefit of the master or mariners, for any unauthorized breach of law exposing the owner to penalties is barratry, though it were intended for the advantage of the owner ; * but negligence is not barratry. Examples of fraudulent barratry are scuttling, burning, or stranding, or selling or disposing of a ship, or running away with her,^ embezzling the cargo and unlawfully selling it, or making away with the proceeds, or any mischief done to ship or cargo by mutineers.^ Examples of barratry through mere illegality are smuggling,'' illegal trading,^ breach of port regula- ' Simpson v. Charleston F. &M. Ins. Dederer v. Delaware Ins. Co., 2 Wash. Co., Dudley (S. C), 289. C. C. 61. ' Parkhurst V. Gloucester Mut. Fish- ' Falkner v. Ritchie, 2 M. & S. 290. ing Ins. Co., 100 Mass. 301 ; s. c, 97 Lawton v. Sun Mut. Ins. Co., 2 Cush. Am. Dec. 100. Patapsco Ins. Co. v. 500. Coulter, 3 Peters, 232. • Elton v. Brogden. 2 Str. 1264. " Atkinson v. Great West. Ins. Co., ' Havelock v. Hancill. 3 T. R. 277. 65 N. Y. 531, overruling s.c, 4 Daly, 1. " Earle v. Rowcroft. 8 East, 126. * Grill V. General Iron Screw Col- See Carrington v. Merchants' Ins. Co.. Uery Co., L. R. 3 C. P. 476. See 8 Pet. 495. § 218 Jettison. 239 tions, exposing the ship to seizure or penalties,' and the hke. But it should be clearly understood that complicity of the owner in any of these misdemeanors will exclude them from the categor3^of barratry and discharge the underwriter from all responsibility for the consequences. Complicity may be inferred from a want of reasonable vigi- lance, as where a captain had gone on smuggling for three suc- cessive voyages without interference on the part of the owner.^ By the owner must here be understood that owner who has the immediate control over the master and crew ; that is to say, the power of dismissing them. A ship-owner who is also part owner can commit barratry as against his co-owners and their underwriters, though, of course, not against the underwriters of his own share.^ If the policy contains a warranty against capture and seizure, and the barratry is smuggling, and the loss claimed is a penalty inflicted as the price of releasing a ship after seizure, this is not recoverable, being a loss by seizure and therefore barred by the warranty.^ The liability of underwriters for the consequences of the barratrous acts of the master and crew may be limited by express agreement. § 318. Jettison. — This is the intentional throwing over- board of a part of the cargo, or any article on board of a ship, or the cutting or casting away of masts, spars, rigging, sails, or other furniture, for the purpose of lightening or relieving the ship in case of necessity or emergency. For such losses, the underwriter of the goods jettisoned is in the first instance directly liable ; ^ the loss, though by the hands of ma,n, being necessitated or justified by the accidents of navigation. When goods or effects are jettisoned for the common safety, all who have derived benefit, that is to say, the owners of the ship and the entire cargo, are bound to join in replacing the ioss by the contribution called general average. If the under- writer of the article thus sacrificed has paid his assured the ■ Knight V. Cambridge, referred to Wilson v. General Mut. Ins. Co., 13 in 8 East, 136. Cush. 360 ; s. c, 59 Am. Dec. 188. '•^ Pipon V f 'ope, 1 Camp. 434. * Cory v. Burr, 8 Q. E. D. 313. •Jones V. Nicholson, 10 Ex. 28. 'Dickenson v. Jardine, L. R., 3 C. Contra, where part owner is master, P. 639. 240 Insurance : Fire, Life, Marine. § 219 loss, he is entitled to stand in the place of the assured, and to receive his share of the indemnity furnished by the general contribution. When goods are jettisoned, the freiglit is, so to speak, jettisoned with them, and is lil., 14 C. B. N. S. 259. KJ". 332, by D wight, C._- ^-^-^ n 244 Insurance: Fikk, Life, Marine. §223 damage to the thing insured, and fuUing on the owner of it, cannot be recovered from the insurer. For example, when a ship is damaged by sea peril the insurer is liable for the cost of repairing but not for the ship- owner's loss because the ship is laid up and unable to earn freight while being repaired. Nor, again, supposing that during that period it is necessary to retain the ship's crew, or any portion of them, is he liable for the owner's loss in having to pay and feed them while the ship is so unemployed.^ These losses result not from the damage but from the delay incidental to the damage, so that the damage suffered by the ship, it may be argued, is only the remote cause of them. So if fruit, meat, or any other article of like perishable nature putrefies by reason of delay springing out of sea peril, the insurer is not liable.' Nor, except under the special provision of the collision clause, is the insurer of a ship liable in case the assured is obliged to pay damages to the owner of some other ship on account of a collision occasioned by the fault of his crew. § 233. Wear and Tear. — Wear and tear is distin- guished from sea peril in not being occasioned by unusual violence or any accident, but by tlie mere " silent, natural, gradual action of the elements upon the vessel itself." The chief seat of wear and tear is naturally that portion of the fabric which is directly used in urging the vessel through the water—the sails, rigging, and lighter spars of a sailing vessel, and the screw-shaft of a steamer. Wear and tear must be discriminated from sea-damage, not so much by the kind of weather it occurs in as b}^ the kind of damage done ; what is ordinary weather for one season or voyage being storm for another. Besides that, the language of ship-masters varies greatly in intensity of epithet as descriptive of weather. To distinguish what is wear and tear in particular cases must, to a great extent, be left to the trained judgment of experts in such matters. Some general rules for their guid- ance, however, are adopted in the practice of adjusters, which may be brought under the following heads : Sails split or blown away while set are ordinarily treated as wear and tear ; 1 DeVaux v. Salvador, 4 Ad. & Ell. ' Taylor v. Dunbar, L. R., 4 C. P. 480. sue. § 223 Wear and Tear. 246 but not so, if set when the ship is aground, or if lost in con- nection with spars carried away, or if blown adrift when furled, or in the act of furling or setting them ; and a further excep- tion ought probably to be made in the case of sails split when the ship is h'ing to, or scudding before the wind, or when she broaches to. The ground of this rule is, that the mere press- ure of the wind upon the sails while the ship is under canvas subjects them to an ordinary continuous strain, the effects of which are every now and then shown by their splitting or giving way. Where rigging is chafed, or stays or running gear parted, from no assignable cause beyond the continuous strain upon them, it is for the same reason treated as wear and tear ; but not so, if the cause of the breakage or chafing is something unusual and accidental, such as the carrying away of a mast, or the like. The same rule, wnth the same exception, is appli- cable to light spars, as studding sail booms, royal and top- gallant yards, and the like. What, for this purpose, are light spars, must be left to the judgment of experts. It seems hardly reasonable that the same rule should serve for small coasters, or yachts, which frequently lose their little spars by carrying on sail, and ships of the largest class, whose top- gallant masts may be bigger than the others' topmast, or even mainmast. Spars carried away when no sail is set on them are always admissible as particular average. The breaking of a screw shaft, through mere wear and tear, is perhaps one of the most ordinary dangers of steam naviga- tion. It is supposed that by the constant revolution of the shaft some process of crystallization is set up, which by degrees renders the iron brittle, so that it may snap under the mere ordinary strain in fine weather ; and this takes place at periods so varying in different cases that it is hardly practicable to guard against it. Such a breakage, where there is no accident or violence to account for it, can, of course, be treated only as wear and tear. But there is a good deal of floating wreckage in the sea, and cases do occur in which the breakage of a shaft is not improbably attributable to contact with some such thing. A ship's ground-tackle, windlass, and hawsers used for mooring, are of necessity subjected to much constant ordinary 246 Insurance : Fire, Life, Marine. § 224 strain, or wear and tear. For this reason, the rule of prac- tice formerly was to treat the breakage of a hawser, or parting of a chain cable, or breaking down of a windlass, as mere wear and tear, unless it could in some way be traced to an accident out of the common course, such as the falling of another ship athwart the hawser, so as to bring a double strain upon it, or the like. Latterly, there has been a tendency to relax this strictness, particularly with regard to chain cables ; a duly tested chain, it is argued, ought not to give way except under some extraordinary strain, so that its giving way is itself a proof, not that the chain was faulty but that the strain was exces- sive. As for a ship's calking — if, without being struck by seas, thrown on her beam ends, or meeting with bad weather, a ship on a long voyage gradually becomes leaky, this is a suspicious symptom of wear and tear, as affecting the hull. If, in such a case, it shall appear that the ship has not been calked for a long time, the ship-owner will probably have difficulty in estab- lishing: a claim on his insurers. But these are cases as to which it is hardly possible to lay down a rule ; the principle is, that, before an underwriter can be made liable for the calking, it must be shown that the leakiness has been occasioned by more than ordinarily bad weather : and ordinarily bad weather is a relative term, varying with the season and kind of voy- age ; and the application of this principle to individual cases can only be made with the aid of experts. 234. Original Defect. — Underwriters are not liable for any loss which is the immediate result of an original defect in any part of the hull or materials. For instance, where a chain parts owing to a defective link, the consequent loss of the anchor and chain is not recoverable. Again, there may be an original flaw in the welding of a stern- post, shaft, or otherpart of the hull or machinery, which, though at first so slight as to be imperceptible, gradually reveals itself and becomes enhanced by the working of the vessel at sea, until it culminates in a breakdown of the part affected. In such a case the cost of making good the injury will not form the subject of a claim under the policy.* ) Thames & Mersey Marine Ins. Co. v. Hamilton, L. B., 12 App. Cas. 484i § 225 Sea Damage and Dktkuioration. 24:7 § 235. Sea Damage and Ordinary Deteriora- tion, Combined. — When the repair of sea damage is com- bined with that of ordinary deterioration, it is often a work of considerable nicety for the adjuster to resolve the complica- tions which ensue, and refer each description of damage to its proper head. Preparator}' to the consideration of a few of the cases of mixed damage ^Yhich most frequently occur, it will be advis- able to inquire how far such matters can be dealt with upon general principles. (1) In the first place it is to be remem- bered, that, where deterioration of any kind exists to such an extent as to make a vessel unseaworthy on sailing, the risk under a voyage policy will not attach. (2) Where the war- ranty of seaworthiness is not implied, or has been satisfied, the underwriters are liable for all loss or damage proximately caused by the perils insured against ; and there is no other con- dition of the ordinary policy, whether express or implied, which exonerates underwriters from loss or damage by the perils in- sured against on the ground that the peril only became opera- tive through the weakness of the thing exposed to it. (3) De- terioration by wear and tear is provided for by the deductions for improvement ; but when an article is worn out, those de- ductions are inapplicable, as the article is practically lost by the ordinary deterioration. (4) The liability of the under- writer for the repair or renewal of an}'- part of a ship's hull or materials, lost or damaged by the perils insured against, is unaffected by the presence of ordinary deterioration, excepting w^here that deterioration is so extensive that it would have involved the condemnation of the subject of it, irrespective of the further injury, in which case there is no liability on the part of the underwriter, as the ship-owner has sustained no loss by the perils insured against. In applying these principles, we may first take a case where the combined damage was so great as to amount to a construc- tive total loss of the ship. A ship insured with the clause " allowed to be seaworthy for the voyage " encountered a vio- lent storm, in consequence of which she was much damaged and had to put into a port of refuge. On examination it was found that many of the beams were broken, and many of the bolts and fastenings loosened ; and that the vessel being old, and in 248 Insurance: Fire, Life, Marine. § 22(* many parts decayed, the decayed parts could not be again made use of, as they would not bear rebolting, but would re- quire to be replaced with new timbers. There was, however, no reason to doubt that the decayed parts were strong enough to have enabled the ship safely to perform the voyage, had it not been for the heavy weather encountered. It was estimated that the aggregate cost of the necessary repairs would exceed the value of the vessel when repaired. On an action upon the policy to recover for a constructive total loss, the learned judge who tried the case left it to the jury to say whether the cost of the repairs of the damage arising from the perils insured against would have exceeded the value of the vessel when re- paired, directing them, if they were of that opinion, to find for the plaintiffs. The jury returned a verdict for the plain- tiffs. A new trial was then moved for, on the ground that the jury should have been directed, in considering the repairs that were necessary, to exclude from the estimate all such re- pairs as the decayed state of some parts of the ship made nec- essary ; but the court held that there had been no misdirection, adding that, having carefully examined the evidence, they saw no ground to suppose that any repairs had been included in the estimate which were not fairly referable to the perils of the sea.* In this case, it is to be observed that the deterioration which the vessel had suffered by wear and tear was, in effect, cast upon the underwriter, as the necessity to make it good arose from the operation of the perils insured against. § 326. Application of these Principles to Par- ticular Average. — We have next to consider the application of the foregoing principles to the adjustment of particular average. For the sake of illustration, let it be supposed that a mast has been sprung by a peril of the sea, and has likewise an inherent defect. If that defect existed on the sailing of the vessel to such an extent as to render her unseaworth}^ the risk, under a voyage policy, would not attach. On the assump- tion that the warranty of seaworthiness had been complied with, or was not implied, the underwriters would be liable for the loss sustained by the assured through the springing of the mast by sea perils, though the inherent defect may have con ' Phillips V. Nairne, 4 C. B. 343. § 226 Particular Average. 249 tributed to that result. If, however, tlie weather were only ordinary, and the mast, which could liave resisted the strain exerted upon it in the absence of the defect, were sprung in consequence of the defect, the underwriters would be free from liability. The extent of the loss sustained by the assured through the springing of the mast by sea perils has next to be ascertained. If the inherent defect were so y-i-eat as to involve the condem- nation of the mast, irrespective of the injury by sea perils, the assured, having sustained no loss by the latter, would have no claim under the policy. If, however, but for the injury by sea perils, the mast would still have been serviceable, the under- writers would be liable for the cost of repairing that injury. Should the injury involve the renewal of the mast, either on account of the spring alone, or because the latter, though it could have been repaired by fishing the mast, had the latter been sound, cannot be so repaired on account of the defect, the underwriters will be liable for the cost of the renewal, less the ordinary deduction for improvement. If, however, the spring occur in one part of the mast, and the defect in another, so that the spring might have been repaired by fish- ing the mast, but in consideration of that injury, coupled with the defect, it is decided to have a new mast, the liability of the underwriters will be confined to the estimated cost of fishing the old mast, less the usual deduction for improve- . ment, that being the extent of the loss by sea perils. ,/ A similar case occurs where, in the course of repairing injuries caused by sea perils to a ship's bulwarks and stan- chions, or upper deck beams, it is necessary to remove several deck-planks ; and the latter, owing to the wood being old and frail, cannot be removed without spoiling them, though if there had been no such defect they could have been replaced. In that contingency, if the deck-planks, though defective, would still have been serviceable had it not been for the dis- turbing effect of the sea perils, the underwriters are liable for the cost of replacing them, less the ordinary deduction for improvement ; though they would not be liable if the planks were so defective as to necessitate their renewal, irrespective of the accident. When injury to iron-work by the perils insured against is / 250 Insurance : Fire, Life, Marine. § 227 combined with the effects of corrosion, the liabiHty of under- writers for the combination should be tested according to the same method as has been apphed to the case of similar injuries to wood-work combined with the effects of decay. In case of the fracture of a steamer's shaft, or the breaking down of her machinery, in consequence of inherent defect alone, there is no Habihty on the part of underwriters for the consequent damage ; but, if the damage be aggravated owing to the action of sea perils upon the injured parts, the under- writers will be liable for the enhancement. For instance, should a propeller get loose upon the shaft, owing to a defect in the key, the cost of making good that defect would not be recoverable ; but should heavy weather ensue, and the violence of the sea acting upon the displaced propeller cause injury to it or to the shaft, the damage so caused would be claimable as particular average. In the event of a shaft being fractured, or a steam-engine breaking down, on account of sea perils com- bined with inherent defect, the extent of the loss arising from the former cause must be ascertained upon the same principles as have been stated in relation to other repairs. § 337. Limitation of the Liability of Under- "writers. — The principal losses which are not covered by the terras of the policy, and for which the underwriters are not liable, are arranged, as below, in a summary form under the four heads specified. 1. Loss by deterioration and ordinary outlay in navigation, such as the splitting or carrying away of sails by the wind ; the breaking and straining of the rigging while navigating ; the parting of hawsers and ground-tackle, unless subjected to an extra strain owing to some accidental occurrence ; the rolling away of small spars, such as studding-sail booms or top-gallant and royal yards, with the exception last mentioned ; injur}'^ to pumps ; the breakage of a steamer's shaft, unless attri butable to heavy weather, or some other peril insured against ; damage to the hull of a vessel through taking the ground in the ordi- nary course of navigation ; slackness of seams, resulting from wear and tear; the wastage of metal sheathing consequent upon use and exposure ; damage by rats or worms ; decay of wood-work ; corrosion of iron-work ; and, in general, the ordi- § 227 Limitation of Liability. 251 nary deterioration of a vessel's hull and materials; ordinary leakage and breakage of cargo; and all oi'dinary charges incurred during the prosecution of the adventure, including wages and victualing of the crew, though enhanced in amount owing to the prolongation of the voyage through sea perils. 2. Loss by the inherent defect of the subject insured, as where fish or meat becomes putrid, rice or flour heated, fruit rotten, wine sour, or hides tainted, not by contact with sea water, but by natural decomposition, even though the latter arise from the prolongation of the voyage by sea perils ; * disease and natural death of animals ; original defects in the hulls or mate- rials of vessels ; flaws in the machinery of steamers, etc. 3. Loss remotely caused by the perils insured against. This limitation includes loss of interest on capital embarked at sea, or loss of market on cargo, owing to the protraction of the voyage by bad weather ; loss arising from the compulsory abandonment of the voyage consequent upon blockade, hostile occupation, or other deterrent cause ; the liability of ship- owners for loss or injury caused to persons or property through the default of their servants ; the liability of ship-owners for the charges incurred in the removal of wreck, even though the underwriters have paid a total loss and claimed the salvage ; loss by the forced sale of goods at a port of refuge to provide funds for the repair of the ship, or to defray other expenses necessary for the prosecution of the voyage ; ^ the liability of the cargo-owner to make up the deficit in the payment of a bottomry bond, on ship and cargo, arising from the ship and freight being of insufficient value ; ^ loss by the forced sale of property under admiralty decree to realize the amount of a claim thereon ; * loss by a prejudice, or suspicion of damage ; ' the forfeiture of freight, arising from the exercise of a power of mulct or canceling option by the charterer, etc.* 4. Loss directly attributable to the misconduct of the as- sured or his agent.' The following are instances of this limita- ' Taylor v, Dunbar, L. R., 4 C. P. ' Cator v. The Great Western Ins. 206. Co., 2 Asp. Mar. L. C. 90. » Powell V. Gudgeon. 5 M. & S. 431. ' Inman SS. Co. v. Bischoff, 5 Asp. • Greer v. Poole, 4 Asp. Mar. L. C. Mar. L. C. 6. Mercantile SS. Co. v. 800. Tyser, 5 Asp. Mar. L. C. 6, note. ♦ Thompson v. Reynolds, 7 El. & B. ' Thomp.-on v. Hopper, 6 E. & B. 172. 172, 937. 252 Insurance : Fire, Life, Marine. § 228 tion: Loss by unseaworthiness ; loss in the shipping or landing of cargo, directly attributable to the negligence of the ship- owner's servants, or to defect in the ship's tackle; damage by bad stowage, rats or other vermin ; loss by American capture or hostile arrest for illegality ; loss resulting from the act of a foreign state, of which the assured is a subject, when com- mitted with a hostile intention against this country (the assured being, in such a case, identified in the eye of the law with his government in the proceeding) ; the loss of articles placed in improper or insecure situations, such as water-casks on deck, and hawsers or other ropes lying on deck, unless the vessel is just entering or leaving port. Under the same head may be placed the custom by which an underwriter is exonerated from liability for the loss of cargo laden on deck, unless its carriage there is sanctioned by special agreement in the policy, or by established custom of the trade. § 338. The Sue and Labor Clause. — This clause is to be treated as an engagement distinct from the main body of the policy,^ and therefore not subject to the restrictions con- tained in the memorandum. The liability under it is not a liability for particular average.^ It is distinct from the rest of the policy in this further sense, that, although the underwriter's liability for a loss of the thing insured resulting from a single casualty is restricted to the amount of his subscription, he may be liable beyond that amount for such a loss when coupled with a claim under the sue and labor clause, as when expense is in- curred in an unsuccessful attempt to save a ship which never- theless is totally lost.' Two conditions are requisite to constitute a claim under the sue and labor clause : the apprehended mischief must be some- thing for which the underwriters would have been liable, and the measure for safety which gives rise to the expense claimed must be the act of the assured himself or of his agent or ser- vant. If, for example, goods are insured '" free of capture," it is clear that an expense incurred to prevent a capture could not ' Lohre v. Aitchison, 2 Q. B. D. * Alexandre v. Sun Mutual Ins. Co., 609. 51 N. Y. 2oii. Lohre v. Aitchison, 3 ' Kidstonv. Empire Marine Ins. Co., Q. B. D. 558. Providence & S. SS. L. B , 1 C. P. 535. Co. V. Phoenix Ins. Co.. 89 N. Y. 563. § 230 Other Assuranok. 258 be claimed under this clause ; nor, if " against total loss only," an expense incurred merely to diminish damage or avert a loss other than total.' Where salvors pick up a ship derelict at sea, or as volunteers, and bring the property to port in safety, without being in any sense hired by an agent of the assured, the payment for salvage is not a claim under the sue and labor clause. The cost of re- pairing a damaged ship is not a claim under the sue and labor clause, while the cost of earning freight by a justifiable trans- shipment is ; because in the latter case there is a worse evil averted, while in the former case there is not. § 229. Exemption under Five Per Cent,— J^o partial loss or particular average shall in any case he paid unless amounting to Jive per cent. The purpose of this restriction is to relieve the insurers from such small injuries as may very probably be caused by the natural deterioration of perishable articles, and to exempt them from trifling losses often arising more from wear and tear than from perils insured against, and almost certain to occur in any event. By the English view, successive losses may be added to- gether to make up the required percentage ; ^ but the Massa- chusetts court was of the contrary opinion and held otherwise in respect to successive losses happening to the ship." For a further consideration of percentage clauses see § 232. § 230. Other Assurance. — If the assured shall have made other assurance prior in date to this policy^ this company shall he answerable only for so mucJi as the amount of such prior assurance may he deficient towards fully covering the premises herehy assured, and this company shall return the premium upon so much of the sum hy them assured as they shall he by such prior assurance exonerated from / and in case of any assu7'ance upon said premises subsequent in date to this policy, this com- pa/ny shall nevertheless be answerable for the full extent of the ' Kideton v. Empire Ins. Co., L. R., ' Brooks v. Oriental Ins. Co., 7 Pick. 1 C. P. 543. 259. Paddock v. Commercial Ins. ' Blackett v. Royal Exchange Ass. Co., 104 Mass. 521. Co., 2 Cr. & J. 244. 254 Insurance : Fire, Life, Marine. § 230 sum hy them suhscribed without right to claim contribution from such subsequent assurers, and shall accordingly be entitled to retain the premium hy them received in the same manner as ij no such subsequent assurance had been made. This is the American rule in marine insurance, and it differs from the rule in fire insurance, and also differs from the Eng- lish marine rule, under which all policies share proportionately in the interest irrespective of the dates when they were sub- scribed, unless there is some stipulation to the contrary.^ This difference in the laws of different countries is incon- venient and leads to confusion when part of an interest happens to be insured in one country and part in another. It is a general principle of law that fractions of a day are not regarded, but if two or more policies are made on the same day, insuring the same property against the same risks, and the question of priority is material, this priority will be determined by ascertaining at what time on that day the first was made.' Priority is determined according to the time of effecting the insurance rather than the inception of the risk, and for this purpose the written date of the policy is not conclusive.^ This clause of the policy is only applicable to other or double insurance, which has been already explained. It is sometimes expressly stipulated that other insurance of the same date as the policy in question shall be deemed simul- taneous therewith. If the property is fully covered by the prior insurance, the subsequent insurance does not attach ; but it has been held that if the prior for any reason fails during the term of the subsequent insurance, the latter may then attach, but not if it is because the first company becomes insolvent.* If all the policies, or several of them, of different dates do once attach, and the property is diminished below their aggre- gate amount during their life, the question arises whether the insurance shall abate j^ro rata on all the policies, or first on the latest policies. On principle, the former rule would seem to be ' American Tns. Co. v. Griswold, * Lee v. Mass. Ins. Co., 6 Mass. 308 i4 Wend. 899. ■• Kent v. Manufacturers' Ins. Co., 18 * Potter V. Marine Ins. Co., 2 Mason Pick 19. Ryder v. Phoenix Ins. Co., 470. 98 Mass. 186. § 231 Free of Capture. 255 the more satisfactory, though tliere is a decision to the con- trary.^ The effect of violating a provision against other insurance has been considered in connection with the clauses of the fire policy. § 331. Warranted Free of Capture. — The meaning of the term_^^jvarranted.JEree,'' when employed to introduce an exception to the underwriters' liability, is to guarantee that the interest insured shall be free from any of the excepted perils as a cause of loss for which the underwriter is responsi- ble. This kind of warranty means that although the general terms of the policy would have covered the peril, yet consider- ing the special hazard incident to the particular subject, the underwriters, unless they are paid the premium for consenting to take it, do not choose to be liable for the risk. The words "capture" and "seizure" are not to be under- stood as having sole reference to the acts of belligerents. It is true that the proper meaning of the word " capture " is, as already stated, a hostile taking with intent to keep ; but this signification is extended by the addition of the word " seizure," the ordinary and natural meaning of which is a forcible taking possession, however effected.^ Thus a ship had got ashore on the west coast of Africa, where she was boarded by natives, who, after plundering the vessel, left her in such a condition that she was abandoned as not worth repairing. In an action for the loss thus caused it was found by the jury that the natives took possession of the ship to plunder the cargo, and not for the purpose of keeping her, but it was held by the court that this seizure, though only temporary, was a seizure within the meaning of the words in the guaranty, and that the underwriters were consequently exonerated.^ The words "capture " and " seizure " occurring in juxtaposi- tion will therefore be understood to include every forcible pro- ceeding, arising out of the perils insured, whereby the assured ' American Ins. ("o. v. GriswoJd, 14 " Johnston t. Hogg, 5 Asp. Mar. Wend. 399. L. C, 51. ' Johnston t. Hogg, 6 Asp. Mar. L. C. 53. 256 Insurance : Fire, Life, Marine. § 232 is deprived of the control or possession of his property, whether such proceedin^g be permanent or only temporary in effect, and whether it be the act of an enemy, a friendly power mistaking the vessel for an enemy,^ mutinous passengers,^ or a lawful authority, with the exception of piratical seizure, where that exception is made in the policy.* / If the liability of the insurers depends upon the legality of the seizure, this legality must be determined by the govern- ment of the country to which the vessel belongs, and the courts of such country must recognize as conclusive the claims of the executive branch of their government in regard to the sovereignty of any island or country and the right of a vessel to be in its waters/ § 233. The Memorandum Clause. — The exemption of this clause is not applicable to total loss nor to losses calling for general average contribution, for which, in spite of it, the underwriters are liable ; nor in Lloyd's form of policy is it applicable in the case of the stranding of a ship. Average properly signifies a proportionate or eouitable dis- tribution. This word is loosely employed both in law and in the trade of insurance, and care is needed to escape confusion. As here used it means partial loss.^ " Free of average unlsss general or the ship be stranded," has been construed to mean, " Free of average except general, or unless the ship be stranded;" that is, the underwriters, if such is the form of exemption, are free from all average or partial loss on the articles named, if not a general average loss, and they are liable for all partial loss on the articles named in case the ship be stranded, no matter whether the stranding caused the damage or not.^ The damage may even have been discovered and repaired before the stranding takes place, but nevertheless the under- writers would be liable. A stranding at any time during the term insured has the effect of a condition, and effaces the » Powell V. Hyde, 5 El. & B. 607. * Williams v. Suffolk Ins. Co., 18 » Klein wort v. Shepard, 1 El. & El. 1'et. 415. 447. '' Wadsworth v. Pacific Tns. Co., 4 • Swinnerton v. Columbian lus. ''o., Wend. :i3. 87 N. Y 174 ; s. c, 93 Am. Dec. 500. " Burnett v. Kensington, 7 T. li. 210. § 282 Memorandum Clause. 257 remainder of the clause. By average unless general is meant particular average.* The terra pai-ticular average is confined to the deterioration or actual loss of part of the subject insured. Whence it fol- lows that the percentages specified in the memorandum must be similarly confined as regards their composition. Accord- ingly, neither general average, particular charges, nor the extra charges incurred to substantiate a claim on underwriters are admissible to form part of the amount requisite to constitute a claim for the particular average, which must be composed ex- clusively of the loss, consisting either in the deterioration or actual destruction of a part of the subject insured b}^ the oper- ation of the perils insured against.^ Expenses incurred to restore goods to their proper state which have arrived at their destination in a sea-damaged con- dition are admitted to make up the percentage of a claim for particular average, and are payable by the underwriters when, either alone or in conjunction with other partial loss, they amount to the requisite percentage. The earlier cases held that under the restriction of the memorandum clause, the under- writers would not be liable for a total loss unless actual as con- trasted with constructive.^ The later cases would seem to point out a contrary rule upon this important point,* Where the exemption in the policy is worded, " free of par- tial loss," the Massachusetts court is of opinion that the under- writers are liable for a constructive total loss as well as for an actual total loss.' Total physical loss is not necessary, but only total loss of value to the owner, in order to constitute total loss. Conse- quently, when the exemption clause is worded, " free of partic- ular average only," the underwriters are liable if there has been a justifiable abandonment for a total loss of value, though / rv some of the goods may ultimately be saved and brought into €" port in specie.^ Whether the court in the Wallerstein case » Wright V. Williams, 20 Hun, 320. Mayo v. India Mut. Ins. Co., 152 Mass. ' Price V. Ins. Ass., L. R. 22, Q. B. D. 172 (1890). 580 (1889). » Mayo v. India Mut. Ins. Co., 158 • Burt V. Brewers & Malts. Ins. Co., Mass. 172 (1890). 9 Hun, 3:-!3 ; affirmed but not involv- " Wallerstein v. Columbian Ins. Co., ing this point in 78 N. Y. 400. 44 N. Y. 204; s. c, 4 Am. Rep. 604. • Chadsey v. Guion, 97 N. Y. 333. Ins. Co. v. Fogarty, 19 Wall. 640. p ^ 17 "" " ^(T/ 258 Insi:kanok: Fike, Life, Marine. §233 considered the loss actually or constructively total is not alto- gether clear. But the exemption relieves the underwriters, unless there has been either a total or a constructive loss of the entire cargo insured. Hence when the ship sank and was lost, but before the loss a portion of the cargo had been safely delivered, no recovery was permitted against the underwriters.^ If a ship is afloat, or it is practicable to put her afloat, or if she is in such a condition that she is capable of being repaired at any expense, she cannot be held to be "an actual total loss ; " but the underwriters may take pos- session of her under a rescue clause in such a case, and con- vert the loss into " an actual total loss." ^ Under the exemption, " free from average unless general," or liable " for total loss only," the underwriter is not accountable for a partial loss of any one species of goods, except for general average, although separate boxes or packages of such species may be totally lost.' In order to mitigate the severity of this rule, it is usual to insert what are called "average clauses," the effect of which is to subdivide the subject matter insured, whether ship or cargo, into smaller parcels, so as to give the assured a chance of re- covery in case this or that portion be seriously damaged while the bulk is uninjured. For example, with cotton a clause may be inserted, " average payable on every ten bales running landing numbers." This means that if in any parcel of ten bales, as they are entered in the dock landing book, there is a damage above the memorandum restriction, the insured may recover, although the damage on the entire bulk of that species of goods named in the policy would fall below the memoran- dum percentage of its value. § 233. What Constitutes Stranding. — A vessel is stranded within the meaning of the memorandum clause, " free of average unless the ship be stranded," when, in consequence of some unusual or accidental occurrence, she comes in contact with the ground or other obstruction, and remains hard and fast upon it.^ In examining the conditions which are necessary to consti- ' Chadsey v. Guion, 97 N. Y. 333. ' Chadsey v. Guion. 97 N. Y. 333. » Carr v. Security Ins. Co., 1U9 N. Y. * McDougle v. Royal Exchange As- 504. surance, 4 Camp. 283. § 233 Stranding. 259 tute such a stranding, we have first to notice that a literal lying upon the strand is not essential ; for whether the ship be cast upon the shore of the sea, the bank of a river, a rock, a heap of stones or rubbish, piles driven into the shore, or the wreck of another vessel, is immaterial, so long as she comes into contact with and remains resting upon some hard substance in the manner about to be described. Two specific features are necessary in order that a ground- ing may amount to a stranding within the meaning of the memorandum ; first, it is essential to constitute a stranding that the grounding should be accidental — not one that occurs in the ordinary course of navigation. To determine whether a grounding was ordinary or extraordinary, inquiry must be made as to whether the ship took the ground in the accus- tomed place and manner, and in a tidal harbor upon the ebb of the tide, or whether she took the ground in an unusual place or manner, owing to the happening of something fortuitous. The circumstance that the damage was or was not sustained by the ship or cargo through taking the ground, is in general immaterial in deciding as to the ordinary or extraordinary character of the grounding.^ Circumstances of an extraordi- nary nature occurring in connection with an ordinary ground- ing will not convert that class of grounding into a stranding, unless they affect the mode in which the vessel takes the ground. A vessel grounded at Dunkirk merely through the ebbing of the tide, but after she had settled it was found that she had received injury by striking upon some hard substance. The court, while allowing that any damage caused to ship or goods by this accident would be attributable to perils of the seas, held that the ordinary character of the grounding was not removed thereby.^ A different conclusion was arrived at in a case where the mode of taking the ground was affected by an accident. Thus a vessel had grounded in the usual place and manner in a tidal river, but had afterwards, owing to the stretching of a rope, been moved somewhat astern by the force of the wind, so that she came into contact with a heap of rubbish and sustained ' Hearne v. Edmunds, 1 Brod. & ' Kingsford v. Marshall, 8 Bing Bing. 388. 458. 260 Insurance : Fire, Life, Marine. § 233 damage. This was held to be a stranding within the meaning of the memorandum.' Where a vessel, which was moored in a tidal harbor, fell over antl was stove in on the ebb of the tide because the rope by which she was lashed was of insuffi- cient strengtli ; this was also held to be a stranding.- Where, by a temporary change of circumstances, however caused, the bottom of a river or harbor is in a particular place in a condi- tion different from its ordinar}^ condition, and thereby a vessel intendetl to take the ground comes in contact with the ground at that place in a different manner from usual, that is a strand- ing within the memorandum. Accordingly, a vessel was held to have stranded where, in taking the ground in a tidal harbor, instead of resting upon an even keel, she pitched by the head into a hole, which had been caused by the paddles of steamers in leaving the harbor at low tide, and the existence of which had not previously been discovered.^ The second essential feature in the constitution of a strand- ing is that the grounding must amount to a settling down upon the obstruction, as opposed to a mere " touch and go." A striking of the ship upon the ground, however violent, will not of itself suffice to constitute a stranding, nor will a mere temporary stoppage of the ship's way. In practice it is deemed sufficient to amount to a stranding if a vessel is hard and fast, without reference to the extent of her surface which is in actual contact with the obstruction. No definite period can be fixed as the time during which a vessel must remain quiescent in order to have stranded. In one case which came before the courts, it appeared that the vessel had struck upon a rock, and after remaining for a minute and a half, had floated off and proceeded upon her A^oyage. It was held by Lord Ellenborough that this detention was insuf- ficient ; for a stranding meant lying on the shore or something analogous to that. If it is merely ''touch and go" with the ship, there is no stranding. Every striking must necessarily produce a retarding of the ship's motion. If by the force of the elements she is run aground, and becomes stationary, it is immaterial whether this be on piles, or on the muddy bank of ' Wells T. Hopwood, 8 B. & Adol. ' Letchford v. Oldham, L. R., 6 Q. aO. B. D. 538. * Bishop V. Pentland, 7 B. & C 319. § 235 Cargo on Deck. 261 a river, or on the rocks, or on the seashore. But a mere strik- ing will not do, no matter where that may happen.' As a mere striking the ground with a temporary stoppage will not suffice to constitute a stranding, neither will it suffice if the ship be dragged through the mud, or if she pass over a bar bumping at intervals ; but if she is forced ashore or driven on a bank, and remains for any time on the ground, that consti- tutes a stranding without reference to the degree of damage she may thereby sustain. The shortest time which has been allowed by the English courts as sufficient to amount to a stranding, occurred in a case where it appeared that the vessel had struck upon a rock and remained from fifteen to twenty- minutes. This was deemed a sufficiently long detention upon the ground to comply with the condition.^ Where a vessel is intentionally run ashore, as, for instance, to keep her from sink- ing, the grounding is equally a stranding as where it is purely accidental.^ The voluntary stranding of a ship in the presence of an extreme peril is not, by the rule prevailing in England, a general average act which calls for general contribution from the other interests ; but, as we have already observed, the rule is otherwise in the United States^ § 234. Cargo on Deck. — Cargo on deck is not covered hy this policy unless specially indorsed hereon' in all cases to he free from loss hy wet, hreaJiage, leaTiage, or exposure. The general rule in regard to deck load, and the effect of custom upon it, have been already considered. Although not entitled to protection by the terms of the policy, the deck load, if benefited by a general average act, must contribute its share together with the other interests. § 235. Blockade. — Warranted not to ahandon in the case of blockade, and free from any experise in consequence of capture, seizure, detention, or hlockade, hut in the event of hlockade, to he at liberty to proceed to an open port and there end the voyage. ' McDougle V. Royal Exchange As- ' Bowring v. Elmslie. 7 T. R. 216. surance, 4 Camp. 'ZSZ. ^ olumbian Ins. < o. v. Ashby, 13 « Bater v. Towry, 1 Stark. 436. Peters, 331. §taretHope, 9 Wall.^08». 262 Insurance: Fire, Ltfe. Marine. §236 This expressly limits a liability which would otherwise be imposed upon the insurers by the general terms of the body of the policy, as has been already explained in detail. § 336. Average Distingviishecl from Salvage Loss. — A particular average on goods consists either in a deteriora- tion or total loss of part of the subject insured by the operation of the perils insured against. It is requisite to distinguish between a particular average and a salvage loss on goods, as some confusion has occurred in the use of these terms, A salvage loss is a total loss diminished by salvage, and takes place, in relation to goods, when there is either an absolute or a constructive total loss of the subject in- sured, but some remains of the property have been recovered by the assured. In that case the claim upon the underwriters is for the difference between the insured value and the net pro- ceeds ; and the latter are computed by deducting from the gross proceeds of the property saved all charges incurred in realizing the salvage. In short, as it has been concisely put by Stevens, the merchant " receives the net proceeds from the per- son who effects the sales, and the balance from the under- writer." Where only a part of the subject insured is sold short of its destination, the remainder being delivered there, the claim, though stated in practice after the manner of a salvage loss, is in principle one for particular average, which is proved by the fact that it is excluded by a warranty to be " free from average, unless general." ^ If goods arrive in specie at their port of des- tination sea-damaged and with the marks obliterated, so that they cannot be delivered to their respective owners, there is nevertheless no claim for total loss under such circumstances, for the owners of the goods are tenants in common of the mass, and the claim is to be stated, according to the rules of partic- ular average, as on goods which have arrived at their destina- tion.2 § 337. Riders. — A variety of forms of policies are in use both in ocean marine and inland marine insurance, and a great ' Ralli V. Jaason, 6 El. & B. '^ Spence v. Union Mar. Ins. Co., 422. L. R., 3 C. P. 42Z § 238 Adjustment. ^63 number of special clauses have been framed, and such clauses are often attached in the form of riders, sometimes for the pur- pose of restraining and sometimes for the purpose of extending the liability of the underwriters for special purposes. § 238. Adjustment. — The details of the adjustments of marine losses between the insurers and the insured are fre- quently a matter of great complication, and for the most part are put into the hands of professional experts called average adjusters. The adjusters make up an account, apportioning the loss according to the respective rights of the different interests. If there are general average losses, these must be included ; but if there has been a general average adjustment in a foreign port between the parties primarily interested in it, to wit, the owners of ship, cargo, and freight respectively, then the results arrived at in that adjustment are taken as conclusive and incor- porated into the adjustment between the insurers and the in- sured. The professional adjuster is supposed to act in a judicial rather than in a partisan capacity, but his adjustment is not binding upon any of the parties unless by special agreement. In practice the adjustment is generally made the basis of an amicable settlement among the different interests, and law-suits are not as common over marine adjustments as in other branches of insurance business. On the arrival of the ship and cargo partially damaged, the master or owner of the ship ad- vertises for bids for repairs. Bids are accepted, the survey of damage is made, and contracts for rebuilding executed. These, with the bills of lading or invoices, the freight manifest, the charter party, the policies of insurance, and any other proofs of loss, furnish the adjuster with the necessary material for mak- ing up his account. After a loss has been adjusted and paid, the policy becomes merged in the adjustment, and the insurers cannot thereafter avail themselves of any defence, which they might have had under the policy as a ground for opening the adjustment ; but for fraud in obtaining the adjustment itself relief can be ob- tained.