(Jflruf U ICaui ^rJ|onI Sltbrattj Cornell University Llbrai^ KF 1196.085 1897 A Treatise on the law of fire Insurance, 3 1924 019 308 539 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019308539 A TREATISE ON THE LAW OF FIRE INSURANCE WITH A PHILOSOPHICAL AND ANALYTICAL DISCUSSION OF LEADING CASES By DrO^TRANDER SECOND EDITION- REVISED AND ENLARGED St. Paul, Minn. WEST PUBLISHING CO. 1897 Copyright, 1896, BY D. OSTRANDER. To Henry E. Southwell, Esq., My Dear Sir: Our acquaintance reaches back many years, to a time when both you and I were looking forward into life with the uncertainty which boys usually experience who realize that their own unskilled energies are to be brought into competition with those who have gained strength and discipline in many successful contests. Without demonstration, we have found a mu- tual esteem and companionship; and, while walking apart, our paths have often converged, — crossed and then separated again. There have been greet- ings and clasping of hands, after which each has passed on his different way. Friends we were, and are, yet always free. On your judgment and business sagacity I have leaned; in your unselfish friendship I have trusted. The dedication of this book, the fruit of tired hours, I beg to offer you in recogni- tion of many services unsought; of a relationship unspoken. Of the value of what I have here accomplished, I leave with diffidence to the judgment of those for whose use my work is intended; but, such as it is, 1 bring as a tribute to a friendship long continued, — one without a broken or cracked link. Yours, sincerely, D. OSTRANDEB. Chicago, January 1, 1892. (iii)* PREFACE. A policy of insurance is so unlike the ordinary contract in some of its provisions, being less specific and definite, that contention fre- quently arises concerning its interpretation, when the unexpected and unprovided for happens. The purpose of this book is to present in a familiar manner the more complicated and less understood ques- tions which in the construction of the insurance contract will some- times call for consideration, with such illustration of legal rules and principles as may be afforded by a large number of instructive cases that have been carefully analyzed and decided by the English and American courts. Especial attention has been given to pointing out, for the better understanding of those who, from want of time and opportunity, have been unable to familiarize themselves with this branch of the law and this class of contracts, the use of certain im- portant conditions found in all insurance policies, which are the cause of dispute and litigation under a great variety of unlocked for contingencies. That obscurity should often exist, and construc- tion become necessary, ought, perhaps, to be expected, from the fact that an insurance policy is never prepared in reference to any par- ticular case. The printed stipulations and conditions are general in their character, and unless qualified by the agreement of parties, ex- pressed in writing, the intention to insure may be, in many instances, in part or even wholly defeated. As forfeitures are often the occa- sion of hardship and injustice, and always repugnant to the law, it may be expected that the courts will enforce the contract when- ever it is possible to do so without violence to its clearly-expressed language, and consistently with the ascertained intention of the par- ties; hence it will frequently occur that they will be called upon to consider a general provision in reference to the circumstances of a particular case. In their interpretations, the courts in such instances are without any infallible rule to guide them, and necessarily often OSTIi.riKE INS. (V) PREFACE. differ in their judgment of the law, and thus there has come to exist a good deal of conflict among authorities. In the preparation of this book, the writer has had in view the importance of carefully distinguishing cases, in reference to local laws, as well as to the particular language of the contract in each instance presented for construction; and, above all, he has faithfully endeavored to set forth and illustrate the legal principles applicable to such classes of cases as are more frequently found to be the subject of contention. To those who look to the underwriter for indemnity against loss by flre, the author indulges the hope that this book will be found of especial value, as, with much painstaking, there have been pointed out the rocks on which their confidence of protection may be wrecked. The "policy" is primarily for the benefit of the property owner. The interests of all others are only incidental. To him it is of the high- est importance that he understand that the contract is one of mutual covenants; that there is something for both parties to perform; that his duty is not ended with the payment of the premium. In a clear understanding of all these duties, the policy holder will find his greatest security. Realizing that many lawyers and others, nonprofessional business men, who may frequently have occasion to consult a treatise on the subject of fire insurance law, have only limited opportunity to refer to libraries for the purpose of examining authorities cited, the author has endeavored to relieve their embarrassment, so far as possible, by incorporating into the pages of his book as much of the text of leading cases as will enable the reader to understand intelligently the principles of law relating to each particular case under discus- sion. If this treatise, offered now with difladence to the public, shall be useful in relieving the courts of litigation, by reason of a better understanding of the rights of parties to the fire insurance contract, the writer will enjoy the satisfaction of having rendered a service to his fellows, and in this be amply repaid for his toil. D. 0. TABLE OF CONTENTS. TABLE OF CASES CITED. (Page xxili.) CHAPTER I. CONTRACT. 1. The Contract. 2. When Parol Evidence is Admitted to Vary the Terms of a Written Contract. 3. The Insured will be Bound by the Statements Contained in the Ap- plication, when Written by Himself or His Agent. 4. Contract not Complete unless the Minds of the Parties have Met. 5.. When Contract is not Complete Usage. 6. Insurance Contracts Sui Generis. 7. Contract Personal — Must be Definite and Complete. 8. Insurer will not be Held, unless Premium is Actually Paid, or There is a Definite Understanding in Regard to Credit. 9. When Contract is not Complete for Want of Agreement in Regard to Kate and Term of Risk. 10. Giving of Note for Premium. 11. Reformation. 12. A Parol Contract must be in Praesentl. 13. When the Risk Begins. 14. When the Insurer will be Liable for Loss Occurring Before the Con- tract is Made. 15. When the Contract Terminates. 16. Authority of Broker to Consent to Cancellation of Policies. 17. In What Manner Cancellation can be Made. 18. When the Insured has Forfeited His Right under the Contract, He cannot Demand a Return of the Unearned Premium. 19. Parties may Agree on Terms of Cancellation Different from Those Expressed in the Policy. 20. The Condition of Policy in Regard to Payment of Premium must be Strictly Performed. 21. Rehearing on Certain Important Points. OSTK.FIKB INS. (vii) Vm TABLE OF CONTENTS. § 22. A Void Policy can be Revived Only by the Affirmative Action of Both Parties. 23. Divisibility of the Contract an Unsettled 'Doctrine. 24. When Parol Evidence is not Admissible to Vary the Terms of a Written Contract. 25. Courts cannot Make Contracts for the Parties. 26. When Insurer Is Estopped from Declaring Forfeitures. 27. Usage will not Control or Nullify Definite Contract Stipulations. 28. Reformation of Contract. 29. When Reformation of Contract vfIU be Refused. 80. When Suit is Brought on the Contract, It Is an Election of the Rem- edy. 31. Construction. 32. Statutory Policies. Sa. Conclusions. CHAPTER II. AGENCY. 8 84. When the Acts of a Soliciting Agent will Bind His Principal. 35. The Powers of an Agent will be No Larger than Those Which the Principal has Conferred. 36. Powers of the General Agent. 37. Legal Effect of Agent's Opinion. 38. Misconduct of Agent Maizes Him Personally Liable to His Prin- cipal for the Injury Occasioned. (See section 49.) 39. Agent cannot Delegate His Authority to Another. 40. Statutory Provisions Concerning Agency. 41. Agent of Both Parties. 42. May be Agent of Both Parties in Respect to Different Matters, 43. Distinction between Broker and Agent. 44. Broker Frequently Agent of Both Parties. 45. Who Pays the Broker. 46. Authority of Broker to Consent to Cancellation of Policies. 47. When Knowledge of Agent is Imputed to the Principal. 48. Proof of Agency. 49. When Loss Results from Neglect or Misconduct of Agent, He will be Liable to His Principal. (See section 38.) 50. Liability of Agent When Disobeying Instructions. 51. The Local Agent must Obey the Instructions of the General or Special Agent. 52. When Agent is Liable to Insured. 53. Knowledge of Agent. 54. Limitation of Soliciting Agent's Authority in Certain Cases. TABLE OF CONTENTS. IX { 55. Agents -svill Bind Their Principals' When Acting Within the Ap- parent Scope of Their Authority. 56. Persons Dealing with Agents are Put upon Inquiry as to the Extent of Their Authority. 57. Local Agents cannot Waive Notice aud Proofs of Loss. 58. Powers of Attorney. 59. Conclusions. CHAPTER in, TITLE AND OWNERSHIP. f 60. Who may Insure. 61. Concerning the Right of a Husband to Insure His Wife's Property. 62. When the Insured must Disclose His Title. 63. The Policy Becomes Void When the Insured's Interest in the Property is Changed. 64. When Insured's Interest is Less than Sole and Unconditional Owner- ship, It must be Disclosed. 65. When Alienation Occurs. 66. When Holding an Executory Contract of Purchase is not Ownership. 67. The Contract will be Construed with Reference to the Character and Situation of the Property Insured. 68. A Change from Ownership to a Life Estate Voids the Policy. 69. Insurance without an Interest in the Property Is Contrary to Public Policy. 70. Keal-Estate Mortgage Is not a Change of Title. 71. Incumbrance. 72. A Person Holding a Contract of Sale, in Possession, Is Sole and Un- conditional Owner. 73. Holding under a Contract of Sale Is not Unqualified Ownership. 74. When There is a Change of Title without a Sale. 75. Sale by Joint Owner of an Undivided Interest Voids the Policy. 76. Partition of the Property Insured is a Change of Title and Interest. 77. Change of Title by Death will Void the Policy unless Otherwise Provided. 78. Levy under an Execution Voids the Policy. 79. A Real-Estate Mortgage will not Void the Policy unless so Stipulated. 80. The Insured must Disclose Title and Incumbrance When so Re- quired by the Policy. 81. When Judgment Liens Void the Policy. 82. When Sale under Execution Voids the Policy. 83. The Courts will Give Effect to the Plain Provisions of the Contract. 84. Statement of General Principles Concerning Title, Alienation, and Incumbrances. 85. Conclusions. t TABLE OF CONTENTS. CHAPTER IV. PAYMENT OF PREMIUM. 86. Policy -will be Void without a Consideration. 87. When Policy Acknowledges Receipt of Premium the Insurer cannot Plead Nonpayment as a Defense. 88. Premium must be Paid as Stipulated. 89. Agents having Authority Only to Take Applications cannot Waive Payment of Premium. 90. When Payment to the Broker is Payment to the Company. 91. When Default in Payment of Note Given for the Premium will Void the Insurance. 92. TTie Maker of the Note must Seek the Payee, When no Place of Pay- ment is Designated. 93. When the Policy is Suspended during the Nonpayment of the Pre- mium. 94. Premiums must be Paid in Money. 95. Conclusions. CHAPTER V. PARTNERSHIP. 96. Changes in Partnership. 97. What Is a Partnerstiip. 98. What is a Dormant Partner. 99. When a Change in Partnership Voids the Policy. 100. The Conditions of the Policy a Part of the Consideration. 101. When a Partnership is Dissolved and the Property Divided, the Insur- ance Terminates. 102. When a Partnership may Exist although There is No Contribution to the Capital Stock by Certain of the Partners. 103. A Partner may Insure His Undivided Interest. 104. Distinction between a Partner and Stockholder. 105. A Stockholder in a Corporation has an Insurable Interest. 106. Firm Names. 107. Corporate Names. 108. Conclusions. CHAPTER VI. SUBROGATION. 109. When the Insurer is Subrogated. 110. When the Mortgage is Canceled before the Fire the Insurer will not be Liable. TABLE OF CONTENTS. XI 111. A Doubtful Doctrine— Double Payment. (See sections 120, 123, and 124.) 112. When Insurance is Talieu Separately by Both the Mortgagor and Mortgagee. (See sections 119, 120, and 124.) 113. Insurer can Insist upon Subrogation when Stipulated for. 114. When Replacing the Property Destroyed does not Excuse Payment to Mortgagee. (See sections 119, 120, and 124.) 115. When the Property has been Restored the Insurer is Excused. (See sections 119, 120, and 123.) 116. When Contribution cannot be Claimed from Other Insurers on the Eisli. 117. Unless it be Otherwise Stipulated, the Mortgagee and Payee will Have no Rights under the Policy, Independent of the Mortgagor or Owner of the Property. 118. Who may Make Proofs of Loss. 119. When Insurer will not be Liable under Mortgage Clause. 120. When Policy is Void as to Mortgagor and Valid as to Mortgagee. 121. When Mortgagor may Recover. , 122. Contribution under Jlortgage Clause. 123. Application of the Mortgage Clause. 124. Mortgage Clause will not Protect Mortgagee While Acting In Bad Faith. 125. When Insurer may Collect from the Carrier. 126. When by Subrogation the Insurer will Have a Right of Action against Those through Whose Negligence the Loss has been occa- sioned. 127. Negligence the Basis of Liability. 128. Burden of Showing Negligence will Generally Rest on the Plaintiff. 129. What is the Proximate Cause. 130. Contributory Negligence. 131. As to Who is Primarily friable. 132. Conclusions. CHAPTER Vn. WARRANTIES AND REPRESENTATIONS. 5 133. Warranties must be Performed unless Performance is Waived. 134. Distinction between Warranties and Representations. 135. What is Performance, and What is Not. 13G. May the Written Evidence of Warranty be Set Aside by the Parol Testimony of an Interested Witness? 137. Is it within the Province of the Court to Annul a Promissory Warranty because such Warranty Contemplates Changes in the Circumstances of the Risk? Xll TABLE OF CONTENTS. § 138. The Right of Persons to Make Contracts Concerning All Subjects Affecting the Ordinary Afifairs of Life is a Constitutional One, and Cannot be Talien Away, by Construction or Otherwise. 139. Warranties and Conditions Precedent Essentially Alike. 140. Warranty Concerning the Quantity of Land Comprising the Premises Insured. 141. When Warranties are In Prsesenti, and When Continuing. 142. Conclusions. CHAPTER VrCE. VACANT OR UNOCCUPIED. § 143. Importance of the Condition Concerning Vacancy, 144. What is Occupancy? 145. When Occupied at the Time of the Loss. 146. Occupancy will be Determined in Reference to Character of the Risk. 147. Policy Conditions will be Construed Strictly in Respect to Occupancy. 148. If the Property is Vacant at the Time the Insurance is Effected, with Knowledge of the Insurer, will Estoppel Apply? 149. What Constitutes Occupancy is a Question of Law— Construction of Contract. 150. That the Risk is Increased When the Property is Vacant, the Courts will Take Judicial Notice. 151. Animus Revertendi. 152. When a Condition has been Broken, and the Forfeiture Waived, the Waiver will not Continue to Relieve Later Forfeitures, Arising from New Breaches of the Same Condition, 153. Application of the Rule that Contract is Entire. 154. What Constitutes Vacancy. 155. When Insured Knows that Agent is Disobeying the Instructions of His Principal, in Granting Privileges or Waiving Conditions, Such Acts will be without Legal Effect. 156. Conclusions. CHAPTER IX. FIXTURES. I 157. General Definitions. 158. Fixtures and Machinery in Mills Distinguished. 159. Fixtures Distinguished from Buildings. 160. When Duplicates and Extra Parts of MDl Appliances are and are noi Fixtures. 161. Are the Engines and Cars of a Railroad Fixtures? 162. Particular Things that in Their Ordinary Uses are Regarded as Fix- tures. TABLE OF CONTENTS. xiii i 163. Statutes and Other Ornaments for Lawn and House. 164. Partitions and Otlier Improvements Owned by Tenants, with and without Privilege to Remove. 165. What are Fixtures in Manufacturing Estatilishments— A General Discussion. 166. Fixtures, as the Subject of Contract, may be Treated by the Agree- ment of Parties either as Fixtures, Chattels, or Real Estate. 167. To Determine whether the Subject of Insurance is or is not a Fix- ture, Reference must be had to the Circumstances of Each Particu- lar Case. 168. Conclusions. CHAPTER X. ADJUSTMENT. i 169. When a Fire Occurs, the Insured must Use His Best Endeavors to Protect the Property. 170. "Notice" and "Proofs of Loss," and "Books of Account." 171. Must Produce Original or Duplicate Invoices When Required. 172. Examination under Oath. 173. The Insured must Answer Truthfully All Relevant Questions, and, Failing to Do So, will Forfeit All Right to Recover. 174. When False Swearing will Avoid the Policy, although No Fraud in Re- gard to the Insurer Is Intended. 175. Statements Involving Matters of Judgment and Opinion. 176. When False Statements, under Oath, Concerning the Amount of Loss, will Defeat Recovery, whether Such Statements are Material or not. 177. When Insured Absents Himself, so that He cannot be Subjected to a Sworn Examination, the Insurer will be Excused from Payment of Loss. 178. Fraudulent Overvaluations in Proofs of Loss Forfeit All Claim under the Policy. 179. The Contract will Generally be Construed so as to Afford the Indem- nity Contemplated. 380. Indemnity does not Include Unrealized Profits. 181. When Indemnity is the Market Value. 182. When the Cost of Production is the Measure of Damages. 183. Parties may Contract as to the Limit of Liability. 184. Adjustment of Building Claims. 185. Adjustments on Personal Property. 186. Unnecessary Expense need not be Considered in Computing the Cost of Production. 187. When the Insurer is not Liable for Loss Caused by Fire. 188. Will There be no Liability unless There is Actual Ignition Outside of the Agencies Employed? XIV TABLE OF CONTENTS. S 189. Insurance against Loss by Fire does not Indemnify against Loss by Lightning. 190. Wtien a Manufacturing Establishment Ceases to Operate, the Insurer will not be Liable. 191. What is a Manufacturing Establishment? 192. Gross Negligence. 193. Gross Carelessness will Excuse the Insurer When so Stipulated. 194. Consequential Damages. 195. Damages by Removal. 196. Measure of Damages. 197. When Both the Insurer and Insured will Contribute in Payment of Loss by Removal. 198. Replacement of Property Damaged or Destroyed. 199. When Repairs ai"e not Properly Made, the Insured's Remedy is by an Action at Law on the Contract to Repair. 200. The Insurer may Restore the Property, although Loss is Payable to a Mortgagee. 201. When the Cost of Rebuilding or Repairing is Less than the Insurance, the Insurer will not be Excused from the Payment of Future Losses on the Balance of the Policy. 202. An Election to Rebuild is Irrevocable. 203. The Insurer will Have his Election to Rebuild or Replace, although the Policy is Made Payable to a Third Person. 204. When the Insurer Is Entitled to Contribution from Co-Insurer. 205. Apportionment of Nonconcurrent Policies. 206. Contribution when Policies are General and Specific. 207. Contribution when Any of the Co-Insuring Policies are Invalid, or where Any of the Companies Insuring on the Risk have Become. In- solvent. 208. Co-Insurance Clause. 209. Assignment of Policy. 210. The Relations Created between Insurer and the Assignee of Policy are Wholly Independent of the Original Insured. 211. Assignment for the Benefit of CreditoVs is Alienation, within Meaning of Policy. 212. Assignment of Policy for Collateral Security does not Invalidate the Insurance, unless It is so Stipulated in the Policy. 213. When Settlement is Conclusive. 214. The Adjustment is the Making of a New Contract. 215. When There is No Implied Promise to Pay an Award. 216. Fraud Vitiates the Award. 217. Settlement Rests on Mutual Faith and Understanding. 218. The Party Asking to have Settlement Set Aside must Offer to Return Any Consideration He has Received on Account of Such Settlement 219. Personal Opinions Generally without Legal Effect. 220. Conclusions. TABLE OF CONTENTS. XV CHAPTER XI. NOTICE AND PROOFS OF LOSS. ; 221. When and in What Manner Notice of Loss must be Given. 222. When Proofs of Loss must he Furnished. 223. When a Definite Time is Stipulated, unless There is Waiver, There must be Performance. 224. If the Proofs Filed are Unsatisfactory, the Insurer must State His Objections within a Reasonable Time. 225. When Technical Defenses will be Waived on Demanding Proofs of Loss. 226. What Proofs must Contain. 227. Who has Authority to Waive Proofs of Loss. 228. Where the Right to Rebuild is Taken Away by Statute, Formal Proofs may not be Required. 229. When Proofs will be Excused. 230. When Time for Filing Proofs will be Extended. 231. The Question as to Whether the Proofs are Sufficient will Generally be for the Court. 232. Magistrate's Certificates. 233. The Condition Concerning Magistrate's Certificate is Reasonable, and will be Enforced. 234. The Magistrate's Certificate should be Upheld from Considerations of Public Morality. 235. Who is a Magistrate. 236. It is the Nearest Magistrate or Notary Public Whose Certificate must be Furnished. 237. The Magistrate must be Disinterested. 238. When "Notice" or "Proofs" are Sent by Mail. 239. Reasonable Time. 240. When Time for Filing Proofs Expires on Sunday. 241. Conclusions. CHAPTER XII. OTHER INSURANCE. S 242. Why the Amount of Insurance is Limited. 243. When Other Insurance will Avoid the Policy. 244. When Subsequent Insurance will Cause a Forfeiture. 245. V When, in Case of Double Insurance, the Last Insurer is Discharged. 246. Insurance not Consented to will Cause a Forfeiture. 247. Insurance on Separate Interests in the Property Covered will not be "Otter Insurance," within Meaning of the Policy. XVI TABLE OF CONTENTS. § 248. Other Concurrent Insurance. 249. When Policy is Voided by Other Insurance, There can be No Rescis- sion. 250. Not Double Insurance unless Both Policies Protect the Same Interesta 251. When Consent in Writing must be Had. 252. Who may Consent to Additional Insurance. 253. Conclusions. CHAPTER Xm. LOCATION OF BISK. § 254. Location and Circumstances of the Risk must not be Changed. 255. The Conditions of the Policy in Respect to Changes must be Strictly Construed. 256. It Is Judicial Tyranny for the Courts to Substitute Their Own Ideas as to What the Contract should be, for the Carefully Formulated and Clearly Expressed Agreement of the Parties. CHAPTER XIV. ARBITRATION. § 257. Parties may Contract as to Manner of Settlement, Providing the En- forcement of Their Agreements does not Oust the Courts of Their Jurisdiction. 258. When Arbitration or Appraisement is a Condition Precedent. 259. Arbitration in Case of Total Loss. 260. General Considerations. 261. Performance can be Required Only within the Strict Terms of the Policy. 262. When the Stipulation to Arbitrate or Appraise Is not a Condition Precedent. 263. Neither of the Parties can Insist on Conditions, in the Submission, Different from Those Expressed in the Policy. 264. The Submission should Distinctly Express the Exact Duty which the Appraisers or Arbitrators are to Perform. 265. In the Submission There should be No Substantial Departure from the Agreement of the Parties as Expressed in the Policy. 266. Award is made a Condition Precedent Only When a Prescribed Line of Action is Consistently Followed. 267. When, Award is Defeated by the Arbitrary Insistence of Either of the Appraisers on the Performance of Unreasonable Things, the Mis- conduct of Such Appraiser will be Chargeable to the Party by Whom He was Selected. TAIiLFC OF CONTENTS. XVil § 26S. Submission may be by Paml unless the Policy Otlierwise Provides. 269. "Whatever the Appraisers do in Excess of Their Authority will be void. 270. Appraisers may Construe Contracts, and Pass upon Other Questions of Law. when Necessary to do So in the Performance of the Duties Submitted. 271. Good Faith is Required in All Things, from tlie Submission to the Award. 272. The Duties of the Appraisers are Judicial. Nothing can be More Im- proper in the Appraiser than the Character of Agent or Attorney. 273. General Considerations. 274. A Submission to Appraisers is not a Waiver of Other Defenses within tlie Terms of the Policy. 275. When the Insurer has Acted in Good Faith, a Failure to Obtain an Award will not Give the Insured a Right to Bring Suit on the Pol- icy. 276. When Arbitration and Award are Conditions Precedent, There will be No Right of Action without Performance, unless Performance is Excused through the Fault of Insurer. 277. Who may Appraise. 278. Submission to -Arbitrate or Appraise Subject to Same Rules of Con- struction as Other Contracts. 279. Arbitrators, How Chosen. 280. Arbitrators First Selected cannot Choose an Umpire by Lot. 281. Parties have a Right to be Heard and to Present Proofs. 282. Distinction between Arbitration and Appraisement. 283. Parties must have Notice of When and Where Appraisers Meet, and have Opportunity to be Heard. 284. Who are Qualified as Arbitrators or Appraisers. 28.5. When a Stockholder may -4^ct as an -Appraiser or Arbitrator in a Mat- ter in Which the Corporation is Interested. 280. A. Person Who has Formed an Opinion is Disqualified to Serve as Ar- bitrator. 287. The Award will be Upheld if Arbitrators were Known to have Formed Opinions at Time of Their Appointment. 288. Arbitrators may Select Time and Place of Meeting. 289. Parties must liave Notice of the Time and Place of Meeting of Ar- bitrators. 290. Arbitrators must Act Together. 291. When One of the Three Arbitrators Withdraws During the Inquiry, the Other Two may Proceed, and the Award will be Good. 292. When Arbitrators cannot Refuse to Hear Evidence. 293. When Arbitrators may Meet without Notifying the Parties. 294. Distinction between Appraisement and Arbitration. 295. When Notice of Meetings is Indispensable, and When It may be Omit- ted. OSTR.FIRE INS. — J XVlll TABLE OF CONTENTS. § 296. When the Award has been Signed and Delivered, it caunot be Recalled; the Appraisement has Terminated. 297. Submission Need not be in Writing. 298. Conclusions. CHAPTER XV. IKON-SAFE CI^AUSB. § 299. Importance of Inventory and Books in Proving a Claim for Loss. 300. Books must Show a Record of Purchases and Sales. .301. Failure to Produce Books and Inventory at the Adjustment of Loss will not be Excused. 302. Books Need not be Kept in a "Safe,"' except During the Interval after Closing the Store at Night and Opening in the Morning. 303. The Words "Iron Safe" are not to be Construed Literally. By the Designation Nothing More is Warranted than the Protection of Such Safe as Those Ordinarily Used by Merchants and Other Busi- ness Men for the Same Purpose. 304. Conclusions. CHAPTER XVI. ILLEGAL BUSINESS. § 305. Policies Covering Property Used or Appropriated for Carrying ou Illegal Business are Void. 306. When the Courts will not Compel Payment of the Premium. 307. What is Illegal Business. 308. Conclusions. CHAPTER XVn. IN REGARD TO BUILDINGS. § 309. Valued Policy Laws. 310. When is a Building Wholly Destroyed. 311. Principles of Construction. 312. "Wholly Destroyed" Refers to Values, instead of Species. 313. That cannot be Wholly Destroyed Which Remains of Great Value. 314. When Buildings shall Fall, except as the Result of Fire. 315. Proximate Cause 316. It is the Building that is Insured, not the Material of Which it is Composed. 317. Damage to Party WaUs. TABLE OB' CONTENTS. xix CHAPTER XVIII. INCREASE OP HAZARD. § 318. The Acceptance of the Risk and Premium Paid is Based on Existing Conditions, Affecting the Hazard. 319. Many Kinds of ProiJerty are Insured in Reference to Their Uses. 320. That Which is Indispensable to the Ordinary Use and Enjoyment of the Property will be Presumed to have been Consented to. unless Specially Prohibited. 321. What Constitutes an Increase of Hazard will Usually be a Question for the Jury. 322. Testimony of Experts Competent to Show an Increase of Hazard. 323. Conclusions. CHAPTER XIX. EXPLOSIONS AND EXPLOSIVES. § 324. Insurance against Loss by Fire does not Include Ijoss from Explosion. 325. When Fire is the Proximate Cause of the Loss, the Insurer is Liable. 326. A Fire Insurance Policy does not Cover Loss by Lightning, unless by Special Agreement. 327. the Keeping or Storing of Explosives, When Prohibited, will Avoid the Policy. 328. When the Policy is Silent in Regard to Keeping Explosives. 329. Customary Use. 330. Conditions must be Performed. 331. When Insured is Responsible for the Acts of his Tenants. 332. Immaterial Whether or not the Prohibited Articles Caused the Fire. 333. Conclusions. CHAPTER XX. CONDITIONS PRECEDENT. § 334. What are Conditions Precedent. 335. Conditions Precedent must be Performed unless Waived. 336. Warranties and Conditions Precedent, in Respect to Their Dignity and Importance, are Essentially the Same. 337. Conditions Precedent do not Depend upon Any Particular Form of Words. 338. When the Conditions and Requirements of the Policy are a Part of the Consideration. 339. Conditions Defined. 340. General Observations Concerning Conditions Precedent. :X TABLE OF CONTENTS. CHAPTER XXI. CONCERNING LIABILITY OP WATEK-SUPPLY COMPANIES. i 341. When Water-Supply Companies are Liable. 342. When There is No Privity between the Person Suffering Loss and the Water-Supply Company. 343. Obligation of Water-Supply Company to the Rate-Paying Citizen. 344. When a Municipal Corporation, for a Consideration, Agrees to Sup- ply Its Citizens with Water, It will be Liable for Its Failure to Per- form. 345. Where the Contract between the Municipal Corporation and Water- Supply Company is Made for the Benefit of the Individual Citizens. 346. When Municipal Corporations cannot be Made to Respond in Damages on Account of Their Failure to Supply Water. ^ 347. Law Unsettled. 348. The Relations between the Water-Supply Company and the Citizens, for Whom the Municipality Contracts. CHAPTER XXII. WAIVER AND ESTOPPEL. § 349. Distinction between Waiver and Estoppel. 350. What is Estoppel! 351. When Estoppel will Arise. 352. Denial of Liability a Waiver of Proofs. 353. When Proofs are Deficient in Matter or Bad in Form. 354. Waiver of Notice of Loss. 355. In Regard to Waiver of Proofs of Loss. 356. Who may Waive Policy Conditions. 357. Local Agents will not be Presumed to Have Authority to Waive Con- ditions of Policy Relating to Loss. 358. Parol Agreements, Inconsistent w^th the Terms of the Written Con- tract in Regard to Subsequent Performance, will not be Bniorced. 359. Offer of Compromise, Pending Negotiations for Settlement, is not a Waiver of Technical Defenses. 360. When Accepting Payment of Premium after a Loss will not be a AYaiver of the Right to Insist on Forfeitures. 361. Revival of Void Contract. 362. When Sale of Damaged Grain is Waiver of Defenses. 363. Defenses being Unlinown When Sale Takes Place, There can be No Waiver. 364. Waiver is not Necessarily Irrevocable. TABLE OF CONTENTS. XXl 365. The Person Who It is Claimed has Waived a Eight must he Shown to have Had the Power to Do So. 366. Conclusions. CHAPTER XXni. SE'rrLEMENT. I 367. When Settlement is not Conclusive. 368. What is Duress. 369. Settlement will not be Set Aside, unless the Consideration is Returned.^ 370. A Compromise Settlement will be Sustained, in the Absence of Fraud, although JIaterial Facts have not been Disclosed. 371. When an Adjustment, with Promise of Payment, is not Conclusive. 372. When a Compromise will be Final. 373. Conclusions. CHAPTER XXIV. BAILMENT AND CARRIER. I 374. Both the Bailor and Bailee may Insure. 37.5. When Bailee Insures to Protect Himself Only. 376. BaUee for Hire. 377. Grain in Elevators. 378. One cannot Insure Property in Which He has no Interest as Owner, Agent, Trustee, Bailee, etc. 379. Liability of Carriers. CHAPTER XXV. REMEDIES. 380. What the Declaration must Aver. 381. Waiver and Estoppel must be Pleaded. 382. Answer— What Defenses must be Specially Pleaded. 383. When is a Suit Commenced? 384. An Alias Summons. 385. In Whose Name must Suit be Brought? 386. When Suit may be in .Name of Mortgagee. 387. An Agreement between Mortgagor and Mortgagee as to Payment of Losses, without Notice to tlie Insurer, does not Bind the Latter. 388. When the Cause of Action on a Policy is Single, It cannot be Split. into Several Suits. 389. When the Party Having the Beneficial Interest may Sue. XXU TABLE OF CONTENTS. § 390. The Proper Person to Sue is the One from Whom the Consideration Moves. 391. Who shall Bring Suit? 392. In What Manner Expenses are to be Apportioned. 393. Written Assignment, on Payment of Loss, only Invests the Ansignee with an Equitable Right to Cause of Action. 394. Action Separable when not Objected to. 395. Judgment Annulling Foreclosure and Sale not Conclusive as to the Validity of the Foreclosure Proceedings. 396. What is Legal Process? 397. The Garnishee must Act in Good Faith in Respect to all Parties. 398. When the Court Having Jurisdiction Refuses to Recognize Exemption Laws of the State where the Debtor Resides. 399. The Garnishee may Replace the Property Burned. 400. The Insurer as a Garnishee will be in Peril when the Court Wrong- fully Takes Jurisdiction of the Case. 401. The Situs of a Debt is the Place where its Owner Resides. 402. When the Court will not Obtain Jurisdiction. 403. When Defendant is Nonresident, and no Personal Service bad, the Court will not Have Jurisdiction. 404. AVhere is the Place of the Contract? 405. Parties to a Contract may Agree as to the Time when an Action to Enforce its Provisions shall l)e Barred. 406. When the Stipulation Limiting Time within Which Suit may be Brought is Waived. 407. When the Stipulation Limiting Time within Which Action can be Brought is not Waived. 408. When Term of Limitation Begins to Run. 409. What Facts do or do not Constitute a Waiver of the Condition. 410. When Suit is Commenced within the Term, afterwards Dismissed, and Another Suit Brought after the Expiration of the Term, the Last Suit will be Barred. 411. Different Rule Followed in Ohio. 412. Separate Interests cannot be Joined in One Suit. 413. When the Insurer Keeps Itself Inaccessible to Service of Summons, the Insured will be Excused from Bringing Suit within the Time Stipulated. 414. What will not Excuse Failure to Bring Suit within Time Stipulated. 415. Conclusions. INDEX. (Page 845.) TABLE OF CASES CITED. [the figures refer to pages.] Abbott T. Insui-ance Co., 319. Abrahams v. Association, 407. Acer T. Insurance Co., 564. Adams v. Bushey, 593. V. Hackett, 664. V. Insurance Co., 52, 584. T. New York Bowery F. Ins. Co., 588, 591, 602, 604, 613, 614, 615, 616, 617. Adams' Adm'r t. Ringo, 594. Addington v. Allen. 512. Adema t. Insurance Co., 215, 223. Advertiser & Tribune Co. v. Detroit, 171. Aetna Ins. Co. t. Burns, 414. T. Confer, 809. V. Hannibal & St. J. E. Co., 807. V. Holcomb, 12, 103, 256. V. .Jackson, 211. V. .Johnson, 464. T. Maguirp, (14. T. Meyers. 410, 413. T. People's Bank, 53.5, 721, V. rhelps. 490. T. Keed, 513. T. Resh, S3. 216. T. Stevens. 589. V. Tyler. 564. V. Weissinger, 66. Aetna Iavp Stock, etc., Ins. Co. v. Olm- stead, 97. Agneiv V. Insurance Co., 482. Agricultural Ins. Co. y. Ansley, 414. v. Frith, 408. T. Montague. 23. 227, 273. T. Morrow, 258. Alabama Gold L. Ins. Co. v. Johnston, 223. Alamo F. Ins. Co. v. Schmitt, 257. Albion Lead Works v. Williamsburg City F. In.s. Co., 412. Albrecht y. Railway Co., 70. Alcott y. Hugus, 809. . Aldrich y. Jessiman, 645. Alexander y. Insurance Co., 194, 283, 403, 756. V. Walter, 739. Allemania F. Ins. Co. v. Fred, 784. y. Hurd, 567. V. Little, 840. Allemania F. Ins. Co. y. Peck, 266, 304. Allen y. German American Ins. Co., 397, 563. y. Insurance Co., 210, 431, 440, 527, 550, 562. y. Bundle, 752. AUeyn v. Insurance Co., 491. Allison y. Insurance Co., 556, 560. Alston y. Insurance Co., 15, 391, 410. Althorf y. Wolfe, 361. American Bldg. & Loan Ass'n v. Farmers' Ins. Co., 344. American Central Ins. Co. y. Brown, 743, 746. y. Cowan, 356. y. McCrea, 502. y. McLanathan, 485, 492, 787. American F. Ins. Co. y. Brighton Cot- ton Manuf g Co., 47o. y. Center, 651. T. First Nat. Bank, 742. v. Hazen, 533. V. Sisk, 748. American Ins. Co. t. Barnett, 771. y. Crawford, 513. V. Foster, 407. y. Henley. 2S5. y. Leonard, 285. T. McWhortiT, 74. y. Neiberger, 11. v. Padfield. 407, 413. y. Reploglo. 561. y. Story, 2S, 284. 285. American Steam Boiler Ins. Co. v. An- derson, 144, 147. American Towing Co. v. German F. ^'-'- Ci,.. 472. American Underwriters' Ass'n y. George, Auics V. Xcw York Union Ins. Co., 834. Ampleman v. Citizens' Ins. Co,, 675, Anderson v. Assurance Co., 121, 491. y. Insurance Co., 336. Andes Ins. Co. y. Fish, 215. y. Shipman, 97, 173. Andrews v. Essex F, & JI. Ins. Co., 665. y. Richmond, 777. Angell y. Hartford Ins. Co., 19. Angelrodt v. Insurance Co., 497. OSTR. FIRE INS. (xxiii) XXIV CASES CITED. [The figures refer to pages.] Annapolis & E. K. Co. v. President, etc., Baltimore F. Ins. Co., 573. Appleby v. Insurance Co., 603. Appleton Iron Co. v. British America Assur. Co., 230. Arff V. Star F. Ins. Co., 160. Armitage v. Insole, 721. Armstrong v. Robinson, 626. Arnfeld v. Assurance Co., (U. Arnold v. Potter, 825. V. Sprague, 185. Arthur v. Homestead F. Ins. Co., 837. Arthurholt v. Insurance Co., 164, 283. Ashbrook v. Insurance Co., 285. Ashworth v. Insurance Co., 15, 407, 413. Associated Firemen's Ins. Co. v. Assum, 83. Assurance Co. v. Sainsburv, 807. Atchison, T. & S. F. R. Co. v. Irwin, 787. Atkinson y. Goodrich Transportation Co., 365. T. Newcastle & G. "Waterworks Co., 724, 730. Atlantic Ins. Co. v. Goodall, 554. Attorney General v. Life Ins. Co., 272. V. Lorman, 477. Audubon v. Excelsior Ins. Co., 20, 29. Aultman & Co. v. Lee, 86, 298. Aurora F. Ins. Co. v. Eddy, 391, 456, V. Johnson, 441, 447. ^^i^:°/^^F- ^ M. Ins. Co. V. Kranich, 344, 524, 526. Austin V. Drew, 467, 468, 470, 472 V. Holland, 545. Avery v. Stewart, 549, 550. Ayres v. Insurance Co., 211, 246, 746 Babcock y. Montgomery Ins. Co., 467. 472, 699. Backus y. Coyne, 626. Badger v. Insurance Co., 524, 528 Baer v. Insurance Co., .562. Baile v. Insurance Co., 530 Bailey v. Bensley, 777. V. Insurance Co., 223, 827 Baines y. Ewing, 192. Baird v. Evans. 717. Baker v. Farmbrough, 635. V. German F. Ins. Co., 396, 714 v. Insurance Co., 391. Baldwin v. Insurance Co., 83 88 339 V. Middlebergor, 27. < • ■ V. State Ins. Co.. Ill, 229 V. Thompson, 319. Balestracci v. Insurance Co., 468 Ball & Sage Wagon Co. v. Aurora F & M. Ins. Co., 273. Bancroft v. Grover, 597. Bank v. Huntington, 810. Bank of British Columbia v. Page, 662 Bannister v. Read, 635. Banting v. Insurance Co., 528. Barber v. Insurance Co., 840. Barnard v. Insurance Co., 566. Barnes v. Union Mut. F. Ins. Co., 238. Barr v. King, 819. Barre v. Insurance Co., 190, 201, 529, 749. Barrett v. Insurance Co., 11, 390. Barry v. Insurance Co., 408. Bartholomew v. Insurance Co., 189. Basch V. Humboldt Mut. F. & M. Ins. Co., 275, 276, 279. •^Rtchelaev v. Insurance Co., 390. Bates V. Insurance Co., 797. V. Railway Co., 820. Battaille v. Insurance Co.. 528. Battles V. Insurance Co., 391. Batty V. Carswell, 192. Baumgartel v. Insurance Co., 44, 136, 186, 748. Baxter v. Insurance Co., 774. • Beadle v. Insurance Co., 290. Beals T. Insurance Co.. 485, 489. Bean v. Farnam, 609. 626. Beardsley v. Davis. 184. Beatty v. Insurance Co., 742. Beaulieu v. Finglam, 361. Bebee v. Insurance Co., 747. Beck V. Hibernia Ins. Co., 98, 102, 253, 260. V. Insurance Co., 452. V. Water Co., 725. Becker v. Waterworks, 725. Beekwith v. Cheever, 44, 46. lii.'<.'|]e v. Insurance Co., 13, 97, 196. Behrens v. Insurance Co.. 562. Bell V. Insurance Co., 525, 742. v. Price, 597. Belleville Mut. Ins. Co. v. Van Winkle, 18. Benicia Agricultural Works v. Germa- nia Ins. Co., 226. Benjamin v. Association, 790. Bennett v. Agricultural Ins. Co., 399, 413. V. Insurance Co.. 11, 49, 69, 95, 99, 166. 186, 410. 555. 566, 750. V. Lycoming Co, Mut. Ins. Co., 548. V. Whitney, 730. Benny v. Rhodes, 299. Benton v. Insurance Co., 579. Bernard v. Insurance Co., 387. Berry v. Insurance Co.. 513, 772. Bersche v. Insurance Co., 490. Feitliold V. Goldsmith, 306. Bertholf v. Quinlan, 36, 299. Best V. Bander, 664. Bibend v. Insurance Co., 506. Bidwell V. Connecticut L. Ins. Co., 785. V. Insurance Co., 796. Bigelow V. Assurance Co., 278 V. Maynard, 645. V. Newell, 595. Biggs V. Insurance Co., 24 310 Bigler v. Insurance Co., 556, 557. Bilbie V. Lumley, 507. CASES CITED. XXV [The figures refer to pages.] Billings V. Billings, 642. Billington v. Insurance Co., 55o, .564. Bird V. Appletou, iH5o. Birmingham P. Ins. Co. y. Ivroeger, 97, 748. T. Pulrer. 598. Bisbee v. Ham. 7ti9. Bishop T. Bishop, 42S. Black V. Oliver. 665. Blackburn t. Insurance Co., 505. Blackerby t. Continental Ins. Co., 66, 245, 287, 289, 293. Blackett t. Royal Exch. Assur. Co., 60. Blackwell v. Insurance Co., 315. y. Ketcham, 191. Blair y. Insurance Co., S40. Blake v. Exchange ilut Ins. Co., 495. V. McCartney, 241. Blanks y. Hibemia Ins. Co., 840. Blanton v. Gale, 609. Blin T. Hay, 635. Bliven v. Screw Co., 601. Bloom T. Burdick, 792. V. Insurance Co.. 36, 66, 273, 285, 531, 741. 742. Blooming Grove Mut. F. Ins. Co. v. ilc- Auerney, 260. Blossom V. Insurance Co.. 522, 742. Blumer v. Phoenix Ins. Co., 352. 391, 403. Boardman v. Merrimac Ins. Co., 663, 665. Boatman P. .t M. Ins. Co. v. Parker, 702. Bobbitt V. Ijiverpool & London & Globe Ins. Co.. 785. Bodine v. Exchange P. Ins. Co., 162. Boehen v. Insurance Co., 273. Boehm v. Bell, 65. Boetcher v. Insurance Co., 132. Boggs V. Insurance Co., 301. Bohart v. Obeme, 195. Bole V. Insurance Co., 476. Bonefant r. Insurance Co., 408. Bonner v. Home Ins. Co., 440, 442, 447. Bonneville v. Assurauce Co., 11, 99, 199, 529. Boon V. Insurance Co., 786. Boston Water Power Co. v. Gray, 592, 593, 594, 603, 608, 610. Boston & Salem Ice Co. v. Koyal Ins. Co., 219. Bostwick V. Atkins, 151. Bottomley v. Ambler, 645. Bourgeois v. Northwestern Nat. Ins. Co., 119, 133. Boutelle v. Insurance Co., 24, 315. Bouton V. Insurance Co., 278. Bowditch Mut. P. Ins. Co. v. Winslow, 215, 235, 375. Bowen v. Pope, 817, 820. Bowes V. Insurance Co., 522. Bowlin V. Insurance Co., 137, 193, 199, 200, 529, 748, 749. Bowling V. McParland, 784. Bowman v. Pranklin P. Ins. Co., 83, 88, 258. Boyd V. Magruder, 627. v. Vandei-l)ilt Ins. Co., 342, 397, 741, 753. Boynton v. Clinton & Essex Mut, Ins. Co.. 573. Bradbury y. N. B. & More. P. Ins. Ass"u. 570, 577. Braddy v. Insiu-ance Co.. 611. Bradley v. Insurance Co.. 840. V. Potomac Ins. Co., 28, 277, 279. v. Wheeler, 104. Bradshaw v. Agricultiu-al Ins. Co., 589, 611. Brady v. Insurance Co., 829. y. Mayor, etc., 626. V. Northwestern Ins. Co., 344, 459, 4G1, 469. Br.andup v. Insurance Co., .5.55. Braunstein'v. Accidental Death Ins. Co., 718, 721. Bray y. English, 638. Brenner v. Insurance Co., 680. Bridges v. Gan-ett, 299. Briggs V. Hervey, .^)45. v. Insurance Co., 619, 702, 748. Brightman y. Hicks, 740, 752. Brighton Manuf'g Co. v. Reading P. Ins. Cq., 412. Brink v. Hanover P. Ins. Co., 79, 342, 525. 53.3. 742, 745, 757. V. Insurance Co., 620, 645, 741. Brinley v. National Ins. Co., 464, 486. British America Assur. Co. v. Cooper, 57 159. V. Wilkinson, 514, 772. British & American Tel. Co. v. Colson, 541. British & Poreign Ins. Co. v. Gulf, C. & S. P. R. Co.. 3.59. Britton v. Royal Ins. Co., 454. V. A^'aterworks Co., 725. Broadwater v. Insurance Co., .50. Broadway Ins. Co. v. Doying, 605. Brock V. Insurance Co., 60(i. Brogan v. Insurance Co., 234. Brooklyn v. Railway Co., 730. Brooklyn L. Ins. Co. v. Bledsoe, 285. Brooks V. Insuran<'e Co., 353. Brown v. Bellows, 645. V. Clay, 595. V. Commercial P. Ins. Co., 223. V. Commonwealth Mut. Ins. Co., 259, 2(15. V. Hankorson, 60S. V. Hariford P. Ins. Co., 513, 763, 769, 771, 772. V. Insurance Co., 138, 195, 237, 257, 658. V. L(avitt, 613, 636. V. .Alayor, etc., New York, 792. V. Royal Ins. Co., 485. 489. Browiificld v. Insurance Co., 280. Browning v. Insurance Co., 262. Bruce v. Insurance Co., 780. Brun.swick Sav. Inst. v. Commercial Union Ins. Co., 797. Brush V. Insurance Co., 795. XXVI CASES CITED. [The figures refer to pages.] Bryan v. Insurance Co., 83. Bryant v. Insurance Co., 97. Buchanan v. Cun-y, 626. Buck V. Alfee, 667. V. Insurance Co., 217, 318. Buckley t. Garrett, 314. Buell V. Insurance Co., 377. Buffum V. Fayette Hut. F. Ins. Co., 18, 24. 40. Buick V. Mechanics' Ins. Co., 53, 56, 166. Bull V. Harragan, 664. T. Insurance Co., 336. .~i24. BuUman v. Commercial Union Ins. Co., 502, 503, 612. Bumstead v. Insurance Co., 441. Burchell t. Marsh. 603. Burger v. Limbaeh, 300. Burlington Ins. Co. v. Lowery, 521, 524, 794. V. Rivers, 1.38, 740. V. Threlkeld. 570. Burnett v. Bufala Home Ins. Co., 24, 266, 304, 308. Bumside v. Twitehell, 427. Burritt v. Insurance Co., .375. Burson v. Fire Association, 221. Burt V. Bowles, 74. Burton v. Hintrager, 319. V. Insurance Co., 355. Bush T. A^^estchester F. Ins. Co., 529, 749. Bushey v. Culler, 642. Busk V. Royal Exchnuge Assur Co., 479. Butler T. Boyles, 645. T. Insurance Co., 377. V. Mayor, etc., 604. 609, 614. Byars v. Thompson, 645. Byers v. Farmers' Ins. Co., 232, 352. Cahill V. Insurance Co., 281. Cairo & F. Co. v. Parks, 784. Caldwell v. Wcutworth, 664. Caledonian Ins. Co. y. Traub, 531, 741. Caledonian Ry. Co. v. I^ockhart, 593, 645. Calhoon T. Belden, 222. 233. California Ins. Co. v. Union Compress Co., 468, 774. Cnmeron v. Insurance Co., 441. 522, 527. Campbell v. Insurance Co., 377, 481 503, 535, 530, (521 , V. Mesier, 684. V. Western, 504, 597. 611. Canfield v. Watertown F. Ins. Co., 598 641. Capital City Ins. Co. v. Autrcy, 257. V. Caldwell, 429. Capital Pub. Co., In re, 477. Caraher v. Insurance Co., 411. Carberry v. Insurance Co., 355. 78.j 794. Card V. Phoenix Ins. Co., 311, 315. Carey v. German American Ins. Co., 64, 79, 136, 250, 251, 342, 410, 531, 742, 748, 813. Carlin t. Assurance Co., 477. Carlisle v. Wallace, 777. Carlock v. Phenix Ins. Co., 284, 755. Carlwitz t. Germania F. Ins. Co., 301. Carpenter t. Insurance Co., 23, 336, 523, 556, 562, 563, 567. v. Wood, 635, 640. Carr v. Insurance Co., 412, 415. Carrigan v. Lycoming F. Ins. Co., 200, 663, 665. Carroll v. Insurance Co., 584. Carson v. Insurance Co., 35. Carter v. Boehm, 454. V. Insurance Co., 528. V. Rockett, 355. Case T. Hartford F. Ins. Co.. 469, 482. V. Manufacturers F. & JI. Ins. Co.. 586. Case Manufacturing Co. v. Garven, 432. Cashau v. Insurance Co., 519. Cashman t. Insurance Co., 455. Cassacia v. Insurance Co., 790. Cassell, In re, 631. Cassity v. New Orleans Ins. Ass'n, 499. Catlin V. Insurance Co., 478, 526. Cayon v. Insurance Co., .j^."), 538, 746. Centennial Mut. L. Ass'n v. Parham, 148, 358. Central City Ins. Co. v. Gates, 543, 544. Central R. & B. Co. v. Lampley, 730. Cerf V. Insurance Co., 706. Chadbourne v. German American Ins. Co., 67, 68. Chamberlain v. New Hampshire F. Ina. Co., 407, 802, 804. Chamberlin v. Whitford, 351. Chambers v. Insurance Co., 840. Chandler v. Insurance Co., 415, 480, 840. ' Chaudos v. American F. Ins. Co., 590, 603, 604, 608, 609. 612, 613. Chapman v. Insurance Co., 620. Chase v. Box Co., 435. V. Insurance Co.. 189. T. Washburn, 777. Chattilon v. Insurance Co., 392. Cheek v. Insurance Co., 392. Chellis V. Coble. 195. Chesbrough v. Wright, G62. Chicago, St. L. & N. (>. R. Co. v. Pull- man. South Car Co., 368. Chicago & M. L. S. R. R. Co. v. Hughes, 612. Chippewa Lumber Co. v. Phenix Ins. Co., 462, 588, 622, 624. Chouteau v. Allen, 172. Chrisman v. State Ins. Co., 229, 375 Christian v. Dripps, 427. V. Insurance Co., 501. 512, 763 Christie v. North British Ins Co ''8 Christmas v. Russell. 799. Cinque Mars v. Insurance Co., 441 Citizens Ins. Co. v. Doll, 528, 533 ' CASES CITED. XXVU ITbe figures refer to pages.] Citizens Ins. Co. t. McLaughlin, 106. Citizens Mut. F. Ins. Co. v. Sovtwell, I'J. City F. Ins. Co. v. Corlies. 702. City of Delphi v. Startzmnn, 7S7. City Planing l^- Shingle Mill Co. v. Mci- ohants M. & C. Mut. F. Ins. Co., 47r,. Claflin V. Commonwealth Ins. Co., 44-, 446, 450. Clark V. Baker. 104. r. Burt, 04.5. T. Insurance Co.. 12. (>•"). 83, 102, 212, 485. 533, S.'.O, 665. Clarke t. Insurance Co., 214. Clay F. & M. Ins. Co. t. Huron Salt & Lumber Mfg. Co.. 790. Cleaver v. Insurance Co., 11, 137, 103, 201, 529. Clemans v. Society. 353. Clement v. Rohrahach, 045. Clerk V. Withers, 251. Clevenger t. Insurance Co.. 194, 201. Clodfelter v. Hulett, 74. Cobb T. Insurance Co., 97, 450. Coburn v. Odell, 0(>-l. Coggs T. Bernard, 775. Cohen t. Insurance Co.. 2S5. Cohn T. Insurance Co., 211, 216. Colby T. Insurance Co.. 501. Cole V. Insurance Co.. 358. Coleman t. Lewis. 434. Coles T. Browne. 27. Collins V. Assurance Corp., 219, 256. T. Blantern. (>(iii. V. Collins. 644. V. Freas. 008. T. Insurance Co., 185, 219, 250, 491, 555. V. Locke, 597. Colonius T. Insnrance Co.. 771, 833. Colt T. Phoenix F. Ins. Co.. 250. Columbia Delaware Bridge Co. v. Geisse, 174. Columbian Ins. Co. t. Lawrence, 210. 215, 339. 3.55. 441. 478. 535. ColTin T. Corwm, 809. Commercial Bank v. Firemens Ins. Co., 508. Commerctal F. Ins. Co. v. Allen, 436, 458, 491. V. Morris, 17. Commercial Ins. Co. v. Huckberger, 448. V. Ives, 15, 173. T. Mehlman, 702, 706. V. Robinson, 700. V. Spankneble, 85. Commercial T'nion Assur. Co. v. Dun- bar, 414, 417, 783. V. Hocking, 837. V. Meyer, .530. V. Scammon, 262. Commonwealth Ins. Co. v. Berger, 2.50. V. Sennett, 465, 483, 533. Conant v. Perkins, 114. Concord Union Mut. F. Ins. Co. v. Woodbury, 795. Cone V. Insurance Co., 321, 414, 802. Connecticut F. Ins. Co. v. Hamilton. 5SS. 591, 600. V. Tilloy, 89, 418. Connecticut Mut. L. Ins. Co. v. New York & N. H. R. Co., 807. Connor v. Hanover Ins. Co., 821. Conrad v. Massasoit Ins. Co., 036. V. Trustees, 728. Consolidated Real Estate & F. Ins. Co. V. Cashow, 276. Continental Ins. Co. v. Allen, 282. V. Boykiu, 289. v. Chase, .530. 823. V. Chew, 36, 66, 211, 285. V. Hillraer, 28, 295. V. H. M. Loud & Sons Lumber Co., 809. V. Hoffman, 289. V. Hulman, 500, 560. T. .Tenkins, 18. 24, 43. V. Lippold, 519, 533. V. Munns. 101, 503. V. Pearce, 392. V. Ward, 222. V. Wilson, 598. Continental L. Ins. Co. v. Kessler, 785. Conwell V. Voorhees, 730. Cook v. Champlain Transportation Co., 367. V. Insurance Co., 407, 413. 833. Cooley V. Willard, 193. Coombe v. Greene, 721. Cooper V. Insurance Co., 46. Cope V. Gilbert, 035. Corcoran v. A\'ebster, 435. Cormier v. Insurance Co., 339. Corning v. Strong, 188. Cornish v. Insurance Co., 092. Corrigan v. Insurance Co.. 407. Cottingham v. Firemans Fund Ins. Co., 222. 232. Couch V. Insurance Co., 702, 706. V. Woodruff. 94. Courcier v. Ritter, 175. Coursin v. Insurance Co., 218, 829. Cousens v. Lovejoy, 819. Cowan V. Insurance Co., 786. Cox V. Insurance Co., 106. Craig V. Insurance Co., 408. Craighton v. Insurance Co., 530. Crane v. Insurance Co., 190, 456. V. Partland, 27. Cranston v. Kenny, 611. Crescent Ins. Co. v. Camp, 252, 315. V. Griffin, 555. Criswell v. Riley, 171. Critchett v. Insurance Co., 187. Crocker v. Peoples Mut. P. Ins. Co., 388. Crnft V. Insurance Co., 17. Cromie v. Insurance Co., 497. Crook V. Insurance Co., 219. Crossley v. Insurance Co., 598, 599. Cumberland Bone Co. v. Andes Ins. Co., 211. Cumberland Valley Mut. Protection Co. V. Douglas, 478. CASES CITED. [Tbe flsjiires refer to pages.] Cummingham v. Bvansville & T. H. R. Co., 810. Cummings v. Cheshire Co. M. F. Ins. Co., 2.3, 226. Cummins v. Insurance Co., 415. (jurran v. Downs, 664. Currier v. Insurance Co., 283, 289. Curry y. Lacl^ey, 643. Curtin v. Insurance Co., 291. Curtis V. Insurance Co., 829, 834. Gushing t. Rice, 97. Cushman v. Insurance Co., 38, 108. Cutting V. Stone, 594. D Dndmun JMfg. Co. v. Worcester M. P. Ins. Co., 223. Dailey t. Preferred Masonic Mut. Ace. Ass'n, 16, 44, 46, 71: Dale V. Insurance Co., 36, 66, 272, 2S.j. 738. V. Turner, 787. Daniels t. Insurance Co., 106, 374, 693, 827. T. "Willis. .597. Dater v. Wellington, 626. Davenport t. Insurance Co., 620. David V. Insurance Co., 531. Davidson v. Insurance Co., 219, 831. V. New Orleans, 824. Davis V. Berger. 626. V. Boardman, 797. V. Clinton Waterworks Co.. 725. V. Insurance Co.. 211. 219, 227, 343, 358, 459, 533. 691. Davis Shoe Co. v. Kittanning Ins. Co.. 524, 536. Dawson v. Fitzgerald, 597. Day V. Insurance Co., 475, 567. Dayton Ins. Co. v. Kelly, 278. Dear v. Assurance Co., 439. De Forest v. Fulton Ins. Co., 211, 326, 774. . De Groot v. Insurance Co., 594, 633. De Grove v. Insurance Co.. 130. Deitz V. Insurance Co.. 747. Delaviuge v. Insurance Co., 65. Delaware, 1'he, 60. Delaware tV: H. Canal (^o. v. Pennsvl- vania Coal Co., 601, 621, 721. Dennisou v. Insurance Co.. 41'-!. Denny v. Insurance Co., 15, 373. De Ridder v. McKnight. 234. Dermani V. Insurance Co., ;!04. Deisraazos v. Insurance Cn. 827. Devendorf v. Beardsley, 790. DcA-ens v. Insurance Co., 161, 166, 190, 741. Devine v. Insurance Co., 414. Devlin v. Insurance Co.. 439. Dey V. Poughkeepsie Mut. Ins. Co.. 23 310, 312, 314. ' ' Dibble v. Assurance Co.. 53^ 54, 167. Dick V. Insurance Co., iv>3, 742. Dickinson Co. v. Mississippi Valley Ins. Co., 190. Diehl V. Insurance Co., 710. Diffenbaugh y. Insurance Co., 211. Dinning v. Insurance Co.. 43. Dircks v. Insurance Co., 277. Disbrow v. .Tones, 23. Distilled Spirits, The, 172. Dittner v. Insurance Co., 687. Diver v. Insurance Co., 18, 295. Dix v. Jlercantile Ins. Co., 24, 237, 238, 309. Dodge V. Insurance Co., 108. Dodge Co. Milt. Ins. Co. v. Rogers, 377, 687. Doe V. Burnham, 664. Dohlanti-y v. Insurance Co., 408, 531, 742. Dohn V. Insurance Co., 377. Doke V. .Tames, 645. Dole V. Insurance Co., 83. Dolloff V. Insurance Co., 448. Dolph V. Clemens, 597. Donaldson v. Insurance Co., 210, 355. Donnell v. Insurance Co., 104. Donogh V. Insurance Co., 555. Dove V. Insurance Co., 16. Dover Glass Works Co. v. Amer'c"n F. Ins. Co., 12, 95, 186, 227, 256, 721. Dowling V. Insurance Co., 740. Downing v. Ringer, 667. Dows V. Insurance Co., 700. Doyle T. Insurance Co.. 785. Drain v. Doggett, 36, 299, 300. Dreher v. Aetna Ins. Co., 237, 313. Drennen v. London Assur. Corp., 304, 312. Dresser v. Insurance Co., 304. Dryer v. Insurance Co., 132, 186, 280, 761. ■ Dube V. Insurance Co., 505. Dudley v. Corporation, 477. V. Thomas, 645. V. M'arde. 432. Duluth Nat. Bank v. Knoxville F. Ins. Co., 153. Dumpor's Case, 326. Dunbar v. Insurance Co., 392. Duncan v. Sun F. Ins. Co.. 710. r. Water Co., 730. Dunham v. Insurance Co., 452. Dunlop V. Insurance Co.. 249. Dupreau v. Insurance Co., 218. Durand v. Thouron. :-!S.l. Dwelling House Ins. Co., v. Brodie, 392, 841. V. Dowdall. 532, 742. v. Hardie, 2S.'5. V. Hoffman, 215. V. Johnson, 7.S(^>. V. Osbom, 415, 522, 840 Dwinniug v. Phenix Ins. Co.. 20 Dykers v. Allen, 104. CASES CITED. XXIX [The figures refer to pagv^s,] E :Eads V. Williams, 5!«. 639, 642. 64.'i. Sagle F. Co. v. Globe Loan & Trust Co., 531, 743. Eastern R. Co. t. Relief F. Ins. Co., 211. Eastman v. Burleigh, (520, 027. V. Jleredith, 734. East Texas F. Ins. Co., v. Blum, 100. 505. T. Brown, o.">8. T. Clarke, 222. 232, 235. V. Dyches, 234. T. Flippen, 555. r)63. V. Harris, 651, 059. V. Kempner, 227, 408. 412. T. Mims, 286. Eaton T. Insurance Co., 761. T. 'W'hiting, 319. Eaves v. Estes, 434. Eddy V. Insurance Co.. 747. V. London Assur. Corp.. 347. Eddy St. Iron Foundry t. Hampden Stock & Mut. P. Ins. Co., 570. Edgerly v. Concord, 734. T. Insurance Co., 530, 786. Edgerton v. Preston, 322. Edmands v. Insurance Co., 231. Edmonstone v. Hartshorn, 146. Edson V. Insurance Co.. H40. Edwards v. Insurance Co., 12, 100, ISO, 520. Egan V. Insurance Co., 137, 840. Eggleston v. Insurance Co., 441. Eichner t. Insurance Co.. 622. Eiseman v. Hawkeye Ins. Co., 442, 780. 788. Elkins V. Susqxiehanna ilut. F. Ins. Co., 280, 286. Ellen T. Topp, 721. Elliott T. Grand Lodge, 18, 44. V. Insurance Co.. 218. V. Life Ass'n, 387. V. Preston. 817. V. Royal Exchange Assur. Co., 602. T. Swartwout, 705. Ellis T. Insurance Co., 19, 102, 232, 358, 830, 840. Ellmaker's Ex'rs v. Franklin F. Ins. Co., 457, 482. Ellsworth V. Insurance Co., 439. Elmendorf t. Harris, 642. Elwes T. Maw. 423. Ely V. Ely, 210. Emery t. Waae, 033. Empire State Ins. Co. v. American Cent. Ins. Co.. 155, 158. England v. Insurance Co., 408. 410. 414. English V. Franklin F. Ins. Co., 577. Eiinis V. Insurance Co., 802. Enos V. Insurance Co., 137, 193, 201, 521, 531, 743. Equitable F. Ins. Co. v. Quinn, 4.58. JBquitable Ins. Co. v. McCrea, 5C2. Equitable L. Assur. Soc. v. Pettus, 820. Ermentrout v. Insurance Co., 130, 183, 137, 355, 519, 532, 748, 794. Esch V. Insurance Co., 223. Essex Sav. Bank v. Meriden F. Ins. Co., 88. Estes V. Insurance Co., 166. y. Mansfield, .5!I5. European iV Am. Stuiim Shipping Co. v. Crosskey. 031. Evans y. Gale. 770. Everett v. Assurance Co., 698. V. Insurance Co., 570, 793. Ewald V. Insurance Co., 285. Excelsior F. Ins. Co. v. Royal Ins. Co., 210. Express Co. v. Kountze Bros., 779. F Fabyan v. Insurance Co., 79, 410, 756. Fahn v. Reichart, 363. Fairfield Say. Bank y. Chase, 172. Falconer v. Jlontgomery. 042. Farmer y. Association, 792. Farmers' F. Ins. Co. y. Mispelhorn, 440. Farmers' Ins. Co. y. Archer, 23, 227. V. Wells, 413. v. Williams, 747. Farmers' Loan & Trust Co. v. Hen- drickson, 428. Farmers' Mut. F. Ins. Co. v. Bowen, 293. Farmers' Mut. Ins. Co. v. New Holland Turnpike Co.. 457, 482. v. Taylor, 533, 745. Farmers' & Drovers' Ins. Co. v. Curry, 231. Farmers' & Merchants Ins. Co. v. Ches- nut, .507. Farntim v. Insurance Co., 280. Farrar v. Stackpole, 424, 425. v. Triplet, 300. Farrow v. Insurance Co., 797. Faulkner v. Assurance Co., 702. Faust v. Insurance Co.. 531, 706. Feibelman v. Assurance Co., 761. Fellowes y. Madison Ins. Co., 838. Ferree v. Trust Co., 79, 506. Ferrer v. Insurance Co., 783. Ferriss y. North American F. Ins. Co., 454. 791. Fidelity Mut. L. Ass'n v. Ficklin, 353. Fidelity & Casualty Co. v. Alpert, 390. y. Teter, 73. Field V. Insurance Co., 173. Findeisen v. Insurance Co., 738, 741. Finley v. Insurance Co., 24, 310. Finne.y v. Insurance Co., 23. Fire Ass'n v. Flournoy, 222, 358. y. Rosenthal, 485, 490, 491 . Fire Ins. Cos. v. Felrath, 355, 547. Firemen's Fund Ins. Co. v. Barker, 11, 38. 95, 256. y. Congregation Rodeph Sholom, 680, 681. V. Norwood, 10, 95, 100, 138. xx-s: CASES CITED. [The figures refer to pages.] Firemen's Ins. Co. t. Holt, 556, 560. Firemen's Ins. Co. v. Floss, 743. Fire & Marine Insurance Co. v. Morri- son, 219. First Congregational Church v. Holyoke Mut. F. Ins. Co., 687. First National Bank v. American Cent. Ins. Co., 524, 554. V. Manchester F. Assur. Co., 759. V. Ocean Nat. Bank, 775. First National Bank Ballston Spa v. President, etc., Ins. Co. N. Am., 353. First National Bank of Waxachie v. Lan- cashire Ins. Co., 201. Fischer v. Insurance Co., 732. Fisher v. Insurance Co., 458, 462. V. Towner. 612. Fitchburg R. Co. v. Charleston Mut. F. Ins. Co., 576. Fitchburg Sav. Bank v. Amazon Ins. Co., 260. Fithian v. Railroad Co., 819. Fitzgerald v. Fitzgerald, 645. T. Insurance Co., 408. Fletcher v. Insurance Co., 310, 431. Flint V. Insurance Co., 272, 277. Flynii V. Insurance Co., 791. Fogg T. Insurance Co., 797. Foot V. Insurance Co., 456. Foote V. Insurance Co., 797. Forbes v. Insurance Co., 201, 567. T. Turner, 611. Forbush v. Insurance Co., 556. Ford V. Cobb, 4.34. V. Jones, 631. Forest City Ins. Co. v. School Direct- ors. 284. Forward v. Insurance Co., 97, 220, 740. Foster v. Charles, 445. v. Equitable Mut. F. Ins. Co., 336, 488. V. Swasey, 174. V. Van Reed, 3.36. V. Water Co., 725. Fouch V. Wilson, 17-1. Fowler v. Insurance Co.. 106, 285. V. Waterworks, 725, 730. Fox T. Hazelton, 637. V. Insurance Co., 210. 795. Fraim v. Insurance Co., 706. Francis v. Insurance Co., 691. V. Railroad Co., 776. Frankle v. Insurance Co., 280. Franklin v. Insurance Co., 97, 130. Franklin F. Ins. Co. v. Chicago Ice Co., 528. v. Coales, 211, .530. V. Crockett, 217. V. TJpdegraff, 455, 533. Franklin Ins. Co. t. Sears, 135, 179, 182. Franklin M. & F. Ins. Co. v. Drake. 214. Franklin Say. Inst. v. Central Mut. F. Ins. Co., 797. Frazee t. Moffitt, 477. Freedman t. Fire Ass'n, 738. Freeman y. Bass, 94. V. Insurance Co., 229. Fried v. Insurance Co.. 46. Friemansdorf v. Watertown Ins. Co., 337, 339, 358. Friesmuth y. Insurance Co., 65, 83, 88. Frisbie v. Insurance Co., 388. Fritz V. Insurance Co., 521, 743. Fromherz v. Insurance Co., 165. Frost y. Woodruff, 220. Frost's Detroit ■ Lumber & W. W. Works y. M.Ulers, etc., Ins. Co., 78, 94. Fudickar y. Insurance Co., 592. 603. Fullam y. Insurance Co., 830, 840. Fuller V. Insurance Co., 11, 99, 253. y. Lamar, 97. Funke v. Insurance Ass'n, 556, 562. Furniss y. Hone. 104. Furtado v. Rodgers, 65. G Gage y. Lewis, 97. Gale y. Insurance Co.. 556. Galloway's Heirs y. Webb, 633. Galyeston Ins. Co. v. Long, 252. Galyon y. Ketchen, 243. Gamwell y. Insurance Co., 416. Gauser y. Insurance Co., 570. Garliek y. Insurance Co., 284. Garr v. Gomez, 643. Garred y. Macey, 643. Garretson y. Merchants & Bankers Ins. Co., 201, 391. Garyer y. Insurance Co., 88. Gaskarth y. Insurance Co., 679. Gaskin y. Phoenix Ins. Co., 230. Gasser y. Sun F. Office, 587, 622. Gates y. Insurance Co., 478. Gauche v. Insurance Co., 584, 622. Gay y. Waltman, 626. Gaylord y. Insurance Co., 218. Gee V. Insurance Co., 556, 560. Geib y. Insurance Co., 377, 454. Geiss y. Insurance Co., 84. Georgia Home Ins. Co. y. Hall, 216. y. Kinnier's Adm'x, 245. y. Leayerton, 530. V. Stein, 256, 257. Gere y. Insurance Co., 598. Gcrhauser y. Insurance Co., 173, 44S, 4.-.5. Gerling v. Insurance Co., 256, 261. German American Bank v. Agricultural Ins. Co.. 260. German American Ins. Co. y. Buck- staff, 627. V. Davis, 412. 456. V. Etherton, 585. y. Hart, 390. y. Hocking, 743, 830. y. Steiger, 586. German F. Ins. Co., y. Encaustic Tile Co., 153. V. Stewart, 138, 257, 519. CASES CITED. XXXI [The figures refer to pages.] Germania F. Ins. Co. v. Bromwell, 9(», 752. V. Columbia Encaustic Tile Co.. 519 V. Curra'n, 448. 456. V. Deckard, ti87. V. Home Ins. Co., 23, 96, 304, 315, 7.')(l. T. A\'arner. 588, 609. German Ins. Co. t. Brown, 523. V. Carrow, 841. r. Daniels, 37, 108. V. Davis, 412, 527, 533, 761, 840. V. Falrbank, 788. V. Grunert, 7S9. T. Hayden, 216. T. Helduk. 201. 567. T. Hunter. 24. 211, 216. V. Ward. 524. German Mut. Ins. Co. v. Neiwedde, 9S. 101. Gibbons v. German Ins. & Sav. Inst., 470. Gibbs T. Insurance Co., 455. Gibson t. Cooke. 799. V. Powell, 608. Gilbert v. Insurance Co.. 570. T. Sleeper. 222. T. State, 253. Gill V. Insurance Co.. 234, 377. Gillett V. Insurance Co., .5(54. 783, 786. Gilligan v. Insurance Co., 4ot). Gllman v. Insurance Co.. 21.5. Girard F. & JI. Ins. Co. t. Boulden, 783, 790. T. Hebard, 316. Gladding t. Ass'n, 193. Glen V. Insurance Co., 732. V. Lewis, 756. Glendale Woolen Co. v. Protection Ins. Co.. 353, 391, 403. GloTcr V. insurance Co., 588. T. Lee, 506. Godchaux t. Insurance Co., 772. Goddard t. Insurance Co., 11, 18. 38, 108, 403, 651. V. King, 595. Godfrey v. Macomber, 817. Goit T. National Protection Ins. Co., 12, 28. 279. Goldman v. Insurance Co., 651. Goldsmith v. Insurance Co., .527. Good V. Insurance Co., 485. 490, 491. Goode T. Insurance Co.. 153, 740. Goodell V. Raymond, 645. Gooden v. Insurance Co.. 830, 833. Goodrich v. Hulbert, 612. Gorsuth V. Butterfield, 664. Gorton v. Insurance Co., 285. Goss V. Insurance Co., 133, 740. Gottsman y. Insurance Co., 83, 88. Gould V. Cayuga Co. Nat. Bank, 769. V. Insurance Co., 173, 200, 522, 523, 743, 746. Grable t. Insurance Co., 222. Grace v. Adams, 359. Grace v. American Cent. Ins. Co., 50, 52, 59, 02, 69, 179, 281, 387, Graham v. Insurance Co., 173, 211, 343, 357. 358. y. Trimmer, 105. (irant y. Insurance Co., 831. Graves y. Insurance Co., 341, 530. Gr;iy v. Murray, 184. V. Sims, 65, 664. Graydon, Swanwick & Co. y. Patterson, 299. Greaves v. Insurance Co., 528. Greeley v. Iowa State Ins. Co., 284. Green v. Bank, 820. V. Insurance Co., 579. Greenough v. Eolfe. 611. Greenwald v. Insurance Co., 698, 700. Greenwood, In re, 031, 632. Greenwood v. Burns. 300. Greenwood Ice & Coal Co. v. Georgia Home Ins. Co.. 1.58. Greer v. Canfield, 608, 646, Greiss v. Insurance Co., 790, 791. Griffey v. Insurance Co., 67, 506. Griffith y. Zipperwick, 775. Grigsby v. Insurance Co., 447, 840. Grill y. Screw Co., 779. Gross V. Insurance Co., 441, 442, 447. Grosvenor y. Insurance Co., 7ytj, 797. 802. Grymes v. Sanders, 108. Gude V. Insurance Co., 165, 283. Guernsey v. Insurance Co., Ill, 742. Guest V. Insurance Co., 215. Guinn v. Insurance Co., 10, 100, 256. H Haas y. Insurance Co., 747. Hadley y. Insurance Co.. 173. Hahn v. Assurance Co., 531. 760. Haire y. Insurance Co., 98, 564. Hale y. Insurance Co., 201, 797. Hall V. Franklin, 662. y. Insurance Co., 98, 215. .502, 564. 589, 591. 594, 601. 633. V. Railroad Co.. 807, 808. V. Storrs. 36. 299. Hallack y. March, 62(i. Hallock y. Conmiercial Union Ins. Co., 47. Halpin v. Insurance Co., 408, 477. Hamblet v. Insurance Co., 358. Hambleton v. Insurance Co., 25. 190. Hamilton v. Insurance Co., 218, 222, 547, 554, 597. 599. Hammatt v. Emerson, 44.5. Hammel v. Queen Ins. Co., 250, 355, 800. Hammond y. Insurance Co., 441, 499. Hamrick v. Combs, 205. Hancox v. Insurance Co., 317. Hand v. Insurance Co.. 786, 789. Hankins v. Rockford Ins. Co., 11, 99, 133, 137, 153, 154, 194, 201, 232, 257, 258, 748, 789. xxxn CASES CITED. [The figures refer to pages.] Hanover F. Ins. Co. v. Ames, 177. V. Brown, 504. T. Connor, 230. v. Gustin, 372, 389. V. Lewis, 315, 458, 622, 625. T. National Excti. Banlc, 356. V. Slirader, 159. Hardwiclc v. Insurance Co., 13, U7. 783. Hardy v. Bank, 739. v. Insurance Co., 556. Harle r. Council BlufCs Ins. Co., 28, 294. Harper t. Insurance Co.. 106. Harriman t. Queen Ins. Co., 671. Harrington t. Higliam. 626. T. Insurance Co., 491. Harris v. Insurance Co., 28. 65, 211, 214, 295. 442, 450, 694, 841. V. Mitcliell, 629. T. Norton, 635. Harrison v. Insurance Co., 201, 521, 529, 530, 591, 749, 753. 838. Hart T. Insurance Co., 840. T. Kennedy, 628. V. Railroad Co., 779. 807, 808. V. ^\'estern R. Corp., 369. Hartford Bffidge Co. t. Granger, 642. Hartford F. Ins. Co. v. Bonner Merc. Co., 589. T. Davenport, 44. 92, 186, 414, 750, 799, 800. S()9. V. Farrish, 578. V. .Tosey, 13, 97, 152, 173. T. King. 17, 44. T. Reynolds, 53, 54,- 55, 60, 130, 156. 1()7, 169. V. Ross. 24, 238, 310, 314. T. Small, 132, 137, 280, 555, 747. V. Walsh, 87, 344. V. Webster, 91. V. Williams, 348. Hartford Steam Boiler Iu.s|i. & Ins. Co. V. Lasher Stocking Co.. 17, 45. Hartranft v. AViogmann, 477. Hartshorne v. Insurance Co., 18, 408. Haskius V. Insurance Co., 490, 790 Hastings v. Westchester F. Ins. Co 338. 351, 357, 358. Hatch v. Taylor, 174. Hathaway v. Insurance Co., 314, 794 Hathorn v. Germania Ins. Co., 60. Haven v. Emery, 434. V. Winnisimmot Co.. 604. 614 Havens v. Home Ins. Co., 85, 88, 186 562, 1.7)0. Hawley v. Cramer. 151. V. Insurance Co., 217. Haxall V. Shippen, 245. Hay V. Insurance Co., 840. Hayes v. Association, 787. V. Mk-higan Cent. R. R. Co., 730. 7.31. Head v. Providence Ins. Co., 142. Healey v. Insurance Co., 189. Heavue v. New England Mut. M. In.«. Heath v.' Coreth, 357. V. Insurance Co., 190, 456. Hebner v. Insurance Co., 24, 216. Hcdger v. Insurance Co., 458. Hedges v. Railroad Co., 548. Hcebner v. Insurance Co., 827. Heilman v. Westchester F. Ins. Co., 489. Heller v. Crawford, 663. Hench v. Insurance Co., 260. Henderson v. Insurance Co., 478. v. Railway Co., 358. Henly v. Mayor, etc., 728. Hennessey v. Insurance Co., 230. Henning v. Assurance Co., 217. Herbst v. Lowe, 11, 93, 99, 195, 257. Hermann v. Niagara F. Ins. Co., 50, 52. Herndon v. Triple Alliance, 11. Heron v. Insurance Co.. 499. Herrick v. Belknap. 721. Herriter v. Porter, 809. Herrman v. Adriatic F. Ins. Co., 84, 408, 409, 411, 456, 476. Hervey v. Insurance Co., 694. Heuer v. Insurance Co., 697. Heusinkveld v. Insurance Co., 533. Hewey v. Nourse, 360. Hibernia Ins. Co. v. Bills, 38, 87. V. O'Connor, 524. Hickerson v. Insurance Co.. 607. Hickman v. Insurance Co., 4')'>. Hicks V. lasurancp Co.. 230. Hieatt v. Morris. 683. Higgins V. Moore, 36, 104, 299. Higginson v. Dall, 210. Higham v. Han-is, 770. Hill V. Helton. 192. V. Insurance Co., 407, 408, 412, 756. V. Sewald, 427. Hillier v. Alleghany Co. Mut. Ins. Co., 470, 483. Hills V. Insurance Co., 635. Hillyard v. Mut. Benefit L. Ins. Co., 79(i. Hine v. Woolworth, 240, 242, 267. Ilines V. Driver, 97. Hinman v. Insurance Co., 83, 88, 215. Hittinger v. Inhabitants of Westford, 477. Hobbs V. Insurance Co., 242, 314, 700. Hobby V. Dana, 694. Hodge V. Insurance Co., 280. Hodgkius V. Montgomery Co. Mut. Ins. Co., 543, 544. Hoffecker v. Insurance Co., 687. Hoffman v. Aetna F. Ins. Co.. 24 304 307, 309, 326. 439. 458, 527. v. John Hancock JIut. L. Ins. Co., 36, 296. Holbrook v. Insurance Co., 5(;;!, 576. HoUaway v. Insurance Co., figures refei- to pages.] Milner v. Field, 7121. Miltenberger v. Bon com. 210. Milwaukee Mechanics' Ins. Co. t. Nei- wedde, '2M. T. Stewart. .">ill, 742. Milwaukee & St. 1*. Ry. Co. v. Kellosg. 365. Miner v. Bradley. S2. T. Insurance Co., !)i. Minneapolis. St. 1". &_S. S. M. Ry. Co. V. Home Ins. Co.. .'!.)!). Minnesota Co. v. St. Paul Co., 427. Mispelhorn v. Farmers F. Ins. Co., 54ti. Mississinewa Min. Co. v. Patton, 727. Missouri, K. & T. Ry. Go. v. Kansas Pac. Ry. Co., 730. Missouri Pac. R. Co. v. Cullers, 363. V. Sharitt, t>2«. 821. T. Sherwood, 779. Mitchell T. Assurance Co., 795. T.Bush, 594, 603. Mix T. Ins. Co., 740, 830, 840. Mobile Ins. Co. v. Columbia & G. R. Co., 810. Mobile & M. R. Co. v. Jurey, 369. Moeller t. Ins. Co., 38, 108. Mohr lVc Mohr Distilling Co. v. Insurance Co., 67. Monroe t. Insurance Co., 229. Montgomery v. Pickering. 97. Moore t. Barnett, ."i92, 633. T. Giesecke, 108. V. Insurance Co.. 36, 47. 66, 79, 83, 121, 137. 2.j7, 273, 285, 342, 358, 4(IS. 410, 4.-|4, 455, 748, 756, 794. Moran v. Bogert, 642. Morgan t. Morgan. 612. Morley v. Liverpool & London ~>. Mountford r. Scott. 172. Mount Leonard Milling Co. v. Liverpool & London & (Jlobe Ins. Co., 210. Mount Vernon Mfg. Co. v. Summit Co. Mut. F. Ins. Co., 812. Mueller v. Insurance Co., 69, 442, 478, 741. Muhleman t. Insurance Co.. 285. Mullin V. Insurance Co., .■'.92. Mullins V. Arnold. 604, 614. Mulry V. Insurance Co., 415, 790, Murdock v. Chenango Co. Mut. Ins. Co., 229, 238, 382, 710. Murphy v. Insurance Co., 833. Mussey v. Insurance Co., 564. Jlutual Assnr. Soc. v. Scottish Union & Xatl. Co., 51. Mutual Benefit L. Ins. Co. v. Davis, 662. Mutual F. Ins. Co. v. Alvurd, 586. Mutual L. Ins. Co. v. Davidge, 277. V. Wager, 507. v. Young, 18. Myers v. Insurance Co.. 43, 554. Mynard v. Syracuse, B. & N. Y. R. Co. ■778. Myrick v. Bill, 435. N Nappanee Furniture Co. v. Vernon Ins. Co., 227. National Bank v. Burkhardt. 60. V. Insurance Co., 387. National L. Ins. Co. v. Minch, 149, 507. National Mut. F. Ins. Co. v. Barnes, 554. Nave V. Home Mut. Ins. Co., 679. Neale v. Ledger, 0)30, 631. Nebraska & I. Ins. Co. v. Christiensen, 280. Nelson v. Brown, 777. Nesbit V. Burry, 220. Neville v. Merchants & M. Ins. Co., 25. New V. German Ins. Co., 79, 342, 502. Newark F. Ins. Co. v. Sammons, 281. Newark Mach. Co. v. Kenton Ins. Co., 16, 44, 71, 100. Newby v. Rogers, 786. Newcastle F. Ins. Co. v. Macmorran, 375. New England F. & M. Ins. Co. v. Wet- more, 794. New Jersey Steam Nav. Co. v. Mer- chants Bank, 779. Newman v. De Lorimer, 319. New Orleans Ins. Ass'n. v. Holberg, 266, 304. V. M.itthews, 530. New York Central Ins. Co. v. National Protection Ins. Co., 150, 790. V. Watson, 79, 342, 562, 567, 757. New York Ice Co. v. Northwestern Ins. Co., 111. New York Life Ins. Co. v. Fletcher, 124. V. Statham, 285. New Y'ork Lumber & Wood Working Co. V. Peoples F. Ins. Co., 16, 70. Niagara F. Ins. Co. v. Bishop, 584. V. Scammon, 519, 564. Niblo V. Ins. Co., 210, 431, 457, 465, 482. Nichols V. Baxter, 795. V. Fayette Ins. Co., 564, 568. V. Larkin, 786, 788. Nickerson v. Bridgeport Hydraulic Co., 725. Nippolt V. Insurance Co., 17. Nixon v. Queen Ins. Co., 527. North American F. Ins. Co. v. Zaengcr, 414. xxxvm CASES CITBE. [Tbe figures refer to pages.] North British & Mercantile Ins. Co. v. Freeman, 257. V. Lambert, 154. Northrup v. Insurance Co., 787. Northup T. Germania 1\ Ins. Co., 155. Northwestern Mut. L. Ins. Co. v. Amer- man, 291. T. Germania F. Ins. Co., 802. V. Hazelett, 500. Northwestern Nat. Ins. Co. v. Mizu, 137, 142, 651. Norton v. Gale, (>42, 643. v. Insurance Co., 527. Norwich F. Ins. Co. v. Boomer, 21 5. 3HC. Norwich Union F. Ins. Co. v. Girton, 771. V. Standard Oil Co., 806, 808, 809. Nowell V. Wright, 730. Noyes v. Insurance Co., 576. Nurney v. Insurance Co., 598. Nye V. Liscombe, 820. Oabes v. Insurance Co., 24, 310. Oakland Home Ins. Co. v. Allen, 840. O'Brien v. Insurance Co.. 18, 98, 232, 249, 273, 428, 441, 455, 533. Ocean Ins. Co. v. Carrington, 18. O'Conner v. Insurance Co., 524, 746. Ohiquest t. Farwell, 204. Oiler T. Gard, 93. Oldham v. Insurance Co., 304. Old Saucelito Land & Dry Dock Co. t. Commercial Union Assur. Co., 620, 622. Olds Wagon Works v. Coombs, 74. O'Leary v. Insurance Co., 137. Omaha F. Ins. Co. v. Dierks, 531, 741. Omnium Securities Co. v. Canada F. & M. Ins. Co., 358. O'Neill V. Insurance Co., 375. O'Reilly t. Assurance Co., 28, 43, 193, 274. Orient Mut. Ins. Co. t. Wright, 18. Ormsby v. Phenix Ins. Co., 344, 353. Orr V. Hanover F. Ins. Co., 223, 505. Oshkosh Gas Light Co. v. Germania F. Ins. Co., 530. Oshkosh Match Works v. Manchester F. Assur. Co., 441. Oshkosh Packing & Provision Co. v. In- surance Co., (?71, 675. Otis V. Harrison, 662. Over V. Lake Brie & W. Ry. Co., 809. Overby v. Overby, 667. Owen V. Farmers Joint Stock Ins. Co., 522, 722. Packard v. Insurance Co., 200, 747. Paddock v. Insurance Co., 114. Paducah Lumber Co. v. Paducah Water Supply Co., 730, T.iG. Page V. Sun Ins. Office, 497. Paine y. Insurance Co., 407, 413. Palatine Ins. Co. v. Brown, 651, 651. Palmer v. Forbes, 427. V. Insurance Co., 11, 289. V. Merrill, 799. V. Sawyer, 788, 789. Pangborn v. Insurance Co., 402, 770. Parker v. Insurance Co., 121, 391, 392, 455, 487, 492. Parks V. Insurance Co., 743, 746. Parsons v. Insurance Co., 13, 137. Partridge v. Insurance Co., 60, 106. Patch V. Insurance Co.. 272. Paterson v. Harris, 322. Patten v. Insurance Co., 375. Patterson v. Delaware Co., 427. v. Insurance Co., 18, 24, 43, 524. Pavey v. Insurance Co., 377. Pearl Street, In re, 645. Pechner v. Insurance Co., 203. Peck V. .Tenness, 815. Peet V. Insurance Co., 256. Pelican Ins. Co., In re, 570. V. Smith, 211, 216. V. Troy Co-operative Ass'n., 680. V. Wilkerson, 651, 715. Pelton V. Westchester F. Ins. Co., 21S, 233. Pelzer Mfg. Co. v. American F. Ins. Co., 173. Pencil V. Insurance Co., 498. Pennoyer v. Neff, 820. Pennsylvania Ins. Co. v. Carter. 