* This principle is applicable to adjustments in all branches of insurance law. » Smith V. Glens Falls Ins. Co., 63 N. Y. 85. uA MMy'v I LT i ■' PART SEOOND. UL&JDING ILLUSTRATIVE OASPS^« CHAPTER I. two of the earlier english oases. Court of King's Bench, 1777. TYRIE V. FLETCHER. (Cowp. 666.) The contract of insurance is an entirety. If the risk does not attach the pre mium is returnable, but if it attaches at all the premium cannot be appor tioned. This was an action on the case, for money had and received to the plaintiff's use, brought by the plaintiff, the insured in a policy of insurance, against the defendant the underwriter, for a return of part of the premium. The cause was tried before Lord Mansfield, at Guildhall, at the sittings after last Trinity term, when, by consent, a verdict was found for the plaintiff, subject to the opinion of the court upon the question, whether, under the circumstances of the case, a proportionable part ought to be returned or not. If the court should be of opinion that a proportionable part of the premium ought to be returned, then a nonsuit was to be entered. It now came before the court, upon a rule to show cause why a nonsuit should not be entered ; and the cause, as it appeared from the report, was shortly this : The policy of insurance was upon the ship Isabella, at and from London to • The chapters of Part Second are illustrative ot the corresponding chap> ters of Part First, and should be read in connection with them. 266 Insurance: Fire, Life, Marine, o. i any port or place where or whatsoever, for twelve months, from 19th of August, 1776, to 19th of August, 1777, both days inclusive, at £9 per cent., warranted free from captures and seizures by the Americans, and the consequences thereof. In all other respects it was in the common form, against all perils of the sea, etc. The ship sailed from the port of London, and was taken by an American privateer about two months afterward. Lord Mansfield, C. J. — It was very proper to save this case for the opinion of the court, because in all mercantile transactions certainty is of much more consequence than which way the point is decided, and more especially so in the case of policies of insurance ; because, if the parties do not choose to contract according to the established rule, they are at liberty between themselves to vary it. This case is stripped of every authority. There is no case or practice in point ; and therefore we must argue from the general principles applicable to all policies of insurance. And, I take it, there are two general rules established applicable to this question. The first is, that where the risk has not heen run, whether its not having heen run was owing to the fault, pleasu7'e^ or will of the insured, or to any other cause, the premium shall he returned, because a policy of insurance is a contract of in- demnity. The underwriter receives a premium for running the risk of indemnifying the insured ; and whatever cause it be owing to, if he does not run the risk, the consideration for which the premium or money was put into his hands fails, and therefore he ought to return it. (2) Another rule is, that if that risk of the contract of indemnity has once commenced, there shall he no apportionment or return of premiuyn afterioard. For though the premium is estimated, and the risk depends upon the nature and the length of the voyage, yet if it has commenced, though it be only for twenty-four hours or less, the risk is run ; the contract is for the whole entire risk, and no part of the consideration shall be returned ; and yet it is as easy to apportion for the length of the voyage, as it is for the time. If a ship had been insured to the East Indies agreeably to the terras of the policy in this case, and had been taken, twenty- four hours after the risk was begun, by an American captor, b. i. Tyrie v. Flktcher. ^67 there is not a color to say that there should have been a return of the premium. So much, then, is clear, and indeed perfectly agreeable to the ground of determination in the case of Stevenson v. Snow, 3 Burr. 1237 ; for in that case the inten- tion of the parties, the nature of the contract and the conse- quences of it, spoke manifestly two insurances and a division between them. The first object of the insurance was from London to Halifax, but if the ship did not depart from Ports- mouth with convoy (particularly naming the ship appointed to be convoy), then there was to be no contract from Portsmouth to Halifax. Why, then, the parties have said, '' We make a contract from London to Halifax, but on a certain contingency it shall only be a contract from London to Portsmouth." That contingency not happening reduced it, in fact, to a contract from London to Portsmouth only. The whole argument turned upon that distinction. Mr. Yates, who was for the plaintiff, put it strongly upon that head ; and all the judges, in delivering their opinion, lay the stress upon the contract com- prising two distinct conditions, and considering the voyage as being, in fact, two voyages : and it was the equitable way of considering it ; for, though it was at first consolidated by the parties, there was a defeasance afterwards, though not in words. I think Mr. Justice Wilraot put it particularly upon that ground, but it was the opinion of the whole court. There was a usage, also, found by the jury in that case, that it was customar}'^ to return a proportionable part of the premium in such-like cases, but they could not say what part. The court rejected this as a usage for the uncertainty ; but they argue from it, that there being such a custom plainly showed the gen- eral sense of merchants as to the propriety of returning a part of the premium in such cases. And there can be no doubt of the reasonableness of the thing. There has been an instance put of a policy where the measure is by time, which seems to me to be very strong, and apposite to the present case ; and that is an insurance for a man's life for twelve months. There can be no doubt but the risk there is constituted by the measure of time, and depends entirely upon it ; for the underwriter would demand double the premium for two years that he would take to insure the same life for one year only. In such policies there is a general 268 Insuranoe : Fire, Life, Maiiine. 0. I. exception against suicide. If the person puts an end to his own life the next day, or a month after, or at any other period within the twelve months, there never was an idea in any man's breast that part of the premium should be returned. A case of general practice was put by Mr. Dunning, where the words of the policy are, " At and from , provided the ship shall sail on or before the 1st of August;" and Mr. "Wallace considers, in that case, that the whole policy would depend upon the ship sailing before the stated day. I do not think so ; on the contrary, I think, with Mr. Dunning, that can- not be. A loss in port before the day appointed for the ship's departure can never be coupled with a contingency after the day ; but if a question were to arise about it, as at present advised, I should incline to be of opinion that it would fall within the reasoning of the determination in Stevenson v. Snow, and that there were two parts or contracts of insurance, with distinct conditions. The first is, I insure the ship in port, pro- vided she is lost in port before the 1st of August ; and sec- ondly, if she is not lost in port, I insure her then during her voyage from the 1st of August till she reaches the port speci- fied in the policy. The loss in port must happen before the risk on the voyage could commence ; and, vice versa, the risk in port must cease the moment the risk upon the voyage began. Let us see, then, what the agreement of the parties is in the present case. They might have insured from two months to two months, or in any less or greater proportion, if they had thought proper so to do. But the fact is, that they have made no division of time at all ; but the contract entered into is one entire contract from the 19th of August, 1YT6, to the 19th of August, 1777, which is the same as if it had been expressly said by the insured, " If you, the underwriter, will insure me for twelve months, I wiU give you an entire sum ; but I will not have any apportionment." The ship sails, and the under- writer runs the risk for two months : no part of the premium then shall be returned. I cannot say, if there had been a recapture before the expiration of the twelve months, that the policy would not have revived. Aston, J. — This case depends upon the words of the policy, and I am of opinion it is one entire contract at a certain gross a I. Smith v. Scott. 269 sura of £9 per cent, for a certain period of time — viz., twelve months — and that no division is to be impHed. The determi- nation in Stevenson v. Snow went expressly upon this consider- ation, that there were ttvo distinct voyages, and no con- sideration received by the insured for the premium upon the second voyage; and there certainly was not, for there never was any point of time when any risk was run from Portsmouth. In Bond V. Nutt^ the losses insured against were distinct, and unconnected with each other: 1st, a loss of the ship in port, if any should happen there ; 2d, a loss in her passage home, provided she sailed on a certain day. The risk in some policies may be distinct and divisible in its nature. In the case of an insurance upon a life, the sum is lumped, and the time is lumped for the year. So in this case, I think, the contract is one entire contract, and therefore that there ought to be no return of premium. Mr. Justice Willes and Mr. Justice Ashurst were of the same opinion. Nonsuit. CouET OF Common Pleas, 1811. SMITH V. SCOTT. (4 Taunt. 126.) Tntv/rance grants indemnity for loss by the perils specified, notwithstanding that the negligence of the assured or others may contribute. This was an action upon a pohcy of insurance upon the ships Helena and Merlin^ at and from the bay of Honduras to their port or ports of discharge in Great Britain, and a loss was averred to have happened to the Helena by circumstance, that, while she was proceeding on her voyage, a certain other ship on the high seas, by and through the force of the winds and waves, was carried and sailed against the Helena, without any neglect or default of the persons on board the Helena, and the Helena became lost and stranded by the perils of the seas. Upon the trial of the cause, at the London sittings, after Trinity term 1811, before Mansfield, C. J., the evidence was, that a ship named the Margaret ran foul of the Helena by the grossest neglect ; for when, upon the shock beitig given, some of the Helena^ s crew went on board the Margaret, they found 270 Insukanoe : Fire, Life, Marine. o. L only one man on the deck, and he was asleep. Hereupon it was objected by the counsel for the def 3ndant, that the occasion of the injury was not the perils of the seas, but the gross neg- ligence of the crew of the Margaret, and that this was a fatal variance from the loss averred. The jury, however, found a verdict for the plaintiff, subject to this point, which the chief justice reserved. Accordingly, Lens, Serjt., on this day moved for a rule nisi to set aside the verdict and enter a nonsuit, adding that the plaintiff had his remedy against the owners of the Ma/rgaret. Mansfield, C. J. — I do not know how to make this out not to be a peril of the sea. What drove the Margaret against the Helena f The sea. What was the cause that the crew of the Margaret did not prevent her from running against the other? Their gross and culpable negligence ; but still the sea did the mischief. It is reasonable enough that the plaintiffs should permit the defendant to use their names as plaintiffs against the owners or crew of the Margaret, so as to recover whatever the plaintiffs would be entitled to as against the Margaret, and to apply it in diminution of their loss ; but it would lead to endless discussion if it were required that no cause except the cause of loss alleged in the declaration should be conducive to the loss. Heath, J. — If this doctrine were to prevail, it might go still further, and it might be contended that, if a master conducts his ship so unskillf uUy as to run it on a rock, that is not a peril of the sea, but a peril of the unskillfulness of the master. Rule refused. CHAPTEK II. GENEBAL PBINOIPLES. Nature of the Contract. Exchequer Chamber, 1854. DALBY V. INDIA & LONDON LIFE ASSUR. CO. (15 C. B. 365.) Insurance : how far a contract of indemnity, and when insurable interest must exist. Parke, B. — This case now comes before us on a bill of exceptions to the ruling of my brother Cress well at nisi prius. It is an action on what is usually termed a policy of life assur- ance, brought by the plaintiff, as a trustee for the Anchor Assurance Company, upon a policy of £1,000 on the life of his late Royal Highness the Duke of Cambridge. The Anchor Life Assurance Company had insured the duke's life in four separate policies — two for £1,000 and two for £500 each — granted by that company to a Mr. Wright. In consequence of a resolution of their directors, they determined to limit their insurances to £2,000 on one life ; and, this insurance exceeding it, they effected a policy with the defendants for £1,000 by way of counter-insurance. At the time the policy was subscribed by the defendants, the Anchor Company had unquestionably an insurable interest to the full amount. Afterwards an ar- rangement was made between the office and Mr. Wright for the former to grant an annuity to Mr. Wright and his wife, in consideration of a sum of money, and of the delivering up the four policies to be canceled, which was done ; but one of the directors kept the present policy on foot by the payment of the premiums till the duke's death. It may be conceded for the purpose of the present argument that these transactions 372 1>"SL'RA_NCE : Fire, Life, Marine. c. n. between Mr. "Wright and the otRce totally put an end to that interest which the Anchor Company had when the policy was effected, and in respect of which it was effected, and that at the time of the duke's death and up to the commencement of the suit the plaintiff had no interest whatever. This raises the very important question, whether, under these circumstances, the assurance was void, and nothing could be recovereil thereon. TVe are all of opinion that it (the interest of the plaintiff which had terminated before the duke's death) was sufficient, and but for the case of Godsall v. Boldero, 9 East, 72, should have felt no doubt upon the question. The contra^?t commonly called life as&ia'iince, ichen j.rr<>j)erl i/ considered, is a mere contract to pay a certain sum of money on the death of a j}erson. in consid- eration of the due payynent of a certain annuity for his life, the am.ount of the annuity heing calculated in the nrst instance ac- cording to the probable duration of the life • arid when once fixed it is constant a?id invariable. The stipulated amount of annuity is to be uniformly paid on one side, and the sum to be paid in the event of death is always (except when bonuses have been given by prosperous offices) the same on the other. This species of insurance in no loay resembles a contract of indem- nity. Policies of assurance against fire and against marine risks are both properly contracts of indemnity, the insurer eno-ag^ins: to make s:ood, within certain limited amounts, the losses sustained by the insured in their buildings, ships, and effects. Policies on maritime risks were afterwards used im- properly, and made mere wagers on the happening of those perils. This practice was limited by the 19 G. II., c. 37. and put an end to in all except a few cases ; but at common law. before this statute with respect to maritime risks, and the 14 G. III., 3, c. 4S. as to insurances on lives, it is perfectly clear that aU con- tracts for wager policies and wagei-s which were not contrary to the policy of the law were legal contracts : and so it is stated by the court in Cousiris v. yarites. 3 Taunt. 315, to have been solemnly determined in the case of Lucena v. Craufurd, 2 Bos. (fe P. 324. 2 N. R. 269. without even a difference of opinion among all the judges. To the like effect was the decision of the court of error in Ireland, before all the judges except three, in The British Insurance Co. v. Mngee. 1 Cooke (te Ale. 1S2, that the assurance was legal at common law. Their contract, o. II. Dalby y. India & London Life Assur. Co. 273 therefore, in this case to pay a fixed sum of XI, 000 on the death of the late Duke of Cambridge, would have been unquestionably legal at common law if the plaintiff had had an interest therein or not ; and the sole question is whether this policy was ren- dered illegal and void by the provisions of the statute 14 Ct. j[ILj_c^_48^ This depends upon its true construction. The statute recites that the making insurances on lives and other events, wherein the Insured shall have no interest, hath introduced a mis- chievous kind of gaming, and for the remedy thereof it enacts (§1.) " that no insurance shall he made by any one on the life or lives\ of any person or persons, or on any other events whatsoever, wherein the person or persons for whose use and benefit or on whose account such policy shall be made shall have no interest, or by way of gaming and wagering; and that every assurance made contrary to the true intent and meaning thereof, shall be >- null and void, to all intents and purposes whatsoever." As the Anchor Assurance Company had unquestionably an interest in the continuance of the life of the Duke of Cambridge, and that to the amount of £1,000, because they had bound themselves to pay a sum of £1,000 to Mr. Wright on that event, the policy effected by them with the defendants was certainly legal and valid, and the plaintiff, without the slightest doubt, could have recovered the full amount if there were no other provision in the act. The contract is good at common law, and certainly not avoided by the first section of the 14 G, TIL, c. 48. This section, it is to be observed, does not provide for any par- ticular amount of interest. According to it, if there was any interest, however small, the policy would not be avoided. The question arises on the third clause ; it is as follows : " And be it further enacted, that in all cases where the insured hath inter- est in such life or lives, event or events, no greater sum shall be recovered or received from the insurer or insurers than the amount or value of the interest of the assured in such life or hves, or other event or events." Now, what is the meaning of this provision ? On the part of the plaintiff it is said it means only that in all cases in which the party insuring has an inter- est when he effects the policy, his right to recover and receive is to be limited to that amount ; otherwise, under color of a small interest, a wagering policy might be niade to a large amount, as it might if the first clause stood alone. The right to 18 2Yir Insurance : Fire, Life, Marine. o. i. recover, therefore, is limited to the amount of the interest at the time of effecting the policy ; upon that value the assured must have the amount of premium calculated ; if he states it truly, no difficulty can occur ; he pays, in the annuity for life, the fair value of the sum payable at death. If he misrepresents by overrating the value of the interest, it is his own fault in paying more in the way of annuity than he ought, and he can recover only the true value of the interest in respect of which he effected the policy, but that value he can recover. Thus the liability of the assurer becomes constant and uniform, to pay an unvarying sum on the death of the cestui que vie, in consideration of an unvarying and uniform premium paid by the assured. The bargain is fixed as to amount on both sides. This construction is effected by reading the word " hath " as referring to the time of effecting the policy. By the first sec- tion the assured is prohibited from effecting an insurance on a life, or on an event wherein he " shall have " no interest — that is, at the time of assuring; and then the third section requires that he shall recover only the interest that he " hath ; " if he has an interest when the policy is made, he is not wager- ing or gaming, and the prohibition of the statute does not apply to his case. Had the third section provided that no more than the amount or value of the interest should be insured, a question might have been raised, whether, if the insurance had been for a larger amount, the whole would not have been void ; but the prohibition to recover or receive more than that amount obviates any difficulty on that head. On the other hand, the defendants contend that the meaning of this clause is, that the assured shall recover no more than the value of the interest which he has at the time of the recovery, or receive more than its value at the time of the receipt. The words must be altered materially to limit the sum to be recovered to the value at the time of the death, or if payable at a time after death, when the cause of action accrues. But there is the most serious objec- tion to any of these constructions. It is, that the written con- tract, which, for the reasons given before, is not a wagering contract, but a valid one, permitted by the statute, and very clear in its language, is by this mode of construction com- pletely altered in its terms and effect. It is no longer a con- tract to pay a certain sum as the value of a then-existing 0. I. Dalbt v. India & London Life Assuk. Co. 275 interest in the event of death, in consideration of a fixed annuity, calculated with reference to that sum, but a con- tract to pay, contrary to its express words, a varying sum, according to the alteration of the value of that interest at the time of the death or the accrual of the cause of action, or the time of the verdict or execution, and yet the price or the premium to be paid is fixed, calculated on the original fixed value, and is unvarying, so that the assured is obliged to pay a certain premium every year, calculated on the value of his interest at the time of the policy, in order to have a right to recover an uncertain sum, namely, that which happens to be the value of the interest at the time of the death or afterwards, or at the time of the verdict. He has not, therefore, a sura certain, which hB stipulated for and bought with a certain annuity ; but it may be a much less sum, or even none at all. This seems to us so contrary to justice and fair dealing, and common honesty, that this construction cannot, we think, be put upon the section. We should, therefore, have no hesitation, if the question were res Integra^ in putting the much more reasonable construction on the statute, that if there is an inter- est at the time of the policy it is not a wagering policy, and that the true value of that interest may be recovered, in exact conformity with the words of the contract itself. The only effect of the statute is to make the assured value his interest at its true amount when he makes the contract. But it is said that the case of Godsall v. Boldero^ 9 East, 72, has con- cluded the question. Upon considering this case, it is certain that Lord Ellenborough decided it upon the assumption that a life policy was in its nature a contract of indemnity, as policies on marine risks and against fire undoubtedly are ; and that the action was, in point of law, founded on the supposed damnifi- cation occasioned by the death of the debtor existing at the time of the action brought, and his lordship relied upon the decision of Lord Mansfield, in Hannilton v. Metides, 2 Burr. 1270, that the plaintiff's demand was for an indemnity only. Lord Mansfield was speaking of a policy against marine risks, which is in its terms a contract for indemnity only. But that is not the nature of what is termed an assurance for life ; it really is what it is on the face of it, a contract to pay a certain sum in the event of death; it is valid at common law, and, if 2T6 Insdrancp:: Fire, Life, Marine. o. it. it is made by a person having an interest in the duration of the life, is not prohibited by the statute 14 G. Til, c. 48. Judgment reversed, and a venire de novo. Supreme Court of Judicature, 1881. RAYNER V. PRESTON. (L. R., 18 Ch. D. 1.) Inturance is a personal contract, and does not run with the title of ths property insured. This was an appeal from a judgment of Jessel, Master of the Rolls, dismissing the action. The plaintiffs purchased from the defendants a messuage and vYorkshops. Between the date of the contract and the time fixed for completion, the buildings purchased were injured by fire. The vendors had before the contract insured the buildings against fire, but there was not in the contract any mention of this fact or of the policy. The plaintiffs brought an action to establish their right to a sum received by the vendors from the insurance office, or to have it applied in or towards reinstating the buildings injured. The Master of the Rolls decided against their claim, and from this decision the plaintiffs appealed. It was contended by the appellants that they were entitled to the moneys (1) on general principles, irrespective of any special circumstances alleged to exist in the case ; (2) under the provisions of the Act 14 Geo. III., c. Y8, either alone or with the aid of the special circumstances of this case. Brett, L. J. — For a reason which will presently appear (viz., the different opinion of Lord Justice James), I give with some fear the result of the (I must say) very clear opinion which I have in this case. This action is brought by the plaintiffs against the defend- ants to recover money which is in the hands of the defendants ; and, therefore, if the action had been brought at common law, it would have been an action for money had and received. That action was always treated at common law as being founded upon equity, and therefore it seems to me that the decision in this case, whatever it ought to be, would be the o. n. Rayner v. Preston. 277 same whether it should be considered to be a decision at com- mon law or in equity. It seems to me that the question raised between the plain- tiffs- and the defendants calls upon us to consider, first of all, the nature of a policy of fire insurance ; and, secondly, what was the relation with regard to the policy and to the property between the plaintiffs and the defendants in this case. Now, in my judgment, the subject-matter of the contract of insurance is money, and money only. The subject-matter of insurance is a different thing from tlie subject-matter of the contract of insurance. The subject-matter of insurance may be a house or other premises in a fire policy, or may be a ship or goods in a marine policy. These are the subject-matter of insurance, but the subject-matter of the contract is money, and money only. The only result of the policy, if an accident which is within the insurance happens, is a payment of money. It is true that, under certain circumstances, in a fire policy there may be an option to spend the money in rebuilding the premises ; but that does not alter the fact that the onl}' liability of the insurance company is to pay money. The contract, therefore, is a con- tract with regard to the payment of money, and it is a con- tract made between two persons, and two persons only, as a contract. In this case there was a contract of insurance made between the defendants and the insurance company. That contract was made by the defendants, not on behalf of any undisclosed principal, not on behalf of any one interested other than them- selves. The contract was made by the defendants solely and entirely on their own behalf, and at a time when they had no relation of any kind with the plaintiffs. It was a personal con- tract between the defendants and the insurance office, to which they were the sole parties. It is true that under certain cir- cumstances a policy of insurance may, in equity, be assigned so as to give another person a right to sue upon it ; but in this case the policy of insurance, as a contract, never was assigned by the defendants to the plaintiffs. It would have been assigned by the defendants to the plaintiffs if it had been included in the contract of purchase, but it was not. Any valuation of the policy, any consideration of increase of the price of the premises in consequence of there being a policy, was wholly omitted. 278 Insurance : Fire, Life, Marine. o. n. There was nothing given by the plaintiffs to the defendants for the contract. The contract, therefore, neither express! v nor impliedly, was assigned to the plaintiffs; and, so far as regards the contract of insurance, there never was any relation of any kind between the plaintiffs and the defendants. But there did exist a relation between the plaintiffs and the defendants, not with regard to the subject-matter of the con- tract, but with regard to the subject-matter of the insurance. There was a contract of purchase and sale between the plain- tiffs and the defendants in respect of the premises insured. It becomes necessary to consider accurately, as it seems to me, and to state in accurate terms, what is the relation between the two people who have contracted together with regard to premises in a contraot of sale and purchase. With the greatest deference, it seems wrong to say that the one is a trustee for the other. The contract is one which a court of equity will enforce by means of a decree for specific performance. But if the vendor were a trustee of the property for the vendee, it would seem to me to follow that all the product, all the value of the property received by the vendor from the time of the making of the contract ought, under all circumstances, to be- long to the vendee. What is the relation between them, and what is the result of the contract ? Whether there shall ever be a conveyance depends on two conditions : first of all, whether the title is made out, and, secondly, whether the money is ready ; and unless those two things coincide at the time when the contract ought to be completed, then the contract never will be completed and the property never will be con- veyed. But suppose at the time when the contract should be completed, the title should be made out and the money is ready, then the conveyance takes place. Now it has been suggested that when that takes place, or when a court of equity decrees specific performance of the contract, and the conveyance is made in pursuance of that decree, then by relation back the vendor has been trustee for the vendee from the time of the making of the contract. But, again, with deference, it appears to me that if that were so, then the vendor would in all cases be trustee for the vendee of all the rents which have accrued due and which have been received by the vendor between the time of the making of the contract and the time of completion ; o. II. Rayner v. Preston. 279 but it seems to rae that that is not the law. Therefore, I ven- ture to say that I doubt whether it is a true description of the relation between the parties to say that from the time of the making of the contract, or at any time, one is ever trustee for the other. They are only parties to a contract of sale and pur- chase of which a court of equity will under certain circum- stances decree a specific performance. But even if the vendor was a trustee for the vendee, it does not seem tb me at all to follow that anything under the contract of insurance would pass. As I have said, the contract of insurance is a mere per- sonal contract for the payment of money. It is not a contract which runs with the land. If it were, there ought to be a- decree that upon the completion of the purchase the policy be handed over. But that is not the law. The contract of insur- ance does not run with the land ; it is a mere personal contract, and unless it is assigned no suit or action can be maintained upon it except between the original parties to it. I therefore, with deference, think that the plaintiffs here cannot recover from the defendants, on the ground that there was no relation of any kind or sort between the plaintiffs and the defendants with regard to the policy, and therefore none with regard to any money received under the policy. James, L. J. — I am unable to concur in affirming the judg- ment of the Master of the Rolls. According to my view of the case, the plaintiff's contention is founded not only on what I may call the natural equity which commends itself to the gen- eral sense of the lay world not instructed in legal principles, but also on artificial equity as it is understood and administered in our system of jurisprudence. I am of opinion that the relation between the parties was truly and strictly that of trustee and cestui que trust. I agree that it is not accurate to call the relation between the vendor and purchaser of an estate under a contract while the contract is in fieri the relation of trustee and cestui que trust. But that is because it is uncertain whether the contract will or will not be performed, and the character in which the parties stand to one another remains in suspense as long as the contract is m fi^ri. But when the contract is performed by actual convey- ance, or performed in everything but the mere formal act of 280 Insurance: Fire, Life, Marine. c. n. sealing the engrossed deeds, then that completion relates back to the contract, and it is thereby ascertained that the relation was throughout that of trustee and cestui que trust. That is to say, it is ascertained that while the legal estate was in the vendor the beneficial or equitable interest was wholly in the purchaser. And that, in my opinion, is the correct definition of a trust estate. Wherever that state of things occurs, whether by act of the parties or by act or operation of law, whether it is ascertained from the first or after a period of suspense and un- certainty, then there is a complete and perfect trust, the legal owner is, and has been a trustee, and the beneficial owner is, and has been a cestui que trust. This being the relation between the parties, I hold it to be an universal rule of equity that any right which is vested in a trustee — any benefit which accrues to a trustee, from whatever source or under whatever circumstances, by reason of his legal ownership of the property — that right and that benefit he takes as trustee for the beneficial owner. If the policy of insurance in this case were a collateral contract, such as the policy which a creditor effects on the life of his debtor, the case would be wholly different. But the policy of fire insurance is not, in ray opinion, a collateral contract, it is not a wagering contract, a contract that if a fire happens then a certain sura of money shall be paid to the insurer ; it is in terms and in effect a con- tract that, if the property is injured then the insurance company will make good the actual damage sustained by the property. That damage, and that damage only, gives the right and is the measure of the right, and it seems to me impossible to say that it is not by reason of the legal ownership, and in respect solely of the injury done to that legal ownership, that the right to recover from the insurance company accrued to the insured. If the fire in this case had happened through the wrongful or negligent act of a third person while the contract was in fieri the legal right to sue for the damage would be in the vendor ; but on the completion of the contract the purchaser would be entitled to use the name of the vendor as his trustee to sue for the damage so sustained, or, if the damages had actually been recovered in the interval, to recover the damages from the vendor. And it appears to me that there is no distinction in principle between this right and the right to use the vendor's 0. II. Raynek v. Preston. 281 name in an action on the contract of indemnity against loss by fire wliich the poHcy of insurance is. It is not, in my view of the case, at all material to consider what would be the case if after actual conveyance and during the currency of the policy a fire had occurred. The vendoi' in that case would have no right as between him and the insurance office, and the pur chaser would have no right of action, because one of the conditions of the policy excludes it, and, independently of that condition, the policy would, or might probably be held not to run with the land in the hands of the subsequent owner, and in that case there would not be that which is the foundation of the right — legal ownership and right in one person, and equitable ownership in another. No doubt it is a mere accident that there was such a policy, and there was such a right. The vendee could not have complained if there had been no insurance. But that has occurred in a great variety of cases in which equitable rights have arisen. Where there is a creditor, a debtor, and a surety, and the surety finds out that by something to which he was not privy, and of which he had never heard, somebody else had become surety, or the creditor had obtained security, the surety has a right to obtain contribution from such surety, or to obtain such security as the case may be, and the creditor releasing such surety or parting with such security would probably find himself in considerable peril. In the same city in which this controversy has arisen there occurred, some years ago, a great destruction of property by reason of an explosion of gunpowder, caused by a fire. Houses were damaged, not by fire, but by the explosion caused by a fire in another neighboring place. The insurance offices thought that it was for their interest to be very liberal, and treat the dam- age from the explosion as a damage by fire within the policies, and to pay accordingly. This was a mere act of liberality. They thought it was for their permanent benefit commercially to be liberal, and they were liberal accordingly. See Taunton V. Royal Insurance Company, 2 H. & M. 135. I cannot my- self doubt, that if a trustee, or a vendor who had become trustee by the completion of his contract, had received this bounty, he would have received it by reason of his trusteeship, and would have had to give it up to his cestui que trust or purchaser. 282 Insurance : Fire, Life, Marine. o. ii. Brett, L. J. — I should like to add to what I have said, that I feel very great doubt whether, as between the defend- ants and the insurance company, the defendants can keep the moneys. In the Court of Appeal, 1883. CASTELLAIN v. PRESTON. (L. R,, 11 Q. B. D. 380.) Th» Doctrine of Subrogation as Related to Indemniijf. Appeal of the plaintiff from the judgment of Chitty, J., in favor of the defendants. The plaintiff sued on behalf of the Liverpool and London and Globe Insurance Company, to recover a sum, £330 with interest since the 25th of September, 1878. On the 25th of March, 1878, the defendants, as owners of certain lands and buildings in Liverpool, effected an insurance on the buildings against loss by fire, and they kept the policy on foot by pay- ment of the premiums until after the fire hereinafter men- tioned occurred. The policy was in the usual form, giving the insurers the option of reinstating the property. On the 31st of July, 1878, the defendants contracted to sell the land and the buildings to their tenants, Messrs. Rayner, for the sum of £8,100, and they received a deposit. The contract provided that the time of the completion should be such day within two years from the date as the vendors should name. On the 15th of August in the same year, a fire occurred, damaging part of the buildings. A claim was made on behalf of the defendants, and after negotiation as to the sum to be paid, the amount of the claim was ultimately fixed at £330, and that sum was in fact paid on the 25th of September, 1878, by the insurers, who were at that time ignorant of the exist- ence of the contract for sale. On the 25th of March, 1879, the defendants named the 5th of May as the day of completion, and on the following 12th of December the conveyance was executed and the balance of the purchase money paid. Brett, L. J. — In this case the action is brought by the plaintiff as representing an insurance company against the defendants, in respect of money which has been paid by that 0. 11. Castellain v. Prkston. 283 company to the defendants on account of the loss by fire of a building. Tlio defendants were the owners of property con- sisting partly, at all events, of a house, and the defendants had made a contract of sale of that property with third persons, which contract, upon tiio giving of a certain notice as to the time of payment, would oblige those third persons, if they ful- filled the contract, to pay the agreed price for the sale of that property, a part of which was a house, and according to the peculiarity of such a sale and purchase of land or real property the vendees would have to pay the purchase money, whether the house was, before the date of payment, burnt down or not. After the contract was made with the third persons, and be- fore the day of payment, the house was burnt down. The vendors, the defendants, having insured the house in the ordi- nary form with the plaintiff's company, it is not suggested that, upon the house being burnt down, the defendants had not an insurable interest. They had an insurable interest, as it seems to me ; first, because they were at all events the legal owners of the property ; and, secondly, because the vendees or third persons might not carry out the contract, and if for any reason they should never carry out the contract, then the vend- ors, if the house was burnt down, would suffer the loss. Upon the happening of the fire the defendants made a claim on the insurance company represented by the plaintiff, and were paid a certain sum which represented the damage done to the house. After that, the contract of sale between the defendants and the third persons, the vendees of the property, was carried out, and the full amount of the purchase-money was paid by the third persons to the defendants notwithstanding the fire. Under those circumstances, the plaintiff representing the insur- ance company brings this action ; I do not say that he brings it to recover back the money which has been paid by the insur- ance company (for that expression of opinion would rather in- terfere with the form of the action), but he brings the action in respect of that money. The question is whether this action is maintainable. The case was tried before Chitty, J., and he in a very careful and elaborate judgment (8 Q. B. D. 613) has come to the conclu- sion that the insurance company cannot recover against the defendants in respect of the money paid by them. It seems to 284 Insurance : Fire, Life, Marine. o. n me tliat tlie foundation of his judgment is this, that he con- siders that the ctrino of subrogation of the insurer into the position of the assured is confined within Hmits which prevent it from extending to the present case. I must now consider whether I can agree with him. In order to give my opinion upon this case, I feel obliged to revert to the very foundation of every rule which has been promulgated and acted on by the courts with regard to insur- ance law. The very foundation, in my opinion, of every rule which has been applied to insurance law is this ; namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the funda- mental principle of insurance; and if ever a proposition is brought forward which is at variance with it — that is to say, which either will prevent the assured from obtaining a full indemnity, or which will give to the assured more than a full indemnity — that proposition must certainly be wrong. In the course of this discussion many propositions and rules well known in insurance law have been glanced at. For instance, to speak of marine insurance, the doctrine of a con- structive total loss originated solely to carry out the funda- mental rule which I have mentioned. It was a doctrine intro- duced for the benefit of the assured ; for, as a matter of business, a constructive total loss is equivalent to an actual total loss; and if a constructive total loss could not be treated as an actual total loss, the assured would not recover a full indemnity. But grafted upon the doctrine of constructive total loss came the doctrine of abandonment, which is a doc- trine in favor of the insurer or underwriter, in order that the assured may not recover more than a full indemnity. The doctrine of constructive total loss, and the doctrine of notice of abandonment ingrafted upon it, were invented or promulgated for the purpose of making a policy of marine insurance a con- tract of indemnity in the fullest sense of the term. I may point out that the doctrine of notice of abandonment is most difficult to justify upon principle; it was introduced rather ass a matter of justice in favor of the underwriters, so as to a II. Castkllain v. Preston. 285 prevent the assured from obtaining by fraud more than a full indemnity. That doctrine is to a certain extent technical; that is to say, although the assured has in reality suffered a constructive total loss, and although he is upon general princi- ples entitled to recover, nevertheless he must fail unless he has given a notice of abandonment. I suppose that the doctrine of notice of abandonment was originally introduced by mer- chants and underwriters, and afterwards adopted as part of the law as to marine insurance ; but at first sight it seems a mere encroachment of the judges. I have mentioned the doctrine of notice of abandonment for the purpose of coming to the doctrine of subrogation. That doctrine does not arise upon any of the terms of the contract of insurance ; it is only another proposition which has been adopted for the purpose of carrying out the fundamental rule which I have mentioned, and it is a doctrine in favor of the underwriters or insurers, in order to prevent the assured from recovering more than a full indemnity ; it has been adopted solely for that reason. It is not, to my mind, a doctrine applied to insurance law on the ground that under- writers are sureties. Underwriters are not always sureties. They have rights which sometimes are similar to the rights of sureties, but that again is in order to prevent the assured from recovering from them more than a full indemnity. But it being admitted that the doctrine of subrogation is to be applied merely for the purpose of preventing the assured from obtain- ing more than a full indemnity, the question is, whether that doctrine as applied in insurance law can be in any way limited. Is it to be limited to this, that the underwriter is subrogated into the place of the assured so far as to enable the underwriter to enforce a contract, or to enforce a right of action ? Why is it to be limited to that, if when it is limited to that, it will in certain cases enable the assured to recover more than a full indemnity ? The moment it can be shown that such a limita- tion of the doctrine would have that effect, then, as I said before, in my opinion, it is contrary to the foundation of the law as to insurance, and must be wrong. And, with the greatest deference to ray brother Chitty, it seems to me that that is the fault of his judgment. He has by his judgment limited this doctrine of subrogation to placing the insurer in Insurance: Fiue, Life, Marine. o. n. the position of the assured only for the purpose of enforcing a right of action, to which the assured may be entitled. In order to apply the doctrine of subrogation, it seems to rae that the full and absolute meaning of the word must be used, that is to say, the insurer must be placed in the position of the assured. Now it seems to me that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried to the extent which I am now about to en- deavor to express, namely, that as between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable, which can be or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured, by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be or has been diminished. That seems to me to put this doctrine of subrogation in the largest possible form, and if in that form, large as it is, it is short of fulfilling that which is the funda- mental condition, I must have omitted to state something which ought to have been stated. But it will be observed that I use the words " of every right of the assured." I think that the rule does require that limit. In Burnand v. Rodocanochi, 7 App. Cas. 333, the foundation of the judgment to my mind was, that what was paid by the United States Government could not be considered as salvage, but must be deemed to have been only a gift. It was only a gift to which the assured had no right at any time until it was placed in their hands. I am aware that with regard to the case of reprisals, or that which a person whose vessel has been captured got from the English Government by way of reprisal, the sum received has been stated to be, and perhaps in one sense was, a gift of his own Government to himself, but it was always deemed to be capable of being brought within the range of the law as to insurance, because the English Government invariably made the " gift," so invariably that as a matter of business it had come to be considered as a matter of right. This enlargement, or this explanation, of what I consider to be the real meaning of the o. n. Castellain v. Preston. 987 doctrine of subrogation, siiows that in iiiy opinion it goes much further than a mere transfer of those rights which may at any time give a cause of action either in contract or in tort, because if upon the happening of the loss there is a contract between the assured and a third person, and if that contract is immediately fulfilled by the third person, then there is no right of action of any kind into which the insurer can be subrogated. The right of action is gone ; the contract is fulfilled. In like manner, if upon the happening of a tort the tort is immediately made good by the tort feasor, then the right of action is gone ; there is no right of action existing into which the insurer can be sub- rogated. It will be said that there did for a moment exist a right of action in favor of the assured, into which the insurer could have been subrogated. But he cannot be subrogated into a right of action until he has paid the sum insured and made good the loss. Therefore innumerable cases would be taken out of the doctrine, if it were to be confined to existing rights of action. And I go further and hold that if a right of action in the assured has been satisfied, and the loss has been thereby diminished, then, although there never was nor could be any right of action into which the insurer could be sub rogated, it would be contrary to the doctrine of subrogation to say that the loss is not to be diminished as between the assured and the insurer by reason of the satisfaction of that right. I fail to see at present, if the present defendants would have had a right of action at any time against the purchasers, upon which they could enforce a contract of sale of their property whether the building was standing or not, why the insurance company should not have been subrogated into that right of action. But I am not prepared to say that they could be, more particularly as I understand my learned brother, who knows much more of the law as to specific performance than I do, is at all events not satisfied that they could. I pass by the question without solving it, because there was a right in tlie defendants to have the contract of sale fulfilled by the purchasers notwithstanding the loss, and it was fulfilled. The assured have had the ad- vantage, therefore, of that right ; and by that right, not by a gift which the purchasers could have declined to make, the assured have recovered, notwithstanding the loss, from the purchasers, the very sum of money which they were to obtain •^SS Insuranck : > ire, Life, Marine. o. n. whether this building was burnt or not. In that sense I can- not conceive that a right, by virtue of which the assured has his loss diminished, is not a right which, as has been said, affects the loss. This right, which was at one time merely in contract, but which was afterwards fulfilled, either when it was in contract only, or after it was fulfilled, does affect the loss ; that is to say, it affects the loss by enabling the assured, the vendors, to get the same money which they would have got if the loss had not happened. While I am applying the doctrine of subrogation which I have endeavored to enunciate, I think it due to Chitty, J., to point out what passages in his judgment require some modifica- tion. I find him reading this passage: "I know no founda- tion for the right of underwriters, except the well-known prin- ciple of law, that where one person has agreed to indemnify another, he will, on making good the indemnity, be entitled to succeed to all the ways and means by which the person indem- nified might have protected himself against or reimbursed him- self for the loss." That is a quotation from Lord Cairns, in Simpson v. Thomson, 3 App. Cas. 284. The learned judge then goes on: "What is the principle of subrogation? On payment the insurers are entitled to enforce all the remedies, whether in contract or in tort, which the insured has against third parties, whereby the insured can compel such third parties to make good the loss insured against." That is, as it seems to me, to confine this doctrine of subrogation to the principle that the insurers are entitled to enforce all remedies, whether in con- tract or in tort. I should venture to add this : "And if the as- sured enforces or receives the advantage of such remedies, the insurers are entitled to receive from the assured the advantage of such remedies." Then, when we come to this illustration, " Where the landlord insures, and he has a covenant by the ten- ant to repair, the insurance office, on payment in like manner, succeeds to the right of the landlord against his tenant ; " 1 would add this : "And if the tenant does repair, the insurer has the right to receive from the assured a benefit equivalent to the benefit which the assured has received from such repair." Then, dealing with the case of Burnand v. Rodocanochi, 7 App. Cas. 333, the learned judge cites the opinion of Bramwell, L. J. He says that Bramwell, L. J.. \k '?'s judgment held that o. II. Castellain v. Preston. 289 it was not salvage, but " that in the circumstances the sum re- ceived by the shi})-o\vn(n' was but a pure gift, and there was no right on the part of the insurers to recover any part of it over against him." I, for myself, venture to add this as the reason : "Because there was no right in the assured to demand the compensation from the American Government." There was no right to demand it; it was bestowed and received as a pure gift. Darrell v. Tihhltts, 5 Q. B. D. 560, seems to me to be entirely in favor of the plaintiff in *this case. I shall not retract from the very terms which I used in that case. It seems to me that in Darrell v. Tibhitts the insurers were not subrogated to a right of action, or to a remedy. They were not subrogated to a right to enforce the remedy, but what the}' were subrogated into was the right to receive the advan- tage of the remedy which had been applied, whether it had been enforced, or voluntarily administered by the person who was bound to administer it. That seems to me to be the doctrine. Then with regard to the passage : " The doctrine is well established that where something is insured against loss, either in a marine or a fire policy, after the assured has been paid by the insurers for the loss, the insurers are put into the place of the assured with regard to every right given to him by the law respecting the subject-matter insured," I wish to explain that that was a distinct clause, and it was so intended by me when I stated it. I then mentioned contracts : " And with regard to every contract which touches the subject- matter insured, and which contract is affected by the loss or the safety of the subject-matter insured by reason of the peril insured against." I fail to conceive any contract which gives a right over the thing insured, which is not affected by the loss or safety of it, and if it is necessary to bring the present case within those terms, it seems to me that the contract of purchase and sale was affected by that loss. I will not go further with the judgment of Chitty, J., except to say this, that at the end my learned brother has put it thus, that " the only principle applicable is that of subrogation as understood in the full sense of that term." There I agree with him, only my view of the full sense is larger than that which he adopted. "And that where the right claimed is under a contract between the insured and 19 290 Insurance: Fire, Life, Marine. o. ii. third parties, it must be confined to tlie case of a contract relating to the subject-matter of the insurance, which entitled the insurers to have the damages made good." I think it would be better expressed in this way : " Which entitles the assured to be put by such third parties into as good a position as if the damage insured against had not happened." If it is put in that sense, it seems to me to be consistent with the prop- osition which I laid down at the beginning of what I have said, and to cover this case. I will repeat it : " Which entitles the assured to be put by such third parties into as good a posi- tion as if the damage insured against had not happened." The contract in the present case, as it seems to me, does enable the assured to be put by the third party into as good a position as if the fire had not happened, and that result arises from this contract alone. Therefore, according to the true principles of insurance law, and in order to carry out the fundamental doctrine, namely, that the assured can recover a full indemnity, but shall never recover more, except, perhaps, in the case of the suing and laboring clause under certain circum- stances, it is necessary that the plaintiff in this case should suc- ceed. The case of Darrell v. Tibhitts, 5 Q. B. D. 560, has cut away every technicality which would prevent a sound decision. The doctrine of subrogation must be carried out to the full extent, and carried out in this case by enabling the plaintiff to recover. Cotton, L. J. — In this case the appellant's company in- sured a house belonging to the defendants, and before there was any loss by fire the defendants sold the house to certain purchasers. Afterwards there was a fire, and an agreed sum was paid by the insurance office to the defendants in respect to the loss. The appellant apparently seeks to recover the sum which the office paid to the defendants, and if the plain- tiff's claim could be shaped only in this form, I think my opinion would be against him. The plaintiff's claim may be treated in substance in another way ; namely, the company seek to obtain the benefit, either wholly or partly, of the amount paid by them out of the purchase money which the defendants have received since the fire from the purchasers. In my opin- ion, the plaintiff is right in that contention. I think that the o. 11. Castellain v. Preston. 291 question turns on the consideration of what a policy of insur- ance against fire is, and on that the right of the plaintiff de- pends. The pohcy is really a contract to indemnify the person insured for the loss which he has sustained in consequence of the peril insured against, which has happened, and from that it follows, of course, that as it is only a contract of indemnity, it is only to pay that loss which the assured may have sustained by reason of the fire which has occurred. In order to ascer- tain what that loss is, everj^thing must be taken into account which is received by and comes to the hand of the assured, and which diminishes that loss. It is only the amount of the loss, when it is considered as a contract of indemnity, which is to be paid after taking into account and estimating those benefits or sums of money which the assured may have received in dimi- nution of the loss. If the proposition is stated in that manner it is clear that the office would be entitled to the benefit of anything received by the assured before the time when the policy is paid, and it is established by the case of Darrell v. Tibhitts, 5 Q. B. D. 560, that the insurance company is entitled to that benefit, whether or not before they pay the money they insist upon a calculation being made of what can be recovered in diminution of the loss by the assured ; if they do not insist upon that calculation being made, and if it afterwards turns out that in consequence of something which ought to have been taken into account in estimating the loss, a sum of money, or even a benefit, not being a sum of money, is received, then the office, notwithstanding the payment made, is entitled to say that the assured is to hold that for its benefit, and although it was not taken into account in ascertaining the sum which was paid, yet when it has been received it must be brought into account, and if it is not a sum of money, but a benefit that has been received, its value must be estimated in money. Now Lord Blackburn, in the case of Burnand v. Rodocanochi., 7 App. Cas. 339, states the principle in these words : " The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy or a policy against fire on land, or any other contract of indemnity), and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay ; and if the indemnifier has already 292 Insurance : Fire, Life, Marine. o. it. paid it, then if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back." In Darrell v. Tibhiits, to which I have already referred, the ques- tion which we had to consider v/as whether the insurance office was entitled to the benefit produced in consequence of a cove- nant to repair if the building should be damaged by an explosion of gas. In ray opinion it was not intended in any way to limit the right of the insurer, as an insurer, to cases where the con- tract in respect of which benefit had been received related to the same loss or damage as that against which the contract of indemnity was created by the policy. That was what was before this court in that case, and undoubtedly expressions do occur as to a contract relating to the loss or affecting the loss; but the principle was not limited to contracts. The principle which I have enunciated goes further, and if there is a money or any other benefit received which ought to be taken into account in diminishing the loss or in ascertaining what the real loss is against which the contract of indemnity is given, the indemnifier ought to be allowed to take advantage of it in order to calculate what the real loss is, even although the bene- fiit is not a contract or right of suit which arises and has its birth from the accident insured against. Of course, the difficulty is to consider what ous^ht to be taken into account in estimat- ing that loss against which the insurer has agreed to indemnify, and we have been pressed in argument with many difficulties. One which possibly was put to us most strongly, was that the contract of -sale has nothing to do with destruction by fire, and if any part of the purchase mone)^ is to be taken into account, why is a gift not to be taken into account ? That may be said to diminish the loss as well as a contract of sale. The answer is that when a gift is made afterwards in order to diminish the loss, it is bestowed in such terras as to show an intention to benefit the assured, and to give the insurer the benefit of that would be to divert the gift from its intended object to a differ- ent person. That really was what was decided in Burnand v. Rodocanochi. There the monev bestowed, not as a matter of right, but as a gift, was intended to benefit the assured beyond the amount which they had got in consequence of 0. II. Castellain v. Preston. 293 any insurance. There is another ground which may possibly exclude gifts. It may be that the right of the insurer to have a sum brought into account in diminution of the loss, against which he has given a contract of indemnity, is confined to that which is a right or other incident belonging to the person in- sured, as an incident of the property at the time when the loss takes place. This definition would not include a sum subse- quently bestowed on the assured by way of gift, for it can in no way be said to have been appertaining to him as owner of the property at the time when the loss took place. But, in the present case, what we have to consider is whether the contract of sale is not an incident of the property, belonging to the owners at the time of the loss in such a way that it ought to be brought into account in estimating the loss, against which the insurer has undertaken to indemnify. What was the position of the parties ? The defendants' house was insured, and there was a loss from fire, the damage caused by the fire being estimated by the parties at £330. Ultimately, the prop- erty having been already agreed to be sold at a fixed price, the assured received the whole amount of that price. Now they did that in respect of a contract relating to the subject insured, the house ; and, to my mind, if they received the whole amount of the price which they previously had fixed as the value of the house, that must of necessity be brought into account when it was received, for the purpose of ascertaining what was the ultimate loss against which they had concluded a contract of indemnity with the insurance office. Here the purchasers have paid the money in full, and as the property was valued between the vendors and the purchasers at £3,100, the vendors got that sum in respect of that which had been burned, but which had not been burned at the time when the contract was entered into. They had fixed that to be the value, and then any money which they get from the purchasers, and which together with £330, the sum paid by the office, exceeds the value of the property as fixed by them under the contract to sell, must diminish, and in fact entirely extinguishes the loss occasioned U) the vendors of the property by the fire. Therefore, though it cannot, to my mind, be said that the insurers are entitled, because the purchase is completed, to get back the money which they have paid, yet they are entitled to 294 Insurance : Fire, Life, Marine. o. n. take into account the money subsequently received under a contract for the sale of the property existing at the time of the loss, in order to see what the ultimate loss was against which they gave their contract of indemnity. On the principle of DarreJl v. Tihhetts, when the benefit afterwards accrued by the completion of the purchase, the insurance company were entitled to demand that the money paid by them should be brought into account. Therefore the conclusion at which I have arrived is, that if the purchase money has been paid in full, the insurance office will get back that which they have paid, on the ground that the subsequent payment of the price which had been before agreed upon, and the contract for pay- ment of which was existing at the time, must be brought into account by the assured, because it diminishes the loss against which the insurance office merely undertook to indemnity them. In my opinion, therefore, the decision below was erroneous. I think Chitty, J., based it upon this, that in this case there was no right of subrogation, no contract which the office could have insisted upon enforcing for their benefit. I think it im- material to decide that question, because the vendors have exercised their right to insist upon the completion of the purchase.* Judgment reversed. ' Here follows a long opinion by Bowen, L. J. It is not probable that the doctrine of this ease will prevail in the United Stfttes. Compare Nelson v. Bound Brook Mut. Fire Ins. Co., 43 N. J. Eq. 256. King v. State Mut. Fire Ins. Co., 7 Cush. 1. International Trust Co. v. Boardman. 149 Mass. 161. Insurance Co. v. Updegraff, 21 Pa. St. 5l3. Clinton v. Hope Ins. Co., 45 N. Y. 454. Smith v. Glens Failcs Iub. Co., 6iB N. Y. 85. See supra §§ 32, 158. CHAPTER III. GENERAL PRINCIPLES. CkmmiTrmiation and Construction of the Contraot. Supreme Court op Judicature, 1889. THOMPSOJNT V. ADAMS. (L. R., 23 Q. B. D. 361.) A valid agreement to insure may be closed either by parol or by a binding slip. Mathew, J. — This was an action brought to recover the 5um of £100, which it was alleged by the plaintiffs the defend- ant had agreed to cover by an insurance against fire upon the goods of the plaintiffs in premises of theirs in New Zealand, The action was resisted on the ground that there had been no contract of insurance, or in the alternative, if there had been a contract of insurance, that it was subject to conditions which had not been fulfilled, and, therefore, that tiie underwriters were not liable. The plaintiffs are merchants carrying on business in New Zealand, and they were represented in this country by a firm of Geard & Sons, who acted for them under a power of attor- ney. They instructed Geard & Sons to effect insurances upon goods on 'their premises in New Zealand ; and Messrs. Geard & Sons, for that purpose, about the month of October, 1886, placed themselves in communication with a firm of insurance brokers of high standing, Messrs. Collins & Co., who undertook to endeavor to effect insurances to the amount of X20,000. Now, insurances had been effected in the same way previously, and amongst the insurances previously effected were some at Lloyd's. It appears, within the last four or five years the underwriters at Lloyd's have undertaken, in addition to their ordinary business, the business of insurances against risks 296 Insurance : Fijuo, Life, Marine. o. hi. on land — against fire risks— and insurances had for this period been effected at Lloyd's by Messrs. Thompson ; and Mr. Adams, the present defendant, it appeared, had taken a line on some of the previous policies. Messrs. Collins & Co., not being members of Lloyd's, had placed themselves in com- munication with Mr. Bray, an insurance broker, who was entitled to effect insurances at Lloyd's ; and Mr. Bray, in ac- cordance with the usual course of business, prepared a slip con- taining the particulars of the proposed insurances, and showing the risk in the same way as if it were a marine risk to the underwriters at Lloyd's. Amongst others the risk was shown to the defendant, who initialed the slip on behalf of others whom he represented for £300, of which £100 represented the amount of his insurance. In the ordinary course with reference to risks of this de- scription, as well as with reference to maritime risks, the slip is followed by a policy of insurance. In the particular case the slip was initialed in October, 1886. The policy ought to have been put forward through the broker and signed by the under- writers ; but, strange to say, no policy was tendered for signa- ture down to the end of the month of February following. On February 28th news reached this country that the premises of the plaintiffs had been burnt down on the previous day, and a quantity of their goods destroyed. Up to this time, as no policy had been issued, no premiums had been paid, but upon March 1st the premiums upon all the insurances were paid by the plaintiffs to Messrs. Collins & Co. The defendant, how- ever, with other underwriters, refused to accept the premium, or to sign a policy, or to pay the amount for which the slip had been initialed. Upon that the claim was put forward against the defendant upon the slip, and it was asserted by the plaintiffs that the slip was a sufficient insurance under the cir- cumstances, and that the fact that no policy had subsequently been signed was immaterial. The defendant set up as a defense the absence of the policy, and declined to pay. Under those circumstances it was that the action was brought against him. Now several lines of defence were adopted by the defend- ant before me, and were argued with great ability on his behalf. In the first place it was said there was no policy of insurance. In the second place it was said, as I have o. in. Thompson v. Adams. 297 already mentioned, that if there were any contract of insur- ance, it was a contract subject to the condition that a policy should be subsequently issued. Thirdly, it was said that in the particular case the conduct of the phiintiffs and their agents showed that they had abandoned the insurance, and elected not to complete it by a policy, and, therefore, that the defend- ant was not liable. It was said that it was a breach of good faith on the part of the plaintiffs to put forward a poHcy which never would have been put forward if the fire bad not occurred. It was said that this alleged contract was only to be gath- ered from the slip initialed by the underwriters, but that the slip was no contract ; that it was only an honorary undertak ing on the part of the underwriters to make a contract sub sequentlv, and that being so, the underwriters chose in the present case not to be bound by it. It was alleged that it was right and fair, under the circumstances, that they should not be bound by it, and that, therefore, there was an end of the matter. I had evidence laid before me with reference to this curious point, for it strikes one at first glance that it was cer- tainly a most extraordinary course of business that the under- writers were setting up. They were suggesting that it should be taken that this slip was procured, not for the purpose of securing protection to the assured, but of getting a piece of paper with some writing upon it, which had no meaning what- ever in point of law. That did not seem very likely. One knows how important it is that there should be a prompt insur- ance in respect of goods against fire risks. Considering how great the risk is to an individual, and how small a premium he has to pay, the great object is to get himself insured against damage by fire, and according to this theory no man could effect a prompt insurance at Lloyd's against damage by fire. There must be an interval between the slip and the subsequent policy, and that interval would leave the underwriter free, if he thought proper not to accept the risk. Approaching the consideration of the evidence by the light of common sense, I was prepared for the result. The plaintiff's witnesses all said * that the slip was a contract, and regarded as a binding legal contract to effect a subsequent insurance. There is no statu- tory difficulty in the way, and no reason why the shp should 298 Insurance : Fire, Life, Marine. o. hi. not be a binding contract, and there is every reason for supposing that such would be the intention of the person presenting the slip to be initialed in respect of the risk. On the other hand, there was the evidence of the underwriters, and the underwriters sought to set up a custom to treat these slips as honorary undei*takings only. It has become manifest that they could not rely upon a single fact to prove the existence of the alleged custom, and that they were only treating me with what a judge has so often to hear, an opinion — -a strong opinion — of the witnesses on the one side as to the merits of the case, and of what the result of the liti- gation ought to be. All these gentlemen thought it was very wrong under the circumstances of this case that this slip should be an}^ thing more than an undertaking, out of which the underwriter could get if he thought fit. Some light was thrown upon the value of their opinion by the evidence of one of the principal witnesses, who said : " I regard this slip against fire risks in the same way as a slip against marine risks, and a slip against marine risks is onl}^ an undertaking in honor, because the statute forbids that it should be more, and I con- sider the statute applies to an insurance against fire, and there- fore it is to be treated exactly as the same thing, and that is the custom at Lloyd's." Unfortunately, the reasoning broke down, because the statute does not apply, and there is no reason why a contract should not be entered into by the slip ; there is every reason, indeed, to suppose that the parties would intend it to be a contract, and upon that point I am against the defendant. I think there was a binding contract to insure, and that the contract contained in the slip is not one from which the underwriter could escape on the ground that it was only optional whether or not he should go on with the con- tract, and perfect it by a policy of insurance. Then there was an alternative point, and it was that to which Mr. Barnes bent all his energy ; he said, assuming that this slip is to be treated as a protecting note, like that which is ordinarily issued by an insurance company (for insurance com- panies recognize the necessity for prompt insurance, and before the policy is issued they will issue a protecting note which will have all the effect of a policy until the document has been pre- pared), still there ought to be read into this slip an implied con- 0. III. Thompson v. Adams. 299 dition. An implied condition isacondition to be proved by cir- cumstantial evidence, not by any tiling tliat passes in a particular case in terms between the plaintiff and the defendant, but a con- tract to be inserted because the conduct of the parties shows it is the basis of the whole arrangement. The proviso, said Mr. Barnes, that I ask to read in is this : the contract contained in the slip is to be upon the condition, that within a reasonable time the policy is put forw^ard for signature, and if it be not put foi- ward within a reasonable time the insurance is to be at an end. That was the proviso that I was asked to insert, as it were, in this slip ; and really the sole ground upon which that argument rested appeared to me to be that there is an interval ordinarily between the date of the slip and the time when the policy is sent. The course of business is, that, after the slip has been completely initialed, the policy should be prepared by the broker (Mr. Bray in this case), and submitted to the different underwriters ; and when they have signed the policy, as a mat- ter of business, the amount of the premium appears for the first time in the accounts, and the contract is supposed to be complete in all formal particulars. Now, that is inevitable. That delay between the slip and the policy it is impossible to avoid. In the first place, it is not because a particular under- writer initials a slip, that the matter is completed at Lloyd's, or completed anywhere else. The broker has to go round and get all the risk covered ; but, further, he has to obtain in many oases precise information as to the nature of the risk — what is called technically the wording — and when the property insured is property abroad, the interval would be longer, necessarily, than if it were at home. On this point again I had a great body of evidence laid before me on each side. The plaintiff's witnesses said the delay is nothing ; the matter is complete when the slip is initialed. That is the business view of the affair. The underwriters are none the worse off for any delay : they very often do not trouble themselves very much as to the time the policy comes forward ; and in support of that view the plaintiffs produced a number of slips, some initialed by the defendant himself, in which it appeared there had been a long interval, of weeks and months in some instances, between the date of the slip and the date of the policy. On the other hand, witnesses were called for the defendant, who said that the 300 Insurance : Fire, Life, Marine! o. hi. understanding was that tlje policy was to be put forward promptly, and if it was not put forward the transaction ought to be regarded as being at an end. But, again, no single in- stance could be adduced by any of those witnesses to throw hght on a supposed course of business, and I am satisfied that the defendant's contention upon this point is wrong. See what the consequences would be of adopting their view. If such a clause was to be written into the policy, there must necessarily be an interval of time between initialing the slip and the com- pletion of the policy, during which preparations would be made for laying the policy before the underwriters for their signa- ture. "What is the position of the underwriter meanwhile? Clearly he is on the risk. Then, according to the argument, if the policy be put forward within a reasonable time he is bound to sign it, legally bound to sign it. Then, in the interval, he is upon the risk ; but, according to the defendant's argument, this proviso would enable the assured, at the expiration of a reasonable time, to be off. Having kept the underwriter on the risk, and the interval being so ended, he could say ; I avail myself of that proviso, which is to be treated as part of the slip, and I get rid of my liability to pay the premium. When the defendant's witnesses were examined, they were compelled to prove a course of conduct which was totally in- consistent with such a state of things, because it was proved, that, when there was delay, repeated demands were made by the underwriters themselves as to the reason for the delay. There was one answer of the defendant which really put him out of court on this matter. He was asked : " Now, if no fire had occurred in this case, and the premium had been tendered to you in the month of February, would you have taken it ? " " Yes," he said, " I should have regarded the tender of the premium as an indication of good faith, and I should have signed the policy." That seems to me to make an end of that point which had been made by the defendant. From the evidence, I find, as a fact, that there is necessarily an interval between the slip and the policy in all these cases ; and I am satisfied that it would be most unreasonable to read such an implied contract into the slip. There must be judgment for the plaintiffs upon the issues tried before me. r j ^ ^ vj. i ■ *-^ Judgment for the plamtijjs. c. III. LiPMAN V. Niagara Fikk Ins. Co. 301 New York Court of Appeals, 1890. LIPMAN V. NIAGARA FIRE INS. CO. '-' (121 N. Y. 454.) The contract, whether closed by parol or binding slip, ia subject to the terms oj the usual policy. Appeal from judgment of the General Term of the Su- preme Court entered upon an order which aifirmed a judg- ment in favor of plaintiff entered upon a verdict. This was an action upon an agreement of insurance evi- denced by what is termed by insurance men a " binding slip," which was in these words : " Pell, Wallack & Co., Insurances, 55 Liberty Street, New York, September 2, 1885. " The undersigned do insure for account of Shaped Seam- less Stocking Co. amounts as specified below at 1^ for 12 months from September 2, 1885, on machinery and stock, building No. 3 (as per form, building situate Randall's Island, N. Y.). This receipt binding until policy is delivered at the office of Pell, Wallack & Co. Company. Amount. Accepted by. Niagara $2,500 Pollock." Andrews, J. — The binding slip signed by the defendant was not a mere agreement to insure, but was a present insurance to the amount specified therein. The instrument is informal. It states on whose account the insurance is made, the property covered, the amount insured, the term of insurance, and the date. But it does not specify the risk insui'ed against, nor does it contain any conditions such as are usually found in insurance policies. The evident design of the writing, as disclosed by the testimony, was to provide temporary insurance pending an inquiry by the company as to the character of the risk, or, if that was known, during any delay in issuing the policy. The secretary of the defendant signed the binding slip upon the solicitation of Pell, Wallack & Co., insurance brokers of the plaintiff, in the after- noon of September 2, 1885. The officers of the defendant, hav- ing made inquiry as to the risk, notified the plaintiff's brokers before one o'clock of the afternoon of Sej)tember 3, that the 302 Insurance : Fire, Life, Marine. o. hi. defendant declined it. The property described in the binding slip was destroyed by fire in the afternoon of September 3, the fire having commenced about three o'clock. The claim on the one side is that the binding slip was a complete and perfect contract, binding the defendant, according to its language, " until policy is delivered at the oflBce of Pell, Wallack & Co.," and not terminable, therefore, by notice prior to that time, or, if so terminable, then only upon reasonable notice, which, as is claimed, was not given, nor in any event upon notice to the plaintiff's brokers, they not being agents of the plaintiff for the purpose of receiving such notice. It is insisted on the other side that the contract evidenced by the binding slip was a contract subject to the conditions contained in the ordinary policy in use by the company, one of which contained the following clause : " This insurance may be determined at any time by request of the assured, or by the company on giving notice to that effect to the assured, or to the person who may have procured this insurance to be taken by this company." The notice given on the 3d of September prior to the fire terminated, as is insisted, the contract of insurance pursuant to this condition. We think there can be no doubt that the true construction of the binding slip only obligated the defendant according to the terms of the policy in ordinary use by the company. There is no other reasonable interpretation of the transaction. The binding slip was a short method of issuing a temporary policy for the convenience of all parties, to continue until the execution of the formal one. It would be unreason- able to suppose either that the brokers expected an insurance except upon the usual terms imposed by the company, or that the secretary of the company intended to insure upon any other terms. The right of an insurance company to terminate a risk is an important one. It is not reserved in terms in the binding slip, and could not be exercised at all so long as no policy should be issued, unless the condition in the policy is deemed to be incorporated therein. Upon the plaintiff's contention the company could not can- cel the risk so long as the binding slip was in force, and the only remedy of the company to get rid of the risk would be to issue the policy and then immediately cancel it. The binding 0. III. LiPMAN V. Niagara Fire Ins. Co. 303 slip was a mere memorandum to identify the parties to the contract, the subject-matter, and the principal terms. It refers to the policy to be issued. The construction is, we think, the same as though it had expressed that the present insurance was under the terms of the usual policy of the company to be there- after delivered. The trial judge was of opinion that the binding slip was not a complete and independent contract of insurance, subject to no conditions ; but he ruled that the obligation of the defendant was to be determined by the question, whether the condition in the defendant's policy, that the company might terminate the policy b}'^ notice to the " person who procured the insur- ance," was a usual one, and submitted the case to the jury on that issue. The case of DeGrove v. Metropolitan Ins. Co.^ 61 N. Y. 594, is, we think, a decisive authority against the view of the learned trial judge. The General Term dissented from the ruling of the trial judge on this point, and held that notice to Pell, Wallack (fe Co., the brokers who procured the insur- ance, was authorized by the condition in the policy. It, how- ever, sustained the judgment on the ground that notice did not terminate the contract until a reasonable time had elapsed after it was given, and that the two and a half hours which inter- vened between the notice and the happening of the fire was not such reasonable time, and that consequently the insurance was then in force. We think there can be no reasonable doubt, upon the lan- guage of the condition, that notice to the brokers was a good notice, and that, if otherwise sufficient, it terminated the de- fendant's liability. The brokers procured the insurance. In fact, their duties in respect to it had not terminated. The binding slip provided that the policy, when issued, should be delivered at their office. The notice was given to persons to whom notice might be given by the express language of the policy. The special language of the condition in the defend- ant's policy upon this point was, it is said, inserted to meet the objection pointed out by this court in Hermann v. Niagara Fire Ins. Co., 100 K Y. 415. It remains to consider whether under the condition the policy terminated eo instanti on notice by the company. There is no language which postpones the effect of notice until the 304 Insurance : Fire, Life, Marine. o. m. lapse of a reasonable time thereafter. The rule is well settled, that, where a person undertakes to do an act upon notice fi'ora another, it is implied that he shall have a reasonable time after he is called upon to do the thing, or render the service, and, no time for performance being specified, the law gives him a reasonable time. But where a contract fixes the time of per- formance the rule of reasonable time has no application. We have been referred to no case, nor have we found an}'^, which sanctions the doctrine, that, wliere one has assumed an obliga- tion which is to continue until notice given to the other party, the obligation continues after notice. If in this case the pre mium has been paid beyond the period when notice was given, then the bare notice would not have terminated the risk. But this for the reason that the company is bound in such case, in order to terminate the policy, not only to give notice, but to refund or offer to refund the insurance premium. This is the construction placed on clauses like the one in question. The cancellation in such case only takes place on notice and return of the premium for the unexpired term. Va7i Yalhenburgh v. Lenox Fire Ins. Co., 51 N. Y. 465 ; Wood on Fire Ins., § 106. The privilege reserved by the company to terminate the policy on notice cannot be exercised under the circumstances which would make it operate as a fraud on the insured, as in case of notice given pending an approaching conflagration, threatening to destroy the property insured. Home Ins. Co. V. Heck, 65 111. 111. In the present case no premium had been paid. The notice was given in good faith. There was no special emergency at the time. It was given during business hours, in ordinary course. The contract provides that it should be terminated on notice. We perceive no reason why the contract should not be construed according to its terms. The parties might have provided that the risk should be carried by the company after notice for a reasonable time, to enable the insured to place it elsewhere. But they did not do so, and even if a custom of that kind had been proved, which was not, it would have been inadmissible to change or extend the explicit language of the contract. We think the cancellation was effected at the time o. ni. Merchants' Mutual Ins. Co. v. Lyman. 305 of the service of the notice. Mueller v. South Side Fire Ins. Co.^ 87 Penn. St. 399 ; Orace v. Am. G. Ins. Co., 109 U. S. 278. Judgment reversed. United States Sctreme Court, 1872. MERCHANTS' MUTUAL INS. CO. v. LYMAN". (15 WaU. 664.) All antecedent negotiations become merged in the policy at the time of ths contract. Lyman & Co. brought their action in the court below against the Merchants' Mutual Insurance Company of New Orleans, for the sum of $12,000, the value of the brig Sailor Boy, lost at sea on the 8th of Januar}^ 1870, and which was insured, as they allege, by the said company. Their petition set forth, that on the 30th of October, 1869, the company had issued a policy to them on the brig for the sum named, which insured her until January 1, 1870. That on the 15th December, 1869, they applied to the com- pany to insure them in the same sum, upon the same vessel, for three months from the said 1st January, 1870. That, after taking time to consider, the company, on Decem- ber 24, 1869, proposed to renew the insurance for the premium of $600, and that on December 31, the plaintiffs accepted this proposition for renewal, and that the company on that day agreed with them that it would issue the policy, and make it out and send it to them, and receive the premium. That on the 15th January, 1870, the plaintiffs sent for the policy and paid the premium, and the companj^ issued to plain- tiffs the policy annexed to the petition ; that the said policy was but a compliance with and a formal statement of the agreement to renew the insurance, made December 31, 1869. That on the 8th of January, 1870, the brig was lost, etc. Along with their petition, the plaintiffs filed two policies of insurance, on their face such as above stated ; that is to say, one dated October 30, 1869, for two months, expiring January 1, 1870, and one dated January 15, 1870, and which, by its terms, purported to make an insurance "from the 1st of January, 1870, to the 1st of April, 1870." 20 306 Insurance ; Fire, Life, Marine. o. in On the trial it appeared that the plaintiffs, when they re newed the policy of the 15th January, and paid the premium for insurance, knew that the vessel was lost, and that the defendants had no such knowledge or information. As on this state of facts it would be obvious that no action could be sustained on the policy — and indeed that, in point of fact, the taking of such a policy, and causing the defend- ant to sign it, would have been a fraud — the plaintiffs framed their petition on the assumption, and directed their evidence to the showing that the execution of the policy was but carry- ing into effect an agreement made before the loss of the vessel. In order to sustain this their case they offered in evidence the deposition of their agent, which gave an account of con- versations had by him in reference to a renewal of the in surance with some one in the defendants' oflBce. The de- fendants objected to this testimony, on the ground that there was a written application for and contract of insurance be- tween the parties for the same amount of insurance and same amount of premium, on the same object insured, the vessel called Sailor Boy^ \>y the same plaintiffs as insured, and same defendants as insurers, for the same space of time, to wit, from the 1st day of January, 1870, to the 31st March, 1870 ; that the plaintiffs had no right to contradict the writ- ten application aforesaid by proof of a previous verbal con- tract ; that the plaintiffs' right of action, if any, was on the written application and contract aforesaid, and that they could not ignore the said written contract to fall back on an alleged previous verbal contract of the same tenor and purport ; that the evidence showing that when the said written contract was executed, the plaintiffs and their agents were aware of the fact of the previous loss and abandonment of the Sailor Boy. the said written application and policy were not binding in law, but were nevertheless the contract of the parties sub- ject to be gainsaid by proper allegations and proof of fraud ; that the plaintiffs could not ignore the written contract. But the court ruled as follows : " The plaintiffs put their entire case upon a verbal contract to renew the insurance made, as they allege, on the 31st day of December, eight days before the loss. They admit that o. III. Merchants' Mutual Ins. Co. v. Lyman. 807 when they sent for the written policy, on the 15th of January, they knew of the loss, and that they could not recover on the written policy standing by itself, but they say that the real contract was made on the 31st of December, and that they had a right to go to the jury on that issue." The court accordingly overruled the objection and admitted the testimony. A verdict was given, and judgment entered for the plaintiffs, for the sum insured, and interest. The case being now here on error. Mr. Justice Miller delivered the opinion of the court. Undoubtedly a valid verbal contract for insurance may be made, and when it is relied on, and is unembarrassed by any written contract for the same insurance, it can be proved and become the foundation of a recovery as in all other cases where contracts may be made either by parol or in writing. But it is also true that when there is a written contract of insurance it must have the same effect as the adopted mode of expressing what the contract is, that it has in other classes of contract, and must have the same effect in excluding parol testimony in its application to it, that other written instru- ments have. Counsel for the defendants in error here, relies on two propositions, namely, that the policy, though executed Janu- ary 5th, is really but the expression of a verbal contract, made the 31st day of December previous, and that the loss of the vessel between those two dates does not invalidate the con- tract, though known to the insured and kept secret from the insurers ; and secondly, that they can abandon the written contract altogether and recover on the parol contract. We do not think that either of these propositions is sound. Whatever may have been the precise facts concerning the negotiations for a renewal of the insurance previous to the execution of the policy, they evidently had reference to a written contract, to be made by the company. When the company came to make this instrument, they were entitled to the information which the plaintiffs had of the loss of the vessel. If then they had made the policy, it would have bound them, and no question would have been raised of the validity of ihe instrument or of fraud practiced by the insured 308 Insurance : Firk, Life, Marine. o. in. On the other hand, if they had refused to make a policy, no injurv would have been done to the phiintiffs, and they would then have stood on their parol contract if they had one, and did not need a policy procured by fraudulent concealment of a material fact at the time it was executed and the premium paid. To permit the plaintiffs, therefore, to prove by parol that the contract of insurance was actually made before the loss occurred, though executed and delivered and paid for after- ward, is to contradict and vary the terms of the policy in a matter material to the contract, which we understand to be opposed to the rule on that subject in the law of Louisiana as well as at the common law. We think it equally clear, that the terms of the contract having been reduced to writing, signed by one party and accepted by the other at the time the premium of insurance was paid, neither party can abandon that instrument, as of no Talue in ascertaining what the contract was, and resort to the verbal negotiations which were preliminary to its execution, for that purpose. The doctrine is too well settled that all previous negotiations and verbal statements are merged and excluded when the parties assent to a written instrument as expressing the agreement. And it is hardly necessary to say, that the party who has destroyed the validity of that contract by his own fraud, cannot for that reason treat it as if it had never been made, and recover on the verbal statements made before its execution. Judgment reversed, loitli directions to grant a new trial. New York Court of Appeals, 1860. HAEPEH V. NEW YORK CITY INS. CO. (22 N. Y. 441.) The written portion of the policy prevails over the general printed form. This was an action upon a policy of insurance, dated the 3d March, 1853, whereby the defendant insured the plaintiffs against loss by fire, to the amount of $10,000, on their print- ing and book materials, stock, paper, stereotype plates, fixtures, printed books, and steam-engine, contained in certain brick build- 0. in. Harper v. New Yokk City Ins. Co. 309 ings particularly described, with the privilege '•' for a printing- office, bindery, book-store, and steam-boiler in the yard." The printed conditions of the policy contained the usual clause, that the company should not be liable for any loss or damage by fire "occasioned by camphene or other inflammable liquid." It was shown on the trial, that the fire, by which the plaintiffs' premises were totally destroyed, was occasioned by the accidental igniting of a quantity of camphene, kept for cleaning the rollers used for fine printing ; and that such use was not merely advantageous, but absolutely necessary' in a printing-office. There was a verdict for the*plaintiffs, subject to the opinion of the court, and judgment having been entered thereon, at the General Term, the defendant took this appeal. CoMSTocK, C. J. — The jury found, in answer to interroga- tories specially submitted to them, that the use of camphene in the manner proved was according to a general and estab- lished usage in the printing and book business as carried on by the plaintiffs, and that such use was necessary in that busi- ness. In the written part of the policy, the subject of insur- ance is described as the plaintiffs' printing and book materials, stock, etc., '■^ privileged for a printing ojflce, hindery^'' etc. The language is identical with that contained in the policy which was before us in the case of Harper v. Albany Insurance Com- pcmy, lY N. Y. 194. We there held, for reasons which need not be repeated, that the insurers were liable for loss occasioned by the necessary and customary use of camphene in the plaintiffs' business, although the use of that article was prohibited, in general terms, in the printed conditions annexed to and form- ing a part of the contract. In that case, the printed form of the policy, if construed without reference to the subject of insurance as described in the written part, proscribed the use or presence of camphene for any purpose. In this case, the printed condition declares, in substance, that if the article is used, and a loss is occasioned thereby, the insurer will not be liable. There is no other distinction between the two cases. And this distinction is not one of principle. In the case cited, we found no irreconcilable repugnancy between the written and printed clauses of the contract. If such a repug- 810 Insurance: Fire, Life, Marine. o. m. nancy had been discovered, then, as the court said, the printed form must yield to the more careful and deliberate written language of the parties in describing the subject of insurance, at the very moment when the policy was issued. But it was considered, that each clause might take effect ; by insuring the plaintiffs' stock, with the privilege of a printing-office and book-bindery, the use of such materials, including camphene, as were necessary in that business was allowed ; otherwise, the contract was a mere delusion. But the restraining clause might, nevertheless, have its full effect upon the use of cam- phene for the purposes of light, and for all purposes beyond its necessary connection with the stock and business insured. So, in this case, camphene must be considered as a part of the stock insured ; its continued presence and use were allowed, because the business which required its use was expressly priv- ileged. The printed condition, exempting the underwriters from loss when occasioned by this article, should therefore be construed as referring to uses not within the privilege thus granted ; otherwise, the two parts of the contract are repug- nant to each other, and the printed form must yield to the deliberate written expression. An insurance upon the plain- tiffs' stock and business, to be of no effect if a loss should be occasioned by the combustion of an article constituting a part of that stock, and necessarily used in the business, would, I think, be an anomalous undertaking. Undoubtedly, such a contract might be made : a policy can be so framed as to allow the presence of a dangerous article, and even so as to insure its value, while at the same time it might exempt the insurer from loss, if occasioned by the presence or use of the article ; but I think it would need very great precision of language to express such an intention. Where camphene or any hazardous fluid is insured, and its use is plainly admitted, the dangers arising from that source are so obviously within the risk under- taken, that effect should be given to the policy accordingly, unless a different intention is very plainly declared. And such an intention, instead of being hid away in printed forms, remote from the principal contract, ought to be found in the deliberate expressions which are made use of at the time when the contract is entered into. Without doubt, all the printed conditions