286. V. Gottsman's Adm'rs, 250. 257, 260. Pennsylvania Mut. F. Ins. Co. v. Schmidt, 259, 262. Pennypacker v. Capital Ins. Co., 544. Penson v. Lee, 65. People V. Lamborn, 204. V. Soper, 792. People's St. Ry. Co. v. Spencer, 24, 218, 219. Peoria M. & F. Ins. Co. v. Botto, 67. V. Frost, 807. V. Hall, 23, 228, 316, 829, 839. V. Hervey, 794. V. Lewis, 519. V. Whitehill, 830. V. Wilson, 483. Percival v. Insurance Co., 388. Perkins v. Insurance Co., 18, 184. Perry v. Insurance Co., 46, 47, 223, 441, 530. Perry County Ins. Co. v. Stewart, 219. Peters v. Newklrk, 642. V. Warren Ins. Co.. 470. Petrie v. Woodworth. 703. Phenix Ins. Co. v. Bachclder, 284, 295. 788. V. Covey, 173. V. Dungan, 35, 278. 292. V. First National Bank. 336. V. Lamar, 500. 5.'i9. ."ill'' V. La Pointe, 439. .-;1H. V. liorcnx, 89. 22(;. TS.j. V. Mimcer, 103, 273.' CASES CITED. XXXIX [The figures refer to pages.] Phenix Ins. Co. t. Omaha Loan & Trust Co., 350. T. Pickel, 261. T. Pratt, 185, 181. V. Kogers, 521, 530, 741. y. Rollins, m. 291. V. Sullivan, 439. V. Tomlinson, 292. T. Wilcox tSr Gibbs Guano Co., 95, 104, 750. Philadelphia F. & Ii. Ins. Co. v. Mills, 248. 250, 2t!8. Philadelphia Tool Co. v. British Am. Assur. Co., 101, 102. Philbrook v. Insurance Co.. 556. Philips V. Knox Co. Ins. Co., 2J7, 317, 320, 321. Phillips V. Insurance Co., 441, 442, 498. T. Mayer. 300. V. Van Schaick, 787. Phoenix Assur. Co. v. Allison, 346. V. Coffman, 15, 373. 388. Phoenix Ins. Co. v. Asberry, 24, 218. T. Badger, .'iSn. V. Benton, 229. Y. Center, 532. 533. V. Oopeland. 392. V. Erie & ^S'. Transp. Co., 359, 369. V. Frissell. 182. V. Greer, 697. V. Hague, 18, 44. V. Hamilton. 325. r. Lansing, 292. 293. V. Lawrence. 83. V. Lebcher. 840. T. Levy, 530. V. Munday, 455, 791. T. Perkey. 784. V. Rad Bila Hora, 139. V. Stevenson, 64. T. Taylor, 530. V. Tucker, 415. 524. V. Van Allen, 772. T. Ward, 13, 97, 153, 256. T. Witt, 138. Tickel V. Phenix Ins. Co., 392, 548. PiekereU v. Carson. 424. Piedmont & A. L. Ins. Co. v. Ewing, 18. Pierce v. Carleton, 819. V. Nashua F. Ins. Co., 24, 266, 304, 309. Pioneer Mfg. Co. v. Phoenix Assur. Co., 622. Pitney v. Insurance Co., 564. Pitt V. Insurance Co., 286. Planters' Ins. Co. v. Myers, 133, 281, 747. V. Ray, 278. V. Sorrels, 392. V. Walker Lodge, 67. Planters' Mut. Ins. Co. v. Deford, 173. 524. V. Rowland, 218. Planters & Merchants Ins. Co. t. Thurs- ton, 173, 457. „ „„ Plath V. Insurance Ass'n, 83, 88. Piatt T. Insurance Co., 12, 186. Plimpton V. Bigelow, 321, 820. Plumb V. Insurance Co., 97. Podlech V. Phelau, 431. Polhill V. Walter, 445. Pollard v. Insurance Co., 663. Pomeroy v. Insurance Co., 827. Pool V. Honnessy, 613. Poor V. Insurance Co., 415, 756. Porter v. Insurance Co., 137, 216, 748. Poss V. Assurance Co., 475. Post V. Garrow, 550. V. Insurance Co., 746. Potter v. Insurance Co., 97, 106, 513, 763, 772. V. Parsons, 204. Pottsville Mut. F. Ins. Co. v. Horan, 693. v. Minnequa Springs Imp. Co., 137, 193, 277, 280. Powers V. Briggs, 185. v. Insurance Co., 266, 304. Powers Dry Goods Co. v. Imperial F. Ins. Co., 588, 617. Pratt V. Adams, 662. T. Draughon, 667. Pray v. Burbank, 664. President Worcester Bank v. Hartford F. Ins. Co., 201. Price V. Brown. 594. Proctor V. Tows, 175. Protection Ins. Co. v. Hall, 211. Providence L. Assur. Soc. v. Reutlinger, 391. Providence-Washington Ins. Co. v. The Sidney, 359. Provident L. Ins. Co. v. Fennell, 276. Purcell v. Insurance Co., 531. Purdue v. Noffsinger, 786. Putnam v. Insurance Co., 317, 455, 555. Putnam Tool Co. v. Fitchburg Mut. F. Ins. Co., 137, 191. Q Quarles v. Clayton, 23, 241, 492. Quarrier v. Insurance Co., 83. Queen Ins. Co. v. Devinney, 514, 772. V. Kline, 13, 750. V. Young, 567. Quinlan v. Providence-Washington Ins. Co., 11, 12, 70, 99, 118, 136, 520, 522, 748. Quong Tue Sing v. Anglo Nevada Assur. Corp., 48. R Rae V. Hackett, 721. Kahilly v. Wilson, 777. Railway Passenger Assui. Co. v. Bur- well, 520. Ranay v. Alexander, 721. Rand v. Redington, 612. Rankin v. Amazon Ins. Co., 378. Rann v. Insurance Co., 456. Raynsford v. Phelps, 730. Read v. Morse, 364. Reaper City Ins. Co. r. Brennan, 2b-. xl CASES CITED. [The figures refer to pages.] Renrdon v. Insurance Co., 474. Redfipld T. Insurance Co., 211, 295. Redmou v. Insurance Co., 194. Reed v. Insurance Co., 211, 598, 601. Reeside, The, 105. Reeve, Case & Co. v. Phoenix Ins. Co., 706. Reid V. Insurance Co., 693. V. Lord, 793. Reilly v. Insurance Co., 670, 672. Reiner v. Hurlbut. 822. Remelee v.. Hall, 592. Remington v. Insurance Co., 771. Renninger v. Insurance Co., 257. Renshaw v. Missouri State Mut. F. & M. Ins. Co., 700, 701. Residence F. liis. Co. v. Hannawold, 416. Rex V. Insurance Co., 795. Reynell v. Sprye, 512. Reynolds v. Collins, 175. . T. Fargo, 683. V. Ferree, 300. V. Reynolds, 600. Rheims v. Insurance Co., 523. Rice v. Tower, 230, 251. Rich V. New York Cent. & H. U. R. Co.. 727. Richards v. Continental Ins. Co., 173, 408, 752. Richardson v. Copeland, 434. V. Huggins, 608. V. Insurance Co., 83, 215, 664. V. Olmstead, 777. Richardson's Adm'r v. German Ins. Co., 244. Richmond t. Assurance Co., 166. Riddlesbarger v. Hartford Ins. Co., 836, 837. Rider v. Insurance Co., 211. Riggs V. Commercial Mut. Ins. Co., 217, 320. Riley v. Insurance Co., 281. Ring V. Assurance Co., 410. Rintoul T. Railroad Co., 359. Ripley v. Gelston, 765. V. Insurance Co., 753, 785, 795, 829. Rising Sun Ins. Co. v. Slaughter, 556. Ritchie v. People, 305. Ritter v. Insurance Co., 841. Robert v. Insurance Co., 272. Roberts v. Insurance Co., 97, 524. 530. Robinson v. Chamberlain, 729. V. Insurance Co., 28, 295. V. Peterson. 292. V. Rohr, 730. V. United States, 60. Roby V. West, 664. Roche V. Rhode Island Ins. Ass'n, 816, Rochester v. Whitehouse, 643. Rochester Loan & Banking Co. v. Lib- erty Ins. Co., 215, 531, 741. Rockford Ins. Co. v. Nelson, 214. V. Travelstead, 530. Rockingham Mut. F. Ins. Co. v. Bosher 807. Rogers v. Insurance Co., 785. Rohrback t. Insurance Co., 211, 215, 283. Rokes T. Insurance Co., 519. Roper T. London, 597. Rosenthal v. Walker, 545. Rosenwald v. Plienix Ins. Co., 586, 587. Roth T. Railroad Co., 548. Roumage v. Insurance Co., .535. Rowley v. Insurance Co., 563. Royal Ins. Co. v. McCrea, 166, 281. Ruckman v. Ransom, 594. Ruggles V. Insurance Co., 130, 281. Rumsey v. Insurance Co., 211. Rundell v. La Fleur. 603. Runkle v. Insurance Co., 64, 67. Ruse V. Insurance Co., 825. Russell V. De Grand, 664, 667. V. Insurance Co., 173, 401. Ruthven v. Insurance Co., 153. Ryan v. Insurance Co., 11. V. Rand, 277. Ryder v. Insurance Co., 114, 490. Sabin v. Angell, 594. Sadlers Co. v. Babcock, 23. Safford v. Grout, 512. St. John V. American Mut. F. & M. Ins. Co., 478, 700, 702. St. Johnsbury v. Thompson, 730. St. Louis, Ft. S. & W. R. Co. v. Grove, 787. St. Louis, I. M. & S. R. Co. v. Commer- cial Union Ins. Co., 369, 807. St. Louis Ins. Co. v. Glasgow, 478. St. Martin v. Thrasher, 626. St Paul F. & M. Ins. Co. v. Archibald, 252, 269. V. Coleman, 28, 295. V. Wells, 414. Salter v. Burt, 549, 550. Sanders v. Cooper, 102. Sandford v. Trust F. Ins. Co., 18, 29. Sanford v. Insurance Co., 513, 7tJ3, 790, 797. Sanger v. Wood, 113. Sargent v. Insurance Co., 43, 157. Sarsfield v. Insurance Co., 403. Sater v. Insurance Co., 17. Sauner v. Insurance Co., 267. Sauvey v. Insurance Co., 563. Savage v. Insurance Co., 24, 310, 456. Saville v. Insurance Co., 499, 507. Sawyer v. Corse, 730. v. Thompson, 820. Scammon v. Insurance Co., 519. Schauer v. Insurance Co., 53, 54, 56, 158, 168. Schenck v. Insurance Co., 556. Schimp V. Insurance Co., 289, 290. Schindler v. Westover, 770. Schmidt v. Insurance Co., 15. Schollenberger v. Insurance Co., 599. Schemer v. Insurance Co., 194. Schoneman v. Insurance Co., 58, 64, CASES CITED. xli [The figures i-efer to pages.] School Dist. No. 116 v. German Ins. Co., 693. Schriefer v. Wood, 477. Schroedel v. Insurance Co., 38, 108, 215, 216. Schroeder v. Insurance Co., 839, 841. Schumitsch v. Insuraaoe Co., S3, ~~io. Schwartz t. Insurance Co., 65, 272. Scott V. Avery, 584, 585, 601, 602, 721. T. Bank, 775. V. Shepherd, 365. Scottish Union & National Ins. Co. r. Clancy, (522. T. Dangaix. 145. Scripture v. Lowell Mut. F. Ins. Co., 472, 701. Scudder v. Andrews, 667. Seagrave v. Insurance Co., 778. Seaman t. Insurance Co., 217. Security Ins. Co. v. Bronger, 446. T. Farrell. 4.jS. V. Pay. 190, 446. 569. V. Mette. 166. 2S2. 681. Security L. Ins. & Ann. Co. v. Gober, 11, 272. Selden v. Blyers, 97. Sellers t. Commercial F. Ins. Co.. 163. Selma, E. & D. R. Co. t. Tyson, 819. Semple v. Atkinson. 2()5. Sentell v. Oswego Co. Farmers Ins. Co., 231, 260. Sessons v. Barfield, 609. SeTcranee t. Insurance Co., 38, 111. Seward v. City of Rochester, 598. Sexton T. Graham, 777. T. Insurance Co., 408, 527. Seybert's Adm'rs r. Insurance Co., 260. Seyk V. Millers Nat. Ins. Co., 670. Shakey v. Hawkere Ins. Co., 28, 283, 285. Shapiro v. Insurance Co., 522. Sharman v. Bell, 603. Shaw V. Insurance Co., 211, 'L50, 455. Sheen v. Rickie, 422. Sheldon v. Insurance Co.. 277. 388. 403. Shepherd v. Insurance Co., 79, 7.56. Sherwood t. Insurance Co., 242. 519. .Shoemaker v. Insurance Co., 375. Shoenfeld t. Fleisher, 184. Short V. Insurance Co.. 98, 101, 414. Shotwell T. Insurance Co., 211. Shuggart v. I^ycoming F. Ins. Co., 24, 137, 193. 310. Shnltz T. Insurance Co., 28, 283, 285. Sias V. Insurance Co., 133. Siltz T. Insurance Co., 173, 554. Silverberg v. Insurance Co.. 194. Simmons v. Insurance Co., 133. Sisk V. Crump, 726. Siter's Appeal, 218. Skipper v. Grant, 589. Slater v. Emerson, 722. Sleeper v. Insurance Co., 407, 445, 450, 756. Smiley v. Insurance Co., 698, 700. Smith V. Bank, 319. Smith T. Faulkner, 601. V. Insurance Co.. 84, 141, 149, 2nn, 215, 218, 235, 250, 261, 269, 358, 391, 393, 396, 445, 5()6, 529, 530, 743, 747, 749, 772, 797. V. Jones, 809. T. Kincaid, 609. V. Smith, 611, 627, 635, 645. V. Stephenson, 192. V. Thorndike, 594. Snedeker v. Warring, 429, 430. Snedicor y. Insurance Co., 166. Sneed v. Assurance Co., 651, 659. Snow V. Oil Co., 24, 218. Soars V. Insurance Co., 510. Somerfield v. Insurance Co., 556. Sonneborn t. Insurance Co., 408. Sossamau v. Insurance Co., 232. Southard y. Steele, 626. South Australian Ins. Co. v. Randell. 777. Southern Ins. Co. v. Parker. 651. V. AVhite, 373, 383, 390. Southern Mut. Ins. Co. v. Yates, 11, 384. Southern Mut. L. Ins. Co. v. Taylor, 272, 285. Spann v. Cochran, 357. Spaulding v. Chicago & N. W. Ry. Co., 361. Speagle v. Insurance Co., 418. Spear v. Stacy, 594. Sperry v. Springfield F. & M. Ins. Co., 703. Spinetti v. Atlas S. S. Co., 778. Spooner v. Mattoon, 775. Springfield F. & M. Ins. Co. y. Brown, 345. y. McLimans, 408. V. Village of Keeseville, 732, 734. Sprott V. Association, 658. Squires y. Anderson, 608. Stacey y. Insurance Co., 556. Stache y. Insurance Co., 507, 771. Stadler v. Trever. 184. Stamps V. Commercial Ins. Co., 489. Standard Life & Ace. Ins. Co. v. Lau- derdale, 390. Standard Oil Co. v. Triumph Ins. Co., 65, 166. Staples y. Ffiirchild, 702. State V. Greenleaf, 664. V. Pierce, 730. State Ins. Co. v. Belford, 784, 838. y. Hughes, 791. y. Jamison, 181. T. Maackens, 447. y. Meesman, 840. y. Richmond, 180. V. Schreck, 81, 83. v. Stoffela, 836. State Mut. F. Ins. Co v. Arthur, 375. T. Roberts, 797. V. Updegrafe, 211. State of Minnesota v. Barber, 780. Stearns y. Quiiicy Mut. F. Ins. Co., 798. Stebbins v. Insurance Co., 44, 46. xlii CASES CITED. [The figures refer to pages.] Stebbins v. Leowolf, 549. Steele v. German Ins. Co., 97, 173, 523, 740. Steen v. Insurance Co., 830. Steeves t. Insurance Co., 455. Stehlick v. Insurance Co., 132. Steinbach v. Lafayette Ins. Co., 704. T. Relief Ins. Co., 704. Stenuett v. Insurance Co., 174. Stensgaard v. Insurance Co., 353, 383. Stephens v. Capital Ins. Co., 15, 70. Sterling v. Insurance Co., 791. Stevens v. Gray, 609. Stevenson v. Snow, 662. Stewart v. Woodward, 299. Stockton V. Insurance Co., 190. Stockton Combined H. & A. Works v. Glens Falls Ins. Co., 152, 510, 611. Stone V. Insurance Co., 53, 55, 56, 62, 65, 169, 170, 392, 474, 475, 477, 817. V. Miller, 792. Storm V. Insurance Co., 455. Stoughton V. Gas Co., 336. Stout V. Commercial Union Assur. Co., 702. V. Insurance Co., 388, 506. V. McLacblin, 105. Straus V. Ross, 220. Straw V. Truesdale, 593. Strohn v. Hartford F. Ins. Co., 32. V. Railroad Co., 253. Strong V. Insurance Co., 210. V. Strong, 637. Stuart V. Insurance Co. 211. Stupetski V. Insurance Co., 409. Suffolk F. Ins. Co. v. Boyden, 331, 337. Suggs V. Hartford Ins. Co., 558, 562. V. Travelers' Ins. Co., 834. Summerfield v. Insurance Co., 591, 602. Summers v. Vaughan, 351. Sun Fire Office v. Clark, 555. V. Ermentrout, 180. v. Wich, 132, 373. Sun Mut. Ins. Co. v. Mattingly, 523. V. Texarkana Foundry & Machine Co., 403. V. Wright, 18. Susquehanna Ins. Co. v. Perrine, 150. Susquehanna Mut. F. Ins. Co., v. Swank, 11. Sussex Co. Mut. Ins. Co. v. Woodruff, 336, 790. Sutherland v. Bank, 820. V. Insurance Co., 560. Swan V. Liverpool & London & Globe Ins. Co., 223, 524, 533. Swanger v. Mayberry, 667. Sweeting v. Insurance, Co., 556 Swenson v. Sun Fire Office, 358. Swinfen v. Swinfen, 204. Switzer v. Wilvers, 191. Sword V. Low, 434. Swords V. Owen. 38. 662. Syndicate InS. Co. v. Bohn, 12, 100, 122, 186, 217, 344. V. Catchings, 153, 173, 521, 529. T Tainter v. City of Worcester, 734. Talbott V. Hartley, 645. Tallman v. Insurance Co., 2.^9, JdO. Tannert v. Insurance Co., 699. Tarleton v. Staniforth, 29. Tasker v. Insurance Co., 157. Tate V. Evans, 192. V. Insurance Co., 201. Tayloe v. Insurance Co., 283, 530. Taylor v. Insurance Co., 41, 43, 230. V. Railroad Co., 730. Teaff V. Hewitt, 423, 432, 436. Tebbetts v. Dearborn, 316. Texas Banking & Ins. Co. v. Cohen, 266, 304. V. Hutchins, 787. V. Stone, 392. Thatch V. Metropole Ins. Co., 800. Thayer v. Insurance Co., 18, 416. Thierolf v. Insurance Co., 533. Thomas v. Bartow, 108. v. Commercial Union Assur. Co., 389. V. Insurance Co., 336, 448, 556, 560. V. Railroad Co., 642, 644. Thompson v. Blanchard, 616. V. Insurance Co., 24, 66, 265, 28o, 287, 783. 841. Thomson v. Insurance Co., 12, 70, 99, 122, 186, 257. V. Thomson, 622. Thome v. Beas, 184. Thornton v. Chapman, 642. V. McCormick, 595. Threshing Mach. Co. v. Firemens Ins. Co., 226. Throop V. Insurance Co., 785. Thurnell v. Balbirnie, 721. Thurston v. Insurance Co., 436. Thwing V. Great Western Ins. Co., 114. Tidey v. Mollett, 719. Tierney v. Phenix Ins. Co., 263, 812. Times F. Assur. Co. v. Hawke, 490. Tingley v. Bateman, 823. Titus V. Glens Falls Ins. Co., 442, 447, 524, 624, 741, 746, 754. Todd V. Insurance Co., 190. V. Reid, 300. Tolman v. Insurance Co., 492. Tongue v. Nutwell, 431. Torrey v. Bank of Orleans, 151. Towne v. Association, 578. Town of Rochester v. Town of Chester, 645. Trabue v. Insurance Co., 24, 38, 83, 219, 238, 310, 314. Trade Ins. Co. v. Uarracliffi, 211, 285, 286. Traders' Ins. Co. v. Chase, 815. V. Newman, 214. V. Pacaud. 315. V. Race, 408. Train v. Insurance Co., 18. Transatlantic F. Ins. Co. v. Dorsey, 700. Transportation Co. v. Downer, 779. CASES CITED. xliii [The figures refer to pajjes.] Travelers Ins. Co. v. California Ins. Co., Travis V. Insurance Co., 214. Tripp V. Insurance Co., 137, 748. Trott V. Insurance Co., 212. Trudo V. Anderson, 300, Trull T. Roxbury Mut. F. Ins. Co.. 490. Trumbull v. Insurance Co., 211, 219. Trustees First Baptist Church v. Brook- lyn F. Ins. Co., 18. 20, 108. Trustees of Fire Assn. Phila. v. Wil- liamson, 83, 702, 706, 710. Tubb v. Insurance Co., '1'.'.", 455. Tubbs V. Insurance Co., 523. Tuckerman v. Insurance Co., 211. Tufts T. McClure, 745. Tunno, In re, 631. Turnbull v. Insurance Co., 687, 739. Turner v. Insurance Co., 134, 562, 797. V. Turner, 97. V. Yates, 601. Turnipseed v. Hudson, 752. Tyler v. Insurance Co., 18. Tyrie v. Fletcher, 662. U tJhrig V. Insurance Co., 588, 601. TJlrtch v. Insurance Co., 585. Underwriters Agency v. Seabrook, 18. V. Sutherlin, 830. 840, 841. Union Central Li. Ins. Co. v. Chowning, 36, 66, 95, 104, 273, 285, 750. Union Ins. Co. v. Barwick, 530, 585. T. McGookey, 519. Union Mut. Ins. Co. v. Wilkinson, 12. Union Mut. L. Ins. Co. v. McMillen, 761. T. Mowry, 94. Union Nat. Bank v. German Ins. Co., 555 752 United Life, Fire & M. Ins. Co. v. Foote, 702. United States v. Ames, 627. V. The Paul Shearman, 664. V. Robeson, 601. United States F. & M. Ins. Co. v. Tardy, 144. United States L. Ins. Co. v. Ludwig, 793 Universal F. Ins. Co. v. Block, 2T'J, 281, 535, 536. Universal Mut. F. Ins. Co. v. Weiss, 137, 193, 841. Van Allen v. Assessors, 321. V. Insurance Co., 109, 749. Van Buren v. Insurance Co., 799. Vance v. Foster, 458, 486, 487. A'an Cortlandt v. Underbill, 597, 632, Oil. Vandegraaff v. Medlock, 339, 355. Vandekarr v. Thompson, 93. V an Deusen v. Insurance Co., 230. Van Epps v. Van Epps, l.jl. Vaufrin.'lertaclen v. Insurance Co., 523. Vankirk v. Insurance Co., 215. Vann v. Downing, 171. Van Valkenburgh v. Insurance Co., 64. Veazie v. Williams, 174. Vessel Owners Towing Co. v. Taylor, 634. Viele V. Insurance Co., 130. Viney v. Bignold, 601. Virginia F. <& M. Ins. Co. v. Morgan, 12, 70, 95, 186, 372, 384, 390, 651, 750. V. Vaughan, 304. Von Genechtin v. Insurance Co., 785. Von Wein v. Insurance Co., 52. Voorhis v. Freeman, 426. Vose V. Insurance Co., 189. w WaddingtoD v. Insurance Co., 65. Wade V. Saunders, 97. Wadhams v. Gay, 204. Wagner v. Insurance Co., 507, 772. Wainer v. Insurance Co., 217. Wait V. Insurance Co., 415. Waldeck v. Springfield F. & M. Ins. Co., 699. Waldman v. North British & Merc. Ins. Co., 151, 190. Walker v.- Insui-ance Co., 93, 521, 531, 743. V. Maitland, 479. V. Sanborn, 595. V. Sherman, 424. Wall V. Insurance Co., 106, 272, 285, 290, 403, 450, 573. Wallace v. Insurance Co., 586, 598. Waller v. Northern Assur. Co., 98, 215, 254. Wallingford v. Home Mut. F. & M. Ins. Co., 18, 24. Wallis V. Carpenter, 612. Walradt v. Insurance Co., 814. Walroth v. insurance Co., 391. Walsh V. Insurance Co., 193, 201, 748. Walton V. Agricultural Ins. Co., 96, 750, 751. Ward V. Insurance Co., 440, 527. V. Shaw. 221. Warder v. Baldwin, 787, Warren v. Davenport F. Ins. Co., 217, 317. 321. Washburn v. Artesian Ins. Co., 698. V. Great Western Ins. Co., 113. V. Miami Valley Ins. Co., 698, 7O0. V. Western Ins. Co., 698. Washington F. Ins. Co. v. Kelly, 210, 219. Washington F. & M. Ins. Co. v. Chese- bro, 175. Washington Mut. Ins. Co. v. Merchants & Manufacturers Mut. Ins. Co., 68(!. Washoe Tool Mfg. Co. v. Hibernia F. Ins. Co., 279. Waters v. Merchants Louisville Ins. Co., 479, 701. Wntkins v. Baird, 705. xliv CASES CITED. [The figures refer to pages.l Watkins v. Brunt, 784. Way V. Abinston Mut. F. Ins. Co., 470. Waynesboro Mut. V. Ins. Co. v. Cono- ver, 830, 841. Webber v. Howe, 664. Weber t. Morris & E. R. Co., 369._ Webster v. Insurance Co., 216, 256. Weed V. Insurance Co., 115, 201, 2H), 520, 791. Weeks v. Medler, 94. Weide v. Germania Ins. Co., 453. Weidert v. Insurance Co., 201, 408, 521, 529, 530, 753, 786. Weiss V. Insurance Co., 743. Welch T. Insurance Co., 24, 315. Wellcome v. Insurance Co., 526, 528. Wells V. Cooke, 630. Welsh V. Assurance Corp., 519, 524, 531, 743, 746, 753. V. Insurance Co., 786, 788. West V. Insurance Co., 24, 173, 266, 304. Westchester F. Ins. Co. v. Foster, 563. V. Wagner, 137. Westchester Ins. Co. v. Dodge, 244. West Coast Lumber Co. v. State Inv. & Ins. Co., 531, 742. Western v. Insurance Co., 827. Western Assur. Co. T. Altheimer, 651. T. Layer, 249. V. McPike, 408. V. Mason, 409, 415. T. Provincial Ins. "Co., 277. V. Eector, 392. V. Stoddard, 88. Western Home Ins. Co. v. Richardson, 37, 524, 743. Western Mass. Ins. Co. v. Ricker, 24 230, 310. Western Union Tel. Co. v. Pennsylva- nia, 780. West Jerse.v R. Co. v. Thomas, 632. Wheat V. Railroad Co.. 821. Wheeler v. Insurance Co., 278, 290, 706. V. Newbolrl, 104. Wheeler & Wilson Mfg. Co. v. Givan, 299. Wheeling Gas Co. v. City of Wheeling, 613. Whipple V. North British & Merc. Ins. Co., 509. V. Whitman, 205. Whitcomb v. Insurance Co., 827. White V. Ashton, 740, 751. v. Brown, 339, 355. V. Insurance Co., 50, 52, 64, 408 415, 692. Whitehead v. Tuckett, 193. Whitehurst v. Insurance Co., 478. White Mountains R. Co. v. Beane, 59,"). Whitmarsh v. Insurance Co., 106. Whitney v. Insurance Co., 414. V. Smith, 93. Wiberly v. Matthews, 593, 645. Wich v. Insurance Co., 222. Wierengo v. Insurance Co., 12, 70, 100, Wightman v. Insurance Co., 455. Wilbraham v. Snow, 251. Wilbur V. Insurance Co., 85, 282. ^Vilcox V. Insurance Co., 11, 71, 98, 102, 122, 186, 255, 257, 410. V. Singletary, 626. Wilkins y. Insurance Co., 141, 789. Wilkinson v. First Nat. F. Ins. Co., 837, 841. Willcutts V. Insurance Co., 285. Williams v. Insurance Co.. 229, 285, 2!)0, 291, 411, 448, 478, 521, 539, 687. V. Robbins. 185. V. Woodman, 667. Williamson v. Insurance Co., 355, 794. Willis V. Insurance Co., 439, 527. Willow Grove Creamery Co. T. Planters Mut. Ins. Co., 689. Wilson V. Boor, 642. V. Hill, 23. V. Insurance Co., 162, 189, 375, 555, 560, 836. V. Jones, 322. V. Marryat, 665. Wineland v. Insurance Co., 217. Winnesheik Ins. Co. v. Holzgrafe, 137, 190, 193. V. Schueller, 448, 524. Winslow V. Bromich, 435. AMnthrop v. Insurance Co., 106. Wolf V. Insurance Co., 448. Wolff V. Insurance Co., 601, 622. Wolford V. Baxter, 433, 434, 436-. Wood V. Helme, 634, 635. V. Insurance Co., 18, 24, 28, 210, 279, 310, 314, 403, 455, 573. V. Shepherd, 626. Woodbury v. Northy, 645. Woodbury Sav. Bank v. Charter Oak Ins. Co., 568. \\'ooddy V. Insurance Co., 218, 519. Woodruff V. Insurance Co., 415. 456. Woodward v. Insurance Co., 230. Worley v. Insurance Co., 417. V. Moore. 769. Worsley v. Wood, 441, 715, 720. Wright V. Insurance Co., 98, 101, 540. 586. V. Pole. 482. V. Wright, 609. Wustum V. Insurance Co., 407. Wyatt V. Benson, 626. Wyman v. Insurance Co., 377. V. Wyman, 241. Wytheville Ins. Co. v. Stultz, 215. Young v. Insurance Co., 157, 223, 524. v. Robertson. 662. Zigler v. Insurance Co., 28, 43, 273. Zimmerman v. Erhard, 324. v. Insurance Co., 137, 748, 789. Zmck V. Insurance Co., 788. t FIRE INSURANCE. INTRODUCTION. Any person under the common law not disqualified to make con- tracts may insure. In the early periods of the business, these ven- tures were wholly confined to the limited operations of individual underwriters. The undertakings were generally small, and related to hazards with which the underwriter was personally familiar. The contracts were by parol, and embraced only such matters as descrip- tions of the subject to be insured, the voyage, and the amount of premium. Experience demonstrated the importance of having many contingencies that were likely to arise definitely provided for, that at first had not been clearly understood, and for which the simple parol agreement proved unsuited and inadequate. Thus, out of the varied circumstances and growing necessities of the business was, in the process of time, evolved the insurance policy. We can under- stand that the individual underwriters afforded but meager facilities for the general public to obtain indemnity. Their ventures were few. and at first appear to have been mainly intended to protect and foster enterprises which for personal reasons the underwriters de- sired to encourage. The utility of insurance was, however, early recognized, and its benefits gradually extended until large aggrega- tions of capital were required to afford the security demanded. Thus it was that corporations came to take the place of the personal cap- italist, the merchant, or banker, under whose protection ships were to sail tlie seas, and perhaps, in rare and isolated cases, the owners of valuable property on shore were to be insured against loss. "With the agency system, which is of comparatively recent origin, the business became localized wherever there was property to insure, and competent persons could be found to attend to the simple yet responsible duties of inspecting risks and making contracts of insur- ance. The advantage growing out of this departure, the establishing OSTR.FIRE IiNS. 1 INTRODUCTION. of an agency system, consists in the better facilities offered to prop- erty ownei's to procure insurance through an immediate and respon- sible representative of a distant corporation, — a person who is always accessible, and with whom persons seeking insurance can negotiate with freedom, and without delay and expense. The disad- A'antages relate largely to the increased moral hazard which has come to exist on account of the local business being sometimes intrusted to dishonest and incompetent agents, through whose fraud or negligence the watchful and enterprising incendiary finds an op- portunity to make the insurer the victim of his greed and crime. With the planting of agencies at every business center, the insurance company has found it necessary, for its own protection and the protection of the general public, to incorporate into its policy many provisions that were before unknown. These are intended mainly to secure, on penalty of forfeiture, the fullest disclosures of all im- portant facts in regard to the condition and circumstances of the property insured, and to prohibit changes that will lessen the interest of the insured in maintaining the most efficient watchfulness for its security, or that will create a motive for .ts destruction. The pur- pose of these promissory and restrictive provisions is obviously to secure the largest possible measure of good faith on the part of the insured, and thereby save the insurer from loss through "fraud and evil practice,'' and incidentally to save society from the injury it would suffer from a constant menace to the integrity of its members, on account of removing the chief impediments to crime, and by offer- ing a reward for evil doing. Than the underwriter, there is no class of men who have a larger interest in maintaining the public con- science and the highest sense of business probity. For a long period insurance was confined to marine risks, and, when the business was extended to the protection of property owners against loss by fire, it was in opposition to much prejudice on the part of the general public, because of the popular belief that it would increase crime, and cause even honest people to relax in the watchful care which every property owner should exercise to prevent accidents from fire. This expectation has been realized to a degree that suggests a doubt whether, in the interests of property and morality, the business of insurance should not be so regulated by statutory law as to prevent insuring in such an amount that the insured will no longer have a INTRODUCTION. 6 substantial interest in protecting tlie subject from loss. The de- struction by fire of property to the value of more than a hundred million of dollars annually in the United States alone is a serious waste, and presents an important problem for the consideration of the economist. Notwithstanding the better facilities provided for extinguishing tires, the work of destruction goes on year after year, involving homes, warehouses, factories, and valuable merchandise, representing comfort and competency for many thousands of people. But this loss of property is not the worst aspect in which this problem is presented. Fraudulent carelessness and intentional crime have come to be a large element in the cause of this destruction. In this fact is involved the corruption of public morals, and a weakened sentiment of respect for the law. A business that continually offers a temptation for the commission of crime will inevitably produce its disastrous effects on the public conscience; and society, for its own preservation, must sooner or later bring it imder statutory regu- lations. For this condition of things the insurer is no more to be blamed than the insured. The latter demands indemnity on the basis of exaggerated valuations -a fact which, in a large proportion of cases, is well known to him, but unknown to the company which writes the policy. Overinsurance is no less the rule among honest persons than among rogues. To obtain accurate or even approximate esti- mates of the value of property on which insurance is predicated would generally involve expense, such as the employment of experts, which would necessarily be added to the premium, and thereby in- crease the cost of the insurance. This precaution against overval- uations is therefore omitted, in the interest of the policy holder. WTien a loss occurs under circumstances that clearly point to in- cendiarism, it will seldom occur that the general public will man- ifest any considerable interest in finding out, and bringing to a just punishment, the guilty party. The authorities are frequently indiiferent, and thus it will happen that crime is often committed with impunity, and the criminal well remunerated for his clever undertakings, who proceeds with confidence to repeat, under other circumstances, and at other places, a crime that has been attended with so much profit, and with so little difficulty and danger. Marshall, in his treatise on Insurance, written about the begin- INTRODUCTION. ning of the present century, refers to this unpromising feature of the business (page 682), from which we quote as follows: "It can- not be denied that this species of insurance affords great comfort to individuals, and often preserves whole families from poverty and ruin ; and yet it has been much doubted by wise and intelligent per- sons whether, in a general and national point of view, the benefits resulting from it are not more than counterbalanced by the mis- chief it occasions. Not to mention the carelessness and inattention which security naturally creates, every person who has any concern in any of the fire offices, or who has attended the courts of West- minster for any length of time, must own that insurance has been the original cause of many fires in London, with all their train of mischievous consequences." The benefits of insurance at the present time, in encouraging and promoting business enterprises, are incalculable. It often estab- lishes a basis for credit, and enables manufacturing and commerce to extend their operations to a proportion that would otherwise be impossible. Capital, which unprotected is always timid, would be withheld from such enterprises of public utility as involve more than ordinary hazards from fire, without the promise of indemnity in the event of loss. The insurance company gives confidence and stability where otherwise would exist only doubt and hesitation. TTie magnitude of all great business undertakings would necessarily shrink materially in their proportions without the support and encouragement given to them by the underwriter, whose office it is to strengthen the hands of industry, to steady and give a uni- form and certain movement to the wheels of commerce. It stays the slings and blunts the arrows of outrageous fortune, by its sys- tem of distributing the ills of accident and chance. It is well known that insurance companies, as a rule, perform their obligations promptly, and even with a liberality that frequent- ly suggests more of waste than business prudence. A company hav- ing a large premium income will necessarily have numerous losses to settle and pay. It is accustomed to regard a loss as the inevit- able incident of the undertakings in which it is engaged, and it is only when a succession of disastrous fires has increased the loss ac- count above the average which has been provided for in the pre- miums received that any anxiety comes to exist in regard to gen- INTRODUCTION. i> eral results. In the adjustment of claims when there are no doubts presented concerning the good faith of the claimant, it will seldom happen, among reputable companies, that an avoidance of the con- tract will be urged for purely technical reasons. The insurer is accustomed to pay, in perfonning its obligations, under circum- stances where important contract stipulations have been violaited, such as would cause persons engaged in other business to decline the recognition of any duty in the matter. These liberal methods of dealing arise largely from the nature of the business. The suc- cess of the underwriter depends almost wholly upon the favor with which he is regarded by the public. The reputation that increases the premium income is secured by generous and liberal treatment of his patrons in the settlement of claims, instead of parsimony and the insistence on technical rights. Pursuing, therefore, with pru- dent zeal, its own interests, it tomes to express in the conduct of its affairs a liberality that is sometimes the subject of just criti- cism; departing, as it often does, from rules that have come from the crystalizing of experience in other business undertakings. Thus it is seen that the insurance company, with all the benefits it brings to society, has certain marked tendencies to weaken the public con- science, and to introduce habits and methods that are without the beams and braces that have been found in practice to be the only sure supports of successful business undertakings. ANALYTICAL DISCUSSION LAW OF FIRE INSURANCE, OBTR.F.RK INS. (7)* Ch. 1) LAW OF FIRK INSURANCE. § 1 CHAPTER I. CONTKACX. 1. The Contract. 2. When Parol Evicience is Admitted to Vary the Terms of a Written Contract. 3. The Insured will be Bound by the Statements Contained in the Ap- plication, when Written by Himself or His Agent. 4. Conti-aet not Complete unless the Jlinds of the Parties have Met. 5. When Contract is not Complete. 6. Insurance Contracts Siii Generis. 7. Contract Pei-sonal^Must be Definite and Comijlete. 8. Insurer will not be Held, unless Premium is Actually Paid, or There is a Definite Understanding in Regard to Credit. 9. When Contract is not Complete for Want of Agreement in Regard to Rate and Term of Risli. 10. Giving of Note for Premium. 11. Reformation. 12. A Parol diutract must be in Prsesenti.- 13. When the Risk Begins. 14. When the Insurer will be Liable for Loss Occurring Before the Con- tract is JIade. l.j. When the Contract Terminates. 16. Authority of Broker to Consent to Cancellation of Policies. 17. In What Manner Cancellation can be Made. 18. When the Insured has Forfeited His Right under the Contract, He cannot Demand a Iteturn of the Unearned Premium. 19. Parties may Agree on Terms of Cancellation Different from Those Expressed in the Policy. 20. The Condition of Policy in Regard to Payment of Premium must be Strictly Performed. 21. Rehearing on Certain Important Points. 22. A ^'oid Policy can )je Revived Only by the Affirmative Action of Both Parties. 23. Divisibility of the Contract an Unsettled Doctrine. 24. When Parol Evidence is not Admissible to A^ai-y the Temis of a Written Contract. K. Courts cannot Make Contracts for the Parties. 26. When Insurer is Estopped from Declaring Forfeitures. 27. Usage will not Control or Nullify Definite Contract Stipulations. 28. Reformation of Contract. 29. When Reformation of Contract will be Refused. OSTR. FIRE INS. (9) § 1 LAW OK FIRE INSURANCE. (Ch- 1 § 30. Wlien Suit is Brouglit on the Contract, it is an Electioij of llie Rem- edy. 31. Construction. 32. Statutory Policies. 33. Conclusions. § 1. The Contract. While the insurance contract is in most cases evidenced by the policy, it may exist wholly by parol. When this occurs, it will be generally under circumstances where the agreement of the parties contemplates the issuance of a policy, and the rights and obligations of both the insured and the insurer will be fixed by the terms of the form of contract in use by the company which is a party to the agreement. When a policy is delivered by the insurer, and accepted by the insured, the law will presume it expresses the contract as made by the parties.^ But this presumption may be set aside, and parol 1 "If the lajnguage employed is free from ambiguity, the writing will be enforced in accordance with its temis. If, by reason of fraud or mutual mistalce, the real agreement t)f the parties is unexpressed, the instrument may be refomied, upon proper proofs, in a court of equity. But, as an ex- pression of the intention of the parties, an unambiguous written agreement, when sued on in a court of law, is unalterable by oral testimony." Martin V. Insurance Co., 57 N. J. Law, 023, 31 Atl. 213. The policy, at the time of the fire, and at all times before, was in the hands of the insurer's agent; but it fully appeared that the Insured could, had he so desired, have had its possession. It was held that insured must be presumed to know the contents of the policy; that, if he had not read it, he alone was in fault, and must be bound by its conditions in the same manner and to the same extent as would have been the case had the policy been in his possession. Guinn v. Insurance Co. (Tex. Civ. App.) 31 S. W. 566. The law presumes that the parties to a contract know its contents. In Fireman's Fund Ins. Co. v. Norwood, 16 C. C. A. 145, 69 Fed., at page 80, the court said: "There is no doubt that there are cases where one party to a written contract has been so imposed upon by the fraudulent representa- tions of its contents, or by some artifice or deceit of the other party, which pre- vents him from reading it, that he may be excused for ignorance of its contents. But I cannot subscribe to the proposition that a mere statement or agreement as to the terms of the proposed contract, made in the pre- liminary oral negotiations which result in the subsequent written contract, will excuse either party from reading the conti-act when it is delivered, or will reverse the settled mle that the written contract must prevail over the preliminary negotiations. It is the duty of evei-y party to a contract to 110) Ch. 1) COKTKACT. § 1 evidence allowed to show that when the policy refers to an applica- tion, which is made a part, and its statements agreed to be warran- ties, such application does not set forth the facts as they were stated by the insured; that the facts were truthfully given, but falsely and fraudulently written in the application by the company's agent. It read it and to know its contents when lie has an opportunity to examine it before he accepts it, and iu the absence of fraud, concealment, or misrep- resentation as to its contents he must he conclusively presumed to have knowledge of them. Contracts for insurance furnish no exception to this rule. Morrison v. Insurance Co., 69 Tex. 353, 359, 6 S. W. G05; Quinlan v. Insurance Co., 133 N. Y. 356, 365, 31 N. E. 31; Wilcox v. Insurance Co., 85 Wis. 193, 55 N. W. ISS; Fuller v. Insurance Co., 3C Wis. 599, 604; Herbst V. Lowe, 65 Wis. 321, 26 N. W. 7.ol, 754; Hankins v. Insurance Co., 70 Wis. 1, 2, 35 N. W. 34; Herndon v. Triple Alliance, 45 Mo. App. 420, 432; Palmer V. Insurance Co., 31 Mo. App. 467, 472; Southern Mut. Ins. Co. v. Yates, 28 Grat. (Va.) 585, 593, 594; Ryan v. Insurance Co., 41 Conn. 168, 172; Bar- rett V. Insurance Co., 7 Cush. (Mass.) 175, 181; Holmes v. Insurance Co., 10 Mete. (Mass.) 211, 216; Susquehanna Mut. Fire Ins. Co. v. Swank, 12 Ins. Law J. 625. 027; Maine Mut. Marine Ins. Co. v. Hodgkins, 00 Me. 109, 112, 113; American Ins. Co. v. Neiberger, 74 Mo. 167, 173; Beach, Ins. § 411, and cases cited. Where there are no grounds for construction, contracts must be enforced as made. Fireman's Fund Ins. Co. v. Barker (Colo. App.) 41 Pac. 513; Maril v. Insurance Co., 95 Ga. 604, 23 S. E. 403; Bennett v. Insurance Co., 5.") N. J. Law, 377, 27 Atl. (Ul. The conditions and limitations are parts of the contract, and it is imma- terial whether or not they are read by the insured. The legal effect of such conditions and limitations gains or loses nothing by the care or indifference of assured in acquainting himself with their character. The policy was de- livered at the place and to the person named by the plaintiff, and he is bound by its terms, whether he read it or not, there being no facts shown which prevented him from doing so. Jlorrison v. Insurance Co., 69 Tex. 353, 6 S. W. 605; Goddard v. Insurance Co., 67 Tex. 71, 1 S. W. 906; Security Life Ins. & Annuity Co. v. Gober, 50 Ga. 404; Cleaver v. Insurance Co., 71 Mich. 414, 39 N. W. 571; Bonneville v. Assurance Co., 68 Wis. 298, 32 X. W. 34; Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. E. 31; Susque- hanna Mut. Fire Ins. Co. v. Swank, 102 Pa. St. 17. The fact that the plain- tiff did not know tbe contents of the policy will not relieve him from the binding force of the warranty contained in it. He could have read it if he had desired to do so. If, however, the insurer knew of the existence of the incumbrance at the time, courts will hold it to have been waived. It will not be presumed that the party making the contract Intended to perpetrate a fraud by putting in a condition which he knew would prevent it from (11) § 2 LAW OF FIUE IXS'JRANCE. i^"' '■ may be shown, too, by parol, that facts that are set up in avoidance- of the policy were known to the company at the time of the inception of the contract. When this is done the principle of estoppel will apply. The authorities in support of both these propositions are very numerous.^ § 2. When Parol Evidence is Admitted to Vary the Terms of a "Written Contract. The rule of law is that the evidence of a contract cannot exist partly in parol and partly in writing. It is also a rule of law that parol testimony cannot be admitted to vary the terms of a written contract. While these rules express the "conscience of the law,"" which an eminent jurist has aptly said "is safer to follow than the taking effect. Liverpool & L. & G. Ins. Co. v. Bnde, 65 Tex. 123; Aetna Ins. Co. V. Holcomb (Tex. Sup.) 34 S. W. 915; Quinlan v. Insurance Co., 31 N. E. 31, 133 N. Y. 356; Thomson v. Insurance Co., 90 Ga. 78, 15 S. E. 652; Virginia Fire & Marine Ins. Co. v. Morgan, 80 Va. 290, 18 S. E. 191. Insured charged witli knowledge of the conditions of policy. Principles- of law applicable ably discussed by Justice Grant, of Michigan court. Wierengo v. Insurance Co., 57 N. W. 833, 98 Mich. 021. The insurance was on seven steam boilers. Afterwards two more were purchased, and placed contiguous to those in position when the policy was- written. Held, that the conversation between the plaintiff and the insur- ance company's inspector did not extend the insurance to cover the boilers subsequently purchased. Laclede Fire-Brick Manuf'g Co. v. Hartford Steam- Boiler Inspection & Ins. Co., 9 C. C. A. 1, 60 Fed. 351. Courts may interpret, but cannot change, contracts. A very carefully considered discussion of the reciprocal rights of contracting parties. Dover Glass- Works Co. v. American Fire Ins. Co. (Del. Bit. & App.) 29 Atl. 1039. When insured accepts policy with knowledge of its terms, it will be held, to embody the agreement of the parties. Edwards v. Insurance Co., 60 N. W. 782, 88 Wis. 450. While parol evidence of contemporaneous agreements cannot be produced, to change the written instrument, it is competent to show oi-al agreements- that are only coUateral. Piatt v. Insurance Co., 153 111. 113, 38 N. E. 580. When policy is in possession of insured, knowledge of its contents will, be presumed. Syndicate Ins. Co. v. Bohn, 12 C. C. A. 531, 05 Fed. 165. 2 Union Mut. Ins. Co. v. Wilkinson, 13 Wall. (U. S.) 222; Golt v. Insurance- Co., 25 Barb. (N. Y.) 189; Citizens' Mut. Fire Ins. Co. v. Soitwell, 8 AUen, (Mass.) 217; Clark v. Insurance Co., 8 How. (U- S.) -^35 (12) •Ch. 1) CONTRACT. § 2 ■conscience of any person, no matter however wise and virtuous he may be," there have been in many recently adjudicated cases clear departures from both the letter and spirit of these long-established and conservative rules. Thus, a person seeking insurance on his mill, knowing that the risk will not be accepted unless a watchman is kept on the premises, states in his application that a watchman is employed to guard the property during the nighttime. This answer is written in the application, and signed by the insured. The appli- cation, by its own terms, and by special reference in the policy, is made a warranty, and a part of the contract; but on the occurrence of a fire it is ascertained that at the time the application was made, and subsequently, no watchman was kept. Here, then, is a clear breach of the warranty; and, by the express terms of the policy, the company is relieved from the payiuent of the loss. But the courts will allow the insured to testify that he stated to the agent who filled up the application "'that there was no watchman," and that he signed the application without reading it. Thus the integrity of the appli- cation is impeached, and the insurer deprived of a very essential provision of its contract.' 3 The evidence tended to show that, when the contract of insunmce was made, It was explained to the agent of defendant by plaintiff tliat be in- tended to place a mortgage on the property covered, and that such pro- posal was then assented to. Held, that the insurer was estopped from pleading as a defense the incun.brance subsequently placed on the property. Hardwick v. Insurance Co., 2(\ Pac. 840, 20 Or. o47. The application, which untruthfully stated the mcumbranee, was pre- pared by the insurer's agent, who, as attorney for the insured, had been made acquainted with the facts concerning the incumbrance. It was held that the knowledge and fraud of its agent estopped the insurer from plead- ing the incumbrance as a defense. Beebe v. Insurance Co., 53 N. W. 818, 93 Mich. 514; Phcenix Ins. Co. v. Ward, 7 Tex. Civ. App. 13, 26 S. W. 763; Home Fire Ins. Co. v. Hammang, 44 Xeb. .')66, 62 N. W. 883; Farsons v. In- surance Co. (Mo. Sup.) 31 S. W. 117. When, at inception of the insurance, the agent of the comiiauy bad knowl- edge of facts that constituted a forfeiture under the terms of the policy, it will be deemed to have been the intention of the insurer to waive such conditions as were inconsistent with the facts disclosed or understood. Manchester Fire Assur. Co. v. Glenn, 13 Ind. App. 365, 40 N. E. 926; Queen Ins. Co. V. Kline (Ky.) 32 S. W. 214; McKinney v. Insurance Soc., 89 Wis. 053, 62 N. W. 413; McXally v. Insurance Co.. 137 N. Y. 389, 33 N. E. 475; Hartford Fire Ins. Co. v. Josey, 6 Tex. Civ. App. 290, 25 S. W. 685. (13) § 3 LAW OF FIRE INSURANCE. (C-D- 1 So, too, where no application in writing is taken, but it is a condi- tion of the policy that, if the property be incumbered, it must be so represented to the company, and the fact indorsed on the policy, and after a loss it is discovered for the first time that the property was incumbered at the time the policy was written and delivered. It will be seen that there is a very strong temptation placed before the insured to defeat the forfeiture by testifying that he informed the agent of the company of the incumbrance when negotiating the insurance. Cases of this kind are of frequent occurrence, and clearly demonstrate, the danger of admitting parol testimony to change and practically nullify a written contract, whether such change and nullification be called "estoppel," or something else equally signifi- cant of substitution and evasion. Hardships will sometimes occur, frauds will sometimes be perpetrated, under a strict application of the general rule stated, which has been formulated by the best wis- dom of the courts, and tested by the experience of generations of jurists. But will not greater hardships and worse abuses result from its abandonment? Does not this substituting of secondary evidence for that of the highest character mark a dangerous depar- ture from a time-honored and conservative rule for establishing the verity of facts that form the basis of written instruments? § 3. The Insured will be Bound by the Statements Con- tained in the Application, When Written by Himself or His Agent. The authorities have differed a good deal in respect to this question. While generally holding that the insured may dispute the genuine- ness of statements contained in the application when written therein by the agent of the company, although signed by himself, the case is otherwise when the application is filled up by the insured or his agent.* And so, too, when the policy is made and accepted by the insured, expressing upon its face the condition or warranty, the insured will be bound. This last proposition must, however, be urn * The application had been signed for the insured by another, without the insured's authority, who, on being informed, ratified the act by accepting the policy. Held, that the insured must be bound by the application, In the same manner and to the same extent as he would had he si-ned the an (14) t^h. 1) COKTRACT. § 4 derstood as subject to important modifications as respects conditions existing at the date of the policy, as explained in previous paragraph. § 4. Contract not Complete unless the Minds of the Parties have Met. Where there has been no agreement between the parties as re- gards all essential matters, the contract is incomplete, and cannot be enforced; ^ but where the minds of the insured and insurer have plication with his own hand. Phoenix Assnr. Co. v. Coffnian (Tex. Civ. App.) 32 S. W. SIO. In Denny v. Insurance Co., 13 Gray (Mass.) 497, the preliminary paper is referred to as a "survey." It expressed an agreement, wlilch was made a warranty, that the insured should keep a watchman. Tlie "survey" hav- ing been signed by a third person, without express authoritj^ and the agree- ment in regard to watchmen being executory, the Massaclmsetts court was of the opinion that it could not be enforced. It said: "Admitting the soundness and force of this agreement, and that plaintiff is bound by the survey, so far as he has recognized and adopted it by accepting the policy, the question still remains to be determined, to what extent such recognition and adoption go. And the answer to this tiupstion depends upon the proper and legitimate meaning of the word 'survey,' because it was of this, and this only, that the plaintiff had notice by the terms of his policy. ' * * So far as they are of an executory nature, or relate to the use or occupation of the premises subsequent to the date of the policy, it is clear that the plaintiff is not bound by them." Schmidt v. Insurance Co., 41 111. 295; Com- mercial Ins. Co. v. Ives, 56 111. 102; Ashworth v. Insurance Co., 112 Mass. 422; Insurance Co. v. Lyman, 15 Wall. U(J4. (170; Alston v. Insurance Co., 4 Hill (N. y.) 329. 5 The solicitor who took the application had no authority to issue policies, or otherwise to bind the Insurer by a completed contract of insurance. . The application was received at the office of the company .March 10th. Policy was written, and returned to the solicitinj; agent three days later, and was In his hands when the Are occurred, March KJth. The application re- quested Insurance against both fire and tornado, and in Uilfereut sums, par- ticularly designated. The policy, as written by the company and mailed to its agent, did not conform with the application, in the fact that the tornado insurance did not cover all the subjects requested. As the policy written differed in an essential particular from the application, and had not been accepted before the fire, it was held tha* there had been no meeting of the minds of the parties, and that the company was not liable for the loss. Stephens v. Insurance Co., 87 Iowa, 283, 54 N. W. 139. The P Co had can-led the risk for one year, and (without being asked (15) ;§ 4 LAW OF FIRE INSURANCE. (Ch. 1 met, and the policy, as written, does not express their mutual inten- tion, it may be reformed by a court of equity. But this will not bo done unless the evidence is so convincing as to leave no room to do so by the insured) on the expiration of its policy forwarded to its local agent a renewal. At the time of the loss this renewal had been re- ceived, but had not been delivered to the insured. No premiums had been paid. Held, that there was no contract. New York Lumber & Wood-Work- ing Co. v. People's Fire Ins. Co., 90 Mich. 20, 55 N. W. 434. The Michigan Pipe Company applied to one Schnieck, who was an insur- ance agent representing several companies, requesting that he issue to said Michigan Pipe Company policies on lumber, for a sum mentioned. No par- ticular companies were designated, nor was the rate of premium, or term •of the insurance, agreed upon. For the convenience of the agent, Schmeck, the policies were to be written, and the insurance to begin, on the 1st of the following month. The fire occurred on the Hth, and it was in evidence that all of the policies had been written before that time. Held, that as plaintiff had been insured for several years on the same class of property, •dealing all the time with the same agent, the rate of premium and tenn of insurance were presumed to have been understood; that a custom had been established between the parties which rendered any special and distinct -agreement in respect to these matters unnecessary; that the writing of the policies on the 2d, 3d, 4th, and 5th days of the following month, although they had not been delivered, and no premium paid, was in substantial ac- cord with the understanding of the parties, and effectuated a valid insur- ance. Michigan Pipe Co. v. North British & Mercantile Ins. Co., 97 Mich. ■493, 56 N. W. 840; Dove v Insurance Co., 9S Mich. 122, 57 N. \V. 30. When the application lias been accepted, tliere is an existing contract; and the parties will be bound it the premium has been paid, or payment ar- ranged for. It is immaterial whether or not the policy has been delivered. Dailey v. Association, 102 Mich. 289, 57 N. W. 184; Xewiirli Mach. Co. v. Kenton Ins. Co., 50 Ohio St. .VI-IJ, .'S N. E. 1000. Plaintiff had been insured by the Denver Insurance Company, wliose pol- icy expired on January 9th. Neither then nor at any previous time had any request been made by plaintiff to renew the policy. Five days after- wards a fire occurred, and plaintiff immediately telephoned the resident agent of the Denver Company, asking if the insurance was continued by re- newal, and the agent replied that it was. Plaintiff then sent to agent's office, and procured the policy, which was dated January 9th. When ob- taining possession of the policy, nothing was said by plaintiff about the .property having burned. When delivering the policy, the agent knew noth- ing of the fire. Plaintiff ijleaded a local custom on part of St. Paul agents to renew policies uuless otherwise directed. Held, that such custom would not be sufficient to bind the defendant, unless it was general and known to (16) Oh. 1) CONTRACT. § 4 for doubt as to what the intention of the parties actually was. If the evidence shows that the policy was written so as to express the both parties. No contract. Nippolt v. Insurance Co., 57 Minn. 275, 59 N. W. 191. "Wlien offer of contract is made by letter, and accepted in same manner, tlie contract is complete when the letter of acceptance is deposited in the mail." This is based on the proposition that the "post" is the agent of the one proposing the contract. In grder to make contract complete, the ac- ceptance must be identical with the terms proposed. Hartford Steam-Boiler Inspection & Ins. Co. v. Lasher Stocking Co., 66 Vt. 439, 29 Atl. 629. Plaintiff met agent of insurer, and reminded him that his policy had ex- pired. Agent answered that the company would not continue risk for same amount. Plaintiff then said, ^"Well, write policy for such sum as you think right." Nothing further was done, and a week or two later the property burned. It was held that the conversation referred to did not import an agreement between the parties to insure. Sater v. Insurance Co. (Iowa) 61 N. W. 209. The agent of insurer contemplated being absent, and, before going away, so far arranged for the continuance of the policy in suit, which would ex- pire during his absence, as to write a renewal, and make entry on his office register. At or near the time of the expiration of the policy the agent of the insured called at the office of the insurer's agent, and was shown by a boy in charge the renewal entry, and was told that the insurance was continued. Some time after the agent of the insurer returned, he was in- structed by the company's manager to cancel, and thereupon returned pol- icy to the general office, without notifying the insured of what had 'tran- spired. No premium had been paid, and it was held that there was a valid insurance. Lum v. Insurance Co., lOi Mich. 397, 62 N. W. 502; Croft v. Insurance Co., 40 W. Va. 508, 21 S. E. 854. Held, in case last cited, that contract may be complete, although the se- lection of the company to carry the risk is left to the decision of insurer's agent. Held, that the expression of a desire or intention to procure an insurance, or a proposition made to an insurance agent to insure property, and an as- sent or acceptance by the agent to insure, without further and more par- ticular agreement, would not amount to a contract of insurance, or an agreement to insure. The subject-matter, period, rate to be paid, and amount of insurance, must be agreed upon, expressly or by implication, be- fore there can be an absolute, binding agreement between tlie parties. Com- mercial Fire Ins. Co. v. Morris, 105 Ala. 498, 18 South. 34; Hartford Fire Ins. Co. V. King (Ala.) 17 South. 707. A soliciting agent, having no authority to bind his company by contract, took plaintiff's application, and told him he was insured from that moment. The court held that the soliciting agent being without authority, real or OSTR FIRE INS. 2 (17) § 4 LAW OF FIRE INSURANCE. (Ch. 1 understanding of one of the parties only, then it will be held nu- gatory, as there had been no concurrence of purpose. The general principle of law in regard to parol contracts is tersely apparent, to make binding contracts, his statements to applicant were to be construed only as an expression of bis personal opinion of the legal effect of what had been done. O'Brien v. Insurance Co., 108 Oal. 227, 41 Pac. 298. It is held that completion of contract "depends upon the question whether the respective parties have come to an understanding upon all the elements of the contract, so that nothing remains to be done." An agreement "to in- sure contemplates the delivery of the policy as the consummation of a con- tract." Elliot V. Grand Lodge, 2 Kan. App. 430, 42 Pac. 1009. When insured had asked for policy for one year, it was written for three years. Held, that there could be no insurance without some act of the ap- plicant signifying his acceptance of the longer period. Phoenix Ins. Co. v. Hague (Tex. Civ. App.) 34 S. W. 654. Insured, under a life policy, had been permitted to pay his premium for several years at a particular bank. This bank had made an assignment, and its agency to make collection for defendant company terminated. On the day before an annual payment of premium became due, insured offered payment at the bank, and it was refused. The tender was held good. Manhattan Life Ins. Co. v. Fields (Tex. Civ. App.) 26 S. W. 280. The leading authorities in respect to when a contract is consummated are Mutual Life Ins. Co. v. Young, 23 Wall. (U. S.) 85, 5 Ins. Law J. 17; Wood V. Insurance Co., 32 N. Y. 619, also in 5 Benn. Fire Ins. Cas. 60; Train v. Insurance Co., 62 N. Y. 59S, 6 Ins. Law J. 13; Msad v. Insurance Co., 3 Hun (N. Y.) 608, 5 Ins. Law J. 907; Tyler v. Insurance Co., 4 Kob. (N. Y.) 151; Hughes V. Insurance Co., 55 N. Y. 2G5; Goddard v. Insurance Co., 108 Mass. 56, also 2 Ins. Law J. 663; Thayer v. Insurance Co., 10 Pick. (Mass.) 326; Hartshorn v. Insurance Co., 15 Gray (Mass.) 240; Continental Ins. Co. v. Jenkins, 5 Ins. Law J. 514; Ocean Ins. Co. v. Carrington, 3 Conn. 357; Un- derwriters' Agency v. Seabrook, 49 Ga. 563, also 43 Ga. 583; Kimball v. In- surance Co., 17 Fed. 625, 12 Ins. Law J. 923; Trustees of First Baptist Church V. Brooklyn Fire Ins. Co., 28 N. Y. 153; Belleville Mut. Ins. Co. V. Van Winkle, 12 N. J. Eq. 333, 4 Benn. Fire Ins. Cas. 269; Kohne y. In- surance Co., 1 Wash. C. C. 93, Fed. Cas. No. 7,920; Perkins v. Insurance Co., 4 Cow. (N. Y.) 645; Sun Mut. Ins. Co. v. AVright, 23 How. (U S.) 412; McCuUoch V. Insurance Co., 1 Pick. (Mass.) 278; Sandford v. Insurance Co.l 11 Paige (N. Y.) 547; Diver v. Insurance Co., 17 Ins. Law J. 156; Orient Mut. Ins. Co. V. Wright, 23 How. (U. S.) 401; Buff urn v. Insurance Co., 3 Allen (Mass.) 300; Wallingford v. Insurance Co., 30 Mo. 40; Patterson v. Insurance Co., 5 Ins. Law J. 376; Mattoon Manuf g Co. v. Oshkosh M f' Ins. Co., 69 Wis. 564, 35 N. W. 12, 17 Ins. Law J. 3; Piedmont & A. L Ins' Go. V. Ewing, 92 U. S. 377, 6 Ins. Law J. 285. (IS) Ch. 1) CONTRACT. § 4 and clearly stated in the case of Angell v. Hartford Ins. Co." The facts there may be recited as follows: The agent of the Hartford Company agreed to insure the plaintiff for $1,000, in the term of three years, for a premium of |30, which was to be paid when the policy was delivered. There was a delay on the part of the agent in writing the policy, and in the meantime the property burned. The plaintiff tendered the premium, and demanded that the policy agreed upon be made out and delivered to him, which was refused. Suit was brought to enforce the parol agreement made between the plaintiff and defendant's agent. Such contract was held good, and damages awarded. Grover, J., in delivering the opinion of the court, said: "The counsel for the appellant is mistaken in suppos- ing that the action was based upon a parol contract of insurance for three years. There was not suflScient evidence to show that Car- penter [the agent] was authorized to make such a contract for the defendant. It was alleged in the complaint, and the testimony tended to prove, that a preliminary contract was made, by which it was agreed that the defendant should insure the plaintiff up- on the property, against damage by fire, for a sum and at a rate agreed upon, for the term of three years from the time of making the contract, and that the policy of insurance should short- ly thereafter be made out, to take effect from that time, ;ind to be delivered to the plaintiff by Carpenter, at which time it was agreed that the premium should be paid. It was proved that Car- penter was the agent of the defendant, with authority to negotiate contracts of insurance, agree upon the rate of premium, term of insurance, and, in short, to agree upon all the terms of the con- tract; that he was furnished with policies executed in blank by the president and secretary of the defendant, with authority to iill up and deliver the same to any party with whom he made a contract. This authorized him to make a preliminary contract, binding upon the defendant, to be consummated by filling up and delivering a policy pursuant thereto. The case comes directly within the prin- ciple upon which Ellis v. Albany City Ins. Co.'' was decided by this court. The question whether such an agent was authorized to bind his principal by such a contract was fully considered in that case. 6 59 N. Y. 171. ' 50 N. Y. 402. (19) § 6 LAW OF FIRE INSURANCE. (Ch. 1 The only distinction between that and the present is, in that case the premium was paid to the agent at the time of making the con- tract, and had been paid to the company, while in this case credit was given therefor until the policy should be delivered. This has no effect upon the validity of the contract.* A recovery of the amount insured was proper, in an action for breach of contract. The pri- vate instructions given by the defendant to Carpenter, by which he was to regulate his conduct in the transaction of the business, were not known to the plaintiff or her agent, and could not, there- fore, affect the rights of the parties." § 5. When Contract is not Complete — TJsage. The question of what was necessary to be done to complete a con- tract of insurance was considered by the supreme court of Illinois in Dwinning v. Phenix Ins. Co." The contest there arose on a bill in chancery to compel the defendant company to issue a policy of insurance in conformity with the terms of an alleged contract made by parol. Prom the facts stated' by the court, it appears: That one Nathan Whitman, a broker, undertook to obtain for the plaintiff a considerable sum of insurance on the building known as the "Steel Block," in Chicago, a few days before the great fire in 1871. That Robert Critchell was the authorized agent of the de- fendant company, and that he had in his employ a clerk and in- spector named Lookinland. That the broker. Whitman, had some conversation with Lookinland in reference to placing f5,000 of the risk with the defendant. L. had examined the building to be in- sured, and it was claimed that W. had made with him, through his clerk, Mann, an agreement to insure. This was denied by L., who lestifled that the only definite understanding reached was that W. should send to Critchell's office a signed application. On the 7th Mich. 461, 58 N. W. 496; Home Ins. Co. v. Curtis, 32 Micli. 402; Carson v. Insurance Co., 43 N. .7. Law, 300. 27 phenix Ins. Co. v. Dungan, 37 Neb. 468, 55 N. W. 1069. Note was given for the premium, part of which remained unpaid at the time of the Are. Payment was subsequently made of the balance, but re- (35) § 10 I.AW OF FIRE INSURANCE. (Ch. 1 Where a company insured its own agent, from whom it had taken the customary bond, and to whom it had given, on other occasions, indulgence in the payment of his premium, it was held that there were no presumptions of intended credit. A deferred payment, if made after a loss, and accepted by the insurer with knowledge of the fire, will be a waiver of the forfeiture." But, as payment of premium after a loss is presumptively too late, the burden of show- ing acceptance will rest on the insured.''^ The rule of law is general, and practically inflexible, that an agent cannot pay his own debt with his principal's money; that a debt owing to the insured from the insurer's agent will not excuse the former from making a cash payment of the premium. And this even though the agent proposes that his personal debt be canceled, and the insured take credit for the amount in settlement of his premium."" There are but few departures from this rule.'^ turned by tlie insurer wlien it learned of the loss. Held, that the failure of the company to insist on payment of the note when due did not amount to waiver of forfeiture. Dale v. Insurance Co., 95 Tenn. 38, 31 S. W. 266; McEvoy V. Insurance Co., 46 Neb. 782, 65 N. W. 888. 2 8 The insurance was for the company's agent. Policy had been for- warded by course of mail, with the request that insured remit, but payment of the premium had not been made when fire occurred. To avoid the for- feiture, it was urged that the company was protected by an agency bond, and that in former years agent had been favored with credit. It was the opinion of the Iowa court that these facts were immaterial, as they did not justify a presumption that credit was Intended. Moore v. Insurance Co., 91 Iowa, 636, .57 N..W. 597. Acceptance of the premium after knowledge of the loss is a waiver of for- feiture. Continental Ins. Co. v. Chew, 11 Ind. App. 330, 38 N. E. 417. When so stipulated in policy, the default in paying premium note will discharge the insurer. See numerous cases cited. Union Cent. Life Ins. Co. V. Chowning (Tex. Civ. App.) 2S S. W. 117. Payment of premium note must be made at maturity, unless payment is excused. Bloom v. Insurance Co. (Iowa) 62 N. W. 810. 29 Moore V. Insurance Co., supra. 30 Hoffman v. Insurance Co., 92 U. S. 161; Story, Ag. § 98; Aultman & Co. V. Lee, 43 Iowa, 404; Drain v. Doggett, 41 Iowa, 682; Hall v. Storrs, 7 Wis. 253; Higgins v. Moore, 34 N. Y. 422; Bertholf v. Quinlan, 68 111. 297; Holton v. Smith, 7 N. H. 446. 31 The premium was $30. Of this sum, a payment was made of $20 in cash, and by agreement with the insurer's agent the applicant was allowed to take credit for $10 on account of money which the agent had previously (36) ^h- 1) CONTRACT. § 11 When the insurer has received its premium, it is estopped from saying that payment was not made by the assured. It often happens that, in the accommodations of business, tlie agent will account to his principal for premiums, and find his advantage in extending a credit to the insured. When this occurs, the debt is a matter of convenience and interest between the person of the agent and the insured, and does not concern the company wliich issued the policy. Should a loss occur, the insurer would be charged, although actual payment had never been made by the insured.^- The burden of proving that a contract exists will, of course, always rest upon the one claiming its benefits, and it can only be done by a prepon- derance 'of testimony. § 11. Reformation. "VMien either party to a contract claims that the written instru- ment does not express the agreement made, application may be made to a court of equity for reformation; and parol testimony may be produced to show that the contract, as actually agreed to by the parties, was something different from that expressed in the ^\Titing. A court, however, will not be justified in ordering a con- tract reformed, except on such evidence as will leave no doubt that there has been a mutual mistake, and that the contract, as written, does not set forth the intention and understanding of ei- ther party. If the writing expresses without ambiguity the agree- ment as understood by one of the parties, but not by the other, there can be no reformation; for no contract exists to reform, the minds of the parties not having met.^^ The presumptions of law are borrowed of him. Held, that it was competent for the parties to arrange payment in this manner. Kerlin v. Accident Ass'n, 8 Ind. App. 628, 36 N. B. 156. 3 2 Krause v. Assurance Soc, 99 Mich. 461, 58 N. W. 496; Miller v. Insur- ance Co., 12 Wall. 285. Where an offer had been made before the fire to pay the premium, but actual payment had been deferred until the insured's property was de- stroyed, it was held that such payment must be construed to relate back to the time of the first offer. Western Home Ins. Co. v. Ricliardson, 40 Neb. 1, 58 N. W. 597. 33 German Ins. Co. v. Daniels (Tex. Civ. App.) 33 S. W. 549; Mead v. Insurance Co., 64 N. Y. 454; Hughes v. Insurance Co., 55 N. Y. 265; (37) § 11 LAW OF FIRE INSURANCE. (tih. 1 all in support of the written instrument, and these can be over- come only when the proofs of error are so positive and convincing u.s to leave no doubt in the mind of the court that justice requires the reformation asked for. The general rule of law is that parol testimony cannot be intro- duced to change or modify the terms of a written instrument. This is a wise and long-established principle for the government of ju- dicial proceedings, and one that is seldom departed from. Until recently it has been held, almost without dissent, that a contract was an entirety, and if void in part was void in whole, except in cases ^\here both the contract and the consideration were separable on lines of natural division, when the subjects of iftsurance are rather related than joined. Mr. Parsons states the rule very concisely to be, "If the consideration is single, the contract is entire.'' This proposition is sustained by a long list of authorities, includ- ing nearly all the courts of last resort in this country.^* The prin- ciple of law which the rule formulates is elementary, and practically never disputed. A policy of insurance will be void when its terms are such as to be opposed to public policy. This has been held many times where business has been carried on in violation of the revenue laws, and where intoxicating liquors have been sold without license, or when prohibited by statute. The principle is correctly stated in Swords V. Owen: '^ "When the laws of a state provide restrictions upon individuals, etc., foreign or domestic, which regulate the manner they shall do business, or, except on certain conditions, any con- tracts with such individuals, which, if sanctioned, would encourage them 1o abate, such laws are void." I.edyard v. Insurance Co., 24 Wis. 49G; Goddarcl v. Insurance Co., 108 Mass. 56; Hearne v. Insurance Co., 10 Alb. Law J. 348; Mackenzie v. Ooulson, L. R. 8 Eq. 368; Severance v. Insurance Co., 5 Blss. 156, Fed. Cas. No. 12,- C80; Moeller v. Insurance Co., 52 Minn. 336. 54 N. W. 189; Scbroedel v. In- surance Co., 158 Pa. St. 459, 27 Atl. 1077; Cushman v. Insurance Co., 65 Vt. 569, 27 Atl. 426. = i Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848; Kansas Farmers- Ins. Co. V. SaJndon, 53 Kan. 623, 36 Pac. 983; Martin v. Insurance Co. (N. J. Sup.) 31 Atl. 213; Hibernia Ins. Co. v. Bills (Tex. Sup.) 29 S. W. 1063; Fireman's Fund Ins. Co. v. Barker (Colo. App.) 41 Pac. 514; Manchester Fire Assur. Co. v. Gleim (Ind. App.) 41 N. E. 847. 