and specifications 0. III. Harper v. New Vokk City Ins. (/o. 311 annexed to a policy are, or at least may be, a part of it. But they relate to insurance in general, as practiced by the under- writer ; and upon, or within, those forms, the parties to each policy actually issued write their own particular intention. The plain meaning of the written part should, therefore, pre- vail, and other clauses must yield, if repugnant, or they must be construed so as to avoid a conflict of intention. In this case, I think the perils of keeping and using camphene were insured against, so far as the keeping or use of it was permitted at all, and that the clause which exempts the insurer from liability should be understood as applying to the presence of the article under other conditions. The judgment should be affirmed. Selden, J. {dissenting). — Contracts which belong to an ex- tensive class, such as charter-parties, policies of insurance, etc., where all are in their main features identical, are usually reduced to a prescribed /brmwZa, embracing those general pro- visions which are applicable to most cases of the class, and tHen printed, leaving blank spaces to be filled up in writing, so as to adapt the contract to the particular case. In construing such contracts, if there is any repugnancy between the written and the printed portions, the latter is to be modified and con- trolled by the former. In other words, those general provis- ions which were framed for the class at large must yield to such as are more specific, and designed for the particular case. This rule, which was applied in Harper v. Albany Mutual Insurance Company, 17 N, Y. 194, and Bryant v. PoughTceep- sie Mutual Insurance Company, id. 200, is equally applicable here. That portion of the printed conditions incorporated into the policy which related to the various articles and kinds of business denominated hazardous and extra hazardous, and those which are subjected to special rates of insurance, virtu- ally prohibited the use of camphene upon the insured premises. But the written portion insured the plaintiffs upon their print- ing-office, bindery, and book-store, and upon the materials, stock, and machinery therein ; and as it appeared that cam- phene constituted a necessary portion of such stock, and was essential to the carrying on of the business insured, its use was 812 Insurance : Fihk, I^ife, Makine. o. hi. clearly authorized by this clanso of the policy. There was, therefore, a direct conflict between the general provisions con- tained in the printed conditions of the policy and the written description of the particular subject of insurance ; and, of course, the latter must prevail. The use of camphene, there- fore, was authorized, and it was itself insured as a part of the plaintiffs' stock. Thus far there is no controversy between the parties, but the contest arises under another clause of the policy. The eighth condition provides, that the company " will not be liable for loss or damage caused by lightning, except that which results from fire that may ensue therefrom ; nor for any loss, either by fire or otherwise, occasioned by the explosion of a steam-boiler, or occasioned hy camphene or other inflammable liquid^ or by the explosion of gunpowder." The position of the defendants is, that the loss, as shown by the proofs, was " occasioned by camphene," and hence they are not responsi- ble. It becomes necessary, therefore, to put a construction upon that condition of the policy which I have just recited. The counsel for the plaintiffs contends that this provision was only intended to exempt the company from liability for any loss which should be occasioned by camphene " in a rela- tion or use outside of the description and privilege " contained in the policy. But there are serious difficulties in the way of such a construction ; it is an entire departure from the lan- guage of the provision, which is broad and general, embracing every loss which should be in any way occasioned by cam- phene. To make this interpretation compatible at all with the terms of the provision, it is necessary to interpolate a chiuse more extensive than the entire provision as it stands. The policy says the insurers will not be liable for any loss " occBr sioned by camphene." This is said to mean, that they will not be liable for such a loss, provided the camphene which caused the loss was outside the insured premises, or was used upon such premises in a manner not authorized by the policy. I know of no rule for the interpretation of contracts which warrants so extensive an interpolation ; it would make a con- tract widely different from that which would result from the terms used by the parties themselves. The argument in favor of this interpretation is, that, hy 0. III. Harper v. New York City Ins. Co. 313 force of the rule that the written is to ])i'evail over the printed portion of the poHcy, the defendants have not only authorized the use of camphene by the plaintiffs for certain purposes, but have consented to include camphene itself as a part of the plaintiffs' stock, among the articles insured; and that it cannot be supposed that they intended to exempt themselves from liabihty for a loss which should be occasioned by one of the insured articles, and which was upon the premises under the precise circumstances authorized by the policy. The incongruity suggested by this argument is hardly suf- ficient to prevent our construing this contract as the parties have made it. What repugnance is there between the provis- ion which authorizes the use of camphene in the business of the insured, and that which exempts the company from liability for a loss ''occasioned by camphene"? I can see none whatever. By the written portion of the policy, the insurers assumed a responsibihty in regard to the use of camphene, from which they were entirely exempted by the printed conditions relating to hazardous and extra-hazardous business ; the eighth condition comes in as a modification of this responsibility. It operates as a division and mutual distribution between the insurers and the assured of the risks resulting from the use of this hazardous article. By the two provisions combined, the insurers say to the assured, we will agree that the mere presence of camphene upon the insured premises, or its use there in your business, shall not vitiate the policy ; but if it shall be the actual primary cause of any loss, we will not be held responsible. Such an arrangement is not open to any legal objection, but one which the parties had a perfect right to make, and which seems to me not unnatural. It does not cast the entire risk upon either of the parties, but divides it between them. If a fire occurs from some other cause, and, in consequence of the presence of cam- phene upon the premises, it is aggravated and made more de- structive than it otherwise would have been, the loss falls upon the insurers. If a fire is occasioned by the camphene, and the insurers are not able to trace it to that cause, the loss falls upon them. It is only in those cases where the insurers are able to show that camphene was the original cause of the loss, that the risk is assumed by the assured. I see nothing, either in law or m reason, against the making of such a contract ; and that is 314 Insurance : Fire, Life, Marine. o. hi. precisely the contract which these parties have made, if we interpret their language according to its natural import. Dbnio and Clbrkb, JJ., also dissented. Judgment affirmed. New York Court op Appeals, 1883. WmNE V. NIAGAKA FIRE INS. CX). (91 N. Y. 186.) Forfeitures are not favored. Appeal from order of General Term of Supreme Court entered upon an order which affirmed a judgment in favor of plaintiffs, entered upon a verdict. For six or seven years previous to July, 1876, the defendant, the Niagara Insurance Company, by "William H. Fredenburgh, its agent, had insured the Eagle Hotel property belonging to plaintiff, Henry W. Winne, by a policy for $2,000, loss, if any, payable to Benjamin J. Winne, mortgagee, his co-plaintiff. About the time of the expiration of the policy, July, 1876, the defendant, the insurance company, mailed Fredenburgh, their agent, a paper which contained opposite Winne's name the word " drop." Fredenburgh, the agent, told plaintiff that he had got a letter from the company that they wouldn't carry as large an amount as $2,000, and showed him the paper or letter, explain- ing the meaning and contents. Fredenburgh then said that the Niagara would carry the policy for $1,000, and afterwards agreed to issue a policy for that amount, and did write it ; but before its delivery, and the next day after it was agreed to be written, the hotel burned. Fredenburgh had been accustomed to give Winne credit for premiums, and hold policies till called for. The company refused to pay the loss on the ground that the agent had no authority whatever to insure plaintiff's hotel for any amount. Andrews, Ch. J. — The jury found that there was an uncon- ditional agreement ou the part of Fredenburgh to reinsure to 0. III. WiNNK V. NlAdAKA FlKK Tn8. Co. oij the amount of $1,000, and the claiui of the (iefendant that there was no completed contract of insurance rests upon the fact that the rate of pi-emiuni and the (hiration of the risk were not specified when the agreement was made. There can be no doubt that these are essential elements of a contract of insur- ance, and if there was no meeting of minds of the parties upon these particulars, the contract of insurance was not consum- mated, and the matter stood as a mere negotiation, incom])lete, and imposing no obligation upon either party. The claim that there was no consensus of the parties upon these points rests upon the fact that no words passed between them in respect to the time or rate of insurance when the alleged contract was made. But this was unnecessary, provided the jury were authorized, from the circumstances of the transaction, to infer that the parties intended that the new policy should be issued for the same time and at the same rate of premium as the policy which had just expired. There was an express agreement as to the subject-matter of the insurance, the parties, the risk, and the amount. The negotiation referred to a new insurance for $1,000 on the same building insured by the previous policy, and in the same company. In the absence of negative words, it is a reasonable inference that the parties also understood that the new insurance was to be for the same time and at the same rate of premium as the prior one, differing only in amount. The policy prepared by the agent after the negotiation for the new policy specified the same rate of premium as the prior one, and was for the usual time of one year. We think the jury were authorized to find that the minds of the parties met as to all the essential terms of the contract, and that there was a completed contract of insurance between Fredenburgh and the plaintiff Henrj^ W. "Winne. The remaining question on the merits arises upon the de- fendant's claim that Fredenburgh had no authority to insure the Eagle Hotel property, and that this was known to Winne when the alleged contract was made. It is admitted that Fredenburgh was the general agent of the defendant at Kings- ton at the time of the transaction. He was intrusted with blank forms of policies of the defendant, signed by its officers, and was authorized to bind the company by his contracts in the first instance, the company reserving the right to cancel policiea 816 Insukance: Fike, Life, Marine. o. hi. issued by him, and terminate the risk. Under this general authority, Fredenburgh had insured the Eagle Hotel property in the defendant's company for several years, to tJje amount of $2,000, the last policy for that amount expiring July 1, 1876. The alleged limitation of his authority to insure the Eagle Hotel property is contained in a paper called an " expiration sheet," sent by the company to Fredenburgh, according to its usual custom, showing the policies ^Yhich would expire during the month ensuing that in which it was sent, and containing notations opposite each risk. The particular sheet now in question was sent in June, 1876, and contained a list of seven policies, issued at his agency, which would expire in July. Opposite the policy on the Eagle Hotel property was the word " drop," and opposite the others the word " renew." Whether this expiration sheet was seen by Winne before he made the agreement with Fredenburgh for the policy now in question, was a subject of controversy on the trial. But assuming that it was exhibited to and read by Winne before that time, so that he is chargeable with notice of its contents, we are nevertheless of opinion that the language used was not equivalent to an absolute instruction to Fredenburgh not to insure the Eagle Hotel property for any amount, and that an insurance of the property by him for a smaller sura was not prohibited. The evidence tends to show, and the jury have found that the agent so interpreted the instruction. The prior policy was in fact dropped. The risk was reduced in amount. The agent prepared the new policy, directed it to be reported to the com- pany, and it was entered by the clerk in the register of com- pleted contracts. The word " drop " in the expiration sheet, to say the least, was ambiguous and equivocal, and the principle applies that a letter of instruction from a principal to an agent should be expressed in clear language, and that if not expressed in " plain and unequivocal terms, but the language is fairly susceptible of different interpretations, and the agent in fact is misled and adopts and follows one, while the principal intended another, then the principal will be bound, and the agent will be exonerated." Story on Agency, § 74. See, also, Herrinan V. Merchants' Ins. Co., 81 N. Y. 188; 37 Am. Rep. 488. In the absence of special limitation, the authority of Fredenburgh to make the contract in question is unquestionable. The lim:ta- 0. III. WiNNE V. Niagara Fikk Ins. Co. 317 tion proved, simply })i()hil)ited the renewal of the existing risk, or an equivalent insurance. Winne had a right to put this interpretation u[)on tlie instruction. If the company intended to decline any insurance on the property, it should have said so. It cannot in justice defeat the contract in question by putting an interpretation upon its instructions at variance with that of its agent and Winne, and of which the language was clearly capable. The remaining question is whether a joint action lies in favor of the plaintiffs. The plaintiff Henry W. "Winne was the owner of the property insured, and the plaintiff Benjamin J. Winne was the mortgagee. The policy contains the clause, " loss, if any, payable to Benjamin J. Winne, to the extent of his mortgage interest therein." We think a joint action is proper. The plaintiffs have a common interest in enforcing the contract. The ])laintiff Henry W. Winne has no adverse interest to that of his co-plaintiff. The fund is applicable, first upon the mortgage debt, and when that is paid, the balance belongs to the mortgagor. It is, we think, quite appropriate, and in accord with the flexible rule of procedure now applied to courts of justice, to allow persons situated as are the plain- tiffs to unite in maintaining the action, and the practice is sanctioned by the language of the code, and of adjudged cases. Code, § 466 ; Boynton v. Clinton, etc., Ins. Co., 16 Barb. 254 ; Ennis v. Harinonfij F. Ins. Co., 3 Bosw. 516 ; Lasher v. N^oi'th- western Ins. Co., 18 Hun, 101. We find no error in the record, and the judgment should therefore be affirmed. All concur. Judgment affirmed. CHAPTER IV. GENERAL PRINCIPLES. • Representations and ConcealTnents, \ Jnited States Supreme Court, 1886. -^ PHCENIX LIFE INS. CO. v. RADDIN.* (120 U. S. 183.) Representations ; concealments. Me. Justice Gray delivered the opinion of the court. This was an action brought by Sewell Raddin, and prose- cuted by his administrator, upon a policy of life insurance, dated April 25, 1872, the material parts of which were as follows: "This policy of insurance witnesseth, that the Phoenix Mutual Life Insurance Companj'^ of Hartford, Conn., in consid- eration of the representations made to them in the apphcation for this policy, and of the sum of," etc., " do assure the life of Charles E. Raddin, of Lynn, in the county of Essex, State of Massachusetts, in the amount of ten thousand dollars, for the term of his natural life." "This policy is issued and accepted by the assured upon the following express conditions and agreements ; " namely, among others, that " if any of the declarations or statements made in the application for this policy, upon the faith of which this policy is issued, shall be found in any respect untrue, this policy shall be null and void." The application was signed by Sewell Raddin, both for his son and for himself, and contained twenty-nine printed " ques- ' As to whether application forms p ries, and untrue declarations made by him regarding his health and habits of life, undertakes a heavy onus, to the discharge of which it must be strictly held. I do not go the length of say- ing that gross and willful falsehood must be proved. But, first, the falsehood must be clear, and on a subject which is, or rea- sonably may Be, material to the risk ; and second, if not willful, it must be inexcusable in this sense, that it consists in a blam- ably reckless or careless assertion or omission of which an hon- est man, giving ordinary attention to the matter in hand, would not have been guilty, and which, in fairness to the office which was deceived, cannot be treated or passed over as immaterial or trifling." These observations were not necessary to the decision of Scottish Life Assurance Compayiy v. Buist, because the learned judge held it to be proved that the statements warranted had been made fraudulently. But his Lordship adopts his dicta in that case as expressing the principles which ought to govern the decision of the present case ; and, consistently with these principles, he treats the seventh question as an " appeal to the man himself as to the epithets which he would apply to himself 342 Insurance : Fire, Life, Marine. o. iv. with respect to his habits," and upon that footing he holds that the answer to it cannot be regarded as false. The Lord Justice Clerk seems to have taken substantially the same view ; inasmuch as he states that if he " had thought that the answers given here were not given in good faith," he would have agreed with Lord Rutherfurd Clark, who was of opinion that the appellant ought to prevail. I am unable to assent to the principles so clearly enunciated by Lord Young, in Scottish Life Assurance Company v. Buist. When the truth of a particular statement has been made the subject of warranty, no question can arise as to its materiality or immateriality to the risk, it being the very purpose of the warranty to exclude all controversy upon that point. As the Lord Chancellor (Cranworth) said in Anderson v. Fitzgerald, 4 H. L. 503 : " Nothing, therefore, can be more reasonable than that the parties entering into that contract should deter- mine for themselves what they think to be material, and if they choose to do so, and to stipulate that unless the assured shall answer a certain question accurately, the policy or con- tract which they are entering into shall be void, it is perfectly open to them to do so, and his false answer will then avoid the policy." It would, in my opinion, be equally subversive of the contract, which the parties make for themselves, to hold (as Lord Young apparently does) that there can be no breach of such warranty, unless it is proved that the answer of the assured, being untrue, was made by him either willfully and in the knowledge of its untruth, or inexcusably, in the sense of its having been a blamably reckless or careless assertion. An ingenious argument was addressed to your Lordships by the respondent's counsel, for the purpose of showing that the seventh question, from its very nature, involved only matter of opinion and not of fact, and consequently that any reply to it must be treated as an expression of opinion, and not as an assertion of fact. It appeared to me that their argument, which turned upon a very fine-drawn distinction between what were termed matters of pure fact and matters of opinion, had really no practical bearing upon the case before us. There are facts innumerable which can only be ascertained by the test of opinion, but they are not the less facts in a legal, what- ever they may be in a metaphysical, sense. It appears to me 0. V. Thomson v. Weems. 3i3 to be in vain to contend that the character of a man's habits, temperate or intemperate, is matter of opinion and not of fact. The second branch of the fourth question in the proposal sub- mitted by the deceased furnishes an apt illustration of that which, in the ordinary sense, is a matter of mere opinion as distinguished from matter of fact. It runs thus : " Do you consider yourself of a sound constitution ? " That is a query which obviously relates, not to the soundness of the assured's constitution, but to his own opinion on the subject ; and in that respect it presents a marked contrast to the terras of the seventh question. It was also argued by the respondents that in Scotland it has been long settled, by decision, that such a question as the seventh, occurring in a proposal made by the assured, as the basis of a polic}'^ upon his own life, is merely intended to elicit the personal opinion or belief of the assured, and that the deceased, William Weems, must be presumed to have given the answer, now said to be untrue, in reliance on that judicial interpretation. It is necessary, therefore, to examine the two authorities which were cited in support of that proposition by the respondents' counsel. The first of these authorities is the case of Hutchison and Others V. National Loan Fund Life Assurance Company^ 7 Court Session Cas.. 2d series, 467, which was decided by the First Division of the Court of Session, on 21st of February, 1845. A lady of the name of Armstrong had, in February, 1843, effected an assurance upon her own life with the company, and she died in November of the same year. Her proposal, w^hich was made the basis of the contract of assurance, con- tained this query, " Has the party an habitual cough, or any disease or symptom of disease ? " To which the answer was " No," and also a declaration " that I am now in good health, and do ordinarily enjoy good health." In defense to an action for the amount of the policy, the company alleged that the as- sured was, at the date of the insurance, of intemperate habits, and laboring under disease of the liver, which resulted in dropsy, of which she died. The Lord Ordinary reported the case upon issues, to the First Division, when the argument turned upon the defendeiV pleas, to the effect that the policy was void, by reason of there having been a breach of the war* 344 Insurance : Fire, Life, Marine. o. v. ranty that the insured was in good "health, and had no disease or symptom of disease. What the court held is best explained by their interlocutor: "Find that whatever issues may be granted for trying this case, the proposal of Mrs. Armstrong, and declaration therein referred to, form the basis of the con- tract in the policy of insurance in question, and import a war- ranty only to the effect that the declarant was and had been, according: to her own knowledge and reasonable belief, free from any disease or symptom of disease material to the risk, and that they do not import a warranty against any latent and imperceptible disease that could only be discovered by post-mortem examination, or from symptoms disclosing them- selves at an after period of time." Whatever may be the merits of that judgment, it is beyond question that the main reasons assigned for it by the very learned judges who then constituted the First Division, go the full length of affirming that it would have been pactum illicitum, had the assured so answered the query as to take upon herself the risk of her be- ing affected, at the time of entering into the policy, by a latent and deadly disease, the existence of which could only be dis- covered by a post-mortem examination. As might have been ex- pected, the respondents' counsel did not attempt to vindicate the judgment by reference to these reasons, which they were not prepared to maintain, and preferred to rest it upon another and more reasonable ground, which is very clearly indicated in the opinion of Lord Fullerton. His Lordship construed the answer and declaration as together amounting to nothing more than a statement by the assured that she was at the time in good health ; and he further held that " good health," in the ordi- nary sense of the term, means " the perfect conscious enjoy- ment of all one's faculties and functions, and the conscious free- dom from any ailment affecting them, or any symptom of ailment." The second of these authorities is Ufe Association of Scot- land v. Foster, 11 Court Sess. Cas., 3d series, 351. In that case the association brought an action to reduce a policy which had been effected with them by the deceased, Mrs. Mary Foster, upon her own life, in respect of an alleged breach of warranty. The proposal for assurance contained a declaration by the de- oeased " that I am al present in good health, not being afflicted 0. V. Thomson v. Weems. 345 with any disorder, external or internal," and an agreement by her that if any untrue statement were made therein, " or in the answers to questions by the society's medical officer in refer- ence to this proposal,"' the assurance should be null and void. A number of questions were put to Mrs. Foster by the medical officer. The fourth of these was : '"Are you now in your own opinion in perfect health?" to which her answer was "Yes;" and the sixth was in these terms : " Have you had rheumatism, gout, rupture, fits, asthma, s})itting of blood, disease of the chest, or any affection of the kidneys or urinary organs?" to which she answered, '' No." To her questions and answers there was appended a declaration by the assured, setting forth that the above statements were " faithful and true." The assured died of rupture, on the 30tli of November, 1871, six months and a half after the date of the proposal. A proof was led, from whicli it appeared that, at the time when she made that proposal — and for some months previously — the assured had a small swelling on her groin, which caused her no inconven- ience, and did not affect her general health. That dwelling, as subsequent events showed, was due to hernia; but there was no reason whatever to suppose that the deceased knew that she was affected by hernia, or that the swelling in question in- dicated to her the existence of that disease. The First Division of the court, before whom the case depended, held that there had been no breach of warrantv, and assoilzied the defenders. It is of importance to observe that the pursuers of the reduc- tion did not plead the untruth of any statement made by the deceased in her proposal for assurance. The onl}^ statements upon which they relied as untrue, and therefore constituting a breach of wai-ranty, were those made by the assured in reply to the questions put by their medical officer. Upon this point the Lord President (Inglis) says : " It is not alleged by the pursuers that there is any untrue averment in the words of the declaration itself. They admit that Mrs. Foster was within the fair meaning of the words ' in good health ' and not 'afflicted with any disorder, internal or external.'" The con- troversy between the parties was therefore narrowed to the single issue — whether the assured, by her sixth repl}' to the medical officer, had asserted that she was not at the time affected by latent disease, such as rupture, or any of the other 346 Insurance: Fire, Life, Marine. o. t. diseases specified in his question. It appears to me to have been rightly decided by the learned judges that the assured did not make an assertion to that effect. The assured was, in my opinion, entitled to assume that the object of the doctor who put questions to her concerning her health, in the course of his medical examination, was to elicit from her such facts as were within her knowledge for his own information and guid- ance; and, to my mind, the terms of the sixth query indicate that it was addressed to her for no other purpose. The as- sured had already told him, in reply to query fourth, that, " in her own opinion," she was, at the time, " in perfect health." That was followed up by the sixth query, which does not ask, " Have you, at present, rheumatism, gout, rupture, etc.," but "Have you had these diseases or any of them?" The query relates not to present time, but to the past ; and whilst it can be reasonably construed as referring to every form of active disease of which the assured must have been previ- ously conscious, I think it would be unreasonable to hold that the querj^was meant to refer to antecedent latent disease, of which the assured was unconscious. I am accordingly of opinion that Life Association of Scot- land V. Foster has really no bearing upon the doctrine in sup- port of which it was cited. A very different question would have arisen for decision in that case if the assured had, in the proposal which she submitted as the basis of assurance, af- firmed that she was not, " at the time," affected with hernia. As for the case of Hutchison v. National Loan Fund Life Assurance Company, it is impossible to assent to the general principles upon which it was decided ; and, to my mind, it is not clear that the decision could be justified upon other grounds. But it is unnecessary to consider that question, be- cause, assuming these cases to have the effect contended for, they do not appear to me to give the least support to the respondents' case. Both these authorities relate to internal disease, of the existence of which the person affected is uncon- scious, and which medical examination cannot detect until he is in extremis, or, it may be, until life is extinct ; and the only point arising for decision was, whether a particular query or statement was so expressed as to include latent and unknown, as ^ell as apparent and known, diseases. But intemperate habits 0. V. Thomson v. Wkkmh. 34:7 are certainly not, in any sense, latent disease only discoverable in a post-mortem examination. Such habits may, in some instances, be occult ; but, as a general rule, the knowledge of them is not confined to their owner : indeed, it may happen that their outward manifestations are more readily appreciated by bystanders than by the man himself. The purpose for which such a query as the seventh question in this case is ad- dressed to intending insurers is to elicit the fact and not the opinion of the assured ; and, if he chooses to give a satisfactory answer, he must take the risk of its being true. If his answer is hesitating or unsatisfactory, the insurers are put upon their guard, and have the option of declining the assurance, or seek- ing information from other sources, or of charging a higher premium. I now come to the second question in this appeal, which, as I have already said, is a question not of law but of fact. Was the late William Weems, on the 9th of November, 1881, and had he previously been, a man of " temperate habits," as he then asserted ? If that question must be answered according to the truth, and not according to the personal belief of the deceased, two of the judges of the Second Division, the Lord Justice Clerk and Lord Rutherfurd Clark, were of opinion that he was not. It does not clearly appear what view of the evidence would have been taken, upon that assumption, by Lords Young and Craighil] ; but I think the Lord Ordinary was prepared to hold, and did hold, that the deceased was, in point of fact, a man of temperate habits within the meaning of the seventh question. I entirely agree with many of the observations which were made by the Lord Ordinary in regard to what ought, for the purposes of this case, to be considered as consti- tuting temperate habits, although, upon the evidence before us, I am unable to come to the same conclusion as his Lordship. I am disposed to think that the learned judge must have at- tached undue weight to the case of the Knicker'boGker Life Assurance Company of New York v. Foley^ 15 Otto, 350, in regard to the rubric of which his Lordship says : " The law here stated is that which the Lord Ordinary adopts, and which he has endeavored to apply in his present judgment." Now, as I read the rubric and report, there was no law laid down in that case. An American iury had found that a man was of 348 Insurance: Fire, Life, Marine. o. t. temperate habits, although it had been proved at the trial that he had an attack of delirium tremens ; and the court refused to disturb the verdict, the main reason assigned for that decision being a statement occurring in some treatise on medical juris- prudence to the effect that, in the case of an intemperate man. delirium tremens is occasioned by abstinence from drink, and, in the case of a temperate man, by indulgence in liquor. Even if it had been laid down as matter of law, I should hesitate very much to adopt such a standard as that. A man suffering from delirium tremens occasioned by recent drinking may pos- sibly be more temperate than another man who is similarly afflicted in consequence of his having abstained from his usual potations ; but I should not like to affirm that either of them was, in the ordinar}^ sense of the term, a man of temperate habits. It is, however, perfectly clear that a mere finding of fact by a jury cannot — although the court may have declined to set it aside and grant a new trial — form any precedent for the guidance of a court of law. I believe it to be useless to attempt a precise definition of what constitutes " temperate habits," or " temperance," in the sense in which these expressions are ordinarily employed. Men differ so much in their capacity for imbibing strong drinks that quantity affords no test ; what one man might take with- out exceeding the bounds of moderation, another could not take without committing excess. In judging of a man's so- briet}^ his position in life, and the habits of the class to which he belongs, must, in my opinion, always be taken into account, because it is the custom of men engaged in certain lines of business to take what is called refreshment, without any impu- tation of excess, at times \vhen a similar indulgence on the part of men not so engaged, would be, to say the least, sus- picious. But I do not think that the habits of a particular locality ought to be taken into account, or that a man who would be generally regarded as of intemperate habits ought to escape from that imputation because he is no worse than his neighbors. In the present case the evidence clearly establishes that the assured was a most able and estimable man ; but that circumstance is not of much weight, because able and estimable men are not necessarily exempt from social failings. I shall not dwell upon the details of the proof, of the import of which c. V. Thomson v. AVeems. 849 I take very much the same view which is clearly and succinctly expressed in the opinion of Lord Rutherfurd Clark. It seems to me to be the fair result of the evidence, that the assured was in the habit of taking more drink than was good for him ; that he was frequently affected with drink on occasions when all except himself were sober; that his indulgence to excess had become so apparent that several of his friends remon- strated with him on the subject, and that, instead of repudi- ating the charge, he admitted it and promised amendment. These facts appear to me to be fully proved, and they are, in my opinion, altogether inconsistent with the truth of the asser- tion that he was, on the 9th of November, 1881, of temperate habits, and had always been so. I cannot, in considering this part of the case, leave out of view the cause of the assured's death, as certified by the late Dr. Colligan. The statement in his certificate was made by Dr. Colligan in the ordinary course of his professional duty, and in compliance with statutory enactment. There is nothing to suggest that the statement was made dishonestly or even negligently; and it is, in my opinion, good jprima facie evidence of what the medical attend- ant of the assured judged and believed to be the cause of his death. Of course it is not conclusive evidence that death was due to chronic hepatitis; it may be rebutted. But the testi- mony of Dr. Hunter is not, in my opinion, suflBcient to displace it. That gentleman saw the assured at Bridge of Allan about a month before his death ; but he did not examine the assured, or visit him professionally, until within a few days of his decease, after congestion of the brain had set in. The witness had not the same opportunity of determining what was the primary disease as the medical attendant of the patient who visited him daily for a fortnight before brain svmptoms supervened ; and the facts certified by Dr. Colligan are strongly corroborated by the other evidence in the case. Interlocutors appealed from reversed. 350 Insurance : Fire, Life, Marine. o. ▼. New York Court of Appeals, 1882. BURLEIGH V. GEBHARD FIRE INS. 00. (90 N. Y. 220.) Interpretation of a iearranty. Action by court without jury upon two policies of insur- ance issued to plaintiffs. The property insured was personal, and its location is described as follows : '' All contained in their frame storehouse with slate roof, situate, detached at least one hundred feet, on the east side of Lake Champlain, in the town of Shoreham, Yt." The court found from the evidence that a little shanty oi office, standing seventy-five feet distant from the storehouse in which the property insured was situated, containing a small quantity of gunpowder, did not increase the risk nor create any additional exposure of the latter to the fire, and refused to find the contrary. The court also found and decided that the words contained in each policy, above quoted, did not constitute a warranty, on the part of the insured, that the building was one hundred feet from the small shanty called an office ; that the existence of the small building within seventy-five feet of the storehouse containing the property insured did not in fact increase the risk. FiNOH, J. — We think the statement contained in the poli- cies issued by the defendants, describing the building which contained the personal property insured as " detached at least one hundred feet," is a warranty. We cannot hold it to be a mere description of the building for the purpose of identifying the personal property insured contained within it. The phrase is not adapted to any such purpose. It adds nothing to the identity of the storehouse, already sufficiently described by its ownership and situation on the lake. In Wall v. The East River Mut. Ins. Co., 7 N. Y. 370, the personal property in- sured was described as "contained in the brick building with tin roof, occupied as a storehonse, situated on the northerly side of and about forty-two feet distant from their ropewalk at Bush wick." The court said that the identity of the building 0. V, Burleigh v. Gebhard Fikk Ins. Co. 851 was distinctly ascertained by other facts of the description, and that the phrase " occupied as a storehouse" related to the risk and could not be otherwise applied. The language in the policies before us, as to the detached character of the building, applies fitly to the risk, and is entirely inappropriate as matter of description. "We must hold, therefore, what indeed was not denied in the dissenting opinion at General Term or on the argument at our bar, that the phrase in question is not merely descriptive of identity, but relates to the character of the risk, Thus understood and appearing on the face of the policy, it amounts to a warranty. Alexander v. Germanla Fire Ins. Co., Q% N. Y. 464 ; Richards v. Protection Ins. Co., 30 Me. 273 ; Parmelee v. Hoffman Fire Ins. Co., 54 N. Y. 193. Such result is, however, disputed upon the ground that the language is that of the insurers and is vague and void for ambiguity. The argument is that to avoid a forfeiture the words used must be most strongly construed against the insurer; that the word " detached " will not be defined so as to destroy the contract ; that in the sense of separate, or disengaged from, the policy does not add from what ; that it may mean " detached at least one hundred feet" from " earth, sea, or sky," or from " Lake Champlain ; " and that if it means from any building, it must be construed to mean any building which constitutes an ex- posure and increases the risk, which was not true of the office building, since the trial judge found as a fact that it did not so increase the risk. We do not think the language is so vague or ambiguous as to make the warranty void. The fair import of the words and the intent of the parties indicated by the terms of their agreement must guide the construction. Higgins v. Phcenix Mut. Life Ins. Co., 74 N. Y. 6. It cannot be doubted that both parties perfectly understood the meaning of the phrase to be that the storehouse stood by itself as a detached or sep- arate building, and apart from other buildings at least a distance of one hundred feet. The expression, although brief, is not meaningless, but to the common understanding, and especially in connection with an insurance against fire, conveys unmistak- ably the idea we have expressed, and must have been so under- stood by each of the contracting parties. If it did not mean that, it meant nothing, and what was intended as a serious busi- ness transaction becomes an idle play with words. But the 352 Insurance : Fire, Life, Marine. o. v. further contention, that the language must be held to mean, detached one hundred feet from any other building of such character as to constitute an exposure and increase the risk, seems to us a sensible and just construction. The brevity of the language requires that something be added to complete and elucidate the meaning. The phrase may mean, detached one hundred feet from any other building, whatever its size or character. This would be a rigorous and severe interpretation, most favorable to the insurer and operating harshly upon the insured. So construed, it would make anything which could be deemed a building, however small or insignificant, as an ice- house, or privy, or open shed, within the prescribed distance, operate as a breach of the warranty. If a construction so lit- eral or severe is intended by the insurer, he should at least say so by apt and appropriate language, and not ask the courts to supply it by intendment. If it be granted that such small and insignificant structures were not meant, and should be treated as if they did not exist, the question would remain, how small and how insignificant must they be to be disregarded, and how large and of what character to justify a conclusion of breach of the warranty, and where and upon what principles is the line to be drawn between buildings strictly such, but proper to be disregarded, and those whose presence breaks tht warranty. These questions can be wisely answered in but one way. The test must be whether the building within the distance named is or is not an exposure which increases the risk. One which does not can scarcely be supposed to come within the warranty, unless such result is indicated by explicit language which wiU bear no other reasonable interpretation. No such language is contained in these policies, and when the courts are asked to supply a defect and complete an imperfect phrase, they should remember that the necessity is the fault of the insurer, and construe the language in view of the natural understanding of the parties, and with justice to both. Declining to hold the phrase in the policy to be meaningless and void, we are com- pelled to choose between two constructions ; the one rigorous and hard and producing a forfeiture, and the other natural and reasonable and supporting the obligation. "We have heretofore aecided that in such case the latter construction is to be pre- ferred. Baley v. Homestead Fire Ins. Co., 80 N. Y. 21 ; 36 0. V. BuRLEiGir V. Gebhard Fire Ins. Co. 353 Am. Rep. 570. We hold, therefore, that the warranty in this ca^e was that no other building, of such size and character as to constitute an exposure and increase the risk, stood within one hundred feet of the storehouse. Thus construed, it is apparent that the warranty was not broken. The findings of fact, taken together, show that the only building within the prescribed distance of one hundred feet was the small office. This was described as being ten by twelve feet on the ground, and seven feet high ; a frame build- ing clapboarded and ceiled inside ; having a chimney, but no stove in it ; used sometimes as an office, and at the time of the fire containing a quantity of gunpowder, temporarily stored. The evidence showed, or at least tended to show, that this building, standing seventy-five feet from the subject of insur- ance, was not an exposure and did not affect the risk, and the trial court found that fact substantially, and refused to find the contrary. It follows that there was no breach of the warranty, and that the General Term erred in so deciding and in revers- ing the judgment. All concur, except Rapallo, J., dissenting, and Miller, J., not voting. Orders reversed 88 CHAPTER VI. GENERAL PRINCIPLES. Waiver and Estoppel. United States Supreme Court, 1871. UNION MUT. INS. CO. v. WILKINSON. (13 Wall. 222.) Nature of a waiver or an estoppel, and Jiow it may he established. The Union Mutual Insurance Company, of Maine, insured the life of Mrs. Malinda Wilkinson in favor of her husband. Both husband and wife, prior to the rebellion, had been slaves, and the husband came to Keokuk, Iowa, from Missouri. The company did business in Keokuk (where the application was made and the policy delivered), through an agent, one Ball, to whom it furnished blank applications. The mode of doing business appeared to have been that the agent propounded certain printed questions, such as are usual on applications for insurance on lives, contained in a form of application, and took down the answers ; and when the application was signed by the applicant, the friend and physician forwarded it to the company, and if accepted, the policy was returned to this agent, who delivered it and collected and transmitted the premiums. On this form of application were the usual questions to be answered by the person proposing to effect the assurance ; and by the terms of the policy it became void if any of the repre- sentations made proved to be untrue. Among the questions was this one : " Has the party ever had any serious illness, local disease, or personal injury,' if so, of what nature, and at what age?" o. VI. Union Mut. Ins. Co. v. Wilkinson. 355 And the question was answered : " No." So, too, after an interrogatory as to whether the parents were alive or dead — they being, in the case of Mrs. Wilkinson, both dead — were the questions and answers : '' Question. Mother's age, at her death \ " Aimoer. 40. " Question. Cause of her death ? ^^ An steer. Fever." Mrs. Wilkinson having died, and the company refusing to pay the sum insured, Wilkinson, the husband, brought suit in the court below to recover it. The defence was that the answers as above given to the questions put were false ; that in regard to the first one, Mrs. Wilkinson, in the year 1862, had received a serious personal injury, and that in regard to the others, the mother had not died at the age of 40, but at the earlier age of 23, and had died not of fever but of consumption. As to the first matter, that of the personal injury, the judge (under a rule of practice in the State courts of Iowa, adopted by the Circuit Court of that district, and which allows the jury in addition to its general verdict to find also special ver- dicts and answers to interrogatories put) required the jury to respond to certain interrogatories. These and the answers to them were thus : '"'■ Interrogatory. Did Malinda Wilkinson, in the year 1862, receive a serious personal injury, by falling from a tree? " Answer. Yes, injured ; not seriously. " Interrogatory. Were the effects of such fall temporary, and had these effects wholly passed away without influencing or affecting her subsequent health or length of life prior to the time when the application for insurance in this case was taken ? " Answer. Yes." As to the other matter, the age at which the mother died and the disease which caused her death, evidence having been given by the defendant tending to show that she died at a much younger age than forty years, and of consumption, the plaintiff, in avoidance of this, was permitted (under the defend- ants' objection and exception) to prove that the agent of the insurance company, who took down the answers of the appli- cant and his wife to all the interrogatories, was told by both 356 Insurance : Fire, Life, Marine. o. yi. of them that they knew nothing about the cause of the mother's death, or of her age at the time; that the wife was too young to know or remember an^'^thing about it, and that the husband had never known her ; and to prove that, there was present at the time the agent was taking the apphcation, an old woman, who said that she liad knowledge on that subject, and that the agent questioned her for himself, and from what she told him he filled in the answer which was now alleged to be untrue, without its truth being affirmed or assented to by the plaintiff or the wife. This the jury found in their special verdict, as they had the other facts, and found that the mother died at tlie age of 23 ; did not die of consumption ; and that the applicant did not know when the application was signed how the answer to the question about the mother's age and the cause of her death had been filled in. In charging the jury, the court said, on the first branch of the case — that relating to the personal injury — that if the effects of the fall were temporary, and had entirely passed away before the application was taken, and if it did not affect Mrs. Wilkin- son's health or shorten her life, then the non-disclosure of the fall was no defense to the action ; but, on the other hand, that if the effects of the fall were not temporary, and remained when the application was taken, or if the fall affected the general health, or was so serious that it might affect the health or shorten life, then the non-disclosure wcmld defeat recovery, although the failure to mention the fall was not intentional. On the second branch — that relating to the age of the mother — the court said to the jury, that if the applicant did not know at what age her mother died, and did not state it, and declined to state it, and that her age was inserted by the agent upon statements made to him by others in answer to inquiries he made of them, and upon the strength of his own judgment, based upon data thus obtained, it was no defense to the action to show that the agent was mistaken, and that the mother died at the age of twenty-three years. Verdict and judgment having gone for the plaintiff, the insurance company brought the case here on error. Mr. Justice Miller delivered the opinion of the court. o. VI. Union Mut. In8. Co. v. Wilkinson. 357 On the first branch of the case the court said to the jury, that if the effects of the fall were temporary, and had entirely passed away before the application was taken, and if it did not affect Mrs. Wilkinson's health or shorten her hfe, then the non-disclosure of the fall was no defense to the action. On the other hand, if the effects of the fall were not temporary, and remained when the application was taken, or if the fall affected the general health, or was so serious that it might affect the health or shorten life, then the non-disclosure would defeat recovery, although the failure to mention the fall was not intentional or fraudulent. It is insisted by counsel for the defendant, that, if the injury was consided serious at the time, it is one which must be men- tioned in reply to the interrogatory ; and that whether any further inquiry is expedient on the subject of its permanent influence on the health, is for the insurer to determine before making insurance. But there are grave and obvious difficulties in this construction. The accidents resulting in personal in- juries, which at the moment are considered by the parties serious, are so very numerous that it would be almost impos- sible for a person engaged in active life to recall them at the age of forty or fifty years ; and if the failure to mention all such injuries must invalidate the policy, very few would be sustained where thorough inquiry is made into the history of the party whose life is the subject of insurance. There is, besides, the question of what is to be considered a serious injury at the time. If the party gets over the injury com- pletely, without leaving any ill consequence, in a few days, it is clear that the serious aspect of the case was not a true one. Is it necessary to state the injury and explain the mistake to meet the requirements of the policy ? On the other hand, when the question arises, as in this case, on a trial, the jury, and not the insurer, must decide whether the injury was serious or not. In deciding this, are they to reject the evidence of the ultimate effect of the injury on the party's health, longevity, strength, and other similar considerations ? This would be to leave out of view the essen- tial purjiose of the inquiry, and the very matters which would throw most light on the nature of the injury, with reference to its influence on the insurable character of the life proposed. 358 Insurance : Fire, Life, Marine. o. vi. Looking, then, to the ])urpose for which the information is sought by the question, and to the difficulty of answering whether an injury was serious, in any other manner than by reference to its permanent or temporary influence on the health, strength, and longevity of the party, we are of opinion that the court did not err in the criterion by which it directed the jury to decide the interrogatory propounded to them. Passing then to the second branch of the case. The defendant excepted to the introduction of the oral testimony regarding the action of the agent, and to the instructions of the court on that subject ; and assigns the ruling of the court as error on the ground that it permitted the written contract to be contradicted and varied by parol testimony. The great value of the rule of evidence here invoked cannot be easily overestimated. As a means of protecting those who are honest, accurate, and prudent in making their contracts, against fraud and false swearing, against carelessness and inac- curacy, by furnishing evidence of what was intended by the parties, which can always be produced without fear of change or liability to misconstruction, the rule merits the eulogies it has received. But experience has shown that in reference to these very matters the rule is not perfect. The written instrument does not always represent the intention of both parties, and sometimes it fails to do so as to either; and where this has been the result of accident, or mistake, or fraud, the principle has been long recognized that under proper circumstances, and in an appropriate proceeding, the instrument may be set aside or reformed, as best suits the purposes of justice. A rule of evidence adopted by the courts as a protection against fraud and false swearing would, as was said in regard to the analo- gous rule known as the statute of frauds, become the instrument of the very fraud it was intended to prevent, if there did not exist some authority to correct the universality of its applica- tion. It is upon this principle that courts of equity proceed in giving the relief just indicated ; and though the courts, in a common law action, may be more circumscribed in the freedom with which they inquire into the origin of written agreements, such an inquiry is not always forbidden by the mere fact that the party's name has been signed to the writing offered in evidence against him. c. VI. Union Mut. Ins. Co. v. Wilkinson. 359 In the case before us a paper is offered in evidence against the plaintiff containing a representation concerning a matter material to the contract on which the suit is brought, and it is not denied that he signed the instrument, and that the repre- sentation is untrue. But the parol testimony makes it clear beyond a question, that this party did not intend to make that representation when he signed the paper, and did not know he was doing so, and, in fact, had refused to make any statement on that subject. If the Avriting containing this representation had been prepared and signed by the plaintiff in his application for a policy of insurance on the life of his wife, and if the representation complained of had been inserted by himself, or by some one who was his agent alone in the matter, and for- warded to the principal office of the defendant corporation, and acted upon as true, by the officers of the compan}'-, it is easy to see that justice would authorize them to hold him to the truth of the statement, and that as they had no pp.rt in the mistake which he made, or in the making of the instrument which did not truly represent what he intended, he should not, after the event, be permitted to show his own mistake or carelessness to the prejudice of the corporation. If, however, we suppose the party making the insurance to have been an individual, and to have been present when the application was signed, and soliciting the assured to make the contract of insurance, and that the insurer himself wrote out all these representations, and was told by the plaintiff and his wife that they knew nothing at all of this particular subject of inquiry, and that they refused to make any statement about it, and yet knowing all this, wrote the representation to suit him- self, it is equally clear that for the insurer to insist that the policy is void because it contains this statement, would be an act of bad faith and of the grossest injustice and dishonesty. And the reason for this is that the representation was not the statement of the plaintiff, and that the defendant knew it was not when he made the contract ; and that it was made by the defendant, w^ho procured the plaintiff's signature thereto. It is in precisely such cases as this that courts of law in modern times have introduced the doctrine of equitable estop- pels, or, as it is sometimes called, estoppels in pais. The principle is that where one party has by his representations or 360 Insurance : Fire, Life, Marine. o. "Vi. his conduct induced the other party to a transaction to give him an advantage which it would be against equity and good conscience for him to assert, he would not in a court of justice be permitted to avail himself of that advantage. And although the cases to which this principle is to be applied are not as well defined as could be wished, the general doctrine is well under- stood and is applied by courts of law as well as equity where the technical advantage thus obtained is set up and relied on to defeat the ends of justice or establish a dishonest claim. It has been applied to the precise class of cases of the one before us in numerous well-considered judgments by the courts of this country. Indeed, the doctrine is so well understood and so often enforced that, if in the transaction we are now consider- ing. Ball, the insurance agent, who made out the application, had been in fact the underwriter of the policy, no one would doubt its applicability to the present case. Yet the proposition admits of as little doubt that if Ball was the agent of the insurance company, and not of the plainti£f, in what he did in filling up the application, the company must be held to stand just as he would if he were the principal. Although the very well-considered brief of counsel for plaintiff in error takes no issue on this point, it is obvious that the soundness of the court's instructions must be tested mainly by the answer to be given to the question, " Whose agent was Ball in filling up the application ?" This question has been decided differently by courts of the highest respectability in cases precisely analogous to the present. It is not to be denied that the application, logically considered, is the work of the assured ; and if left to himself, or to such assistance as he might select, the person so selected would be his agent, and he alone would be responsible. On the other hand, it is well known — so well that no court would be justified in shutting its eyes to it — that insurance companies organized under the laws of one State, and having in that State their principal business office, send these agents all over the land with directions to solicit and procure applications for policies, furnishing them with printed arguments in favor of the value and necessity of life insurance, and of the special advantages of the corporation which the agent represents. They pay these agents large commissions on the premiums thus obtained, o. VI. Union Mut. Ins. Co. v. Wilkinson. 361 and the policies are delivered at their hands to the assured. The agents are stimulated by letters and instructions to activity in procuring contracts, and the party who is in this manner induced to take out a policy rarely sees or knows anything about the company or its officers by whom it is issued, but looks to and relies upon tho agent who has persuaded him to effect insurance as the full and complete representative of the company, in all that is said or done in making the contract. Has he not a right to so regard him ? It is quite true that the reports of judicial decisions are filled with the efforts of these companies, by their counsel, to establish. the doctrine that they can do all this and yet limit their responsibility for the acts of these agents to the simple receipt of the premium and delivery of the policy, the argument being that, as to all other acts of the agent, he is the agent of the assured. This proposition is not without support in some of the earlier decisions on the subject ; and at a time when insurance companies waited for parties to come to them to seek assurance, or to forward appli- cations on their own motion, the doctrine had a reasonable foundation to rest upon. But to apply such a doctrine in its full force to the system of selling policies through agents, which we have described, would be a snare and a delusion, leading, as it has done in numerous instances, to the grossest frauds, of which the insurance corporations receive the benefits, and the parties supposing themselves insured are the victims. The tendency of the modern decisions in this country is steadily in the opposite direction. The powers of the agent Sire, prifnd facie, co-extensive with the business intrusted to his care, and will not be narrowed by limitations not communicated to the person with whom he deals. An insurance company, estab- lishing a local agency, must be held responsible to the parties with whom they transact business for the acts and declarations of the agent, within the scope of his employment, as if they proceeded from the principal. In the fifth edition of "American Leading Cases," after a full consideration of the authorities, it is said : " By the interested or officious zeal of the agents employed by the insurance companies, in the wish to outbid each other and procure customers, they not unfrequently mislead the in- sured, by a false or erroneous statement, of what the applica- 302 Insukanoe : Fike, Life, Marine. o. vi. tion should contain, or, taking the preparation of it into their own hands, procure his signature by an assurance that it is properly drawn, and will meet the requirements of the policy. The better opinion seems to be that, when this course is pur- sued, the description of the risk should, though nominally pro- ceeding from the insured, be regarded as the act of the in- surers." Roioley v. Empire Ins. Oo., 36 N. Y. 550. The modern decisions fully sustain this proposition, and they seem to us founded in reason and justice, and meet our entire approval. This principle does not admit oral testimony to vary or contradict that which is in writing, but it goes upon the idea that the writing offered in evidence was not the instrument of the party whose name is signed to it ; that it was procured under such circumstances by the other side as estops that side from using it or relying on its contents ; not that it may be contradicted by oral testimony, but that it may be shown by such testimony that it cannot be lawfully used against the party whose name is signed to it. Judgment affirmed. New York Court of Appeals, 1877. TAN SCHOICK v. NIAGARA FIEE INS. CO. (68 N. Y. 434.) An act of tlie company's agent in recognition of the validity of the contract, coupled with knowledge of a ground for forfeiture, will amount to a waiver. Folger, J. — This was an action upon a policy of fire insur- ance. It contained this condition : " Any interest in property insured not absolute, or that is less than a perfect title, or if a building is insured that is on leased ground, the same must be specifically represented to the company, and expressed in this policy in writing, otherwise the insurance shall be void," The fact is, that part of the property described in the policy, as subject of the insurance, was a building on leased ground. That fact was not expressed in writing in the policy. The de- fendant claims that thereby the insurance was void, and puts itself thereon as a defense to the action. It is to be observed of this condition, that it is not one of those which are subse- quent to the formation of the contract, a breach of which may 0. VI. Van Schoick v. Niagara Fire Ins. Co. 363 occur after there has been a valid contract made and entered into, and continued in existence for a part of its prescribed term. It is a condition precedent, lying at the threshold of the making of the contract, and which, if not then performed or not then obviated, prevents the formation of an enforcible contract. It is obvious that, this building being on leased ground, the very moment that the policy passed from the de- fendant to the plaintiff the insurance on it was void, if the con- dition holds. They were concurrent acts, the delivery of the contract, and a breach of this condition ; so that at the same instant that the defendant said we insure this building, at the same instant the condition was broken and the insurance was void. So that, if nothing is shown to break the rigid effect of this condition, there never was any insurance by this defendant upon that building. We Avould scarce expect two parties to go through so senseless and trifling an act, if the facts were known to each at the time ; but would rather conclude that they had by words or act agreed that the condition should not be con- sidered as binding. " If these defendants were an entity, and could have stood near to that building when the oral negotia- tion for insurance was made and completed, and have seen " and known that it was upon leased ground, " could it fairly be contended that they would have offered to the plaintiff, or that he would knowingly have received, as the correctly written evidence of the contract, this policy, with the condition in question contained in it as an operative and binding clause? We cannot suppose that either plaintiff or defendant would do the utterly absurd thing of making, with deliberation and knowledge, a contract that was void from inception, and was in contradiction of the facts and statements of the negotiation." It is plain that the plaintiff and the agent meant to contract and did contract for the insurance of that building as a build- ing on leased land. Cone v. Niag. Fire Ins. Co.., 60 N. Y. 619. Hence we are not surprised that the plaintiff claims that the fact that the building was on leased ground was made known to the defendant when the policy was applied for ; and that the policy was delivered and the premium accepted by them without insisting upon the fact and the condition. He makes that action of the company, with that knowledge, his reply to their defense based on that condition and its breach. 364 Insurance : Fike, Life, Marine. 6. vi. We must first inquire whether the plaintiff is right as to the fact of the prior knowledge of the defendant that the building was upon leased ground. It is shown that at a time previous to the issuing of this policy the facts in relation to the title of the property, just as they were (that the land was owned by one person and the building by another, and the contract be- tween them), were told to one Lewis, an insurance agent. This Lewis, Avhen the policy in suit was issued, having this inforimi- tion, and with a view to this insurance, asked if there was any change in the property, and was told that there was not. So that, at the time of the issuing of this policy, Lewis was in- formed of the fact that this building was within the scope of this condition. It is now to learn if Lewis was the agent, or substantially so, of the defendant. It is shown that one Doo- little was the commissioned and ostensible agent of the defend- ant, but that Lewis and he were in partnership in the business of soliciting and procuring insurance ; that Lewis did with assent of Doolittle so act as to this defendant ; that such action was known to defendant and not disapproved of by it ; that a joint commission had for some time been promised by the defendant to those two as its agents, which was delayed, but finally issued before the delivery of this policy. Bodine v. Exchange Fire Ins. Co., 51 I^. Y. 117. We think that the facts bring the case within that decision. So that, as the informa- tion of the agent is the information of his principal, the de- fendant, when it accepted this risk, had information that this building stood upon leased ground. Besides that, in stating these facts as they appeared to hira on the motion of the de- fendant that the court direct a verdict for it, the learned judge who held the circuit assumed or found that Lewis had the rela- tions of an agent to the defendant. No objection was made by the defendant to this, nor any request to go to the jury upon it as a question of fact. So it must be taken as a conceded fact in the case. Tallman v. Atlantic Ins. Co., 3 Keyes, 87. And so again comes up the oft-recurring and still vexed question between insurance companies and their policy-holders — whether a fact, thoroughly well known and comprehended by both sides to the contract before it is delivered, may, by force of some condition, crouched unseen in the jungle of printed matter with which a modern policy is overgrown, make a de- c. VI. Yan Sohoick v. Niagara Ft be Ins. Co. 365 fense for the company, after tlie catastrophe and damage has hap[)ened against which it professes to guard. It is to bo con- fessed that the decisions in this State do not, upon a cursory- perusal at least, seem strictly in harmony in regard to it. There are cases which hold that where an application is made a part of the policy by the terms of it, and some false assertion has been inserted in the application by the agent, when the truth has been at the same time well known to him, that the in- sured shall not be prejudiced thereby ; Roioley v. The Einpire Ins. Co., 3 Keyes, 557 ; Plumh v. Catt. Im. Co., 18 N. Y. 392 ; Ames V. N. Y. Ins. Co., 14 N. Y, 253. There are others where the fact feU within the condemnation of some condition of the policy ; yet as the fact, as it existed, was known to the com- pan}'', it was held to be estopped from setting up the condition against a recovery; 14 N. Y., supra ^ Bidwell v. N. W. Ins. Co., 24 id. 302; Bodine v. Exchange Ins. Co., 51 id. 117. There are others in which there was a suit in equity, seeking a reformation of the contract, and it was held that the facts showed unmistakably that the parties never meant to enter into a contract wnth such a condition or description in it as was set up against a recovery; Cone v. Niagara Ins. Co., 60 N. Y. 619; Maher v. R'lbernia Ins. Co., 67 id. 283. In the latter case, the facts made a clear estoppel in pais against the company. It has also been held that a warranty, part of the printed matter of the policy, has been dispensed with by the oral agreement of the parties made before the delivery of the policy ; McCall v. Sun Mut. Ins. Co., ^^ N. Y. 505. On the other hand, in an action at law it has been held, that, where the terms of the pol- icy are clear and unambiguous, parol proof is inadmissible to vary them, or to show that either or both parties were not aware that they were exchanging a contract such as was re- quested, and as agreed with the facts in the situation of the property. Pindar v. Resolute Ins. Co., 47 N. Y. 114 ; see also Rohrhack v. Germania Ins. Co., 62 id. 47. And so it has been held that parol proof is not admissible to show that both parties knew that a statement in an application for a policy was not true; Ripley v. JEtna Ins. Co., 30 N. Y. 136. Other cases bearing upon the subject might be cited — quantum suff. There is no doubt but that, ordinarily considered, this con- dition in the policy was a warranty that the building did not 366 Insurance: Fire, Life, Marine. o. vi. stand upon leased land, and that the truth of that warranty became a condition precedent to any liability on the part of the defendant. Yet there is no doubt, too, that a condition in a policy may be waived by the insurer, or, as some cases put it, he be estopped from setting it up, and that such result may be worked by parol, or by act Avithout words. It has been held over and over, that the customary clause in a policy, that it will not be binding upon the insurer until the premium is paid in fact, may be waived by parol or by act, and the policy may be delivered and become a binding contract upon the insurer without payment in hand of the premium ; Trustees, etc., v. Br. Ins. Company, 19 N. Y. 305 ; Sheldon v. Atlantic Fire Ins. Co., 26 id. 460; Wood v. Po. Ins. Co., 32 id. 619; Boehen v. Wms. B. City Ins. Co., 35 id. 131 ; Bodine v. Ins. Co., 51 id. 117. As to other waivers, see Ludwig v. Jersey City Insurance Company, 48 N. Y. 384, and cases there cited ; Shearman v. Niagara Fire Insurance Company, 46 id. 532. Now, in this first class of cases, it has been thought that the fact that the insurer delivered to the insured the written contract as the consummated agreement between them, and did not then exact present payment of the premium as a necessary precedent to delivery, was too plainly in contradiction with the condition for prepayment for it to be supposed that it was meant by the in- surer or supposed by either party that it was intended to make that condition a potent part of the contract. Such a provision, it is said, could have no effect upon the delivered and perfect contract in which it was contained ; 19 N. Y., supra. It would be imputing a fraudulent intent to the defendant in this case, to say or to think that they did not mean, when they delivered this policy to the plaintiff, to give him a valid and binding contract of insurance, or that they did not mean that he should believe that he had one, or that they did not suppose that he did so believe. And such imputation can be avoided only by supposing that it had overlooked this condition, and so forgotten to express the fact as to the building, in writing, upon the policy ; or that it waived the condition, or held itself estopped from setting it up. The condition of prepayment of premium is, like this under consideration, one at the threshold of the making of the contract, and, if it is not observed, no valid contract is made unless it is stepped over or thrust aside. c. VI. Yan Schoick v. Niagara Fire Ins. Co. 367 It is consistent with fair dealing and a freedom from fraudu- lent purpose to hold that one or the other was done ; that is, that there was waiver, or an estoppel. There are other conditions precedent which may be waived. Thus in Myers v. Life Insurance Company^ 27 Penn. St. 268, it is said that the countersigning by the agents is under some circumstances not essential, though required by condition. The ground there stated is, that, on an equitable interpretation of the whole contract, it may become the duty of the court to dispense with a portion of the forms of the contract, if it can find any reliable substitute for them, on the principle that cures defective execution of powers where the intention to execute is sufficiently plain. The contract was to be complete when delivered by the agents, and countersigning b}'' them was to be the appointed evidence of its proper delivery. There ma}" be other evidence, to be regarded as equivalent. So here it was not that the defendant would not at all insure a build- ing on leased lands. They did agree to take a risk upon it. But, to have it insured by them, the fact of it being on leased land must be expressed to them. This was done. As evidence that it was done, it must, they said in the policy afterwards delivered, appear in writing on the polic3\ This is, like coun- tersigning by agent, but one of the forms of making the con- tract. That the policy was delivered, and the premium received, with full purpose of insuring that building, with full purpose of making a valid and obligatory contract, is evidence that through neglect or forgetfulness one of the forms was not observed, or that it was waived by the parties. This case is to be distinguished from that of Pindar, 47 N. Y. 114. There Pindar asked a policy in a certain form of words. The insurer issued it to him in a different form, and in such form as would not cover certain classes of goods, and as, by the presence of those classes in the store, rendered the whole policy void. It was not proposed to show that the insurer knew that the very class of goods on which insurance was sought was in the store, and that the policy was delivered with the purpose to insure that class, and with the mutual understanding that by the policy it was insured. Hence, that case differs from this, and it was properly held that Pindar was bound by his contract. In RohrhacK's Case, supra^ the 368 Insurance: Fire, Life, Marine. o. n. decision wont upon the effect of a peculiar clause in the policy, and in that fact is quite different from this. Chase v. Hamil- ton Insurance Company^ 20 N. Y. 52, is put upon a ground very like that in liohrhaclis Case: that it was printed in the application, that the company would not be bound by knowl- edge of the agent, and that the company could not be held thereby, unless there was fraud, or prevention of the applica- tion from making a true statement. Ripley v. The JEtna In- surance Company^ 30 N. Y. 136, is to be distinguished from this in hand. There the representation or warranty was prom- issory. It was an agreement by the applicant that he would thereafter keep a watchman in his mill of nights. This looked to the future conduct on his part. It was not a part of the form of the contract. And though the agent of the insurer knew the custom of the applicant had not been to keep a watchman in his mill from midnight on the last day of the week till midnight of the first day of the next week, that did not affect his promise thereafter to do differently. It is diflBcult to make all the cases upon this subject har- monize ; but, by the force of authority, we are constrained to hold, that such a condition as this may be waived by the insurer, by express words to that effect, or by acts done under such circumstances as would otherwise impute a fraudulent purpose, and as will estop him from setting up the condition against the insured. We, therefore, conclude that the judgment appealed from should be affirmed. Church, Ch. J., Andrews and Miller, JJ., concur; Allen, Rapallo, and Earl, JJ., dissent. Judgment affirmed. 0. VI. Dewees v. Manhattan Ins. Co. 369 New Jersey Court of Errors and Appeals, 1872. DEWEES V. MANHATTAN INS. CO. (6 Vroom, 366.) The opposing view ; namely, that the terms of the policy cannot be disturbed by parol testimony of what occurred at or prior to its inception. Assumpsit on a policy of insurance. Beasley, Chief Justice. — The contract between these liti- gants, on the point which I shall discuss, is clear and unambig- uous. The defendants agreed to insure a building occupied as a country store, and the stock of goods, consisting of the usual variety of a country store. This, by the plain meaning of the terms employed, is a warranty on the part of the insured that the building was used, at the date of the agreement, for the purpose specified. It was a representation, on the face of the policy, touching the premises in question, and which aiBFected the risk ; and such a representation, according to all the author- ities, amounts to a warranty. Formal words are not necessary for the creation of an obligation of this character, and, in fact, it usually arises from words of description which limit the risk contained in the written contract. For example, in a marine insurance, the words " to sail on such a day," or " in port," or "all well on such a day," are plain warranties, demanding a literal fulfillment, and are quite as efficacious as would be a formal clause framed to effect the same purpose. Referring to a fire insurance, the court in Wood v. The Hartford Fire Ins. Co., 13 Conn. 533, says any statement or description, on the part of the insured, on the face of the policy, which relates to the risk, is an express warranty, and such a warranty, being a condition precedent, must be strictly complied with, or the in- surance is void. The same doctrine is maintained by the Court of Appeals of New York, in the case of Wall w The East River Mutual Insurance Company, 3 Seld. 370, the policy in that instance being declared void on the ground that the building was described as being " occupied as a storehouse," and it ap- peared it was used also for another purpose. The cases are numerous and decisive upon the subject — so much so that it does not appear to me to be necessary to refer to them in de- 24 370 Insurance: Fire, Life, Marine. o. vi tail, as, in my opinion, the character of a representation of this kind is apparent upon its face. It can be intended for no other purpose than to characterize the use of the building at the date of the insurance ; for, unless this is done, there can be no restriction on the use of the property by the insured dur- ing the running of the risk. Unless this description has the force thus attributed to it, the premises could have been used for any of the most hazardous purposes. A building described in a policy as a ''dwelling-house" could, except for the rule above stated, be converted into a mill or factory. I think it is incontestably clear that the description of the use of the prem- ises in this case was meant to define the character of the risk to be assumed by the defendants. But, besides this, it is plain that the written contract was violated in a fatal particular by the assured. By the express terms of one of the stipulations of the insurance, it is declared that, if the premises should be used " for the purpose of carry- ing on therein any trade or vocation, or for storing or keeping therein any articles, goods, or merchandise denominated hazard- ous, or extra hazardous, or specially hazardous, in the second class of the classes of hazards annexed to this policy, etc., from thenceforth, so long as the same shall be so used, etc., the policy shall be of no force or effect." Among the extra-hazardous risks, that of keeping a " private stable " is enumerated ; and it was shown on the trial, and was not denied, that at the date of the policy, and at the time of the fire, a part of the building insured was applied by the plaintiff to this use. It cannot be denied, then, that if we take into view these conditions of the case alone; the plaintiff's action must fall to the ground. He did an act which, by force of his written agreement, had the effect to suspend, temporarily, his insurance. As this fact, having this destructive effect, could not be dis- puted, it became necessary, in order to save the plaintiff's action, to avoid the effect of the written contract ; and this burden was assumed, on the argument, by the counsel of the plaintiff. The position taken with this view was, that the policy was obtained for the plaintiff by the agent of the defend- ants, and that he knew that the building in question was, in part, used as a stable. The plaintiff's claim appears to be a meritorious one, and c. VI. Dewees v. Manhattan Ins. Co. 371 on this account, and in the hope that there might be found some legal ground on which to support this action, the case was allowed by me at the circuit to go to the jury, and the questions of law were reserved for this court. But the consid- eration which I have since given the matters involved has excluded the faintest idea that, upon legal principles, this suit can be successfully carried through. In my opinion, that end can be attained only by the sacrifice of legal rules which are settled, and are of the greatest importance. Let us look at the proposition to which we are asked to give our assent. The contract of these parties, as it has been committed to writing, is, that if the plaintiff shall keep a stable on the premises insured, for the time being the policy shall be vacated. But, it is said, the agent of the defendants who procured this contract was aware that the real contract designed to be made was that the plaintiff might apply the premises to this use. This knowledge of the agent of the defendants, and which, it is conceded, will bind the defendants, is to have the effect to vary the obligations of the written contract. Upon what principle is this to be done ? There is no pretense of any fraud in the procurement of this policy. The only ground that can be taken is, that the agent, knowing that the premises were to be, in part, used as a stable, should have so described the use in the policy. The assumption is, and must be, that the warranty, in its present form, was a mistake in the agent. But a mistake cannot be corrected, in conformity with our judicial system, in a court of law. No one can doubt that in a proper case of this kind an equitable remedy exists. It is possible, therefore, that in this case, in equity, the present contract might be reformed so as to contain a permission for the plaintiff to keep his stable in this building; but I think it has never before been supposed that this end could be reached in this State by proof before the jury in a trial at the circuit. The principle would cover a wide field, for, if this mistake can be there corrected, so can every possible mistake. If the plaintiff can modify the stipulation with respect to the restricted use of the premises, on the plea of a mistake in such stipulation, on similar grounds it would be open to the company to modify the policy with respect to the amount insured. I am at a loss to see how, on the adoption of 372 Insurance : Fikk, Life, Marine. o. vi. the principle claimed, we are to keep separate the functions of our legal and equitable tribunals. Nor do I think, if this court should sustain the present action, that it could be practicable to preserve, in any useful form, tlie great primary rule that written instruments are not to be varied or contradicted by parol evidence. The knovirl- edge of the agent, in the present transaction, is important only as sliowing what the tacit understanding of the contracting parties was. Suppose, instead of proof of such tacit under- standing, the plaintiff had offered to make a stronger case, by showing that the agent expressly agreed that the building might be used not only as a country store, as the policy stated, but also as a stable, and that the restraining stipulation did not apply to the extent expressed. Can any one doubt that, according to the practice and decisions in this State, such proof should have been rejected ? A rule of law admitting such evi- dence would be a repeal of the principle giving a controlling efficacy to written agreements. The memory and understand- ing of those present at the formation of the contract would be quite as potent as the written instrument. I have not found that it is anywhere supposed that this general rule which illegalizes parol evidence, under the condi- tions in question, has been relaxed with respect to contracts for insurance. Decisions of the utmost authority, both in England and in this country, propound this doctrine as applica- ble to policies in the clearest terms. Chief Justice Parker, in his opinion in Iligginson v. Dall, 13 Mass. 96, says that " pol- icies, though not under seal, have, nevertheless, ever been deemed instruments of a solemn nature, and subject to most of the rules of evidence which govern in the case of specialties. The policy is itself considered to be the contract between the parties, and whatever proposals are made, or conversations had, prior to the subscription, they are to be considered as waived, if not inserted in the policy, or contained in a memorandum annexed to it." Atherton v. Brown, 14 Mass. 152, is, upon this point, of the same complexion, and has close pertinency to the case under consideration with respect to the application of the rule of evidence. The description was of property insured " on board the Spanish brig New Constitution,''^ and the /essel was captured, and, with her cargo, was condemned as Araeri- 0. VI. Dewees v. Manhattan Ins. Co. 373 can property ; and it was held that the description in the policy amounted to a warranty that the vessel was Spanish, and that it was not competent for the assured to show that the under- writers were informed, at the time of their subscription, that she was, in fact, an American vessel. The court said that parol evidence of what was within the knowledge of the under- writers was not admissible. The following are cases which establish the same proposition : Yandervoort v. The Coluiiihia Insurance Company, 2 Caines' E.. 155 ; Weston v. Mnes, 1 Taunt. 115; Parks v. General Int. Assur. Co., 5 Pick. 34; Flinn V. ToUn, 1 Mood. & Malk. 367 ; Jetinings v. The Che- nango Mut. Ins. Co., 2 Denio, 75 ; Angell on Fire and Life Ins., §§ 20, 21. There are several reported decisions which I do not think are distinguishable with respect to legal rules and their application, from the present. Among these is that of Jennings v. Th€ Chenango Mutual Insurance Company, 2 Denio, 75. There the property insured was described as a " grist-mill," and it was proved that carpenters' work was accustomed to be done in ic, with instruments and fixtures which were kept there. One of the principal questions in the case was whether it was com- petent to prove, that, at the time the application was made for this policy, the agent for the defendants was informed that these fixtures were in use in the mill. This proof was rejected, and the policy held void ; the ground of rejection being the general rule of evidence, which places written instruments above the level of parol testimony. Quite as strong in favor of the same doctrine is the case of Kennedy v. The Si. Lawrence County Mutual Insurance Company, 10 Barbour, 285. The application of the insured, which formed a part of the policy, described erroneously the buildings which were within a cer- tain distance of the premises. Here the same circumstance was relied on as a defense Avhich has been set up in the present case ; namely, that the agent of the defendants had full knowl- edge of the situation of the premises and its neighborhood, and that he drew the application, and specified in it such buildings as he chose. This defense was overruled, and the defendants had judgment. With respect to the case of Plumb v. The Cattaraugus County Mutual Insurance Company, 18 N. Y. 392, to which 374: In8URA.nck : Fire, Life, Mabinb. o. ti. we were referred by counsel, my answer is two-fold : first, that I cannot assent to the doctrine on which that judgment is founded ; and, in the second place, that doctrine, if correct, could have no application to the facts now under considsration. In the case from New York here referred to, there was, in the application for the policy, a misdescription of the distance of the adjacent buildings from the premises insured, and to this defense the reply was, that the agent of the company had made the measurements, and had obtained the signature of the plaintiff on the assurance "that the application was all right, and just as it should be." The court decided that this declara- tion of the agent could not be offered for the purpose of alter- ing or contradicting the written contract, but that it was admissible as an estoppel in pais. Now, it is at once obvious that, by force of that view, the agreement in question was enforced, not in the sense of the written terms, but in the sense of the oral evidence, and that the practical result was precisely the same as though the instrument had been reformed in conformity to such evidence at the trial. I think there is no doubt that this application of the doctrine of estoppel to written contracts is an entire novelty. In the long line of innumerable cases which have proceeded and been decided on the ground that parol evidence is not admissible as against a Bvritten instrument, no judge or counsel has ever intimated, as it is believed, that the same result could be substantially obtained by a resort to this circuity. It is true that, if there be a substantial ground in legal principle for its introduction, the fact that it is new will not debar from its adoption ; but I have not been able to perceive the existence of such substantial ground. In my apprehension, the doctrine can be made to appear plausible only by closing the eyes to the reason of the rule which rejects, in the presence of written contracts, evi- dence by parol. That reason is, that the common good requires that it shall be conclusively presumed in an action at law, in the absence of deceit, that the parties have committed their real understanding to writing. Hence, it necessarily fol- lows, that all evidence merely oral is rejected, whose effect is to vary or contradict such expressed understanding. Sucn rejection arises from the consideration that oral testimony is unreliable in comparison with that which is written. It is 0. VI. Dewees v. Manhattan Ins. Co. 375 idle to say that the estoppel, if permitted to operate, will pre- vent a fraud or inequitable result ; most parol evidence contra- dictory of a written instrument has the same tendency ; but such evidence is rejected not because, if true, it ought not to be received, but because the written instrument is the safer crite- rion of what was the real intention of the contracting parties. In the case now criticised, the party insured stipulated against the existence of buildings within a definite number of feet from the insured property ; by the admission of parol testimony, this stipulation was restricted and limited in its effect. This result, no doubt, was strictly just, if we assume that the parol evidence was true ; but, standing opposed to the written evidence, the law presumed the reverse. The alternative is unavoidable ; it is a choice between that which is written and that which is unwrit- ten. In the case cited, the effect of the rule adopted by the court was to give a different effect to the written terms from that which they intrinsically possessed, a result induced by the admission of oral evidence. This, I cannot but think, was a palpable alteration of the agreement of the parties. The mis- take of the court appears to have been in regarding simply the legal effects of the facts which were proved by parol. Receiv- ing that testimony into the case, a clear estoppel was made out ; but the error consisted in the circumstance that such oral evidence was, on rules well settled, inadmissible. The question presented was purely one as to a rule of evidence, but it was treated as a problem relating to the application of general legal principles to an admitted state of facts. The case was not decided by a unanimous court ; three judges dissented, and, in my judgment, that dissent was based on satisfactory grounds. But it has been already observed, that, even if the doctrine of the adjudication should be received by this court, such result could have no effect on our decision of the present case. The reason is, that the facts now before us do not present the ele- ments of an estoppel. Such a defense rests on a misconception as to a state of facts, induced by the party against whom it is set up. The person who seeks to take advantage of it must have been misled by the words or conduct of another. Now, in the present case, the agent did not make any statement nor did he do anything which led the plaintiff to alter his condi- 876 Insukanob : Fire, Life, Marine. c. VL tion. The most that can be laid to his charge is, that from carelessness he omitted properly to describe the use of the premises insured. But this was not a misstatement of a fact on which the plaintiff acted, because the plaintiff was aware of the circumstance that the building was put to another use. The alleged error in the description is plain on the face of the policy, and the law incontestably charges the defendant with knowledge of the meaning and legal effect of his own written contract. Certainly the entire state of things was as well known to the plaintiff as it was to the agent of the defendants. To found an estoppel on the ignorance of the plaintiff of the plainly expressed meaning of his own contract, would be absurd. Being of opinion that the plaintiff's case, on this first point, cannot stand, I have not thought it necessary to look into the other grounds of objection raised on the part of the defense. CHAPTER Vn. GENERAL PRINCIPLES. Waiver and Estoppel — Continued. OONNEOTICUT SuPREME CoURT OF ErRORS, 1871. COUCH V. CITY FIRE INS, CO. (38 Conn. 181.) Essential provisions of the charter cannot be waived.^ Assumpsit on a policy of insurance. The twelfth section of the defendants' charter contained the following provision: "If there shall be any other insur- ance upon the whole or any part of the property insured by any policy issued by said company, during the whole or any part of the time specified in such policy, then every such policy shall be void, unless such double insurance shall exist by con- sent of said company, indorsed upon the policy under the hand of the secretary." The defendants insured Mrs. Couch, one of the plaintiffs, on a dwelling-house and other property owned by her, by a policy containing a condition similar in substance to the above provision of the charter. At the time the policy was issued other insurance existed on the same property in the North American Fire Insurance Company, but the consent of the de- fendants to such other insurance was not indorsed upon the policy. The insured property having been destroyed by fire, this action was brought to recover the loss. ' The opinion of the court contains a good exposition of this principle, but the application of it made to the facts of this case would seem to be open to some question. Cumberland Valley Mut. Prot. Ins. Co. v. Sehell, 29 Pa. St. SI; Hoxsie v. Prov. Mut. Fire Ins. Co., (J R. I 517; Puller v. Boston Fire Ins. Co., 4 Met. (Mass.), 206 ; Wilbur v. New England Mut. Fire Ins. Co., 31 Me. «19. 