3 5 43 How. Prac. (N. Y.) 176. (38) <^h- 1) CONTRACT. § 12 Each of these subjects will be separately discussed, and authori- ties examiued, in its proper place. § 12. A Parol Contract must be in Prsesenti. Xo agreement to insure at some future time,' although definitely stated, will be enfoi'ceable. The contract, when completed by the dis- tinct assent of both parties to all its terms, will be binding for a future insurance; that is to say, the insurance may take efEect at some future time, but the contract must be complete in prassenti. In other words, it must be a contract of insurance, not an agreement to insure at some time in the future. In an agreement as to future in- surance, from the nature of the business, and the circumstances of change and uncertainty which affect all classes of perishable prop- erty, contingencies may arise that would make performance impos- sible. A simple illustration will make plain this proposition. Sup- pose Brown to be a general agent of an insurance company, having full power to negotiate insurance, and to bind his company by con- tracts entered into either in writing or by parol, and agrees on the 20th of December with Smith, the owner of a building, that he will insure it on the 1st day of January following, in the sum of |o,000, for the term of one year; the premium to be f50, and to be paid on the delivery of the policy. Thus, the terms are all agreed upon. The minds of the parties have met in regard to every essential fact to the consummation of the contract, but there are possible contingen- cies involved which would deprive the agreement of any legal force. Suppose, for instance, the building should be destroyed by flood, hur- ricane, or even fire, on Christmas. When the time arrives that the contract is to become operative, the subject of insurance is no longer in existence. There is nothing to which the policy can attach. What, under the circumstances, would be the situation, should the agent, in carrying out his agreement with Smith, issue a policy, and demand the stipulated premium? Could he enforce by suit a demand so absurd? Most certainly not. Nor is it clear that the case would be different if the policy had been written and delivered at the time of the agreement (December 20th), and a note given for the premium, payable, say, January 1st. Payment could be refused for want of consideration, the property having been destroyed before the risk be- (39) §12 LAW OF FIRE INSURANCE. (Cb. 1 gan to run. We have shown in a preceding section that, when there is no obligation to pay a premium, there is no liability to pay a loss. But, again, the tenure of Brown's agency is uncertain. His author- ity to make contracts may be terminated at the will of his principal. He has agreed with Smith to execute a contract of insurance 10 days in the future; and suppose during the interim his power is withdrawn, and when the time arrives for him to perform his agreement he is wholly without authority to act. Nor would the case be changed in any of its essential features should the sudden death of the agent pre- vent the execution of the contract on the 1st of January. Smith, too, might voluntarily dispose of the property by sale, or it might be sold under legal process, and the relations so changed that he would no longer have an insurable interest. In either event, he could not be held liable to pay the agreed premium to the company which Brown represented. The agreement for this future insurance is purely a personal matter between Brown and Smith, and, should either fail in performance, it is a matter in which the insurance com- pany has no concern. Should Brown neglect or refuse to carry out his agreement to insure the property when the time came to consum- mate the contract, and a loss should subsequently occur, he would, perhaps, be liable to Smith in an action for damages. Of this, how- ever, we express no opinion, as it is not a subject for discussion prop- erly within the scope of this work. The case of BufEum v. Fayette Mut. Fire Ins. Co.'» is referred to as an authority in support of the proposition that an agent in a case such as the one we have here supposed would be held liable in a personal action for damages. There the policy had not expired when the in- sured called on the treasurer of the company and said to him, "I want to see about the policies, and want to extend the time to the 1st day of May, when I shall have funds." Chadwick, the treasurer, replied, "I do not know what I can do." Then Allen, the insured, expressed the urgency of the matter by saying: "If I must, I will go out and borrow the money. At any rate, I do not want the policies vitiated." The treasurer, desiring to oblige Aller, answered, "No, I will take the responsibility, and if anythmg happens 1 will see the premium paid;" then adding, "Now, you understand that if anything happens the re- 's o 3 Allen (Mass.) 360. (40) Ck. 1) CONTRACT. § 12 sponsibility stands on me." On May 2d the property burned, and it was not until the expiration of three months after the fire that a ten- der of the premium was made, and soon after suit was commenced. The court said: "It is quite obvious that Chad wick did not, as agent of the company, agree that he would use their funds to pay this pre- mium, but it was in his private capacity that he agreed to advance the money. Although he was treasurer, his private capacity would not bind the company. If he made a valid agreement in his private capacity, the remedy would be against him, if he violated it, and no claim against the company could arise out of it." These cases, of course, are easily distinguishable in important particulars. Chadwick could have paid the money, but failed to do so. There was no limitation upon his powers, — no contingencies involved. There was an absolute personal agreement to perform a thing which he might have done, but did not. In the case of the agent. Brown, there is this important difference: He agreed to do something which, in a possible contingency, would be abso- lutely beyond his power. This fact, the law will presume, was un- derstood by Smith, and that there was an implied qualification of the agreement entered into, — that it might be defeated by events possible to arise. It is very doubtful, therefore, whether agree- ments of this character contain enough of the elements of a con- tract to form the basis of an action for damages. The author does not find that any of the writers on insurance law have ever examined the principle here discussed,^-that a parol contract of insurance must always be complete in praisenti. In the case of Taylor v. Phenix Ins. Co.°^ the doctrine here contended for is fully sustained. The facts are clearly stated by Lyon, J., in his opin- ion. He said: "The proof of the alleged contract of insurance is all contained in the following testimony of the plaintiff. After testifying to a conversation with Mr. Towell before the policy expired, concern- ing its renewal, he proceeded as follows: 'Afterwards, and on the 18th day of June, I had a conversation with Towell about renewing the policy. I met Towell in front of the post office, and said to him: «I want to renew that insurance policy of mine. I am going 3T 47 Wis. 365, 2 N. W. 559, 8 Ins. Law J. 851. (41) § 12 LAW OF FIRE INSURANCE. (Ch. 1 away to be gone a week or ten days, and I want it done before I leave." He said, "All right." I then said: "Mr. Hopkins offers to insure my property at 2 per cent., and you charged me 2^ last year. I do not want it in those local companies. I would rather have it in the same company, and have it renewed. Won't you do it at 2 per cent.?" He answered, "I will." I said again: "I am going to leave for Palmyra and Brodhead, to be gone a week or ten days. Is there anything else you want me to do?" "No; nothing else. I have the description in the ofiQce, and will attend to it." I said to renew the old insurance policy the same as it was before, in the same company and the same amount, and he said, "All right." I went away that day, and returned again in .about ten days, on the day before the fire.' "We fail to find in the above testimony satisfactory evidence of a renewal of the policy in pra^senti. The purport of all the con- versation on the subject between the plaintiff and Mr. Towell was that the policy should be renewed thereafter, — not that it was then renewed. The plaintiff said to the agent that he wanted it re- newed, and desired that it should be renewed before he left home. The agent assented. They then agreed upon the premium to be paid therefor. The agent said there was nothing more for the plaintiff to do, but that he (the agent) had the description of the property to be insured in his office, and promised to attend to the matter of renewal. The plaintiff then directed the agent to renew the old policy the same as it was before, in the same company and for the same amount, and the agent promised to do so. That is all there is of the alleged parol contract of renewal. It seems to us that the whole conversation pointed unmistalfably to some further act to be done to renew the policy,— to a renewal in futuro. Else why talk about the agent having the description in his office, and his promise to attend to the business, and why the closing direc- tion to the agent to renew the old policy in the same company, and for the same amount? If the policy was then and there renewed, the description ceased to be material, and the promise was super- fluous, as was also the final direction to the agent to renew. In- deed, both the promise and direction tend strongly to prove, if they do not prove conclusively, that neither of the parties intended a contract of renewal in prsesenti, or supposed they had made any (42) Ch. 1) CONTRACT. § 12 contract other than an executory oral contract that the company should renew the policy, and the plaintiff should pay the prenaium at some early future time. There is no evidence whatever inconsistent with the hypothesis that the agent was to make a certificate of re- newal, and the plaintiff was to pay the premium, as conditions pre- cedent to the renewal, or to show that the parties intended a con- tract out of the usual course of the business of insurance. It is our duty to construe the alleged parol contract as established by the proofs, and we are constrained to hold that it is not a contract of insurance in prtesenti, and contains no waiver of the conditions contained in the policy sought to be renewed." '* 3 8 In Idaho Forwarding Co. v. Fireman's Fund Ins. Co., 29 Pac. S26, S Utah, 41, the agent, Mallory, of the defendant company, was cashier in a mer- cantile establishment for plaintiff, and had been instructed by the latter to renew the policy, insuring the property when It expired, which would be some two weeks later. To this the agent agreed, but neglected to do so, and, the property having burned, action was brought to recover on a parol contract to insure. The court said: "It was the duty of Mallory, under the instructions of plaintiff's manager, to continue the risk, after the old policy expired, by reinsuring, but the evidence shows that he neglected to do this. For the failure to follow plaintiff's orders, the defendant cannot be responsible. It is apparent that Mallory failed to make the contract that he was authorized and instructed by plaintiff to make. An agreement to make a contract at a future day is not the equivalent of the one to be made, or of a present contract, though all the terms to be put in the latter are agreed upon. If one of the parties to the first agreement refuses to bind himself when the time comes, the court may compel a specific perform- ance of it, if from the facts it would be equitable to do so; and if perform- ance is decreed a judgment may be entered in the case for the amount found to be due the plaintiff on the contract, if any amount Is then due the plain- tiff by its terms, or an action may be instituted on it if either party refuses to comply with it. By the language used on the 1st of February, the de- fendant did not assume the risk the plaintiff contends that he did. That language had reference to insurance thereafter to be made. The plaintiff has set up in his complaint a contract in preesenti. This action is not for specific performance." Zigler v. Insurance Co., 82 Iowa, 569, 48 N. W. 987; Taylor v. Insurance Co., 47 Wis. 365, 2 N. W. 559; Sargent v. Insurance Co., 86 N. Y. 626; Dinning v. Insurance Co., 68 111. 414; Markey v. Insurance Co., lis Mass. 178; Myers v. Insurance Co., 121 Mass. 338; O'Reilly v. As- surance Corp., 101 N. Y. 575, 5 N. E. 568; Patterson v. Insurance Co.. 5 Ins. Law J. 376; Continental Ins. Co. v. Jenkins, Id. 514. The rule in respect to a parol agreement for future performance is well (43) § 13 LAW OF FIRE INSURANCE. (Ch. 1 § 13. When the Risk Begins. Wliere the agent is authorized to accept proposals for insurance and forward them to the company, or to some officer having author- ity to issue policies, and it is understood, and so stated in the proposal or application, that if the risk is accepted the insurance shall begin on the day when the proposal is made and signed by the applicant, and the property is burned after the policy is written and deposited in the mail, but before it is received by. the applicant, the company will be held for a loss.^' When the risk is thus submitted for the illustrated in Baumgartel v. Insuvauce (Jo., 136 N. Y. 547, 32 N. E. 090. The plaintiff held a policy in the defendant company, with the usual stipula- tions that it should become void if there was other insurance without no- tice, and written consent indorsed on the policy. The plaintiff gave evi- dence at the trial of the case that soon after procuring other insurance he met the defendant's agent on the street, and informed him that he had ob- tained another policy for .^l.OOO, and that the agent replied: "All right. I will attend to it." The court, in commenting on the fact, said: "At most, the language of the agent amounted to nothing more than his personal promise to do something in the future, and neither he nor the company could be held to be in default with respect to such promise until the plain- tiff had presented the policy to him, and requested him to make the indorse- ment. * * * The act which ^\as necessary to continue the policy in force was never performed, and the conversation between the plaintiff and the agent imported nothing more than an understanding that at some future time the plaintiff would produce the policy, and the agent would make the necessary indorsement. If the plaintiff understood by what was said that the agent would at some time seek him out and give the written consent in the manner required, the company would not be responsible for the neglect of the agent in that respect." In Hartford Fire Ins. Co. v. Davenport the court said: "In this case the vacancy concerning which the parties conversed, if there was any such con- versation, was one contemplated in the future, and the stipulation or un- derstanding, if it amounted to anything, was an executory contract, in- tended to form a part of the contract of insurance. This being so, the doc- trine cannot be admitted that any part of the contemplated contract can rest in parol." 37 Mich. 609, 72 Ins. Law J. 228. 3 Dailey v. Accident Ass'n, 102 Mich. 289, 57 N. W. 184; Newark Mach. Co. V. Kenton Ins. Co., 50 Ohio St. 549, 35 N. E. 1060; Hartford Fire Ins. Co. V. King (Ala.) 17 South. 707; Elliott v. Grand Lodge (Kan. A pp.) 42 Pac. 1009'; Phoenix Ins. Co. v. Hague (Tex. Civ. App.) 34 S. W. 654; Beckwith v. Cheever, 21 N. H. 41; Stebbins v. Insurance Co., 60 N. H. 65-70. (44) Ch- 1) CONTRACT. § 13 inspection and approval of the company, any act on its part clearly signifying an acceptance of the hazard ends the negotiations in a completed contract, and should a loss subsequently occur the com- pany will be liable. That the deliberations of the company have flnallj resulted in a decision to accept the risk will be presumed, if it is shown that the policy has been written and sent to either the applicant or the solicitor of the company, with instructions to de- liver it to the insured. It is quite immaterial whether the policy has been received by the applicant before the destruction of the property. If it has been written, and placed in the post oflQce, to be forwarded by course of mail, or sent by special messenger, it cannot be recalled, or subsequent delivery prevented, so as to re- lieve the company from payment of the loss. The application usual- ly presents to the company a definite proposal for insurance. All the essential terms of the contract desired by the applicant are set out. When this proposal is accepted, the negotiations are ter- minated, and the contract is complete. The subsequent writing and delivery of the policy has no important significance, except as evi- dencing that the minds have met, and a conclusion been reached expressing the mutual intent of the parties. This might in most cases be otherwise shown, but when the policy, as before stated, is deposited in the post office, addressed to the applicant, or to the agent, with instructions to deliver it to the applicant without con- dition, the undertaking to insure on the part of the company is beyond recall, and should a loss occur before the policy reaches the insured the company cannot escape payment; and this will be true although after the policy is mailed to the agent the company learns that the property has burned, and immediately telegraphs to decline the risk and return the undelivered policy.*" 40 The negotiations for insurance were conducted througii the medium of the mails. The conclusion reached by the court was, that when a pro- posal is ofCered by letter, and accepted in the same manner, the negotiations end in a completed contract when the letter signifying acceptance is de- posited in the mail. This conclusion is based on the proposition that the post is the agent of the one first employing it as the medium for negotia- tions. In order to make a conti-act complete, the acceptance must be iden- tical with the terms proposed. Hartford Steam-Boilei' Inspection .fe Ins. Co. V. Lasher Stocking Co., 66 Vt. 439, 20 Atl. 629. Application was made on Septemljer 12tli, and approved by the company, (45) § 13 I,AW OF FIRE INSURANCE. (Ch- 1 Unless the acceptance is in the same terms as the proposal, noth- ing will be concluded, as there will be lacking the essential ele- ment of accord. From this rule there can be no departure. In the interests of justice, the courts frequently read between the lines of a contract, and And implied, or, by forced construction, a "sav- ing clause." An instance of this kind is presented in the case of Dailey v. Preferred Masonic Mut. Ace. Ass'n.*^ The proposal was for accident insurance, and set forth that the applicant was a con- ductor for a passenger train. The policy subsequently issued, of which the proposal or application was made a part, provided that the insurer should not be liable for any injury caused while "en- tering or alighting from a moving train." It was the opinion of the court that, the occupation of the insured being clearly explained in the application, it must be presumed to have been within the contemplation of the parties that the insurance applied for was intended to cover all the ordinary hazards incident to the duties of a passenger conductor, among which was entering and alighting from trains while in motion; that on acceptance of the application the contract was complete, and free from the restrictive clause- mentioned. It is the law in New Hampshire that any act on part of the in- surer in reference to the application, indicating its satisfaction with the risk, such as writing the policy, unless such act is brought to^ the knowledge of the applicant, will not be conclusive as to the completion of the contract; in other words, "A proposition does not to whom it was referred, on September 19th; but policy was issued. of the 22d, at which time it was written. On September 21st the Insured propertj- ^^•as burned, which fact was unknown to the agent who wrote the policy.. It was held that the contract was complete on the 19th of September, at whicli time the company signified its approval of the risk. In Perry v. Insurance Co. (N. H.) 33 Atl., on page 733, the court said that,, at any time before notice to the applicant of the acceptance of the applica- tion, either party was at liberty to withdraw from the undertaking. "A proposition does not become a contract until the maker or his agent is noti- fied of its acceptance." See Stebbins v. Insurance Co., 60 N. H. 65-70; Beck- with V. Cheever, 21 N. H. 41; Pried v. Insurance Co., 50 N. Y. 243, 47 Barb. (N. Y.) 127; Cooper v. Insurance Co., 7 Nev. 116; Kentucky aiut. Ins. Co.. V. Jenks, 5 Ind. 96. 41 102 Mich. 289, 57 N. W. 184. (4G) ^h. 1) CONTRACT. § 14 become a contract until the maker or his agent is notified of its acceptance." " § 14. When the Insurer will be Liiable for Loss Occurring^ before the Contract is Made. In Hallock v. Commercial Union Ins. Co.,*^ the agent of the defend- ant was not authorized to make binding contracts of insurance. Hi* appointment was only to solicit, take applications, and forward them to the company ; and, when accepted, policies were returned to him to be delivered to the insured. In this instance the application provided that, if a policy was issued on the proposals submitted, such policy should be of even date with the application, which was March 12th. The applicant offered to pay the premium to the agent at that time, but was told by him to keep it until called for. The next day a policy was issued, and sent to the agent for delivery. Meanwhile, and 10 hours before the policy was actually written, the property was destroyed by fire. Defendant, having learned that the property was burned, telegraphed its agent not to deliver the policy. This- instruction was obeyed, although the agent did receive the premium, a tender having been made after the fire. The court held that the contract was complete when the proposal was accepted, and that it became operative, in accordance with its own terms, at noon on the 12th day of March, while the property was still in existence. While the correctness of this decision has been questioned, we fail to find that it violates any principle of law. It is true that when the pro- posal was accepted, and the contract became for the first time a subsisting obligation, the subject of insurance had ceased to exist; but, by the terms of the agreement, if the risk was accepted by the company it should begin at noon on the 12th day of March. That it was competent for the parties to make contracts that should relate back, and be operative from the time of the beginning of the nego- tiations, or to any other period, there is no good reason for doubt. If it were otherwise, then, in this case, had the property not burned 4 2 Perry v. Insurance Co. (N. H.) 33 Atl. 731; Moore v. Insurance Co., 62 N. H. 240. erson will be held to have general powers in reference to any matters concern- ing the placing of such insurance, and may accept notice of can- cellation, substitute the policy of one company for another, and bind his principal by waiver or express agreement in writing, or by parol. ^^ In Buick v. Mechanics' Ins. Co.,^^ plaintiffs arranged with one F. O. Davenport, an insurance broker, to take care of their insur- ance. This relation had continued for several years. Plaintiffs were not familiar with insurance contracts, and referred every de- tail of that department of their business to the broker, Davenport. They designated the amount of insurance to be written, but left all else to the discretion of their agent or broker. The policies, how- ever, were alwaj^s sent to plaintiffs. About the middle of August, 1S92, Davenport was instructed to procure |t,000 insurance on the contents of a particularly specified building. This order was promptly executed, and |1,000 of the amount named was placed with the Michigan Fire & Marine Insurance Company. No pre- mium on this policy was ever paid. Some two weeks later the Michigan Fire & Marine telephoned Mr. Davenport that they wished to cancel. He replied, "\'^ery well," and on the same day rewrote the insurance in the defendant company through its authorized agents at Detroit. Of this fact the Michigan Fire & Marine was an hour or two later informed. Three days afterwards the property burned, and the Mechanics' Insurance Company declined to pay. The trial court found, as matter of law, that Davenport, acting within the scope of his authority as agent for plaintiffs, could substitute one policy for another, and that his action in this regard made the policy in suit a valid and subsisting contract at the time of the fire. The supreme court of Michigan, sustaining this finding, said: "The plaintiff's intrusted the whole subject of the insurance to 50 Schauer v. Insurance Co., 88 Wis. 561, 60 N. W. 994; Buick v. Insur- ance Co., 103 Mich. 75, 61 N. W. 337; Hartford Fire Ins. Co. v. Reynolds, 36 Mich. 502; Dibble v. Assurance Co., 70 Mich. 1, 37 N. W. 704; Stone v. Insurance Co., 105 N. Y. 543, 12 N. E. 45. 51 103 Mich. 75, 61 N. W. 337. (53) § 16 I.AW OF FIRE INSURANCE. , (Ch. 1 Davenport, and had done so for years. They did not even know in what companies they were insured. The Michigan company dealt with the broker, Davenport, alone. He assented to the cancella- tion, obtained the new policy now in suit to take the place of the Michigan policy, and delivered it to the plaintiffs before the fire, with notice of the cancellation and the substitution. Plaintiffs re- ceived it, but did not ooen the envelope containing it, and it was consumed in the fire. We think this case is clearly within Hartford Fire Ins. Co. v. Eeynolds,^^ in which it is said, at page 507, 'It is certainly not necessary to give notice to the principal who deals through a broker, who is notified.' ^^ The Michigan policy provides for cancellation upon five days' notice. This provision, however, can be, and in the present case was, waived by the assent of both parties to the contract. Such waiver did not affect or change the defendant's liability. If the parties to the Michigan company's polirv -^sv fit to waive the provision, the defendant cannot question it." It will be observed that the court mentions in this case that no premium had been paid the Michigan Fire & Marine, but does not intimate in what respect this fact has any significance as affecting the rights of either of the parties to the litigation. It is quite clear that the court was in no way influenced in its judgment by any considerations concerning the premium. The real question in- volved was determined by the important fact of Davenport's power to act for the insured, without special instructions, in regard to the substitution of the Mechanics' policy for that of the Michigan Fire & Marine. The same rule of construction is found in Schauer v. Queen Ins. Co." The plaintiffs there owned a grist mill, on which they had been accustomed to carry a large amount of insurance. A part of this was written in companies for which Warren & Son were agents. On account of the uncertainty and inconvenience in deal- ing with different agents in respect to a matter with which they were not wholly familiar, plaintiffs in the fall and winter of 1892 requested Warren & Son to take charge of all their insurance on = 2 ae Mich. 502. 64 88 Wis. 5G1, 00 N. W. 994. 6 3 Dibble V. Assurance Co., supra. (54) Cll. 1) CONTRACT. § 16 the mill, stating the amount to be carried, but it does not appear that any instructions were given as to what particular companies the risk should be placed with. Warren & Son agreed to keep the property insured. Among the policies procured was one of $1,500 in the Oakland company, which was ordered canceled by the insurer early in January, 1893. This policy was replaced by War- ren & Son, they writing another with the defendant in this suit for the same amount. About January 13th plaintiffs were notified by Warren & Son of the substitution of the Queen for the Oakland policy, and to this they expressed their satisfaction. On January 14th the manager of the defendant company at Chicago wrote Warren & Son to immediately retire their policy. This letter came by course of mail to the hands of Warren & Son on January 15th, and on January 19th they entered a cancellation of the policy on their agency record; and it appears that thereafter they diligently sought to replace the insurance with other companies, applying through their correspondents at Chicago, Green Bay, and possibly elsewhere, but before any arrangements were consummated the fire occurred, on January 25th. In delivering the opinion of the court. Judge Cassoday said: "The only question presented is whether the policy was effectually canceled by the notice so given to Warren & Son, under the clause of the policy which provides that 'this policy shall be canceled at any time at the request of the assured, or by the company, by giv- ing five days' notice of such cancellation.' The only objection to the notice is that it should have been given to the plaintiffs per- sonally, instead of Warren & Son, but we are clearly of the opinion that the trial court was right in holding, as a matter of law, upon the undisputed evidence, that the business arrangements between Warren & Son and the plaintiffs in reference to their insurance au- thorized Warren & Son to receive such notice of cancellation. * * * Upon the facts stated we must hold that the duties of Warren & Son to the defendant and to the plaintiffs were in no sense repugnant." °° A careful distinction should be observed between brokers who are 66 Hartford Fire Ins. Co. v. Reynolds, 36 Mich. 502; Stone v. Insurance Co., 105 N. Y. 543, 12 N. E. 45. (55) § 16 I.AW OF FIRl? INSURANCE. (Ch. 1 only authorized to procure policies of insurance on specified prop- erty to a stated amount, in designated companies, and those whose agency extends to the exercise of a discretion as to what policies shall be accepted and what rate of premium paid. In the first case the broker has but one duty to perform, the procuring of the poli- cies, and turning them over to the insured. When this is done it M'ill most frequently happen that the agency is terminated, and notice to the broker of cancellation, or of any other matter affecting the action of the parties, will not charge the insured with knowledge. But the rule is different in respect to the second class mentioned. The agency there is of a larger scope, and more general character. The requirement is not to obtain policies to a certain amount, but to keep the property insured in responsible companies. This im- ports a measure of freedom and permission to exercise important discretionary powers, and while these relations continue, although the broker may be only a special agent of the insured, it is clearly within the apparent scope of his authority to bind the insured by accepting notice of cancellation, and by surrendering one policy, and replacing the insurance thereunder with a different company.^' The responsibility and rights of the parties concerned will not be essentially changed when the person selected by the property owner to take charge of his insurance business holds the appointment as agent of various insurance companies, and has authority from them to make contracts to insure, and to write and deliver policies. The same rule of law above explained as applicable to brokers will con- trol the conduct of persons who are the acknowledged agents of both parties, qualified only by the fundamental principle of agency, that a person sustaining a relation of confidence and fidelity to both parties will not be permitted to act when judgment is required or interests conflict. i In Stone v. Franklin Fire Ins. Co.," Longford & Co. were the agents of the defendant, who wrote the policy. They were dealing with a broker named Frank. On the 26th of February these agents wrote Frank that the defendant wished to cancel the policy in suit, and that they would do so at noon of the 28th of that month. As 56 Buick V. Insurance CJo., supra; Schauer v. Insurance Co., supra. 5T 105 N. Y. 543, 12 N. B. 45. (56) Ch, 1) CONTRACT. § 17 there had been no premium paid, the court held that defendant had no duty to perform in that respect. The policy was issued to the Standard Tinware Company, and before suit was assigned to the plaintiff, Stone. The court said: "We are of the opinion that, upon the undisputed evidence, Frank was so far the agent of the tinware company that notice to him was notice to that company. He had been the agent of the tinware company for about two years, through whom it procured insurance upon its property from various com- panies; in all, to the amount of $10,000. It does not appear that he received any particular instructions as to the companies from which he was to receive insurance, or as to the rates of premium, or the amount to be insured in any particular company. It is in- ferable that all these matters were left to his discretion." It should be noted that the president of the tinware company at the trial testified that Frank was not his agent, — -only a broker whom he had authorized to obtain the insurance. Frank also stated in evidence that "he had nothing to do but to place business as Schei- der (the president of the tinware company) ordered him to do." The court characterized this testimony as mere expressions of the witness' opinion, and without such legal effect as to impair the force and significance of the other evidence offered, which it thought sufficient to fully establish the agency of Frank. It said, "If, upon the evidence, the. jury had found that Frank was not authorized to receive notice, their verdict would have been so far contrary to the evidence that it would have been the duty of the trial judge to set it aside." WTien the agent of the insurance company is also agent of the insured, a request made to him by the insurer to cancel a policy will not be notice to the insured. The courts will not go so far in recognizing the dual character of an agent acting in antagonistic relations as to endow him with the legal capacity of giving notice to himself. =' § 17. In What Manner Cancellation can be Made. Unless the policy provides that it may be terminated at the op- tion of one or the other of the parties, it will continue to the end 5 8 British-American Assur. Co. v. Codper (Colo. App.) 40 Pac. 147. (57) I 17 LAW OF FIRE INSURANCE. (Ch. 1 of the tei-m for which it is written, except, of course, it^is canceled hy mutual consent.^" In such a case, the abrogation of the con- tract depends upon the same conditions of agreement as has been shown were indispensable in its formation. As the minds of the parties must have met to create a contract, so, too, they must meet as to its termination, unless the obligation is made to end in some other manner by the original agreement. Where the right to can- cel on notice is reserved, it is important that conformity be had in all material respects to the provisions of the policy concerning such notice. If it is to be given so as to allow a certain number of days to intervene before the cancellation shall become effective, compliance must be had with so much strictness that no substan- tial right can be violated. Thus, if the policy stipulates that the insurer may cancel, on giving the insured a notice of 10 days in advance of the time when cancellation is to talte effect, a notice of less time, as 9 days, will not entitle the insurer to the right to can- cel. The notice should not merely express a desire to cancel. De- sire is not intention, nor is it cancellation. The exact time when the liability of the insurer wiU terminate should be definitely stated, and a return of the premium either made or tendered. A refund- ing of the unearned premium, of course, need not be made until the time has arrived when cancellation is effected, and a surrender of the policy required. When the policy has become void on account of a breach of its conditions, there is no rescission, and no return premium can be demanded. When the policy is so conditioned that the insurer shall have the right to either cancel or declare a forfeiture in the event of certain contingencies, and such contingen- cies arise, the insurer must declare its intention to exercise its right within reasonable time, or it will be deemed to have been waived. Thus, in a Nebraska case the policy provided that, if the premium was not paid at a time mentioned, the company would have the right to declare a forfeiture. There was a default in pay- ing the premium, but the company neglected to notify the insured that it would treat the policy as terminated, and, a loss subsequent- ly occurring, the company was held to be liable."" 6 McAllister v. Insurance Co., 101 Mass. 558. 6 Schoneman v. Insurance Co., 16 Neb. 404, 20 N. W 284 (58) Ch. 1) CONTRACT. § 17 In McAllister v. New England Life Ins. Co.®^ tlie policy was de- livered to the insured and a note for the premium given to the com- pany. The contract was complete and operative. Subsequently, the insured became dissatisfied, and declared that he abandoned the whole thing, and would have nothing more to do with the insurer. Still, he retained the policy, and the company retained the note. A loss afterwards occurring, the latter was held to be liable. This decision was based on the principle that the contract was intended to impose mutual burdens, and secure mutual advantages; that it could not be abandoned by either party without the consent of the other, except in the manner provided by its own terms. The in- surer had an interest in the note which it held for the premium, and was under no obligations to relinquish its benefit, because the insured had become dissatisfied, and wished to abandon the en- gagement. Notwithstanding the insured's declaration that he "abandoned the whole thing, and would have nothing more to do with the company," he could not escape liability on account of his note; and this being the case the company was both morally and legally holden for the loss. The case of Grrace v. American Cent. Ins. Co.^^ is here referred to because of the authority it brings to the support of two important points involved in this general discussion. The insurance was pro- cured through a broker, to whom proper notice of cancellation was given. The policy provided, in suitable language, that any person other than the insured, who procured the insurance to be taken, should be deemed to be the agent of the assured, and not of the company. It was admitted that the plaintiff, when the loss oc- curred, had never received any notice of the intention of the com- pany to terminate the risk. The opinion of the court was delivered by Justice Harlan, and it held that the provisions of the policy be- fore referred to should not be construed to mean that the broker was agent of the assured for any other purpose than to procure the insurance; that notice to him of the defendant's intention to can- cel was not sufficient. The insurance in this case was effected in the city of New York, and the defendant offered evidence, which was admitted by the trial court, against the objection of the plain- ci 101 Mas.s. 5.jS, supra. e^ 109 U. S. 278, 3 Sup. Ct. 207. (59) § 17 LAW OF FIRE INSURANCE. (Ch. 1 tiff, to show that there was an established custom in New York that authorized an insurance company, when desiring to terminate a risk, to give notice to the brolier through whom it was procured. In reference to this proposition, the court said, "An express writ- ten contract, embodying in clear and positive terms the intention of the parties, cannot be varied by evidence of usage or custom";, quoting with approval the language of Lord Lyndhurst in Blackett V. Royal Exch. Assur. Co.,*^ that "usage may be admissible to ex- plain what is doubtful, but never admissible to contradict what is- plain." " In Hathorn v. Germania Ins. Co.,"'' the policy contained a pro- vision permitting the company at any time to cancel by giving no- tice of such purpose, and refunding a ratable proportion of the pre- mium for the unexpired term. The company elected to terminate- the risk. Notice was given the assured, and the policy surrendered,, but the unearned premium had not been repaid when the fire oc- curred. It was subsequently tendered by the company, and ac- cepted by the insured, without knowledge of the loss, and it was held that the insurer was liable. This decision is based on the principle that the premium is an indispensable element in a contract of insurance. Without it, there will be an incompleteness in all negotiations, either to insure or to rescind. In both cases there must be either payment or waiver. The case of Hartford Ins. Co. v. Reynolds °° is not in conflict with this general proposition, although frequently referred to as sup- porting the doctrine that payment of the unearned premium is not an indispensable condition. Kirchofer was the authorized agent of the plaintiff in error. He had general powers; could make binding contracts of insurance; was intrusted with policies signed in blank by the officers of the company, which he had authority to fill up, countersign, and deliver to persons with whom he had made con- tracts to insure. Reynolds, the defendant in error, had agreed with Kirchofer that the latter should insure, and keep insured, a certain property, in the Hartford Company. In accord with this^ 63 2 Cromp. & J. 249. 6*Pai-tridge v. Insurance Co., 15 ^Yall. 573; Robinson v. U. S., 13 Wall. 365; The Delaware, 14 Wall. 603; National Bank y. Burkhardt, 100 U. S. 692.. 5 55 Barb. (N. Y.) 28. ee 36 Mich. 502, 7 Ins. Law J 214 (GO) ■Ch. 1) CONTRACT. § 17 agreement, a policy was written by Kirchofer; and, with the con- -sent of Eeynolds, it had been retained in K.'s office. The premium was charged on the books of the latter, and subsequently paid in the settlement of accounts between K. and R. Some time after- wards, Kirchofer received instructions from the plaintiff in error to cancel the risk. This was done by returning the policy to the company without the knowledge of Reynolds. The court said: "It is no part of an insurance agent's duty to his company to look after the insurance of other persons, and all that he does in that way, beyond what relates to insuring in his own company, is out- side of his business character. As the insurance broker, he rep- resents the insured, and not the insurer; and inasmuch as there was evidence in this case which was open to the jury, even if seri- ously disputed, which in many things it was not, and which tended to show that Kirchofer did not exact payment of the premium when due, but kept a private account with Eeynolds, who only paid when called upon, the effect of this upon the various questions in the controversy is quite important. If notice of cancellation was necessary, and if any repayment of premium was necessary to com- plete it, as was usually the case, it may be questionable how far such notice is required when the agent of the company is also the only agent or person with whom the company has acted on behalf of the insured. It is certainly not necessary to give notice to the principal, who deals through a broker who is notified, or to repay money to any one but the broker who pays the premium. If the jury believe that the arrangements with Kirchofer were such that he gave a personal credit to Reynolds, and at the same time ar- ranged the premium out of his own moneys or credits with the com- pany, then the restoration to him was a sufficient repayment; and his subsequent collection from Reynolds of the money, for which 'there was no existing insurance, could not have the effect of reviv- ing an insurance that the company had canceled. To revive a can- celed policy already rejected by the company would require evidence of authority in the agent to rescind or recall the action of his prin- cipal, which could not be presumed, and would also require clear proof of an understanding that that specific act was intended to be done. So far as we can determine from the record, there is an absence of proof of any such agreement, as well as any power to (61) § 17 LAW OP FIRE INSURANCE. ifih. 1 make it. We have already said that if Kirchofer was acting in the capacity of an insurance broker for Reynolds, and keeping an ac- count with him generally in receiving specific premiums as they were due to aud required by the company, his knowledge of the can- cellation, and the return or credit to him by the company of the premium, would bind Reynolds. If it was Kirchofer's duty to notify persons insured, and to deal with them in cases of cancellation, the failure to do so was a breach of duty; but if he was himself the party to receive, as well as to give, notice, the company was ex- onerated when dealing with him as the agent of the insured, as it would have been in dealing with any other agent or person. Reyn- olds, by employing him in this double and anomalous capacity, di- rectly contributed to produce the complication." This case is easily distinguishable from that of Grace v. American Cent. Ins. Co., and other analogous cases, heretofore considered, where it has been held that the broker is the agent of the insured only for the purpose of procuring the insurance. Kirchofer's agency for Reynolds was co-extensive with the business of keeping this property insured. All duties thereto he had undertaken to per- form, by the appointment of his principal. Reynolds personally gave the matter no attention whatever. Kirchofer paid the pre- mium, and retained the policy in his possession. He was the only person with whom the company dealt. Until a loss occurred, it does not appear that Reynolds so far interested himself as to in- quire whether or not his agent, Kirchofer, was performing his duties with fidelity." A. held policy of (}. Co., which was procured through broker Z. G. Co., being dissatisfied with the risk, requested cancellation of the broker, Z. This was agreed to, and two days later Z. procured, in plaintiff's name, another policy for the same amount in the Q. Co., and, the G. Co. was informed of what had been done. The property was burned a few days later, and after the adjustment the Q. Co. paid its proportion, and suit was brought to recove" also of G. Co. The court said: "It may be conceded that there was no formal, technical can- cellation of the policy issued by the defendant. It was in possession of plaintiffs. Defendant had not returned or offered to return to 07 stone v. Insurance Co., 105 N. Y. 543, 12 N. E. 45. (62) Ch. 1) COKTKACT. I 17 them the premium. But was there a substitution of the liability of a third party for that of the defendant, by the consent of the plaintiffs, defendant, and the third party? Defendant's contract was one of indemnity in a fixed amount, against loss by fire on certain goods. A third party, the Queen Insurance Company, took its place, and in- demnified plaintiffs against precisely the same loss, in the same amount, on the same goods, then stood by its contract, and paid the loss. This was a complete and effectual substitution of another in- surer in place of defendant, and this was by the consent of all par- ties interested ; for it is not important to discuss the exact authority of an insurance broker, as Zugschmidt was, and determine to what extent he was the agent of the insured and the insurers, — that is, ^A'here the line should be drawn. It is undisputed he acted through- out for the plaintiffs and for both companies, and communicated with both; and all consented, and ratified his acts. Nor is it controlling tliat there was no formal cancellation or surrender of the first policy. The plaintiffs got the policy in the Queen Company, and, what is more important, got ttie money upon it. The premium they had paid to the defendant, in so far as they were entitled to a return of it, is ow- ing by the defendant, through the broker, to the Queen Company, to whom the broker, acting for plaintiffs, transferred defendant's liabil- ity. Plaintiffs ought to have surrendered for cancellation defend- ant's policy. What ought to have been done, equity will consider at having been done. The case is not unlike that of a creditor who has taken surety for a debt. The surety declines to be longer responsi- ble. The debtor procures a new surety, acceptable to the creditor, v\ ho takes the place of the first on a new note. The creditor retains possession of the old note. The new surety pays the debt. The creditor sues the first surety on the old note, alleging it had never been formally delivered up or canceled. In such case the learned judge of the court below would very promptly have said that, if a creditor be once paid, his mere possession of the old note would not warrant the exaction of a second payment of the same debt. It seems to us there is no distinction between the supposed case and the one before us, except that the first is a contract for suretyship, and the second of indemnity. The injustice worked by permitting a second recovery in the one is the same as in the other. No party ought to be allowed to recover twice for the same debt, no matter how many instruments (63) § IS LAW OF FIRE INSURANCE. (Ch. 1 evidencing the amount of his debt he may hold, nor how many distinct ■obligors there may be on them. Most creditors are content if theif debt be paid once. All ought to be. We think there was error in refusing to affirm defendant's second point." °' § 18. The Insured, having Forfeited His Right to Recover under the Policy, cannot Demand Repayment of the Premium. Insurance policies usually provide that the company may cancel ■at any time, on notice, and refunding a ratable proportion of the pre- mium. When this occurs, it may avail itself of this option for any •cause whatever, or from mere caprice."' There is no duty incum- bent upon it to give any reason for its action. The giving of the notice required by the policy, and the refunding or tender of the unearned premium, will terminate the risk.'"' When the policy becomes void by reason of a breach of any of its conditions, that is an end of the matter, and no obligation will rest on the insurer to refund any portion of the premium.^ ^ When the insured by his own act or neglect forfeits a right to recover under the terms of the policy, he at the same time forfeits his right to claim a rescission, and to have repayment of the unearned premium. In other words, when -a policy has become void because of the violation of its conditions by the insured, he cannot afterwards demand any benefits in the matter, either of indemnity or unearned premium, for the contract has terminated by its own terms, and the premium has been forfeit- ed. A different rule has been held in Illinois and Nebraska." If the policy never attached, by reason of any mistake that does not f>8 Arnfeld v. Assurance Co., 172 Pa. St. 605, 34 Atl. 580. o» Irwin V. Insurance Co., 2 Disn. (Ohio) 68; International Life Ins. & Trust Co. v. Franklin Fire Ins. & Trust Co., 66 N. Y. 119. 70 Runkle V. Insurance Co., 6 Fed. 143; Van Vallieuburgh v. Insurance -Co., 51 N. Y. 465; Hollingsworth v. Insurance Co., 45 Ga. 294; White v. In- surance Co., 120 Mass. 330; Home Ins. Co. v. Curtis, 32 Mich. 402. Ti Carey v. Insurance Co., 84 Wis. 80, 54 N. W. 18; Phoenix Ins. Co. v. Stevenson, 78 Ky. 150; Johnson v. Insurance Co., 41 Minn. 396, 43 N. W. 50; Aetna Ins. Co. v. Maguire, 51 111. 342. 7 2 Manufacturers' & Merchants' Ins. Co. v. Armstrong, 145 lU. 469, 34 N. J3. 553; Schoneman v. Insurance Co., 16 Neb. 404, 20 N. W 284 (64) Ch. 1") CONTRACT. § 19 inYolve fraud and evil practice, the insured will be entitled to a return of the whole premium, for none of it has been earned." But it will be otherwise where the insurer lias once become charged with a liability, and the policy is afterwards voided by the act or negli- gence of the insured. So, too, if the undertaking to insure does not succeed, without fault of the insurer, — as, if the risk be a building, it should be blown down, or carried away by a flood, or fall of ita own weakness, — the premium will be treated as earned.''* § 19. Parties may Agree on Terms of Cancellation Differ- ent from Those Expressed in the Policy. It is competent for the parties to agree on terms of cancellation independent and different from those expressed in the policy, as, for instance, where the policy provided that the company should have the right to cancel on the repayment of a ratable proportion of the premium, and it was shown that the insured had agreed with the '3 Gray v. Sims, 3 Wash. C. 0. 276, Fed. Cas. No. 5,729; Penson v. Lee, 2 Bos. & P. 330; 'S^'addingtoii v. Insurance Co., 17 Johns. (X. Y.) 23; Clark V. Insurance Co., 2 Woodb. & M. 472, Fed. Cas. No. 2,829; Friesmuth v. In- surance Co., 10 Gush. (Mass.) 588. -* Mount v. Walte. 7 Johns. (X. Y.) 434; Delavinge v. Insurance Co., 1 Johns. Cas. (N. Y.) 310; Furtado v. Rodgers, 3 Bos. & P. 191; Moses v. Pratt, 4 Camp. 297; Schwartz v. Insurance Co., 3 Wash. C. C. 170, Fed. Cas. No. 12,505; Hoyt v. Gilman, 8 Mass. 336; McCulloch v. Assurance Co., 3 Camp. 406; Lowi-y v. Bourdieu, 2 Doug. 468; Boehm v. Bell, 8 Term R. 154. See International Life Insurance & Trust Co. v. Franklin Fire Ins. Co., 66 N. Y. 119, 5 Ins. Law J. 371. In Harris v. Insurance Co.. 53 Iowa, 236, 5 X. W. 124, 9 Ins. Law J. 525, the court held, "A party cannot recover upon an insurance contract avoided by his own act, although the insurer has not offered to rescind or return the unearned premium." In Stone v. Insurance Co., 105 N. Y. 543, 12 N. B. 45, the broker who pro- cured the policy had been the agent of the plaintiff for several years, and had large discretionary powers in regard to placing his insurauce. The pre- mium was not paid, but charged to the broker by the defendant, in whose hands the policy remained. Notice of cancellation was given only to the broker, and no offer was made to return the unearned premium. The court held (one judge dissenting) tliat the notice of cancellation to the broker was sufficient to terminate the Insurance. See, also. Standard Oil Co. v. Triumph Ins. Co., 64 N. Y. 85, 3 Hun, 591, 6 Thomp. & C. 300. OSTR FIRE INS. 5 ("^) § 20 LAW OF FIRE INSURANCE. (Cli. 1 company before the fire occurred, and accepted $13 as the amount of unearned premium that he was entitled to receive, although an accurate computation after the fire disclosed that the insured might have demanded a larger sum, by about SO cents. It was held that an agreement to accept the amount named was conclusive, and that the liability of the insurer was at an end." § 20. Condition of Policy in Regard to Payment of Premium must be Strictly Performed. Where a note is given for the premium, or a part of it, and it is, by proper stipulations contained in the policy, made a condition of its continued validity that the note shall be paid at maturity, the insurance will terminate when default is made; and no duty will rest on the insurer to give notice, or in any way to declare a forfeiture.'^ If the note is made payable at any designated place, the maker must find it there, and offer payment. Failure to do so will be at his peril.'' If, however, the note is not accessible at the place named, when due, no forfeiture will result, although payment is not made; but it is otherwise when the note does not specify any particular place of payment. The maker himself must then seek the holder, and, failing to do so, the default will not be excused, and a forfeiture will result. Where the policy reserves to the in- surer the right to cancel on notice and a refunding of the unearned premium, a tender of a ratable proportion of the premium must be made. It will not be sufflcient to write the insured that "the insur- ance is terminated, and the company will pay such portion of the '6 Aetna Ins. Go. v. Weissinger, 91 Ind. 297. 7 8 Held, that premium note must be paid at maturity, unless payment is excused. Payment is in the nature of condition precedent. Bloom v. In- surance Co. (Iowa) 62 N. W. 810; Union Cent. Life Ins. Co. v. Cliowning, 8 Tex. Civ. App. 455, 28 S. W. 117, and cases tliere cited; Continental Ins. Co. V. Chew, 11 Ind. App. 330, 38 N. E. 417; Phenix Ins. Co. v. Rollins, 63 N. W. 46, 44 Neb. 745; Moore v. Insurance Co., 90 Iowa, 636, 57 N. W. 597; Dale V. Insurance Co., 95 Tenn. 38, 31 S. W. 266; McEvoy r. Insurance Co., 46 Neb. 782, 65 N. W. 888. " Mclntyre v. Insurance Co., 52 Mich. 188, 17 Ni W. 781, and 13 Ins. Law J. 216; Thompson v. Insurance Co., 104 U. S. 252; Blackerby v. Insurance Co., 83 Ky. 574, 15 Ins. Law J. 756. (6G) Ch. 1) CONTRACT. § 20 premium as he may be entitled to receive "when the policy is sent in," or that he shall "call at company's office and get his money." No duty can be required of the insured, except to surrender the policy on a tender of the unearned premium being made. It is not incum- bent on him to "send in the jwlicy," or to go to the company's office to "attend to the business." The cancellation being asked for by the company, no burdens can be imposed upon the insured. He may disregard any request made by the company seeking to enforce a right that will cause him either trouble or expense.'^ In Chadbourne t. German- American Ins. Co.,^" the policy was is- sued to the owner of the property, with loss, "if any," payable to B. Afterwards the property was sold to B, and the policy, by prop- er indorsement, made to recognize the change of interest, and was also indorsed payable, in case of loss, to "C," a new mortgagee. A. had given his note for the premium, which he failed to pay. The company mailed to B. and C. a notice that they would cancel the policy if the premium was not paid on that day, or the next. This letter was received on Friday morning by one of the parties. The other, being absent, did not get the notice until some time later in the day. The premium was not paid, and on Monday morning, at about 10 o'clock, they each received (that is, B. and C.) another let- ter from the company, informing them that the policy was canceled, and requesting that it be returned to them, together with the pre- mium earned. Two or three hours afterwards the property burned. The policy reserved to the company the right to cancel at its op- tion, by giving noti(Jfe and refunding the unearned premium; and the court held that it was a question for the jury whether the no- tice given afforded reasonable time in which the insured could act in procuring other insurance. It also intimated that the surrender of A.'s note given for the premium was precedent to rescission. From the facts stated, we think the last proposition involves a fallacy which may be dangerously misleading. It is difficult to under- stand in what respect the rights of the parties were complicated T8 Griffey v. Insurance Co., 100 N. Y. 417, 3 N. E. 309; Id., 30 IIuu (X. Y.) 299; Peoria, M. & F. Ins. Co. v. Botto, 47 111. 516; Planters' Ins. Co. v. Walker Lodge, 1 White & W. Civ. Cas. Ct. App. 415; Kunkle v. Insurance Co., 6 Fed. 143; Mohr & Mohr Distilling Co. v. Insurance Cos., 12 Fed. 474. 79 31 Fed. 533, 16 Ins. Law J. 897. (67) § 20 I.AW OF FIRE INSURANCE. (Ch- 1 by the note held by the company, and given by A. in payment of the premium. When the property was bought by B., the company, by suitable indorsement on the policy, consented that B. should be substituted for A. as a party to the contract. Thus, new and in- dependent relations were established with B., while those thereto- fore existing with A. were wholly broken off. When B. and C. became parties to the contract,^ — one as owner and the other as mortgagee, — so far as they were concerned the premium was pa,id, and the note given by A. was a personal matter between him and the company. Either to retain or to surrender this note could in no way affect the rights of B. and C. The company could cancel for any cause, or from mere caprice, but the returning of A.'s note would not excuse it from paying to B. and C. that portion of the premium which had not been earned. The note was evidence of the debt which A. owed the company. It expressed the compensation promised by A. for the contract of indemnity granted to him, and subsequently transferred to B. and C. Presumptively, A. had ar- ranged with B. and C. to be reimbursed; but, whether this was done or not, the obligation of parties could not in any manner be affected. The company, in consideration of A.'s note, had given to B. and C. a paid-up policy. This could not be canceled by returning the un- paid note to A., but by paying to B. and 0. a ratable proportion of the premium. It was their insurance that was being canceled, not A.'s. The court, too, we think, erred in submitting to the jury the question of whether the insured had reasonable notice of the can- cellation, t In this view we are sustained by the New York court of appeals in the case of Lipman v. Niagara Fire Ins. Co.^" The decision is a late one, and carefully considered. The conditions of the policy in regard to cancellation differ in no essential particulars from that in the suit of Chadbourne v. German-American Ins. Co., supra, and three hours after notice of cancellation was given the property was destroyed by fire. Among other things, the plaintiff urged that the liability of the insurer could not be terminated without reasonable notice. The court said: "It remains to consider whether, under the condition, the policy terminated eo instanti on notice by the com- ■ 80 121 N. Y. 454, 24 N. B. 61)9. (68) Cll- 1) CONTRACT. § 21 pany. There is no language which, postponed the effect of notice un- til the lapse of a reasonable time thereafter. The rule is well set- tled that, when a person undertakes to do an act upon notice from another, it is implied that he should 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 performance, the rule of reasonable time has no application. We have been referred to no case, nor have we found any, which sustains the doctrine that, where one has assumed an obligation which is to continue until notice is given to the other party, the obligation continues after no- tice. » * » The contract provides that it shall be terminated on notice. We perceive no reasons 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 can- cellation was effected at the time of the service of the notice." '^ § 21. Rehearing on Certaij. Important Points. When the policy clearly expresses the agreement between the parties, performance of its terms will be enforced in a court of law. "ViTien, however, the policy fails to evidence the contract made, it may be reformed in a court of equity ; but there can be no reforma- tion unless it be conclusively shown that the parties — not one, but tioth — intended something different from what the policy sets forth. ^= The conditions, requirements, and limitations of the policy, so far as they relate to the circumstances and subject of the risk, are essential parts of the contract; and it is immaterial whether or not the insured has read the policy, and knows its contents. The legal 81 Mueller v. Insurance Co., 87 Pa. St. 399; Grace v. Insurance Co., 16 BlatcM. 433, Fed. Cas. No. 5,648. Last case reversed on another point In 109 U. S. 278, 3 Sup. Ct. 207. 82 Bennett v. Insurance Co., 55 N. J. Law, 377, 27 Atl. 641. (69) § 21 LAW OF FIRE INSURANCE. (Ch. 1 effect of the language employed to express either benefits or obli- gations gains or loses nothing by either the care or indifference of the insured in informing himself as to its meaning and scope. When the insured has the means of knowledge in regard to the terms of the policy he has accepted, and under which he claims loss, his neglect to carefully inform himself cannot be urged to the prej- udice of the insurer, who is not in fault.*^ It will often be a matter of some difficulty to fix the exact point of agreement between parties who are negotiating the terms of insurance. When they proceed along different lines, or if on the same line, but showing distinct points of divergence, there will be no contract. This is illustrated in the case of Stephens v. Capital Ins. Co.** The soliciting agent who took application had no au- thority to issue policies or otherwise bind the company by his parol contracts to insure. The application sent in was received at the office of the company on March 10th. The policy was written and mailed to the soliciting agent on the 13th. This he received, and continued to hold when the property was burned, on the 16th. The application requested insurance against fire for $1,540, and against cyclone for |750. This cyclone insurance, the application contem- plated, should apply to all the property included in the fire hazard; but in the policy, as written and mailed to the agent, it was made specific, and covered only a portion of the property which was the subject of the fire risk. The court held that the material disagree- ment between the insurance applied for and that granted showed that when the fire occurred the negotiations were incomplete, and that either party could recede from the undertaking. Certainly the applicant might have refused payment of the premium, on the ground that the policy did not furnish the full measure of indemnity he had asked for. In New York Lumber & Wood- Working Co. v. People's Fire Ins. Co.,*'^ the risk had been carried by the P. Co., who, a few days be- fore the termination of the insurance, wrote a new policy to con- es Wierengo v. Insurance Co., 98 Mich. 621, 57 N. W. 833; Thomson v. In- surance Co., 90 Ga. 78, 15 S. E. 652; Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. E. 31; Virginia Fire & Marine Ins. Co. v. Morgan, 90 Va. 290, 18 S. E. 191; Albrecht v. Railway Co., 87 Wis. 105, 58 N. W. 72. Bi 54 N. W. 139, 87 Iowa, 283. ss 55 n. w. 434, 96 Mich. 20. (70.1 Ch. 1) CONTRACT. § 21 tinue the old one, and forT\arded same to its local agent, to be de- livered to the insured as a renewal of the expiring risk. While thus held by the agent, the first policy terminated, and the property burned. The court held there was no liability; and clearly it was right, as there had been no mutual agreement to continue the in- surance. There was a willingness shown on the part of the P. Co. to renew the policy, but the insured had signified no willing- ness on his part to accept. While an actual, physical delivery of the policy is not necessary for the completion of the contract, the undertaking should advance so far that the insured is entitled to its possession and control. When this is done, if the policy is retained by the insurer's agent, he will hold it as agent of the insured. The circumstances under which a policy is held by the agent will be con- sidered in respect to the question of whether or not there has been a delivery. It was held in Newark Mach. Co. v. Kenton Ins. Co.*° that if the terms of the insurance have been agreed upon, and the completed contract distinctly accepted by the insured, a delivery will be pre- sumed, and, if the policy continues in the hands of the agent, he will be construed to be the agent of the insured for that purpose. When this occurs, although the insured may never have seen his policy, he will be charged with knowledge of its contents.*^ That which is ambiguous or inconsistent in the form or language of the policy must be explained and reconciled so as to preserve good faith, and to recognize the highest intelligence of the contract- ing parties. The circumstances and character of the hazard must be taken into account, when forming a conclusion as to the proper construction which the language of the contract should be given. This was well illustrated in the case of Dailey v. Preferred Masonic Mut. Ace. Ass'n.'* The policy was based on a written application, which fully explained that the person asking for insurance was a conductor on a passenger train. There was a provision printed in the policy that the insurer should not be liable for any injury caused by "entering or alighting from a moving train." The court held that, the occupation of the insured having been explained in the applica- 86 35 N. E. 1060, 50 Ohio St. 549. 87 Wilcox v. Insurance Co., 55 N. W. 188, 85 Wis. 193. «8 102 Mich. 289, 57 N. W. 184. ' (71) § 21 LAW OF FIRE INSURANCE. (Ch. 1 tion, it must be presumed that it was within the contemplation of the parties that the insurance applied for and granted covered all the ordinary hazards of a passenger conductor, which includes that of entering and alighting from moving trains. This case is, referred to only for the purpose of illustration, and without accepting the principle of construction in any larger sense than the one in which it is applied by the Michigan court. It will be observed that in this case the application was a part of the policy, and, the two parts of the one contract being repugnant, they must be brought into agreement by construction. This the court did in the manner ex- plained, and I think correctly; but to extend the application of this rule to embrace imputed knowledge or parol agreements would in- volve perils of the gravest character. Suppose there had been no written application in this instance, and admit the fact to have been known to the agent and to the company that the person ask- ing for insurance was a conductor, and that in the performance of his ordinary duties it frequently became necessary for him to step on and off trains while in motion. Would this knowledge, in any important respect, change the relations of the parties, or create ob- ligations outside of the written contract? If the applicant accepts the policy, he is charged with the knowledge of its contents, and bound by its terms, notwithstanding he will not be protected while entering or alighting from moving trains. The fact that this peril was known to exist does not raise a presumption that it was in- tended to be covered by the insurance. The general promise of in- demnity on the part of the company is qualified with this particular exception. In this respect the company had a right to limit its liability. All Are insurance policies prohibit the keeping of cer- tain articles which are regarded as exceptionally dangerous, and there are other things which are permitted to be kept, but excluded from the insurance, for reasons which are deemed sufiicient. It will sometimes happen that merchandise of a different character, owned by the same person and located in the same place, will be insured at different rates, for the valid reason that articles of a particular class are so delicate or fragile that they are more seriously affected by the accident of fire than other kinds of merchandise. When this occurs, and the owner of the property is unwilling to pay the rate which the insurer demands, no wrong is done, no rule of business (72) Ch- 1) CONTRACT. § 21 or principle of law is violated, if the policy is so written as to ex- press the attitude of the parties, and to except from the insurance such articles or classes of property as are subject to great damage from slight causes, and therefore properly chargeable with a higher rate of premium. The distinctions here are important, and it is to be regretted that they are not always carefully observed by the courts. It is the difference between reconciling the repugnant provisions of a written contract (policy and application), and the presuming of x>arties to have contemplated obligations where there are no evidences of their having done so, beyond the fact that "it might have been." In Fidelity & Casualty Co. v. Teter,^" the statement of facts shows that Teter, who was dealing in horses, had in contemplation a busi- ness venture that made it necessary to undertake a journey to a distant state, and, before starting, went to one Merchant, who was general agent for plaintiff company, and particularly inquired if the accident policies issued by Merchant would protect him, and cover aU accidents happening, or to which he would be liable, either while caring for his horses, or traveling by the ordinary public convey- ances ; and, on being assured by the agent that the protection would be full in either case, Teter accepted a policy which provided that "this covers the assured only against the hazards of travel as a passenger on a public conveyance provided by a common carrier with- in the United States and Canada." The Insured, while attending his horses, was accidentally killed. Action was brought on the policy, to recover the insurance, |5,000. The company defended on the ground that the accident did not occur while the insured was "traveling by public conveyance," and consequently the injury was not one within the terms of the policy. In discussing this case, the supreme court of Indiana plainly indi- cates that the parties to a contract must be bound by the lan- guage employed to express their agreements, when such language can have but one meaning; tha't it is not competent for persons entering into a contract to intend one thing, while using words importing something distinctly different. When the language of the contract is doubtful or ambiguous, then the construction put upon it by the 80 136 Ind. 672, 36 N. E. 283. (73) § 22 LAW OF FIRE INSURANCE. (Ch. 1 parties themselves should be influential in determining the construc- tion to be given by the courts. Justice Hackney refers to Olds Wagon-Works v. Coombs,'"' and quotes approvingly as follows: "In interpreting a contract, the language employed therein is the ex- clusive medium through which to ascertain its meaning. The situa- tion of the parties, and the circumstances under which the contract was made, may become a proper subject of inquiry, in order to arrive at the sense in which the language was employed." Applying the rule of construction which I have here set forth to the accident policy accepted by Teter, the court said: "This contract is free from ambiguity, and is susceptible of construction by the court without the aid of extrinsic facts. Its language is clear, positive, and within the comprehension of a man of ordinary intelligence. With such contracts, the parties are bound by their contents, and are presumed to have acted with full knowledge of their proper con- struction." It will be observ^ed that the court here ignores the state- ment made by Merchant, the general agent of the company, which was accepted by Teter, that the policy would ■^over and protect him against all the ordinary accidents to which he would be subject dur- ing his journey, by public conveyance, or otherwise. The court treats this as having no greater legal effect than an opinion ex- pressed by the agent, which the insured was not bound to accept, and, however it may have influenced his judgment, in no way chahged the liability of the company under the policy. The court said, "False representations as to the legal effect of a written contract do not affect such contracts."