378 Insdbanoe : Fire, Life, Marine. o. m. On the trial the plaintiffs claimed that it was competent for the defendants to waive the above conditions of the charter and the policy, by acts in parol, and introduced parol evidence to prove such waiver by the officers and agent of the company. The defendants objected to the admission of such evidence, but the court admitted it. The defendants also asked the court to charge the jury that it was not competent to prove the consent of the company to such double insurance by any other evidence than an indorsement of such consent upon the policy under the hand of the secretary, nor was it competent for the executive officers of the company, by any acts in parol, to waive a substantial compliance with the requirements of their charter in this respect, and in reference to this policy. The court (Pardee, J.) charged the jury, that the question of waiver was for them upon all the evidence before them, and that, if the executive officers of the company had waived the right to require such evidence of consent, by any acts in parol which they should find proved in the case, or if they had au- thorized their agent, and he had so waived, then the company was bound, and was estopped by such acts and waiver, not- withstanding the charter and the conditions of the policy, and without such indorsement as was called for by the charter. The jury returned a verdict for the plaintiffs, and the de- fendants moved for a new trial for a verdict against evidence, and for errors in the rulings and charge of the court. Park, J. — There was double insurance in this case at the time this policy was issued, and the consent of the company thereto was not indorsed upon the policy. The charter there- fore declares the policy void, and it is void unless the twelfth section is of such a character that its provisions can be waived by the defendants. If this provision was made solely for the benefit of the de- fendants, there might be force in the claim of the plaintiffs that it could be waived, on the ground that what is exclusively for the benefit of a person, either natural or artificial, is for him to enjoy or not as he pleases ; and if he chooses to forego the benefit, he has a right to do so, as no one but him is inter- ested in the matter. But we think the defendants are not solely interested in this provision of the charter. It was made 0. VII. CouoH V. City Fire Ins. Oo. 379 to guard against the danger of over-insurance. It is well known that over-insurance encourages incendiary fires ; and insurers are therefore extremely careful not to insure property to the full amount of its value, but leave the assured to be him- self the insurer of a pai't thereof, that he may have a common interest with them in the preservation of the property. The eleventh section of the defendants' charter, as well as the one under consideration, shows what solicitude the legislature entertained lipon this subject, and the great care they exer- cised to prevent this evil. Such being the tendency of over-insurance, it is manifest that it endangers not only the welfare of insurers, but the welfare of all their policy-holders, who have a deep interest in their solvency in case of loss by fire. Insurance companies insure property to an amount many times their capital, and it may easily happen that a few fraudulent incendiary fires scat- tered over the countiy should involve them and their policy- holders in heavy and perhaps ruinous losses. But the evil of over-insurance does not stop here. Ever}' where insured prop- erty is mingled indiscriminately with property not insured. The burning of the insured property burns the other also ; and ever}' year vast amounts of property not insured go to destruc- tion in consequence of the over-insurance of property in its neighborhood. Surely the welfare of such owners should be considered by legislatures, and provision should be made for them when corporations like these are created. It is to be con- sidered also that the welfare of the State, which has an interest in all the property of the State, requires that this should be done. One great source of this evil is the insurance of the same property by different companies, when each company is not aware of the act of the other. To prevent this evil, as far as may be, in the present case, we think the legislature inserted the twelfth section in the defendants' charter, intending thereby to put it out of the power of the defendants to insure property otherwise than is provided therein. The evil could not be successfully reached by merely requir- ing the consent of the company to such further insurance. There would be no security from misunderstanding, misremera- brance, and fraud. The difference is great between leaving the 380 Insurance : Fire, Life, Marine. o. vii. consent of the company to be proved by the vagueness and uncertainty of parol evidence, and requiring it to be shown by a formal indorsement upon the policy under the hand of their secretary, which could not be made without consideration and deliberation on the one hand, and certainty of the fact on the other. Hale v. Mechanics Mut. Fire Ins. Co., 6 Gray, 169. This difference is all-important in a case like this ; and, in- deed, if mere consent was all that the legislature intended by the twelfth section of this charter, then no object was accom- plished, or could be accomplished, by inserting it in the char- ter ; for if the defendants should make an absolute contract of insurance, without any condition that it should become void if there was or should be further insurance on the property by any other company, during the whole or any part of the time covered by the policy, they would be taken by jurors as having given consent in advance to such further insurance ; or the mere fact of such al)solute contract would be sufficient evidence with them of a waiver of the condition. It would be urged that the plaintiff was ignorant of the provisions of the charter, and, if the defendants intended to make it a part of the con- tract, they would have informed the plaintiff by inserting it in the policy. Thus, in order to make it a part of the contract, it would have to be inserted in the policy of insurance, whether it was embodied in the charter or not ; and, if inserted in the policy, it would have all the effect that the charter could give it, if the legislature intended no more by this provision than mere consent. We think, therefore, that the legislature had more than this in view, and intended to limit the power of the company in the matter. If, then, the twelfth section must have such construction, manifestly it could not be waived by the defendants, or de- parted from in any essential particular ; for, in the language of Chief Justice Marshall, in the case of Head v. Providence Ins. Co.., 2 Cranch, 127, " the act of incorporation is an enabling act ; it gives the corporation all the power it possesses ; it enables it to contract, and when it prescribes to it a form of contracting it must observe that mode, or the instrument no more creates a contract than if the body had never been incor- porated." Pliillips on Insurance (vol. i. p. 9) says an incor- porated insurance company '' is the mere creature of the act to o. yii. Union Mutual Life Ins. Co. v. Mowrt. 881 which it owes its existence, and may be said to be precisely what the incorporating act has made it, to derive all its powers from that act, and to be capable of exercising them only in the manner which that act authorizes." See also Kew London v. Brainard, 22 Conn. 552; Occum, Co.n. Sprague Manufactur- ing Co.^ 34 Conn. 529 ; Hood v. New York c& New Haven R.R. Co., 22 Conn. 502. We think, therefore, that it was not competent for the plaintiffs to prove the consent of the defendants to the double insurance on the plaintiffs' property by any other evidence than an indorsement of such consent on the policy under the hand of the secretary of the company, and that the jury should have been so instructed. In this opinion the other judges concurred ; except Fostkb, J., who dissented. New trial. United States Supreme Court, 187T. UNION MUTUAL LIFE INS. CO. v. MOWRT. (96 U. S. 544.) An oral promise of the insurers or their agent, made at the time of or before the contract, will not operate as an estoppel or waiver, and cannot be shown to contradict the policy. Action upon a policy of insurance of which the concluding clause is as follows: " But the same [the policy] shall not be binding until countersigned and delivered by John Shepley, agent, at Providence, R. L, nor until the advance premium is paid." There was a verdict for the plaintiff ; and, judgment having been rendered thereon, the defendant sued out this writ of error. Mr. Justice Field delivered the opinion of the court. This was an action on a policy of insurance, issued by the Union Mutual Life Insurance Company, a corporation created under the laws of Maine, upon the life of Nelson H. Mowry, for the sum of $10,000. The insurance was effected by (the plaintiff) a nephew of the insured, for his sole benefit. The 882 Insurance : Fire, Life, Marine. a vn, nephew was at the time a creditor of tlie insured to the extent of $6,000, and had agreed to embark with him in an enterprise requiring the expenditure of considerable capital, and depend- ing for its success upon the knowledge and skill of the insured in business. These circumstances gave the nephew such an in- terest in the life of the insured as to prevent the policy from being a wager one. The insurance effected was from the 9th of March, 1867, and the policy recited the payment of the first annual premium on that day, and stipulated for the payment of the subsequent premiums on the same day of that month each year. The payment of the insurance money, after notice and proof of the death of the insured, was made dependent upon the punctual payment, each year, of the premium. The policy, in terms, declared that it was made and accepted by the insured and the nephew, upon the express condition that if the amount of any annual premium was not fully paid on the day and in the manner provided, the policy should be " null and void, and wholly forfeited." And it declared that no agent of the company, except the president and secretary, could waive such forfeiture, or alter that or any other condi- tion of the policy. The second premium, due on the 9th of March, 1868, was not paid, and the insured died on the 8th of April following. Forty-five days after it was due, and fifteen days after the death of the insured, this premium was tendered to the com- pany, and was refused. The question for determination is, whether a tender of the premium at that time was sufficient to hold the company to the payment of the insurance money. By the express condition of the policy, the liability of the company was released upon the failure of the insured to pay the premium when it matured ; and the plaintiff could not recover, unless the force of this condition could in some way be overcome. He sought to overcome it by showing that the agent who induced him to apply for the policy represented to him, in answer to suggestions that he might not be informed when to pay the premiums, that the company would notify him in season to pay them, and that he need not give himself any uneasiness on that subject ; that no such notification was given to him before the maturity of the second premium, and for that reason he did not pay it at the time required. This rep- a VII. Union Mutual Life Ins. Co. v. Mowky. 383 resentatiori before the policy was issued, it was contended in the court below, and in this court, constituted an estoppel upon the company against insisting upon the forfeiture of the policy. But to this position there is an obvious and complete answer. All previous verbal arrangements were merged in the written agreement. The understanding of the parties as to the amount of the insurance, the conditions upon which it should be pay- able, and the premium to be paid, was there expressed for the very purpose of avoiding any controversy or question respecting them. The entire engagement of the parties, with all the con- ditions upon which its fulfillment could be claimed, must be conclusively presumed to be there stated. If, by inadvertence or mistake, provisions other than those intended were inserted, or stipulated provisions were omitted, the parties could have had recourse for a correction of the agreement to a court of equity, w^hich is competent to give all needful relief in such cases. But, until thus corrected, the policy must be taken as express- ing the final understanding of the assured and of the insurance company. The previous representation of the agent could in no respect operate as an estoppel against the company. Apart from the circumstance that the policy subsequently issued alone expressed its contract, an estoppel from the representations of a party can seldom arise, except where the representation relates to a matter of fact — to a present or past state of things. If the represen- tation relate to something to be afterwards brought into ex- istence, it will amount only to a declaration of intention or of opinion, liable to modification or abandonment upon a change of circumstances of which neither party can have any certain knowledge. The only case in which a representation as to the future can be held to operate as an estoppel is where it relates to an intended abandonment of an existing right, and is made to influence others, and by which they have been induced to act. An estoppel cannot arise from a promise as to future action with respect to a right to be acquired upon an agree- ment not yet made. The doctrine of estoppel is applied with respect to repre- sentations of a party, to prevent their operating as a fraud upon one who has been led to rely upon them. They would have that effect, if a party, who, by his statements as to matters of 884 Insurance : Fire, Life, Marine. o. vil fact, or as to his intended abandonment of existing rights, had designedly induced another to change his conduct or alter his condition in reliance upon them, could be permitted to deny the truth of his statements, or enforce his rights against his de- clared intention of abandonment. But the doctrine has no place for application when the statement relates to rights depending upon contracts yet to be made, to which the person complain- ing is to be a party. He has it in his power in such cases to guard in advance against any consequences of a subsequent change of intention and conduct by the person with whom he is dealing. For compliance with arrangements respecting future transactions, parties must provide by stipulations in their agree- ments when reduced to writing. The doctrine carried to the extent for which the assured contends in this case would sub- vert the salutary rule that the written contract must prevail over previous verbal arrangements, and open the door to all the evils which that rule was intended to prevent. White v. Ashton, 51 N. Y. 280 ; Bigelow, Estoppel, 437-441 ; White V. Walker, 31 Bl. 422 ; Faxtoti v. Faxon, 28 Mich. 159. The learned judge who tried this case in the circuit court instructed the jury, in substance, that if they could find from the language of the agent that there was an agreement between him and the assured, made before the policy was executed, that the latter should have notice before he should be required to pay the annual premium, then that the company, not having given such notice, was estopped from setting up the forfeiture stipulated by the policy for non-payment of the premium when due. For the reasons we have stated, we think the court erred in this instruction. There is nothing in the record which shows that the agent was invested with authority to make an insurance for the com- pany. In representing himself as an agent, he only solicited an application by the assured to the company for a policy. That instrument was to be drawn and issued by the company, and it shows on its face that the authority to the agent was limited to countersigning it before delivery and to receiving the pre- miums. But even if the agent had possessed authority to make an insurance for the company, and he made the agreement jire- tended, still the assured was bound by the terms of the policy subsequently executed and accepted by him. c. VII. Landeks v. Coopeb. 385 The judgment must be reversed, and tiie cause remanded for a new trial ; and it is /So ordered. New York Court of Appeals, 1889. LANDERS V. COOPER. (115 N. Y. 279.) A new subject-matter of insurance cannot be substituted by the doctrine of waiver and estoppel. Appeal from judgment of General Term of Supreme Court in favor of plaintiff. This action was upon a policy of insurance issued by the "Watertown Fire Insurance Company, of which company the defendant is receiver, to the plaintiff, upon his " two-story dwelling-house." Andrews, J. — Two defenses are relied upon : first., that the building burned was not the building mentioned in the applica- tion and survey, and insured by the policy ; and, second., that when the polic}'' in question was issued, there was a prior in- surance on the building destroyed, in the Glens Falls Insurance Company, not consented to Iw the Watertown Fire Insurance Company, whereby, by the terms of the policy sued upon, it be- came void. The defendant, to establish the first defense, relied upon the following facts : (1) The policy, by its language, in- sures Landers in the sura of $800 " on the property described in the apphcation and survey bearing even date therewith, and which is hereby referred to as forming a part of the policy ; viz., $800 on his (Landers) two-story dwelling-house, Afton, N. Y." (2) The application on which the policy was issued describes the property to which the application relates as situated in Af- ton, N. Y., and being a tenant-house, two stories high, sixteen by twenty-four with wing sixteen by twenty-four, with two chimneys, and located sixty feet south of the dwelling-house of Landers (the applicant), and sixty feet west of a barn. This is an accurate description of the tenant-house near the dwell- ing-house of Landers, with the exception that its height is one and a half stories, and not two stories. (3) On the back of the application is a survey and diagram showing the dwelling- 26 386 Insurance: Fire, Life, Marine. o. tii. house, the tenant-house (consisting of a main part and wing), and the barn, their rehitive positions ; and under the tenant- house is the word '' risk." (4) The mill-house (the house burned) was situated half a mile from the dwelling-house of Landers, and was also a tenant-house. It was a building two stories high, twenty by thirty feet in size, without any wing, and having but one chimney. It was distant, at the nearest part, thirty-seven feet from a steam mill of Landers. It cor- responded in no respect with the building described in the ap« plication and survey with the single exception of height. (5) The application and survey were forwarded by Cannon, the agent, to the office of the company at Watertown, and the policy was issued thereon and mailed by the company to Laa ders. The company had no information as to the risk, or of any negotiations between Cannon and Landers other than was disclosed by the application. The plaintiff, notwithstanding this apparently conclusive evidence that the house insured was the tenant-house and not the mill-house, has recovered for the loss by fire of the mill- house, upon certain extrinsic proof submitted to the jury. It was shown that Landers, prior to the issuing of the policy in question, held two policies of insurance in the Glens Falls Insurance Company, of $800 each — one on the tenant-house (near his dwelling-house) expiring July 1, 18Y3, and one on the mill-house expiring May 1, 1874 — each for three 3^ears at the same rate of premium. The local agent of the Glens Falls Insurance Company, in the spring or summer of 1873, removed and sold out his business to Cannon, the local agent of the defendant's company, who transferred to him, among other things, an " expiration book," in which the two pohcies to Landers were entered — one entry being, "Thomas Landers, Glens Falls ; number of policy, 197 ; property, Afton, $800 ; premium, $4.80 ; expiring 1st of July, 1873," and the other, " Thomas Landers, Glens Falls Insurance Company ; number, 351 ; farm property in Afton, $800 ; premium, $4.80 ; rate, 60c. ; expiring the 1st of May, 1874." It will be noticed that the entries do not show on their face to what particular build- ing they severally apply. The plaintiff's version of the circum- stances which preceded the issuing of the policy in question is, substantially, that the agent Cannon in the spring of 1873 met a VII. Landers v. Coopeb. 387 Landers and informed him that the poHcy on the mill-house was about expiring, and asked him if he did not want it renewed, stating that the former agent of the Glens Falls Company had left, and he (Cannon) had his papers and was doing his business, and that he was the agent of the Water- town Fire Insurance Company, which was a good company, and solicited Landers to take a polic}'' in that company, to which he finally consented. The testimony of Landers to the point that the negotiation with Cannon related to a renewal of the policy on the mill-house is corroborated, to some extent, by other members of his family. The policy which expired in July, 1873, was the policy on the tenant-house. The policy on the mill-house did not expire until May, 18Y4. It was the policy on the tenant-house which needed to be renewed, and not the policy on the mill-house. But Landers relied, as he claimed, on the assurance of Cannon that it was the policy on the mill-house which would expire first, and thereupon author- ized him to procure a new insurance upon that building. Within a short time after the conclusion of the negotiation. Cannon made out the application and survey, and signed the name of Landers to the application, and forwarded them to the defendant. The application and survey, as has been shown, related to the tenant-house and not to the mill-house. Cannon, on the trial, contradicted the testimony of Landers and his witnesses as to the fact that the negotiation between himself and Landers related to the mill-house, and testified that the tenant-house was pointed out by Landers as the one upon which the policy was about to expire, and that the prop- osition on his part to procure a new policy related to the ten- ant-house and not to the mill-house. Upon this state of facts and the additional fact testified to hy Landers, that he did not authorize Cannon to sign any application, and that he had no knowledge of the application or survey until after the fire, the court submitted to the jury to find whether the application was authorized by Landers, and instructed them that if it was made without his authority or knowledge, and he did not know of the representations therein, they should disregard the appli- cation and survey, and determine the case upon the point whether the negotiation between Landers and Cannon related to the mill-house, and instructed them, in substance, that if 388 Instjranoe: Fire, Life, Makine. a vii. they found that it did relate to the mill-house, and not to the tenant-house, the policy covered the mill-house, and the plain- tiff was entitled to recover. The defendant, before the sub- mission of the case to the jury, moved that the case should be dismissetl on the grounds, among others, that the policy did not cover the mill-house, but tlie tenant-house, and that, assum- ing the policy covered the mill-house, there was a prior exist- ing insurance thereon not consented to by the defendant. We think the case was tried and submitted to the jury upon an eiToneous view of the law. The action was brought distinctly and solely upon the polic}^ of August 1, 1873, and to enforce the contract of insurance contained in that instrument. The building burned was the mill-house, and unless the policy was upon that building the plaintiff did not establish the cause of action alleged in the complaint. The subject of the insur- ance is to be ascertained from the description in the policy and such extrinsic evidence as may be necessary to identify the property described. But extrinsic evidence which goes beyond the purpose of aiding in the interpretation of the written contract, and tends to show that the subject thereof was other and different from that described in the written instrument — that is to say, in this case, that the building intended to be in- sured was the mill-house, although not the building actually covered by the policy — while it might tend to establish a case for the reformation of the contract, would be inadmissible to sustain an action to enforce the contract as written, as thoug-h it applied to the building intended to be covered, but not de- scribed in the policy. The policy w.as issued upon a written application and survey made by Cannon, the local agent of the company, in the name of Landers, and forwarded by the agent to the main office of the company. The company approved the application and thereupon issued and mailed the policy to Landers. It must be assumed upon the finding of the jury that the negotiation between Cannon and Landers related to an in- surance on the mill-house and not on the tenant-house ; and, further, that the agent in making the written application and signing Landers' name thereto, and in making the survey and diagram of the premises, acted without Landers' authority, and that Landers had no knowledge of tlie representations made by the agent to the com pan}' until after the lire. 0. vn. Landers v. Coopek. 389 The evidence leaves no possible room for question that the company, when it issued the policy, intended to insure the tenant-house, and not the mill-house. Nor can there be any doubt that the policy describes the tenant-house, and not the mill-house, as the subject insured. It is quite impossible to treat this policy as a contract insuring the mill-house, if the application and survey are considered in ascertaining the sub- ject of insurance. It is only by rejecting them that the subject is left in any possible doubt. This the trial court permitted the jury to do upon the theory that the representations in the application and diagram were the unauthorized acts of the agent, and were not, therefore, binding upon Landers. In substance, the court permitted the jury to strike from the written part of the policy the clause referring to the applica- tion and survey, and to regard only the words, " $800 on his (Landers) two-story dwelling-house," which, standing alone, describe with suflBcient accuracy the mill-house, and then to find that the policy was one upon the mill-house, as the agent Cannon and Landers intended. The court treated the case as analogous (1) to those which hold that a contract of insurance is not defeated by a misrepre- sentation as to some fact material to the risk, or made so bj" the terms of the contract, contained in an application prepared by the agent in the name of the insured, but without his author- ity, and upon which the company acted in issuing the policy. Benninghoff v. Agricultural Ins. Co., 93 N. Y. 496 ; Sprague V. Holland Purchase Ins. Co., 69 id. 128; Vilas v. N. Y. C, Ins. Co., 72 id. 590; Ames v. W. Y. Union lis. Co., 14 id. 253. (2) To the class of cases where the agent, having been author- ized by the insured to fill out the application in his name, mis- stated, by mistake or inadvertence, the information given by the insured, and thereby misled the company. Rowley v. Empire Ins. Co., 36 N. Y. 550 ; Baker v. Home life Ins. Co., 64 id. 648 ; Grattan v. Metropolitan life Ins. Co., 92 id, 274 : Bennett v. Agricnlttiral Ins. Co., 106 id. 243. (3) To the cases which hold that a company cannot insist upon a condition declar- ing the contract to be void if a certain fact or situation exists not represented to the company and indorsed on the policy, provided the company or its authorized agent knew the fact or situation relied upon to defeat the contract at the time the 390 Insurance : Fire, Life, Marine. o. vii. contract was made. Van Sohoick v. Niagara Fire Ins. Co., 68 N. Y. 434; RicKmovd v. Same, 79 id. 230; Short v. Home Ins. Co., 90 id. 1(). In none of these cases was there any question as to the subject of the insurance. In all of them it was conceded that the policy covered the building or property destroyed by the fire. The matters alleged as constituting a defense related to some incident of the contract or to the per- formance of some condition collateral to the express object of the contract. In cases falling within the two classes of cases first mentioned, the fault was committed by the agent of the defendant, and it is held, that, as between the company and the insured, the company should bear the loss. In cases of the third class, it is held that it could not have been the intention that the policy should be defeated by reason of an omission to communicate facts known to the company when the contract was made, or the failure to have the written recognition of the company of their existence. The courts in these cases apply the doctrine of waiver or estoppel to prevent fraud or injustice. But the principle which relieves the party insured from re- sponsibility for unauthorized representations made by the agent of the insurer in respect to some incident of the risk, and pei'- mits them to be disregarded in an action to enforce the con- tract, has no application where the point in issue is as to the subject of the insurance, and the contract is explicit upon that point. If the contract of insurance relates to one definite and distinct subject, it cannot be turned into a contract for the insurance of another and different subject on proof that the agent of the company, by mistake, described the wrong property in his application. The agent's authority here was to " make surveys and take applications for insurance." He had no authority to enter into contracts of insurance in behalf of the company. The company passed upon the applications and accepted or rejected them in its discretion. In determining the question whether the policy issued covered the mill-house or the tenant-house, the papers on which the company acted were material evidence. In ascertaining to which subject the policy applied, it is immaterial whether the application was made by the authority of the insured or not, or whether it was genuine or forged. There must be a meeting of minds between the parties to a contract before a contract is formed. If the 0. vn. Landers v. Cooper. 391 facts show that the company intended to insure the tenant- house, and the written contract apphes to that house, the plaintiff cannot recover in this action, although he may have intended to procure an insurance on the mill-house, and by the agent's fault the application was made to refer to the tenant- house. If there is any remedy against the company for the mistake or carelessness of the agent, it is not available in an action to enforce a contract relating to one subject, as if it were a contract relating to another subject. I am not aware of any principle in the law of estoppel which prevents the defendant from showing that the contract relates to the tenant-house, or which justifies the court in excluding from the consideration of the jury, in the determination of the issue, the application and survey upon which the company acted, because made without the authority of the insured by the company's agent, "We are of opinion that the defense, that the policy was not upon the mill-house, but was upon the tenant-house, was clearly estab- lished, and that upon this ground a nonsuit should have been granted. All concur. Judgment reversed. CHAPTER YIII. GENERAL PRINCIPLES. Authority of Agents of the Company to Waive and Estop as Affected hy Stipulations in the Policy Restricting their Authority. Minnesota Supreme Court, 1883. KAUSAL V. MINNESOTA FARMERS' MUT. FIRE INS. ASSO. (31 Minn. 17.) Effect of stipulation in the policy that soliciting agent is not agent of the insurers. Action to recover upon a policy of fire insurance, issued to husband and wife jointly, upon a certain house and furniture in which tliey allege that they had an insurable interest, and which were subsequently destroyed by fire. The policy con- tained a stipulation that the soliciting agent should be deemed the agent of the assured. The answer of the defendant admits the issuance of a joint policy to the plaintiff's, alleges that the same was issued in reliance upon the statements and answers contained in the application, which the plaintiffs agreed should be warranties on their part; that "in and by such policy it is provided that any misrepresentation by the assured of the value, condition, situation, title, or occupancy of the property, or any omission to make known every fact material to the risk, or any misrepresentation whatever, or fraud, or attempt at fraud, whether in written application or otherwise, shall cause a forfeiture of all claims under the policy," and " that if the interest of the assured be not truly stated, then the policy shall be null and void." The answer further alleges that in their application the plaintiffs stated that the dwelling-house o. VIII. Kausal v. Minn. Farmers' Mut. F. Ins. Asso. 393 described was completed and painted, and that such statement was false. The reply alleges that the plaintiffs " are foreigners, and ignorant of the English language, and did not know what was contained in the application for insurance mentioned in said answer; that the same was made out by an agent of the de- fendant, and plaintiffs signed the same by his direction, with- out knowing the contents of the same. The reply admits "that said house was not completed or painted," but alleges " that at the time the said application was made an agent of defendant, duly authorized to solicit insurance and to take and receive applications therefor on the part of the defendant, was present at the said house so insured, and examined the same, and fully knew all the circumstances of its condition, and solicited said insurance, and wrote out said application as aforesaid, and told the plaintiffs the same was correct, and induced them to sign the same." The reply denies all other allegations than those above admitted. On the trial before Young, J., and a jury, the defendant objected to the reception of any evidence on the part of the plaintiffs, on the ground that it is incompetent, irrelevant, and immaterial under the pleadings, which objection was sustained. The plaintiffs then offered to prove all the allegations of the reply, which offer was rejected, and the action was dismissed. Plaintiffs appeal from an order refusing a new trial. Mitchell, J. — 1. On principle, as well as for considerations of public policy, agents of insurance companies, authorized to procure apphcations for insurance, and to forward them to the companies for acceptance, must be deemed the agents of the insurers and not of the insured in all that they do in preparing the application, or in any representations they may make to the insured as to the character or effect of the statements therein contained. This rule is rendered necessary by the manner in which business is now usually done by the insurers. They supply these agents with printed blanks, stimulate them by the promise of liberal commissions, and then send them abroad in the community to solicit insurance. The companies employ them for that purpose, and the public regard them as the agents of the companies in the matter of preparing and 394 Insurance: Fire, Life, Marine. o. viii. filling up the applications — a fact which the companies perfectly understand. The })arties who are induced by these agents to make applications for insurance rarely know anything about the general officers of the company, or its constitution and by- laws, but look to the agent as its full and complete represent- ative in all that is said or done in regard to the application ; and, in view of the apparent authority with which the com- panies clothe these solicitors, they have a perfect right to con- sider them such. Hence, where an agent to procure and for- ward applications for insurance, either by his direction or direct act, makes out an application incorrectly, notwithstand- ing all the facts are correctly stated to him by the applicant, the error is chargeable to the insurer and not to the insured. Ins. Co. V. Mahme, 21 Wall. 152 ; his. Co. v. Wilkinso7i, 13 Wall. 222 ; MalleaUe Iron WorAs v. Phoenix Ins. Co., 25 Conn. 465 ; Hough v. City Fire Ins. Co., 29 Conn. 10 ; Wood- iury Savings Banh v. Charter Oak Ins. Co., 31 Conn. 517 ; Miner v. Phoenix Ins. Co., 27 Wis. 693 ; Winans v. AUemania Fi/re Ins. Co., 38 Wis. 342; Rowley v. Empire Ins Co., 36 N. Y. 550 ; Brandup v. St. Paul F. db M. Ins. Co., 27 Minn. 393 ; 2 Am. Lead. Cas. (5th ed.), 917 et seq.; Wood on Insurance, c. 12 ; May on Insurance, § 120. 2. After the courts had generally established this doctrine, many of the insurance companies, in order to obviate it, adopted the ingenious device of inserting a provision in the policy, that the application, by whomsoever made, whether by the agent of the company or any other person, shall be deemed the act of the insured and not of the insurer. But, as has been well remarked by another court, " there is no magic in mere words to change the real into the unreal. A device of words cannot be imposed upon a court in place of an actuality of facts." If corporations are astute in contriving such pro- visions, courts will take care that they shall not be used as instruments of fraud or injustice. It would be a stretch of legal principles to hold that a person dealing with an agent, apparently clothed with authority to act for his principal in the matter in hand, could be affected by notice, given after the negotiations were completed, that the party with whom he had dealt should be deemed transformed from the agent of one party into the agent of the other. To be efficacious, such notice 0. VIII. Kausal v. Minn. Fakmeks' Mct. F. Ins. Asso. 395 should be given before the negotiations are completed. The application precedes the policy, and the insured cannot be pre- sumed to know that any such provision will be inserted in the latter. To hold that, by a stipulation unknown to the insured at the time he made the application, and when he relied upon the fact that the agent was acting for the company, he could be held responsible for the mistakes of such agent, would be to impose burdens upon the insured which he never anticipated. Hence, we think that if the agent was the agent of the com- pany in the matter of making out and receiving the applica- tion, he cannot be converted into the agent of the insured by merely calling him such in the policy subsequently issued. Neither can any mere form of words wipe out the fact that the insured truthfully informed the insurer, through its agent, of all matters pertaining to the application at the time it was made. We are aware that in so holding we are placing our- selves in conflict with the views of some eminent courts. But the conclusion we have reached is not without authority to sustain it, and is, we believe, sound in principle, and in accord- ance with public policy. Wood on Insurance, § 139 ; May on Insurance, § 140 ; Com7ne7'cial Ins. Co. v. Ives^ 56 111. 402 ; Gans V. St. Paul F. c& M. Ins. Co., 43 Wis. 108 ; Columbia /ns. Co. V. Cooler, 50 Pa. St. 331. 3. It is contended by respondent that there is a distinction in this regard between " stock " and " mutual " insurance com- panies ; that the difference in the character of the companies makes a difference in the relative duties of the applicant and the company, and in the authorit}^ of the agents employed ; that, in the case of a mutual company, the application is in effect not merely for insurance, but for admission to member- ship — the applicant himself becoming a member of the com- pany upon the issue of the policy. By some courts a dis- tinction in this respect is made between the two classes of companies. This distinction is usually based upon the ground that the stipulations held binding upon the insured are con- tained in the charter or by-laws of the company, and that a person applying for membership is conclusively bound by the terms of such charter and by-laws. Such is not this case, for the stipulations claimed to bind the insured are only in the policy. But, so far as concerns the questions now under con- 396 Insurance : Fire, Life, Marine. o. viit. sideration, we fail to see any distinction between the two kinds of companies, and we feel confident that the average applicant for insurance is rarely aware of any. It is true that, in the case of a mutual company, the insured becomes in theory a member of the company upon the issue of the policy. But, in applying and contracting for insuranc*?, the applicant and the company are as much two distinct persons as in the case of a stock company, and we see no reason for holding the agent who takes the application 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]iany. Coluvnhia Ins. Co. v. Cooper., supra • May on Insurance, §§ 139 et seq. 4. Verbal testimony is competent to show that the applica- tion was filled up by the agent of the company, and that the facts were fully and correctly stated to him, but that he, with- out the knowledge of the insured, misstated them in the application. This was not in violation of the rule that verbal testimony is not admissible to vary a written contract. It proceeds upon the ground that the contents of the paper were not his statement, though signed by him, and that the insur- ance company, by the acts of their agent in the matter, are estopped to set up that it is the representation of the insured. Ins. Co. V. Wilkinson, sujpra ; May on Insurance, § 143, and cases cited, note 3. At the time the application for this insurance was made, defendant's agent, authorized to take such applications, was personally present on the premises, and was first fully informed by the plaintiffs of all the facts, and then himself wrote out the application, and told William Kausal that it was correct. William Kausal then signed it, and also signed his wife's name thereto, upon th^-statement and representation of the agent that such was the proper mode of making the application. On this state of facts, if the policy does not cover the loss, it is the fault of the defendant and not of the plaintiffs. It seems clear that plaintiffs are not without remedy. Order reversed c. VIII. Messelbach v. Norman. 397 New York Court of Appeals, 1890. MESSELBACH v. NORMAN. (122 N. Y. 578.) The limitation in the policy in respect to the agent's power to loaive or estop it primtt facie hindin;/, and must he overcome by proof of an actual or osten- sible authority sufficiently broad, before a waiver or estoppel can be estab- lished. FoLLETT, Cn. J. — June 9, 1883, the defendant insured the plaintiff against such loss or damage, not exceeding $1,500, as should be caused by fire, during the next three years, to a building then in process of erection, which, when completed, was to be occu})ied as a dwelling. The policy contained, among others, the following provisions : " This polic}' shall become void, unless consent in writing is indorsed hereon by or on behalf of the society, in each of the following instances, ... if any building hereby insured be or become vacant or unoccupied for the purpose indicated in this contract." The building was finished August 1, 1883, and thereafter was occupied as a dwelling by a tenant until April IT, 1884, when he left, and the building remained unoccupied until April 26, 1884, w^ien it was totally destroyed by fire. The building was unoccupied wnthin the meaning of the policy. Ilalpin v. Phenk- Ins. Co., 118 N. Y. 165. No written consent was in- dorsed on the policy that it should continue in force while the building was unoccupied, and it is conceded that no recovery can be had unless the evidence establishes a waiver of this pro- vision. Undoubtedly, a party to a contract which contains a provision that it shall not be changed except by a writing signed by him may by conduct estop himself from enforcing the provision against a ])arty who has acted in reliance upon the conduct ; and so the acts of an agent who possesses the power of the pi'incipal, or who has been held out by the prin- cipal to possess his power in respect to the |)ro vision alleged to have been altered or changed, may also estop his principal. But under a policy containing a provision that the insurer " shall n(,t l)e bound ... by any act of or statement made . . . by any agent . . . which is not authorized by this policy or contained therein, or in any written paper mentioned 398 Insurance: ^ire, Life, Marine. c. viii. therein," the power can only be exercised in the mode pre- scribed, unless it is shown that the agent possessed, actually or apparently, the power of his principal in respect to the pro- vision alleged to have been waived. JValsk v. Hartford Fire Ins. Co., 73 N. Y. 5 ; Marvin v. Universal Life Ins. Co.^ 85 id. 278. Upon the question of waiver the plaintiff testified : " When Mrs. Jones, the tenant, moved out of the building I went and saw Mr. Bennett (the agent of defendant) right away. Q. "What did you say to him ? A. I told Mr. Bennett the tenant wanted to go out, and I want to move in myself ; he said all right. . . . Q. What, if anything, did you say to the agent about the property being vacant, and about the policy of in- surance ? -4. I told him the folks had gone out, and I would go in a few days ; he said all right ; he did not say anything about the policy or the insurance. Bennett told me when he gave me the policy to notify him if the people were moving out ; I did not say anything else to him." The plaintiff's son- in-law testified : '^ Q. What have you heard him (Bennett) say, in relation to the policy in suit, in reference to Mrs. Jones moving from the premises? A. I heard Bennett say, in Am- sterdam, that he told plaintiff that he was going to have busi- ness in Schuyler Street, and would stop and fix her policy so that it would be all right, providing it was vacant ; he said he told her this the same da}^ she notified him the family were going to move out." This is the only evidence tending to establish a waiver. The referee did not find, as a question of fact, that there was a waiver of any of the provisions of the policy ; but simply found that the conversations above quoted were had, and decided, as a question of law, that they con- stituted a valid waiver. This conclusion is open to two objec- tions : (1) It violates the following provision of the policy : " The use of general terms, or anything less than a distinct, specific agreement, clearly expressed and indorsed on the policy, sliall not be considered as a waiver of any printed or written condition expressed therein." (2) There is no evidence that Bennett had power to waive by conduct cr in any way, except as specified in the policy, any of its provisions. The evidence in respect to the terms of Bennett's agency is very meager and general in its character. The plaintiff testified that the policy c. VIII. Knickerbocker Life Ins. Co. v. Norton. 399 was delivered by '* L3nnan Bennett, defendant's agent." The policy was countersigned by " Lyman Bennett, agent ; " and a consent indorsed on it, when issued, that the building be finished without extra charge, was signed " Lyman Bennett, agent," which is all the evidence from which the extent of his powers can be ascertained. There is no finding describing the extent of his powers or the character of his agency, whether it was general or special. Such a record is quite insufficient to justify this court in holding, as a matter of law, that Bennett possessed the powers of the principal in respect to the provis- ions under consideration, or any powers except such as he was shown to have exercised. The burden of showing that Bennett possessed the powers of the principal was, under the terms of the policy, upon the plaintiff, which she failed to sustain. No legal waiver of the provision in respect to unoccupancy having been established, the plaintiff was not entitled to recover. The order should be affirmed, and judgment absolute ren- dered against the appeUant, with costs. All concur. Order affirmed. United States Supreme Court, 18T7. KNICKERBOCKER LIFE INS. CO. v. NORTON. (96 U. S. 234.) To overcome the restriction of the policy in respect to the agent's power to waive, an actual or ostensible authority emanating from the principal must be shown to exist, and this depends largely upon the drcumstcmces of each case, concerning the effect of which judges may easily differ. This action was brought by Phoebe A. Norton on a policy of insurance, issued by the Knickerbocker Life Insurance Com- pany of New York, on the life of Jesse O. Norton, for the benefit of his wife and children. The policy contained the fol- lowing condition : " If the said premium shall not be paid on or before twelve o'clock, noon, on the day or days above men- tioned for the payment thereof, at the office of the company in the city of New York (unless otherwise expressly agreed in writing), or to agents when they produce receipts signed by the president or secretary, or if the principal of or interest upon any note or other obligation given for the premium upon said 400 Insurance : Firk, Life, Marine. o. viii. policy shall not be paid at the time the same shall become due and payable, then, and in every such case, the company shall not be liable to pay the sura assured, or any part thereof ; and said policy shall cease and be null and void." By an indorsement on the policy, it was declared that " agents of the company are not authorized to make, alter, or abrogate contracts, or waive forfeitures." The insured died on the 3d of August, 1875 ; and the com- pany refused to pa}- the insurance, on the ground that the policy was forfeited by reason of the non-payment of certain notes given for the last premium, which was due April 20, 1875. It was conceded that all the other premiums had been paid. The declaration, besides a special count on the policy, con- tained the ordinary money counts. The defendant pleaded the general iosue, and, specially, that the premium notes were not paid at maturity, and that the policy thereby became forfeited. The plaintiff replied, first, that the agent of the defendant at Chicago, regularly authorized by the defendant so to do, ex- tended the time of payment of the first note, which became due on the 20th of June, to the 20th of July, when she tendered the amount thereof to the agent, who refused to receive the same ; and that she also tendered the amount of the second note at its maturity, which was likewise refused ; secondly, that after the maturity of the first note, the agent of the de- fendant, regularly authorized so to do, waived all advantages the company might have claimed because of its non-payment at maturity, and extended the time of payment, as before stated, with an averment of tender and refusal. The defendant, by way of rejoinder, denied that it had extended the time of pay- ment, or that it had waived any advantages as alleged. This was the issue at the trial. It appeared on the trial that the premium in question was settled by the payment of $50 in cash, and the balance in two promissory notes given by Jesse O. Norton to the insurance company, payable respectively in two and three months, and maturing, one on the 20th of June, the other on the 20th of July, 1875. Each note contained a clause declaring that if it were not paid at maturity the policy would be void — this be- ing the usual form of premium notes. o. VIII. Kniokerbockeb Life Ins. Co. v. Norton. 401 On the issue as to extension of time on the notes, and the authority of the agent to grant it, the plaintiff produced three witnesses — Randall, agent of the company down to March, 1874 ; Frary, his successor, who was agent at the time in ques- tion ; and Martin Norton, son of the insured, who acted in behalf of his father in reference to the alleged extension, and to the tender of payment. The testimony of these witnesses tended to show that for- merly the company had allowed their agent to extend time on premium notes for a period of ninety days ; that this indulgence was afterwards reduced to sixty days, and then to thirty; and that, at the period in question, the agent was required, as a general thing, to return the notes in his hands if not paid by the 15th of the month following that in which they became due. As to what took place with reference to the notes in ques- tion, there is some conflict in testimony between Martin Norton and the agent Frary. The former testified, in substance, that he called on the agent, in behalf of his father, in June, 1875, a few days after the first note became due, and told him that his father wished it extended for thirty davs ; to which the a^ent agreed — his answer being, "All right." That he called again on or about the 8th of July, to request an extension of the other note, which would become due on the 20th of that month, and a further extension of the first note to the 10th of Auo-ust. That the agent said he would have to write to the company about this. That, on the 13th, he called again, and told the agent that his father had concluded to pay both notes ; and the agent gave him the figures, showing what was due on them. That he called again on the 15th, prepared to pay the notes, when he was informed by the agent that he could not receive the money, having received orders from the company to return all the papers to New York, and he had done so. That he then made a legal tender of the amount due on the first note, which was refused. Frary testified that he had no recollection of the first interview, or of agreeing to extend the first note. As to the rest, they did not materially differ. In addition to the testimony relating to the general p'^^actice of the agents in granting extensions of time for the payment of premium notes, evidence was given tending to show that 26 402 Insukanoe : Fire, Life, Marine. a vni. Norton, the insured, had usually received more or less indulgence of that kind. The counsel for the defendant moved to strike out the testi- mony touching the usages of the company as to non-payment of prior premium notes by Norton, and prior indulgence thereon to him, as incompetent, and in conflict with the terms of the policy, and as showing no authority in Frary to give the al- leged extension ; which was without consideration, if made, and after the forfeiture had occurred. The counsel for the defendant also moved to strike out that portion of Martin Norton's testimony relative to an agreement for an extension of the premium notes, such agreement being without authority on the part of the agent, etc. The court overruled the latter motion ; and, as to the first, directed the jury to disregard so much of Randall's testimony as tended to show the conduct of the defendant and plaintiff in regard to former payments ; but allowed to stand so much of Randall's and Frary's testimony as tended to show the powers of the agents in reference to giving extensions on premiums or pre- mium notes. This ruling was excepted to. In charging the jury, the court left it to them to say, from the evidence, whether the agent of the defendant had power to waive a strict compliance with the terms of the agreement as to the time of paying the notes given for the premium ; and, if he had such power, whether such a waiver was in fact made : if it was, and if the insured offered to pay the notes within the time to which they were extended, and the company refused to receive payment, that then the plaintiff was entitled to re- cover. The jury were further instructed that the power vested in Randall, the previous agent, was only pertinent as it tended to throw light on the powers vested in his successor, Frary. The defendant's counsel excepted to the charge, and submitted several instructions, the purport of them being, in substance, that, in view of the express provisions of the policy, the evi- dence was utterly irrelevant and incompetent to show any authority in the agent to grant any indulgence as to the time of paying the notes, and to waive the forfeiture incurred by their non-payment at maturity ; or to show that any valid and legal extension was, in fact, granted, or that the forfeiture of the policy was waived. 0. VIII. Knickerbocker Life Ins. Co. v, Norton. 403 These instructions were refused. There was a judgment for the plaintiff, whereupon the company sued out this writ of error. Mr. Justice Bradley, after stating the case, delivered the opinion of the court. The material question in this case is, whether, in view of the express provisions of the policy, the evidence introduced by the assured was relevant and competent to show that the com- pany had authorized its agent to grant indulgence as to the time of paying the premium notes, and waive the forfeiture in- curred by their non-payment at maturity ; or to show that any valid extension had, in fact, been granted, or the forfeiture of the policy waived. The written agreement of the parties, as embodied in the pol- icy and the indorsement thereon, as well as in the notes and the receipt given therefor, was undoubtedly to the express purport that a failure to pay the notes at maturity would incur a for- feiture of the policy. It also contained an express declaration that the agents of the company were not authorized to make, alter, or abrogate contracts or waive forfeitures. And these terms, had the company so chosen, it could have insisted on. But a party always has the option to waive a condition or stip- ulation made in his own favor. The company was not bound t6 insist upon a forfeiture, though incurred, but might waive it. It was not bound to act upon the declaration that its agents had no power to make agreements or waive forfeitures; but might, at any time, at its option, give them such power. The declaration was only tantamount to a notice to the assured, which the company could waive and disregard at pleasure. In either case, both with regard to the forfeiture and to the powers of its agent, a waiver of the stipulation or notice would not be repugnant to the written agreement, because it would only be the exercise of an option which the agreement left in it. And whether it did exercise such option or not was a fact provable by parol evidence, as well as by writing, for the obvious reason that it could be done without writing. That it did authorize its agents to take notes, instead of money, for premiums, is perfectly evident, Irom its constant practice of receiving such notes when taken by them. Thatii 404 Insuranck; Fikk, Lifk, Marine. o. viii, authorized them to grant indulgence on these notes, if the evi- dence is to be believed, is also apparent from like practice. It acquiesced in and ratified their acts in this behalf. For a long period it allowed them to give an indulgence of ninety days; after that, of sixty ; then of thirty days. It is in vain to con- tend that it gave them no authority to do this, when it con- stantlv allowed them to exercise such authority, and always ratified their acts, notwithstanding the language of the written instruments. We think, therefore, that there was no error committed by the court below in admitting evidence as to the practice of the company in allowing its agents to extend the time for payment of premiums, and of notes given for premiums, as indicative of the power given to those agents ; nor any error in submitting it to the jury, upon such evidence, to find whether the defend- ant had or had not authorized its agent to make such exten- sions, nor in submitting it to them to say whether, if such authority had been given, an extension was made in this case. Much stress, however, is laid on the fact that the extension claimed to have been given in this case was not given, or applied for, until after the first note became due and the forfeiture had been actually incurred. But we do not deem this to be mate- rial. The evidence does not show that any distinction was inade in granting extensions before or after the maturity of the notes. The material question is, whether the forfeiture was waived ; and we see no reason why this may not be done as well by an agreement made for extending the note after its maturity, as by one made before. In either case, the legal effect of the indulgence is this : the company say to the insured, Pay your note by such a time, and your policy shall not be for- feited. If the insured agrees to do this, and does it, or tenders himself ready to do it, the forfeiture ought not to be exacted. In both cases, the parties mutually act upon the hypothesis of the continued existence of the policy. It is true, if the agreement be made before the note matures and before the forfeiture is incurred, it would be a fraud upon the assured to attempt to enforce the forfeiture, when, relying on the agreement, he per- mits the original day of payment to pass. On the other hand, if the agreement be made after the note matures, such agree- ment is itself a recognition, on the company's part, of the con- 0. Till. Knickerbocker Life Ins. Co. v. Norton. 405 tinued existence of the policy, and, consequently, of its election to waive the forfeiture. It is conceded that the acceptance of payment has this effect ; and we do not see why an agreement to accept, and a tender of payment according to the agreement, should not have the same effect. Both are acts equally demon- strative of the election of the company to waive the forfeiture of the policy. Grant that the promise to extend the note is without consideration, and not binding on the company — which is perhaps true as well when the promise is made before matu- rity as when it is made afterwards — still it does not take from the company's act the legitimate effects of such act upon the forfeiture of the policy. Perhaps the note might be sued on in disregard of the extension ; but if it could be, that would not annihilate the fact that the company elected to waive the forfeiture by entering into the transaction. If it should repu- diate its agreement, it could not repudiate the waiver of the forfeiture, without at least giving to the assured reasonable notice to pay the money. Forfeitures are not favored in the law. They are often the means of great oppression and injustice. And, where adequate compensation can be made, the law in many cases, and equity in all cases, discharges the forfeiture, upon such compensation being made. It is true, we held in Statharmus Case, 93 U. S. 24, that, in life insurance, time of payment is material, and cannot be extended by the courts against the assent of the company. But where such assent is given, the courts should be liberal in construing the transaction in favor of avoiding a forfeiture. The case of leases is not without analogy to the present. It is familiar law, that, when a lease has become forfeited, any act of the landlord indicating a recognition of its continuance, such as distraining for rent, or accepting rent which accrued after the forfeiture, is deemed a waiver of the condition. In Doe V. Meux, 4 Barn. & Cress. 606, there was a general covenant to repair, and a special covenant to make specific repairs after three months' notice; and a condition of forfeiture for non-performance of covenants. The landlord gave notice to the tenant to make certain specific repairs within three months. This was held a waiver of the forfeiture already incurred under the general covenant. Justice Bailey said: 406 Insurance : Fike, Life, Marine. c. viil " The landlord, in this case, had an option to proceed on either covenant ; and, after giving notice to repair within three months, he might have brouglit an action against the defendant upon the former covenant, lor not keeping the premises in repair. But that is very different from insisting upon the forfeiture. ... I think that the notice amounted to a declaration that he would be satisfied if the premises were repaired within three months, and that he thereby precluded himself from bringing an ejectment before the expiration of that period." In Doe V. Birch, 1 Mee. ik W. 402, there was a covenant on the part of the tenant to make certain improvements on the premises within three months, or that the lease should be void. He failed to make the improvements in the manner stipulated ; and, after the expiration of the three months, the landlord's son, on his father's behalf, made a demand of a quarter's rent. But, it not appearing that the landlord knew of the tenant's failure with regard to the improvements, it was held that the son had not sufficient authority to waiv^e the forfeiture. Otherwise, it seems, that the demand of the rent would have amounted to a waiver. Baron Parke referred to Greenes Case, 1 Croke, 3, where calling the party a tenant, in a receipt for b3'gone rent, was held to be sufficient evidence of a waiver, though the ac- ceptance of that i-ent was not such. And he adds : " If it had been proved that the father had notice of the alterations, and he had still allowed the son to receive the rent, the forfeiture might have been waived. But that was not proved ; and the question of waiver does not, therefore, distinctly arise in the case. If it had, the authorities cited show that this was a lease voidable at the election of the landlord. Then, I think that an absolute, unqualified demand of rent, by a person having suffi- cient authority, would have amounted to a waiver of the for- feiture, and it would have been like the case I cited from Croke's Reports." In Wai'd V. Day, 4 Best & Smith, 335, after a forfeiture of a license to gather minerals off of a manor had been incurred, the landlord entered into negotiations with the licensee and his son, to grant to the latter a renewal of the license when it should expire; and terms were agreed on, which the landlord afterwards refused to carry out. It was held, that, by enter- ing into these negotiations, he waived the forfeiture of the C. VIII. Knickerbockkk Like Ins. C'o. v. IS'orton. 4Dt (original license. The negotiations assumed that the original license Was to continue to its termination. The exaction of the forfeiture was in the landlord's election ; and he evinced his election not to enforce it by entering into the negotiations; Justice Blacliburn says : '* Most of the cases in which the doc- trine of election has been discussed have been cases of landloru and tenant under a regular lease, in which has been reserved a right of re-entry for a forfeiture — that is, an option to deter- mine the lease for a forfeiture; but this doctrine is notj as Mr. Russell seems to think, confined to such cases. So far froiri tliat being so, the doctrine is but a branch of the general law, that, where a man has an election or option to enter into an estate vested in another, or to deprive another of some exist- ing right, before he acts he must elect, once for all, whether he will do the act or not. He is allowed time to make up his mind ; but when once he has determined that he will not con- sider the estate or lease — whichever it may be — void, he has not any further option to change his mind." And then the learned judge cites authorities, going back to the Year Books, to show that a determination of a man's election in such cases may be made by express words or by act ; and that if, by word or by act, he determines that the lease shall continue in exist- ence, and communicates that determination to the other party, he has elected that the other shall go on as tenant. These cases show the readiness with which courts seize hold of any circumstances that indicate an election or intent to wa've a forfeiture. We think that the present case is within the reason of these authorities ; and that the objection, that the, note was already past due when the agreement to extend it was made, is not sufficient to prevent said agreement from operating as a waiver of the forfeiture. We find no error in the record, and the judgment of the Circuit Court is Affirmed. Mr. Justice Swayne, Mr. Justice Field, and Mr. Justiok Strong dissented. Mb. Justice Strong. I dissent from the judgment given in this case. The insurance effected by the policy became for- 408 Insurance : Fire, Life, Marine. c. viii. feited by the non-payment ad diem of the premium note. The poHcy then ceased to be a binding contract. It was so ex- pressly stipulated in the instrument. Admitting that the com- pany could afterwards elect to treat the policy as still in force, or, in other words, could waive the forfeiture, the local agent could not, unless he was so authorized by his principals. The policy declared that agents should not have authority to make such waivers. And there is no evidence in this case that the company gave to the agent parol authority to waive a forfeit- ure after it had occurred. They had ratified his acts extend- ing the time of payment of premium notes, when the extension was made before the notes fell due. But no practice of the company sanctioned any act of its agent done after a policy had expired, by which new life was given to a dead contract. Connecticut Supreme Court op Errors, 1874. RYAN" V. WORLD MUTUAL LIFE INS. CO. (41 Conn. 168.) R is prima facie negligence for the applicant to omit to read the application which he signs, and thin presumption is conclusive, unless overcome by proper evidence. Carpenter, J. — This is an action on a policy of life insur- ance. The policy is expressed to be " in consideration of the representations, declarations and covenants contained in the application therefor, to which reference is here made as a part of this contract, etc." It is further declared that " This policy is issued and accepted on the following express conditions and agreements : First. That the statements and declarations made in the application therefor, and on the faith of which it is issued, are in all respects true, etc." The application, there- fore, is a part of the policy ; and the plaintiff's agreements therein contained are warranties, and, if not true, she cannot recover, unless there has been a waiver by the defendants, or under the circum^^tances they are estopped from denying their truth. In the application ai : the following questions and answers : " 12. Has the party ever had any of the following diseases [naming a long list of diseases, and among them] : bronchi- a vin. Ryan v. Wokld Mutual Life Ins. Co. 409 tis, consumption, spitting of blood, or any serious disease ? " — " None of these." '" 17. Has the party had during tne last seven years any- severe sickness or disease ? If so, state tlie particulars, and the name of the attending physician who was consulted and pre- scribed."—" No." " 25. Has the party employed or consulted any physician ? Please answer this yes or no. If yes, give name or names and residence." — " No." " 27. Has any previous examination or application been made for assurance on the life proposed ? " — " No." '• Has any company declined to issue a policy for the party ? " — " No." Upon the trial the plaintiff- offered to prove, not that the above answers were true, but that different answers were in fact given, both by herself and the insured, and that the an- swers were wrongly written by the local agent of the defend- ants without the knowledge or consent of the plaintiff or her husband. Aside from the claim that the defendants are re- sponsible for the conduct of their local agent, this is merely an attempt to substitute for a part of the written contract declared on, a different parol contract ; for the representations and war- ranties of the plaintiff contained in the written agreement, oral representations and warranties of an entirely different charac- ter. It requires no argument to show that this cannot be done. But the plaintiff claims that truthful answers having been given to each interrogatory, and the incorrect answers con- tained in the application being there by the sole act of the agent, the defendants are bound by the answers as written, and are precluded from denying their truth. Whether this is so or not depends upon the extent of the agent's authority. It must be admitted that the express authority of the agent was limited to receiving the application, forwarding it to the home office, receiving, countersigning, and delivering the policy and collecting the premiums. The courts in this State have construed the powers of these agents liberally, and extended them somewhat by implication. Thus it has been held that in vvriting the application, and explaining the interrogatories and ^,he meaning of the terms used, he is to be regarded as the agent of the company. 410 Insurance : Fire, Life, Marink. o. nil In this case we are asked to go further than any case has yet gone, and clothe the agent with an authority not given him in fact, and to hold the principal responsible for an act which could not by any possibility have been contemplated as being within the scope of the agency. In most, if not in all. of the cases in which the act of the agent has been regarded as the act of the principal, the act has been the natural and probable result of the relations existing between the parties. or so connected with other acts expressly authorized as to afford a reasonable presumption that the principal intended to authorize it. But it cannot be supposed that these defendants intended to clothe this agent with authority to perpetrate a fraud upon themselves. That he deliberately intended to defraud them is manifest. He well knew that if correct an- swers were given no policy would issue. Prompted by some motive he sought to obtain a policy by means of false answers. His duty required him not only to write the answers truly as given by the applicant, but also to communicate to his princi- pal any other fact material to the risk which might come to his knowledge from any other source. His conduct, in this case, was a gross violation of duty, in fraud of his principal, and in the interest of the other party. To hold the principal responsible for his acts, and assist in the consummation of the fraud, would be monstrous injustice. When an agent is appar- ently acting for his principal, but is really acting for himself, or third persons, and against his principal, there is no agency in respect to that transaction, at least as between the agent himself or the person for whom he is really acting and the principal. The principal reason urged for holding the defendants liable in this case is the one suggested in the argument, that when one of two innocent persons must suffer by the fraud, negligence, or unauthorized act of a third, he who clothed the third with the power to deceive or injure must be the one. Our answer is, in the first place, that this is not exactly a case in which one of two innocent persons must necessarily suffer. There is no absolute loss for us to determine on whom it shall fall. If the plaintiff fails to recover she sustains no pecuniary loss, except the premium paid, nor that even if she is innocent and the law is so that she can recover it back on 0. VIII. Ryan v. World Mutual Life Ins. Co. 411 the ground that there was a failure of consideration. It is unlike a case of fire insurance. Nearly all property may be insured at some rate, if not in one office in another. But in this case the plaintiff's husband was not an insurable subject. His situation was such that one company had rejected him, and but for the aid of fraud neither this nor any other company would have accepted him. Had the truth been stated no policy would have issued, and as she would have had no better success probably with other companies we cannot see that she has been misled to her prejudice except in relation to the premium, which is comparatively a small matter. In the second place, if the rule is to be applied to this case it is by no means certain that it will aid the plaintiff. The fraud could not be perpetrated by the agent alone. The aid of the plaintiff or the insured, either as an accomplice or as an instrument, was essential. If she was an accomplice, then she participated in the fraud, and the case falls within the principle of Lewis V. The Phoenix Mutual Life Ins. Co.., 39 Conn. 100. If she was an instrument, she was so because of her own negli- gence, and that is equally a bar to her right to recover. She says that she and her husband signed the application without reading it and without its being read to them. That of itself was inexcusable negligence. The application contained her agreements and representations in an important contract. When she signed it she was bound to know what she signed. The law requires that the insured shall not only, in good faith, answer all the interrogatories correctly, but shall use reason- able diligence to see that the answers are correctly written. It is for his interest to do so, and the insurer has a right to pre- sume that he will do it. He has it in his power to prevent this species of fraud and the insurer has not. Courts should never extend by implication the power of an agent except to carry into effect the probable intention of the parties, or to prevent third persons dealing with the agent from being misled to their injury. In this case there is no ground for the supposition that the defendants ever intended to author- ize the agent to act directly contrary to their interests ; and if the plaintiff has been deceived, her own negligence at least materially contributed to it. We need not enlarge upon the evils necessarily resulting 412 Insurance : Fihk, Life, Marine. o. viii. from holding msurance companies lial)le for such acts of their agents. The question is vital to the insurance interests of the country. The insured no less than the insurers are deepl}'' interested in it. If this verdict is sustained it will tend to establish a principle fraught only with mischief. Every life insurance company in this country, and to some extent the fire insurance companies, will be at the mercy of their agents. A door will be open to fraud, collusion, and legal robbery, unpre- cedented in the history of jurisprudence. In view of the probable consequences of such a principle — evils co-extensive almost with the magnitude of the interests involved — we ought to pause and consider well before extending the doctrine of some of the modern cases to a case like this. We are constrained therefore to hold that a limited agency in a case of life insurance will not be extended by operation of law to an act done by the agent in fraud of his principal, and for the benefit of the insured, especially where it is in the power of the insured by the use of reasonable diligence to defeat the fraudulent intent. The court very properly instructed the jury that " an untrue or fraudulent statement or denial made by the applicant of a fact material to the risk to induce the issuance of a pohcy will prevent the policy from taking effect as a valid contract, unless the insurer has in some way waived or estopped himself from relying u|>on such mistatement to avoid the policy. This waiver, t(j Ije effectual, must be made by an officer of the com- pany authorized to make it. If there has been no evidence of any waiver except by a medical examiner of the company, or by a local agent, there must be additional proof of specific author- ity given them, or the company will not be bound." Some of the cases cited by the plaintiff are cases of fire insurance, in which the agents were intrusted with blank poli- cies, signed by the president and secretary, and had full power to fill up and issue the same without referring the application to the home office. In such cases the corporation contracts solely by its agent. The acts and knowledge of the agent are the acts and knowledge of the corporation, and there is a manifest propriety in holding the corporation liable accord- ingly. This court has held that in writing: the answers to the 0. VIII. Ryan v. World Mutual Life Ins. Co. 413 interrogatories in the application, the agent is to be regarded as the agent of the company rather than the agent of the insured. We do not question the propriety of those decisions, considering the circumstances of the cases in which they were made ; but we cannot regard them as estabhshing an inflexible rule of law applicable to all cases. A brief reference to some of the cases will illustrate the distinction which we make. When the applicant stated fully and truthfully the circumstances relating to the title to the property insured, and the agent, knowing all the facts, but for the sake of convenience, stated the title incorrectly and issued a policy, it was held that the company could not take advan- tage of it. The court regarded the transaction as equivalent to an agreement that, for the purpose of the insurance, the title should be considered as it was stated to be by the agent. Peck V. New London County MutuaJ Ins. Co., 22 Conn. 575. See also Woodbury Savings Banh v. Charter Oak Ins. Co., 31 Conn. 517. When the applicant answered the interrogatory, " Is a watch kept on the premises during the night? " by stating the facts, and the agent wrote the answer, " Watchman till 12 o'clock," which answer was not strictly true, it was held that the company was bound by it. Malleable Iron Works v. Phcenix Ins. Co., 25 Conn. 465. See also Beebe v. Hartford County Mxit. Fire Ins. Co., 25 Conn. 51 ; Hough, v. City Fire Ins. Co., 29 Conn. 10. The case before us is a case of life insurance. The power of the agent was in fact limited. He had no power to issue policies. The terms of his agency conferred no authority to waive conditions or forfeitures, or to agree to false and fraudu- lent answers to any of the interrogatories, or to make any other contract to bind the company. Presumptively the in- sured and the plaintiff knew all this before paying the premium ; for the printed policy, which was in their hands for several days, contained at the bottom this note : " The president and secretary of the company are alone authorized to make, alter or discharge contracts, or to waive forfeitures." The jury then were correctly told that " there must be additional proof of special authority given them," (the local ygent and the medical examiner,) " or the company will not be bound," 414 Insurance : Fire, Life, Marine. o. vin. The jury found such special authority. But we look through the record in vain to find any evidence to support such a finding. The verdict was manifestly against the evidence, and justice requires that it should be set aside and a new trial awarded. <;HAPTEE IlL GENERAL PRINOIPLES : MAKINB. CouBT OF Exchequer, 1839. DIXON V. SADLER. (5 M. & W. 405.) Warranty of aeaworthineu. Assumpsit on a policy of insurance, dated the 22d of Jano- ary, 1838, on the ship John Gook^ and cargo, at and from the 17th of January, 1838, until the 17th of July, 1838, at noon, in port and at sea, at all times and in all places, being for the space of six calendar months. The declaration averred the loss of the ship to have taken place on the 19th of May, 1838, by perils of the sea. The defendant pleaded, first, that the vessel was not lost by the perils of the sea; secondly, the following special plea : " That, though true it is that the said vessel was by the perils of the sea wrecked, broken, damaged, and injured, and became and was wholly lost to the plaintiffs, for plea, nevertheless, the defend- ant says that the said wrecking, breaking, damaging, and injuring the said vessel, and the loss of the same by the perils of the sea, as in the said first count mentioned, was occasioned wholly by the willful, wrongful, negligent, and improper con- duct (the same not being barratrous) of the master and marin- ers of the said ship, whilst the said ship was at sea, as in the said first count mentioned, and before the same was wrecked, broken, damaged, injured, or lost, as therein mentioned, to wic : on the 19th of May, 1838, by willfully, wrongfully, negli- gently, and improperly (but not barratrously) throwing over- board so much of the ballast of the said ship, that by means thereof she then became and was top-heavy, crank, unfit to 416 Insurance : Fire, Life, Marine. o. ix carry sail, and wholly unseaworthy, and unfit and unable to endure and encounter the perils of the sea which she might and would otherwise have been able to have safely encountered and endured ; and by means and in consequence of the said willful, wrongful, negligent, and improper (but not barratrous) conduct of the said master and mariners, the said ship became and was wrecked, broken, damaged, injured, and lost by the perils of the sea, which perils, but for the said conduct of the said master and mariners, she could and would have safely encountered and overcome without being so wrecked, broken, damaged, injured, and lost, as in the said first count is mentioned." The plaintiflF replied, " That the said wrecking, breaking, damaging, injuring the said vessel, or the loss of the same by the perils of the sea, as in the first count mentioned, was not so occasioned by such conduct of the master or mariners of the said ship, in manner and form as in the said plea is alleged," etc. At the trial before Parke, B., at the last Spring Assizes for Northumberland, it appeared that the plaintiff was a ship- owner residing at Sunderland, and was the owner of the John Cook, and had effected the policy in question with the defend- ant, an underwriter at Lloyd's. The vessel left Rotterdam for iSunderland properly ballasted and equipped on the 15th of May, and arrived on the 19th of May opposite a point called Seaham, which w^as about four miles from the port of Sunder- land. On arriving there, and having a pilot on board, the master commenced heaving part of the ballast overboard, as was proved to be usual on such occasions. Whilst this was going on the vessel drifted to the northward, and a strong squall coming on, the vessel drifted to the southeast, the ship was upset on her broadside, and her masts lay on the water. Every endeavor was made to right her, but in vain. She afterwards sank, off Eyhope, drifted on shore, and became a total wreck. If the crew had not removed the ballast, the ship would most likely have stood the squall. It was objected at the trial that this was not a risk wliich the underwriter had undertaken to indemnify against. The learned judge was of opinion that the word " willful " in the plea meant that the ballast was knowingly thrown overboard, and in a negligent manner, but said he would reserve that question for the opinion D, IX. Dixon v. Sadler. 417 of the court. And his Lordship left two questions to the jury : First, was it negligent conduct to throw the ballast overboard before arriving in harbor? Secondly, did they think the mas- ter exercised a reasonable discretion in throwing overboard ? They found, as to the first question, that they did think it negligent generally to throw over the ballast ; secondly, that the master did right, supposing the practice itself authorized him. A verdict was thereupon entered for the defendant on the second issue, the learned judge giving the plaintitf liberty to move to enter a verdict on that issue, if the Court should be of opinion that his construction of the meaning of the word " wilful," as used in the plea, was incorrect. Pakke, B. — In this case the defendant, to a declaration upon a time policy for six months, stating a loss b}^ perils of the seas, pleaded three pleas, on each of which issue was joined. On the first and third, the verdict was found for the plaintiff ; on the second, for the defendant. This plea stated, '* that, though the vessel was lost by perils of the sea, yet that such loss was occasioned wholly by the willful, wrongful, negligent, and improper conduct of the master and mariners of the ship, by willfully, wrongfully, negligentl}^ and improperly throwing overboard so much of the ballast that the vessel became un- sea worthy, and was lost by the perils of the sea, which other- wise she would have safely encountered and overcome." On a motion for a judgment non obstante veredicto^ it occurred to the court to be questionable whether the plea was not at all events bad, inasmuch as the terms of it did not exclude the case of a loss by barratry, for which the underwriters would be clearly liable, and that on this declaration, and, as the fact cer- tainly was, that the crew were not guilty of barratry, it was very properly agreed that the plea should be amended by in- serting the words " but not barratrously " after the words "negligently and improperly." And the plea, therefore, in its present shape raises the question whether the underwriters are liable for the willful but not barratrous act of the master and crew, in rendering the vessel unseaworthy before the end of the voyage, b}'^ casting overboard a part of the ballast. The case was very fully and ably argued, during the course of the last and present term, before my brothers, Alderson, Gurney, 37 418 Insurance: Fire, Life, Marine. o. ix. Maule, and myself. We have considered it, and are of opinion that the plea is bad in substance, and that the plaintiff is en- titled to judgment, notwithstanding the verdict. The question depends altogether upon the nature of the implied warranty as to seaworthiness or mode of navigation between the assured and the underwriter on a time policy. In the case of an insurance for a certain, voyage^ it is clearly es- tablished that there is an implied warranty that the vessel shall be seaworthy, by which is meant that she shall be in a fit state as to repairs, equipment, and crew, and in all other respects, to encounter the ordinary perils of the voyage insured at the time of sailing upon it. If the assurance attaches before the voyage commences, it is enough that the state of the ship be com- mensurate to the then risk. And, if the voyage be such as to require a different complement of men, or state of equipment, in different parts of it (as, if it were a voyage down a canal or river and thence across to the open sea), it would be enough if the vessel were, at the commencement of each stage of the nav- igation, properl}^ manned and equipped for it. But the assured makes no warranty to the underwriters that the vessel shall continue seaworthy, or that the master or crew shall do their duty during the voyage ; and their negligence or misconduct is no defence to an action on the policy, where the loss has been immediately occasioned by the perils insured against. This principle is now clearly established by the cases of BtisJc v. Royal Exchange Company, 2 B. & Aid. 72 ; Walkej^ v. Mail- land, 5 B. & Aid. 171 ; Tloldsworth v. Wise, 7 B. & C. 791 ; Bishop v. Portland, id. 219 ; and Shore v. Bentall, id. 798, n. ; nor can any distinction be made between the omission by the master and crew to do an act which ought to be done, or the doing an act which ought not, in the course of the navigation. It matters not whether fire which causes a loss be lighted im- properly, or, after being properly lighted, be negligently at- tended ; whether the loss of an anchor, which renders the ship unseaworthy, be attributable to the omission to take proper care of it, or to the improper act of shipping it, or cutting it away ; nor could it make any difference whether any other part of the equipment were lost by mere neglect, or thrown away or destroyed in the exercise of an improper discretion, by those on board. If there be any fault in the crew, whether of o. IX. Dixon v. Sadler. 419 omission or commission, the assured is not to be responsible for its consequences. The only case which appears to be at variance wich this principle is that of Law v. Ilollingsworth, 7 T. R. 160, in which the fact of the pilot, who had been taken on board for the navigation of the River Thames, having quitted the vessel be- fore he ought (under what circumstances is not distinctly stated) appears to have been held to vitiate the insurance. In this respect, we cannot help thinking that the case, although attempts were made to distinguish it in some of the decided cases, must be considered as having been overruled by the modern authorities above referred to ; and that the absence, from any cause to which the owner was not privy, of the master or any part of the crew, or of the pilot (who may be considered as a temporary master), after they had been on boai'd, must be on the same footing as the absence, from a similar cause, of any part of the necessary stores or equip- ments originally put on board. The great principle established by the more recent decisions is, that, if the vessel, crew, and equipments he 07'iginaUy sufficient, the assured has done all that he contracted to do, and is not responsible for the subse- quent deficiency occasioned hy any neglect or miscondtict of the master or crew • and this principle prevents many more and difficult inquiries, and causes a more complete indem- nity to the assured, which is the object of the contract of insurance. If the case, then, were that of a policy for a particular voyage, there would be no question as to the insufficiency of the plea ; and the only remaining point is, whether the circum- stance of this being a time policy makes a difference. There are not any cases in which the obligation of the assured in such a case, as to the seaworthiness or navigation of a vessel, is settled ; but it may be safely laid down, that it is not more extensive than in the case of an ordinary policy, and that, if there is no contract as to the conduct of the crew in the one case, there is none in the other. Here it is clear that no objec- tion arises on the ground of seaworthiness of the vessel until that unseaworthiness was caused by throwing overboard a part of the ballast, by the improper act of the master and crew ; and, as the assured is not I'esponsible for such improper act, we 420 Insurance : Firfc, Life, Marine. o. n. are of opinion that the plea is bad in substance, and the plain- tiff entitled to our judgment. Rule absolute to enter judgment for the plaintiff , non obstante veredicto. Supreme Judicial Court of Massachusetts, 1878. BURGESS V. EQUITABLE MARINE INS. CO. (126 Mass. 70.) Warranty against deviation. Action of contract on a policy of insurance. Risk to commence June 13, 1874, and to expire with the voyage. The vessel insured, named Christie Johnstone, sailed from Plymouth on June 13, 1874, on a cod-fishing voy. age to the Banks, in a seaworthy condition, with four barrels of clam bait, which was the usual quantity of bait taken by vessels of her class on such a voyage. For several years past it had been the practice of such vessels to take a supply of bait insufficient to last for the entire trip, and to rely principally on catching squid on the Banks, to use for bait ; and for years prior to 1874 squid had been plenty on the Banks, but in 1874 they were very scarce. After fishing on the Banks for three weeks, and having exhausted nearly all his bait, the master of the vessel, solely for the purpose of procuring bait, went to St. Peter's, the nearest practicable port where bait could be obtained, there procured bait, and then sailed from St. Peter's to the Banks, and resumed fishing. To reach the port of St. Peter's, the vessel sailed about one hundred and ten miles from the fishing- ground. She left the fishing-ground on Thursday, reached St. Peter's on Saturday, and. having procured bait there, left St. Peter's on Tuesday following, and then sailed for another bank, where she arrived and resumed her fisning on the next Thursday. On August 6, 1874, while so fishing on the Banks, the vessel encountered a severe gale, sprung a leak, and was totally lost, with all the property on board. The defendant requested a ruling from the trial judge, that these facts amounted in law to a deviation ; which was de- clined, the judge ruling as follows : " If the vessel left FJym- 0. IX. Burgess v. Equitable Marine Ins. Co. 421 outb with the usual amount of bait for the kind of fishing in which she was to engage, and by an unexpected failure of bait of the kind ordinarily taking on the fishing-ground, it became necessary for her to go into port to procure bait, and she went to the nearest practicable port for that purpose, such going into port was not, as matter of law, a deviation." Endicott, J. — By the terms of the policy the vessel was in- sured " at and from Plymouth to the Banks, cod-fishing, and at and thence back to Plymouth." This is a definite and distinct description of the contemplated voyage between two fixed termini. The Banks are named as the outw^ard terminus, and while there engag-ed in cod-fishing, and until her return to Plymouth, the vessel was covered by the policy. The language used is not open to the construction that it was the intention of the parties to insure her while prosecuting the adventure elsewhere, or doing what was necessary to make it successful outside and beyond the prescribed limits. A voyage is the sailing of a vessel from one port or place to another port or place, and the purpose for which it is to be conducted, whether as a trading, freighting, or fishing voj^age, is often mentioned in policies of insurance. But this designation cannot vary or extend the description, route, or termini of the voyage as named in the policy, unless some usage, connected with the particular trade or adventure, is shown to exist. No evidence was offered of a usage in such voyages to leave the Banks and go into port for bait. So far as the evidence reported discloses any usage in that regard, it appears that for some years it had been the practice to carry out a limited amount of bait, and to rely upon obtaining an additional supply on the Banks. Such being the practice to obtain bait on the Banks, wlien the supply taken out was exhausted, a departure from the Banks for that purpose could not have been contemplated by the parties in making the policy. We have, therefore, a definite description of the voyage in the policy, and a usage that does not extend its provisions. The question decided in Friend v. Gloucester Ins. Co., 113 Mass. 326, arose upon a clause in a policy prohibiting a fishing vessel from sailing on a voyage east of Ca|^ Sable after a certain date, and throws no light upoa the construction to be given to the words of this policy. 422 Insurance; Fire, Life, Marine. o. ix. The decision in The Tarquin, 2 Lowell, 358, turned upon the construction of the shipping articles of seamen, and not of a policy of insurance. We are, therefore, of opinion, that the vessel, by leaving the Banks and going to St. Peter's for bait, departed from the voyage described in the policy ; and the only question to be determined is, whether in law there has been a deviation which avoids the policy. It may be stated, in general terms, that the assured is pro- tected by his policy while the vessel pursues the usual and customary course of the voyage ; but any departure from the course, or delay in prosecuting it, without necessity or just cause, is a deviation, and discharges the insurer, because an- other voyage has been voluntarily substituted for that which was insured. Whether the degree or period of the risk is in- creased, is unimportant, as the assured has no right to substi- tute a different risk. Whenever, therefore, there is a manifest departure from the course of the voyage, the assured must show that it was justified by the necessity of the case. Stocker v. Harris, 3 Mass. 409, 418 ; Brazier v. Clap, 5 Mass. 1 ; Coffin X. JVewhuryport Ins. Co., 9 Mass. 436, 449 ; Kettell v. Wiggin, 13 Mass. 68. In the case at bar, the alleged necessity arose from scarcity of bait. The plaintiff did not put on board, when the vessel sailed from Plymouth, enough for the entire trip. Squid had been plenty on the Banks during several years prior to 1874, and the plaintiff relied upon catching them and using them for that purpose. They happened this season to be very scarce, and, after fishing three weeks and nearly exhausting his supply, the master sailed for St. Peter's, over one hundred miles distant, procured bait, and returned to the Banks after an absence of a week. It is to be observed that this so-called necessity did not arise from any peril insured against in the policy, or ordinarily insured against in policies of insurance, and did not involve the safety of the vessel or of any property on board : it had rela- tion solely to the success of the fishing adventure, and in this the defendant had no interest and had assumed no responsi- bility. We are of opinion that the claim of the plaintiff cannot be. sustained ; and that a necessity to justify the departure in thia 0. IX. Burgess v. Equitable Marine Ins. Co. 423 case cannot be found in the fact that, without going to St. Peter's for bait, the voyage would have failed to be successful or profitable to the plaintiff. The strictness with which the courts have held the insured to the route named in the policy is illustrated by the cases already cited, and by many others cited at the argument. Dodge V. Essex Ins. Co., 12 Gray, 65 ; Middlewood v. Blakes, 7 T. K. 162 ; Brown v. Taylew\ 4 A. & E. 241 ; Fernmidez V. Great Western Ins. Co., 48 N. Y. 571 ; Merchants' Ins. Co. V. Algeo, 32 Penn. St. 330. But the question to be determined here is, what is the nature and extent of the necessity or just cause which will warrant a departure from the route. In this connection it may be well to refer to the necessities which clearly justify a departure. There is no deviation where the master is compelled by force either to depart from his route or delay its prosecution by the acts of his crew ; Elton v. Brogden, 2 Str. 1264 ; Driscol v. Passmore, 1 B. & P. 200 ; Driscol V. Bovil, 1 B. & P. 313 : or where he is detained by those in authority, or taken out of his course by a ship of war ; Scott V. Thompson^ 1 N. P. 181. In Phelj^s v. Auldjo, 2 Camp. 360, a master was ordered to sail out and examine a vessel in the offing Vjy a captain of a king's ship, and, it appearing that he complied without remonstrance or threat of force, it was held to be a deviation. In cases of this description there must be a vis major , compelling a departure or delay, which excuses the master. So, where the master is obliged to leave his courso. or delay by stress of weather or other peril of the sea, or to g' > into port to repair or refit, or to re-man or recruit his crew dis- abled by sickness or reduced by casualties, or to avoid captui<\ or to join convo}' in time of war, there is no deviation. It is unnecessary to cite all the cases which fall within these exco})- tions; many of those relied on by the plaintiff are clearly with- in them. Dnnlo'p v. Allan, Millar on Ins., 414 ; Green \. Elmslie, Peake, 212 ; Clark v. United Ins. Co., 7 Mass. 365. The case last cited is put upon the express ground that the ship was prevented by causes insured against from proceeding on her route, and the departure was from necessity. See also Folsom V. Merchants' Ins. Co., 38 Maine, 414. Nor is the departure from the route for the purpose of sa v ing human life a deviation ; nor is a policy avoided when the 424 Insurance: Fire, Like, Marine. c. ix. ship goes out of her course to obtain necessary medical assist- ance for those lawfully on board. Bond v. Brig Cora, 2 Wash. C C. 80 ; Perkins v. Augusta Ins. Co., 10 Gray, 312. In this class of cases the justification does not rest on the same ground as in those previously noticed. It is allowed from motives of humanity, and cannot be extended to the saving or protection of property. In all cases the necessity must be a real and imperative necessity affecting the vessel — such as actual force preventing the master from exercising his will, peril of the sea, danger of capture, want of repair, disability of the crew, or unseaworthiness — occurring under such circum- stances that the master, acting upon his best judgment for the interest of all parties, has no alternative, and is forced to leave his route or delay its prosecution. When the departure is caused by such a necessity the change of route in no respect alters the insurance, because the course of a sea-voyage must at times be necessarily subject to extraordinary perils of the sea, and contingencies beyond the control of the master, and in the presence of which he is forced to succumb ; and when they occur, and he is obliged to depart from the usual course of the voyage, there is no deviation in the legal sense of the term, for the departure is the necessary incident of the route named in the policy as prosecuted at the time by the ship. The probability of such occurrences is well understood ; they are known perils of the voyage, and enter into the ordinary contract of marine insurance. And when the master, compelled by the necessity, does that which is for the benefit of all concerned, the act is within the intention of the policy as much as if expressed in terms. It would be practically impossible to state in the policy all the perils which might arise in a sea-voyage and excuse departure from the route ; and, therefore, by the rules of interpretation applicable to this species of contract, the policy is held by implication to include them. See Green v. Pacific Ins. Co., 9 Allen, 21T, 219. In such a policy as this the necessities justifying a de- parture, in the absence of usage, from the route, and a visit to a port not named, are those which are caused by some peril occurring in the prosecution of the voyage within the limits named in the policy, and not those which arise in the prosecu- tion of the business for which the voyage was undertaken. 0. IX. Burgess v. Equitable Marine Ins. Co. 425 It is true, there is a class of oases, much relied on by the plaintiff, where the test is whether the ship at the time of the alleged deviation was pursuing the object and business of the voyage. But those are cases of delay, where the ship was at the port or place named or permitted in the policy. The per- mission in a policy to go to certain ports or places must always be construed in reference to the purpose of the voyage. Wil- liams V. Shee, 3 Camp. 469 ; 1 Arnould on Ins., §§ 141, 142. Any delay for the prosecution of other business, or any unrea- sonable delay in prosecuting the business of the voyage, at such port, is a deviation. African Mej'chants v. British Ins. Go.., L. R., 8 Ex. 154. But if the delay was necessary in order to accomplish the objects of the voyage, and was reasonable under the circumstances of the case, then there is no deviation. Columhian Ins. Co. v. Catlett, 12 Wheat. 