^ The principal could have been bound by no statement so palpably in conflict, not only Tjith the plain and ordi- nary meaning, but also with the legal effect, of the contract." § 23. A Void Policy can be Revived only by the Affirma- tive Action of Both Parties. When the policy stipulates that it shall become void on the happen- ing of events particularly designated, such as change of title or con- trol, incumbrance, other insurance, etc., it will be the duty of the 9 124 Ind. 62, 24 N. E. 589. 81 Burt v. Bowles, 69 Ind. 1; Clodfelter v. Hulett, T2 Ind. 137; American Ins. Co. V. McWhorter, 78 Ind. 136. (74) Ch. 1) CONTRACT. § 22 courts to give legal effect to such expressed intention of the parties. Stipulations of this class cannot lose their character, or cease to be ^ital elements of the contract, for the reason that no substantial right has been violated, or the enforcement of the stipulation would be arbitrary. The parties being competent to contract, and having done so, it wiU be presumed that they have acted understandingly ; and, in the absence of fraud, the agreement entered into will not be considered by the courts in reference to the particular benefits or injuries to one party or the other which may result from enforcement. That is a matter which it will be presumed the insured and the in- surer have determined for themselves. The courts cannot always understand the facts and circumstances which are clearly understood by the parties, and influence their judgment, at the time the stipula- tions are entered into. Had different conditions been insisted upon by one or the other, negotiations would perhaps have been broken off, and no contract consummated. As courts and juries cannot look into the heart of man, and discover the motive that governs conduct in particular cases, they are incompetent to decide as to the reason- ableness or materiality of particular stipulations which have been made a part of the contract. The existence of such stipulations im- plies that they were regarded as important by the parties, who, act- ing wisely or not in a matter clearly within their constitutional privileges, cannot be interfered with by the courts, nor arrested in any manner, while exercising a right fundamental and paramount, — the right to make contracts concerning the ordinary affairs of life. Judge Jackson, of the United States supreme court, in the case of Imperial Fire Ins. Co. v. Coos Co.,'^ said: "For a comparatively smaU consideration, the insurer undertakes to guaranty the insured against loss or damage, upon the terms and conditions agreed upon, and upon no other; and when called upon to pay, in case of loss, the insurer therefore may justly insist upon the fulfillment of these terms. If the insured cannot bring himself within the conditions of the policy, he is not entitled to recover for the loss. The terms of the policy constitute the measure of the insurer's liability, and in order to recover the insured must show himself within those terms. • * * It is immaterial to consider the reasons for the conditions 8 2 14 Sup. Ct. 379, 151 TI. S. 452. (75) § 22 LAW OF FIRE INSURANCE. (Gh. 1 or provisions on which the contract is made to terminate, or any other provision of the policy which has been accepted and agreed upon. It is enough that the parties have made certain terms and conditions on which their contract shall continue or terminate. The courts may not make a contract for the parties. Their functions and duty consist simply in enforcing and carrying out the one actually made." There are no carefully considered cases where a different principle of law has been applied, or seriously contended for. The courts have been often called upon to construe, but never to annul, a contract made by the parties in interest, and to substitute one of their own creation. When contracts are unskillfuUy formulated, or expressed in obscure and ambiguous terms, there will sometimes exist a reason- able doubt as to what was intended. The settlement of this ques- tion is the duty of the courts. Its wisdom may be employed to de- fine the meaning of words and sentences. When this is done, the contract will be enforced, consistently with the interpretation or con- struction given. There is another class of cases which has produced much con- fusion, and has uusettled cpiuions where careful distinctions have not been observed. It has been often held — and correctly, too, I think — that an insurance company cannot insist upou lorfeitures, under the terms of its policy, by reason of facts of which it had knowledge when the policy was issued. In these decisions I find nothing inconsistent with the law as set forth by Justice Jackson ill the case above referred to. The courts properly proceed upon the theory that the parties cannot be presmned to have contem- plated an insurance that did not insure. They assume that the parties to a contract did act with good faith, and with an intelligent, understanding of the obligations mutually undertaken; but it is found that the insured has paid a premium, and received from the insurer a form of contract which by its own terms is void from the beginning. One party has given a consideration, and the other party has taken it; but the first receives no promise, and the last assumes no duty. It being recognized that the law of compensa^ tion governs in all business engagements, the presumption here' arises that the policy does not accurately express the agreement of (7G) ■Ch. 1) CONTRACT. § 22 the parties; and in sncli cases parol testimony is permitted to support estoppel, show waiver, or even to reform the contract. In Imperial Fire Ins. Co. v. Coos Co., the policy expressed a condi- tion that it should be void and of no effect, if without notice to the company, and permission therefor indorsed in writing on the policy, mechanics should be employed in building, altering, or repairing the premises. It was in evidence, and not disputed, that me- •chanics had been employed on the premises for a period of five or six weeks, and considerable changes had been made in the arrange- ment of partitions, floors, heating appa^ratus, etc., and that car- penters, masons, painters, and plumbers had been thus engaged without the knowledge of the insurer; but it was conceded that the work had been completed, and the last of the mechanics had i-etired, a few hours before the fire occun-ed. The insurer con- tended that it was wholly immaterial whether the hazard had been so changed on account of the improvements made as to increase the risk; that the conditions of the policy had been violated by the employment of mechanics on the premises without its written per- mission, and that the agreed eifect of such violation was to relieve the insurer from its promised contingent liability; and that, the policy having become void when the reconstruction of the build- ing was entered upon, it did not revive when the work was com- pleted. And this was the view of the matter taken by the court. It said: "These provisions are not unreasonable. The insurer may have been willing to carry the risk at the rate charged and paid, so long as the premises continued in the condition in which they were at the date of the contract; but the company may have been unwilling to continue the contract under other and different conditions, and so it had a right to make the above stipulations and conditions on which the policy or contract should terminate." The court, further discussing the different views contended for, explained that the question of materiality was no element of the conditions on which the forfeiture was based; that it was com- petent for the parties to agree that the continuance or failure of the contract should not depend upon facts and opinions difficult to •determine, and concerning which vexatious controversies were like- ly to arise. They could make an arbitrary rule, — one that would be free from doubt, and easy of application. It said, "The violation (77) § 22 LAW OF FIRE INSURANCE. (Ch- 1 by the assured terminates the contract of the insurer, and it could not be thereafter made liable on the contract, without having waived that condition." In Frost's Detroit Lumber & W. W. Works v. MUlers', etc., Ins. Go.,"" the policy provided that all ordinary repairs could be made without prejudice, but that if the building insured be altered, added to, or enlarged, due notice must be given, and consent obtained. The building insured was afterwards, and during the term of the policy, without knowledge of the insurer, substantially enlarged; and the court held that there coulij be no recovery, although the risk had not been increased. So, too, in Mack v. Rochester German Ins. Co.°* the policy stipu- lated for a forfeiture if, without notice to and consent of the com- I)any, mechanics should be employed, making changes or repairs in the building covered. At the time of the flre, workmen were engaged on the premises, contrary to the provisions of the policy. The court said: "These conditions, when plainly expressed in the policy, are binding upon the parties, and should be enforced by the courts if the evidence brings the case clearly within their meaning and intent." In deciding the case of Imperial Fire Ins. Co. v. Coos Co., supra, the court referred with approval to Kyte v. Commercial Union Assur. Co.'" The provision of the policy there was that it should become \oid if, without consent, the circumstances of the risk should be so changed as to increase the hazard, or if there should be kept on the premises such articles as were prohibited by statute. Afterwards, intoxicating liquors were kept and sold, in violation of law. This use of the premises, however, was discontinued before the property was burned, but the court held that this fact did not relieve the for- feiture. It said: "The contract of insurance depends essentially upon an adjustment of premium to the risk assumed. If the as- sured by his voluntary act increases the risk, and the fact is not known, the result is that he gets an insurance for which he has not paid. * * * An increase of risk, which is substantial, and which is continued for a considerable period of time, changes the basis upon which the contract of insurance arises;- and since there is a provi- sion that in case of an increase of risk which is consented to or known 93 37 Minn. 300, 34 N. W. 35. a* 106 N. Y. 560, 13 N. E. 343. so 149 Mass. 116, 21 N. E. 361. (78) •^b. 1) CONTRACT. § 22 by the assured, and not disclosed and the assent of the insured ob- tained, the policy shall be void, we do not feel at liberty to qualify the meaning of these words by holding that the policy is only sus- pended during the continuance of such increase." "^ In New v. German Ins. Co.'''' there is a distinct recognition of the rule that, when a policy is once void, ^t will continue so until there has been such affirmative action by both parties as will be equiva- lent to the making of a new agreement. The property in this case had been sold, and the policy assigned to the purchaser, and afterwards forwarded to the company for its assent to the assignment. This was not given, and the policy was returned to the assignee, who did not observe that consent had been withheld, and laid the policy away until after the property was burned. Action to recover on the policy was based on an alleged waiver. It was held that waiver could not have the effect to restore a contract that was actually void. If the violated stipulation made the promise of indemnity, or obligation to pay a loss, only voidable, then waiver would be sufficient to save a forfeiture. The court very pertinently said, "A void contract is in- capable of being inspired with legal validity except by some act equivalent in effect to a new execution." "' 96 Lyman v. Insurance Co., 14 Allen (Mass.) 329. 9 7 5 Ind. App. 82, 31 N. E. 475. 98 1 May, Ins. (New Ed.) 126; New York Cent. Ins. Co. v. Watson, 23 Mich. 486, at page 488; Brink v. Insurance Co., 70 N. Y. 593. In case last cited the court said: "When the assured has lost all right under the policy, and the insurer has become absolved from all liability, the assured cannot by his own act restore the contract, or reimpose a liability upon the insurer. That can only be done by a new agreement, founded upon a new consideration." Ferree v. Trust Co., 07 Pa. St. 373; Fabyan V. Insurance Co., 33 N. H. 203; iloore v. Insurance Co., 62 N. H. 240; Shep- herd V. Insurance Co., 38 N. H. 232. When the obligation of a contract is at an end because its terms and con- ditions have been broken by the insured, there is no duty resting upon the company to declare a forfeiture, or to return the unearned premium. Carey y. Insurance Co., 54 N. W. 18, 84 Wis. 80. (79) § 23 LAW OF FIRE IKSURANCE. (Ch. 1 § 23. The Divisibility of the Contract an Unsettled Doctrine. The contract of insurance is generally held to be indivisible. In several states there has been a departure from this rule, and the policy is treated as separable, when written to cover on different subjects in specific sums; and, when there has been an avoidance as to one of these subjects, the liability of the company will continue unimpaired as to the remainder of the policy. Elsewhere the rule has been enforced that the contract is entire when the premium is in one sum, and indivisible without judicial inquiry, and a resort to involved and complicated computations. Mr. Parsons states the rule concisely to be, "If the consideration be single, the contract is entire." This statement of the law is sus- tained by all the text writers, and, besides, has the support of many decisions emanating from courts of great learning and wisdom. As we have before pointed out during the progress of this discussion, the insurance contract, in many respects, is sui generis. Circum- stances will sometimes arise when the ordinary rules of construction will impose hardships, and involve mischievous consequences that are unnecessary, and were not within the contemplation of the parties when the undertaking was entered upon. Courts have gen- erally recognized this fact, and have given to their interpretations a freedom and elasticity which have been found necessary to protect litigants, and to save forfeitures and secure a faithful performance of contract obligations. There is, perhaps, no*class of contracts to which the principle of entirety should inhere with greater persist- ency than to that of insurance. A familiar illustration will make the truth of this proposition apparent. B. owns a mercantile. build- ing and stock. Both are insured in one policy, — each, we will sup- pose, for $5,000. Subsequently B. procures apother insurance on the stock, for a sum greater than its value. The second policy is obtained without the knowledge of the first insurer, and in violation of the terms of its policy. The excessive insurance attaches a moral hazard to the whole property. The diminished interest of the owner in protecting the property, if honest, and the increased temptation to burn it, if dishonest, involve, to precisely the same extent, the (SO) Ch. 1) COKTRACT. risk on the buUding as it does that on the stock. Xow, if the con- tract is held to bo separable, and that portion which relates to the stock Toid on account of the other insurance, while the part covering on building continues valid, a v^rong is done the insurer, in depriving him of the conditions of security which he had carefully provided for by the terms of the policy. So far as the circumstances of the haz- ard have been changed, it is wholly immaterial whether the addi- tional insurance was placed on the stock, or on the building. That which affects the moral hazard and increases the perils of one in- creases in exactly the same degree the perils of the other. The supreme court of Xebraska, in the case of State Ins. Co. v. Schreek,^' states a view of this matter which we think cannot be sus- tained on either a logical or equitable basis. The policy there cov- ered both the building and contents, each being insured in specific sums. The real estate, after the insurance was placed, became mort- gaged, in contraTention of the terms of the policy; and the court held that there was an avoidance as to the building, and that the com- pany could not be required to pay, "as it had so stipulated, for cer- tain implied valid reasons." That is, as may be supposed, because the diminished interest which the insured would have in the property on account of the mortgage would lessen his vigilance and care in protecting the building against accident from fire; and then, as if to snatch the chattels insured by the policy "as a brand from the burn- ing," the court adds, "Now, it cannot be contended that the fact of mortgaging the real estate could in any degree affect the risk, so far as the personal property is concerned." This proposition is not war- ranted in practical experience. As certainly as the cargo goes down with the ship at sea, there is loss or damage to personal property contained in buildings when the buildings themselves are the subject of loss. It is indisputably true that chattels are sometimes removed from burning stores and warehouses, but experience demonstrates that, in a large proportion of cases, stocks burn with the building in which they are contained; and, when their removal is possible, it is generally incomplete, and always attended with loss and dam- age. Many classes of stocks, on account of their fragile and in- flammable character, pay higher rates of insurance than the build- 9 2T Xeb. 527, 43 N. W. 340. OSTE.FIRE INS. 6 (SI) § 23 LAW OF FIRE INSURANCE. (Ch, 1 ings in which they are contained. Generally, the building and its contents should be considered as one risk. The position taken, therefore, by the Nebraska court, is clearly illogical, and cannot find support in the reasons giren. In McQueeny v. Phenix Ins. Co.^"" is found a- careful and exhaust- ive discussion of the question under consideration. The Phenix Company insured two dwellings under one policy. They were sit- uated about 30 feet apart. One was insured for $400, and the other for $600. The policy contained a clause as follows: "If, during this insurance, the above-mentioned premises should become vacant or unoccupied, or if the occupation or possession of such premises is changed, except as herein specially agreed to in writing upon the policy, then and from thenceforth, so long as the same shall con- tinue vacant and unoccupied, or shall be so appropriated, applied, or used, this policy shall cease, and be of no force and effect." One of the dwellings at the time of the fire, it was admitted, was occupied; in the other no one was living. The insurer acknowl- edged liability and paid the loss on the dwelling that was inhabited, and claimed that the policy was void as to the other. The plain- tiff contended that the two houses were a part of the same prem- ises insured by one indivisible contract, and that, as the insurer acknowledged its liability for the loss on one building, it could not properly refuse payment for the other, and the court so held. We quote from the opinion the conclusions reached by the court, and its reference to authorities examined: "If the consideration to be paid is single and entire, the contract must be held to be entire, although the subject of the contract may consist of several«dis- tinct and wholly independent iterns.^"^ "In the case of McClurg v. Price,"^ it is said: 'If the consider- ation is single, the contract is entire, whatever the number or va- riety of the items embraced in its subject.' Our attention is called to no case in which the correctness of this statement of the general rule is denied or questioned. It has been stated and approved by many authors and courts, but it is said that 'a policy of insurance 10 52 Ark. 257, 12 S. W. 498. 1012 Pars. Cont. 519; Johnson v. Johnson, 3 Bos. & P. 162; Miner v. Bradley, 22 Pick. (Mass.) 457. 102 59 Pa. St. 420. (82) Ch. 1) ^ CONTRACT. § 23 is a contract so different from those in which these general rules have been laid down that it is doubtful whether they can be ap- plied to this peculiar contract, or in what manner the application of them should be made.'" ^"^ The court then proceeds to say: "In what the difference consists, or why those general rules which the wisdom of our jurisprudence has formulated to govern in the consideration of contracts should not be applied in construing in- surance policies, is not stated, nor apparent to us. We can see no good reason why a contract which, if made between individuals, would be entire, should be held divisible if made between an individ- ual and an insurance company.^"* i»3 Quarrier v. Insurance Co., 10 W. Va. 530. iO'« When the policy covers on separate subjects, each will be regarded as a distinct insurance, and the company discharged as to one may be held as to another. Traliue v. Insurance Co., 25 S. W. 848, 121 Mo. 75. When policy insures specifically different subjects, it is severable, and ad- mits of being separately executed. Kansas Farmers' Fire Ins. Co. v. Saln- don, 53 Kan. 623, 36 Pac. »83. This view is sustained by the courts of last resort in the states of Maine, Massachusetts, Pennsylvania, Maryland, Virginia, Wisconsin, Michigan, and Minnesota. It receives support from the courts of New Hampshire and Vermont, although not expressly approved by them, and the supreme court of West Virginia held the contract entire. Dole v. Insurance Co., 51 Me. 472; Richardson v. Insurance Co., 46 Me. 394; Friesmuth v. Insurance Co., 10 Gush. (Mass.) 587; Kimball v. Insurance Co., 8 Gray (Mass.) 33; Lee V. Insurance Co., 3 Gray (Mass.) 583; Gottsman v. Insurance Co., .56 Pa. St. 210; Trustees of Fire Ass'n of Phila. v. Williamson, 26 Pa. St. 190; As- sociated Firemen's Ins. Co. v. Assum, 5 Md. 165; Bowman v. Insurance Co., 40 Md. 620; Moore v. Insurance Co., 28 Grat. (Va.) 508; Hinman v. In- surance Co., 30 Wis. lot); Schumitsch v. Insurance Co., 48 Wis. 26, 3 N. W. 595; Aetna Ins. Co. v. Resh, 44 Mich. 55, 6 N. W. 114; Plath v. Association, 23 Minn. 479; McGowan v. Insurance Co., 54 vt. 211; Baldwin v. Insurance Co., 60 N. H. 422; Bryan v. Insurance Co., 8 W. Va. 605. Opposed to this view, we find discussions of the courts of last resort in the states of New York, Missouri, Kentucky, and Nebraska, and tlie decision before referred to (Quarrier v. Insurance Co., supra); Merrill v. Insurance Co., 73 N. Y. 462; Phoenix Ins. Co. v. Lawrence, 4 Mete. (Ky.) 9; Koontz v. Insurance Co., 42 Mo. 126; Loehner v. Insurance Co., 17 Mo. 247; State Ins. Co. V. Schreck, 27 Neb. 527, 43 N. W. 340. The force of the Kentucky case is much impaired by the fact that it re- lied on the case of Clark v. Insurance Co., 6 Cush. (Mass.) 342, which has never been followed in its own state, but impliedly overruled in several (83) § 23 LAW OF FIKE INSURANCE. (Ch. 1 "The case of Merrill r. Agricultural Ins. Co., supra, is based upon the fact that there was a separate valuation of the subject of in- surance. It is more reasonable, we think, to hold that the sole effect of the apportionment of the amoimt of insurance to the dif- ferent subjects insured is to limit the extent of the insurer's risk upon each item to the amount named. It cannot be said to make a several contract as to each subject of insurance; for a consideration is necessary to each contract, and, the consideration being in gross, there is no way to apportion it to the several contracts so as to sustain each by its proper consideration." We may illustrate the application of this doctrine of the entirety of the contract in another way. The plaintiff in the case under con- sideration contended that the defendant, having acknowledged lia- bility on account of payment of the loss sustained by the burning of one of the dwellings, was estopped from denying liability as to the other, the contract being inseparable. If admitted to be valid in part, it would follow, as a matter of law, that it was valid in whole. This proposition suggests a different problem, but one of no greater difficulty than would be presented by stating in the re- verse form in which it is generally applied the rule, "Void in part, void in whole." What, then, under a state of facts such as the McQueeny Case presents, would have been the rights of the par- ties had the defendant company refused to pay for either dwell- ing on the ground that the contract was entire, and that the avoid- ance as to one of the buildings on account of the vacancy caused a forfeiture as to both? The logical conclusion is that, if the case had been brought to the consideration of the court in this form, the insurer would have been discharged. ^"^ later cases. The New York supr^e court liad held such contracts entire before the case of Merrill v. Insurance Co., supra, was decided. Smith v. Insurance Co., 2.5 Barb. (N. Y.) 497. And since then the superior court of the s-tate has held such a contract entire. Herrman v. Insurance Co., 45 N. Y. Super. Ct. 402. 105 The divisibilily of the insurance contract was before the supreme court of Indiana in the case of Geiss v. Insurance Co., 123 Ind. 172, 24 N. B. 99. The defendant company had issued to plaintiff its policy for $1,000, covering in specific sums on several subjects, among which was a soda foun- tain insured for 9;350. It was shown that plaintifC was not the owner of the soda fountain.— a fact which was not disclosed to the defendant when (84) Ch. 1) CONTRACT. § 23 At this time there are not many questions involved in the litigation of insurance cases tMat are more abstruse, or give more trouble to the courts, than that of the unity or divisibility of the contract. Until quite recently, the decisions have shown a concurrence of opinion. the insurance was cttivted. The policy contained a stipulation, in substance, that, if the insured was not the sole and unconditional owner of the property insured, the policy should be void. The court said: "It follows, as a mat- ter of course, as applied to that item of property the policy was void. The qutstion is, can it be upheld as respects the other separate and distinct classes of property? In Havens v. Insurance Co., Ill Ind. 90, 12 N. E. I.ST, the conclusion was reached that where property covered by a policy of in- surance, altlx'ugh consisting of separate items, constitutes substantially one risk, and Is necessarily subject to destruction by the same conflagration, then, even though separate amounts of insurance be apportioned to each separate item or class of property, if the consideration for the contract and the risk are both indivisible the contract must be treated as entire, and any breach of a stipulation which renders the policy void as to a part aifects the other items in the same manner. * * * The court cannot say that the insurance company would have iusured the soda fountain if the true state of the title thereto had been disclosed, nor can we say that it would have insured the otlier items or classes of property without insuring the soda fountain. The contract was entire and indivisible, and to hold the company liable would be to enforce upon it an obligation which it never entered into. * * * Where the validity of the insurance is made to de- pend upon the assured being the absolute and unconditional owner of the true title of the property insured, a failure to set forth the title with sub- stantial accuracy renders the policy void, not only as to the property, the title to wliich is not truly represented, but all .other property covered by the same policy, and subject to the same risk." Wilbur v. Insurance Co., 10 Cush. (Mass.) 440; May, Ins. § 287. In Havens v. Insurance Co., supra, the policy covered in separate sums on an hotel building, and the furniture therein. Another policy was taken out in the Phenix on the building, without notice to the first insurer, and in violation of the terms of its policy. The court held that the contract was inseparable, and there being an avoidance as to the building, on ac- count of the other insurance, there could be no recovery for loss on furniture. The case of Commercial Ins. Co. v. Spankneble, 52 111. 53, is referred to as iin authority sustaining the doctrine that the insurance is separable when .several subjects are covered in specific amounts. The facts necessary for an understanding of the points presented are stated in the opinion of the court substantially as follows: Anna Spankneble was a married woman, who owned a brewery which was insured under the policy in suit. The policy provided against alienation, in the following manner: "In case of (85) § 23 LAW OF FIRE INSUBANCE. (Ch. 1 Some one, having more or less wisdom than others, or perhaps hav- ing more courage, or less respect for authority, recognizing that a con- tract must be understood in reference to the purpose for which it was- made, ventured upon a departure; and thereupon the question be- any sale, alienation, transfer, conveyance, or change o£ title in the property insured by this company, or o£ any interest therein, such insurance shall be void and cease." It was claimed by the plaintiff in error that the build- ing and the boiler, which were insured in separate sums, had been sold to- one Klausen, but the court was of the opinion that the evidence did not support this conclusion. There was some testimony tending to prove that the husband of the insured had undertaken to tell the property as alleged, but, whether such was his purpose or not, the evidence failed to establish the fact of its accomplishment. The court said: "It nowhere appears that a valid sale of the house was made. It does not appear that such an instru- ment was executed as would pass title, nor was it severed from the free- hold of which it was a part. Again, from an examination of the husband, although he admitted it to be a sale, still, taking his testimony altogether, we are satisfied that the bill of sale, as he calls it, was only intended as a mere security. This is rendered more apparent because he says Klausen came to him afterwards, and asked him how much he must have for the boiler; and, on being informed, Spankneble sold it. If it had been his, why ask the former owner how much he must have on the sale? Again, the policy was to the appellee, and there is no pretense that she ever sold, or authorized the property to be sold; and surely a policy containing such a condition cannot be defeated by a stranger to the transaction, nor should it be by the husband, whose right to sell and dispose of the wife's realty is not recognized." Having thus reviewed the evidence, and reached the conclusion that there had bfeen no sale, and consequently no violation of the terms of the policy that would cause an avoidance, the court adds: "It will be observed that the various articles of property were separately in- sured, and on this boiler there was $500 risk named, and separately speci- fied. Under such a policy, even if the condition related to the personalty, it would be a fair and reasonable construction to say that the sale named in the condition referred to each Item of separate insurance, and that the sale of one class separately insured would rot affect the other. But the clause under consideration obviously relates alone to the real estate. It refers to sale, conveyance, alienation, transfer, or change of title in the property insured; but, if such is not the true construction, as the boiler was alone sold it only renders the insurance on it void." From the statement here given, it appears clearly that the question of the divisibility of the contract was not, in the mind of the court, a con- sideration of any importance in the formation of its judgment concerning the rights of the parties. It declares its opinion, without qualification that (86) ^^- ■^) CONTRACT. § 23 came unsettled, and an open subject for discussion. Now there are widely-opposing opinions, and many difficulties are encountered in giving to the diverse constructions of the courts the support of valid reasons. In New York, Nebraska, Kansas, and several other states, it has been held that where a policy covers on building and contents in separate sums, and where the policy provides that, if the property shall be mortgaged without notice, it shall become void, an incum- brance upon one subject will not discharge the company as to the other.* In other jurisdictions it has more frequently been held that the condition in regard to alienation referred only to the realty, and, as the sale was only of personal property, no forfeiture had resulted. What was said, therefore, in regard to the divisibility of the contract, will be entitled to no greater weight or influence than obiter dicta. As no substantial in- terest was involved in this view of the subject, as no rights were being de- termined, it is fair to suppose that the court did not intend that the declara- tion of opinion concerning this proposition of law, which, while not wholly irrelevant, was immaterial, should be regarded as authority in other and subsequent cases. The same court, in Hartford Fire Ins. Co. v. Walsh, 54 III. 164, again inti- mates that the contract may be considered as separable where two build- ings are insured in specific sums in one policy. In that case, too, the point was not vital, and the reference to the question was wholly incidental. It does not appear, therefore, that the Illinois court has ever directly passed upon the question of the entirety of the insurance contract. When, under the form of the statutory policies generally in use, separation is possible, and a forfeiture comes to exist in respect to one subject, there will be a forfeiture in regard to all. Martin v. Insurance Co. (N. J. Sup.) 31 Atl. 213. It was a condition that the entire policy should be void if the subject of Insurance "he a building, and stand on leased ground," etc. The policy covered a building and machinery. The supreme court of Texas held that the policy must be literally construed, and that, as only a part of the subject insured was a building, the forfeiture did not occur. Hibernia Ins. Co. v. Bills (Tex. Sup.) 29 S. W. 1063. If the risk be an entirety, any change that will avoid a part will avoid the whole. "Thus, if a portion of the property be mortgaged, or additional in- surance be taken upon it, or if the title or ownership of a portion be changed, without the consent of the insurer, such changes affect the entire risk, and cause a forfeiture." Manchester Fire Assur. Co. v. Glenn, 13 Ind. App. 365, 41 N. B. 847. * Merrill v. Insurance Co., 73 N. Y. 452; Insurance Co. v. Fairbanii, 32 Neb. 750, 49 N. W. 711; Insurance Co. v. York, 48 Kan. 488, 29 Pac. 586. (87) § 23 LAW OF FIBE INSURANCE. (.Ch. 1 a different rule prevails, under precisely the same state of facts.f The first of these classes of decisions wholly ignores the only consideration for stipulating that the company shall be relieved from the payment of the loss when the property is mortgaged. It will be understood, of course, that the provision in regard to incumbrances relates to what is known as "a moral hazard," which comes to exist when the interest of the insured is lessened or qualified by the inhibited mort- gage so as to diminish his concern for, and watchfulness in protecting, the property insured. When the policy attaches to a building and to its contents in separate sums, and an incumbrance is placed upon either one or the other, the reason for the stipulation is the same as it would be if the incumbrance included both subjects alike, for the ex- <:ellent reason that, if the incumbrance on the contents creates a moral hazard as to that subject, the building is also involved. And so, too, if the mortgage on the realty has the effect to lessen the insured's care in its protection, then the hazard on the contents is also increased. But it is different in the case of two buildings (if not exposing one an- other), when insured specifically in the same policy, one being mort- gaged and the other not. The indifference of the owner, because of his lessened interest in regard to the preservation of one, would not necessarily extend to, and, increase the moral hazard of, the other part of the risk. The same reasons, therefore, why the first policy should be regarded as entire, do not exist in reference to the last; but the courts, in applying a general rule, do not often take into con- sideration the different circumstances which each cas6 presents, and frequently it would not, perhaps, be entirely proper for them to do so. It will be conceded that, when the motive of the parties does not ap pear conclusively in the contract itself, the courts will not be justified in going outside to find one; but when it is obvious that the intention of the insurer was to stipulate for that vigilance in the care and pro- t Friesmuth v. Insurance Co., 10 Gush. (Mass.) 587; Gottsman v. Insurance Co., 56 Pa. St. 210; Bowman v. Insurance Co., 40 Md. 620; Hinman v. In- surance Co., 30 Wis. 159; Plath v. Insurance Ass'n, 23 Minn. 479; Baldwin V. Insurance Co., 60 N. H. 422; McGowan v. Insurance Co., 54 Vt. 211; Gar- ver V. Insurance Co., 69 Iowa, 202, 28 N. W. 555; Havens v. Insurance Co., Ill Ind. 90, 12 N. E. 137; Essex Sav. Banli v. Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930, and 18 Atl. 324; Western Assur. Co. v. Stoddard. SS Ala. 600, 7 South. 379; Hollaway v. Insurance Co., 121 Mo. 87, 25 S. W. 850; Id., 21 Ins. Law J. 379. (88) Ch. 1) CONTRACT. § 23 tection of the property whieli can arise only from a substantial, per- sonal interest, the courts cannot, in the performance of their duties, disregard the fact. A distinguished jurist once said: "The judges ought to be curious and subtle to invent reasons and means to make acts effectual, according to the just intent of the parties. They will not, therefore, cavil about the propriety of words, where the intent of the parties appears, but will rather apply the words to fulfill the in- tent, than to destroy the intent by reason of the insufficiency of the words." Recently the appellate court of the state of Indiana, where it has been uniformly held that the insurance contract is entire, had under consideration a policy that provided that, if the property in- sured became incumbered without notice to the company and its consent obtained, a forfeiture should occur. A part of the proper- ty insured, subsequent to the attaching of the policy, became mort- gaged, but the court decided that there could be no forfeiture un- der such a provision unless the whole property insured was in- cumbered.^"" This case is referred to as a curious instance of judicial differentiation, and a doubtful application of the doctrine of the indivisibility of the insurance contract. Invoking the com- mon rule that the law abhors forfeitures, the court establishes an- other rule, by which the validity of the contract can be maintained without departing from the principle of constructiou to which the courts of Indiana for a long period have been committed. There is a late case from the court of appeals of Virginia (Con- necticut Fire Ins. Co. v. Tilley),^"' where 16 tenement houses were insured under one policy, there being |187.50 written on each. The policy in that suit contained the usual clause in regard to avoidance in case of vacancy. At the time of the fire, eight of these houses were vacant; the others were occupied. The plaintiff contended, consistently with the doctrines held by the supreme court of Arkan- sas, that half of the buildings being occupied, and the policy being entire, there was no avoidance as to any of the buildings. On the other hand, it was claimed by the defendant that the policy being inseparable, and one-half of the buildings being vacant, and a for- 106 phenix Ins. Co. v. Lorenz, 7 Ind. App. 206, 33 N. E. 444. 107 88 Va. 1024, 14 S. E. 851. (89) § 24 LAW OF FIRE INSURANCE. (Ch. 1 feiture as to such, there was an avoidance as to all. But the Vir- ginia court thought differently, and held that the amount written on each building was a separate and distinct insurance; that the in- demnity was good as to such buildings as were occupied, and void as to others. We think this decision substantially just to both parties, and in no wise conflicting with legal rules. There were 16 different and distinct risks, all written, as a matter of convenience, in one policy. Had the court held that the contract was insepara- ble, it would have been compelled, from the logic of circumstances, to decide that the policy was void as to all the buildings, including those occupied, or valid as to all, including those that were vacant. This would have involved a gross injustice to one party or the other, and in no way have given legal effect to the well-understood intent of the contract. § 24. Parol Evidence Inadmissible to Vary the Terms of a Written Contract. The evidence of a contract, when completed, cannot exist partly in writing and partly in parol. It must be wholly either one or the other, and if in writing, in the absence of fraud or mistake, parol testimony will not be received to change or vary its terms. All pre- vious and contemporary agreements, the law will presume, have been merged in the written instrument. This rule of law is very old, and, as an early writer has said, "it hath long guided the wis- dom of the courts'." The rule was formed to prevent fraud, and to establish the verity of contracts on the basis of the highest possible character of evidence. It recognizes the infirmities of the memory, and the common desire of dishonest persons to enjoy the beneficial stipulations of a contract, and to be relieved from those that are burdensome. In many contracts into which persons enter, there are elements of uncertainty and chance; there are involved the pos- sibilities of both gain and loss. The risk of performance is com- pensated in the promise of advantage. The result of the. under- taking may show mutual profit, or there may be a gain to one party, and a loss to the other. It will often occur that a strong tempta- tion will be presented to one or the other of the parties to a con- tract to escape from the obligations they have assumed, and en- (90) Ch. 1) CONTRACT. I 24 deavor to substitute others that will be less onerous. This -would become possible, through fraud and perjury, were it not for the application of an inflexible rule that the terms of a written con- tract cannot be changed by parol testimony. When the parties haye reduced their agreements to writing, the instrument presump- tively expresses with greater precision their intentions at the time than the subsequent recollections of either of the parties. The writing of a contract implies deliberation and care in defining its terms and obligations. The understanding of the parties will or- dinarily become clear and fixed in the process of elaboration, and in the definite statement of written language. If, therefore, the negotiations have not resulted in the parties perfectly understand- ing one another, the supposed agreement has now taken precise form; and, if not accurately expressing their intentions, it may be corrected; and the law presumes such will be the case, and the verity of the written instrument cannot be disputed, in the absence of fraud or mistake. An old law writer has very properly said, "The natural inclination to rely on the memory for what transpired is born of a desire to have the contract other than what it is." In the case of Hartford Fire Ins. Co. v. Webster,^"* there was a stipulation in the policy that it should be void if the property in- sured became vacant, and so continued for a period of more than 30 days, without immediate notice to, and consent of, the company. The evidence showed that such vacancy had occurred, and that no- tice of the fact had not been given as provided. The insured tes- tified that he did not notify the company of the vacancy, because the agent from whom he obtained the policy told him that it was not necessary to do so. The trial court instructed the jury that "the neglect of Webster to give notice of the vacancy of the prem- ises for more than thirty days would not vitiate or void the policy, if the jury believed from the evidence that the defendant, or its agent, waived such notice at the time the policy was issued, or at any other time before the loss." Justice Scholfleld, of the su- preme court, said: "This instruction is clearly erroneous, and should not have been given. No principle of law is better settled than that the evidence of a contract cannot exist partly in writ- 108 69 111. 392. (91) § 24 . LAW OF FIRE INSpEANCE. (Ch. 1 ing, and partly in parol. Whatever may have been said in refer- ence to the contract between the parties at the time of, or prior to, its execution, after it was reduced to writing parol evidence was . inadmissible to enlarge, modify, or contradict its terms as expressed in the written instrument." The court then marked an important distinction, which is frequently lost sight of, by adding: "The par- ties might, undoubtedly, bv a subsequent agreement, modify or en- large its terms by parol. » * * What was relied on as an ex- cuse for not complying with its tenns was said when the contract was being made, and is directly contradictory to it, as evidenced by the policy." This decision from the Illinois court aptly illustrates the rule as applied to insurance cases. Where the parties have expressed their agreement in writing, the law will presume that it has been done ac- cording to their understanding at that time, and will not allow parol testimony to alter or contradict the written instrument. The rule re- lates, in its application, only to evidence of what the contract was when completed by the assent and agreement of the parties, and for- bids either of them showing by parol that it was something different. Legal presumptions will go no further in support of the verity of the written instrument, for it is competent for the parties, by subsequent parol agreements, to limit or extend, or even abrogate, the entire con- tract. The law will not prevent persons who agree in writing to- day from agreeing to something entirely different, by parol, to-mor- row. Such restrictions of the liberty to make contracts would be an unwise abridgment of personal rights, and contrary to public policy. In the case of Hartford Fire Ins. Co. v. Davenport ^'" the policy pro- vided that it should be void if the property should remain unoccupied for more than 15 days; and it was held that the condition was not waived by the agent's consent, prior to the issue of the policy, that it might remain unoccupied; that a written contract cannot be varied by a previous or contemporaneous oral promise. We quote from the opinion as follows : "In this case the vacancy concerning which the parties conversed, if there was any such conversation, was one con- templated in the future; and the stipulation or understanding, if it amounted to anything, was an executory contract, intended to form 108 Hartford Fire Ins. Co. v. Davenport, 37 Mich. 609, 7 Ins. Law J. 22S. (92) Ch- 1) CONTRACT. § 24 a part of the contract of insurance. This being so, the doctrine can- not be admitted that any part of the contemplated contract can rest if parol. The policy was the conclusion of the bargain, and its ac- ceptance would exclude any parol promises inconsistent with it." The supreme court of Wisconsin, in the case of Herbst v. Lowe (Cas- riodar, J., delivering the opinion of the court), said: "The rule is uni- versal that, in the absence of fraud or mistake, proof of antecedent or contemporaneous verbal agreements between contracting parties can- not be received to alter or control their written agreements."" This is on the theory that. all prior negotiations are either merged in, or excluded by, the contract finally made. The same is true in respect to any prior preliminary agreement, in so far as it is covered by, or in. conflict with, the final contract." In Walker v. State Ins. Co.,^^^ the action was to collect a note given to the defendant company for a premium on a policy of insurance. Walker, the plaintiff in error, defended on the ground that there was no consideration, and that there was fraud and deceit in procuring the note; that the insurance was intended to cover certain stock ^'^hich Walker owned, but that the agent of the insurer had filled up the application in such a manner that the stock intended to be insured was no* mentioned, or in any way included, in the policy subsequently written and delivered. While the plaintiff in error admitted that he had the application in his hands, and might have read it, he claimed that he had not done so, and that he had been misled and defrauded by the act of the agent of the company. The court said : "There is no pretense but what the defendant [below] could have read the appli- cation before he attached his signature to it, if he had desired to do so. * * * It was in evidence that the defendant [below] received liis policy, and retained it for some months before he made any objec- tions to it. * * * The court properly excluded the evidence by which it was attempted to vary and contradict the statements of the written application." 110 Hubbard v. Marshall, 50 Wis. 322, 6 N. W. 497; Hooker v. Hyde, 61 Wis. 208, 21 N. W. 52; Oiler v. Gard, 23 Ind. 212; Vandcrkarr v. Thompson, lf> Mich. 82; Kerr v. Calvit, 12 Am. Dec. 537; Whitney v. Smith, 33 Minn. 124, 22 N. W. 181. 111 id Kan. 312, 20 I'ac. 718. (93) § 24 LAW OF FIRE INSURANCE. (Ch. 1 In Frost's Detroit Lumber & W. W. Works v. Millers', etc., Ins. Co./^" a very important enlargement of the mill insured was made in contravention of the terms of the policy; and plaintiff under- took to show by parol testimony that the enlargement of the build- ing was in contemplation, and understood by the insurer, at the lime the policy was issued. The supreme court of Minnesota said, "As we understand the facts sought to be shown, the proof was incompetent under the rule which forbids oral evidence to vary the terms of a written contract." Best, in his Principles of Evidence,"' gives the supposed reason lor the rule in regard to parol evidence. He says that: "It is assumed that, in choosing the solemn form implied to express and embody their personal intention and agreement, parties have in- tended to thereby fully express that intent and agreement; remov- ing them in this manner from the number of debatable questions, and beyond bad faith, or the treacherous tenure of 'slippery mem- ory.' To admit parol evidence would, in the intendment of law, utterly defeat this object. The instrument, therefore, is conclu- sive as to the point which it covers." ^^* In the case of Union Mut. Life Ins. Co. v. Mowry,^^° the supreme €Ourt of the United States insisted upon the application of liiis rule. The policy contained a condition that, unless the premium was paid when due, the policy should be void. The defendant in error sought to excuse default in payment by showing that the agent who took the application on which the policy was issued agreed that the company would notify the insured of the time when the payment of the premium should be made, and that no such notice had been given. It was urged that the failure to give the agreed notice estopped the company from insisting upon the forfeiture. To this proposition the court did not assent. It said: "To this principle there is an obvious and complete answer. All previous and verbal agreements were merged in the written agreement. The understanding of the parties as to the amount of the insurance, 112 17 Ins. Law J. 50, 37 Minn. 300, 34 N. W. 35. 113 Page 229. 114 Freeman v. Bass, 34 Ga. 358; Couch v. Woodruff, 63 Ala. 466; Weeks v. Medler, 20 Kan. 57. 115 96 U. S. 544. (94) Ch. 1) CONTRACT. § 25 the condition upon wlxieli it should be payable, aud the premium to be paid, was there expressed, for the very purptise of avoiding any controversy respecting them. The entire engagement of the par- ties, with all the conditions 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, which is competent to give all needful relief in such cases; but, until thus corrected, the contract must be taken as expressing the understanding of the assured and of the insurance company." A policy is only the written evidence of a contract that already exists, and when the policy has not been written, or when properly executed is withheld, the contract for insurance, if complete, may be shown by parol. The one thing indispensable is that the minds of the parties have met in respect to all the essentials of the con- tract; that the aggregatio mentium exists.^^° § 25. Courts Cannot Make Contracts for the Parties. It is the duty of courts to interpret contracts, not to create them. Where the written instrument is obscure, or contains ambiguous words, it is the province of the court to ascertain the intention of the parties from the attending circmnstances, and this may be shown, for such purpose only, by extrinsic evidence; but when there are no obscurities, and no fraud or mistake is alleged, the court is forbidden to go beyond the "four corners of the contract." "^ 116 Kentucky Mut. Ins. Co. v. Jenks, 5 Ind. 96. 117 Dover Glass- Works Co. v. American Fire Ins. Co. (Del. Err. & App.) 29 Atl. 1039; Martin v. Insurance Co. (N. J. Sup.) 31 Atl. 213; Fireman's Fund Ins. Co. V. Norwood, 16 C. C. A. 136, 69 Fed. 82, 83; Maril v. Insurance Co., 95 Ga. 604, 23 S. E. 463; Fireman's Fund Ins. Co. v. Barker (Colo. App.) 41 Pae. 513. The policy, as written, delivered, and accepted, is conclusively presumed, in an action at law, to express the entire contract of the parties. Phenix Ins. Co. V. Wilcox & Gibbs Guano Co., 13 C. C. A. 88, 65 Fed., at page T30; Bennett V Insurance Co., 27 Atl. 641, 55 N. J. Law, 377; Virginia Fire & Marine Ins. Co V Morgan 18 S. E. 191, 90 Va. 290; Union Cent. Life Ins. Co. v. Chowning, (05) § 26 LAW OF FIRE INSURANCE. (Ch. 1 § 26. When Insurer is Estopped from Declaring For- feitures. When the company has knowledge of facts, at the time the insur- ance is effected, which, if undisclosed by the assured, would void the policy, it will afterwards be estopped from setting up such facts as a defense to a suit under it. Where the insurer, for instance, has incorporated into its policy a condition that "if the property insured be incumbered the fact must be represented to the company, and its consent expressed in writing on the policy, or it will be void," if it appears that the company had knowledge of an incumbrance when issuing its policy and receiving the premium, and omitted to indorse its consent on the policy, the principle of equitable estoppel may be successfully invoked to save a forfeiture. The fact of knowledge may l)e shown by parol testimony. In applying the principle of estoppel, the coui'ts have frequently found much difflculty, and their decisions have not always been in accord. There is often an apparent inconsistency between the rule that a "written contract cannot be changed by parol evidence," and the application of the doctrine of estoppel. The discussion fre- quently leads to subtle distinctions, and the conclusions reached are sometimes justified more because of their relations to justice than to legal rules. In the case supposed, either one of two things may be presumed: First, that the company waived the condition requiring consent of the incumbrance to be indorsed on the policy; or, second, that to issue a policy, and accept the premium, under circumstances where the company knew and intended that no indemnity would be afforded, is a fraud on the insured. No rule of law can, of course, 26 S. W. 982, 86 Tex. 6.54; Walton v. Insuianee Co., 116 N. Y. 326, 22 N. E. 443; Germania Fire Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 39 N. E. 77. There was attached to the policy a clause requiring the insured to lieep books of account, which should be preserved in a manner specified, and produced In the event of a loss. There was a failure to perform, and testimony was offered to show that the agent who negotiated the insurance and wrote the policy at that time told the insured that the keeping of books would be unnec- essary. It was held that "testimony of oral contemporaneous declarations which contradict the provisions of the policy" must be disregarded. Germania Ins. Co. V. Bromwell (Ark.) 34 S. W. 83. (96) Ch. 1) CONTRACT. § 26 be invoked to aid those who are seeking to find their advantage in the perpetration of fraud. In cases of this kind, parol evidence is admissible to show that a written contract was procured, or its terms fixed, through fraud or misrepresentation. In support of this proposition the authorities are very numerous.^ ^' It has been held lis Gushing v. Eice, 46 Me. 303; Selden v. Myers, 20 How. 506; Lull v. Cass, 43 N. H. 62; Montgomery v. Pickering, 116 Mass. 227; Meyer y. Huneke, 55 N. Y. 412; Gage v. Lewis, 68 III. 604; Hines v. Driver, 72 Ind. 125; Turner v. Turner, 44 Mo. 535; Fuller v. Lamar, 53 Iowa, 477, 5 N. W. 606; Wade v. Saunders, 70 N. G. 270. In Merslion v. Insurance Co., 34 Iowa, 87, the court said: "If the insurer received the premium, with full knowledge of facts constituting a breach of one of the conditions of the policy, the right to insist that the policy is for- feited for that cause is gone." See Plumb v. Insurance Co., 18 N. Y. 392; Potter v. Insurance Co., 5 Hill (N. Y.) 147; Insurance Co. of North America v. McDowell, 50 111. 120; Birming- ham Fire Ins. Co. v. Kroegher, 83 Pa. St. 64; Roberts v. Insurance Go., 41 Wis. 321; Aetna Live-Stock, etc., lus. Co. v. Olmstead, 21 Jlich. 246; Hough V. Insurance Co., 29 Conn. 10; Andes Ins. Co. v. Shipman, 77 111. 189; Frank- lin V. Insurance Co., 42 Mo. 456; Miner v. Insurance Co., 27 Wis. 693; Bryant V. Insurance Co., 21 Barb. (N. Y.) 154; Gobb v. Insurance Co., 11 Kan. 93. The evidence tended to show that the plaintiff explained to defendant's agent, at the time of negotiating the insurance, that it was Ms purpose to place a mortgage on the property to be insured. Held, that the defendant company was estopped from pleading the incumbrance as a defense. Hard- wick V. Insurance Co., 23 Or. 290, 31 Pac. 656. Application was prepared by defendant's agent, and untruthfully stated the incumllrance. Agent was an attorney, and, while acting in professional relations for the insured, was made acquainted with the facts in regard to the incumbrance. The court held that the knowledge and fraud of its agent estopped the insurer from denying liability under the conditions of the policy. Beebe v. Insurance Co., 53 N. W. 818, 93 Mich. 514. When the insurer has knowledge of incumbrances at the time the policy is written, it will be estopped from setting up such incumbrances as a de- fense in a suit to recover for loss. Phoenix Ins. Co. v. Ward, 7 Tex. Civ. App. 13, 26 S. W. 763; McNally v. Insurance Co., 137 N. Y. 389, 35 N. E. 475; Steele v. Insurance Co., 93 Mich. 81, 53 N. W. 514; Hartford Fire Ins. Co. v. Josey, 6 Tex. Civ. App. 290, 25 S. W. 685. Facts known to the agent at the time insurance is effected will be knowl- edge imputed to the company. If insurer accepts risk with knowledge of facts that constitute a forfeiture under the conditions of the policy, it will, after a loss, be estopped from pleading such facts as a defense. Forward OSTE. FIRE INS. 7 (5^7) § 26 LAW OF FIEE INSURANCE. (Ch. 1 by the court of appeals of Indiana "' that, unless the existence of incumbrances was particularly inquired about, the policy conditions, requiring disclosure by the insured, will be deemed to have been waived.^ ^° This decision does not appear to have in its support the weight of authority, and, besides, is subject to the criticism of being illogical, and repugnant to the language of the policy.'^^ V. Insurance Co., 142 N. Y. 382, 37 N. E. 615; Haire v. Insurance Co., 93 Mich. 481, 53 N. W. 623. 119 German Mut. Ins. Co. v. Niewedde. 11 Ind. App. 624, 39 N. E. 534. 120 The policy stipulated that it should be void if the property insured was then, or should thereafter become, incumbered, without consent of the company indorsed thereon. It was in evidence that the property was mort- gaged when the insurance was effected, and that the fact was not dis- closed. Held that, as there was no inquiry in regard to incumbrances, the company must be deemed to have waived the condition. German Mut. Ins. Co. V. Niewedde, 11 Ind. App. 624, 39 N. E. 534. The authorities re- ferred to in support of this decision are Short v. Insurance Co., 90 N. Y. 16; O'Brien v. Insurance Co., 52 Mich. 131, 17 N. W. 726; Hall v. Insurance Co., 53 N. W. 727, 93 Mich. 184; Wright v. Insurance Co., 31 Pac. 87, 12 Mont. 474. 121 In Beck v. Insurance Co., 44 Md. 95, the court said: "In this view of the case, it was wholly immaterial whether the existence of the incum- brance was material to the risk or not, or whether the fact that none was disclosed induced the insurer to Issue the policy or not. The parties them- selves, by their contract, have made it material, and have stipulated that if incumbrances were not disclosed the policy should be void." See full and able discussion of the duty of insured to disclose title, In- cumbrances, etc., when required by the conditions of the policy, in Waller V. Assurance Co., 10 Fed. 232. We quote from the language of Judge McCrary: "But it is insisted that compliance with this provision of the policy was waived by defendant company because Its agent made no in- quiry concerning the extent of plaintiffs interests, and plaintifC made no statement on the subject. The evidence does not support this position. The contract was that if the interest of the insured was any other than entire, unconditional, and sole ownership, then he was to represent the facts to the company, not that he was to disclose them truthfully if re- quested." In Wilcox V. Insurance Co., 55 N. W. 188, 85 Wis. 193, it was alleged in the complaint that, at the time the defendant inspected the subject of In- surance (a horse), no questions had been asked as to the title, or as to other insurance, and that plaintiff did not know that such facts were in any way material to the risk, or that the defendant Intended that the policy to be (9S) eh- Ij CONTRACT. § 27 § 27. Usage will not Control or Nullify Definite Contract Stipulations. Custom is an unwritten law, established by implied consent. More accurately speaking, it is the habit of long-continued acting in a uniform manner concerning particular things. Mr. Broom, in issued thereon should contain a provision relative to such matters. The policy issued was the statutory form in ^Yisconsin, and the conditions in regard to title and incumbrance, it is admitted, were the same as in all other policies in use In that state at that time. The plaintiff had received his policy some two or three weelis before the loss occurred. Judge Casso- day, of the supreme court of Wisconsin, in his opinion said: "Upon such receipt of the policy the contract of insurance was complete in all its terms. and binding upon both parties. The plaintiff accepted it with all its condi- tions and limitations. In the absence of any fraud or mistake, he was, on general principles and authority, conclusively presumed to know its con- tents. Fuller V. Insurance Co., 36 Wis. 599; Herbst v. Lowe, 65 Wis. 321, 26 N. W. 751; Bonneville v. Assurance Co., 68 Wis. 298, 32 N. W. 34; Hankins v. Insurance Co., 70 Wis. 5, 35 N. W. 31; Quinlan v. Insurance Co., 31 N. E. 31, 133 N. Y. 365. In this last case it was, in effect, held that the fact that the insured was ignorant of the conditions printed in the policy of Insurance of the standard form prescribed by the statute of that state :)) § 43 LAW OF FIRE INSURANOK. (Ch, 2 wishes to insure for $50,000. Benson is an acquaintance who has the agency of a single company. Brown requests Benson to pro- cure for him the whole amount of insurance desired, but the' com- pany for which Benson is agent will not accept of the risk a sum greater than |5,000. Benson prepares the necessary surveys and applications, writes a policy for $5,000 in the company for which he is agent, and places the remainder with other companies. That Brown has made Benson his agent for procuring this insurance is a matter too plain to admit of any doubt, as to the amount writ- ten in companies other than the one for which Benson was agent; and, in respect to that one, Benson was Brown's agent in the prep- aration and presentation of the application, survey, and other data on which the policy was issued. Brown would be held responsible for the accuracy of the survey, and the truth of all material state- ments contained in the application furnished the company. And so, too, where the agent of the company has authority only to solicit risks, take applications, and forward, them to the general agent of the company for examination and approval. When this duty has been performed his connection with the transaction in behalf of the insurer is terminated, and he may subsequently act in the same manner for the insured with as much propriety as any other person could do.'* The consideration of these questions requires careful distinctions, and in determining the true relation of parties, in har- mony with settled legal principles, courts often disagree. § 43. Distinction between Broker and Agent, In Arf6 v. Star Fire Ins. Co.== there is found an extended and emi- nently instructive discussion concerning the manner, and under what limitations, an insurance company may be bound by the acts of certain persons, not designated by it as agents, but who have an implied authority to act in particular cases on account of their re- lations to the company's business. The application in that case was taken by one Strecker, who had a desk in the office of the agents of the defendant company, whose names were McDonald & Van «4 East Texas Fire Ins. Co. v. Blum, 76 Tex. 653, 13 S. W. 572. «6 125 N. Y. 57, 25 N. E. 1073. (160) Ch- 2) AGENCY. § 43 Alstyne. A polky was issued by the defendaut on the application mentioned, and subsequently other insurance was obtained, of which notice was given to Strecker. The contention of the defendant was that S. had no authority to receive notice, not being an agent or ofQ- cer of the company. The evidence showed conclusively that Strecker worked entirely for McDonald & Van Alstyne, who paid him a com- mission on the business brought to their office. The court, in its discussion of ,the case, says that, if Strecker was to be regarded as a broker, notice of the other insurance communicated to him would not be sufficient to save a forfeiture.^"* It then proceeds to define the character of a "broker." We quote from the language of the opinion: "What is understood under the designation of an 'insur- ance broker' is one who acts as a middleman between the insured and the company, and who solicits insurance from the public un- der no employment from any special company; but, having secured an order, he either places the insurance with the company selected by the insured, or, in the absence of any selection by him, then with the company selected by such broker. Ordinarily the relation be- tween the insured and the broker is that between the principal and his agent; and, according to Arnould on Insurance,^' 'the business of a policy broker would seem to be limited to receiving instructions from his principal as to the nature of the risk, and the. rate of pre- mium at which he wishes to insure, communicating these facts to the underwriter, effecting the policy with them on the best possible terms for his employers, paying them the premium, and receiving from them whatever may be due in case of loss.' " The court then distinguishes the case under consideration from those of ilellen v. Hamilton I'ire Ins. Co. and Devens v. Mechanics' & Traders' Ins. Co.* In both these cases the brokers who effected the insurance were not in the employ of the company which insured the property. They were free to place their risks wherever they could do so with advantage to themselves, and to the satisfaction of their patrons. Their connection with the insurer was such that when the policies were delivered, and the premiums collected, neither owed any further duty to the other, and their business relations 3 6 Mellen v. Insurance Co., 17 N. Y. 609; Devens v. Insurance Co., 83 N. Y. 168. 87 Volume 1 (2d Ed.) p. 108, c. 5. *1T N. Y. 609; 83 N. Y. 168. OSTR.FIBE INS. 11 (161) § 43 LAW OF FIKE INSURANCE. (Ch. 2 wholly ceased. While Strecker, who obtained the insurance for plaintiff in this suit, occupied the position of a clerk or employ^ in the office of the agents who issued the policy, the fact that his com- pensation consisted of commissions on his business, instead of a salary, had no important significance in the opinion of the court; and the conclusion reached was that, Strecker being a clerk of the agents McDonald & Van Alstyne, the oral notice given to him of the other insurance would be sufficient to prevent a forfeiture.''* This decision is based on the somewhat questionable proposition that an agent has the power to so far delegate his authority that the clerks employed in transacting the ordinary business of his agency may bind the company for which he acts, by waiver of the conditions of the policy, as effectually as the agent could do in person. In support of this doctrine, reference is made to Bodine v. Ex- change Fire Ins. Co." Earl, C. J., said : "We know, according to the ordinary course of business, that insurance agents frequently have clerks to assist them, and that they could not transact their business if obliged to attend to all the details in person, and these clerks cau bind their principals in any of the business which they are author- ized to transact. An insurance agent can authorize his clerk to con- tract for risks, to deliver policies, to collect premiums, and to take payments of premiums in cash or securities, and to give credit for premiums, or to demand cash; and the act of the clerk in all such cases is the act of the agent, and binds the company just as effec- tually as if it were done by the agent in person. The maxim, 'Dele- gatus non potest delegare,' does not apply in such a case." *" And we find opinions to the same general effect in Clark v. Glens •Falls Ins. Co.," and in Kuney v. Amazon Ins. Co." In the last case the supreme court of New York held that the acts of the agent's employes in making contracts, and in doing all other things neces- sary to be done in the dispatch of business, would bind the company the same as if done by the agent in person. From these decisions it appears that the courts of New York are strongly committed to the rather perilous doctrine that a person unknown to the com- as McEwen v. Insurance Co., 5 Hill, 101, approved In Wilson v. Insurance Co., 14 N. Y. 418. 3 9 51 N. Y. 123. 41 21 N. Y. Wkly. Dig. 197. " story. Ag., § 14. 42 36 Hun, 66. (162) Ch- 2) AGENCY. § 44 pany, and one often, too, without experience or business judgment, mar waive forfeitures, and assume important obligations, without its consent, or even its opportunity to enter a protest. § 44. Broker Frequently the Agent of Both Parties. The relations of an agent will often depend upon the nature and circumstances of the duties he undertakes to perform. His con- stancy and good faith cannot be impeached, although in the same transaction, at different times, and even at the same moment of time, in separate and distinct parts of the same matter, he represents both parties, — first one, and then the other. Care, of course, must be taken, in the duality of his relations, to avoid inconsistency, and to fully protect confidence. This rule of law was well illustrated in the case of Sellers v. Com- mercial Fire Ins. Co.*' The evidence there showed that plaintiff went to the office of Trimble & Co., brokers, to procure insurance, and to them represented the character and location of the prop- erty to be covered. Trimble & Co. filled up a blank application, which was signed by plaintiff, and afterwards by Trimble & Co. presented to the agents of the defendant company, who wrote and delivered the policy in suit. For their compensation, Trimble ^ Co. received from the defendant's agents a part of the commission usually paid to the latter for business of the same class. By the terms of application, the statements which it contained were made warranties, and as some of these were untrue a forfeiture was claimed. This the plaintiff sought to avoid by estoppel, and of- fered to show that he made true statements to Trimble & Co., and that the error in filling the blank spaces in application was that of the company's agent. This testimony was excluded on the ground that the brokers, Trimble & Co., were agents of plaintiff, and that knowledge to them was not knowledge to the company. The Ala- bama court, after reviewing the case, said that it was difficult to conceive that the plaintiff "did not whoUy rely upon Trimble & Co. as their agents; and, if they were negligent or unfaithful in the performance of duty, it is to them the plaintiff must look for re- *3 105 Ala. 282, IC South. 798. (163) § 44 LAW OF FIRE INSURANCE. (Ch. 2 dress of whatever loss or injury they may have sustained. The misdescription of the location of the storehouse was either the act or fault of the plaintiffs, or of their agents. Whether the one or the other, it cannot avoid the warranty in the application." When Trimble & Co. were intrusted by defendant with the de- livery of the policy and collection of the premium, the agency was so changed that the broker represented for the time the insurers, in- stead of the insured, and, had Trimble & Co. collected and retained the money, it would not have excused the defendant from payment of the loss. When the insured had received the policy from the brokers, and paid to them the premium, the promise of the insurer did rest upon a consideration, and whether or not the money was ever paid over to the company by the brokers would be a matter of no concern to the insured. In support of this doctrine the Alabama court said: "The de- livery of the policy to Trimble & Co. for delivery to the plaintiffs in payment of the premium did not change their character and rela- tions as agents of the plaintiffs. Thereby they were merely en- abled to consummate their agency, and until its consummation the agency continued. Necessarily thereby they became agents of the defendant, limited in authority to the delivery of the policy and i;pceiving payment of the premium. The payment to them of the premium was the equivalent of a payment to the defendant, render- ing the policy a binding contract, even though they had not paid the premium to the defendant." ** In the case here cited by the Alabama court the policy, at the re- quest of the broker, was sent to him to be delivered to the insured, and collection of premium made. Compliance with this request being had, the broker forwarded said policy to another person, with in- structions to deliver same to insured and collect the premium. These instructions were followed, but the person who had been delegated by the broker, having made collection of premium, retained it until after the occurrence of the fire which destroyed the insured property. Held, that the broker was the agent of the insurer, and that payment of the premium to the person whom he had appointed to receive it was payment to the company.*' iiArthurholt v. Insurance Co., 159 Pa. St. I, 28 Atl. 197. 4b Supra. (164) ^^- ^) AGENCY. § 45 If the courts proceed on the very reasonable theory that the broker is the agent of him from whom he receives his compensation, we are then confronted with the problem, who pays the broker? § 45. Who Pays the Broker? He usually receives the money from the insured, who always, of course, is primarily liable for it, either to the broker or the company. If first paid to the latter, the commission of the broker would be re- ceived by him from the company; but in the usual course of business the broker collects the premium from the insured, deducts his com- pensation, and paj's the remainder to the company. It will be seen that the courts have held with great uniformity that in procuring the insurance the broker is to be regarded as the agent of the in- sured, that his agency then terminates, and that, in respect to subse- quent transactions, he cannot be recognized as having any authority or responsibility whatever. It has been held that notice given to broker of incumbrances would not be knowledge to the company, whose agent he was only, for the purpose of delivering the policy and collecting the premium. Where there was an apparent authority on the part of the agent to act, and information that such authority did not exist having been communicated to the broker, it did not impute knowledge to the in- sured, by whom the broker was employed.*" 16 Broker is agent for company only for delivering tlie policy and collecting the premium. Information communicated to the broker in regard to incum- brances will not be knowledge to company. Gude v. Insurance Co., 53 Minn. 220, 54 N. W. 1117. At the request of the broker, the agent indorsed consent for incumbrance and foreclosure proceedings. At the same time the agent informed broker that he had no authority to make such indorsements. It was held that agent's state- ment, so made, that he exceeded his actual authority in indorsing the company's consent to incumbrance and foreclosure, was not notice to the insured, who might presume that what the agent did was done with authority. Miller v. Insurance Co., 101 Mich. 49, 59 N. W. 439. The broker first solicited the insurance from H. & Co., who declined to place the risk in their own companies, because of its objectionable character. The broker then, through other parties, obtained a policy in defendant company. Held, that the broker was the agent of insured. Fromherz v. Insurance Co. (S. D.) 63 N. W. 784. The Insurance was placed by one Langguth, a broker. Afterwards the com- (165) ^ 46 LAW OF KIRK INSURANCE. (Ch. 2 § 46. Authority of Broker to Consent to Cancellation of Policies. When an agent or broker, as it frequently happens, is charged with keeping a particular property insured, without being required to rei)ort specifically to his principal, the owner, the names of the companies in which the insurance is placed, having full authority to select such policies as he may deem satisfactory, such person will be held to have general powers in reference to any matters concern- ing the placing of such insurance, and may accept notice of cancel- lation, substitute the policy of one company for another, and bind his principal by waiver, or express agreement in writing or by parol. In Buick v. Mechanics' Ins. Co.,''^ plaintiffs arranged with one P. 0. DaA'enport, an insurance broker, to take care of their insurance. This relation had continued for several years. Plaintiffs were not familiar with insurance contracts, and referred every detail of that pany telegraphed its local agent, Fox, to cancel. Fox gave the telegram to Langguth, and requested him to take up the policy, which he agreed to do, but did not. Held, that notice to the brolter was not sufficient, as no actual notice was received by the insured. Snedicor v. Insurance Co. (Mich.) 64 N. W. 35. Held to be a question of fact, for the jury, whether payment to the broker was payment to the company. Bstes v. Insurance Co. (N. H.) 33 Atl. 515. Broker cannot consent to assignment of policy. Richmond v. Assurance Co., 88 Me. 10.'), 33 Atl. 78G. , Because the insurer delivers the policy to the broker, and intrusts him with the collection of the premium from which his commissions are deducted, is not conclusive of agency. Security Ins. Co. v. Mette, 2T 111. App. 324; Royal Ins. Co. v. McOrea (Tenn.) 8 Lea, 531, 11 Ins. Law J. 508. When a broker requests a policy for the use and benefit of his principal, and it is written and delivered as requested, the policy cannot afterwards be returned for cancellation without the consent of the insured. Bennett v. Insurance Co., 115 Mass. 241. In New York the broker was treated as having authority, as agent of the insured, to surrender a policy for rescission or substitution. Standard Oil Co. V. Insurance Co., 64 N. Y. 85. And the same court holds that the agency of the broker ends with the delivery of the policy. How v. Insurance Co., 80 N. Y. 32; Devens v. Insur- ance Co., 83 N. Y. 168. 47 ]02 Mich. 75, 61 N. W. 337. (166) Ch. 2) AGENCY. § 46 department of their business to tlie broker Davenport. Tliey desig- nated tlie amount of insurance to be written, but left all else to the discretion of their agent or broker. The policies, however, were always sent to plaintiffs. About the middle of August, 1892, Daven- port was instructed to procure |4,000 insurance on the contents of a particularly specified building. This order was promptly executed, and $1,000 of the amount named was placed with the Michigan Fire & Marine Insurance Company. No premium on this policy was ever paid. Some two weeks later the Michigan Fire & Marine tele- phoned Mr. Davenport that they wished to cancel. He replied "Very well," and on the same day rewrote the insurance in the defendant company through its authorized agents at Detroit. Of this fact the Michigan Fire & Marine was an hour or two later informed. Three days afterwards the property burned, and the Mechanics' Irisurance Company declined to pay. The trial court foimd, as matters of law, that Davenport, acting within the scope of his authority as agent for plaintiffs, could substitute one policy for another, and that his action in this regard made the policy in suit a valid and subsisting contract at the time of the fire. The supreme court of Michigan, sustaining this finding, said: "The plaintiffs entrusted the whole subject of the insurance to Davenport, and had done so for years. They did not even know in what companies they were insured. The Michigan Company dealt with the broker, Davenport, alone. He assented to the cancellation, obtained the new policy now in suit to take the place of the Michigan policy, and delivered it to the plaintiffs before the fire, with notice of the cancellation and the substitution. Plaintiffs received it, but did not open the envelope containing it, and it was consumed in the fire. We think this case is clearly within Hartford Fire Ins. Co. v. Keynolds,*' in which it is said, 'It is certainly not necessary to give notice to the principal who deals through a broker, who is notified.' The Michigan policy provides for cancellation upon five days' notice.^ This provision, however, can be, and in the present case was, waived, by the assent of both parties to the contract. Such waiver did not affect or change the defendant's liability. If the parties to the Mich- 48 .S6 Mich. 502, 507; Dibble v. Assurance Co., 70 Mioli. 1, 37 N. W. 704. (167) § 46 LAW OF FIRE INSURANCE. CCll- 2 igan Company's policy saw fit to waive the provision, the defendant cannot question it." It will he observed that the court mentions in this case that no premium had been paid the Michigan Fire & Marine, but does not intimate in what respect this fact has any significance as affecting the rights of either of the parties to the litigation. It is quite clear that the court was in no way influenced in its judgment by any con- siderations concerning the premium. The real question involved was determined by the important fact of Davenport's power to act for the insured, without special instructions, in regard to the sub- stitution of the Mechanics' policy for that of the Michigan Fire & Marine. The same rule of construction is found in Schauer v. Queen Ins. Co.*° The plaintiffs there owned a gristmill, on which they had been accustomed to carry a large amount of insurance. A part of this was written in companies for which Warren & Son were agents. On account of the uncertainty and inconvenience in dealing with different agents in respect to a matter with which they were not wholly familiar, plaintiffs in the fall and winter of 1892 re- quested Warren & Son to take charge of all their insurance on the mill, stating the amount to be carried, but it does not appear that any instructions were given as to what particular companies the risk should be placed with. Warren & Son agreed to keep the property insured. Among the policies procured was one of |1,500 in the Oakland Company, which was ordered canceled by the insurer early in January, 1893. This policy was replaced by Warren & Son, they writing another with the defendant in this suit for the same amount. About January 13th plaintiffs were notified by War- ren & Son of the substitution of the Queen for the Oakland policy, and to this they expressed their satisfaction. On January 14th the manager of the defendant company at Chicago wrote Warren & Son to immediately retire their policy. This letter came by course of mail to the hands of Warren & Son on January 15th, and on Jan- uary 19th they entered a cancellation of the policy on their agency record; and it appears that thereafter they diligently sought to *» 88 Wis. 561, 60 N. W. 994. (168) Cll- 2) AGENCY. § 46 replace the insurance witli other companies, applying through their correspondents at Chicago, Green Bay, and possibly elsewhere, but before any arrangements were consummated the fire occurred, on January 25th. In delivering the opinion of the court. Judge Cas- soday said : ''The only question presented is whether the policy was effectually canceled by the notice so given to Warren & Son, under the clause of the policy which provides that 'this policy shall be canceled at any time at the request of the assured, or by the company by giv- ing five days' notice of such cancellation.' The only objection to the notice is that it should have been given to the plaintiffs per- sonally, instead of Warren & Son, but we are clearly of the opinion that the trial court was right in holding, as a matter of law, upon the undisputed evidence that the business arrangements between Warren & Son and the plaintiffs in reference to their insurance authorized Warren & Son to receive such notice of cancellation. * * * I'pon the facts stated, we must hold that the duties of Warren & Son to the defendant and to the plaintiffs were in no sense repugnant." °° A careful distinction should be observed between brokers who are only authorized to procure policies of insurance on specified prop- erty to a stated amount, in designated companies, and those whose agency extends to the exercise of a discretion as to what x>olicies shall be accepted, and what rate of premium paid. In the first case the broker has but one duty to perform, the procuring of the pol- icies, and turning them over to the insured. When this is done, in most cases, the agency is terminated, and notice to the broker of cancellation, or of any other matter affecting the action of the parties, will not charge the insured with knowledge. But the rule is different in respect to the second class mentioned. The agency there is of a larger scope, and more general character. The require- ment is not to obtain policies to a certain amount, but to keep the property insured in responsible companies. This imports a meas- ure of freedom and permission to exercise important discretionary powers, and while these relations continue, although the broker may 50 Hartford Fire Ins. Co. v. KeynoUls, 3U Mich. 502; Stone v. Insurance Co., 105 N. Y. .343, 12 N. E. 45. (169) § 46 LAW OF FIRE INSURANCE. (Oh. 2 be only a special agent of the insured, it is clearly within the ap- parent scope of his authority, to bind the insured by accepting no- tice of cancellation, and by surrendering one policy and replacing the insurance thereunder with a different company. The respon- sibility and rights of the parties concerned will not be essentially changed when the person selected by the property owner to take charge of his insurance business holds the appointment as agent of various insurance companies, and has authority from them to make contracts to insure, to write and deliver policies. The same rule of law above explained as applicable to brokers wUl control the conduct of persons who are the acknowledged agents of both parties, qualified only by the fundamental principle of agency that a person sustaining a relation of confidence and fidelity to both parties will not be permitted to act when judgment is required or interests conflict. In Stone v. Franklin Fire Ins. Co.," Longford & Co. were the agents of the defendant, who wrote the policy. They were dealing with a broker named Frank. On the 26th of February these agents wrote Frank that the defendant wished to cancel the policy in suit, and that they would do so at noon of the 28th of that month. As there had been no premium paid, the court held that defendant had no duty to perform in that respect. The policy was issued to the Standard Tinware Company, and before suit was assigned to the plantifE, Stone. The court said: "We are of the opinion that, upon the undisputed evidence, Frank was so far the agent of the tinware company that notice to him was notice to that company. He had been the agent of the tinware company for about two years, through whom it procured insurance upon its property from various com- panies, in all to the amount of $10,000. It does not appear that he received any particular instructions as to the companies from which he was to receive insurance, or as to the rates of premium or the amount to be insured in any particular company. It is inferable that all these matters were left A his discretion." It should be noted that the president of the tinware company at the trial testified that Frank was not his agent, — only a broker whom he had authorized to obtain the insurance. Frank also stated in »i 105 N. Y. 543, 12 N. E. 45. (170) ■Ch- 2) AGENCY. § 47 evidence that "lie had nothing to do but to place business as Schei- der [the president of the tinware company] ordered him to do." The court characterized this testimony as mere expressions of the witness' opinion, and without such legal effect as to impair the force and significance of the other evidence offered, which it thought sufficient to fully establish the agency of Frank. It said, "If, upon the evidence, the jury had found that Frank was not authorized to receive notice, their verdict would have been so far contrary to the evidence that it would have been the duty of the trial judge to set it aside." The broker is held to the same measure of good faith in perform- ing as any other class of agents, and when he accepts a premium, and undertakes to procure insurance, and neglects or fails to per- form his engagement, he will be charged with the loss, should one occur.^^ An agent or broker who procures for his principal or client a pre- tended insurance in a company known to be insolvent, or having no real existence, will himself be treated as the insurer, and charged with the payment of any loss occurring under such alleged policy.'^^ § 47. When Kno-wrledge of Agent is Imputed to Principal. It is a theory of the law sometimes sustained by the courts that an agent is his principal's alter ego. When this doctrine is ac- cepted, it logically follow.s that knowledge had by the agent, no mat- ter when or how possessed, is knowledge of the principal, and the latter must be presumed to have acted in reference to it in any trans-* action to which it relates. This was held in Advertiser & Tribune Co. v. Detroit." Marston, 52 The broker procured an insurance, as lie had engaged to do, received from his principal the premium, but neglected to remit in payment of the policy. A loss subsequently occurring, the insurer denied liability, oij the ground that there was no consideration. Held, that the broker was liable to his principal for the damage sustained. Criswell v. Riley, 5 Ind. App. 49fl, 30 N. E. 1101. 53 A broker fraudulently pretended to insure his client in a company hav- ing no real existence, and was himself held liable for a loss which occurred. Vann v. Downing, 48 Phila. Leg. Int. 264, 28 Wkly. Notes Gas. 259. 6* 43 Mich. 116, 5 N. W. 72. (171) § 47 LAW OF i'lEE INSURANCE. (Ch. 2 C. o; Merserau v. Insurance Co., 66 N. Y. 274; Mamn v. Insurance Co., 85 N. Y. 278; O'Reilly v. Assurance Corp., 101 N. Y. 575, 5 N. E. 568; Kyte v. As- surance Co., 144 Mass. 43, 10 N. E. 518; Mclntyre v. Insurance Co., 52 Mich. 188, 17 N. W. 781; Cleaver v. Insurance Co., 65 Mich. 527, 32 N. W. 660; Bowlin V. Insurance Co., 36 Minn. 433, 31 N. W. 859; Shuggart v. Insurance Co., 55 Cal. 408; Enos v. Insurance Co., 67 Cal. 621, 8 Pac. 379; Leonard v. Insurance Co., 97 Ind. 299; Winnesheik Ins. Co. v. Halzgrafe, 53 111. 516; Universal Mut. Fire Ins. Co. v. Weiss, 106 Pa, St. 20; Pottsville Mut. Fire OSTR. FIRE INS. 13 (193) § 56 LAW OF FIRE INSURANCE. (Ch. 2 it must be shown that such declaration was made in and about a matter over which the agent had authority from the principal to Ins. Co. V. Minnequa Springs Imp. Co., 100 Pa. St. 137; Clevenger v. Insurance Co., 2 Dak. 114, 3 N. W. 313. But, unless there is a provision in the policy limiting the powers ot the agent, he may alter, modify, or even waive altogether, its conditions. Schemer v. Insurance Co., 50 Wis. 575, 7 N. W. 544; Silverberg v. Insurance Co., 67 Cal. 36, 7 Pac. 38; Alexander v. Insurance Co., 67 Wis. 422, 30 N. W. 727. The case of Hankins v. Insurance Co., 70 Wis. 1, 35 N. W. 34, is one of so much interest in several important particulars that we quote it entire. At the time the policy was issued, June 10, 1885, there was a mortgage on the prop- erty, held by Mrs. Emma Pease, and the policy was indorsed, "loss, if any, pay- able" to her. This mortgage was paid the 14th of July, following; and on the 24th of March, 1886, another incumbrance was placed on the property, amounting to $62.50. The policy contained a clause to the effect that if the property thereby insured should subsequently become mortgaged, or in any manner incumbered "without the consent of the secretary :n writing," then in such case the policy should be void. Besides this, there was another condition of the policy, as follows: "It is expressly provided that no officer, agent, or employe, or any person or persons except the secretary, in writing, can in any manner waive either or any of the conditions of this policy, which is made and accepted upon the above conditions." It was in evidence that the agent who wrote the policy was notified of the last mortgage, on account of wliich a for- feiture was claimed, and agreed orally that it should not cause an avoidance of the policy. Cassoday, J., said: "The mere fact that the mortgage to Pease, mentioned in the policy, had been paid and discharged, did not autliorize the plaintiff to place another mortgage, running to a different party, upon the prem- ises insured, in violation of the conditions of the policy above mentioned. Such conditions in policies 'are to secure risks in which there shall be no motive for intentional or dishonest loss.' Redmon v. Insurance Co., 51 Wis. 301, 8 N. W. 226. True, the mortgage here is small; but to hold that the plaintiff had the right to put it upon the premises in contravention of the agreement, with- out jeopardizing the risk, would be to establish a rule which would autliorize a large mortgage with the same impunity. The question was submitted to the jury whether the plaintiff procured the consent of the local agent to the placing of that mortgage upon the premises, with the instruction that if he did it 'would be a waiver of the company of this special clause in the policy.' The jury necessarily found that the plaintiff did ijrocure such consent, and hence that there was such waiver. It is urged that a local agent for an in- surance company is an agent for such company for all purposes, under section 1977, Rev. St. Expressions may be found, when not limited by the facts of the particular case being considered, authorizing such an inference. But the au- thority of a decision is necessarily limited to the points decided. True, that sec- (194) Ch. 2) AGENCY. ' § 56 act, and that lie was acting under and by virtue oi his authority as such agent. ^^ tion declares that '\Yhoever' does one of the several things therein mentioned 'shall be held an agent of such corporation to all intents and purposes'; but such asency. after all, is limited to the act of the particular person in doing one or more of the things thus speciflcally designated. In that sense, the word 'agent.' 'whenever used' in chajitev 89, Rov. St., is to 'be construed to include all such persons.' Id. In other words, whenever an insurance company au- thorizes any person to do any one of the things thus specitled, it cannot disclaim the agency of such person in the doing of anything necessarily implied in the specific act thus authorized. Thus, it has been frequently held by this and other courts, in effect, that, where a person was authorized by an insurance company to make a contract of insurance, he thereby had implied authority, in doing so, to waive stipulations as to the condition of the property, or other facts then existing; and, it may be, as to subsequent conditions, if such waiver is made at the time of effecting the insurance. But those cases have no bearing upon the question here presented. This contract of insurance was completed in all of its terms, and binding upon both parties, June 10, ISS.j. The plaintiff accepted it with all its conditions and limitations. In the absence of any fraud or mistake, he was, on general principles, conclusively presumed to laiow its contents. Herbst v. Lowe, 65 Wis. 321, 26 N. W. 751; Brown v. Insurance Co., 59 N. H. 298. Thus, it appears that the policy was 'made and accepted' by the plaintiff with knowledge in law of its contents, 'upon the above exijress conditions,' to the effect that no local agent, at least, 'can in any manner waive either or any of the conditions of this policy.' With this policy in his posses- sion, and more than nine months after the contract of insurance had been thus completed, the plaintiff, according to his te,<:timony, requested the local agent to allow him permission, notwithstanding the conditions of the policy, to place the mortgage upon the premises, and claims that such agent answered: 'It is all right. Go ahead and make out the contract.' In other words, it is claimed tliat, notwithstanding the conditions and limitations in the policy, it was nevertheless competent for the local agent, without the knowledge or consent of the defendant, or any of its general officers, and without any consideration, and by mere words, to essentially change and modify the contract which had already been completed and binding upon the parties for more than nine months. Certainly, no such alteration of an existing contract, without the Imowledge or consent of one of the parties to it, in any other business, would be permitted. We must hold that, when the assured has accepted a policy containing a clause prohibiting the waiver of any of its provisions by the local agent, he is bound by such inhibition, and that any subsequently attempted waiver, merely by virtue of such agency, is a nullity." 81 Bohart v. Obeme, 36 Kan. 284, 13 Pac. 388; Chellis v. Coble, 37 Kan. 558, 15 Pac. 505. (195) § 56 I.AVV OF FIRE INSURANCE. (Cll. 2 Where an agent was employed by a life insurance company, hav- ing assigned to him a district consisting of several counties, — his duties being to solicit risks, and forward applications to the com- pany, his compensation to be a commission on the premiums re- ceived, — and, without the knowledge of the company, advertised his agency as a "branch Ofifice," purchasing on his principal's account furniture for fitting up an office, the court held that there was noth- ing shown in the character of his employment to imply authority to charge his principal with the expense of furnishing his office, or to make the purchase he did. Eeid, J., said: "That an agent whose powers are limited cannot bind his principal, by virtue of his employment, by an agreement beyond its scope, is elementary." '^ It would be a very extraordinary and dangerous proposition to hold that, because a person had authority to act for another in one matter, he could bind him by his acts in another and different mat- ter. A. may employ B. to build him a house, and authorize him to purchase material for that purpose; but the fact that B.'s contracts for brick, lumber, and labor are ratified by A. does not justify the inference that B. has authority to insure the house when com- pleted, and any engagements which he might make with the under- writer for that purpose would not bind A. The insurance business is one of large proportions. In certain of its departments its duties are simple, and in others exceedingly complex, requiring experience and skill of the highest order. In the successful management of these responsible affairs, persons are employed, we may suppose, in reference to their special fitness to perform certain designated duties. In the soliciting agent, who is appointed to take applica- tions, to be forwarded to the company for its examination and ap- proval, less experience and less technical knowledge are required. What he has been appointed to do involves less responsibility. His work is like that of a pioneer. It is preliminary and preparatory. The agent who has authority to make a binding contract, and to whom are intrusted blank policies, to be filled up and countersigned, occupies a position of greater trust, where better judgment and a longer experience with business affairs are required. The fact that this class of agents may, without consulting the general office, bind 8 2 Beebe v. Association, 76 Iowa, 129, 40 N. W. 122. (196) ^h- 2) AGKNCY. § 57 their principals for the payment of large sums of money, implies a degree of confidence which only tried integrity and a high order of business talents can inspire. The local agent must have moral character and sound judgment, but he need not be a skilled ac- countant; nor is it indispensable to his success that he should be possessed of extensive and accurate information in regard to the character and value of all kinds of property on which insurance is placed. In this particular there is a broad distinction between the duties of the local agent and the adjuster. The latter must be a rapid and accurate accountant, and, besides, must always have ready for immediate use every available fact in regard to the various kinds of property with which he is called to deal. He must be compe- tent to compute the value of every manufactured product, and tO' estimate the labor and material in the largest structures. He must be familiar with the duties of the miller, mechanic, the artisan, and the common laborer. The duties of these classes of agents are clearly distinct, and persons appointed to take applications will have no implied powers to make contracts of insurance; nor will the local agent, with his large authority to bind his company by a com- pleted contract, have an implied authority to adjust losses. These distinctions the courts have recognized with a concurrence of opin- ion that closely approaches unanimity. § 57. Local Agents cannot Waive Notice and Proofs of Loss. Power to waive implies authority to act. One without the other is impossible. "Waiver" has generally been defined by the courts as the "voluntary relinquishment of a known right." Without the existence of a right, there can be no abandonment, for there would be nothing to abandon. The question, then, as to the power of an agent to waive notice and proofs of loss, must be considered in reference to his authority in respect to the settlement of claims. If the insurance company has carefully defined the duties of its local agent to be entirely separate and distinct from that of its adjuster^ and has not been accustomed to appoint him to the performance of any important duties in respect to the care of damaged property or (197) § 57 I'AW OF FIRE INSURANCE. (Ch. 2 the computation of losses, nor in any manner held him out to the public as having authority in such matters, the agent, it is needless to say, will be wholly without authority, either real or apparent. If it were customary for local agents to adjust losses, then adjustment would be within the scope of every agent's apparent authority; but the fact being that adjustments, except in very rare instances, are directed in every detail by persons specially designated because of their exceptional skill and experience, there can De no reasonable inference that the local agent has any authority in respect to notice and proofs of loss. Where the discussion involved the powers of the agent to waive the condition of the policy requiring the insured to furnish proofs of loss, it was shown by the evidence that the agent had the usual powers qualifying him to do all things necessary to the consumma- tion of a binding contract of insurance, — to settle rates of premium and issue policies. From these undisputed facts the jury found that the agent had also authority to waive proofs of loss. The court held that such finding was unwarranted. "Something more than acts amounting to i)roof of a special agency must be shown. Authority, in fact, or apparent authority, justifying a stranger in dealing with him as his general agent, must be established. If the evidence merely establishes a special agency, a person deals with him, as to matters in excess of such apparent agency, at his peril. In all cases, in the absence of proof of actual authority, the question is whether authority to do the act relied upon is fairly within the scope of the agent's apparent authority, and in determining this question it is competent to show what acts the agent has been permitted to do by the company; and if the proof establishes nothing more than a special or limited authority, which does not fairly embrace the act in question, the assured, as to such matter, has dealt with him at his peril, and cannot charge the company beyond the scope of the agent's real or apparent authority. Authority to make a contract does not necessarily carry with it authority to change any of its details, or waive any of its provisions, after it is made and accepted by the other party. In order to establish such authority, it must be shown that he was in fact authorized to make the change, or that he has, with the knowledge of the company, held himself out and acted as (198) Ch. 2) AGENCY. § 57 tlieii- general agent, or has previously done acts for the company that warranted the assured in believing that he had authority to do the particular act." ^^ The supreme court of Vermont considered the question here pre- sented with careful elaboration, and reached a conclusion consistent with justice, and fully sustained by correct legal principles. A INIr. Henry K. Turner was tho defendant's general agent, having the en- tire management of its business affairs in the New England states; and a ^Ir. Cudworth was its local agent at Brattleboro, A^t., who is- sued the policy. The loss occurred, and plaintiffs had some conver- sation with both Mr. Turner and ilr. Cudworth, the former of whom made partial investigations as to the origin of the fire, and the value of the property destroyed, as shown by testimony of plaintiffs, who claimed that the statements made by the general and local agents waived the stipulated proofs, which had not been furnished. In re- gard to ifr. Cudworth, the local agent, the court said: "We think he had no authority to waive that condition of the policy requiring a sworn statement in the settlement of a loss, although he might, unless restricted, waive conditions concerning the issuance of a pol- icy, or anything apparently within the scope of his authority in the business committed to him. We recognize the full force of the rule as to the liability of the principal for the acts of an agent, as stated in Insurance Co. v. Wilkinson,*^ 'that the powers of an agent are prima 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.' The settlement of losses was no part of the 8 3 Lohnes v. Insurance Co., 121 Mass. 439; Van Allen v. Insurance Co., 64 ^'. Y. 469; Kj-te v. Assurance Co., 144 Mass. 43, 10 N. E. 518; IG Ins. Law J. 330. This question was before the supreme court of Minnesota In the case of Bowliii V. Insurance Co., 36 Minn. 433, 31 N. AY. 859, and Ki Ins. Law .J. 305. The policy there provided that in the event of a loss the assured should forthwith give notice in writing, and, within 30 days thereafter, render a particular ac- count under oath. It was held that a local agent authorized only to make contracts of insurance, countersign and deliver policies, subject to the approval of the company, had no power to waive the provision. Bonneville v. Assurance Co., 68 Wis. 298, 32 N. W. 34. 8 4 13 Wall. 222. (199) I 57 LAW OF FIRE INSDRANCE. (Ch. 2 business of Cudworth. He was not, for that purpose, the defend- ant's agent." *^ The court then proceeds to consider Mr. Turner's relations to the case, and adds: "Turner was the general agent of the defendant, having supervision of all its affairs, and its adjuster of losses, and (unless restricted in his authority, the plaintiffs having notice there- of), we think, had all the powers of the company in the settlement of a loss to waive any of the conditions of the policy. * * » Having held that Turner had authority to waive any condition of the policy, the question remains whether he could do so save in the man- ner provided by the contract. One condition of the policy is that 'no officer, agent, or representative of the company should be held to have waived any of the conditions of the policy, unless such waiver was indorsed on the policy.' This provision was a valid one, binding upon the parties, and effect should be given it. While the defendant could give its oral consent to a waiver of the statement, no officer, agent, or representative could consent, unless the consent was in- dorsed on the policy. This point we think well taken. In Carrigan V. Lycoming Fire Ins. Co.,*" the contract provided that no agent was empowered to waive any of its conditions without special authority, etc. ; and it was held that this term referred to local agents, not gen- eral ones, and tue case notes the distinction between the two. Here the limitation is upon the authority of any officer, agent, or repre- sentative. If Turner was not an officer, he was certainly a repre- sentative, and his want of authority to waive any condition, unless by writing indorsed on the policy, was brought to the knowledge of the plaintiffs by the contract itself; and, where an agent's acts are in excess of such authority, the principal is not bound.^^ Where an agent has apparent authority to do an act, his principal is bound; and, if the latter claims that the act is in excess of the agent's real authority, he should show actual notice to the party with whom he deals. In the case at bar the law presumes notice. It is a part of 8 5 Smith V. Insurance Co., 60 Vt. 682, 15 Atl. 353, and 17 Ins. Law J. Tii; Bowlin v. Insurance Co., 36 Minn. 433, 31 N. W. 859, and 16 Ins. Law J. 305; Kyte Y. Assurance Co., 144 Mass. 43, 10' N. E. 518, and 16 Ins. Law J. 330. 86 53 vt. 418. ; 8T Citing Pacliard v. Insurance Co., 15 Ins. Law J. 475. (200) Ch. 2) AGEKCY. § 57 the contract. The plaintiffs agreed to it. Why should they be rcr leased from it?" ** A case is reported in Wisconsin fully sustaining the rule of con- struction claimed by the Vermont court, above considered. One Gilbert was the local agent of the company, and the plaintiff claimed that the proofs of loss required by the terms of the policy had been waived by him. Lyon, J., said: "There is no proof that Gilbert had any authority in the premises beyond that of an ordinary local agent. Whatever power he may have had, when he made the con- tract of insurance, to waive conditions in the policy, he had no pow- er, as a mere local agent, to waive such conditions afterwards. It was so held in Hankins v. Rockford Ins. Oo.^" We must therefore exclude from our consideration of the case the testimony of such conversation with Gilbert alone." '"' The general rule of law, that the principal will not be bound by the agent except when acting within the scope of his .real or ap- parent authority, was clearly stated and explained by the New York court of appeals in Weed v. London & Lancashire Fire Ins. Co."^ The policy there was issued to the "Estate of O. Richards." 88 Walsh V. Insurance Co., 73 N. Y. 5; Marvin v. Insurance Co., 85 N. Y. 278; Forbes v. Insurance Co., 9 Cush. (Mass.) 470; President, etc., of Worcester Bank v. Hartford Fire Ins. Co., 11 Cusli. (ilass.) 265; Hale v. Insurance Co., 6 Gray (Mass.) 169; Cleaver v. Insurance Co., 65 Mich. 527, 32 N. W. 660, and' 16 Ins. Law J. 744. 8 70 Wis. 1, 35 N. W. 34. 90 Barre v. Insurance Co., 76 Iowa, 609, 41 N. W. 373; Weidert v. Insurance Co 19 Or. 261, 24 Pac. 242; First Nat. Banlc of Waxahachie v. Lancashire Ins.' Co., 62 Tex. 461, 14 Ins. Law J. 278; McPike v. Assurance Co., 61 Miss. 37; Lohnes v. Insurance Co., 6 Ins. Law J. 472; Harrison v. Insurance Co., 9 Allen (Mass.) 231; Tate v. Insurance Co., 13 Gray (Mass.) 79; Clevenger V. Insurance Co., 2 Dak. 114, 3 N. W. 313; Enos v. Insurance Co., 67 Cal. 621, 8 Pac. 379. In the last case cited it was held that when the policy itself provides the man- ner in which its conditions can be waived or modified, as by indorsement, the change or abrogation of the condition can be accomplished in no other way.. "The burden of showing that the agent possesses the powers of the principal is, under the terms of the policy, upon the plaintiff." Garretson v. Insurance Co., 81 Iowa, 727, 45 N. W. 1047; German Ins. Co. v. Heiduk, 30 Neb. 288,. 46 N. W. 481. 91 116 N. Y. 106, 22 N. E. 229. (201) § 57 LAW OF FIRE INSUEANCE. (Ch. 2 Richards had died insolvent, and some time before his death con- veyed by deed of trust, to one Sage, the mill property covered by the policy. Sage was to sell, and distribute the proceeds pro rata among Richards' creditors; and what remained of the proceeds after paying such debts, if anything, was to be paid to Richards, his heirs or legal representatives. Of this conveyance the defend- ant company had no knowledge when the insurance was effected, nor at any subsequent time until after the fire. The policy in suit contained a condition that it should be void if the interest of the insured in the property was other than entire, unconditional, and sole ownership, unless the fact was represented to the company, and expressed in the written part of the policy. To save an avoid- ance on account of the conveyance in trust to Sage, the plaintiff at- tempted to show that the adjuster had waived the forfeiture in his negotiations with the assured in respect to a settlement of the claim, after being informed of the Sage deed, and holding out, as was alleged, that the loss would be paid if additional proofs were made. Mr. Rice, the adjuster, it was not claimed had any authority to act for the defendant company, except in respect to the settlement of the loss. The referee to ^^hom the matter was referred found that the acts of the adjuster were sufficient to create a waiver. To this conclusion the court dissented. It said: "It is well to bear in mind, in discussing the waiver which the referee found grew out of the facts set forth in the finding I have quoted, that the condi- tion in the policy ^^■ith reference to the statement therein of the title or interest of the assured was one precedent to the attaching of the risk. It lay at the threshold of the contract, and, if not then performed or then obviated, there was no enforceable agreement. The delivery of the policy and the breach of the conditions were concurrent acts, and, if the assured had not the sole and uncondi- tional ownership of the property at the moment the po-licy was de- livered, the condition was broken and the insurance was void. To say, therefore, that the condition was waived after a loss had oc- curred, is to hold, substantially, that a new contract had been made. Rice was not an oKicer or general agent of the company. He was a resident of Albany, engaged in an independent business as an insurance adjuster, giving his services to any person who wished to employ him. There is no evidence in the case to show that he (202) Ch. 2) AGENCY. § 57 had any power whatever, except to ascertain and adjust the loss sustained by the assured, and the phiintifE is chargeable with knowl- edge of his power and the extent of his authority; nor is there any evidence that his knowledge of the Sage deed was communicated to the company, or any of its oflicers, or that any of the ofQcers or gen- eral agents of the company ever recognized the validity of the policy after knowledge of its forfeiture." The court then adds that, as Mr. Eice had no power to make a contract for the defendant company, any recognition on his part of the validity of the policy in suit would not in any important sense change the rights of the parties. It said : "The most liberal rule that has been established in cases of this character, which can be invoked in his favor [plaintiff's], is that the agent's power is co- extensive with the business intrusted to his care." "^ The court then quotes the language of Judge Finch in deciding Marvin v. In- surance Co. He said. "The rule could go no further without violat- ing all reason and justice." The reasoning of the court was that Eice, having no authority to m.ake a contract between the parties, could not alter, modify, or change any of the conditions of a sub- sisting one; that he could not waive any of its conditions relating to the forfeiture, even had he intended to do so; that his duty was confined to the adjustment of the loss. Beyond that, he had re- ceived no authority' to perform any act whatever, and anything which he might have done or undertaken to do, except in relation to ascertaining the loss, would be nugatory, and not binding upon his principal. The fact that Mr. Eice was an independent adjuster, employed by the defendant only for this particular occasion, does not make the rase an exception to the general rule of law applicable to all classes of special agents. Whether Eice was employed by the de- fendant to investigate and adjust this one loss only, or whether he was continuously engaged in the performance of these special duties, has no significance whatever. It is only important to know what was the apparent scope of his authority. If there had not been conferred upon the adjusting agent the power to make con- tracts of insurance, then, under circumstances such as those con- 9 2 Insurance Co. v. Wilkinson, 13 Wall. 222; Pechner v. Insurance Co., (ir> X. Y. 20T; Marvin v. Insurance Co., 85 N. Y. 283. (203) § 58 LAW OF FIKE INSURANCE. C^h- 2 sidered by the New York court, no act of his would create an obliga- tion on the part of his principal to pay a loss where no liability be- fore existed. If the adjuster cannot bind his principal by a con- tract of insurance entered into under standingly and by positive agreement, it would be absurd to say that he can accomplish more bv the indirect method of a waiver. § 58. Powers of an Attorney. Persons dealing with an attorney should exercise the same care in ascertaining his authority to act as prudence would require them to do when dealing with any other class of agents. The authority of an "attoi'ney in fact" will generally be found fully expressed in his appointment, and it will seldom occur that the limitations of such appointment can be safely disregarded. An "attornfey at law," while acting in certain relations, will be held to have implied powers, as after bringing of suit it has been held that he could refer the cause; but the general rule is that an attorney at law has no implied authority to compromise or give up any right of his client.*^ It has been held in Iowa that under special circumstances an attorney at law may agree that a judgment be entered against his "client, and the courts will enforce the agreement."* But this doc- trine must be accepted within prudent limitations. It was pointedly repudiated by the supreme court of Illinois in People v. Lamborn."^ In Ohlquest v. Farwell,"" there were several suits brought in different counties, involving the same questions of both law and fact, and the attorneys stipulated that only one case should be tried, and that judgment should be entered in each of the other suits in accord with the verdict and judgment in the contested case. This having been done, and one of the parties being dissatisfied, he moved to have judgment in one of the cases set aside on the ground that the stipula- tion was made without his consent. In delivering the opinion of the court. Justice Beck states very clearly what an attorney can aJid cannot do in respect to waiving his client's rights. He says: "It is 93 Swnfen v. Swinfen, 24 Beav. 549; People v. Lambom, 1 Scam. (111.) 123; Wadliams v. Gay, 73 111. 415. 4 Potter V. Parsons. 14 Iowa, 286. 6 Supra. 96 71 lowa, 231, 32 N. W. 277. (204) ^-l'- 2) AGENCY. § 58 undoubtedly true that an attorney cannot consent to a judgment against his client, or waive any cause of action or defense in the case, neither can he settle or compromise it without special authority; but he is, by his general employment, authorized to do all acts necessary or incidental to the prosecution or defense which pertain to the remedy pursued. The choice of proceedings, the manner of trial, and the like, are all within the sphere of his general authority, and as to these matters his client is bound by his action." To this state- ment the court adds, substantially, that in the exercise of his gen- eral authority the attorney may stipulate that the trial of one suit shall determine another, when the issues of law and fact are the same. There have been, so far as I can find, no deviations from the doctrine that an attorney, having authority to collect a claim with- out special instructions to compromise, is not empowered to accept pa.^Tnent at a less amount of money than the whole sum due."' An attorney has no power by his agreements to release an indorser, or any security which has been given for the benefit of his client; nor will any agreement by an attorney iu behalf of his client, by reason of his implied authority, be sufficient to release a garnishee from the attachment of money or property in his hands. When an attorney holds paper for collection, he has no implied power to extend the time of payment, or to surrender one form of security and accept another. Except when an attorney at law is required to act in refer- ence to matters connected with a suit, or in other legal proceedings, his implied powers will be regarded as practically the same as those of an ordinary agent, and persons dealing with him will be put on inquiry in respect to the limitations of his actual authority. How far the attorney can bind his client will, of course, frequently depend upon the circumstances under which action becomes necessary in order to secure a proper execution of the duties he has been directed to undertake. If the client is absent, living perhaps in a distant city, and his wishes can be ascertained only with difficulty and delay, the attorney may, if instant action is inaportant, be excused in doing things which otherwise would not be justified. It may be said that 9T Martin v. Insurance Co., 85 Iowa, 643, 52 N. W. 534; Hamrick v. Combs, 14 Neb. 381, 15 N. W. 731; Kelly v. Wright, 26 N. W. 610, 65 Wis. 236; Sample v. Atkinson, 64 Mo. 506; Isaacs v. Zugsmith, 103 Pa. St. 77; Whipple r. Whitman, 13 R. I. 512. (205) § 59 LAW OP FIRE INSURANCE. (Ch. 2 ordinarily the attorney will be presumed to have authority to perform such acts as are incidental or indispensable to the accomplishment of the main purpose to which his appointment relates. Authority to settle a claim for loss carries with it the implied authority to receive payment, and to give the company a valid acquittance. But, as be- fore stated, without special authority to do so an attorney cannot bind his client by a compromise settlement. The attorney being an officer of the court signiiies nothing of importance, except as such official character may affect his relations with the court. § 59. Conclusions. When the agent has an apparent authority to act in a particular matter, he may bind his principal; but if he is without real author- ity, and the principal sustains loss, the agent will be liable to him in an action for damages. So, too, it may occur that when an agent contracts to bind his principal, but fails to do so from want of au- thority, the agent himself will be required to perform the things which he had agreed the principal should do. It is the duty of an agent, in the absence of definite instructions, to employ his best judgment to promote his principal's interests; but, if he disobeys positive orders, he will not be excused by showing that he acted in good faith, and that he had excellent reason to suppose that what he did would best advance his principal's interests. Thus, when the agent is directed to cancel a policy, but delays to do so, be- lieving the risk desirable, and that the principal would so regard it when certain facts were explained, and pending such explanation the property burns, it niust be paid for by the company, who after- wards may have its action against the agent to be reimbursed. Risks which a company has accepted, and on which it has paid the agent his commissions, are beyond the control of the latter; and should he, without authority from the company, in a wanton or vin- dictive spirit, or to advance his own interests by placing the busi- ness elsewhere, proceed to a wholesale cancellation, such an act would constitute misconduct towards his principal, and make him liable in an action for damages, and for any money which he may have paid out for unearned premiums he will not be entitled to re- imbursement. (206) Ch. 2) AGENCY. § 59 When an agent exceeds his authority, or acts in relation to mat- ters foreign to his appointment, his engagements are merely per- sonal, and will not charge his principal. As one who has received authority only to make contracts of insurance, countersign and de- liver policies, he cannot bind his company in respect to the settlement of claims. When an agent, acting beyond the scope of his author- ity, signs a submission to arbitrate, the principal may repudiate the act, and the agent will be bound to perform the award. This will be the case, irrespective of the fact of whether or not the agent acted in good faith, or whether or not the award returned \\as to the inter- est of his principal. The rule of law is based upon the fundamental proposition that every person has a right to choose for himself what he will do with his own; that his liberty cannot be restricted, nor his property rights interfered with, by the unauthorized act of an- other. When an agent knowingly and intentionally sacrifices the inter- ests of his principal, he forfeits the protection of the latter; and, when he colludes with the insured to defraud his principal, he be- comes the agent of him whom he thus collusively serves. While the rule admits of no exception, that a person cannot at the same time, and in the same matter, be the agent of both the insured and insurer, he njay, in one transaction, acting in respect to different things, serve both parties without impropriety. An agent cannot delegate his authority to another. The maxim is, "Delegatus non potest delegare." While the rigidity of this rule has been preserved, the courts, with constructive ingenuity, have made it to conform to the conveniencies of business. The acts of the agent's clerk or assistant are construed to be the acts of the agent himself; and thus it has occurred, as in a recent Illinois case, that the principal is bound by the engagements of a stranger. An agent will be liable for the acts of his broker. When the prin- cipal has instructed his agent to cancel a risk, and the latter intrusts performance of the duty to the broker through whom the risk was obtained, if the latter fails to act promptly, and a loss occurs, the agent will be liable. In such case the agent will not be excused by reason of the existence of a local custom to effect cancellation through the broker from whom the risk was received. One having the agency of an insolvent company, and knowing it (207) •§ 59 LAW OF FIRE INSURANCE. (Oil. 2 to be such, who induces persons to accept its policies, makes himself personally liable to those whom he has deluded, for any loss sus- ' tained on account of his misrepresentations. In other words, when an agent knowingly misleads the insured to his injury, the agent will be liable to him in an action for damages. When the agent, at the time of delivering the policy, agrees by parol as to matters of future performance, contrary to the express terms of the written contract, the insurer will not be bound by such parol agreement, and the agent will be personally held to the in- sured. An agent cannot pay his own debts with the money of his princi- pal, nor can he receive merchandise in payment of premiums, unless .authorized to do so by the company. If the insured delivers to the ■agent goods from his store to pay the premium on a policy, or gives him credit on account, and the agent subsequently fails to remit to the company the sum due, the policy will be without consideration, and, in the event of loss, could not be enforced. When, however, the premium is paid in money to the agent, the case is otherwise. In that event the insured is charged with no responsibility in the matter. The law will not permit an agent to place himself in a position where his own interests will be adverse to those of his principal. Where the agent has the power to act, be will also have presump- tively the power to waive. "Waiver" is defined by the courts as the relinquishment of a known right. Such rights and powers, there- fore, as have not been conferred upon the agent, he will not possess, and that which he does not possess he cannot relinquish. The agent is not necessarily the alter ego of the principal; for, in most cases, while some powers are given, others are reserved. The principal Has the exclusive right of decision whether the agency «hall be general or special, but the law will in all cases presume that the agent has authority co-extensive with the employment to which he is appointed. The legal efEect of a word spfken or an act performed by an agent, in respect to matters within the scope of his employment, is the same as though the principal had spoken or acted in person. "Qui facit per alium facit per se." ' (208) Ch. 3) TITLE AND OWNERSHIP. § 60 CHAPTER ni. TITLE AND OWiNERSHIP. i 60. Who may Insure. 61. Concerning the Right of a Husband to Insure His Wife's Property. 62. When the Insured must Disclose His TiOe. 63. The Policy Becomes Void When the Insured's Interest in the Property is Changed. 64. When Insured's Interest is Less than Sole and Unconditional Owner- ship, It must be Disclosed. 65. When Alienation Occurs. 66. When Holding an Executory Contract of Purchase is not Ownership. 67. The Contract will be Construed with Reference to the Character and Situation of the Property Insured. 68. A Change from Ownership to a Life Estate Voids the Policy. 69. Insurance without an Interest in the Property is Contrary to Public Policy. 70. Real-Estate Mortgage is not a Change of Title. 71. Ineumtrance. » 72. A Person Holding a Contract of Sale, in Possession, is Sole and Un- conditional Owner. 73. Holding under a Contract of Sale is not Unqualified Ownership. 74. When There is a Change of Title without a Sale. 75. Sale by Joint Owner of an Undivided Interest Voids the Policy. 76. Partition of the Property Insured is a Change of Title and Interest. 77. Change of Title by Death will Void the Policy unless Otherwise Provided. 78. Levy under an Execution Voids the Policy. 79. A Keal-Elstate Mortgage will not Void the Policy unless so Stipulated. 80. The InsTired must Disclose Title and Incumbrance When so Re- quired by the Policy. 81. When Judgment Liens Void the PoUcy. 82. When Sale under Eseoution Voids the Policy. 83. The Courts will Give Effect to the Plain Provisions of the Contract. 84. Statement of Geoeral Prineijples Oonc-erning Title, Alienation, and Incami)rances. 85. Conclusions. g 60. Who may Insure. Any person may insure wiio ba.a an interest in the ixropertj sutoject to daaiage or deBtructiwn by Sxe. An insurable intereet does not OSTE. FIRE INS. 14 (209) § 60 LAW OF FIRE INSURANCE. (Ch. 3 necessarUy imply ownership. A lessee has a tangible and often valuable interest in the property leased, which may be protected by insurance.^ So, too, has a mortgagee in buildings covered by the mortgage.^ An agent sometimes has an insurable interest in the goods of his principal, and a bailee, whether personally liable or not, can insure property of which he has the custody. It is, however, a common provision of the insurance contract that if the insured be not the sole and unconditional owner of the property insured, or if there be any other person interested therein, the fact must be repre- sented to the company; and, in default of making such disclosures, it is provided that no liability shall exist as to the insurer. Some- times the contract is conditioned to be valid only when the insured has a fee-simple title. Whatever may be the requirement of the policy in these particulars, substantial compliance is indispensable. Sir Edward Colie has defined title as "the means whereby the owner of lands hath the just possession of his property." This definition was accepted by Blackstone. Still, it will appear to most persons unsatisfactory and insufficient. A person may have the legal title to an estate, while its possession is in another. Ownership and possession may be enjoyed by one person, while another holds the legal title, and this without force, violence, or fraud. When property is sold and not delivered, both the vendor and the vendee will gener- ally have an insurable interest.' Where the purchaser of real estate 1 Lessee and Ipssor have each insurable interests. Ely v. Ely, 80 111. 532; Mayor, etc., of New York v. Brooklyn Fire Ins. Co., 41 Barb. (N. Y.) 231; Miltenberger v. Beacom. 9 Pa. St. 198; Allen v. Insurance Co., 36 La. Ann. 767; Niblo v. Insurance Co., 1 Sandt. (N. Y.) 551; Fletcher v. Insurance Co., 18 Pick, (llass.) 419; Mitchell v. Insurance Co., 32 Iowa, 421; Mt. Leonard Milling Co. t. Liverpool & L. & G. Ins. Co., 25 Mo. App. 259. 2 Both mortgagor and mortgagee may insure. Kellar v. Insurance Co., 7 La. Ann. 29; Lycoming Fire Ins. Co. v. Jackson, 83 111. 302; Fox v. Insurance Co., 62 Me. 3."53; Washington Fire Ins. Co. v. Kelly, 32 Md. 421; Excelsior Fire Ins. Co. v. Royal Ins. Co., 55 N. Y. 343; McDonald v. Black, 20 Ohio, 185; Strong v. Insurance Co., 10 Pick. (MasB.) 40; Columbian Ins. Co. v. Law- rence, 2 Pet. 25; Higginson v. Dall, 13 Mass. 96; Kase v. Insurance Co. (N. J. Sup.) 32 Atl. 1057; Donaldson v. Insurance Co., 95 Tenn. 280, 32 S. W. 251. 3 The vendor will have an insurable interest in the property sold, to the extent of any lien which he may retain to secure payment of any part of the purchase money. The interest of the vendee embraces the full value of the property. Wood v. Insurance Co., 4G N. Y. 421; McCutcheon v. (210) Ch. 3' TITLE AND OWNERSHIP. § 60 is in possession, holding a contract for a deed, both the seller and the buyer have an interest in the property which is the proper subject of insurance. The interest necessary to support an insurance may be legal or equitable. Even such incidental relations to the property as that of carrier or bailee, without liability, will be sufficient.* The inchoate right of curtesy which a husband has in the estate of his wife is an interest sufficiently tangible to be made the subject of insurance, when the husband and wife, living in relations of amity, possess and enjoy the property. The insurer's promise of indemnity in such a case, however, will only rest on full and exact representa- tions of interest. A husband cannot insure the property as his own." A builder may protect himself for ^^■ork begun or finished, and for materials supplied." But such liability as may be created by con- tract to complete w-ork within a stipulated time is not covered by an Ingraham. 32 W. Va. 378, 9 S. E. 260; State Mut. Fire Ins. Co. v. Updegrafe, 21 Pa. St. 513; Trumbull v. Insurance Co., 12 Ohio, 305; Stuart v. Insurance Co., 2 Cranch, 442; Beed v. Insurance Co., 74 Me. 537; Redfield v. Insurance Co., 5(1 N. Y. 354; Shotwell v. Insurance Co., 5 Bosw. (N. Y.) 247; Tucker- man V. Insurance Co., 9 R. I. 414; Rumsey v. Insurance Co., 17 Blatchf. 527, 1 Fed. 390; Ayres v. Insurance Co., 17 Iowa, 176; Ridar v. Insurance Co., 20 Pick. (Mass.) 259; Kenny v. Clarkson, 1 Jolms. (N. Y.) 385; Cumberland Bone Co. v. Andes Ins. Co., 64 Me. 466; Rohrback v. Insurance Co., 62 N. Y. 47. * Agent, bailee, and consignee. De Forest v. Insurance Co., 1 Hall (N. Y.) 87; Aetna Ins. Co. v. .lackson, 16 B. Mon. (Ky.) 242; Graham v. Insurance Co., 2 Disn. (Ohio) 2.55; Shaw v. Insurance Co., 49 Mo. 578; Eastern R. Co. V. Relief Fire Ins. Co., 98 Mass. 420; Davis v. Insurance Co. (Cal.) 43 Pac. in.5. 5 The insured property was owned by the wife, while the policy was writ- ten in the name of her husband, and the fact of ownership in the wife was not disclosed. Held, that there could be no recovery by either husband or wife. The claim of the husband, if true, that he was acting as his wife's agent, did not excuse the withholding of facts in regard to ownership. Peli- can Ins. Co. V. Smith (Ala.) 18 South. 105; German Ins. Co. v. Hunter (Tex. Civ. App.) 32 S. W. 344; Continental Ins. Co. v. Chew, 11 Ind. App. 330, 38 N. E. 417; Trade Ins. Co. v. Barracliff, 45 N. J. Law, 543; Cohn v. Insurance Co., 3 Hughes, 272, Fed. Cas. No. 2,970; Dlffenbaugh v. Insurance Co., 150 Pa. St. 274, 24 All. 746; Harris v. Insurance Co., 50 Pa. St. 349. Protection Ins. Co. v. Hall, 15 B. Mon. (Ky.) 411; Franklin Fire Ins. Go. V. Coates, 14 Md. 285. (211) § 61 LAW OF FIEE INSURANCE. (Cfa. 3 insurance on the building. Contingent losses of such character are more in the nature of uses and rents, and may be provided for under a proper form of policy, expressing specifically the intention of the parties. § 61. Concerning the Right of a Husband to Insure His Wife's Property. In several states it has been held that the husband has an insur- able interest in the property of his wife, while in other states a dif- ferent rule prevails; but, even when the law recognizes the hus- band as having a right to the use and control of his wife's estate, he cannot maintain an insurance in his own name; and, when the policy provides for a disclosure of title, it will not be sufficient for the husband to represent that it is his. In several of the states the right of a married woman in respect to the ownership and control of property, is definitely fixed on a basis as independent of the hus- band as of any other person. The contingency^ that she may die without owing debts, and that her estate may possibly descend to her husband, does not create an insurable interest on his part. A son may have a reasonable expectancy of inheriting the property owned by his father, but such fact would not give him a right to in- sure such property in his own name. Interests of this kind are too uncertain and contingent to be the subject of an insurance con- tract. A policy written to protect these intangible and contingent interests would be subversive of public morality, the security of prop- erty, and the best good of society, on account of its wager character.'' The supreme court of Maine, in the case of Clark v. Dwelling- House Ins. Co.,^ discusses this matter. The property there belonged to the wife, and was insured by the husband. The court said, in answer to the question, has a husband, under the laws of Maine, an insurable interest in the property which he has conveyed in fee sim- ple to his wife that "our statutes seem to have removed the last ves- tige of the common-law marital rights of a husband in the real es- late of his wife, however she may have acquired it. His only rights now in real estate he conveys to his wife are a naked veto of a con- 7 Trott y. Insurance Co. (Me.) 22 Atl. 245. « 81 Me. 373, 17 Aa 303. (212) ^"- ^) TITLE AND OWNERSHIP. § 61 veyance by her in fee, and the possibility of taking by descent from her at her deceRse, depending upon his survivorship and her solvency. Her creditors have more right than he in such estate. She may man- age the property without the joinder or assent of her husband, and she may make him her agent or not, as she chooses. The law gives the wife the entire control over such property in every respect, ex- cept the power of conveyance in fee; and, even if it be a homestead, he can occupy it only by her consent, It is subject to be taken by her creditors. A married woman is not limited in the management of her property, however obtained. She may control its income. She may lease it without her husband's consent, and her lessee may expel him from the possession. During her lifetime, he has no in- terest, not even a right of occupancy. If he survives her, and her estate is solvent, he acquires by these events a new interest, and by way of descent only. He would be no more affected by the burning of her house than he would be by the burning of any house which he was merely occupying rent free, or which he might possibly in- herit. It has never been held, as far as we know, that a son has an insurable interest in the property of his father, which he had only a chance of inheriting; nor has it been held, to our knowledge, that a mere occupier without any estate or claim of right has an insur- able interest. The burning of this house undoubtedly subjects the plaintiff to inconvenience, and perhaps to the expense of providing another home. So would he had he been living rent free, and at sufferance in the house of his father or brother or son, in which he had no estate. While he may be affectionately concerned about his wife's property, we do not see that he has any pecuniary interest in it, legal, equitable, or even ponderable, or which the courts can measure or which he can insure under our law. * » * The possi- ble estate the husband may acquire by descent after the death of his wife, if he survives her, and she be solvent, has no existence be- fore her death. Before her death he has no estate, but only a chance of acquiring one. The wife's right of dower exists in her husband's lifetime, though it is then inchoate, but we know of no case where a wife has attempted to insure such a right." In several of the states a different rule prevails; and in some the insurable interest of the husband in the wife's property is recognized by the courts as embracing its entire value. But even in such states (213) § 62 LAW OF FIRE INSURANCE. (Ch. 3 a disclosure of the nature and extent of the interest must be made when the terms of the policy so require. The insurer, under differ- ent circumstances, may be willing to protect any tangible interest; but he has always the right of decision, — a right which cannot be in- telligently exercised unless the interest, if less than absolute owner- ship, is fully disclosed." § 63. When the Insured must Disclose His Title. In regard to the character and circumstances of his title, the in- sured is not bound to make any disclosures, unless inquired about, or it is required that he should do so by the provisions of the policy. If he has a tangible interest, — that is, if he will suffer loss in the event that the property burns, — then he may insure without particu- larly defining the nature or extent of his interest, unless, as before stated, he be interrogated in relation thereto, or exact and particu- lar information is called for by the terms of the policy. But it will seldom occur that the insurer will be found so indifferent concerning matters of such vital importance as title and incumbrance as to ac- cept a risk without calling for the fullest disclosure; and this is generally done by incorporating into the policy a condition that no ■liability shall attach if the property insured is incumbered, or if there be any other person interested therein, unless such interest or incumbrance be represented to the company. When a contract is thus expressed, any concealment, whether fraudulently intended or not, in regard to title, ownership, or incumbrance, will be fatal to a recovery under the policy; ^^ but, as the form of the insurance con- » The Code of Louisiana gives the husband such a right to the use and con- trol of the personal property of his wife that he may insure it in his own name, without particular explanations as to the limitation of his interest. Clarke v. Insurance Co., 18 La. 431. It was held in Kentucky that a husband who is tenant by the curtesy, and has issue, may insure his wife's property in his own name to its full value. Franklin Marine & Fire Ins. Co. v. Drake, 2 B. Men. 47; Rockford Ins. Co. V. Xelson, 65 111. 415; McLean v. Hess, 16 Ins. Law J. 227, 106 Ind. 555, 7 N. E. 567; Kyte v. Assurance Co., 149 Mass. 116, 21 N. E. 361, 16 Ins. Law J. 330; Harris v. Insurance Co., 50 Pa. St. 341; Travis v. Insurance Co., 32 Mo. App. 198; Traders' Ins, Co. v. Newman, 120 Ind. 554, 22 N. B. 428. 10 Title and incumbrances need not be disclosed, unless inquired about. Tlie (214) Ch. 3) TITLE AND OWNEESHIP. § 62 tract now in common use does not permit the insured to withhold any important fact in regard to these circumstances of the risk, it is not necessary to inquire more particularly what would be the rights of the parties were the case otherwise. In the growth of the insur- ance business, it has been found necessary, to prevent concealment of important facts affecting the hazard, to make it a condition of lia- bility that the insured shall disclose, whether particularly inquired about or not, every fact in regard to title, incumbrance, additional in- surance, and other matters which the insurer deems material in fix- ing the value and character of the risk ; and, as questions will here- after arise only under contracts of this form, it will be useless to dis- cuss any other. Many of the earlier decisions related to questions of law arising under a form of contract no longer in use. tei-ms of the policy required that the interest of the insured should be represent- ed, if he was not the sole and unconditional owner. Hall v. Insurance Co., 93 ilich. 184, -j-S N. W. 727. Supporting this ruling is Rochester Loan & Banldng Co. V. Liberty Ins. Co. (Neb.) 62 N. W. 877. Elsewhere it seems that a different rule prevails. See McFetridge v. Insurance Co., 84 Wis. 200, 54 N. W. 326; Schroedel v. Insurance Co., 158 Pa. St. 459, 27 Atl. 1077; Home Ins. Co. v. Smith (T«x. Civ. App.) 29 S. W. 264; Mers V. Insurance Co., 8 Ins. Law J. 505, 68 Mo. 127; Adema v. Insurance Co., 36 La. Ann. 660; AValler v. Assurance Co., 10 Fed. 232; Hinman v. Insurance Co.. 36 Wis. 159; Columbian Ins. Co. v. Lawrence, 2 Pet. (U. S.) 25; Rohrbach T. Insurance Co., 62 N. Y. 47; Richardson v. Insurance Co., 46 Me. 394; Kibbe V. Insurance Co., 11 Gray (Mass.) 163; Bowditch Mut. Fire Ins. Co. v. Win- slow, 3 Gray (Mass.) 415; Smith v. Insurance Co., 6 Gush. (Mass.) 448. In the absence of provisions in the policy calling for statement of the nature of the interest of the assured, unless inguired of, it may be said that he Is not bound to disclose the condition of title and interest. The possession of an in- surable interest would be sufficient, and would support an allegation of owner- ship. Norwich Fire Ins. Co. v. Boomer, 52 111. 