383 ; Phillips v. Irv- ing, Y Man. & Gv. 325. In other words, if the ship is at a place permitted, the delay shall not be a deviation, if it is necessary in the proper prosecution of the business of the voy- age. But this test cannot be applied to a departure f rom Ihe route to a port not named or permitted, for the purpose of the adventure. In all trading vo\^ages, for example, the ship is confined to the ports or coasts named in the polic}'^, and she cannot depart to other places simply because she may better prosecute the trade elsewhere. If the departure from the route to insure the success of the adventure can be justified as a necessity, it would be difficult to state any limit to the privi- lege, or to the duration of the insurance, and, in -the absence of permission to do so in the policy, it cannot be implied. See Kettell V. Wiggin., 13 Mass. ^'^ ; Robertson v. Columhian Ins. Co.., 8 Johns. 491. The plaintiff's vessel might have delayed for any reasonable time upon the Banks for the purpose of fishing or getting bait, without being guilty of deviation ; and would have been protected by the policy, even without proof of usage, because fishing was the purpose of the voyage, and she could properly prosecute it within the route named in the policy. jSfoljle v. Kennoway, 2 Doug. 510, 513. But she could not go beyond or away from the route for that purpose. The illustration put by the defendant's counsel is apposite: "If a vessel insured to Havana and back should learn, before entering the port, that there was no cargo there with whict 426 Insurance : Fire, Life, Marine. o. ix. she could be loaded, no one would say that her policy pro- tected her in going to the nearest port where a cargo could be had." Other illustrations may be given. If a vessel insured to a particular port, having letters of credit, should find on arrival that the parties on whom they were drawn had failed, she could not go to another port for funds, and return for her cargo, and be protected by her policy. If fish had been scarce on the Banks in 18Y4, it would hardly be contended that the vessel could have gone to other fishing-grounds to fish, although not more distant than St. Peter's ; and yet, if she was justified by necessity in leaving to obtain bait at St. Peter's and to return in order to make the trip successful, it would be difficult to hold that the same necessity would not allow her to fish elsewhere. In the argument of the plaintifi"s counsel, no case was cited which sustains the position he has assumed, and we are not aware of an}^ case which goes to this extent. In Greene v. Pacific Ins. Co., 9 Allen, 217, the voyage was broken up by reason of perils to the ship insured against in the policy, and the question was as to the right to abandon. In Stacker v. Harris, 3 Mass. 409, which is strongly relied on by the plain- tiff, an American ship sailing under Spanish colors, as allowed by the policy, delayed at Yera Cruz five months for the pur- pose of recovering outward cargo which had been seized after landing by the authorities. The captain failed to obtain a restitution, and being unable to obtain a clearance from Vera Cruz to the United States under Spanish colors without giving bond to land his cargo in some part of the dominion of Spain, and there being a partner of a Spanish house in Havana by whose assistance he could restore the character of his ship as an American bottom, he took a cargo and freight and sailed for Havana. It is stated in the opinion, though not necessary to the decision, that the delay at Vera Cruz was not a deviation. And it was said by the court : " It may be understood that the insurers by this policy " (w^hich was on ship, cargo, and freight) " were not interested in the outward cargo, after it had been safely landed from the ship. But the captain is the common agent of the concerned, and it is his duty to manage their distinct and separate, as well as their joint interests, ac- cording to his best judgment ; and whatever is fairly done with 0. IX. Burgess v. Equitable Marine Ins. Co. 427 this purpose is witliin the course of the voyage." This is simply stating, in another form of words, that the object for which the ship was at Vera Cruz was the disposal of her cargo, and if the delay was occasioned by fairly attempting to do so, there was no deviation. But the case was decided for the de- fendant, on the ground that, in sailing for Havana, instead of to a port in the United States as required by the policy, the ship deviated, and that the reason for doing so was not such a necessity as justified the departure. It was suggested, in giv- ing the reasons for this decision, that if the partner had died or had left Havana before the ship arrived, then, by force of the same necessity, a voyage to some other Spanish port or ports would have been equally excused ; and thus the ship might have made several passages, although by the terms of the policy she was only insured from Yera Cruz to the United States ; and that this would have been to engage the insurer in an unlimited voyage and risk. The same suggrestion Avould be apphcable in this case. If the master had failed to find bait at St. Peter's, the same necessity would have justified him in visiting port after port until he found it. As in the opinion of the court the trip to St. Peter's was a deviation which discharged the insurer, by the terms of the report there must be Judgment for the defendant. OHAPTER X. GENERAL AVERAGE. \ United States Supricmk Court, 1869. STAR OF HOPE. (9 Wall. 203.) General average : sacrifices, expenses, stranding. Libels by the shippers of cargo against the ship for non performance of contract of affreightment by reason of failure to deliver cargo, which had been sold by the master in tlx; course of the voyage to pay for repairs at Montevideo, mado necessary by the stranding of the ship. Answer by ship-owners, that the stranding took place under circumstances which made the damage, and all expenses consequent thereon, a subject of general average contribution. The district and circuit courts decreed in favor of the libel- lants, and decided that the loss and expense consequent upon the stranding were a subject of particular average and must be borne by the ship. Clifford, J. — With a full cargo on board, the ship sailed for her port of destination on the day alleged in the pleadings ; and during the voyage, to wit, on the 14th of April following, it was discovered that great quantities of smoke and vapor were issuing from the fore and after hatches of the ship. She was proceeding on her voyage at the time the discovery w;i ; made, in latitude forty-six degrees south, longitude fifty-thico degrees west, but the w^eather w^as squally, and the sea wrs rough. Precautions, such as are usual on such occasions, were immediately adopted : the hatches were fastened down, and " everything made tight," in order to check as much as possible 0. X. Stae of Hope. 429 the progress of the fire, at least until a port of succor could be reached. Great alarm was felt, and the fears of all were much in- creased by the fact, well known to all, that the cargo contained prepared gunpowder and large quantities of spirituous liquors. Under the circumstances the crew refused to continue the voy- age, and the master determined, very pi'operly, as the parties agree, to make for the Bay of San Antonio, on the south- east coast of Patagonia, as the nearest anchorage, and at the 3nd of four days the ship arrived off that bay and set the usual signal for a pilot. Throughout that period the signs of fire continued to in- crease ; and in getting up the chains, so as to be ready to cast anchor without delay, they were found to be quite hot, and there were other indications of fire, which greatly heightened the general alarm. Unwilling to run into a bay unknown to him, without a pilot, the master set his signal as aforesaid and waited three hours for one ; but no one came, and it became evident that none could be expected, as the coast was wild and desolate. Something must be done, as the alarm increased as the impending peril became more imminent. Haul off the master could not, as the wind and waves were against any such move- ment. He could not resume the voyage for the same reason, and also because the crew utterly refused their co-operation ; nor could he with safety any longer attempt to " lie to," as the ship was gradual!}^ approaching the shore, and because she was exposed both to the impending peril of fire on board, and to the danger, scarcely less imminent, of shipwreck from the wind and waves. Nothing, therefore, remained for the master to do, which it was within liis power to accomplish, but to run the vessel ashore — which it is agreed b}' the parties would have re- sulted in the " certain, and almost instant loss of vessel, cargo, and all on board " — or to make the attempt to run into the bay without the assistance of a pilot. Evidently he would have been faithless to every interest committed to his charge if he had attempted to beach the vessel at that time and place, as the agreed statement shows that the Aveather was rough, that the wind was high and blowing toward the land with a heavy sea, and that the shore was rocky and precipitous. 430 Insdbance : Fikk, Life, Marine, o. t. What the master did on tlie occasion is well described by the parties in the agreed statement, in which they say he at lengtli determined, as the best thing to be done for the general safety, and especially for the preservation of the cargo and the lives of those on board, to make the attempt to run in without a pilot, preferring all risks to be thereby incurred rather than to remain outside in the momentary apprehension of destruction to all ; and the parties agree that he was fully justified in his decision as tested by all the circumstances, although the ship in attempting to enter the bay grounded on a reef, and before she could be got to sea again sprung a leak and sustained very serious injuries in her bottom. Great success, however, attended the movement, notwith- standing those injuries, as the water taken in by the ship ex- tinguished the fire, and the ship remained fast and secure from shipwreck until the winds subsided and the sea became calm. Repairs could not be made at that place, and the parties agree that the injuries to the ship were such as fully justified the master in returning to Montevideo for that purpose, as that was the nearest port where the repairs could be made. He arrived there on the twenty-seventh of the same month, and it appears by the agreed statement that th-? just and necessary expenses incurred by the ship at that port to enable her to re- sume the voyage were one hundred thousand dollars, including repairs, unloading, warehousing, and reloading of the cargo, and that the master, being without funds or credit, was obliged to sell a considerable portion of the cargo to defray those expenses. Repaired and rendered seaworthy by those means, the ship on the 11th of September in the same year resumed her voyage, and arrived at her port of destination on the 7th of December following ; and the master, without unnecessary delay, delivered the residue of the shipments in good order to the respective consignees, as required by the contract of affreightment. General average contribution is defined to be a contribu- tion by all the parties in a sea adventure, to make good the loss sustained by one of their number on account of sacrifices vol- untarily made of part of the ship or cargo to save the residue and the lives of those on board from an impending peril, or for extraordinary expenses necessarily incurred by one or mere of o. X. Star of Hope. 431 the parties for the general benefit of all the interests embarked in the enterprise. Losses which give a claim to general aver- age are usually divided into two great classes: (1) Those which arise from sacrifices of part of the ship or part of the cargo, purposely made in order to save the whole adventure from perishing ; (2) those which arise out of extraordinary expenses incurred for the joint benefit of ship and cargo. Common justice dictates that where two or more parties are engaged in the same sea risk, and one of them, in a moment of imminent peril, makes a sacrifice to avoid the impending danger, or incurs extraordinary expenses to promote the general safety, the loss or expenses so incurred shall be assessed upon all in proportion to the share of each in the adventure. Where expenses are incurred or sacrifices made on account of the ship, freight, and cargo, by the owner of either, the owners of the other interests are bound to make contribution in the proportion of the value of their several interests ; but in order to constitute a basis for such a claim it must appear that the expenses or sacrifices were occasioned by an apparently imminent peril, that they were of an extraordinar}-^ char- acter, that they were voluntarily made with a view to the general safety, and that they accomplished or aided at least in the accomplishment of that purpose. Authorities may be found which attempt to qualify this rule, and assert, that, where the situation of the ship was such that the whole adventure would certainly and unavoidably have been lost if the sacrifice in question had not been made, the party making it cannot claim to be compensated by the other interests, because it is said that a thing cannot be regarded as having been sacrificed which had already ceased to have any value ; but the correctness of the position cannot be admitted unless it appears that the thing itself for which contribution is claimed was so situated that it could not possibly have been saved, and that its sacrifice did not contribute to the safety of the crew, ship, or cargo. Sacrifices where there is no peril present no claim for contribution ; but the greater and more imminent the peril, the more meritorious the claim for such con- tribution, if the sacrifice was voluntary and contributed to save the associated interests from the impending danger to which the same were exposed. 432 Insurance : Fire, Life, Marine. o. x. Such claims have their foundation in equity, and rest upon the doctrine that whatever is sacrificed for the common benefit of the associated interests shall be made good by all the inter- ests which were exposed to the common peril, and which were saved from the common danger by the sacrifice. Much is deferred in such an emergency to the judgment and decision of the master ; but the authorities everywhere agree that three things must concur in order to constitute a valid claim for general average contribution : First, there must be a common danger to which the ship, cargo, and crew were all exposed ; and that danger must be imminent and apparently inevitable, except by incurring a loss of a portion of the associated inter- ests to save the remainder. Secondly, there must be the vol- untary sacrifice of a part for the benefit of the whole ; as, for example, a voluntary jettison or casting away of some portion of the associated interests for the purpose of avoiding the com- mon peril, or a voluntary transfer of the common peril from the whole to a particular portion of those interests. Thirdly, the attempt so made to avoid the common peril to which all those interests were exposed must be to some practical extent successful ; for, if nothing is saved, there cannot be any such contribution in any case.^ Equity requires, says Emerigon, that in these cases those whose effects have been preserved b}" the loss of the merchan- dise of others shall contribute to this damage, and commercial policy as well as equity favors the principle of contribution, as it encourages the owner, if present, to consent that his property, or some portion of it, may be cast away or exposed to peculiar and special danger to save the associated interests and the lives of those on board from impending destruction ; and, if not pres- ent, the moral tendency of the well-known commercial usage is to induce the master to exercise an independent judgment in the emergency, for the benefit of all concerned. Masters are often compelled, in the performance of their duties, to choose between the probable consequences of immi- ' While this is true, some authorities maintain that the success need not be shown to have been caused by the sacrifice in order to establish a right to gen- eral average contribution, but that it is enough if the circumstances existing at the time of such sacrifice justified a general average act. Arnould, Mar. Ins., p, 854 (6th ed., 1887). See g 119, supra. o. X. ' Star of Hope. 433 nent perils threatening the loss of the ship, cargo, and all on board, and a sacrifice of some portion of the associated inter- ests in their custody and under their control, as the only means of averting the (hingers of the impending peril in their power lo employ. They must elect in such an emergency, and if they, in the exercise of their best skill and judgment, decide that it is their duty to lighten the ship, cut away the masts, or to strand the vessel, courts of justice are not inclined to over- rule their determinations. Owners of vessels are under obligation to employ masters of reasonable skill and judgment in the performance of their duties ; but they do not contract that they shall possess such qualities in an extraordinary degree, nor that they shall do in any given emergency what, after the event, others may think would have been best. From the necessity of the case, the law imposes upon the master the duty, and clothes him with the power, to judge and determine, at the time, whether the cir- cumstances of danger in such a case are or are not so great and pressing as to render a sacrifice of a portion of the associated interests indispensable for the common safety of the remainder. Standing upon the deck of the vessel, with a full knowledge of her strength and condition, and of the state of the elements which threaten a common destruction, he can best decide in the emergency what the necessities of the moment require to save the lives of those on board and the property intrusted to his care ; and if he is a competent master, if an emergency actually existed calling for a decision whether such sacrifice was required, and if he appears to have arrived at his conclu- sion with due deliberation, by a fair exercise of his own skill and judgment, with no unreasonable timidity, and with an honest intent to do his duty, it must be presumed, in the ab- sence of proof to the contrary, that his decision was wisely and , properly made. 1 Controversies respecting the allowance or adjustment of general average more frequently arise in cases where the sacri- fice made consisted of a jettison of a portion of the cargo than in respect to any other disaster in navigation. Explanations and illustrations upon the subject, therefore, whether found in treatises or in judicial decisions, are usually more particularly applicable to cases of that description than 2& 434: Insurance : Fire, Life, Marine. " o. x to a case where the vessel was stranded ; but the leading princi pies of law by which the rights of parties are to be ascertained and determined in such cases are the same whether the sacri- fice made consisted of a part of the cargo or of a part or the whole of the ship, as the controlling rule is, that what is given for the general benefit of all shall be made good by the contri- bution of all, which is the germ and substance of all the law upon the subject. Doubts at one time were entertained whether a loss occasioned by a voluntary stranding of the vessel, even though it was made for the general safety, and to avoid the probable consequences of an imminent peril to the whole adven- ture, was the proper subject of general average contribution ; but those doubts have long since been dissipated in most juris dictions, and they have no place whatever in the jurisprudence of the United States. "Where the ship is voluntarily run ashore to avoid capture, foundering, or shipwreck, and she is afterwards recovered so as to be able to perform her voyage, the loss resulting from the stranding, says Mr. Arnould, is to be made good by general average contribution ; and the writer adds that there is no rule more clearly established than this by the uniform course of maritime law and usage. Sustained as that proposition is at the present day by uni- versal consent,* it does not seem to be necessary to refer to other authorities in its support, nor is it necessary to enlarge that rule in order to dispose of the present controversy ; but to prevent any misconception as to the views of the court it is deemed proper to add that it is settled law in this court that the case is one for general average, although the ship was totally lost, if the stranding was voluntary and was designed for the common safety, and it appears that the act of stranding resulted in saving the cargo. Undoubtedly the sacrifice must be voluntary and must have been intended as a means of saving the remaining proj)erty of the adventure, and the lives of those on board, and unless such ' This statement of the learned court is not quite accurate. See the able defense of a contrary view in the Enc. Brit., subject General Average ; and also York Antwerp Rules. § 125, supra ; Maclachan on Shipping, p. 623 ; Gourlie, Gen. Av., pp. 183, 135. The custom of Lloyd's excludes damage from Toluntary stranding. Owen, Mar. Ins., p. 271 (1890). c. X. Stak of Hope. 435 was the purpose of the act it gives no claim for contribution ; but it is not necessary that there should have been any inten- tion to destroy the thing or things cast away, as no such in- tention is ever supposed to exist. On the contrary, it is suffi- cient, that the property was selected to suffer the common peril in the place of the whole of the associated interests, that the remainder might be saved. Suggestion is made that the act of stranding of the ves- sel in this case was not a voluntary act, as the reef where she grounded was not visible at the time and was unknown to the master; but the agreed statement shows that in undertaking to run into the bay the master knew that the chief risk he had to encounter was the stranding of the ship, and the precautions which he took to guard against that danger show to the entire satisfaction of the court that the disaster was not altogether unexpected. As the ship advanced, the lead was constantly employed, showing eight fathoms at first, then seven, then six only, and so on ; the depth continuing to diminish at each throw of the lead, until the ship grounded and remained fast. Grant that the master did not intend that the ship should ground on that reef, still it is clear that he was aware that such a danger was the chief one he had to encounter in entering the bay, and the case shows that he deliberately elected and de- cided to take that hazard rather than to remain outside, where, in his judgment, the whole interests under his control, and the lives of all on board, were exposed to imminent peril if not to certain destruction. Under these circumstances it is not possi- ble to decide that the will of man did not in some degree con- tribute to the stranding of the ship, which is all that is required to constitute the stranding a voluntary act within the meaning of the commercial law. Suppose the storm outside the bay was irresistible and over- powering, still it does not follow that there was no exercise of judgment, for there may be a choice of perils when there is no possibility of perfect safety. Destruction of all the interests was apparently certain if the ship remained outside, but the master under the circum- stances elected to enter the bay without the assistance of a pilot, knowing that there was great danger that the ship might ground in the attempt ; but his decision was, that it was better 436 Insurance : Ftkio, TiiFE, Marine. o. x. for all concerned to make the attein])t than to remain where he was, even if she did ground : and the result shows that he decided wisely for all interests, as damage I'esulted to none except to the ship, and she would doubtless have been de- stroyed if she had continued to remain outside of the bay. Guided by these considerations, our conclusion is, that the loss and damage sustained by the ship at the place of the dis- aster, and the costs and expenses of the repairs — and all the other costs and expenses as charged in the adjustment — are the proper subject of general average contribution, as alleged b}' the claimants in their answer. Details will be avoided, as the decree must be reversed, and the cause remanded for further proceedings. Brief consideration must also be given to the exceptions, taken by the claimants, to the report of the commissioner, which were overruled by the court. 1. That the commissioner erred in assuming that the valu- ation of the ship, as given in the policy of insurance, is the proper basis of her contributory value in the statement of the amount for general average. As a general rule, the value of the ship for contribution, where she has received no extraordinary injuries during the voyage, and has not been repaired on that account, is her value at the time of her arrival at the termination of her voy- age ; but if she met with damage before she arrived, by perils of the sea, and had been repaired, then the value to be assumed in the adjustment is her worth before such repairs were made. Neither party gave any evidence as to the value of the ship prior to the disaster, except what appears in the policy of in- surance, and, under the circumstances, it is difficult to see what better rule can be prescribed than that adopted by the com- missioner. Strictly speaking, the rule is the value of the ship ante- cedent to the injuries received ; but, as that requirement can seldom be met, the usual resort is her value at the port of departure, making such deduction for deterioration as appears to be just and reasonable. No proof on that subject, except the policy of insurance, was offered by either party, and, inasmuch as ships are seldom insured beyond their actual value, the exception is overruled. o. X. Star of Hope. 437 2. That the commissioner erred in carrying into particular average certain expenses incurred by the master at the port where the repairs were made, which should have been re- garded as the proper subject of general average. We think it plain that the exception must be sustained, as some of the matters charged as particular average, in whole or in part, ought clearly to have been included at theii' full value among the incidental expenses necessarily incurred in making the repairs. Whatever the nature of the injury to the ship may be, and whether it arose from the act of the master in voluntarily sacrificing a part of it or in voluntarily stranding the vessel, the wages and provisions of the master, officers, and crew from the time of putting away for the port of succor, and every ex- pense necessarily incurred during the detention for the benefit of all concerned, are general average. Repairs necessary to remove the inability of the ship to proceed on her voyage are now regarded everywhere as the proper subject of general average. Expenses for repairs, be- yond what is reasonably necessary for that purpose, are not so regarded. The wages and provisions of the master, oflBcers, and crew are general average from the time the disaster occurs until the ship resumes her voyage, if proper diligence is employed in making the repairs. Towing the ship into port, and extra expenses necessarily incurred in pumping to keep her afloat until the leaks can be stopped, are to be included in the adjustment. Surveys, port charges, the hire of anchors, cables, boats, and other necessary apparatus, for temporary purposes in making the repairs, are all to be taken into the account, as well as the expenses of unloading, warehousing, and reloading the cargo after the repairs are completed. Repairs in such a case cannot be made by the master unless he has means or credit ; and if he has neither, and his situation is such that he cannot communicate with the owners, he may sell a part of the cargo for that purpose, if it is necessary for him to do so in order to raise the means to make the repairs. Sacrifices made to raise such means are the subject of general average, and the rule is the same whether the sacrifice was 438 Insurance : Fire, Life, Marine. 6. x. made by a sale of a part of the cargo, or by the payment of marine interest. Governed by these rules, it is believed the rights of the parties may be adjusted vs^ithout serious difficulty or danger of mistake. Decree reversed. CHAPTEE XL new yokk standard fike policnr. Supreme Judicial Court of Massachusetts, 1852. SCKIPTURE V. LOWELL MUTUAL FIRE INS. CO. (10 Cush. 356.) What it lost hy fire. Action on a policy of insurance on a dwelling-house owned by plaintiff, but occupied by one Elbridge Smith, whose minor son, without plaintiff's knowledge, brought a cask of gun- powder into the attic and fired it with a match, doing con- siderable damage. Perkins, J., in the Court of Common Pleas, gave plaintiff judgment for the total damage done, on an agreed statement of facts, and defendants appealed to this court. CusHiNG, J. — The case finds that a burning match being applied, without fault of the plaintiff, to a cask of gunpowder in the attic of his house, the gunpowder took fire, exploded, set fire to a bed and clothing, charred and stained some of the woodwork, and blew off the roof of the house ; and the only question in the case is, whether the loss thus occasioned to the building is covered by the conditions of an ordinary policy against fire. The question may be generalized thus : By the ignitiot of gunpowder within a dwelling-house, damage is done to the house, that damage consisting in part of combustion and in part of explosion. Is the whole damage covered by a policy insuring " against loss or damage by fire ? " The very anomalous case of Austin v. Drew, 6 Taunt. 436, has been adduced in argument and greatly relied upon, as hav- ing apparent analogy to this ; but when that case is examined, 440 Insurance : Fire, Life, Marine. c. xi. the analogy disappears. The evidence there was, of a building of several stories, in each of which sugar, in a certain state of preparation, was deposited for the purpose of being refined; and a chimney, running up through the building, formed almost one whole side of each of the stories ; and by means of this chimney, heat was communicated to the several rooms con- taining the sugar, and thus acted on it chemically. At the top of the chimney was a register used to shut in the heat dur- ing the night. The servant of the assured, in lighting the fires in the morning, neglected to open the register, in consequence of which, undue heat came out into the heating-room, and the sugars were thereby injured. And the action pending, was to recover damage for this under a policy of insurance against loss by fire. The decision in Austin v. Drew has been assumed to estab- lish that, "to bring a loss within the risk insured against, it must appear to have been occasioned by actual ignition, and no damage occasioned by mere heat, however intense, will be within the policy." 2 Marsh, on Ins. (3d ed.) 790. This propo- sition is not the point of the case ; and it cannot be sound law ; for it may well happen that serious damage, within the scope of a fire policy, shall be done to a building, or to its contents, by the action of fire in scorching paint, cracking pictures, glass, furniture, mantelpieces, and other objects, or heating and thus actually destroying many objects of commerce, and yet all this without actual ignition — that is, visible inflammation. All these manifest errors, and the doubts they throw over the case of Austin v. Drew, are dispelled at once by the report of it in Holt and in Campbell, as it was tried at Nisi Prius. There it appears that the claim w^as for damage to the sugars by overheating only. And Chief Justice Gibbs said: "lam of opinion that this action is not maintainable. There was no more fire than always exists when the manufacture was going on. Nothing was consumed by fire. The plaintiffs' loss arose from the negligent management of their machinery. The sugars were chiefly damaged by the heat. And what produced the heat? Not any fire against which the company insured, but the fire for heating the pans, which continued all the time to burn without any excess. The servant forgets to open the register by which the smoke ought to have escaped and the 0. XI. Scripture v. Lowell Mutual Fire Ins. Co. 441 heat to have been tempered." And when one of the jurymen suggested that fires arising from negligence of servants were covered by fire policies, Chief Justice Gibbs assented, and said it was not the case of a fire arising from negligence, for there was no fire except where it ought to have been ; but it was the case of the damage of an article in the process of manufacture by the unskillful management of the fire used as an agent of the manufacture. Austin v. Drew^ 4 Campb. 360 ; Holt N. P. 126. If, in Austin v. Drew, the fire had been where it ought not to be, if, even with careless management, it had burned the build- ing, and notwithstanding it was fire maintained only for the purpose of manufacture, then all the observations of the court go to show that, in this instance, as in that of the whaleship mentioned in Emerigon (1 Tr. de Ass. 436), the insurers would have been held to be liable for the loss. This, therefore, and this only, as correctly stated by Beaumont (Ins. 37), is decided by the case of Austin v. Drew ; namely, that where a chemist, artisan, or manufacturer, employs fire as a chemical agent, or as an instrument of art or fabrication, and the article, which is thus purposely subjected to the action of fire, is damaged in the process by tlie unskillfulness of the operator, and his mis- management of heat as an agent or instrument of manufacture, that is not a loss within a fire policy. This, we apprehend, is good policy and sound law. But it does not touch at all the present case. It has been thought proper thus to analyze the case of Austin v. Drew, because, having been variously reported by four different reporters, and presenting itself prominently in several of the text-books, but in nearly all of them with more or less of misconception, it has become the starting point, in legal construction, of conflicting lines of argument leading to sundry false conclusions, and, among others, that of a sup- posed application to the present question. Some adjudications have also been cited of questions arising in the contingency of damage done by lightning. Thus, in Kennistoji v. Merrimack Insurance Company, the Supreme Court of New Hampshire decided that damage done by lightr. ning, without any combustion to indicate the presence of fire, \s not within the terms of a policy against " fire by accident, lightning, or by any other means " ; the court, in a brief opin- 443 Insurance : Fire, Life, Marinb. a xl ion, deducing the conclusion from the assumed premises that lightning^^r «^ is not fire. 14 N. H. 341. The same conclu- sion, upon similar facts and upon the same words of insurance, " fire by lightning," is elaborately reasoned out in a recent case in New York, Babcock v. Montgomery County Insurance Com- pany, 6 Barb. 637 ; where it is held, that, to constitute a loss within the policy, there must be fire, or burning, and that damage by lightning in other forms is not the risk intended by the contract ; because, though caloric may generate electricity, or electricity caloric, yet caloric and electricity are distinct things in nature. The principle adjudged in the cases of this class will be readily seen by reversing the question. Suppose, not as fact but as mere supposition, a policy insuring against damage done through electricity generated by caloric. Obviously, this would not cover damage done by fire only, electricity not being evolved. So, in the actual case reported, of insurance against fire produced by lightning, if the effects be of lightning only, without exhibition of fire, it would not, according to the above decision, be within the policy. Or suppose insurance on cattle against the risk of death by fire alone. In that assump- tion, if the cattle die, as they may, by a stroke of lightning, without a burn or any other action of fire on their bodies, it would not be the risk contemplated by the contract. Beau- mont on Ins. 37. The question of loss by lightning is very summarily dis- posed of in the older authorities by treating electricity as fire from heaven. See 1 Emerigon, c. 12, § 17, No. 1, and the authors there cited. But the progress of knowledge has led to juster notions of the nature of lightning, and, of course, to dif- ferent conclusions touching its legal relations, which are cor- rectly summed up by a late writer as follows : namely, that fire includes lightning if there be any mark of fire, but not otherwise. Beaumont on Ins. 37. These cases of damage by lightning bear on the present question, therefore, if at all, only by very distant analogy. Neither of them covers it or has any direct relation to it. To the contrary of this, in New York, at least, the same courts which decide that loss by lightning merely is not covered by a fire policy, decide that loss by the explosion of gunpowder is. 0. XI. Scripture v. Lowell Mutual Fire In8. Co. 443 There is a series of cases precisely in point which expressly decide, or by implication assume, that damage done by the explosion of gunpowder ignited within a building, as Avell as that done by its combustion, is within the risk of a fire policy. The case of Grim v. Phmnlx Insurance Company was this : A vessel, insured against fire, was partly laden with gun- powder, which, being ignited by carelessness, the vessel was blown up and totally lost. It was argued by eminent counsel, and the opinion was given b}^ Thompson, C. J., and throughout the case it seems to be assumed that the loss was, in respect to its cause, within the policy, and the decision was made to depend on other considerations, 13 Johns. 451. The same con- clusion is also assumed in the case of Duncan v. Sun Fire In- surance Compa7iy, 6 Wend. 488. In the case of City Fire Insurance Company v. Corlies^ the claim was on a fire policy for merchandise destroyed not in burning, but through the blowing up of the building wherein it was stored, by means of gunpowder ; and the court expressly adjudged this to be " a loss by the peril insured against, within the meaning of the policy." 21 Wend. 367. The question, we admit, is a nice one. Upon careful reflec- tion, however, we have come to the conclusion that the re- ceived opinions on the subject and the adjudications referred to are in accordance with reason and principle. It seems not to be denied that actual combustion, produced by the ignition of gtmpowder, is within the present policy. If, then, a com- bustible substance in the process of combustion produces ex- plosion also, it is not easy to perceive why, of the two diverse but concurrent results of the combustion, the one should be ascribed to fire any less than the other. The plain fact here is the application of fire to a substance susceptible of ignition, the consequent ignition of that substance, and immediate damage to the premises thereby. It is no sufficient answer to say that some of the phenomena produced are in the form of explosion. All the effects, whatever they may be in form, are the natural results of the combustion of a combustible substance ; and, as the combustion is the action of fire, this must be held to be the proximate and legal cause of all the damage done to the prem- ises of the plaintiff. Our opinion excludes, of course, all damage by mere explo- 444 iNstJKANCE : Fire, Life, Makinb. o. xi. sion, not involving ignition and combustion of the agent of explosion, such as the case of steam, or any other substance acting by expansion without combustion. See Perrin^s Admin- istrator V. Protection Insurance Co., 11 Ohio, 146. It likewise excludes all damage occasioned but remotely or consequentially through the agency of gunpowder, such as injury done to a house by falling fragments in the blasting of rocks, or the shattering of a house by the stroke of a cannon-ball, in which examples the shock of a projectile, and not ignition or combus- tion, is the proximate cause of the damage done. "We recognize and accept, in the full force of its application, the maxim: In jure non remota causa sed proxima sjpectatur. Bacon's Max. 1. The legal relations of marine insurance have been copiously discussed in many express treatises of elaborate erudition, and are considered in a great number of judicial decisions, in which the whole subject has been explored with wonderful acuteness and comprehension of logic and of learning ; while fire insur- ance, as a branch of legal knowledge, is, comparatively speak- ing, in its rudiments. The cases on marine insurance throw little if any light on the present question, except in so far as they attempt to prescribe a rule for distinguishing between what is remote and what is proximate cause. The conclusion reached in this discussion, as may be seen by the latest investi- gation of the point in Great Britain, Montoya v. London Assiorance Co., 6 Exch. 451, is that, while for most cases it is practicable to draw the line, and to formalize a rule between the two classes of causes, yet, in other cases, according to the general law of nature, the two classes approach and run into one another until the distinction vanishes ; and within the limits of this debatable land of differences, it is necessary to apply judicial discretion to the particular questions as they arise, just as it is in the not infrequent inquiry whether a thing, or the use or measure of it, be reasonable or not. In Montoya v. London Asstirance Co., it was determined that, where the lower part of a cargo is damaged by sea water and, by the evolution of gases from the part thus damaged or the propagation of heat arising from fermentation, the superior part of the cargo be damaged also, the loss on the latter is by the perils of the sea, the involvement of the secondary effect in the primary one being an example of causa proxima. 0. XI. Scripture v. Lowell Mutual Fire Ins. Co. 446 In the present case there is no room for question concerning a series of causes, as whether primary or secondary, proximate or remote ; for the agent is one and the same throughout, namely, fire. The causa was burning powder ; the causa cau- sans was a burning match ; at each stage of causation it was the action of fire. Nay, to be exact, the burning of the gun- powder, hke the burning of the match, was a succession of several complex acts of burning, yet fire is the agent at each of these distinct stages of causation. Suppose there was a barrel of sulphur in the plaintiff's attic instead of gunpowder, and this being ignited with a match, afterwards the fire had passed from the burning sulphur to the substance of the house. This would be recognized at once as a case of fire. It does not chansre the leo-al relation of causes to substitute a barrel of burning gunpowder for a barrel of burning sulphur. The only difference in the elements of the question is, that the gun- powder, when ignited, consumes with more of rapidity than sulphur, and the combustion is accompanied or followed by explosion. Still, the agent is fire, though it acts in different ways upon the different successive subjects of its action, begin- ning with the match and terminating with the plaintiff's house. On the other hand, cases are conceivable, other than by the use of gunpowder, of explosion without any combustion, which, nevertheless, being the result of the action of fire, are still, it would seem, within the range of the general principle. Various mineral substances exist, of value in commerce and the arts, which explode by the action of fire, without either ignition or combustion. In general, any close vessel of whatever material composed, when filled with an expansive fluid, is liable to explode by the action of heat, though it may be that the vessel and its contents are alike incombustible. The same thing happens, under certain conditions, to some forms of wood ; which, although combustible, may by the action of fire explode, without ignition ; or which, as in the present case, of a house, by having compressed within it some burning substance, which is explosive as well as combustible, like gunpowder, may suffer the double injury of combustion in part and in part of explosion. If, however, the question of consequential damage needed to be explored for the determination of the present case, it 446 Insurance : Firk, Life, Marine. o. xi. would serve to confirm the conclusion at which we have on other premises arrived. Thus, in Great Britain, damage which occurs consequentiall}^ in the case of a fire, by reason of confu- sion of mind, as in throwing fragile objects out of the window, or by sudden terror from alarm, as in leaving open the top of a barrel, and thus wasting the contents, is held to be loss by fire, according to the usages of insurance offices or established legal principle. Beaumont on Ins. 41. So it is in the case of a beam, cornice, or coving, removed to prevent the spread of conflagration, md. We understand the same to be the rule, in the case, for instance, of a fire in the upper story of a build- ing, and the destruction or damage of goods in a lower story, not by fire, but by the water thrown into or upon the building for the purpose of extinguishing the fire. All these are fit illustrations of the question of merely consequential damage. In the hypothesis that fire is to be regarded as causa proxima in the present case we can see but one supposable defect ; namely, the suggestion that, though it be conceded that the explosion of burning gunpowder, and its effects, are the action of fire, yet this particular effect on the building is not exhibited in the form of igneous action. The cases above supposed, of the shrivelling of some masterpiece of pictorial art, the cracking or discoloration of a rich vase or gem, the bursting of a cask of wine through the expansion of its contents, these, it may be said, are distinctly cases of damage, without ignition it is true, but by the direct and specific action of heat as such ; while it is denied that such is the fact in the present case of the blow- ing up of a dwelling-house by the ignition of gunpowder. We do not think the premises of this argument are sustained by the physical facts which occurred. If they were so, then the near- est analogy would be of damage by smoke ; that is, the moisture thrown off by burning wood, and carrying with it ashes, empy- reumatic oil, and other constituent parts of the wood, either in their natural condition, or transformed by the process of combustion. Now it is obvious that mere smoke, without any direct action of heat, may do great damage to many kinds of merchandise, such as delicate textile fabrics, esculent vegetables, articles of taste, and other numerous objects ; and if a dwelling or a magazine take fire, and some parts of it only be consumed, but the contents of apartments, to which the actual fire doesj c. XI. Lyons v. Providence Washington Ins. Co. 447 not extend, are nevertheless damaged by the smoke penetrating into and filhng them, can it be doubted that the damage thus done is a loss within the ordinary conditions of a lire policy ? Semhle, per Gibbs, Chief Justice, arguendo^ in Austin v. Drew, Holt N. P. 127. Yet, incontestably, damage by smoke is an effect, which is not in itself igneous action, though it be the result thereof ; while, as we conceive, the explosion of gun- powder is igneous action. In conclusion, we think the rule, which we propose for the present case, reconciles all the conditions involved in the ques- tion ; is conformable to the nature of things ; and constitutes a coherent and consistent doctrine, namely, that where the effects produced are the immediate results of the action of a burning substance in contact with a building, it is immaterial whether these results manifest themselves in the form of com- bustion, or of explosion, or of both combined. In either case, . the damage occurring is by the action of fire, and covered by the ordinary terms of a policy against loss by fire. Judgment for the plaintiff. Supreme Court of Rhode Island, 1883. LYONS V. PROVIDENCE WASHINGTON INS. CO. (14 R. I. 110.) Location, when material. Carpenter, J. — The plaintiff proved in the trial of this case in the Court of Common Pleas that she procured from the de- fendant a policy of insurance against fire, on certain articles of furniture and wearing apparel, described in the policy as " All contained in house No. — , McMillen Street, Providence, R. I. ; " that at the time of the fire the articles had been removed and were in a house on Power Street, where the fire occurred ; that the defendants had never been informed of the removal ; that she never told them of the removal, and did not think it was necessary to tell them, and that at the time she procured the policy of insurance she owned the house on McMillen Street, in which the articles insured then were. In this state of the proof the defendant requested the presiding justice to instruct 448 Insurance : Fire, Life, Marine. a xi. the jury that the permanent removal of the goods insured from the house on McMillen Street to the house on Power Street, without the knowledge and assent of the defendant corporation, terminated the contract of insurance, and that the plaintiff could not recover. The presiding justice refused such instruc- tion, whereupon a verdict was returned for the plaintiff, and the defendant brings this bill of exceptions. There seems to be no doubt that if this question were to be decided on authority, it must be taken as the general rule that all the material statements of the policy of insurance, including statements as to the place in which the insured property is situate, are warranties, and that such warranties must be true and must continue to be true during the whole life of the policy as the condition of any recovery thereunder, Eddy Street Iron Foundry v. Hampden Stock and Mntual Ins. Co., 1 Cliff. 300 ; Shertzer v. Midual Fire Ins. Co. of Hartford County.^ 46 Md. 506 ; Wall v. East River Mutual Ins. Co., 3 Seld. 370 ; Hart- ford Fire Ins. Co. v. Farrish, Y3 111. 166. The plaintiff, however, contends that this case comes within an exception to the general rule. The argument is, that inas- much as the insured property is household and personal effects, and inasmuch as it is matter of common knowledge that cer- tain persons do at times change their place of abode, carrying with them such of their effects as are of the kind here insured, therefore, it is to be presumed that the defendant issued the policy in suit with the knowledge and expectation that the plain- tiff might make such removal during the term of the insur- ance, and with the implied agreement that she might make such removal without vitiating the policy. There is, indeed, to be deduced from the cases an exception to the general rule as above stated ; but we do not think that, either in reason or on authority, it goes to the extent claimed by the plaintiff. Briefiy stated, the rule seems to be that the temporary re- moval of property, whether occasional or habitual, in pur- suance of a use which is a " certain necessary consequence " arising from the character of the property, without any change in the ordinary place of keeping, will be no defense to an ac- tion on the policy. The reasoning of Lord Mansfield, although in case of marine insurance, applies exactly to this question. PelVy V. Qovernor (& Company of the Royal Exchange Assur- 0. XI. Lyons v. Providence Washington Ins. Co. 449 cmce, 1 Burr. 341 ; Holhrook v. St. Paul Fire