442; Andes Ins. Co. v. Fish, 71 111. 620; Lycoming Fire Ins. Co. v. Jackson, 83 111. 302; Gilman v. Insurance Co., 81 Me. 488, 17 Atl. 544; Vankirk v. Insurance Co., 79 Wis. 627, 48 N. W.'798; Wytheville Ins. Co. v. Stultz, 87 Va. 629, 13 S. E. 77; Dwelling-House Ins. Co. V. Hoffmann, 125 Pa. St. 626, 18 Atl. 397; Guest v. Insurance Co., 66 Mich. 98, 33 N. W. 31. (215) § 63 LAW OF FIRE INSURANCE. (Ch. 3 § 63. The Policy Becomes Void When the Insured's In- terest in the Property is Changed. In the case of Weed v. London & L. Ins. Co./^ it appears from the facts stated that one Richards, becoming insolvent, conveyed his mill by deed of trust to Dean Sage, who was to sell the property, and ap- ply the proceeds in payment of Richards' debts, .'^terwards, and before the trust was executed, Richards died, and the policy in suit was issued, covering the property thus deeded to Sage, and without any knowledge on the part of the insurer of such conveyance. It was one of the conditions of the policy that it should be void unless the interest of the assured was an entire, unconditional, and sole ownership. The New York court of appeals said : "This condition as to the ownership of the property was precedent to the attaching of the risk, and, as Richards' estate had no title, it was broken upon the delivery of the policy. Upon this point of the case, therefore, the plaintiff failed to prove a valid contract, and was not entitled to recover." ^^ Where the title is in two persons jointly, as husband and wife, nei- ther will be "sole owner." ^' Naked possession is not ownership, within the meaning of an insurance policy, even though such posses- sion is undisputed.^* So, too, one is not owner who is in possession 11 116 N. Y. 106, 22 N. E. 229. ; 12 In Collins v. Insurance Co., 44 Minn. 44u, 46 N. W. 906, it was provided that the policy should be void unless the Interest of the insured was that of sole and absolute ownership. The plaintiff had only a Ufe estate. The court said: "Of course, she had an insurable interest, but that interest was not insured. The policy expressly excluded from its operation any Interest other than the absolute and sole ownership." Home Ins. Co. v. Smith (Jfex. Civ. App.) 29 S, W. 264; Georgia Home Ins. Co. v. HaU, 94 Ga. 630, 21 S. B. 828; German Ins. Co. of Freeport, 111., v. Hayden (Colo. Sup.) 40 Pac. 453; -German Ins. Co. V. Hunter (Tex. Civ. App.) 32 S. W. 344; Hebner v. Insurance Co. (111. Sup.) 41 N. B. 627. 18 Schroedel v. Insurance Co., 158 Pa. St. 459, 27 Atl. 1077; PeUcan Ins. Oo. V. Smith (Ala.) 18 South. 105; German Ins. Co. v. Hunter, supra; Hebner v. Insurance Co., supra; Webster v. Insurance Co. (Ohio) 42 N. E. 546; Home Mut. Fire Ins. Co. v. Hauslein, 60 111. 521; Cohn v. Insurance Co., 3 Hughes (U. S.) 272, Fed. Cas. No. 2,970; Aetna Ins, Co. v. Resh, 40 Mich. 241. 11 Porter v. Insurance Co., 2 Flip. 100, 6 Ins. Law J. 928, Fed. Cas. No. 11,286. (216) ^"- ^) TITLE AND OWNERSHIP. § 63 of property of which he enjoys the emoluments, by reason of a dona- tion inter vivos, with promise to convey. i» And the fact that he has paid taxes and made valuable improvements does not have the effect in law to create ownership. One person may hold the legal title to property of which another is the owner.i« When this occurs, as it frequently does in securing loans, both parties will have an insur- able interest; the one holding the legal title to the amount of his loan, and the owner to the full value of the property. In form, only, is there a sale of the property. The legal effect of such transac- tions is to place the parties in the relation of mortgagor and mort- gagee.^^ A stockholder in a corporation has an interest in the corporate property, which may be protected by insurance. While the prop- erty is beyond the control of the shareholder, and his interest in any specific subject of insurance indeterminate, it is easily demonstrated that he will suffer a loss by the occurrence of a flre.^^ "An equitable owner is an entire and sole owner." ^° So, too, the ownership is absolute in the holder of an equitable title, when it is not held in trust, and the right to convey exists.^" Ownership of this kind is very common. A. sells to B., who takes a contract of purchase, conditioned that, when certain payments are made, the former will execute to the latter a legal title. B. becomes the sole and unconditional owner of the property when he enters into pos- session, under a contract of this character; and the relations of the parties thereafter are those of mortgagor and mortgagee. Both have insurable interests. One may insure to protect the security he holds for the payment of the mortgage indebtedness, and the other 1 5 Wineland v. Insurance Co., 53 Md. 276; Jliller v. Insurance Co., 46 Mich. 463, 9 N. W. 493. 18 Henning v. Assurance Co., 77 Iowa, 319, 42 N. W. 308. 17 Hawley v. Insurance Co., 102 Cal. 651, 36 Pac. 926. 18 McCormick v. Insurance Co., 66 Cal. 361, 5 Pac. 617; Id., 86 Cal. 260, 24 Pac. 1005; Syndicate Ins. Co. v. Bohn, 12 C. C. A. 531, 65 Fed. 165; Seaman V. Insurance Co., 18 Fed. 250; Warren v. Insurance Co., 31 Iowa, 464; Riggs V. IiMurance Co., 51 N. Y. Super. Ct. 466; Buelv v. Insurance Co., 1 Pet. (U. S.) 163; Philips v. Insurance Co., 20 Ohio, 174. 10 Franklin Fire Ins. Co. v. Crockett, 7 Lea (Term.) 725. 20 Lebanon Mut. Ins. Co. v. Erb, 112 Pa. St. 149, 4 Atl. 8; Wainer v. Insurance Co., 15;^ Mass. 335, 26 N. E. 877. (217) § 64 LAW OF FIRE INSURANCE. (Ch. 3 to save himself from direct loss should the buildings or other prop- erty burn.''^ § 64. When Insured's Interest is Less than Sole and Un- conditional Ownership, It must be Disclosed. Under all forms of policies now in use, the insured is not only re- quired to particularly state his interest, if it be less than that of "sole and unconditional ownership," but he must also give the insurer notice of any changes which may take place in possession or inter- est.^^ The underwriter is accustomed to compute the measure of the 21 Johannes v. Fire Office, 70 Wis. 196, 35 N. W. 298; People's St. Ky. Co. V. Spencer, 156 Pa. St. 85, 27 Atl. 113; Martin v. Insurance Co., 44 N. J. Law, 485; Millville Mut. Fire Ins. Co. v. Wilgus, 88 Pa. St. 107; Pelton y. Insurance Co., 77 N. Y. 605, 13 Hun, 23; Coursin v. Insurance Co., 46 Pa. St. 323. "Where articles of agreement are entered into for the sale of land, the pur- chaser is considered the owner. It does not seem to be necessary, to produce this effect, that any part of the purchase money shall be paid. It results from the contract. If the laud increases in value, it is his gain. If it de- creases, or if improvements are destroyed by fire or otherwise, it is his loss." Siter's Appeal, 26 Pa. St. 180; Elliott v. Insurance Co., 117 Pa. St. 548, 12 Atl. 676; Imperial Fire Ins. Co. v. Dunham, 117 Pa. St. 460, 12 Atl. 668; Du- preau v. Insurance Co., 76 Mich. 615, 43 N. W. 585; Gaylord v. Insurance Co., 40 Mo. 13; Wooddy v. Insurance Co., 31 Grat. (Va.) 362; Lewis v. Insurance Co., 29 Fed. 496; Smith v. Insurance Co., 91 Cal. 323, 27 Pac. 738; Planters' Mut. Ins. Co. V. Rowland, 66 Md. 236, 7 Atl. 257, 16 Ins. Law J. 345; Hamil- ton V. Insurance Co., 98 Mich. 535, 57 N. W. 735; Knop v. Insurance Co., 101 Mich. 359, 59 N. W. 653. 22 The policy stipulated that "if the property should be sold, or the title or possession thereof be changed, it should be void." The insured afterwards con- veyed to A., by title deed. A. conveyed to B., and the latter gave a bond to the insured, tliat, on the payment of the debt which these several transfers were made to secure, he would reconvey. Held that, under the Code of Georgia, there was such alienation as voided policy. Phoenix Ins. Co. v. Asberry, 95 Ga. 792, 22 S. E. 717. Change of title avoids policy. Snow v. Oil Co. (Tex Civ. App.) 34 S. W. 177. J. and K. were partners in mercantile business, and insured as a firm. During the term of the poUcy, K. sold his interest to J., and took the latter's note for the purchase price. It was agreed that, if the note was not paid at maturity, K.'s Interest in the stock should continue until payment was made. The policy provided that it should become void, if, without the consent of the company, the insured property should be sold, or if the title or possession, or any part (218) tJh" 3) TITLE AND OWM5KSH1P. § 65 hazard he assumes by the care guarantied for its protectian, and this he understands will depend in a very large degree upon the interest of the insured. If such interest be important, the risk will be care- fully watched. If it be small, care and vigilance will be likely to fall into desuetude. This is a reasonable judgment of what is likely to occur so often as to affect seriously the success of their ventures. It is based upon principles of conduct that are fundamental in the human character. § 65. When Alienation Occurs. Generally there will be no alienation while the risk continues that of the vendor; and this, too, although the agreement to sell is in writing, and part of the purchase money has been paid, and the pur- chaser is in possession. The agreement must be so far executed tLat the title has passed to the vendee. This proposition fi'equently involves questions of much diflSculty, concerning which the courts have differed."^ thereof, should be changed. The court said: "There is no room for dispute that the possession was changed. K. had no more the possession of the goods than he would have had under an absolute sale, with a lien thereon. There was such a change of possession, if not of title, as to void the policy." Jones V. Insurance Co. (Iowa) 66 N. W. 169. Where property was leased to vendor at nominal rent, with option to re- purchase at expiration of lease, held, that vendee's interest was qualified, being subject to the equitab'e interest of vendor, an interest capable of be- ing specifically enforced. People's St. Ky. Go. v. Spencer, 156 Pa. St. 85, 27 Atl. 113. Held, that partition of property among heirs was such change as to cause a forfeiture. Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848, overruling Crook V. Insurance Co., .38 Mo. App. 582. Held, that sole ownership was not terminated by foreclosure proceedings until the sherifC's deed had been acknowledged. Both title and ownership, al- though in great peril, continue to that point. Collins v. Assurance Corp., 165 Pa. St. 298, 30 Atl. 924; Davidson v. Insurance Co., 71 Iowa, 532, 32 N. W. 514. -3 Boston & Salem Ice Co. v. Royal Ins. Co., 12 Allen (Mass.) 381; Masters V. Insurance Co., 11 Barb. (N. Y.) 624; Perry County Ins. Co. v. Stewart, 19 I'a. St. 45; Washington Fire Ins. Co. v. Kelly, 32 Md. 421; Davis v. Insurance Co., 10 Allen (Mass.) 113; Trumbull v. Insurance Co., 12 Ohio, 305; Fire & Marine Ins. Co. v. Morrison, 11 Leigh (Va.) 354. (219) § 65 LAW OF FIRE INSUKA.NCE. (Ch. 3- It is often a question, too, of much doubt, and one concerning which the courts have disagreed, at what time a sale is completed,, so as to become an alienation within the terms of an insurance pol- icy. In- Benjamin on Sales ^* we find a statement of the law as fol- lows: "So, if, also, by a fair construction of the contract, the ven- dor is to weigh or measure the article sold, in order to ascertain the- whole sum to be paid, as where an unknown quantity is sold by the pound, yard, etc., the title does not generally pass until the vendor- has done his part, unless the contrary intent sufficiently appears, not because weighing or measuring is in and of itself important, but be- cause the parties have agreed that the vendor shall do it before the title passes; therefore it must be done." ''^ In Nesbit v. Burry,^^ the court held that if, by the contract, the M'eighing was to take place before the sale was completed, and the- mode of weighing agreed upon failed, and the vendor refused to have the articles weighed in any other way or to deliver them, the title did not pass. In Joyce v. Adams," A. sold J. 259 bales of cotton, at 13J cents- per pound, and J. paid down $5 per bale. By the bargain, J. was also- to pay for storage, insurance, and interest; the cotton being deliv- ered 30 days from date, cash on delivery. The custom was for- the seller to weigh the cotton at his own expense, and repair the bales, if need be, and send the weigher's certificate to the buyer, with the bill of the parcels, weight, and price. Before this was done,, the cotton was destroyed by fire in the possession of A., and J. brought suit to recover back his advance of $5 per bale. It was held the title had not passed. So, in Straus v. Eoss,"^ E. sold S. his entire crop of wool for 1864. at 80 cents a pound. S. paid |20 down, and was by a certain date to» call on E. to go to a neighboring town for the wool to be weighed, and 2* Page 264. 20 Kein v. Tupper, 52 N. Y. 550; McClung v. Kelley, 21 Iowa, 508; Froslr V. Woodruff, 54 111. 156. See other cases there cited. In Forward v. Insurance Co., 142 N. Y. 382, .S7 N. B. 615, plaintiff had given, his brother a hill of sale. There was no consideration,— no change of pos- session. Held, that vendee had only a colorable title; that what had beem done did not constitute alienation, within the meaning of the policy. 20 25 Pa. St. 209. 2' 8 N. Y. 201. 2 8 25 Ind. 300. (220) ^^- •^) TITLE AND OVVNEIiSHIP. § 65 pay the balance of the purchase money. S. did not call on K. at the time stated, and R. sold the wool at an advance to other parties. It was held that the title did not vest in S., and that he could not recover damages of R. for nondelivery of the wool. See, also, Lester v. East,^" and cases cited. In McDonald v. Hewett," H. sold to M. a lot of timber on the bank of the Hudson river. H. was to deliver the same in New York City, and M. was to pay for the same when delivered, inspected, and measured In New York. H. sent the timber to New York, but refused to deliver il to M., and transferred it to other parties. It was held the sale was not complete, as it had not been inspected and measured. Benjamin on Sales ^^ further says: "It is not important who is to •do the weighing or measuring, except as that fact may indicate the intention of the parties as to the time the title is to pass. Thus, where the sale is for cash, to be paid for as soon as weighed, and no provision for unconditional delivery, the weighing, and consequently determining the price to be paid, is a condition precedent to a com- pleted sale." In Ward v. Shaw,'^ W. sold to C. a pair of cattle, which C. was to take into his possession, slaughter them, take the quarters to market, weigh them, and pay $7.50 for each hundredweight. Immediately after 0. took possession, his creditors attached the cattle as theirs, but the title was held not to pass before the slaughtering and weighing, — things to be done by the vendee. In Burson v. Fire Association," one Flory had bought a stock of goods of the plaintiff, and was in possession, under an agreement that the stock should become his when paid for. He had made one or two payments under the terms of the agreement. The plaintiff had signed a contract, which stipulated, among other things, that the goods should be his until paid for. The purchaser, Flory, was selling the stock in the regular course of business. Paxon, C. J., said : "I am unable to see why the plaintiff was not the sole and unconditional owner of the property insured, within the meaning of the policy. The evidence is not disputed that the entire legal title to it was in the plaintiff at the time the insurance was effected; that by the very terms of the lease a» 49 lad. 588. 3» 15 Johns. (N. Y.) 349. si Page 268. S2 7 Wend. (N. Y.) 404. as 136 Pa. St. 267, 20 Atl. 401. (221) § 63 LAW OP FIBE INSURANCE. (Oh. 3 or bill of sale, by whatever name it may be called, from the plaintiff to Flory, it was stipulated that the ownership should remain in the plain- tiff until the last dollar was paid. * * * As between the plaintiff and Flory, and as between the plaintiff and the insurance company, the title was in the plaintiff. The fact that Flory had made payments on account to the plaintiff did not give title pro tanto to Flory. This is because they had agreed that it should not; that, until the last dollar was paid, the title was to remain in the plaintiff. In the mean- time, the goods remained the property of the plaintiff; and, when de- stroyed by fire, the loss was his. He must hand over the goods to Flory when the last payment is made, or if that is not possible, ow- ing to their destruction, he must return to him the money he has paid. The contract between the plaintiff and Flory must be executed as they have made it, so long as it is not interfered with by some one who has a right to call its validity in question." While no general rule is clearly discernible for determining the exact time when preliminary negotiations end and the final word is spoken, or the final act per- formed, that completes the sale. In most of the cases examined, it has been seen that the courts have applied the test as to whether con- veyance of title could be compelled in an action for specific perform- ance.''* 3* It was stipulated in the lease that should the party of the second part pay on or before November 3d an additional sum of $26.85, then the party of the first part doth sell, transfer, and convey unto the party of the sec- ond part the absolute title and ownership of said property. Held, that the language of the contract imported sale. Fire Ass'n of Philadelphia v. Flour- noy, 84 Tex. 632, 19 S. W. 793; East Texas Fire Ins. Co. v. Clarke, 79 Tex. 24, 15 S. W. 166; Cottingham v. Insurance Co., 90 Ky. 439, 14 S. W. 417; Marks v. Tichenor, 85 Ky. 536, 4 S. W. 225; Calhoon v. Belden, 3 Bush (Ky.) 674. "It is the vendor's parting with the beneficial Interest in the property that vacates his contract of insurance." See, also, Gilbert v. Sleeper, 71 Cal. 290, 12 Pac. 172. An executory contract of sale, with possession in the vendee, is a change of ownership, and is held by the Pennsylvania court a change of title. Ladd v. Insurance Co., 70 Hun, 490, 24 N. Y. Supp. 384; Hamilton v. Insurance Co., 98 Mich. 585, 57 N. W. 735. Other authorities are Grable v. Insurance Co., 32 Neb. 645, 49 N. W. 713; Wich v. Insurance Co., 2 Colo. App. 484, 31 Pac. 389; Continental Ins. Co. v. Ward, 50 Kan. 346, 31 Pac. 1079. In this case It was held that any change of title, or an ownership with (222) Ch. 3) TITLE AND OWNEBSHIP. § 66 AssigDment for the benefit of creditors is such change of title, ownership, and possession as will cause a forfeiture, under the form of policy in general use. Assignments of this character may, and often do, result in a permanent alienation of the property insured. It is at once put beyond the control of the insured, and it may be said that the proceedings contemplate that the assets of the assignor will be sold and finally disposed of by the assignee, and the proceeds dis- tributed among the creditors. ^A'hen this occurs, the alienation is complete and final. In Orr v. Hanover Fire Ins. Co. the court stated its conclusion of the law as follows: "Upon the execution and delivery of the deed of assignment, all the title and interest originally held by the as- signor passed from him to the assignee. His legal interest was gone. The right of possession was gone, and the assignee was clothed with the right and power to sell and convey the property, and distribute the proceeds among the creditors. After the assignment, the assign- or has no more control over the property than he would have in the case of an absolute sale." ^° § 66. When Holding an Executory Contract of Purchase is not O-w^nership. In Brown v. Commercial Fire Ins. Co., '*" the assured held the prop- erty under an executory contract to purchase, by which the vendor, who was plaintiff in this action, agreed to convey the property upon the payment of |7,000; and it was also provided in the contract that if assured failed to make the payments of the purchase money, or either of them, the contract should, at the option of the vendor, be forfeited; and it appeared the assured had paid no part of the pur- less qualification, did not affect the validity of the insurance. Bailey v. In- surance Co., 13 Fed. 250, 1 McCrary, 221; Esch v. Insurance Co., 78 Iowa, 334, 43 N. W. 229; Lockwood v. Assurance Co.. 47 Conn. 553. 80 158 111. 149, 41 N. E. 854; Dadmun Manuf'g Co. v. Worcester Mut. Fire Ins. Co., 11 Mete. (Mass.) 429; Young v. Insurance Co., 14 Graf, 150; Perry T. Insurance Co., 61 N. Y. 214. 88 86 Ala. 189, 5 South. 500; Lasher v. Insurance Co., 86 N. Y. 423; Mars T. Insurance Co., 68 Mo. 127; Swan v. Insurance Co., 90 Pa. St. 37; Adema v. Insurance Co., 36 La. Ann. 660; Alabama Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 South. 125. (223) § 66 LAW OF FIRE INSURANCE. (Ch. 3 chase money at the time of the issuance of the policy, and that he had no other title to the property. The policy provided, among other things, as f oUows : "This policy shall become void unless consent in writing is indorsed by the company thereon in each of the following instances, namely, if the assured is not the sole and unconditional owner of the property, or if any building intended to be insured stands on ground not owned in fee simple by the assured, or if the interest of the assured in the property as owner, trustee, consignee, factor or agent, mortgagee, lessee, or otherwise is not truly stated in the ■ policy." The plaintiff in this action was the assignee of the insured, one Sage. The court said: "The object of such stipulation in the policy is to protect the company against taking risks on property for an amount disproportionate to the value of the interest of the as- sured, on which the company relies to a great extent as an incentive to use all reasonable precautions to avoid the destruction of the prop- erty. Being incorporated in the policy, it is in the nature of a condi- tion precedent, which must be substantially conformed with to entitle the assured to recover. When the true ownership is not required to be stated by the conditions of the policy, generally it will be sufB- ■cient if the insured has an insurable interest; but, when such re- quirement is the condition of the policy, it becomes a material part ■of the contract, and all rights under it are forfeited by noncompli- ance. A failure in such case to disclose truly the interest in the prop- erty cannot be regarded an immaterial circumstance. By express stipulations, the parties made it material, and the validity of the con- tract depended upon the compliance with the condition. The assured, by accepting a policy in which such condition is incorporated, be- comes bound thereby; and, when he claims to enforce the contract and receive its benefits, he is estopped from denying his assent to the stipulation. The court further said : "The plea clearly shows that the assured was not the sole and unconditional owner; that he did not own in fee simple the ground on which the building stood.; that his interest in the property was not truly stated,— and nanoempli- ance with khe condition and stipulation of the policy will avoid the ■contract." (224) Ch. 3) TITLE AND OWiNKKSHIP. ' § 67 § 67. The Contract will be Construed with Reference to the Character and. Situation of the Property Insured. A contract of insurance will be presumed to have been made in ref- erence to the charactei' of the property or business to which it relates, and to afford the protection which it promises. Thus, while, by certain of its proTisions, it is to become void if any portion of the property insured is sold, or any change takes place in title or pos- session, this prohibition will not be construed as intended to re- strain the merchant or manufacturer from buying and selling in the ordinary course of business, and so, too, may the farmer dispose of his products for an entire seasdii. His hay, grain, and even the live stock mentioned in the policy may be sold without an avoidance; and, when the new crops are gathered into the barns and cribs, they have the same protection as the property in possession at the time the insurance was effected. Thus, it will be seen that a plain stipula- tion in the contract will be rendered nugatory by construction, and for the obvious reason that it is inapplicable to the circumstances presented, and inconsistent with the evident purpose of the parties. It cannot be supposed that it was in contemplation, when the policy was written, that the merchant and the manufacturer were to close their stores and their workshops: or that the farmer, accepting a policy for a term of three or five years, understood that only a single crop was insured, and that, when a sale was made of an ox or a crib of corn, his insurance was forfeited. The contract of insurance is in some important respects "sui generis." It has been framed to suit, with slightly modifying clauses, every class of property under the widely differing circumstances in which it is used and located. From the necessities of the case, there will often be a want of adaptation, and the fixed and rigid terms of the policy, when this occurs, must be bent by .the judicial arm to serve, and not to defeat, the intention of the parties. In several of the states the form of the insurance policy is statutory, and it is inconceivable that the wisdom of the legislator or the wisdom of the underwriter can have provided in advance an inelastic form of words by .which can be given a definite expression, under a gr&at variety of circumstances, of the understandings and agreements of the insured and the insurer. From this necessity of OSTR.FIEE INS. 15 (2^0) § 67 LAW OF FIRE INSURANCE. (Ch. 3 adapting a general form to particular conditions, there will often be obscurities and contention, and the courts will be called to interpret and construe; and this will be, and should be, always performed in such a manner as to prevent forfeitures, whenever it can be done with- out doing violence to any plain contract stipulations. The courts must act on the reasonable presumption that, in consideration of the premium, some form and manner of protection was contemplated, and the contract will be understood and construed as having been made for such a purpose. In Cummings v. Cheshire Co. M. F. Ins. Co.," a dwelling house and contents were insured in specific sums. The dwelling was sold to the plaintiff, and the entire policy assigned to him, with the consent of the defendant. The household goods, insured to the original party, were removed to another place. The dwelling insured and its con- tents having been burned, the defendant claimed that it was not liable for the household goods, as the insurance applied only to the furniture and wearing apparel contained in the dwelling when in- sured, and, as these particular goods had suffered no damage, the company could not be charged; but the court held that, the contract being personal, the goods of the assignee were protected in the same manner and to the same extent as were those of the original in- sured.^' Conditions which influence the judgment and action of the »7 55 N. H. 447. S8 A harvesting machine was described in the policy as "operating in grain fields, and in transit from place to place in connection with harvesting in Fresno Co." At the time of the fire the harvesting season had closed, and the machine was not in grain fields, nor in transit from place to place. Held, that the insurer was not liable. Benicia Agricultural Works v. Germania Ins. Co., 97 Cal. 4U8, 82 Pac. 512; Phenix Ins. Co. v. Lorenz, 7 Ind. App. 266, 33 N. E. 444; McNally v. Insurance Co., 187 N. Y. 389, 33 N. E. 475. The policy covered a threshing machine when "not in use." It had been operated aboiit two weeks, and was at a repair shop when loss occurred. It was held that the words "in use" meant actually in operation. Minneapolis Threshing Mach. Co. v. Firemen's Ins. Co., 57 Minn. 35, 58 N. W. 819. A policy was written to cover, in specific sums, seven diflferent subjects. A new building was subsequently erected 15 feet away, and the policy was indorsed to cover the new structure. The court held that none of the insurance applied to the new building, as the entire insurance was exhausted in paying the losses as originally apportioned; but did not explain why the first apportionment of the insurance should be regarded, and the last treated (220) Ch. 3) TITLE AND OWNEKSHIP. § 69 parties prior to a loss must receive a fair construction, — one that will express as near as possible the intentions of the insurer and insured. Conditions that relate to matters after a loss, if doubt and ambiguity- exist, will be construed most favorably to the insured. § 68. A Change from Ownership to Life Estate Voids the Policy. A. sold to B. the land on which the insured property was located. This sale was confirmed by good and sufficient deed. As a part of the consideration, A. received back from B. a bond, made in conformity with the statutes, which secured to A. the use and occupancy of the property during his life. Thus, his estate in fee was changed to one for life. This sale was made without the knowledge of the insurer. The policy contained a clause that it should be void if there were any sale, transfer, or change of title without the consent of the company. It was held that the company was not liable.^' § 69. Insurance Tvithout an Interest in the Property is Contrary to Public Policy. In Agricultural Ins. Co. v. Montague,*" the policy insured, among other things, an organ and certain articles of silverware. The first of these was purchased on credit, and with the understanding that the as a nullity. We agree with the court that the indorsement to extend the in- surance to the new subject could not be given effect, because there had been a failure to specify the changes to be made, or, in other words, to provide a new apportionment. Nappanee Furniture Co. v. Vernon Ins. Co., 10 Ind. App. 319. 37 N. B. 1064. Courts may construe, but cannot change, contracts. Dover Glass Works V. American Fire Ins. Co. (Del.) 29 Atl. 1039; Tubb v. Insurance Co. (Ala.) 17 South. 615; East Texas Fire Ins. Co. v. Kempner (Tex. Civ. App.) 34 S. W. 393; Manchester Fire Assur. Co. v. Koerner, 13 Ind. App. 372, 40 N. B. 1110. Policy insured "farming implements." Held, that binding twine was cov- ered. Davis V. Insurance Co. (Iowa) 64 N. W. 687; McKeesport Mach. Co. v. Ben Franklin Ins. Co., 173 Pa. St. 53, 34 Atl. 16. 3 Farmers' Ins. Co. v. Archer, 36 Ohio St. 608. *o 38 Mich. 548, 7 Ins. Law J. 708. (227) § 69 T.AW OF FIRE I*;SUIi\NCE. (Ch. 3 title was not to pass until the organ was paid for. This had not been done when the fire occurred. The policy, by its terms, required a full disclosure of title; and, if any other person was interested in the prop- erty, the fact was to be stated, and, failing to make such disclosures of title and interest, the policy would be void. The policy was is- sued to one Graves, and assignedtoMontague, the defendant in error. The court held that, while Graves had an equitable interest in the or- gan, he did not own it, and his neglect to inform the insurer of the state of the title was fatal to recovery.*' The silverware insured, it was in proof, belonged to Graves' wife; but it was alleged and shown that the facts in regard to ownership were fully explained to the agent who wrote the policy, previous to his doing so. It was claimed Ihat, the company having, such knowledge when issuing the policy, its technical defense, on account of the own- ership of the property being in another, was waived. The trial judge took this view of the matter in his instructions to the jury. Justice Gooley, of the supreme court, said : "If the instruction was correct, it is manifest that any person may obtain insurance upon property with- out any right to it whatsoever. He has but to disclose the facts, and the policy, though only a wager policy, will be as legal as any other; but such doctrine is at war with the fundamental principles of insur-' ance, which require that a person shall have an insurable interest be- fore he can insure. A policy issued when there is no such interest is void, and it is immaterial that it is taken in good faith and with full knowledge. The policy of the law does not admit of such insurance, however willing the parties may be to enter into it. The doctrine of ^'i•aiver has obviously nothing to do with such a case. The agent can- not do for the company by waiver what the company is powerless by express contract to do for itself. He cannot by waiver invest the in- sured with an interest he does not own. There was occasion to con- sider this question in Peoria Marine & Fire Ins. Co. v. Hall,*^ and it was there held that an insurance of partnership property by one person in his own name could not be made to embrace the interest of the other partner, notwithstanding it was written by the agent with full knowledge of the facts. The reason is the one above assigned, — it is not competent to write an insurance where an insurable interest *i See authorities cited in notes 34 and 36, ante. *2 12 Mich. 202. (228) Ch. 3) TITLE AND OWiNKRSHIP. § 70 is wanting, whether the facts are known or not. The difficulty is in- herent in the case, and is beyond the reach of waiver." " The court then adds, as a basis for the principal proposition : "Under our statute, the husband has no control whatever over his wife's property, so that the question arises here precisely as it would had the silver been owned by a stranger." Under the insurance contract now in general use, the question will seldom arise whether the insured has or has not an insurable in- terest. The underwriter will in most cases be reluctant to approve risks where there are no better guaranties of care and protection than such as are offered by persons whose interests are qualified, un- settled, and frequently the subject of dispute. Something more is re- quired as the basis of confidence, as a pledge of permanence, as a promise that the insurer shall not become involved in doubtful con- troversies, and made to bear the misfortunes of an unsuccessful con- test to establish a legal right. The importance of this matter is now so well understood that it will not often occur that indemnity wUI be promised to persons whose interests are less than absolute ownership. § 70. Real- Estate Mortgage is not a Change of Title. A real-estate mortgage is not a change of title, although it has been held to be an alienation of ownership and a change of interest.** In that case the policy prohibited an "alienation of ownership," and, the property having subsequently become mortgaged, a forfeiture was held. *3 "At the common law, as well as under the statute of New York against betting and gaming, a policy of fire insurance is void unless the party in- sured has at the time an insurable interest in the property." Freeman v. Insurance Co., 38 Barb. 247, 14 Abb. Prac. (N. Y.) 396; Murdock v. Insur- ance Co., 2 N. Y. 210; Tallman v. Insurance Co., 29 How. Prac. (N. Y.) 71; Home Ins. Co. v. Duke, 75 Ind. 535, 10 Ins. Law J. 857; Phoenix Ins. Co. v. Benton. >i7 Ind. 132, 11 Ins. Law J. 634; Baldwin v. Insurance Co., 60 Iowa, 497, 15 N. W. 300, and 12 Ins. Law J. 371; Williams v. Insurance Co., 24 Fed. 625, 14 Ins. Law J. 708; Chrisman v. Insurance Co., 16 Or. 283, 18 Pac. 466; Monroe v. Insurance Co., 63 Ga. 669. *i Edmands v. Insurance Co., 1 Allen (Mass.) 311. (229) § 71 LAW OF FIKE INSURANCE. (Ch. 3 In Gaskin v. Phoenix Ins. Co./" the interest of the mortgagee hav- ing been changed to that of absolute ownership by foreclosure, and the policy providing for a forfeiture in case there should be a "change in title or possession,'' the court held that there was an avoidance. § 71. Incumbrance. Where the policy only stipulates against alienation or change of title, incumbrance will not ordinarily render it invalid. We have seen in the course of our inquiries that personal mortgages have been held to so affect the hazard as to discharge the insurer, under a provi- sion of the policy that it shall become void if the risk shall in any manner be increased without the consent of the company; *° and 4 8 2 Alien (N. B.) 429. *« Lep V. Insurance Co., 79 Iowa, 379, 44 N. W. 683, and 19 Ins. Law J. 551; Appleton Iron Co. v. British America Assur. Co., 46 Wis. 23, 50 N. W. 1100. The courts have differed widely in their conclusions as to the ownership of mortgaged chattels. Where there had been no change in the possession of the property, it was held in the following cases that the title did not rest in the mortgagee: Hanover Fire Ins. Co. v. Connor, 20 111. App. 297; Rice v. Tower, 1 Gray (Mass.) 426; Hennessey v. Insurance Co., 28 Hun (N. Y.) 98; Taylor V. Insurance Co., 83 Iowa, 402, 49 N. W. 994; Van Deusen v. Insurance Co., 1 Abb. Prac. (N. S.; N. Y.) 349. In case last cited the court declared the rule that, where mortgagor of chat- tels continues to have both possession and the right of possession, there is no alienation. Hubbard v. Insurance Co., 33 Iowa 325; Hicks v. Insurance Co., 71 Iowa, 119, 32 N. W. 201. Chattel mortgage is an increase of the risk. In Lee v. Insurance Co., 79 Iowa, 379, 44 N. W. 683, it was held, as a matter of law, that a chattel mortgage relieved the insurer, under a condition of its policy that if the risk be increased without its consent the policy should be void. The court said: "The giving of a chattel mortgage is, beyond question, an increase of the risk, and a decrease of the defendant's security, because thereby the assured lessened his Interest In the insured property. It makes no difference that a right of action had not accrued upon the mortgage. It was a depletion of the assured's Interest In the property, to the extent thereof, from its execution and delivery." When per- sonal property is mortgaged, and continues in the possession of the mortgagor, it may be doubted whether the insurer wUl be relieved under a policy inhibiting, by its terms, on penalty of forfeiture, any "change of title." See, also, as fully sustaining this decision. Woodward v. Insurance Co., 32 Hun, 365. This was held In Tallman v. Insurance Co., *42 N. Y. 87. But when the (230) Ch. 3) TITl.E AND OWNEKSIIIP. § 71 oircumstanc s may sometimes arise in connection with real-estate mortgages where it will be a proper question to submit to a jury whether the incumbrance had not affected the hazard to such an ex- tent as to prejudice the right of the insurer. In Massachusetts it has been held that, when the policy prohibits an "alteration in the prop- erty" under penalty of forfeiture, a mortgage will prevent recovery.*^ Elsewhere real-estate mortgages have not been held to affect the validity of the insurance, unless it is so stipulated in the policy. "When, in suitable form of words, it is made a condition that incum- brances must be disclosed and consented to by the insurer, it has been held by the courts, with great unanimity, that there must be compliance, or there will be no liability. And it may be said, too, that there is a consensus of judgment that, when the mortgagor of chattels has both the possession and the right of possession, no alienation has resulted by placing the mortgage. The insured represented that the property covered was incumbered for about $3,000. The incumbrances were shown to exceed $4,400, and it was held that the misrepresentation was fatal to recovery. This ruling appears to have been without regard to any question of good faith on the part of the insured.''^ In Farmers' & Drovers' Ins. Co. v. Curry,*'' the insured had war- ranted that he was the sole and unconditional owner; but, it appear- ing that there was a vendor's lien for the unpaid purchase money, it was held that the policy was void. In Sentell v. Oswego County Farmers' Ins. Co.,''" at the time of mak- ing application the agent was informed by the applicant that he in- tended placing a mortgage on the property to the amount of |1,000 ; possession of the property has passed to the mortgagee the case is otherwise. The title is then changed, the sale is completed, and even while the property remains in the possession of the mortgagor the effect of a chattel mortgage would be to render invalid a policy providing for forfeiture in case there should be any "change of interest." If the mortgagor still continues, in law, the owner, it cannot be disputed that his interest in the property has become ma- terially diminished. *^ Edmands v. Insurance Co., I Allen (Mass.) 311; Hutchins v. Insurance Co., 11 Ohio St. 477. *8 Glade v. Insurance Co., .56 Iowa, 400, 9 N. W. 320. «« 13 Bush (Ky.) 312. 50 16 Hun (N. Y.) 516. (231) § 72 LAW OF FIRE INSURANCE. (Ch. 3 and thereupon the agent filled up the application so as to represent an existing incumbrance for the sum mentioned. Subsequently, the premises were mortgaged for |1,200. The policy prohibited any in- crease of incunlbrances without notice and consent. It was held that the covenanf had been violated, and the insurer was released. A mortgage was held by the supreme coart of North Carolina to be an alienation, within the terms of the policy, which provided that if the property insured should be alienated, or in case there was any transfer or change of title, without consent, the policy should be void. The insured having executed a mortgage on the property, with power of sale, the court held there was an avoidance."*^ It was held in Texas that a real-estate mortgage was a change of interest; ^^ and in North Carolina that the execution and delivery of a mortgage, with power of sale, was a change of title and interest." While the owner of real estate is no less an owner, in legal effect, after placing a mortgage on the property, than he was before, it will not be disputed that his interest is frequently diminished exactly in proportion as the incumbrance is increased; and it is this fact, which refers directly to the moral hazard of the risk, that chiefly concerns the insurer; and hence, too, in most cases a disclosure of incumbrances and title is made a condition to the payment of a loss. When its uses are understood, the required representations concern- ing the insured's interest in the property are justified by business considerations, and have the sanction of the courts. § 72. A Person Holding a Contract of Sale in Possession is Sole and Unconditional Owner. This proposition is aptly illustrated in the case of Cottingham V. Firemen's Fund Ins. Co." At the time the policy in that suit was issued, plaintiff owned the property insured, but, before the loss, entered into the following contract of sale : "This contract witness- 01 Sossaman v. Insurance Co., 78 N. 0. 145; Byers v. Insurance Co., 35 Ohio St. 606; EUis v. Insurance Co., 61. Iowa, 577, 16 N. W. 744; Mallory v. In- surance Co., 65 Iowa, 450, 21 N. W. 772; O'Brien v. Insurance Co., 79 Wis. 399, 48 N. W. 714; Hankins v. Insurance Co., 70 Wis. 1, 35 TST. W. 34. B2 East Texas Fire Ins. Co. v. Clarke, 79 Tex. 23, 15 S. W. 166. 53 Sossaman v. Insurance Co., 78 N. C. 145. '>* 90 Ky. 439, 14 S. W. 417. (232) Ch. 3) riTLK AND OWNERSHIP. § 72 eth that we, 0. H. and H. A. King, have this day swapped or ex- changed property with Albert Cottingham, as follows: We, C. H. and H. A. King, give Cottingham the G. H. Cottingham house and lot for the Albert Cottingham house and lot, formerly owned by James A. Watson, and the lot west of the house. * » * Deeds to be made soon. [Signed] C. H. and H. A. King. A. G. Cottingham." The policy provided that it should be void if, without written permis- sion, the property should be sold or transferred, or if any change should take place in title or possession. The court said: "In this state the purchaser of real estate by title bond talies the risk of the property. He is the beneficial owner of it, and its loss or destruction falls upon him, and not on the vendor.°= It is the vendor's parting with the beneficial interest in the property that affects his contract of insurance; and, where a sale of the legal title is to deprive the owner of such interest, a sale of the equitable title only will not be sufficient for the purpose. Eut where, as in this state, the beneficial interest is passed to the vendee of the equitable title, the contract of insurance is affected by such sale. The vendee in such case assumes all risk of loss or destruction of the property. Such risk is ho longer with the vendor; hence the insured's contract of indemnity against the destruction or damage of the insured property is at an end." Where the policy contains a condition that it shall be void unless the insured is the sole and unconditional owner of the property insured, it has been held in several of the states that the company is not re- lieved from payment of loss, although it is shown that the insured, being in possession, holds only a contract of purchase.^" It was represented in Pelton v. Westchester Fire Ins. Co.^' that the insured owned the property. The policy stipulation was that it should be void if assured had not the entire, unconditional, and sole ownership, unless otherwise expressed. He was in possession under a contract of sale by the owner of the fee. It was a provision of that contract that the owner might declare a forfeiture should the vendee default in payment. It was also shown that a default actually ex- isted at the time the insurance was effected. The vendor had not 5 3 Marks v. TicJienor (Ky.) 4 S. W. 225; Calhoon v. Belden, 3 Bush (Ky.) 674. 6 6 Martin v. Insurance Co., 44 N. J. Law, 485; Pelton v. Insui-ance Co., 77 N. Y. 6(K), .13 liun, 23. 5 7 Supra. (233) § 72 LAW OF FIRE INSURANCE. (Ch. 3 t insisted on his right to declare a forfeiture when the loss occurred. It was held that the representation of the assured that he was the owner was not untrue, and that the insurer was liable. In East Texas Fire Ins. Co. v. Djches," the test was suggested by the court that, if the insured could enforce specific performance of a bond given to convey the property, then he was in fact the owner in fee simple. Where the insured was in possession under a contract of sale from the owner in fee, and had paid the entire purchase price, but had not yet received a deed, it was held ^^ that he was the sole, uncondi- tional, and fee-simple owner. In Parsons on Mercantile Law,^° he states this proposition: "EA'ery actual sale is an executed contract, although payment or de- livery may remain to be made." And in De Bidder v. McKnight,"^ the court said : "A sale is not so much a contract for the transfer of property as it is the actual trans- fer of the right to property, and this right passes as soon as the par- ties have agreed to the terms and conditions of the sale; for, when the contracting parties clearly manifest their assent to a sale, the law immediately carries the intention into effect, and transfers the right of property from the one to the other." The meaning of this would seem to be that the right of property can be transferred by the agree- ment of parties, and that the change of physical possession is impor- tant only as a visible and substantial evidence of assent and purpose. The law will recognize other evidence that is sufficiently strong to overcome the presumptions in favor of possession. Again, we quote from Parsons: "" "A contract is made, when the agreement is made that the completion of the sale does not depend upon the delivery of the goods by the seller, nor upon the payment of the price by the buyer; that, by the assent of the parties to the terms of the sale, the buyer acquires at once the property, and all the rights and liabilities of the property; and that, in case of loss or deprecia- tion of the articles purchased, the buyer will be the sufferer, as he will be the gainer by any increase of the value." But he says: "A 6 8 56 Tex. 565. 6 9 Lewis V. Insurance Co., 29 Ifed. 496; Brogan v. Insurance Co., 29 U. 0. C. P. 414; Gill v. Insurance Co., 1 Ont. 341. "o 2d Ed. 81 13 Johns. (N. Y.) 294. 62 2d Ed. (234) Ch. 3) TITLE AND OWNERSHIP. § 73 delay in the delivery of goods or of payment of the same if anything remains to be done by the seller to or in relation to the goods sold for their ascertainment, identification, or completion, the property in the goods does not pass until that thing is done, and there is yet no completed sale. Therefore, if there be a bargain for the sale of spe- cific goods, but there remains something material which the seller has to do to them, and they are casually burned or stolen, the loss is the seller's, because the property has not passed to the buyer." § 73. Holding under a Contract of Sale not Unqualified O-nmership. In Smith v. Bowditch Mat. Fire Ins. Co.,"'' the by-laws of the com- pany required all applicants to state truly their title and interest in the property to be insured, and, on failure to do so, it was provided that the company would not be bound. The applicant described the premises as his, without stating anything specific in regard to his title. On the trial, it was shown that he held under a contract of sale. The court held that "the failure to express the true title of the assured, al- though not interrogated as to it, rendered the policy void.""'' While this decision is supported by many excellent authorities, and declares what we believe to be the correct rule of law, there are, never- theless, courts of eminent learning that have held otherwise, as we have elsewhere pointed out. The statement of the applicant that the property was his was no doubt a truthful one, but the by-laws required by fair implication that he should disclose other facts that were with- held. The applicant was, it is true, the owner of the property ; but the fact that the legal title was in another was important to the insurer, and in good faith should not have been concealed. The by-laws called for information in regard to title as well as interest, and for excellent reasons. While a person holding under a contract of purchase is, in a legal sense, the owner, that ownership is always in fact qualified, and his real interest may often be small in proportion to the value of the property. Suppose, for illustration, A. sells to B. a farm valued at 63 6 Cush. (Mass.) 448. 84Kibbe v. Insurance Co., 11 Gray (Mass.) 163; Bowditch Mut. Fire Ins. Co. V. Wlnslow, 3 Gray (Mass.) 415. (235) § 74 LAW OF FIRE IXSUKAN'CE. (Ch. S $10,000, receiving a cash payinetit of |500. The deferred payments of 19,500 are to be made in sums of $500 each at intervals of six months, until the whole amount is paid. A. enters into a contract, with proper covenants, to deliver to P>. a good and sufficient deed of the property when paid for as above stated. B. now procures an insurance on the farm buildings, describing them as "his," for |5,000. When this is done, it is easy to understand that a dangerous temptation is put be- fore B. to burn the property, and subsequently abandon the farm to A., who, as well as the insurer, has been wronged by the transaction. It is seen, therefore, that the insurance company must for its own pro- tection, and for the protection of public morality, require of those seek- ing insurance the fullest disclosure in regard to their title and interest in the property to be insured. § 74. When There is a Change of Title without a Sale. We have frequently pointed out during the progress of this dis- cussion that there may be a valid sale without a transfer of the legal title, and so, too, it will appear that there may be a transfer of the legal title without an actual sale. In Western Massachusetts Ins. Co. v. Ricker,«= after the insurance was effected, and before the loss, the defendant in error conveyed to one Latourette an undivided one-third interest in the property in- sured. The policy provided for an avoidance in the case of any change in title or ownership without notice and consent. The trial court ad- mitted parol testimony to show that tiie conveyance referred to was intended and understood between the parties as security for money loaned and for advances to be made defendant Ricker. The supreme court held this to be error. It is said: "There may be a transfer or change of title without sale. The words 'transfer or change of title' are more comprehensive than the word 'sale.' Should A. convey a piece of property to B., to be held in secured trust for him, there would be a transfer or change of title from A. to B. It would not be a sale of the property or an actual parting with it for valuable considera- tion, although the conveyance on its face would import a sale by A. to B. If the trust, instead of being secured, appeared on the face 80 10 Mich. 279. (236) '^"' ^) TITLE AND OWNERSHIP. § 75 ■Of the conveyance, there would still br. a change of title. The title would no longer be in A., but in H., his grantee. We think such a <;onveyance would clearly come within the condition of the policy, and put an end to the insurance. If such a conveyance would annul the policy, we see no reason why the conveyance to L. should not have that effect. The title to one-third of the mill was in him, and not in the insured, when the fire occurred. There can be no doubt that the deed being absolute on its face, and not in form a mortgage, placed the title in L. He could have sold the property, and conveyed -a good title to his vendee, if the latter was ignorant of the circum- stances under which he acquired the title. But it is insisted that the conveyance does not affect the insurance on the other two-thirds of the mill. * * * xhe mill was an entirety, and insured as such. The title was changed, not the whole title, but a part of it. The whole title was in the insured at the date of the policy. When the :fire took place, two-thirds of the title only was in them, and one-third in L. This is a change of title to the entirety of the thing insured." "" § 75. Sale by Joint Owner of an Undivided Interest Voids the Policy. In Dix V. Mercantile Ins. Co.,°' the insurance was obtained by Sin- ■clair, Dix, and Harris, who were joint owners of the property insured. Subsequently, and before the loss, Sinclair sold his undivided interest lo the other partners, Dix and Harris. The policy expressed a condi- tion as follows: "In case of any transfer or change of title in the prop- erty insured by this company, or of any undivided interest therein, such insurance shall be void and cease." The court said : "Here was a, transfer by one of the insured to the other of his undivided interest in the property insured. There is a change of title to an undivided interest in the property. At the date of the policy, it belonged to Sinclair. At the time of the loss, it was the property of Dix and Harris. * » * The intention of the company was manifestly, as urged, that no stranger should come into the management and care -of the property without their consent. Knowing the parties with 68 Brown v. Insurance Co., 156 Mass. 587, 31 N. B. 691; Dreher v. Insur- 4mce Co., 18 Mo. 128; Dix v. Insurance Co., 22 111. 272. 67 22 111. 272. (237) § 76 LAW OF FIKE INSURANCE. (Ch. 3 whom they were contracting, relying upon the fidelity and circumspec- tion of each and every one of them, they were willing to take the risk at the premium stipulated. It was an object of the first importance with them to secure for the property the guardianship and care of faithful and trustworthy men, and for this they were willing, for the premium, to intrust the property to the care of Sinclair, Dix, and Harris, but not to the care of Dix and Harris alone. Is it not plain that the insured may be as greatly prejudiced by removing one to whom, with others, they had trusted the guardianship of valuable property, as by the introduction of a stranger? The one removing from the concern may have been the very one in whose vigilance, fideli- ty, and care the greatest share of confidence was reposed; and, by so removing, the hazard is increased to the assured without any corre- sponding increase of premium. This is neither just nor equitable. The plaintiffs, therefore, have no right to say that it was against the coming in of strangers the condition was aimed.""' In Hartford Fire Ins. Co. v. Ross,"* the policy was issued to Ross, Shirk, and Logan, who were doing business as partners. Before the loss occurred, Logan sold his interest to Shirk, without notice to or the consent of the insurer. The policy provided against alienation or change of title in the same manner as in Uix v. Mercantile Ins. Co.;" and the court, referring to the opinion then written, fully adopted the conclusions reached and views expressed by the Illinois court. § 76. Partition of the Property Insured is a Change of Title and Interest. So, also, where the insurance is for one who owns real estate in com- mon with another, and the policy covers on his undivided interest, and, before loss, a partition of the property is had, such change has taken place in title and interest as will render invalid a policy which pro- vides that it shall be void if any alteration or change occurs in the title. This was held in Barnes v. Union Mut. Fire Ins. Co. ^^ We quote 88 Howard v. Insurance Co., 3 Deulo, 301; Murdock v. Insurance Co., 2 N. y. 210. 6» 23 Ind. 179. 7 22 111. 272. Ti 51 Me. 110; Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848. (238) Ch. 3) TITLE AND OWNERSHIP. § 77 from the opinion: "The partition of the property may not have been an alienation, as understood in matters of insurance; but, when a by- law provides that any alteration or change in the title shall make the policy void, any material change in the title will have that effect, though it is not by alienation. The title in the case at bar was mate- rially changed by the partition. The effect was equivalent to an alien- ation and a purchase. The plaintiff no longer owned any interest in the entire property, while he did own the entire interest in a part of it. The title no longer corresponded with the policy in nature or quantity. He insured but one undivided half of the part which he owned after it was divided, and after the division he owned no part of the other half. If he could recover at all, which he cannot do, it would be for only one-fourth part of the whole, or for an undivided half of the part which he continued to own after the partition." § 77. Change of Title by Death will Void the Policy Un- less Other-wise Provided. Where the policy provides that it will become void when any change takes place in title or possession, on the death of the insured the lia- bility of the company will immediately terminate. Whether the same consequences would result if the policy expressed no condition in regard to change of title is, so far as our inquiry has extended, an open question. There are, however, excellent reasons to support so extreme a proposition, proceeding from the purely personal character of the insurance contract. It is the person, and not the property, that is insured. The engagement, too, is one involving mutual obliga- tions. The company's promise of indemnity is to a particular indi- vidual, and made contingent on the performance by him of certain im- portant and specified duties. His personal character, business habits, and reputation are always considerations in estimating the value and desirability of a hazard. When the insured dies, there remain none of the guaranties which were based upon his integrity and watchful habits, and which perhaps alone induced the company to accept the risk. It is left for a stranger to perform in good faith or to neglect with indifference the protection of the property,— a matter always of the first importance to the insurer. The heirs or personal repre- sentatives of the deceased, who assume the care and custody of the (239) § 77 LAW OF FIRE INSURANCE. (Cll. 3 property, may be persons deficient in moral character or intelligence, incompetent to be charged with important responsibilities, or unsafe persons to insure on account of reckless and dissipated habits. So far as we know, the courts have never passed directly on this question; but, for the reasons here stated, we favor the opinion that, in the absence of any provisions contained in the contract continuing its benefits to heirs or personal representatives of the insured, it would terminate at his death. In Lappin v. Charter Oak Fire & Marine Ins. Co.," it was a provi- sion of the policy that any loss for which the company was liable would be paid to the assured, his executors, administrators^ and as- signs. It also provided that if there should be any sale, transfer, or change of title in the property insured, or of any interest therein, without the consent of the company, the policy should cease and be- come void; and the court held that the insurance did cease and be- come of no binding force on the death of the insured ; that the vest- ing of the title in his heirs at law was a change from the insured to others, within the express terms of the policy. In Hine v. Woolworth,'^ the policy was issued by the Homestead Fire Insurance Company to one Bramillet, who subsequently died. The policy expressed a condition that it would become invalid if the interest of the assured should be changed in any manner without the consent of the company. The policy also provided that any loss within its terms should be paid to the assured, his executors, admin- istrators, and assigns. In its discussion of the case, the New York court of appeals said: "It did not by its terms insure the heirs, ex- ecutors, administrators, and assigns against loss by fire, but merely insured Bramillet, and then promised to pay such insurance to him, his heirs, executors, administrators, and assigns. He might suffer a loss in his lifetime, and then die, and the loss would be payable to the executors or administrators; or he might suffer loss, then assign it, and then it would be payable to his assigns. The word 'heirs' is in the same connection with the words 'executors, administrators, and assigns'; and the language imported a covenant to pay them, and, in case the estate was so situated that they would become entitled to the payment of the loss, would be payable to them, but there was no T2 58 Barb. 325. ts 93 N. y. 75, 13 Ins. Law J. 71. l240) C'l- <5) TITLE AND OWNERSHIP. § 77 insurance for their protection. In order to hold that it was an in- surance for the benefit of the heirs, we should also have to hold that it was an insurance for the benefit of the executors, administrators, and assigns, and the latter term would embrace any person to whom the insured might convey his property. Such, clearly, was not the in- tention of the policy. Therefore, when Bramillet died, and the title to the property was transferred to his heirs, there was such a change in the interest as avoided the policy until the consent of the company should be obtained." W.^-man v. Wyman ' * fully sustains the doctrine here stated. Many policies provide that a change of title or interest shall not cause an avoidance when the change is the result of a "succession by reason of death." It may be doubted whether the language of this qualifying clause would be suflBcient to continue the insurance except to heirs and administrators. Webster defines the word "succession" as "the right to enter upon the possession of property of an ancestor or one near of kin, or proceeding in an established order"; and this we understand to be the meaning of the word in law.^^ When the in- sured property, therefore, does not descend to the heir in the man- ner provided by law, but is disposed of by will, a change has taken place that will render the policy invalid. In Quarles v. Clayton,'" is found an interesting discussion in regard to the personal character of the insurance contract, and under what circumstances the obligation of the insurer will not survive the death of the insured. The policy was issued to John W. Quarles, and con- tained the usual stipulations against alienation, etc. In the marriage contract between Quarles and Mrs. Nancy M. Kirk, who subsequently became his wife, and was such at the time of his death, it was pro- vided that the wife should acquire no legal interest on account of the marriage relations in any of the property of the husband, and that, m case he died without making other provision for her, she should have the use of 140 acres of land, on which were situated the home and other outbuildings. Quarles died intestate, and before the metes and bounds of the. 140. acres of land which she was to receive in lieu -4 26 M.- Y. 253. 7 s Hunt V. Hunt, 37 Me. 344; Blake v. McCartney, 4 Cliff. 103, Fed. Cas. No. 1,498. 7« 87 Tenn. 308, 10 S. W. 505. OSTR. FIRE INS. 16 (241) § 77 LA.W OF FIRE INSURANCE. (Ch. 3 of her dower interest, under the marriage contract, had been fixed, the home mansion burned; and the question presented to the court was whether Mrs. Quarles was entitled to the benefit of the insurance which had been obtained by her husband in his lifetime, and which continued on the property up to the time of the fire. The policy pro- vided that it should become void in case any change should take place in the title or possession, except by succession by reason of the death of the assured. The court said : "These provisions have been upheld by the courts as reasonable conditions, limiting and restricting the lia- bility of the assured. That they are reasonable is obvious, when we consider that the contract is one for the personal indemnity of the as- sured against a loss, affecting his interest in the property covered by the policy. The insurer contracts with reference to the character of the assured for integrity and prudence. He might be very willing to agree to make good the loss of one by the destruction of property own- ed by him, while he would be altogether unwilling to insure the same property if owned by another. Again, the contract undertakes to malve good any loss which the assured may sustain, and from this it follows that, if the assured has parted with his interest before the loss, he cannot ask to be indemnified, becausehe has sustained no loss. The provision against the change of title is, therefore, in precise har- mony with the personal character of the contract. In some fire in- surance contracts the stipulation against change of title extends so far as to make the policy void, should such change of title be brought about by the death of the assured. The title in such case is no longer in the assured, but has, by law, passed to his heirs, or by will to his devisees; and a change of title so occurring has been held to defeat an action for a loss occurring after the death of the assured." The contract is not, therefore, one which attaches to or follows the prop- ecty, being one for the personal indemnity of the assured; and, where the insurer does not assent to the assignment of the policy to a grantee of the property, neither the assured nor his assignee of the property can recover upon the policy." '^ The court then makes the distinction between the policy in suit and those in the cases above referred to in the New York court, in respect " Shevwood v. Insurance Co., 73 N. Y. 447; Hlne v. Woolworth, 93 N Y. 75. 18 Hobbs v. Insurance Co., 1 Sneed (Tenn.) 445. (^42) ^"- ^) TITLE AND OWNERSHIP. § 77 to the fact that the policy issued to Mr. Quarles made an exception, when providing against change of interest and alienation, that any change by succession on account of the death of the insured should not work a forfeiture. It said : "The legal effect of this exception is to continue and extend the policy, nowiihstanding the change of title by the death of the assured." The court then further explains that appellant takes whatever interest she has in the property under the fire policy by virtue of her marriage contract, and not by succession; that she was entitled to the homestead dower because she had ex- pressly agreed to take it in lieu of all right which the law would have given her under the provisions of the marriage contract. This inter- est, the court said, was a contingent one, depending upon two events : "First, that she should survive her husband; and, second, that he should not by deed or will make any other provision for her. Both of these events occurred, and, instantly upon the death of her husband, she became seised of an estate for her life in the insured premises. She therefore took this mansion house as the grantee of her husband, and did not take it by succession. * * * But it is insisted that, however she acquired the estate, she has an equitable interest in a life estate in this fund, because it represents the premises which she had a right to occupy and enjoy during her life. This presents a strong case in morals, but her legal rights are not so clear. The rule is well settled that no equity attaches upon the proceeds of a fire policy in favor of third persons who, in the character of grantee, mort- gagee, or creditor, may have sustained loss, in the absence of some trust or contract to that effect.' ° This rule applies as well to vendors and lienors of every class as to mortgagees who may have had their security impaired by a loss by fire. This court, in a well-considered case, held that the holder of a mechanic's lien upon a building had no equitable lien in a fire policy effected by the owner and assigned to a mortgagee.^" * » » rpj^g agi.ee(j state of facts upon which this case is submitted fails to show any covenant, contract, agree- ment, or understanding with Mr. Quarles, who insured this property for the benefit of appellant. The interest of the appellant after the death of her husband was an insurable one; so was the remainder interest of the heirs. The decedent having left no debts, and the Ti> May, Ins. § 4.56; 3 Kent, Coram. (10th Ed.) 499. so Galyon v. Ketchen, 85 Tenn. 55, 1 S. W. 508. (243) § 77 I.AW OF FIRE INSURANCK. (Cll. 3 distributees being the same persons who took the real estate as heirs, no controversy arises as between the administrator and the remainder-men. * * * There is no priyity between appellant and the insurer, and no action of his can be ground to give her an in- terest which she would not otherwise have." The supreme court of Michigan, in Westchester Fire Ins. Co. v. Dodge," has intimated a doubt whether a policy of insurance at the 'death of the person insured would become invalid on accoimt of a stipulation which it contained, that if the property insured be sold or transferred, or any change talve place in title or possession, whether by legal process or judicial decree, the policy should be void. In that case, however, the policy was made payable to Chester Downer, a mortgagee, as his interest might appear ; and the court said that, under such a provision, the mortgagee could not be cut off from the protection which the policy afforded him by the death of the person to whom it was issued. The logic of this 'decision may well be ques- tioned, and indicates clearly the doubt of the court in regard to the main proposition, that, by the death of the insured, such a change occurred as to render the policy invalid, within the terms above ex- pressed. The court of appeals of Kentucky had under consideration this ques- tion in Eichardson's Adm'r v. Cerman Ins. Co.*^ The policy, which was issued during the lifetime of Richardson, contained a stipulation that it should be void if, without the consent of the company, any change took place in the title, use, occupation, or possession of the property insured. The loss occurred after Richardson's death, and during the term for which the policy was written. We quote from the reasoning and conclusions of the Kentucky court as follows ; "Ac- cording to the only meaning we think the language used fairly capable of, the property was insured for a specified period of time, which could, after the premium had been fully paid, be avoided by the company only upon notice and refunding the unearned part of premium; and it agreed to make good, unto not merely the insured himself, but his executors, administrators, and assigns, the immediate loss or dam- age that might happen by fire or lightning to the property at any time during that period, whether before or after his death, and there- si 44 Mich. 420, 6 N. W. 865, and 9 Ins. Law J. 909. 82 89 Ky. 571, 13 S. W. 1. (244) ^^- 3) TITLE AND OWNERSHIP. § 77 fore to treat that event as ipso facto a termination of the policy and liability- under it, would be contrary to the express terms of it, render the stipulation for payment to the personal representatives of the in- sured superfluous, and allow the company to retain the full considera- tion paid, while being held to only part performance of its agree- ments."** The reasoning of the learned court, we think, will fail to convince the average legal mind. The fact that the contract was terminated before the expiration of the term agreed upon, and for which payment of premium was made, has no important significance, as the same court has held;" and it is chiefly upon this fact that the court based its conclusions. The argument, if good, would defeat all forfeitures, or make them to depend upon refunding the unearned premium. Where the policy provides that it will become void whenever any change takes place in the title, interest, or possession of the property insured, it is not necessary, to create a forfeiture, that an actual sale should be made. A change of interest or possession will often occur while the legal title will continue unchanged. The underwriter is alone concerned in the protection of the property, and these provisions of the insurance contract have no other purpose than to secure guar- anties of good faith on the part of the insured. When a risk is ac- cepted, it may be fairly presumed that the company taking the hazard has ascertained and considered carefully all important facts and cir- cumstances affecting its character, and are satisfied to undertake the venture; but, to prevent anything from being concealed that ought to be disclosed, the validity of the policy is made contingent on a full and truthful expression of certain facts, which the policy specially mentions, and which the company deems material for its understand- ing of the risk, and for a basis of its judgment in regard to whether it should be accepted or declined. The character of the hazard being established to the satisfaction of the insurer, its next concern is that no material change shall take place without its consent; and this, too, is provided for by the terms of the policy. The insurer cannot watch its many ventures. They are often remote and widely scat- tered, and besides, too, the greatest dangers that menace property 83 Georgia Home Ins. Co. v. Kinnier's Adm'x, 28 Va. 88, 6 Ins. Law J. 497; HaxaU v. Shlppen, 10 Leigh (Va.) 536. 84 Blackerby v. Insurance Co., 83 Ky. 574, 15 Ins. Law J. 756. (245) § 78 LAW OF FIRE INSURANCE. (Ch. 3 are those that are frequently hidden from public scrutiny. The only practicable plan, therefore, of preserving the status of the risk, is to make the validity of the policy depend upon the insurer being in- formed of any material cjianges made and its consent obtained. In most cases the insured is constantly apprised of the situation of his property, while the company which has assumed the whole respon- sibility in case of loss has its office in a distant city, and is entirely without the means of information. The necessities of the case are apparent, and the requirements contained in the policy in regard to notice and consent are reasonable and will be enforced by the courts with strictness. Mankind has not yet so far advanced in morals as to be no longer governed by motives that arise from considerations of personal interest. This fact is too well understood to need stating. It is recognized by all, and no business undertakings will succeed that are not based upon this underlying principle of human conduct. The underwriter acknowledges his belief in this general infirmity of the race by the careful provision he makes to guard against any motive for the destruction of the property he insures. He has learned in the lessons of experience that the chances of loss are increased in pro- portion as the interest of the holder of his policy is diminished. The supreme court of Iowa, in discussing this matter in connection with title, very properly said: "The object of the insurance company by this clause is that the interest shall not change, so that the assured shall have a greater temptation or motive to burn the property, or less interest or watchfulness in guarding and preserving it from de- struction by fire. Any change in or transfer of the interest of the in- sured in the property, of a nature calculated to have this effect, is in violation of the policy; but if the real ownership remains the same,— if there is no change in the fact of title, but only in the evidence of it, and if this latter change is merely nominal, and not of a nature cal- culated to increase the motive to burn, or diminish the motive to guard the property from loss by flre, the policy is not violated." " § 78. Levy under an Execution Voids the Policy. Policies frequently contain a clause providing, in substance, that the liability of the company shall terminate if, without notice to and »i> Ayres v. Insurance Co., 17 Iowa, 176. (246) ^^' ^) TITLE AND OWNKRSHIP. § 78 itsconsentobtained.there Shan be made a levy of an execution against tlie property insured, or if any cliange sliall talce place in the title, interest, or possession, either by legal process, voluntary conveyance, or from any cause whatever. Under contracts of this form, any sub- stantial change affecting the interest, or even the possession of the property, will cause a forfeiture. Such change may fall far short of alienation, and, so far as possession is concerned, may even be un- lawful and by force; yet, should such change occur, the insured has stipulated to assume the consequences. That it is competent for the parties to so contract, there appears to be no good reason to doubt. As has been shown, the purpose of the underwriter by this class of stipulations is to avoid being involved in contention respecting the ownership and possession of property to which it sustains contract- ual relations. The underwriter understands that these contests, whether right or wrong, always result in disappointment and loss to either one party or the other; and it thus often happens that dan- gerous enmities and vindictive feelings are created, imperiling prop- erty that would otherwise be secure. The insurer may make it a con- dition of the acceptance of a risk that it shall be wholly relieved from any controversies of this kind without notice, and the opportunity to consider and decide when circumstances arise that affect the in- terest or possession of the insured in the property covered. It has been many times held that the insurer may, by proper stipulations, exempt itself from liability on account of loss which has been occa- sioned by riot, insurrection, or other resistance to the regularly con- stituted authorities; but the liberty of imposing restrictive clauses in respect to unlawful interference with property rights is not limited to the violent and illegal acts of organized mobs. The insurer may put the whole responsibility of surrendering the property insured to the control of others, whether by force or legal process, on the one seeking insurance. The company, in accepting the risk, may do so without condition or qualification; or it may, in the absolute free- dom of its will, limit its liability in any particular and to any extent. In such case it is only necessary that the lestrictive clause should state distinctly, either in general or specific terms, the reservation which the company intends to insist upon. Where the policy, there- fore, provides that it will become void if the possession be changed, in any manner without consent, it will be no sufiQcient excuse for the (247) § 78 LAW OF FIRE INSURANCE. (Ch. 3 insured to say that he has been ejected by the sheriff on an illegal process, or that he has been overcome by force, and another has usurped possession. The insurer may well answer: "That is your affair, not mine. It is clearly expressed in the contract between us that possession is to continue unchanged. If you suffer yourself wrongly to be dispossessed, and a stranger to come into control of the property, our responsibility and obligation are ended. By the terms of our contract, we have never "agreed to defend your title or secure your occupation of the property. This you must do for yourself." So far as we know, this'precise question has never been considered by the courts, but we can find no valid reason why a contract stipu- lation such as we have here stated should not be held good. When, however, forfeitures are claimed, the courts will hold the insurer to the letter of the contract. No advantage will be given by con- struction. In Philadelphia Fire & Life Ins. Co. v Mills,*^ an execution was issued after judgment on the property of the wrong person, and the sheriff put a bailiff in possession of the goods. The execution was against the father, and the property levied on belonged to the son. The court said: "Properly speaking, a levy under any process is a levy in pursuance of the authority given by it; and an execution against one man never gives authority to levy on the goods of an- other. The levy in this case was not, therefore, properly under any process, and we discover no valid reason for extending that pro- vision to the case of a wrongful levy. To do so would be to attribute to every levy that is valid in form the effect of avoiding a policy, though such levy should be invalid in substance, and should have endured but an hour." The policy in this case contained the following condition: "The in- surance by this policy shall cease from the time that the property hereby insured shall be levied on, or taken into possession or custody under an execution or other proceedings at law or equity." It ap- pears from the report of the case that it was not a question entirely free from doubt whether the sale of the property by the father to the son was made in good faith; and Sharswood, J., in the trial court, in- structed the jury "that, as the execution was against the father '86 44 Pa. St. 241, 4 Benn. Fire Ins. Gas. 730. (248) C'h. 3) TITI.R AND OWNERSHIP. § 78 after a sale and delivery of possession to the son, the levy made under it was a wrongful one; and that, if the sale was bona fide and the levy consequently wrongful, it should not be regarded as a breach of the covenant in the policy ; but that if the sale was not bona fide, if the alleged sale left the property in the father, and the son acquired nothing, but the transaction was intended to hinder and delay the creditors, then the levy would be such a one as the creditors had a right to make, such a one as was contemplated in the policy, and such a one as would avoid it." In this case it will be observed that the lia- bility of the company was to terminate if the property was levied upon or taken into possession under an execution or other proceed- ings at law ; and while the court, without qualification, sustained the "condition," it held that, as the sheriff acted in the matter without authority, what he did was wanting in the proper character of a levy, and that the proceedings were not in law. Had the policy provided that it would become void should any change of possession take place from any cause, the defense would have been good, notwithstanding the sheriff acted without authority, and his possession of the goods was usurped.^' In Western Assur. Co. v. Layer,^^ the sheriff levied on the stock of a manufacturer, and placed a bailiff in charge, who was instructed not to interfere with the business of the concern, but was required only to allow nothing to be taken away. The work of the factory, under the surveillance of the bailiff, continued in the usual manner; and it was held that the possession of the sheriff was so much a quali- fied one as not to be a violation of the condition of the policy against "change of title or possession by legal process or judicial decree." The court *" clearly indicated that, if there had been an actual dispos- sessing of the owner, the insurer would have been discharged. A levy upon real estate, when there is no change of possession, and where it does not appear that there has resulted any increase of the risk, will not cause a forfeiture under a policy stipulation that "it shall be void if the property insured shall be levied upon or taken into^ possession or custody under any proceedings in law or equity." 87 O'Brien v. Insurance Co., 56 N. Y. 52, 3 Ins. Law J. 685; Dunlop v. Insur- ance Co., 74 N. Y. 145, 7 Ins. Law J. 711; Western Assur. Co. v. Layer, J 4 Ins.. Law J. 552. 88 14 Ins. Law J. 552. »» 14 Ins. Law J. 554. (249) § 78 I^AW OF FIRE INSURANCE. (Ch. 3 This was held in Smith v. Farmers' & Mechanics' Mut. Fire Ins. Co."" We quote from the opinion of the court: "It did not appear, however, that there was anything more than a technical seizure, un- accompanied by any change of possession or increased risk. This rt-as not sufficient to avoid the policy. The condition relied on has no application in the case of a mere technical seizure." This decision is supported by Colt v. Phoenix Fire Ins. Co./' where substantially the same reasons are stated. Eeynolds, J., said : "The le^y of an execution upon real estate under an ordinary judgment is at this time unnecessary, and in fact is never done, and it may be said is now unknown to the law." The levy on real estate in any case is a mere technical matter. There is and can be no change of possession. The property will con- tinue to have the care and protection of the owner, who may remain for a long period to enjoy its use and occupation. In Hopkins Manuf'g Co. v. Aurora Fire & Marine Ins. Co.,"" the condition was that, "if the property insured is levied upon or taken into possession or custody under any proceedings in law or equity, this policy shall thereupon cease." It was held, as in Philadelphia Fire & Life Ins. Co. v. Mills, supra, that the insurer would not be discharged unless the proceedings were valid. So, also, in May v. Standard Fire Ins. Co."' Under a clause im- porting substantially the same condition, an execution was issued against the chattels insured, and the bailiff made a formal seizure, but did not interfere with the assured's custody or possession; nor was any one placed in charge of the property levied upon, and, a bond having been given soon after, the seizure was withdrawn. It was held that the obligation of the company to the mortgagee, to whom the loss was made payable, had not been aifected; that the condition of the policy referred to change of possession that was actual, not constructive. 8 Ins. Law J. 828. «i 54 N. Y. 595. 02 48 Mich. 148, 11 N. W. 846. 935 Ont. App. 605; Hooper v. Insurance Co., 15 Barb. 413, affirmed 17 N. Y. 424. The policy condition that a levy of an execution shall cause a forfeiture applies only to chattel property. Hammel v. Insurance Co., 54 Wis. 72, 11 N. W. 349; Philadelphia Fire & Life Ins Co. v. Mills, 44 Pa. St. 241; Pennsylvania Tns. Co. V. Gottsman's Adm'rs, 48 Pa. St. 151; Carey v. Insurance Co., 84 Wis. SO, 54 N. W. 18; Commonwealth Ins. Co. v. Berger, 42 Pa. St. 285. (250) ^^^- ^) TITLE AND OWNERSHIP. § 78 While the levy of an execution threatens the right of dominion ^Yhieh a person is accustomed to exercise over his property, there is no alienation; and, unless the levy is accompanied with a change of possession, the peril in which the debtor's right of control is placed will not generally affect the validity of the insurance, unless the pol- icy provides for a forfeiture in such contingency.^* The levy is an incident that refers to the financial extremity of the insured, and may frequently signify bad moral hazards and vexatious complica- tions, which the prudent underwriter will wish to avoid; but right of property and "unconditional ownership" still continue with the debtor. Metcalf, J., said, in Rice v. Tower: ^^ "There are obiter dicta in the books that, by a seizure on a fl. fa., the debtor's property in the .goods is lost; that the sheriff acquires a special property; but that the general property of the debtor is divested, and is in abeyance. But the law never was so." When the policy provides that the in- surer shall be discliarged if the possession of the insured property be changed by legal process, and thereafter a writ of attachment issue in regular form from a court of competent jurisdiction, in the execution of which the owner of the property is dispossessed by the officer serving the writ, the insurance will terminate; and this will be true although the suit is not sustained, and the ancillary proceed- ings fail.®* 04 Wllbraham v. Snow, 1 Lev. 282; Id., 1 Vent. ."..S; Clerk v. Withers, G Mod. 293; Id., Holt. 647; Ladd v. Blunt, 4 JIass. 403; Ladd v. North, 2 ilass. 517. 9 5 1 Gray (Mass.) 42(1. 427. 96 In Carey v. Insurance Co., 84 AVis. 80, 54 N. W. 18, the policy had the following condition of forfeiture: "If any change takes place in the title or possession of the property, whether by sale, transfer, conveyance, legal process, or judicial decree, * * * then in every such case this policy shall be void." After the issue of the policy the insured property was taken into possession of the sheriff, in the execution of a writ of attachment. The contention was that the writ of attachment was not a "legal process," and that the alleged levy, therefore, had no effect in law, and was not sufficient to avoid the policy. The attachment was dissolved long after the destruction of the insured prop- erty, which occurred while in the custody of the sheriff. The court said: "It was held on the traverse of the affidavit that the writ never ought to have is- sued, and that there were no grounds for it. Does such fact make the writ any less a 'legal process' when served? It was a legal process when issued. It was issued by authority of and according to law. It was based on a sufficient (251) § 79 LAW OF FIRE INSURANCE. (Ch. 3 § 79. A Real-Estate Mortgage will not Void the Policy unless It is So Stipulated. The rights of the parties will always, of course, depend upon the language of the policy. If the contract is silent in regard to incum- brances, their existence will generally be held to be immaterlaL When words of doubtful meaning are employed to express the inten- tion of the parties, which is frequently the case, the courts are called upon to interpret, and will generally do so in such a manner as to give them such an effect as will best support the principal obligation of the contract. The language being that of the company, when it is ambiguous or of uncertain meaning it will be construed more favora- affidavit. The dismissal of tbe attachment on the trial of the traverse did not make the writ void when it was issued. It was a protection to the otiicer, and a valid process. * * i= it was a legal process when it was seived, and changed the possession of the property. That was sutficient. The possession Df the property was changed by it at the time lawfully, and it put the otficer in possession of it lawfully. It was this change of possession that enhanced' the risk, and avoided the policy." In the case of St. Paul P. & M. Ins. Co. v. Archibold (Tex. App., 1885) 16 Ins, Law J. 153, the court there said: "This was a suit upon a policy of in- surance against fire. The house insured was used and occupied by appellees as a place of business as merchants, at the time the contract was made, and th& policy provided that '* * * if any change takes place in the * * * posses- sion, whether by * * * voluntary act or otherwise, * * * this policy shall be void.' With or without the consent of appellees, legally or illegally, the- sheriff of McLemen county had possession of the house at the date of the Are. The court instructed the jury, in effect, that the illegal possession by the sheriff did not vitiate the policy, under the clause quoted, unless the danger of are was increased. This was not the contract of the parties. Whether the risk was increased or lessened, or the possession of the sheriff was lawful or in violation of law, by the consent of appellees (unless as their agent) or against their wish, the parties have agreed that the contract is void if the possessioa Is changed. The stipulation may be unreasonable, and even outrageous, but It is the contract. It is not open to construction because it is ambiguous, it is not impossible, illegal, immoral, or against public policy, or for any reason roid. That it is improvident or otherwise does not warrant the interference of the court. Galveston Ins. Co. v. Long, 51 Te.\. 89; Crescent Ins. Co. v. Camp, G4 Tex. 521. The charge deprived appellant of the benefit of its contract, and the judgment against it, for this error, must be reversed, and the cause re- manded." (252) *-!ll- ■') TITLE AND OWNKKSHIP. § 80 l)ly for the insured than for the insurer, but, when the language is r^ S. W. 188. Conditions concerning forfeitures reasonable, and in the interests of a true (255) jij 80 LAW OF FIRE INSURANCE. (Ch. 3 It has been held in Pennsylvania that, when the incumbrance is a matter of public record, the insurer will be presumed to have no- tice.^" ^ This new and somewhat startling doctrine was modified by the Indiana court of appeals, where it was held that the insurer would not be charged with knowledge of an incumbrance placed on the prop- erty after the issuance of the policy, although such incumbrance had been duly entered of record.^"^ And a wholly different ruling is given by the courts of Texas.'"' In G-erling v. Agricultural Ins. Co., the polity provided that it should be void if, without notice and consent, the property insured should be- . were all brokers. The latter obtained the insurance desired, from a duly-authorized agent of the company, and from him received the policies, which were delivered to A. through the hands, respectively, of C. and B. A. paid the premium to B., and he in turn paid it to 0., and by him it was kept. The court held that as the brokers were the agents of A., and not of the company, there had been no payment of the premium, and, a loss having occurred, the company was not liable. There has been a good deal of disagreement among the courts in re- gard to the proper status of an insurance broker. Sometimes he is St. 535, 1 Atl. 523; Hodge v. Insurance Co., 33 Hun, 583; Frankle v. Insur- ance Co., 12 Ins. Law J. 614; Farnum v. Insurance Co., 83 Cal. 246, 23 Pac. 869; Nebraska & I. Ins. Co. v. Chrlstiensen, 29 Neb. 572, 45 N. W. 924; Brown- field V. Insurance Co., 35 Mo. App. 54. 18 Elklns v. Susquehanna Mut. Fire Ins. Co., 113 Pa. St. 387, 6 Atl. 224; Far- num V. Insurance Co., supra; Klrkman v. Insurance Co., 90 Iowa, 457, 57 N. W. 952; Dryer v. Insurance Co. (Iowa) 62 N. W. 798; Hartford Fire Ins. Go. V. Small, 14 C. C. A. 33, 66 Fed. 490. 17 100 Pa. St. 137. (280) Oh. 4) PAYMENT OF PREMIUM. § 90 recognized as the agent of the insured, and again as the agent of tlie insurer. In Indiana Ins. Co. v. Hart well ^' a conclusion was reached that the broker was the agent of the party from whom he received com- pensation for his service, irrespective of by whom he may have been employed. The application of this rule will always be uncertain, with- out a decree of the court declaring the ownership of the funds from which the broker receives his fee. The insured pays his premium to the broker, who deducts his commissions, and passes over the remain- der to the insurer. When this occurs, who is it that pays the broker, — the insured or the companj-, — will the courts decide? It will be ob- served that in a very large proportion of cases the broker is employed by the person who seeks insurance. His compensation is so well un- derstood, and fixed by common custom, which in rare instances may be modified by local usage or special contract, that, when he receives from the insured the premium he is required to pay, it is often not a matter of agreement with any one how much of the sum so received he may retain for his services, and how much he must hand over to the under- writer as his proper share of the total sum paid by the person to whom the policy was issued. It is not, therefore, always easy to understand, as declared by the Indiana court, how it is that the broker receives his fee from the insui'er. The money actually coming into the hands of the broker as his fee may never have been in the possession of the in- surer, and in a large majority of cases such will be the fact, and, in the hands of the broker, could not be sued for, nor would it be subject to attachment in suit against the insurer. The circumstances of each case wiU frequently be, no doubt, a surer guide than any formulated rule, in fixing the relations of the broker to the parties for whom, or between whom, he acts. In many of the adjudicated cases the broker has been held to be the agent of the company for the delivery of the policy and receiving of the premium, and that his agency then termi- nates;" that subsequent notice to him of other insurance, incum- 18 123 Ind. 177, 24 N. E. 100. 19 Ruggles V. Insurance Co., 114 N. Y. 415, 21 N. B. 1000; Cahill v. Insurance Co., 5 Biss. 211, Fed. Cas. No. 2,289; Planters' Ins. Co. v. Myers, 55 Miss. 479; Lycoming Fire Ins. Co. v. Ward, 90 111. 545; Newark Fire Ins. Co. v. Sainmons, 110 111. 166; Royal Ins. Co. v. McCrea, 8 Lea (Tenn.) 531, 11 Ins. Law ,T. 508; Grace v. Insurance Co., 109 U. S. 278, 3 Sup. Ct. 207; Universal Fire Ins. Co. T. iBlock, 109 Pa. St. 535, 1 Atl. 523, and 15 Ins. Law J. 219; Riley v. In- (2S1) § 90 LAW OF FIRE INSURANCE. (Ch. 4 brance, etc., on the part of the assured, or of notice of cancellation on the part of the insurer, will not bind either party. In Wilber v. Williamsburgh City Fire Ins. Co.^" It was held that the broker who procured the insurance was the agent of the insured, and not of the company. The essential facts in that case may be briefly stated as follows : The plaintiff's assignors (Leslie & Co.) obtained a policy from the defendant company through brokers, Sands & Flynn, to whom the premium was paid, and by whom it was kept. In due time the defend- ant company notified the insured that the premium had not been paid. On receiving such notice, they wrote defendant that : "We hold the receipt for the premium on our policy, and have paid the money to Mr. Sands on the same; therefore shall hold you responsible, in case of fire, until the expiration of the policy. If Mr. Sands has not paid you any money, we cannot help it, as we looked upon him as your agent." On the same day defendant replied, calling attention to a condition of the policy which reads as follows: "If any broker, or other person than the assured, has procured this policy, or any renewal thereof, or any indorsement thereon, he shall be deemed to be the agent of the insured, and not of this company, in any transactions relating to this insurance." The defendant then indorsed on its office records the cancellation of the policy, and thus the matter rested until a fire occurred some months afterwards, on account of which the property described in the policy was damaged or destroyed. The New York court of appeals was of the opinion that it was competent for the parties to stipulate in the policy that a broker who procured the in- surance to be taken should be considered, in relation to that trans- action, as the agent of the insured, and, it having been so stipulated in this instance, the payment of the premium by the assured to the snrance Co., 110 Pa. St. 144, 1 Atl. 528, and 15 Ins. Law J. 466; Lebanon Mut. Ins. Co. V. Erb, 112 Pa. St. 149, 4 Atl. 8, and 16 Ins. Law J. 47; Martin v. Insurance Co., 101 N. Y. 498, 5 N. B. 338. The single fact that the company delivers to a broker its policy, and pays him a commission out of the money which he receives from the insured, is not conclusive of agency. Security Ins. Co. v. Mette, 27 111. App. 324. If employment imports agency, the broker cannot be the agent of the uisurer, where it appears that he has given the broker no authority to contract in his behalf. Continental Ins. Co. v. Allen, 26 111. App. 576. 20 122 N. Y. 439, 25 N. E. 026. (282) Ch. 4) PAYMENT OF PREMIUM. § 91 broker was only placing it in the hands of his own agent, and that the defendant company was not bound. ''^ The premium will be due at the time the insurance begins, and must be paid then, and in money, unless some other time and man- ner of payment are agreed upon. Usually it will be sufficient to offer, in settlement of the premium, currency, bank drafts, checks, or any of the customary and convenient means of payment, unless objected to, in which event specie or legal-tender funds will be re- quired.^* § 91. When Default in Payment of Note Given for the Premium -wrill Void the Insurance. When a note is given for the premium, and the policy contains a clause that unless it is paid at maturity the insurance will be void, a default in making pajTnent will be fatal. In Shakey v. Hawkeye Ins. Co. ^' the policy stipulated that, if the note given for the premium should not be paid when due, the lia- bility of the company should cease, but that it would be reinstated in case the note was voluntarily paid before suit; that the bringing of suit should operate as an absolute cancellation of the policy, and the whole premium should be considered as earned and payable; that the commencement of the suit should be notice that the liability of the company had terminated; further, that such liability should not be revived, should the note be collected by legal proceedings. The court held that the commencement of suit was sufficient notice of the termination of the policy, and that the collecting of the note did not waive the forfeiture ; that the parties were competent to so contract.* 21 Rohrbach v. Insurance Co., 62 N. Y. 47; Alexander v. Insurance Co., 66 N. Y. 464. Broker agent for the company in delivering the policy and collecting the pre- mium. Gude V. Insurance Co., 53 Minn. 220, 54 N. W. 1117; Arthurholt v. In- surance Co., 159 Pa. St. 1, 28 Atl. 197. 2 2 Currier v. Insurance Co., 53 N. H. 538; Tayloe v. Insurance Co., 9 How. 390; Kerlin v. Association, S Ind. App. 628, 36 N. E. 156; Krause v. Assurance Soc, 99 Mich. 461, 58 N. W. 496; Manhattan Life Ins. Co. v. Fields (Tex. Civ. App.) 26 S. W. 280. 23 44 Iowa, 540; Shultz v. Insurance Co., 42 Iowa, 239, 5 Ins. Law J. 354. • Shultz V. Insurance Co., 42 Iowa, 239, 5 Ins. Law .T. 354. (283) § 91 LAW OF FIRE INSDRANCE. (Ch. 4 The same court held with no less inflexible rigor to the literal en- forcement of the policy condition in the case of Greeley v. Iowa State Ins. Co.^* The defendant was a mutual insurance company, and had assessed its premium notes. The plaintiff, who was a mem- ber of the company, was absent in Europe when the notice of the assessment had been sent through the mails to his usual address. The plaintiff, on going away, left an agent in charge of his business. This fact not being understood by the postmaster, he forwarded the letter containing the notice of assessment to the assured, in Europe; and, before it reached plaintifiE and the money could be returned, the time (30 days) in which assessment was required to be paid had ex- pired; and, a loss occurring before the assessment was paid, the court held that the plaintiff could not recover; that the failure to receive the notice in time was the misfoctune of the assured, but did not relieve the forfeiture. This case is important only as it illustrates the general rule of law that contracts must be performed as they are made. When rigid in their character, courts cannot give them elasticity, even to save hard- ship and wrong. Misfortune and accident, even when the best in- tentions are shown, will not excuse performance, or save forfeiture.^" Where the policy contained a condition that the company should not be liable for any loss when the premium note was wholly or in part past due and unpaid, it was held, under such circumstances, in the absence of waiver, that the liability of the company was sus- pended by the terms of the contract while the default continued. Held, too, that "waiver will not be inferred from an acceptance by the company of a part of the premium note after maturity, nor for an extension of the time of' payment, nor from a statement of the secretary of the company that the company was liable under the laws of the state, notwithstanding the default in payment."^' When a note is given for the premium, and the continued validity 24 50 Iowa, 86. 2 5 American Ins. Co. v. Stoy, 41 Mich. 385, 1 N. W. 877, and 8 Ins. Law J. 691; Forest City Ins. Co. v. School Directors, 4 111. App. 145, 8 Ins. Law J. 879. 26 Garlick v. Insurance Co., 44 Iowa, 553; Oarlock v. Insurance Co., 188 lU. 210, 28 N. E. 53; Phenix Ins. Co. v. Bachelder, 32 Neb. 490, 49 N. W. 217, and 21 Ins. Law J. 618. Premium note may be collected, although by the terms of both note and policy (284) ^h- 4) PAYMENT OF PREMIUM. § 91 of the policy is by its terms made conditional upon the payment of the note at maturity, a failure on the part of the insured to respond at the time mentioned will relieve the company from any duty to pay a loss.'''' If, however, there is no provision in the note or policy avoiding the insurance in case the insured defaults in his payment, the obligation of the company will continue, and in the event of a loss it ^^•ill be no defense for the insurer to say that the promise to indemnify is without consideration.^^ When a note is given to the agent for the premium, and the agent accounts to the company, retaining the note as his own property, or when the company accepts a note for the premium, that does not the company Is relieved from liability during the period of default. McBvoy V. Insurance Co., 46 Neb. 782, 65 N. W. 888. A part of the premium note was unpaid at the occurrence of a loss. Payment was Immediately made, without giving notice of the loss. As soon as the com- pany was informed of the fire, it returned the money and denied liability. It was held that the failure of the insurer to insist on payment of the note when ■due did not constitute a waiver of the forfeiture. Dale v. Insurance Co., 95 Tenn. 38, 31 S. V\\ 266; Continental Ins. Co. v. Chew, 11 Ind. App. 330, 38 X. E. 417; Bloom v. Insurance Co. (Iowa) 62 N. W. 810; Cohen v. Insurance Co., 67 Tex. 325, 3 S. W. 296; Wall v. Insurance Co., 36 N. Y. 157; Shultz v. Insurance Co., 42 Iowa, 239; Williams v. Insurance Co., 19 Jlieh. 451; JoUtt'e V. Insurance Co., 39 Wis. Ill; Goiton v. Insurance Co., Id. 121; Eark v. Insurance Co., Id. 138. 2' Gorton v. Insurance Co., 39 Wis. 121, 5 Ins. Law J. 350; Shalsiey v. In- surance Co., 44 Iowa, 540; Shultz v. Insurance Co., 42 Iowa, 239, 5 Ins. Law J. 354; American Ins. Co.. v. Stoy, 41 Mich. 385, 1 N. W. 877, and 8 Ins. Law J. 691; Williams v. Insurance Co., 19 Mich. 451; Wall v. Home Ins. Co., 36 N. Y. 157; Muhleman v. Insurance Co., 6 W. Va. 508; Thompson v. Insur- ance Co., 104 U. S. 252; American Ins. Co. v. Leonard, 80 Ind. 272. See, also, American Ins. Co. v. Henley, 60 Ind. 515; Southern Mut. Ins. Co. v. Taylor, 33 •Grat. 743, 10 Ins. Law J. 208; Moore v. Insurance Co., 90 Iowa, 636, 57 N. W. -597; Union Cent. Life Ins. Co. v. Chowning, 8 Tex. Civ. App. 455, 28 S. W. 117; Manhattan Life lus. Co. v. Le Pert, 52 Tex. 504; Ashbrook v. Insur- ance Co., 94 Mo. 72, 78, 6 S. W. 462; Fowler v. Insurance Co., 116 N. Y. 393, 22 N. E. 576; New York Life Ins. Co. v. Statham, 93 U. S. 24; Willcuts v. Insurance Co., 81 Ind. 300; Ewald v. Insurance Co., 60 Wis. 431, 19 N. W. 513; Hudson v. Insurance Co., 28 N. J. Eq. 167; Marston v. Insurance Co., 59 N. H. 92; Brooklyn Life Ins. Co. v. Bledsoe, 52 Ala. 538; Dale v. Insur- ance Co., 95 Tenn. 38, 31 S. W. 266. 28 Trade Ins. Co. v. BarraclifC, 45 N. J. Law, 543; Dwelling-House Ins. Co. V. Hardie, 37 Kan. 674, 16 Pac. 92. (285) § 92 LAW OF FIRE INSUKAKCE. (Ch. 4 refer to the policy, and is in no manner made a part thereof, such note is payment; and should the maker afterwards become insolvent, and fail to pay, such default will not impair the validity of the in- § 92. The Maker of the Note must Seek the Payee When No Place of Payment is Designated. Where the continued validity of the policy is conditioned upon the payment at maturity of the premium note, and no place is designated where the note can be found and payment made, the authorities are not wholly in accord as to the rights of the parties, should a loss oc- cur after default in payment. This question was considered by the supreme court of Michigan in Mclntyre v. Michigan State Ins. Co.'" The plaintiff there contended that it was no fault of his that payment of the note had not been made; that no particular place was men- tioned where it would be deposited; that it had not been presented, nor payment demanded. No notice, even, had been given where it could be found. No offer of payment, he insisted, on his part, was necessary to prevent an avoidance or suspension of the policy; that it was the duty of the holder of the note to demand payment at plaintiff's residence. The court said: "This is not a tenable posi- tion. The doctrine indicated relates to the case of indorsees whom, as being under engagement for the debts of others, the law so far favors as to require some preliminary effort to collect from the party personally liable. The reason of this rule does not fit the case of maker and payee, and hence the rule itself does not apply. As be- tween the latter parties, the maker is bound to seek the payee and offer payment. * * * The instrument might have been drawn payable at plaintiff's residence, but he did not elect to require it. 29 Trade Ins. Co. v. Barracliff, 45 N. J. Law, 543, 13 Ins. Law J. 190; Con- tra, Mclntyre v. Insurance Co., 52 Mich. 188, 17 N. W. 781, and 13 Ins. Law J. 216. See, also. In support of text, Elklns v. Insurance Co., 113 Pa. St. 386, 6 Atl. 224, and 16 Ins. Law J. 78; Pennsylvania Ins. Co. v. Carter (Pa. Sup.) 11 Atl. 102; East Texas Fire Ins. Co. v. Mlms, 4 White & W. Civ. Cas. Ot. App. § 1324; Pitt v. Insurance Co., 100 Mass. 500; Krause v. Assurance Soc, 99 Mich. 461, 58 N. W. 496. 3 52 Mich. 188, 37 N. W. 781, and 13 Ins. Law J. 216. (286) Ch. 4) PAYMENT OF PREMIUM. 8 92 He made it payable generally, and the form of undertaking ex- presses the understanding. He bound himself to seek the payee or holder, and mere possession of the money at his house, and the will to pay it, could avail him nothing in point of law. His undertaking went further. No demand on him by the defendant was necessary to make the note either due or suable. Mere nonpayment was default, and no facts arose to excuse it.''^^ The court of appeals of Kentucky, in Blackerby v. Continental Ins. Co.,^- in the urgency of their desire to give effect to the contract and to save forfeiture, which is always repugnant to the law, has given us an example of constructive ingenuity and judicial differentiation. The plaintiff had given his note, by which he promised to pay the de- fendant company the sum due for the premium on a policy which had been issued and delivered to him. The note designated no place where payment could be made, and contained a provision that, unless paid at maturity, the policy should become void. On the face of the note was printed the address of the home office of the company, in New York. The policy also provided for its avoidance in case of the nonpayment of the note, but that in such case liability could be revived on subsequent payment, and the written consent of thesuperintendent of the Western department, at Chicago. The court held that it was not incumbent on the plaintiff, for the purpose of making payment, to seek the defendant at its office at New York or Chicago ; that as the Continental Insur- ance Company had given the plaintiff, Blackerby, no notice at what place the note was deposited, and could be found for payment, in the state of Kentucky, no forfeiture would result, although the plaintiff failed to pay the note when due, or at any other time. The court said: "If the insured can show a reasonable excuse for nonpayment of the premium, based upon the conduct of the insurer, the policy will not be regarded as forfeited. In this instance neither the policy nor the ap- plication of the insured fixed a place for the payment of the premium, or named the person to whom it must be paid. The appellant is a citizen of this state. The appellee is a foreign company, with its prin- cipal office, as the policy shows, in New York City, and branch office for the Western department in Chicago, 111., and a local agent in this 31 Thompson v. Insurance Co., 104 U. S. 252. 32 S3 Ky. 574; 15 Ins. Law .T. 756. (287) § 93 LAW OF FIRE IKSDRANCE. (Cll. 4 state. It was urged that under these circumstances the appellant, to avoid a forfeiture of his policy, was bound to know that his note was at the Chicago office, and to make payment there. We see no reason, however, why from the same contract the insured would not have had a better right to suppose that it must be paid at the New York office." And the court therefore reaches the conclusion that as the note did not name any place where, or person to whom, payment could be made, the insured was excused, and no default had occurred. While this construction of the Kentucky court may seem somewhat strained, its reasoning is sustained by constant recognition of sound legal princi- ples; and, while we may differ as to the correctness of the results ar- rived at, all will agree that "substantial justice" has been done, and that there are "no moralities shrieking aloud." While offering this tribute to the honesty and intelligence of the Kentucky court of ap- peals, it appears to us very clear that a default did occur on a failure to pay the note at maturity ; that it was the duty of the insured to find the payee at either its office in New York or Chicago. State lines form no barriers to commerce, and the trouble and expense of sending a draft to Chicago or New York would have been no greater, and caused but a few days longer delay, than if payment had been required at the nearest metropolis of the plaintiff's own state. But, even if the case were otherwise, it would not offer a valid excuse for setting aside important contract stipulations. If there were any inconven- ience or hardship incident to payment in a distant city, it was a mat- ter that could have been provided for when the insurance was effect- ed; or the undertaking might have been declined. § 93, When the Policy is Suspended during the Nonpay- ment of the Premium. When notes are given for the premium, the policy frequently con- tains a clause providing that if payment is not made at maturity the liability of the company under the policy shall cease, and so con- tinue during the term of default, but that when payment of the note is made the company shall again become liable during the remainder of the term for which the policy is written. Under this class of con- tracts, there will be no liability for a loss occurring while the note remains unpaid after it becomes due, and an acceptance of the pre- (288) ^"' ^) PAYMEXT OF PREMIUM. § 93 mium after loss will be no waiver of the defense which has come to exist on account of the default.*' There will always exist one impor- tant reason, and frequently two, why payment of the note may be offered and accepted subsequent to a fire without in any manner changing the rights of the parties in relation to the loss. These rea- sons refer primarily to business faith, and the duty of all persons to perform their engagements, whether to do so will result in loss or gain. Then, too, if the loss is only partial the insured will have a direct interest in paying the premium, so that the policy will be re- stored for the protection of that portion of the property covered which has not been destroyed. To illustrate, let us suppose a policy issued to Brown in the sum of |1,500 for three years. Of this, $1,000 covers on frame dwelling, and |500 on frame barn. For the whole premium — say, fl5 — a note is given, payable in one year. In both the note and the policy the condition is plainly expressed that unless the note is paid when due the liability of the company shall be sus- pended, and so remain until payment is made. Now, it will be obvious that the insurer has carried the risk for an entire year with- out any compensation. During that period it would have been liable for any loss within the terms of the policy, had one occurred. Ck>mmon honesty, therefore, requires that the insured should pay the note, for he has had the benefit of one year's insurance. The fact that the property has burned while the policy was suspended affords him no indemnity; does not lessen his obligations to pay, under the terms of his contract, for the protection he has enjoyed for a whole year, and which would have continued except for his own fault in neglecting to pay the note. But, again, suppose the bam (insured for |500) only had burned. By making payment of the premium, the policy will be revived as to the f 1,000 covering on dwelling. Brown has a right to make such payment, and demand that his insurance on the property not destroyed shall be restored, and the company, in accepting payment, does not waive its right to insist on any forfeiture that has come to exist because of the previous defatilt; and the ii Continental Ins. Co. v. Boykln, 25 S. O. 323; Continental Ins. Co. v. HofC- man, Id. 327; Currier v. Insurance Co., 57 Vt. 496; Blackerby v. Insurance Co., supra; Palmer v. Insurance Co., 31 Mo. App. 467; Scblmp v. Insurance Co., 124 lU. 354, 16 N. E. 229, 08TR.FIBB INS. — 19 (289) § 93 I,AW OF FIBE INSURANCE. (Ch. 4 same principle of law will apply, although suit has been commenced to enforce collection of the note.'* In Williams v. Albany City Ins. Co.'° the discussion involved a ques- tion closely analogous to the one here under consideration. The in- surance was upon a schooner. A note was given for the premium, which was past due and unpaid when the loss occurred. In the policy sued on was a stipulation as follows: "In case the note or obligation given for the premium thereof, or any part thereof, be not paid at ma- turity, the full amount of premium shall be considered as due, and this policy become void while said past-due note or obligation, or any part thereof, remains overdue and unpaid." Within a few days after the note matured the boat was lost by reason of the perils insured against, and about a week later the note was paid, and the money accepted by the company. The court held that the insurer was not liable; that the intention of the parties was that the policy should be suspended, and not operative, during such period as the note should remain un- paid after maturity. But the court said : "Upon payment after de- fault the policy should again take effect from the time of the payment, and continue for the balance of the period originally fixed, and by rea- son of such default it should only wholly be void, or cease to be capa- ble of revival as a policy, in case the default should continue to the end of the period first fixed for the insurance. The provision, there- fore, is but a stipulation, in another form of words, that the company shall not become liable for any loss which may occur during the con- tinuance of the default." It was the opinion of the court that the condition agreed to by the parties was lawful, and in no respect ob- scure in its meaning, and that the acceptance of payment of the note in no way changed the relation of the parties to the suit. There was no waiver of the rights of the defendant, as it was entitled to full pay- ment of the premium in any aspect of the case.'" 34 Klein v. Insurance Co., 104 U. S. 88; Knickerbocker Life Ins. Co. v. Pen- dleton, 112 U. S. 696, 5 Sup. Ct. 314; Beadle v. Insurance Co., 3 Hill (N. Y.) 161; Wheeler v. Insurance Co., 82 N. Y. 543; Holly v. Insurance Co., 105 N. Y. 437, 11 N. B. 507; Wall v. Insurance Co., 36 N. Y. 157. 8 5 19 Midi. 451. 38 Scliimp V. Insurance Co., 124 111. 354, 16 N. E. 229. The action was brought to recover on premium note for $40. Both note and policy provided that after maturity of note, pending default in payment, the policy should (290) Ch. 4) PAYMENT OF PREMIUM. § 93 In North Western Mut. Life Ins. Co. v. Amerman ^' a note was given for the premium, which was past due and unpaid when loss occurred. After suit was brought, payment of the note was offered, and the mon- ey was accepted. This action on the part of the company, it was in- sisted, estopped it from pleading the forfeiture as a defense. The court said: "Upon the delivery of the policy and commencement of the risk, the appellee acquired a personal, vested right in the premium, as an entirety. The payment of a part of it was merely postponed, and consequently the company had a right to receive the money. But, however this may be, we are clearly of the opinion that the receiving it did not operate as a waiver of the breaches of the condition of the policy." The case of Joliffe v. Madison Mut. Ins. Co.^* is sometimes referred to as opposed to the doctrine which the foregoing cases clearly affirm, but a careful examination of the provisions of the policy in that suit discloses that the rules of construction adopted by the Wisconsin court in no wise conflict with those sanctioned by Michigan and Illi- nois in the cases before considered. The Madison Mutual policy con- tained a condition as follows: "Whenever a promissory note shall be taken for the cash premium, the policy in all such cases shall be issued upon the express condition that, if said note is not paid with- in sixty days after the same shall become due thereafter, all the ob- ligations of the company to the insured shall be suspended until such time as the note shall be fully paid. * * * In case the assured fails to pay the premium note or order at the time specified, then this policy shall cease to be in force, and remain null and void during the time said note or order remains unpaid after its maturity." In order to understandingly distinguish this case from that of Williams V. Albany City Ins. Co., supra, proper attention should be given to the difference in the forms of the several contracts. That of the continue suspended. It was set up in defense to the suit on note that be- cause of the suspension of the insurance tho company should be permitted to recover only a ratable proportion of the note. Held, that the policy was only voidable, on account of the default in paying the premium; that the note was an entirety, and the whole sum collectible. Phenix Ins. Co. of Brook- lyn V. Rollins, 44 Neb. 745, 63 N. W. 46; Ourtin v. Insurance Co., 78 Cal. 619, 21 Pac. 370. 87 119 111. 329, 10 N. E. 225. =» 39 Wis. 111. (291) § 93 LAW OF FIRE INSURANCE. (Ch. 4 Madison Mutual, it will be observed, contained no words defining, «ither in terms or by implication, in what manner the rights of the company or the insured would be affected by the payment of the note after a default had come to exist. This fact the court evidently re- garded of much importance, and we may fairly assume that it dom- inated all other considerations that influenced the conclusion reached, — that the acceptance of payment of the note after a loss was a waiver of the previous default, and made the company liable for the loss. We quote from the opinion : "Had the agreement been that in case of default the whole premium should be considered earned, and that liability of the insurer should be suspended, or the policy be void, until such premium, or note given therefor, should be fully paid, we should have but little diflSculty with the question. In such cases the insurer, having earned the premium, would be en- titled to receive it in any event. If paid during the life of the policy, it would revive the risk from the date of the payment, as to all of the insured property remaining at that date. If not paid during the life of the policy, the insurer would be entitled to it, and might re- cover it by action." There is a class of cases where the policies clearly show that the parties intend there shall be an avoidance when default occurs in pay- ment of the premium note, but fail to define to what extent, and in what manner, their rights shall be affected by subsequent payment. The courts have held that the acceptance of the premium by the insur- er is a waiver of its right to insist on the forfeiture.^' The correct- ness of the legal principle here involved cannot be well questioned. While waiver is based on knowledge and intention (and the courts should be careful to confine its application within just limitations), we think, in the absence of any express agreement as to the effect of the acceptance of the premium after default, the waiver may be fairly inferred. In none of these cases does the policy provide that 3 9 Policy stipulated for forfeiture if premium note was not paid when due. The insurer accepted part payment, without any agreement to restore the insurance. The sum paid was greater than premium actually earned at time of fire. The forfeiture was held to be waived. Phenix Ins. Co. of Brooklyn v. Dungan, 37 Neb. 468, 55 N. W. 1069; Phoenix Ins. Co. v. Lans- ing, 15 Neb. 494, 20 N. W. 22; Phenix Ins. Co. v. Tomlinson, 125 Ind. 84, 25 JSI. B. 126; Eobinson v. Peterson, 40 111. App. 132. (292) Ch, 4) PAYMENT OF PREMIUM. § 9S the payment of the premium shall revive the policy for the remainder of the term, nor that in event of a default the whole premium shall be considered earned and payable. This very pregnant inquiry is then presented: By what right does the insurer receive and retain this money? It is not because it has been earned, for the right to declare the entire premium, earned in a contingency could rest only on an express agreement, which is not found in these cases. It is not as the consideration for a continued and future liability, for, the property having burned, the risk has terminated. There is then only one other ground on which the insurer can justify its action in accepting the offered premium, and that is that it waives the for- feiture, and recognizes a liability for the loss.*" In the case of Blackerby v. Insurance Co. there was a stipulation in the policy that, if the insured failed to pay his notes when due, the policy should be void, and the whole amount of the unpaid install- ments should be considered as earned. The court said: "It is well settled, however, that a condition like this one in a policy of insurance is valid, and that in case of a breach of it by the insured, without a valid excuse, the obligation of the insurer is at an end, although the jjremium note of the insured remains binding upon him. The par- ties have the right to make their own contract, and to fix its terms and conditions; and unless they are illegal, or in violation of public policy, they will be upheld. In this instance they could have agreed upon a higher rate of premium, and they had an equal right to agree that the period of time to be covered by the insurance should become shorter upon some contingency, without altering the amount of the premium. Especially would this be reasonable and just as to any contingency which the legal duty of the insured requires him to, and which he can, prevent. Any other rule would require the insurer to carry the risk, although the insured was at the same time violating the contract without excuse, and to require the company to waive its right to the premium before it could insist upon a release from the risk, brought about by the failure of the insured to perform his part of a contract executory upon both sides, would establish a rule in favor of the latter, resisting upon his own default and a violation of his legal 10 Phcenix Ins. Co. v. Lansing, supra; Schoueman v. Insurance Co., 16 NeK 404, 20 N. W. 284; Farmers' Mut. Fire Ins. Co. v. Bo wen, 40 Mich. 147. (293) § 93 LAW OF FIRE INSURANCE. (Ch. 4 duty. If he pays the entire premium in advance, or fails to pay it ad diem, or at maturity, as he has contracted, the law will not relieve him, when the forfeiture of the policy arises from his own neglect. It is vital to the existence of fire insurance companies, and the inter- ests of both stockholders and policyholders, that the patrons should toe prompt in the payment of their premiums, and, upon the other hand, the insurer should toe held to a just performance of the con- tract; tout if the insured, without sufficient excuse, has failed to com- ply with the conditions which constitute the consideration for the undertaking of the company, his complaint, in case of a sutosequent loss, cannot toe heard. If he neglects to pay his note, without a valid excuse, it is a violation of his plain duty; and, if a sutosequent loss occurs, he has no right, upon any legal or equitatole principle, to reimtoursement." It is provided toy law in Iowa that, not less than 30 days toefore a premium note falls due, notice must toe given of the fact to the insured, and that no forfeiture shall result until 30 days after such notice. In Harle v. Council Bluffs Ins. Co.,*^ under the provisions of this statute, a note was sent to the postmaster, who was the insured, tout it appears that this fact was unknown to the company. In presence of wit- nesses, the insured tore his name ofE from the note, and at the same time placed the money required for its payment in an envelope, intend- ing to mail it, as is alleged, to the company; but this he neglected to do until after more than 30 days from the time the letter inclosing the note was received toy him. When sending the money to the com- pany, some 8 or 10 days sutosequent to the fire, he omitted to mention that a loss had toeen sustained under the policy. The money was ac- cepted toy the insurer, and retained. The Iowa supreme court held: "It is perfectly clear, we think, that the receipt of the money, and its retention, under the circumstances, could not amount to a waiver, or reinstate the policy in force as a toinding contract of insurance. The policy had elapsed, solely through the fault and neglect of French [the insured], toefore the property had toeen destroyed. When payment was made the sutoject-matter of the contract was not in existence. This French knew, tout the defendant did not. It received the money under a mistake of facts. Good faith and fair dealing on the part of 41 71 Iowa, 401, 32 N. W. 396. (294) Cll. 4) PAYMENT OF PREMIUM. § 94 French required that he should have notified the defendant, that the property had been destroyed, and we think his suppression of such facts amounts to a fraud ; and, as no one can be permitted to reap a benefit through or by means of a fraud perpetrated by him, therefore the plaintiff cannot recover. But the failure of French to pay the premium had the effect to render the policy void, so far as the right to recover thereon is concerned. The defendant has done nothing to avoid the contract, but has been ready at all times to perform it."*^ The supreme court of Nebraska, in Phenix Ins. Go. v. Bachelder,** held valid the stipulation contained in the policy, that the insurance should be suspended during any default in payment of the premium note. We quote from the opinion by Justice Nerval. He said : "The clause referred to is not unreasonable. It is but fair and just that while the insured is in default of the payment of his note the company should not be liable for loss, when the parties have so agreed. We have no right to make a new contract for them, or refuse to enforce the one they have made. To hold that the policy was in force at the time of the fire would be to set aside and disregard the plain stipulation of the parties." § 94. Premiums must be Paid in Money. In the absence of any special agreement, the insurance premium must be paid in money. Unless objected to, currency, or even checks, drafts, or bill of exchange, will constitute payment; but the agent will not be presumed lo have authority to accept merchandise on personal account. The distinction between the agent and his prin- cipal should be kept in view. The premium on a policy of insurance is the property of the latter, and not of the former. Where the agent delivers a policy to the merchant with whom he has dealings, and to whom he is indebted for goods due for the use of his family, and the 4 2 In principle this case Is like Harris v. Insurance Co., 53 Iowa, 236, 5 N. W. 124. See, also, Redfleld v. Insurance Co., 6 Abb. N. C. (N. Y.) 456; Diver v. Insurance Co., 17 Ins. Law J. 156; McMartin v. Insurance Co., 41 Minn. 198, 42 N. W. 934; Continental Ins. Co. v. Hillmer, 42 Kan. 275, 287, 21 Pac. 1044; Robinson v. Insurance Co., 76 Mich. 641, 43 N. W. 647; St. Paul Fire & Marine Ins. Co. v. Coleman, 6 Dali. 458, 43 N. W. 693. *3 32 Neb. 400, 49 N. W. 217, and 21 Ins. Law J. 618. (295) § 94 LAW OF FIRE INSURANCE. (Ch. 4 premium, by agreement, is placed to the credit of his account, it is a fraud on the principal; and, should a loss occur, the agent having failed to remit, the insurer will not be liable. The agent cannot ap- propriate to his own use the funds of his principal, without a wrong being done the latter; and when merchandise is accepted in pay- ment, or the premium is applied to pay a debt due to the insured, the latter becomes a party to the wrong, and the company will not be bound. In Hoffman v. John Hancock Mut. Life Ins. Co.** the facts recited show that the agent had accepted in payment of the premium certain articles of personal property, among which was a horse valued at $400. Justice Swayne, who delivered the opinion of the court, said: "If the agent had the right to take his percentage in such a way as he might think proper, this did not justify his taljing a horse at |400; for if Thayer [the agent] had expressly agreed to take a horse in payment of the premium, pro tanto, could that have given valid- ity to the transaction? If the agent had authority to take the horse in question, he could have taken other horses from Hoffman, and could have taken them in all cases. This would have carried with it the right to establish a stable, employ hands, and do everything else necessary to take care of horses until they could be sold. The company might thus have found itself carrying on a business alien to its character, and in which it had never thought of embarking. The exercise of such a power of the agent \\ould be liable to objec- tion. It was ultra vires, and it was- a fraud in respect to the com- pany. Hoffman must have known that neither Goodwin nor Thayer had any authority to enter into such arrangements, and he was a party to the fraud. No valid contract, as to the company, could arise from such transactions. This objection is fatal to appellant's case." The agent in this case may have taken the horse with no purpose of defrauding his company. He may have intended to sell it, and remit the proceeds of the sale to the company, for whom he was assuming to act in a manner and matter without warrant. As the court said, what he had undertaken to do was "ultra vires." This fact must have been understood by the insured, from the nature of the transaction. As an intelligent and reasonable man, he could not ** 92 U. S. 161. (296) Ch. 4) PAYMENT OF PREMIUM. § 94 suppose that it was within the scope of authority of one acting as agent of an insurance companj' to buy and sell property of this class. He must have presumed, from the circumstances of the case, that the agent was acting in fraud of his principal; and in this knowledge, actual or presumptive, he becomes a party to the wrong. Story on Agency *' states the law as follows: "An agent author- ized to receive payment has not an unlimited authority to receive it in any way he may choose, but he is ordinarily deemed intrusted with the power to receive it in money only." And in section 181 the same writer further says: "^Miere an agent has general authority to receive payment of a debt, he is ordinarily bound to receive the whole of it in money only, for that is the only way which will enable him completely to discharge his duty to his principal. But circum- stances may vary his duty; as, for example, if he is a creditor of his principal, and the latter has authorized him to take from the sum received the amount due to himself, it will be sufficient for the agent to receive the balance in cash which will remain due to the principal after deducting the sum due to himself, and, as to the other part of the debt, he may settle it with the debtor as he pleases. Applying this principle to the insurance contract, it would be lawful for him to receive his commissions in the settlement of his personal account, or in merchandise, but that portion of the premium which should be paid to the company could not be paid in this manner without vio- lating the laws of agency." The commentator, in his notes on this section, adds: "But the fact that the principal has on two occa- sions sanctioned the payment to his agent of a pipe, watch, and chain, and charged the same to the agent's account, for a debt which the agent had authority to collect in money, would not authorize the agent to sell any property of his principal, and take in payment a piano." Cases involving this principle of agency have frequently had the consideration of the courts, and we can in no better way explain the application of the general rule affirmed than by quoting from se- lected leading cases, where the contention has arisen under circum- stances so different that the discussion has embraced, in one form and another, the whole subject in controversy. 4B Section 98. (207) § 94 LAW OF FIRE INSURANCE. (Ch. 4 The case of Aultman & Co. v. Lee " is one frequently referred to, and has become a leading authority in regard to the power of an agent to receive payment in any other manner than that in which he has either express or implied authority from his principal to do. The facts, briefly stated, show that one Helguson was the agent of the plaintiffs for the sale of farm machinery, and that he sold to the defendant; Lee, a threshing machine, and took his note in payment. Helguson afterwards purchased from Lee a quantity of wheat, with a distinct understanding that the wheat should be sold, and the pro- ceeds applied in payment of the note. There was a trial by jury, and the court, in its instructions, stated the law as follows: "Before you find for defendant, you must be satisfied that the note has been paid to plaintiffs, or to some person by them duly authorized to receive such payment. If payment is made to the agent, it must be made in money, unless an agreement is shown, or authority is established in the agent, to receive payment otherwise. If Helguson was the agent of the plaintiifs and in possession of the note, defendant was authorized to pay Helguson on the note; and if Lee took the wheat to Helguson, sold the same to him, and Helguson, as agent afore- said for Lee, took the money, the proceeds of the wheat, for the plaintiffs, and was then in possession of the note, and was to indorse the same on the note, then the money proceeds of the wheat, if ap- plied on the note, would be his payment of the note." From the opinion of the supreme court of Iowa, where the case went on appeal, we quote as follows : "The testimony of the defendant is that Helgu- son did not apply the proceeds of the wheat to the payment of the note. Because of its inapplicability to the testimony, and its tend- ency to mislead, this instruction should not have been given. The verdict of the jury is contrary to the evidence. The testimony of the defendant does not establish the defense of any payment. The transaction proved was simply this: Defendant sold wheat to Hel- guson, who was in possession of the note. Helguson agreed to pay a part of the price of the wheat to plaintiffs on the note. Helguson did not do as he agreed. Upon the sale of the wheat, Helguson be- came debtor of the defendant. If plaintiffs had been present, and had agreed to take Helguson in payment, there would have been a <« 43 Iowa, 404. (298) tlh. 4) PAYMENT l)F PREMIUM. § 94 novation, and it would have been discharged, but to this end the concurrence of the three parties interested is necessary. It is now plain that, without the knowledge or assent of the plaintiffs, an old debtor has been discharged, and a ne\^- one has been substituted. A., as agent to B., has in his hands for collection a note of C.'s for f 100. C. has a horse which he wishes to sell, and B. desires to buy. The horse is turned over to B., who agrees to pay the price, flOO, to A. on C.'s note. Does this discharge the note, or is A. compelled to accept B. as his debtor, instead of C? Manifestly not. The case supposed is on the same principle as the case at bar." See, also, Drain v. Doggett.*^ Justice Beck in that case said: "The law is well settled, and has been so held by this court, that the holder of a note for collection, if an agent or attorney, has no right to receive in payment anything except the money, unless specially authorized to do so by his principal or client."** In TSTieeler & Wilson Manuf'g Co. v. Givan *° the plaintiffs em- ployed an agent, who was selling machines, and, in the prosecution of this business, was traveling from place to place. He sold to the defendant a machine, and agreed that he would accept board in his family, and that the cost of board thus had should be credited to the defendant in payment of the machine. The court held that an agent thus emploved had no power to barter or exchange the property with which he was intrusted, or to pledge it in any way for his own debt; that an agent must sell, in the absence of any special instructions or authority, in the ordinary manner, and receive pay only in money; that he could not dispose of his principal's goods under conditions that would make himself the debtor.'" In the case last referred to (McCormick v. Keith 'i) the court said: "The general rule applicable to a case like this is that an *i 41 Iowa, 082. *8 Graydon, Swanwick & Co. v. Patterson, 13 Iowa, 256; Hall v. Storrs, 7 Wis. 253; Higgins v. Moore, 34 N. Y. 422; Bridges v. Garrett, L. R. 5, 0. P. 451; Bertholf v. Quinlan, 08 111. 297. *« 0.") Mo. 89. 50 The case of Holton v. Smith, 7 N. H. 446, is to the same effect. See, also, Benny v. Rhodes, 18 Mo. 147; Stewart v. Woodward, 50 Vt. 81; La Point v. Scott, 36 Vt. 608; McCormick v. Keith, 8 Neb. 143. 51 8 Neb. 143. (299) § 94 LAW OF FIRE INSURANCE. (Ch. 4 agent, in the absence of authority from his principal, either express or implied, can accept only money in discharge of his debt. Con- ceding that the authority of a general agent extended to the settle- ment or compromise of plaintiff's claim, it would by no means fol- low that it would extinguish a debt due to his principal by setting off against it his own debt." In Todd V. Eeid " the court said: "It was but an attempt to pay the debt of one person with the money of another. This the law will not tolerate."^^ The law is stated in Benjamin on Sales ^^ as follows: "That a broker or agent employed to sell has prima facie no authority to re- ceive payment otherwise than in money, according to the usual mode of business, has been well established; and it seems equally clear that if, instead of paying money, the debtor writes off a debt due to him from the agent, such a transaction is not payment, as against the principal, who is no party to the agreement, although it may have been agreed to by the agent." ^^ If, among the very large number of courts in this country that are daily passing upon questions of law, we occasionally find those that are impatient of the restrictions which time-honored rules impose,, the fact need cause no alarm concerning the stability of the law,. and the permanency of benefits to be enjoyed from our system of ju- risprudence. Our courts are often wise, but not always so, and there appears no reason why our confidence in the ways of justice should be disturbed if we sometimes discover tendencies to temporarily diverge from the safe and conservative lines which the doctors of the law have followed for generations. It is doubtless true at this time, when vast business enterprises are managed wholly by agents, that there is a growing tendency on the part of some of the courts to enlarge the powers of the agent, and to magnify him into the alter ego of the principal. Particularly is this true when he is the repre- ss 6 E. c. L. 404. 63 Greenwood v. Burns, 50 Mo. 52; Farrar v. Triplett, 7 Neb. 237; Phillips V. Mayer, 7 Cal. 81. 04 Section 1099. '6 Reynolds v. Ferree, 86 111. 570; Trudo v. Anderson, 10 Mich. 357; Burger V. Limbach, 42 Mich. 162, 3 N. W. 942; McCulloch v. McKee, 16 Pa. St. 289;. Drain v. Doggett, 41 Iowa, 682; Kendall v. Wade, 5 La. Ann. 157. (300) Ch. -1) PAYMENT OF PREMIUM. § 95 sentative of a corporation. Concerning the business to which he has been appointed, he is often regarded as having the same au- thority as the principal might exercise when acting in his own be- half. The reserved powers of the principal are dissipated by con- struction, and especially is his right to limit the powers of the agent in important respects denied. The legal presumptions that have long existed for the protection of the principal are now often with- drawn. We have seen, in the discussion of the preceding pages, that the courts have inflexibly refused to permit the agent to use the principal's money in his personal business, or to increase his per- sonal comfort. The law has always recognized a distinct line of separation between the affairs of the agency and the personal mat- ters of the agent. The departures to which our attention is called are not numerous, and are notable only because they indicate a tendency to diverge from safe rules. In Kerlin v. National Ace. Ass'n ^^ the premium was |30, and, the agent owing a debt of flO to the insured, the court held that the de- duction of such debt from the premium was permissible; recog- nizing the competency of the parties to arrange for the agent to pay his personal debt with his principal's money. In Jones v. Aetna Ins. Co." the insured was allowed to pay his premium by entering upon his books a credit in the personal ac- count of agent; and in Carlwitz v. Germania Fire Ins. Co. the insured was a merchant, and the agent received the premium due the com- pany in trade from the insured's store.' ^ § 95. Conclusions. The premium is the consideration on which rests the promise of indemnity, and unless payment is made, or arranged for at a future time, the insurer will not be charged with loss under the policy. While payment of premium cannot be excused, as in such case there will be no consideration for the contract, immediate payment may be 56 8 Ind. App. 628," 36 N. E. 15G. 57 Fed. Oas. No. 7,453, 8 Ins. Law J. 415. 6 8 Fed. Cas. No. 2,415a, 12 Ins. Law J. 127. (301) § 95 LAW OP FIRE INSURANCE. (Oh. 4 waived. The question as to whether there has been a waiver will be for the juiy. Unless there is a promise, express or implied, to pay a premium, an indispensable element is wanting to a completed contract. The par- ties have not yet agreed to all the essential conditions. When the policy is delivered, containing words clearly expressing an acknowledgment that the premium has been received, the company will be estopped from refusing to pay a loss on the ground that no actual payment has been made. The usual rule, that a receipt is only prima facie of payment, does not apply to defeat rights that proceed from the contract in its operation concerning future contingent events. When the insurer places its policy in the hands of a broker to deliver to the insured, pa\ ment of the premium to such broker will be pay- ment to the insurer. Having the policy for purpose of delivery im- plies authority to make collection of premium. Where the note given for a premium is made negotiable, is not re- ferred to in the policy, and its payment at maturity made a condition of the insurer's liability, the insolvency of the insured and the nonpay- ment of the note will not relieve the company from the payment of a loss. If the premium note is referred to in the policy, and its payment at a stipulatSd time is made a condition precedent to the payment of a loss, there must be strict compliance, or the insurer will be discharged. When the premium note does not designate any place of payment, the maker of the note must seek the payee. Payment of premium may be made, except when otherwise agreed upon or objected to, by check, draft, currency, or in any other con- ■^-enient and customary manner. If, however, money is demanded, gold or legal-tender funds will be required. • (302) C^* ^) PAKTNKESHIP. § 96 CHAPTER V. PARTNERSHIP. 5 96. Changes in Partnership. 97. What is a Partnership. 98. What is a Dormant Partner. 99. When a Change in Partnership Voids the Policy. 100. The Conditions of the PoUcy a Part of the Consideration. 101. Wlien a Partnership is Dissolved and the Property Divided, the Insur- ance Terminates. 102. When a Partnership may Exist although There is No Contribution to the Capital Stock by Certain of the Partners. 103. A Partner may Insure His Undivided Interest. 104. Distinction between a Partner and Stockholder. 105. A Stockholder in a Corporation has an Insurable Interest. 106. Firm Names. 107. Corporate Names. 108. Conclusions. § 96. Changes in Partnership. The changes that frequently occur in the personal organization of a partnership have occasioned much contention in the courts as to wheth- er such changes are in violation of the condition of an insurance con- tract which provides that it shall become invalid when There has been an alienation of the property, or whenany change has taken place in ti- tle or possession. There are three classes of changes which the courts have been most frequently called to consider in reference to the ques- tion of whether a forfeiture has occurred on account of this stipulation in the policy: First, when one or more partnevs retire from the firm, selling their interest to the other partners, who retain ownership and continue in the management of the business; second, when one or more strangers are received into the firm, and exercise an influence in the control of its affairs; third, such changes inter sese as may in- crease or diminish the interest of any individual member of the firm. Changes of the third class have seldom been held by the courts to be of sufficient importance to affect in any substantial manner the rights of (303/ § 96 LAW OF FIRE INSUBANCr-;. (Ch. 5 the insurer.^ It is, however, easy to understand that the shifting of interests between partners may sometimes materially change the char- acter of the risk. Let us suppose a firm composed of Brown and Jones, having a capital of |10,000, of which Brown contributes |7,500, and has the chief management of the company's business. The un- derwriter, when insuring the property, has learned the situation of af- 1 The policy provided against change of title and interest, on penalty of for- feiture. The firm consisted of three partners when the policy was issued. Dur- ing the term of the insurance, two of these sold to the third. Held, that there had heen such change in title and interest as to invalidate the Insurance. Old- ham V. Insurance Co., 90 Iowa, 225, 57 N. W. 861; Germania Fire Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 39 N. E. 77. In the last case, a new partner was admitted during the period the policy was to continue. In Jones v. Insurance Co. (Iowa) 66 N. W. 169, J. and K. were partners. One sold to the other, taking a note for the purchase price, with an agreement that, if note was not paid at maturity, his interest should continue until payment was made. The policy had the usual provision in regard to forfeiture, If there slwuld be any change in title and possession. The coui-t said that there was a change of possession, withholding its opinion as to whether the transaction had effected change of title. In the case of Virginia F. & M. Ins. Co. v. Vaughan, 88 Va. 832, 14 S. B. 754, Lewis, J., said: "The object of such a provision is to protect the insurer against the risk of the introduction of a stranger to the contract, perhaps not in any way known to them, or, if known, not deemed worthy of their confidence. But this reason cannot ajjply where there is simply a transfer of interest by one partner to another. It is suggested that the provision in the policy may have been designed to secure the continuance in the firm of the only member in Avhom the insurer reposed confidence. But to this we answer, in the language of the New York court of appeals, in the well-considered case of Hoffman v. Insurance Co., .32 N. Y. 405, where, in answer to a similar suggestion, it was said: 'The only evidence of the confidence of the Insurers in either of the in- sured is the fact that the company contracted with all, and the theory is rather fanciful than sound that the former may have Intended to conclude a bargain with rogues, on the faith of a proviso that an honest man should be kept in the firm to watch them.' " See, also. Powers v. Insurance Co., 136 Mass. 108; Burnett v. Insurance Co., 46 Ala. 11; Pierce v. Insurance Co., 50 N. H. 297; West V. Insurance Co., 27 Ohio St. 1; Lockwood v. Assurance Co., 47 Conn. 553; Texas Banking & Ins. Co. v. Cohen, 47 Tex. 406; New Orleans Ins. Ass'n v. Holberg, 64 Miss. 51, 8 South. 175; AUemania Fire Ins. Co. v. Peci, 133 111. 220, 24 N. E. 538; Dermani v. Insurance Co., 26 La. Ann. 69; Dresser v. Insurance Co., 122 N. Y. 642, 25 N. E. 956; Drennen v. Assurance Corp., 20 Fed. 657; Klein v. Insurance Co., 3 Ont. (Can.) 234. (304) Ch. 6) PARTNERSHIP. § 98 fairs, aud is content to accept the risk for the agreed premium, relying upon the intelligent care Avhieh the property will receive under Brown's supervision and control. Jones, it may be understood, has indifferent business qualities, and is a person of careless habits, one in whom no confidence can be placed in providing for the security of the property insured. The paramount interest of Brown is the only guaranty ft'hich the insuring company has for the protection of its venture, but during the term of the policy Brown sells to Jones two-thirds of his in- terest in the business, and the latter assumes the management of af- fairs. The change is one of vital importance to the insurer. Still, it is one that the courts have with much uniformity disregarded. Their decisions seemingly are based on the principle that the insurer has ac- cepted both partners, and that, if distinctions are to be made such as we have here suggested, it is the privilege and the duty of the com- pany to so provide by the use of language that will leave no doubt in respect to its intentions. § 97. What is a Partnership. What constitutes a partnership is not always easily determined, and the question has frequently required the consideration and judg- ment of the courts. In most cases, of course, the relations of persons associated in business undertakings are readily understood among themselves, and by those with whom they deal in their corporate or partnership character. Ordinarily, their individual rights and re- sponsibilities are fixed by definite and specific agreements. When this occurs, important questions will seldom arise as to the interests and obligations of those who are members of the partnership or corpo- ration. Where there is a contribution of capital and a sharing in profits, partnership may exist. Parsons says that the test of partner- ship is "community of profits." § 98. What is a Dormant Partner. In Lindley on Partnerships, we find this definition of a "dormant partner." He says : "The right of a lender is to be repaid in money, with such interest or shares of profit as he may have stipulated for, and his right to a share of the profits involves a right to an account OSTK.FIREINS. 20 (.305) § 98 I'AW OF FIEE INSURANCE. (Ch. 5 and to see the books of the borrower. If he stipulates for more than this,— that is, for a right to control the business or the employment of the assets, or to wind up the business, or if his advance is risked in the business, or forms a part of the capital in it,— he ceases to be a mere lender, and becomes in effect a 'dormant partner.' " The line between the lender and this class of partners may often be so obscure as to cause much dififlculty in definitely establishing the rights and responsibilities of those who sustain relations to others, or to a business which, while in a sense casual and accidental, results in both the contribution of capital and the sharing of profits. Cases of this kind are usually presented in connection with some special under- taking. There has not been deliberation and agreement. An exigen- cy has arisen demanding instant action. Some one has supplied capi- tal; some one else, service. Profit or loss has resulted, and the parties concerned subsequently find it necessary to refer to the courts to estab- lish the proper legal effect of what they have severally or collectively done. In Berthold v. Goldsmith,^ it was said by the court: "A partnership is usually defined to be a voluntary contract between two or more competent persons to place their money, effects, labor, and skill of some one, or all of them, in lawful commerce or business, with the un- derstanding that there shall be a community of profits thereof between them. » * » Whenever it appears that there is a community of interest in the capital stock, and also a community of interest in the profit and loss, then it is clear that the case is one of actual partnership between parties themselves, and, of course, it is so as to third persons. All of the decided cases, however, agree that it is seldom or never essential that both of these ingredients should oc- cur in a case in order to establish that relation. Cases occur undoubt- edly where a community of interest in the property, without any refer- ence to the profits, will almost necessarily lead to the conclusion that the relation of the parties is that of partnership; and under some cir- cumstances that conclusion will follow, although the sale of the proper- ty for joint interest may not be contemplated by the parties. * * • Actual participation in the profits as principal, we think, creates the partnership as between the parties and third persons, whatever may 2 24 How. 536. (306) ^h- ^) PARTNERSHIP. § 99 be their intentions in that behalf, and notwithstanding the dormant partner was not expected to participate in the loss beyond the amount of the profits. Every man who has a share of the profits of a trade or business ought also to bear his share of the loss, for the reason that, in taking a part of the profits, he takes a part of the funds of the trade on which the creditor relies for payment." § 99. When a Change in Partnership Voids the Policy. Whether a change in partnership will render the policy of insurance void is a question which the courts have passed upon many times, and imder circumstances so different in their character that general rules are not clearly discernible. When, however, the policy stipulates only against a change of title or ownership, it has generally been held that any change between the partners does not discharge the insurer; but the rule is otherwise when a stranger is received into the firm. In the case of Hoffman v. Aetna Fire Ins. Co.^ the policy provided that it should be void if the property was sold or conveyed without no- tice and consent, and, a retiring partner having sold his interest to his co-partner, it was held that such sale did not cause an avoidance. The same court, it may be mentioned, had previously rendered a contrary opinion, under a contract differing, however, somewhat in its provisions. The exact language of the charter of the company in this case (which was a part of the contract, and referred to, to determine the rights of the parties) read as follows: "When any house or dwell- ing insured under the provisions of this act shall be alienated by sale or otherwise, the policy shall thereupon be ipso facto void." The words here used to express the condition clearly imply that it was something more than an interest or part that was contemplated by the prohibition. The alienation that was to create a forfeiture referred manifestly to the sale of the entire property. This "condition" is ex- ceptional, and seldom found in policies at the present time. The court, in deciding this case, said: "The alienation here contemplated is a sale by the insured to a party not insured. Any transfer of inter- est between the parties insured by the policy is not an alienation, with- in the meaning of the charter. By such a transfer, no new party with » 32 N. Y. 405. (307) I 99 LAW OF FIRE INSURANCE. (Ch. 5 whom the defendant did not contract is introduced, but simply the in- terest of those who did contract is changed. Such change does not affect the risk, whether partial or extending to the entire interest, so long as no new party is brought into contract relations with the in- surer." The opinion here expressed is undoubtedly in accord with the gen- eral trend of authorities. The court further said : "The insurers justi- fied their confidence in each of the assured by issuing to them a policy, but they did not choose to repose blind confidence in others who might succeed them." A legal writer, commenting on the passage last quoted, ventures the following words of qualified criticism: "The court might have here added with better reason and better logic that 'the insurers reposed confidence in the partners when considered together, — in the firm as then constituted, — but that in no manner justified their confidence in either of them individually.' " Undoubtedly, it will sometimes occur, and for reasons heretofore pointed out, that an insurance company will be justified in issuing its policy for the protection of two or more persons when owning property together and uniting in its management, when it will properly hesitate to enter into any contract relations with either of the persons sepa- rately. "The design of the provision was not," the court further ex- plains, "to interdict all sale, but only sales of proprietary interest by parties insured to parties not insured. It was to protect the company from a continuing obligation if the title and beneficial interest should pass to those whom they might not be equally willing to trust." In the case of Burnett v. Eufaula Home Ins. Co.,* the policy provid- ed that it should become void if, without consent of the insurer, the property covered be sold or conveyed, or the interest of the parties therein changed. One of the partners sold his interest to his asso- ciate partner, and, the insurer not having been notified, after a loss it claimed that a forfeiture had resulted. The court held that the com- pany was not relieved. Mr. Wood criticises this decision as follows: "The case carries the doctrine further than was warranted by the cases to which it referred as authority, and further than the rules of fair construction would permit. The interest of the parties in the * 46 Ala. 11. (308) ^h. 5) PARTNERSHIP. § 29 property was clearly changed when a part partner became sole owner^ or when one joint owner parted with any part of his joint interest in, the property." After pointing nut the clear distinction between the case under consideration and the one in New York to which the court referred in support of the position it had taken, Wood again says: "There would seem to be no room for doubt that the object and pur- pose of the insurer was to keep the interest in the property entirely un- changed, both as to persons and quality." ° The criticism of Mr. Wood appears to be fully justified, in view of the very distinct condition of the policy that it should become void' if any change of the interests of the parties in the property should' be made. T\'hether the reasons given for the condition were valid' or not, it was clearly the agreement between the insured and the- insurer. It was undoubtedly, too, an agreement which the parties had a right to make, and one which it was the clear duty of the court to enforce. In the New York case before referred to (Hoffman v. Aetna Fire Ins. Co.), the "condition" was expressed in words of doubtful meaning; and under the familiar rules of construction that, when the language of the contract is uncertain, it shall be con- strued more strictly against the insurer than the insured, the New York court was possibly warranted in holding that the language- used was only intended to prohibit a sale by the persons insured tO' persons not insured. The assignment of reasons for a stipulation in a contract is always impertinent, unless it be for the purpose of showing the intention of the parties. When such intentions are dis- tinctly expressed, the court has no other duty to perform than ta give them legal effect, providing, of course, they are not repugnant to law. In Pierce v. Nashua Fire Ins. Co.," it was stated that "the chief reason for requiring such a stipulation is to guard against the intro- duction of a stranger." '' This same question has been carefully considered by the Illinois court in the case of Dix v. Mercantile Ins. Co." We quote from the opinion: "The intention of the company was manifestly, as urged, that no stranger should come into the management and care of this property without their consent." But the court adds: "It is. 6 1 Wood, Ins. pp. 739, 742. t West v. Insurance Co., 27 Ohio St. 11. « 50 N. H. 299. 8 22 111. 277. (309> § 99 LAW OF FIRE INSURANCE. (Ch. 5 not plain but that the insurer may be as greatly prejudiced by re- moving one to whom, with others, they had intrusted the guardian- ship of valuable property, as by the introduction of a stranger." And it was held that a sale by one partner voided the policy." In Shuggart v. Lycoming Fire Ins. Co.,^" the policy was written to P. and E., partners, and contained a provision, in substance, that it should be void if the property insured was conveyed or the policy assigned without the consent of the company expressed by written indorsement. Further, the policy contained a stipulation that no agent of the company had power to waive any of its conditions, either before or after a loss, without special authority in writing from the company to do so. After the insurance was effected, and without the consent of the defendant company, E. sold his interest in the insured property to P. The local agent was notified of this sale, and promised to procure the required indorsement on the policy, but failed to do so. It was held that the policy was rendered in- valid by the sale to the extent of the interest transferred; that the oral promise of the agent to obtain the consent of the company to the assignment in the required form did not have the effect to create a waiver of the condition in regard to written indorsement; and that receiving the premium after the sale, notwithstanding the knowledge of the agent, did not estop the company from insisting on a forfeiture. In Wood V. Eutland & A. M. F. Ins. Co.,^^ it was said by the court that, "when one partner sells to his associates, there can be no re- covery by the old firm for a subsequent loss. Where there is a vol- The conclusion here reached by the Illinois court is fully supported by Hartford Fire Ins. Co. v. Koss, 23 Ind. 179; Finley v. Insurance Co., 30 Pa. St. 311; Western Massachusetts Ins. Co. v. Riker, 10 Mich. 279; Dey v. Insur- ance Co., 23 Barb. (N. Y.) 623. In Wood v. Insurance Co., 31 Vt. 552, 563, the court declared the law to be: "When one partner sells to his asso- ciates, there can be no recovery by the old fii-m for a subsequent loss. * * * The insurance company may well say that the new firm is not the party with whom it contracted." Keeler v. Insurance Co., 16 Wis. 523; Home Mut. Fire Ins. Co. v. Hausleln, 60 111. 521; Lappin v. Insurance Co., 58 Barb. (N. Y.) 325; Savage v. Insurance Co., 52 N. Y. 502; Biggs v. Insurance Co., 88 N. C. 141; Oakes v. Insurance Co., 131 Mass. 164. 10 55 Cal. 408; Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848. 11 31 Vt. 552. (310) Ch. 5) PARTNERSHIP. § 100 untary change of the firm, the insurance company may well say that the new firm is not the pai-ty with whom they contracted." See, also, Card v. Phoenix Ins. Co.^^ The insurance was to S. and "N., who were partners. Subsequently, another person, K., became a member of the firm. Later, S. sold his entire interest to N. and K., who gave a chattel mortgage on the property to secure the purchase money. It was a condition of the policy that "if the property be sold or transferred, or any change take place in title or possession, the policy shall be void." Held, that there was such a change in title and possession as to avoid the policy, and that the change was in no important sense qualified on account of the mortgage taken by S. The case was thus stated by the court: "The title and pos- session at the date of the insurance was in S. and N., and at the date of the loss both title and possession were in N. and K., and that by the voluntary act of the assured." It was the judgment of the court that the policy had been rendered void.^^ § 100. The Conditions of the Policy a Part of the Con- sideration. By the terms of the insurance contract, it will be found in most cases that the insurer accepts, as a part of the consideration for the indemnity offered, the promise of the insured that he will do, or re- frain from doing, certain things that are particularly designated. TVhen the insured fails to perform in these particulars, there is a failure of the consideration. If the parties so elect, they may agree in this manner, and it will be the duty of the court to enforce the agreement. The insurance company may exact a large premium, and make its promise to indemnify without qualification or condi- tion, and in reference to other matters ; or it may act upon the more conservative principle of business, and accept a smaller premium, in consideration that the risk, in all its circumstances and the. inter- est of the insured therein, shall continue unchanged during the term of the insurance. When this is done in a form of words that dis- tinctly indicates the intention of the parties, any failure to perform the condition releases the insurer as effectually as though there had 12 4 Mo. App. 424, 13 See authorities cited in notes 1 and 9, ante. (311) § 100 LAW OF FIBE INSURANCE. (Ch. 5 been default in payment of the premium. It is not a prerogative of the court to distinguish which conditions are arbitrary and un- reasonable, and which are founded upon considerations affecting the substantial rights and interests of the parties. The materiality of these stipulations has been established by the agreement of the par- ties themselves, and the reasons which may have existed to induce them to enter into a contract in the form presented are not proper subjects of inquiry or discussion. In Dey v. Poughkeepsie Mut. Ins. Co.," the court pertinently said: "The object of the company undoubtedly was to protect themselves against controversies with strangers or persons other than those with whom they contracted. This they had a right to do, and the court cannot make a distinction between diflEerent degrees of viola- tion of the provisions of the policy, or measure their extent." In Drennen v. London Assur. Corp.,^° the question presented for the decision of the United States circuit court was whether the intro- duction of a new partner, one Arndt, resulted in such a change of interest under the terms of the policy as to cause a forfeiture. Judge Miller said: "There are two things with regard to which in- surers are cautious, tenacious, and anxious. One of these is the character of the men with whom they contract, and the other is the character of the man who has possession of the property, especially if it is movable property that is insured; and it is easy to see why this is so. They may very well know that the man or men with whom they deal when the contract is made are cautious, prudent business men, honest, and for a long time successful in business. With these men they contract without hesitation. They have a right to know who these men are, with whom they contract with regard to the possession of the property. They make a contract with A. because they know him, or because they have heard of his character, because they understand that he is honest and fair, and they deal with him just as you would deal with one whom you know to be reliable. You will seek to deal with honest men only. Now, it is against all the principles of contracts to say that, in dealing with one man or with two men, those two can afterwards, acting without the consent of the other par|:y, introduce another man .into 14 23 Barb. (N. Y.) 623. lo 20 Fed. 657, 13 Ins. Law J. 706. (312) ^^- ^) PARTNERSHIP. § 101 the contract, who has all the rights and all the control which those two had before, because that man may be known to be a scoundrel by the insurance company; and, if that rule prevails, the other par- ties have a right to introduce the veriest scum of the earth, and men who have half a dozen times been engaged in the destruction of property to get the insurance." § 101. When a Partnership is Dissolved and the Property- Divided, the Insurance Terminates. In Dreher v. Aetna Ins. Co.,^^ we find a very concise statement of the rule of law applicable in cases of this kind. The property insured was owned by two partners, and, alter procuring the insurance, the firm was dissolved, and the property divided. The policy had the usual condition that it should become void if there should be any trans- fer or change of title in the property insured without consent of the company. We quote from the opinion of the court: "If one of two partners of a mill jointly insured sells his part to a stranger, it may appear like a hardship that such sale should destroy the policy, but it is no more than happens in all cases in which there are joint prom- isees, covenantees, or obligees, where one discharges the promise, cov- enant, or bond. The court below should have given to the jury an instruction leaving to them to find the fact of the transfer or change of ownership of the property from the evidence. This transfer did not necessarily require a sale from one to the other of plaintiffs. It is on this ground alone that the case is reversed. The court should have instructed the jury that upon the dissolution of the partnership and a division of the goods, so that the parties are to hold their shares sepa- rately and distinctly, it is not strictly a sale of the goods, yet it oper- ates a change of title in the goods; and, for not giving such instruc- tions, this court reverses the judgment of the court below." In the voluntary dissolution of a partnership and a division of the property, the interests of the parties are changed, and the rights and obligations of the insured under the terms of the policy are affected in the same manner and to the same extent as when property insured, during the continuance of the policy, is partitioned by order of the 18 18 Mo. 128. (313) § 101 LAW OF FIRE INSURANCE. (Cll. 5 court. The interest in common is changed to an interest in severalty. Before the dissolution of the firm or the partition of the estate, each "of the partners or the persons to whom the estate jointly belongs has an interest in the whole property. Afterwards the relations are so alter- ed that each individual ceases to have any interest in one part, and becomes the sole owner of another part. This is a different condition of title in very important respects from that existing at the time the risk was accepted by the insurer; and, whether its interests have been prejudiced or not, the change is one it has stipulated against, and, hav- ing been made, the insurer is relieved from liability. This proposition is supported by numerous authorities.^^ When the policy is to pro- tect a joint interest, which during the term of the policy is divided, the insurance will not survive to protect either party. In Hathaway v. State Ins. Co.," the facts show that the plaintiff and one E. P. Smith were partners, and, as such, procured an insur- ance. Subsequently, and before loss, the partnership ceased to exist on account of the purchase by the plaintiff of Smith's interest in the property covered by the policy. It was held that the insurance was terminated by the sale. The court said: "The case turns upon the question whether a change of title of the property resulted upon the dissolution of the partnersliip, and the sale by Smith to the plaintiff of all his interest in the property, and it seems to us there can be but one answer to this question. During the existence of the partnership, it cannot be said that plaintiff had title to any specific share or interest in the property; but, upon the dissolution of the partnership and the purchase by him of Smith's interest, he was vested with the absolute title to the whole property." A different rule has been held in Tennessee, where one partner sold to the other; and, a fire having occurred, it was held that the partner who continued the business could recover only for his original interest in the property.^" The rule, to which considerable attention has been given, that re- 1' See chapter on "Title and Ownership," § 84, and authorities there cited. Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848. 18 Hartford Fire Ins. Co. v. Ross, 23 Ind. 179; Wood v. Insurance Co., 31 Vt. 552; Hathaway v. Insurance Co., 20 N. W. 164, 64 Iowa, 229; Buckley v. Garrett, 47 Pa. St. 204; Dey v. Insurance Co., 23 Barb. (N. Y.) 623. 13 Hobbs V. Insurance Co., 1 Snced (Tenn.) 444. (314) Ch. 5) PAETKERSHIP. ' § 102 ceiving into the partnership a person unknown to the insurer will invalidate the policy, must be understood as having possible ex- ceptions. The courts, in construing a contract, will presume that the parties, in agreeing to its terms, were governed by intelligent and just considerations respecting the mutual benefits to be secured. They will proceed on the idea that forfeitures were not contemplated, except for sufficient reasons. It would be in the line of a prudent conservatism for the insurer to object to the introduction of a stran- ger into the active management of the business. But suppose the partnership, so far as the new member was concerned, extended only to sharing in the profits of the business carried on; would not then the enforcement of a rule so arbitrary, so destitute of reason and business faith, cause "moralities to shriek aloud"? ^° We must, of course, keep always in mind the personal character of the insurance contract. The company is dealing with persons, concerning things. Wlien A. and B. are insured, and they after- wards take C. into their business, the insurer may well say that "we have no agreement with this new associate. We did not deem it necessary, when insuring you, to consider his personal and busi- ness character. Of his integrity and prudence we know nothing, and must decline to recognize him as a party to our agreements." ^* A surviving partner, who is also administrator of deceased part- ner, is not sole owner. ^^ § 103. When a Partnership may Exist, although There is no Contribution to Capital by Certain of the Partners. We have heretofore pointed out, in the chapter on "Title and Own- ership," that such a partnership may exist as will change the inter- ests of the insured within the terms of the policy, when a person is admitted to the joint control and management of the business of a 20 Traders' Ins. Co. v. Pacaud, 150 111. 245, 37 N. E. 460; Boutelle v. Insur- ance Co., 51 Vt. 4; Hanover Fire Ins. Co. v. Lewis, 28 Fla. 209, 10 South. 297; Welch V. Insurance Co., 23 W. Va. 288. 21 Card V. Insurance Co., 4 Mo. App. 424; Malley v. Insurance Co., 51 Conn. 222, 13 Ins. Law J. 38; Blackwell v. Insurance Co., 48 Ohio St. 533, 29 N. B. 278; Germania Fire Ins. Co. v. Home Ins. Co. (Super. N. Y.) 24 N. y:. Supp. 357. 22 Crescent Ins. Co. v. Camp, 71 Tex. 503, 9 S. W. 473. (315) § 104 LAW OF FIRE INSDEANCE. (Ch. 5 firm, and shares in its profits, altliough he contributes nothing to the capital stock. This was illustrated in the case of Malley v. Atlantic Fire & Ma- rine Ins. Co.^^ The plaintiff became insured in the defendant com- pany, and subsequently received into partnership one Neely, who was to contribute only time and skill. The court held that this change, by creating a partnership where none existed at the time the policy was issued, invalidated the insurance. It said: "When, therefore, the plaintiff, after the delivery of the policy, executed the recited agreement, and by it formed a partnership between himself and Neely for the prosecution of the dry-goods business, and trans- ferred the merchandise insured as his own property to the partner- ship as his contribution to its capital,. he invested Neely with a part- ner's title to it, which was as absolute in character as his own, though less in value. He did precisely that which he had agreed should make void the contract of insurance." ^* § 103. A Partner may Insure His Undivided Interest. A partner may protect by insurance his undivided interest in the property owned, by the firm. This may be done under a policy is- sued to the firm, with a stipulation that the loss, if any, shall be paid to the partner for whose benefit the insurance is obtained, or the policy may be written in his own name, and made so as to particu- larly designate the interest insured. Unquestionably, a suit could be maintained to recover after a loss in either case.^° ( § 104. Distinction between a Partner and Stockholder. The relations of a partner to the business and property of a firm of which he is a member are essentially different from those of a stockholder to the business and property of a corporation in which he owns shares. It has been disputed that a stockholder has an 28 51 Conn. 222, 13 Ins. Law J. 38. 24 Girard Fire & Marine Ins. Co. v. Hebard, 9o Pa. St. 45. 25 Peoria Marine & Fire Ins. Co. v. Hall. 12 Mich. 202; Tebbetts v. Dear- born, 74 Me. 392. (316). Ch. 5) PARTNERSHIP. § ] 05 insurable interest in the property of the corporation.^" The rea- sons are not, however, readily understood why the owner of shares in a corporation should not protect himself against loss which he may sustain by the destruction of the corporation property. It is true that the shares are choses in action. At the same time, they have a representative character: they express the definite interest of the owner in the tangible and substantial effects of a company. If the whole capital stock be |10,000, a person holding shares for $1,000 will have an interest to the extent of one-tenth in any prop- erty of the company subject to loss by fire. The loss to the indi- vidual stockholder, whether partial or total, would be as easily as- certainable as it would be in any other case. While it is tinae that the stockholder does not technically own the property, it will not be disputed that he suffers loss by its destruction in a sum that may be definitely computed. The mortgagee does not own the property covered by his mortgage. He cannot sell or even control it. His interests in law and in fact are less proprietary than those of a shareholder, but the right of a mortgagee to insure is not now ques- tioned. § 105. A Stockholder in a Corporation has an Insurable Interest. In deciding the case of Warren v. Davenport Fire Ins. Co.,^^ Judge MUIer has presented a carefully prepared and interesting discus- sion concerning the right of a share owner to insure. We quote: ■"The question raised by the demurrer is whether the parties effect- ing the insurance in this case had an insurable interest in the prop- erty insured at the time the risk was taken, and at the time of the loss by fire. The term 'interest,' as used in application to the right to insure, does not necessarily imply property; ^* and, as the con- tract of insurance is one of indemnity against losses and disad- vantages, an insurable interest may be proved in the assured, .with- out the evidence of any legal or equitable title in the property.^" 26 Philips V. Insurance Co., 20 Obio, 174. 2' 31 Iowa, 464. 2 8 Hancox v. Insurance Co., 3 Sumn. 132, Fed. Cas. No. 6,013; Ang. Ins. § 56. 29 Putnam v. Insurance Co., 5 JXetc. (Mass.) 386; Lazarus v. Insurance Co., 19 Pick. (Mass.) 81, 98. (317) § 105 LAW OF FIRE INSURANCE. (Ch. 5 An insurable interest is sui generis, and peculiar in its texture and operation. It sometimes exists where there is not any present prop- erty, or jus in re, or jus ad rem. Yet such connection must be es- tablished between the subject-matter insured and the party in whose behalf the insurance has been effected as may be sufficient for the purpose of deducing the existence of a loss to him from the occurrence of the injury to it.^" In the case under consideration, the assured were stockholders in the Dubuque Lumber Company, a corporation for pecuniary profit. The property destroyed belonged to the corporation. The insurance was upon the interest which the assured had in that property by virtue of the capital stock therein owned by them. The object of the insurance was to indemnify the assured against loss to them in the event of a destruction of the prop- erty by fire. Could or would they sustain loss in such event? How would their interest be affected? It seems to us beyond controversy tha,t, in case of the destruction of the corporate property by fire, the stockholders sustain a loss to a greater or less extent depend- ent on the i)articular circumstances. Suppose the case of a grain elevator upon some one of our numerous railroad lines, built, owned, and managed by a joint-stock corporation; that this is the only property of the corporation; that the entire capital stock is repre- sented in and by this property ; that, in consequence of the profitable nature of the business, large dividends are realized by the stock- holders, and the stock is above par in the market. The destruction of the property by fire would at once result in the loss of dividends to the stoclcholders, and a destruction of the value of the stock, or at least to its reduction to a nominal value. The entire property, representing the whole capital of the corporation, being destroyed, it is difficult to perceive what would give any value to the stock. It is true that, primarily, the loss is that of the corporation, and hence it may insure; but the corporation may refuse to insure, and then the real and actual loss falls on the stockholders. "The defendant argues that shares of stock in a corporation are choses in action, and are not considered to be an interest in the real property of the company, and cites numerous authorities to sustain this position. This may be admitted without denying the share- so Buck v. Insurance Co., 1 Pet. 163. (318) Ch. 6) PARTNERSHIP. § 105 holders' insurable interest in the property of the corporation. A mortgage, also, is but a chose in action. The mortgagee acquires no right to the mortgaged property which can be attached, levied on under a general execution, -or that can be inherited. It is a mere security for a debt.^^ And yet the cases are uniform to the effect that a mortgagee of real property has an insurable interest therein, which he may insure on his own account, but that, when he does so, it is but an insurance of his debt. And, in case of damage by fire to the premises before payment of the mortgages, his loss, if any, is that his security has been impaired or lost. His interest is but a chose in action in the nature of a security, which he may insure; so that, in case of destruction of or damage to the property upon which his security rests, he will be indemnified for the loss he actually sustains. So, also, it seems to us that the owner of stock in a cor- poration for pecuniary profit has a like interest in the corporate prop- erty. A mortgagee of real property has an insurable interest in the mortgaged premises, based upon the interest he has in the preser- vation of the same as security for a debt. He has a legal right to contract for indemnity against injury to the ^alue of his security. Upon precisely the same principle, a stockholder may contract for indemnity to the value of his stock, for he also has an interest in the preservation of the corporate property from destruction by fire; and, in its destruction, he sustains loss in so far as the value of his stock is depreciated in consequence thereof, or his dividends cut off. The argument that, if this is allowed, owners of stock worth not more than 10 per cent, upon its nominal value may be insured at its par value, and, in case of loss by fire, such par value of the stock recovered from the insurer, seems to us unsound. Without entering into a discussion in detail of what would be the exact measure of recovery in such case, we simply answer that no more than the actual loss sustained is in any case recoverable. This rule is well estab- lished, and rests upon just principles."'' "The question under consideration has not received direct judicial 31 Eaton v. Whiting, 3 Pick. (Mass.) 484; Smith v. Bank, 24 Me. 185; Abbott v. Insurance Co., 30 Me. 414; Middleton Sav. Bank v. City of Dubuque, 15 Iowa, 394; Newman v. De Lorimer, 19 Iowa, 244; Baldwin v. Thompson, 15 Iowa, 504; Burton v. Hintrager, 18 Iowa, 348; Hil. Mortg. 215, 32 Ang. Ins. c. 2, and cases cited in note. (319) § 105 LAW OF FIRE INSURANCE. (Ch. 5 determination in any of the states, so far as we have been able to dis- cover. Philips V. Knox Co. Ins. Co.^^ is cited and claimed as an au- thority against the right of a stockholder to insure. The decision in that case, as a careful examination of the same fully shows, was made entirely upon a construction of the charter of the insurance company, which gave a lien on the insured property, including the land on which the buildings stood. By the charter, a sale of the insured property rendered the policy void; and the ninth section de- clared that if the insured have a less estate than an unincumbered title in fee simple to the buildings insured, and the lands covered by the same, the policy shall be void, unless the true title of the in- sured and the incumbrances be expressed in the policy and in the ap- plication therefor. The plaintiff insured as owner of the property, which, in fact, belonged to a corporation of which he was a stock- holder; and the court held that, 'where a building and the land on which it stands is the property of an incorporated company, the stockholders could not, under the provisions of the defendant's charter, insure such property as their individual property in the de- fendant's company.' Under the charter of that company, a mort- gagee even, insuring the property as his own, would likewise be de- feated in a recovery. So the owner in fee simple could not recover if the property was incumbered, and the incumbrance not set forth in the policy; and, of course, the same result must follow where a stockholder insures corporate property as his own individual prop- erty. The decision in that case goes no further than this, and is no authority in support of the proposition th.at a stockholder has no insurable interest in the property of the company, and hence has no bearing upon the question before us." In Eiggs V. Commercial Mut. Ins. Co.,''^ the New York court of ap- peals reached the conclusion that a stockholder has an insurable interest in corporate property. The right of the plaintiff to recover on a policy insuring such interest in this case was contested with much obstinacy by able counsel, and it may therefore be fairly pre- sumed that the decision of the court was reached after carefully con- sidering every valid reason presented by the argument of counsel for the parties interested. The fact, therefore, that a stockholder 38 20 Ohio, 174. 84 125 N. Y. 7, 25 N. E. 1058. (320) *-■''• '') PARTNERSHIP. § 10-5 has an insurable interest in corporate property, may be regarded as no longer a doubtful question. Andrews, J., said: "The stock- holder in a corporation has no legal title to the corporate assets or property, nor any equitable title which he can convert into a legal title. The corporation itself is the legal owner, and can deal with corporate property as owner, subject only to the restrictions of the charter.^^ But stockholders in a corporation have equitable rights of a pecuniary nature, growing out of their situation as stock- holders, which may be prejudiced by the destruction of the corporate property. The object of business corporations is to make profits through the exercise of the corporate franchises, and gains so made are distributed among the stockholders according to their respec- tive interests, although the time of the division is ordinarily in the discretion of the managing body. It is this right to share in the profits which constitutes the inducement to become a stockholder. So, also, on the winding up of the corporation, the assets, after pay- ment of debts, are divisible among the stockholders. It is very plain that both these rights of stockholders, viz. the right to divi- dends and the right to share in the final distribution of the corporate property, may be prejudiced by its destruction. In this case the ships were the means by which profits were to be earned, and their loss woidd naturally, in the ordinary course of things, diminish the capacity of the corporation to pay dividends, and consequently im- pair the value of the stock. The same would be true in other cases which might be mentioned; as, for example, where buildings pro- ducing rent, owned by corporations, should be burned. It is not necessary, to constitute an insurable interest, that the interest is such that the event insured against would necessarily subject the insured to loss. It is sufficient that it might do so, and that pe- cuniary injury would be the natural consequence.^" The question now before us was considered by the supreme court of Iowa in the case of Warren v. Davenport Fire Ins. Co." The court, in a careful opinion, reached the conclusion that a stockholder in a corporation had an insurable interest in the corporate property. In Philips v. Knox Co. Mut. Ins. Co.,^' there is an adverse dictum, but the decision 3 5 Plimpton V. Bigelow, 93 N. Y. 593; Van Allen v. Assessors, 3 Wall. 573. 36 Cone V. Insurance Co., CO N. Y. 619. 3 7 31 Iowa, 464. »'20 Ohio, 174: OSTK FIKE INS. 21 (321) § 106 LAW OF FIRE INSURANCE. (Ch. 5 went on another ground. In Wilson v. Jones,^° the action was upon a policy in favor of the plaintiff, a shareholder in the Atlantic Tele- graph Company, a company organized to lay the Atlantic cable. The court construed the contract as an insurance of the plaintiff in respect to the adventure undertaken by the company to lay the cable, and it was held that his interest as shareholder was an insurable interest, and likened it to the insurance on profits. See, also, Pater- son V. Harris.*" It is difficult to perceive any good reason why,. if a stockholder could be insured on his shares in a corporation against a loss happening in the prosecution of a corporate enterprise, he could not insure specifically the coi-porate property itself embraced in the adventure, and prove his interest by showing that he was a share- holder. The question here is, did the plaintiff have an insurable interest covered by the policy? * '^ * We are of opinion that the view that a stockholder in a corporation may insure specific cor- porate property by reason of his situation as stockholder stands upon the better reason, and also that it is in consonance with the current of authority defining insurable interests in our courts. * * * In conclusion, it seems to us, both upon authoritj' and reason, that the insurance now in question is not a wager policy, but is a fair and reasonable contract of indemnity, founded upon a real interest, though not amounting to an estate, legal or equitable, in the prop- erty insured." § 106. Firm Names. Persons conducting any business enterprise may assume a firm name, and one, too, which fails to indicate in any manner the identity of the persons interested, except in states where it is forbidden by statute to do so. Thus, Brown and Benson, associated as partners, may carry on their business under the firm name of "Johnson & Co.," or they may choose a name appropriately designating the department of trade or manufacturing in which they are particularly engaged, as "The Chicago Iron Company." It was said in Edgerton v. Preston " that "the style of a partner- ship is wholly conventional, and, in the absence of a restrictive stat- ute, a firm may adopt any name it sees fit. Where a note is made 39 L. R. 2 Exch. 139. *o i Best & S. 336. " 15 111. App. 23. (322) Ch. .5) PAETNERSHIP. § 107 payable to order, and the name used is employed as the style or desig- nation of an actual person, firm, or company, the payee is not ficti- tious." § 107. Corporate Names. In certain states, notably in ]New York and Illinois, it has been attempted to regulate these matters by statutes, and to prohibit the use of fictitious names under which might be concealed the identity of the persons actually engaged in the business which the title or firm name was used to designate. In the Criminal Code of Illinois,* we find it thus provided: "If any company, association or person puts forth any sign or advertisement, and there assumes, for the pur- pose of soliciting business, a corporate name, not being incorporated, or being incorporated puts forth any sign or advertisement, assuming any other or different name from that by which it is incorporated or authorized by law to act, such company, association or person shall be fined not less than |10, nor more than |200, and a like sum for every day he or it shall continue to offend after haN'ing been once fined." In defiance of this statute, Edgerton and Sloan, associated as co- partners, found it for their advantage to conduct the business in which they were engaged under the name of the "Garden City Veneer Mills." As they were not incorporated, and apparently do- ing business in violation of law, Preston, Kean & Co. disputed their right to recover on a checlc of which the "Garden City Veneer Mills" was payee. The court of appeals held : "The mere assumption of a name appropriate for a corporation would be no violation of the statute," etc.; and then, as if for the purpose of further explaining the intention of the statute, added: "Nor do we think that, even if it should be found that there had been a violation, the consequences of such violation could be extended bej-ond the infliction of the pen- alty therein prescribed. The statute does not provide that contracts made by persons thus offending shall be invalid. * * * It is fa- miliar law that the name or style of a partnership is wholly conven- tional, and that, in the absence of a restrictive statute, a firm may adopt any name it sees fit." *^ * Cbaptei- 38, § 220. *= 15 III. App. 23. (323) § 107 LAW OF FIRE INSURANCE. (Ch. 5 In the state of New York, a law was enactf»d in 1833 intended to prevent fraud by suppressing the use of fictitious "firm" or "corpo- rate" names. Among the other things forbidden by the statute was the annex "& Co.," unless an actual person was represented; but it appears that the rigor of the statute has been softened by construc- tion, as it has been held that the inhibition does not apply to or in- clude the use of the real name of an actual partner, although such partner is under disability at the time. Thus, where a firm was composed of a husband and wife, the latter being only designated by the "& Co.," and it not appearing that there was any purpose to im- pose upon the public, or to unfairly advertise the credit of the firm by this means, it was held not to be in violation of the statute, not- withstanding the disability of a wife to become the partner of her husband.*' The New York statute forbids the transaction of any business in the name of a partner not interested in the firm, and hence the name of a deceased partner, if continued in the firm name, would be a vio- lation of the statute, and an action to recover for goods sold failed, although no wrongful intent appeared.** But, in the absence of any statutory provision, persons engaged in any lawful business enterprise may^take such firm names as will be found convenient or best intended to express the purpose of the joint undertaking. Partnerships may assume any name that will best accommodate their circumstances, or designate the special char- acter of the business in which they are engaged. Lindley on Partnership says: "In this country a person may le- gally do business under a name not his own. * * * j^ partner- ship is not illegal because it carries on a business under a name which does not disclose its members." While a contract of insurance is a personal one, that fact will not prevent a corporation or a partnership from insuring. The person- ality in both cases is concealed behind the name, which expresses only that which is impersonal; and, where the insurer desires to be informed who the persons are that compose the partnership or own the shares of the corporation, it will be its duty to make such par- *3 Zimmerman v. Erhard, S3 N. Y. 74. *i Lane v. Arnold, 13 Abb. N. C. (N. Y.) 73. (324) Ch. 5) PARTNERSHIP. § 107 ticular inquiry as will disclose the facts wanted, and, failing to do so, it cannot, after a loss, escape payment on the ground that the names of the particular persons interested had not been represented in compliance with the provisions of the policy. Firm names and corporate names, without incorporation, may be assumed; and, un- der such names, chattels may be bought and sold, and the persons associated under such common accepted name, or so designated, may sue and be sued, and do whatever may be necessary to be done in the ordinary or extraordinary course of business aifairs. In Phoenix Ins. Co. v. Hamilton,* ° the statement of facts shows that Vincent Hamilton and Joshua D. Cook had been partners in the grain and commission business at Toledo, Ohio. Hamilton retired from the business, and of this dissolution of the partnership no no- tice was given. By the consent of the retiring partner, Cook continued in business under the original firm name. Subsequent to the with- drawal of H., the policy on which this suit was brought to recover was procured in the name of Hamilton & Cook. One of the de- fenses set up was a want of insurable interest in Hamilton, and thus the question was presented whether an insurance would be valid when effected in the name of a nominal partnership, the busi- ness being carried on by and for the benefit of one of the partners only. Bradley, J., delivered the opinion of the court, from which we quote so much as relates to this discussion: ''Hamilton was a nominal partner, held out to the world as a member of the firm by his own consent, and affected with every liability of a partner to consignors, creditors, and all persons dealing with the concern. The plaintiffs claim that this was a sufficient interest to support the policy, at least in the commission business, where insurance was ef- fected for the benefit of the real owners of the goods. It is objected that a nominal partner is only held such, adversely, for the pur- pose of subjecting him to liability as a partner, and not for the pur- pose of giving him the benefit and advantages of a partner. But,. while this is generally true, the interest of a nominal partner in the liabilities of a firm is such as should entitle him, in the absence of any attempt to defraud, to join with the other members of the firm in effecting insurance on the property of the concern. As Chief Jus- <5 14 Wall. 504, 2 Ins. Law J. 131, (325) § 107 LAW OF FIRE INSURANCE. (Ch. 5 tice Jones remarked, in De Forest v. Fulton Ins. Co.:" It does not always require either the legal title or beneficial interest in the property to entitle a party otherwise connected with it to effect a valid insurance upon it. A carrier may insure goods on contracts to convey, yet he has neither the legal title nor beneficial interest in them, but he is responsible for the loss.' But the case of a nom- inal partnership carried on for the benefit of one or more members of the firm seems to be still stronger, for it may be said that the legal interest in the business is in the firm, while the beneficial interest is in the member or members for whose use it is carried on. In the case before us, as to all the world except themselves, the legal interest of the business was in the firm of Hamilton & Cook, the beneficial inter- est in Cook alone; and, as it is well settled that a trustee or agent may insure the property held in that capacity for the benefit of all concerned, there seems to be no valid reason why persons constitut- ing a nominal partnership should not become competent to effect in- surance as well as transact the other business in the partnership name. In this case, the intimate connection of Hamilton with the business, and the fact that, as between him and the consignors of the grain insufed, the railroad company with whom it was stored, and all other persons dealing with it, he was actually a partner, and incurred all the responsibility and risk attached to that relation, constituted, in our judgment, a sufficient basis of interest for effect- ing insurance in the name of the firm. The doctrine established by a number of cases, that nominal partners are proper plaintiffs as well as proper defendants in actions by. and against the firm, lends support to this view." * * * We may refer to the cases in New York, which decide that a sale by a retiring partner to his co- partners of his interest in the firm is not a breach of the condition that the policy shall be void if the property is conveyed without the consent of the insurance company."'" « 1 Hall (N. Y.) 110. *^ 1 T. Pars. Partn. 134; Story, Partn. §§ 241, 242; Dumpoi-'s Case, 1 Smith, Lead. Oas. 119. ■«8 HofCman v. Insurance Co., 32 N. Y. 405. (326) *^^- 5) PARTNERSHIP. § 108 § 108. Conclusions. Partnership is the association of two or more persons for business purposes, agreeing to unite .their capital, labor, and slvill, and to share in fixed proportion the profits or losses of their joint under- takings. A dormant partner is a person who, while contributing to the capital of a firm, is silent as to the management and control of its business; one who is frequently guarantied against loss, and agrees to accept a share of the profits realized in lieu of interest on the capital he has invested. The courts are not in accord as to whether changes between part- ners — that is, by one partner selling to another — will cause an avoid- ance of a policy which provides against "any change of title or posses- sion." When any change takes place by which a stranger is admitted to the firm, the insurer will be discharged. A change of interest has occurred which the contract prohibited. The new person admitted is not the person with whom the insurer agreed. The conditions of the policy are a part of the consideration. On account of the limitations expressed, and made a part of the contract, a lower rate of premium is charged for the risk. The insured agrees with the insurer that he will do, or refrain from doing, particularly designated things. When this agreement is not performed, there is a partial failure of the consideration, and the insurer will be relieved from the payment of a loss. When a partnership is dissolved, and the property divided, the insurance is at an end. The promise of indemnity never follows the property, and will not be available to the individual members of a firm when separated. A firm is changed by the introduction of a person who contributes nothing to capital invested. When such partner is admitted to the management on account of his skill, and enjoys a share of the profits, there is a change in title and possession, such as will avoid the in- surance. A partner may insure his undivided interest, but, if there is (327) § 108 LAW OF FIRE INSURANCE. (Ch. 5 other insurance by the firm, the fact must be disclosed; otherwise, there will be an avoidance as to both policies. A stockholder in a corporation has an insurable interest, but one which can only be protected under a special form of policy. A stockholder has no control of corporate affairs, and has no power to perform the conditions of the policy in regard to the care and protection of the property, either before or after a fire. He cannot produce books of account, etc., nor can he deliver to the in- surer the damaged property at the "appraised value." A person may conduct his business under a firm name that con- ceals wholly his own identity, and gives no intimation of the real proprietorship of the interest involved. Insurance taken in such firm name will be valid, and actual ownership need not be disclosed, unless particularly inquired about. Except in states where prohibited by statutory law, a person or an association of persons may assume corporate names. They may buy and sell, sue and be sued, and do all things, under their collective title, concerning chattels, which they could do separately or if in- corporated. The nature of such a compact is essentially that of a partnership, and each member of the compact or association will be personally liable for the debts of the concern. (328) Ch. 6) SUBROGATION. § 109 CHAPTER VI. SUBROGATION. § 109. When the Insurer is Subrogated. 110. When the Mortgage is Canceled before the Fire the Insurer will not be Liable. 111. A Doubtful Doctrine— Double Payment. 112. When Insurance is Taken Separately by Both the Mortgagor and Mortgagee. 113. Insurer can Insist upon Subrogation when Stipulated for. 114. When Replacing the Property Destroyed does not Excuse Payment to Mortgagee. 11.5. When the Property has been Restored the Insurer is Excused. 116. When Contribution cannot be Claimed from Other Insurers on the Risli. 117. Unless it be Otherwise Stipulated, the Mortgageia and Payee will Have no Rights under the Policy, Independent of the Mortgagor or Owner of the Property. 118. Who may Make Proofs of Loss. 119. When Insurer will not be Liable under Mortgage Clause. 120. When Policy is Void as to Mortgagor and Valid as to Mortgagee. 121. When Mortgagor may Recover. 122. Contribution under Mortgage Clause. 123. Application of the Mortgage Clause. 124. Mortgage Clause will not Protect Mortgagee While Acting in Bad Faith. 125. When Insurer may Collect from the Carrier. 126. When by Subrogation the Insurer will Have a Right of Action against Those through Whose Negligence the Loss has been occa- sioned. 127. Negligence the Basis of Liability. 128. Burden of Showing Negligence will Generally Rest on the Plaintiff. 129. What is the Proximate Cause. 130. Contributory Negligence. 131. As to Who is Primarily Liable. 132. Conclusions. § 109. When the Insurer is Subrogated. When a mortgagee has procured insurance on the mortgaged prop- erty in his own name, and has himself paid the premium, on pay- (329) § 109 LAW OF FIRE INSURANCK. (Ch. 6 ment of a loss the insurer will be subrogated to the mortgage and notes, or other evidences of debt which the insured holds againet the mortgagor and the property insured. If, however, the money paid in settlement of &■ loss be less than the sum due, or to become due, on the mortgage, then the rights which the insurer will acquire by subrogation will be in subordination to those of the mortgagee for the continued security and ultimate payment of the balance of his debt. To illustrate, we will suppose A. owes B. $3,000, and has given a mortgage on property valued at $5,000 to secure payment. A part of the property mortgaged consists of a building valued at $4,000; on this building B. procures an insurance for $2,000. The building is subsequently wholly destroyed by Are, and the loss paid by the insurer to the full amount of its policy. The mortgagee has still security, it will be seen, on the land for $1,000, and of this he cannot, of course, be deprived by the insurer in the enforcement of its right to subrogation. B. does not insure the property, but his interest in it as mortgagee, or, more properly, perhaps, his mort- gage interest. A. is no party to this contract of insurance, and is entitled to none of the benefits derived from the policy taken by B. The burning of the building removes a large part of the security on which B. has relied for his protection, and, although he receives from the underwriter $2,000, the payment of this sum does not extinguish any part of the debt which A. owes to B. The insurer stands to B. somewhat in the relation of an indorser. For an agreed premium it contracts that it will protect his security on the building to the amount of $2,000, and, having paid this sum, it will be subrogated to the mortgage debt, and may proceed against A. in the same man- ner that B. could do to collect the unpaid debt, but not in any way to the prejudice of B.'s right to recover from A. the full amount his due. In this case B.'s security for the $1,000 still due him on the mortgage cannot be impaired or qualified by any right which the insured has taken by subrogation. It has been held (and we do not assent to the doctrine) that the mortgagee cannot in a case of this kind be compelled to assign the whole mortgage debt to the insurer, it being for a larger amount than the sum paid in settlement of the loss, unless it is so stipulated in the policy ; but the insurer is subro- gated to so much of the debt secured as it has paid under its policy, and will be entitled to the benefits of so much of the remaining se- (330) ^h. 6) SUBROGATION. § 111 ■curity as will not be required for the protection of the interest that B. still retains in the debt owing from A. § 110. When, the Mortgage is Canceled before the Fire the Insurer will not be Liable. Should the debt be paid before the building burns, the insurer will not be liable, as the mortgagee has no insurable interest after pay- ment and satisfaction of the mortgage. When the premium is paid "by the mortgagee, and the policy has been issued in his name, con- taining no stipulation for rebuilding the property burned, should the insurer elect to rebuild, it will still be liable to the mortgagee. The right to rebuild, or replace property burned, "annot in any case be insisted upon by the insurer, unless it is secured by special contract .stipulation. § 111. A Doubtful Doctrine — Double Payment. (See Sec- tions 120, 123, and 124.) The Massachusetts courts have held, in Suffolk Fire Ins. Co. v. Boy den, ^ that the payment of a total loss under a policy in favor of the mortgagee, and the offer on the part of the insurer to pay the amount remaining still due and to become due to the insured does not entitle it to an assignment of the mortgage debt. The policy in that case contained no stipulation requiring the mortgagee, in case -of a loss under a policy where payment was for a less amount than the entire mortgage debt, to assign the securities to the insurer on an offer to pay the entire amount of the mortgage, and the court reached the conclusion that there was nothing in the equities of the -case to create an obligation to make such assignment; that when such a duty existed, it must rest upon a distinct agreement. The same court held, in the case of King v. State Mut. Fire Ins. Co.,^ that where the premium was paid by and the policy issued to the mortgagee, the latter might collect from the insurer the amount of the policy, and afterwards collect his debt from the mortgagor, 4ind the Insurer was not entitled to be subrogated. We find no 1 9 Allen (Mass.) 123. ^ 7 Cush. (Mass.) 1, 3 Benn. Fire Ins. Cas. 186. (331) § 112 LAW OF FIEE INSURANCE. (Ch. 6- courts giving their sanction to the doctrine of these decisions out- side of Massachusetts. They are based upon a very strict construc- tion of the contract, and their logic may well be challenged. It is diflScult to find any principle of law or equity on which they can firmly rest. § 112. When Insurance is Taken Separately by Both Mortgagee and Mortgagor, it will not be Double Insurance within the Meaning of the Policy. (See sections 119, 120, and 124.) When the policy is paid for by the mortgagee, and written in his name, the owner of the property may be a stranger to the contract^ and, should he take out a policy in his own name, the insurance pro- cured by the mortgagee will not avoid the mortgagor's policy, under the condition which causes a forfeiture when other insurance is placed upon the property "without notice and consent" of the in- surer. This has been held in many cases, and recognizes the fact — First, that the mortgagor or owner of the property is in no way privy to the contract into which the insurer has entered with the mortgagee; second, that the two insurances cover separate and dis- tinct subjects. That of the owner relates to his interest in the prop- erty, and that of the mortgagee to his interest in the security. Noth- ing has been done by the mortgagor to create any right to the benefit of this insurance, and the courts have so held. The payment of the loss cannot be applied in extinguishing the mortgage debt, and does the matter stand any better as regards the mortgagee, who may have received from the underwriter, in payment of a loss .on the property covered by his mortgage, a sum equal to the amount he is entitled to receive in full settlement of the debt, and then claims, a right to hold the mortgagor the same as though no money had been paid him on account of the loss? May he receive two payments for one debt? This proposition is repugnant to justice and to law. Such an insurance would be speculative in its character, and op- posed to public policy. There would frequently be a temptation placed before the mortgagee for the commission of a crime, when the mortgaged property was in separate parcels, and, as is often the case, of a value largely in excess of what is required to make the (332) ■Ch. 6) SUBROGATION. § 113 securitj- good. The destruction of the property by fire, or portions of it, would in such case result to the benefit of the mortgagee. This proposition, therefore, is so repugnant to public morals and to pub- lic policy that it ought not to receive the sanction of the courts. If the insurance is treated as only to protect the mortgage interest, as we think it should be, then, on payment of the loss, the insurer be- ing subrogated to all the rights of the mortgagee to receive payment from the mortgagor, the obligation of the contract may be per- formed without violating the underlying principles of morality and law. § 113. Insurer can Insist upon Subrogation -wrlien Stipu- lated for. The case of Dick v. Franklin Fire Ins. Co.^ furnishes a very clear and interesting discussion concerning several important questions that are presented in relation to the rights of the insurer and the insured, when the interest covered by the policy is that of a mort- gagee. The policy in that suit insured F. A. Dick and Ben Farer, trustees of Isaiah B. Williamson, "against loss or damage by fire on their interest under deed of trust" in a certain building. The policy was for $3,500, and the deed of ti'ust was to secure a note for |30,- 000. The deed of trust was conditioned that the grantor should keep the property insured for $16,000, and, failing to do so, the holder of the trust deed was authorized to procure the insurance and pay the premiums, which should become a part of the debt secured by the deed of trust. The policy of insurance contained the follow- ing stipulation : ''It is hereby agreed that in case of loss the assured shall assign to this company an interest in this deed of trust equal to the sum of loss paid under the policy, provided the said assign- ment shall in no wise prejudice the assured's claim under said deed of trust to recover the full amount of their'loan and proper charges." After the occurrence of the fire, the insurer, the defendant company, offered to pay the amount of its policy if the plaintiffs would as- sign to it an interest in the deed of trust equal to the sum which was s 10 Mo. App. 376. (833) § ll3 LAW OF FIRE INSUKANCE. (Ch. 6- to be paid, but the plaintifEs refused to accept payment upon the condition proposed, among other things, for the reason that the stip- ulation in the contract in regard to the assignment was no part of the consideration, and, further, that the value of the property was less than the amount of the loan secured by the deed of trust, it having been sold under the provisions of the deed to Williamson, the highest bidder, for |23,000. Of this sale, which appears to have been made under forms of law, the defendant had no notice until after it had taken place. The court declared the law to be that mortgagors and mortgagees hold separate and distinct interests, each of which can be insured independent of the other; that when the mortgagee insures his interest, and a loss occurs, which is paid by the insurer, in equity it is entitled to subrogation to the rights: of the mortgagee as against the mortgagor, irrespective of any stipu- lation in the policy conferring such a right. We quote from the lan- guage of Tomlinson, J.: "In a case like the present, it is clear that where the insured ha» contracted with the insurer for subrogation as one of the conditions on which it assumes the risk, the contract is good and will be en- forced in the courts. » * * The fact that the deed of trust gave the trustees the right to insure the mortgaged property at the ex- pense of the grantor, making the cost of the insurance an additional charge upon the premises; and providing that the insurance money collected in case of loss should be applied in rebuilding, « * «- did not in any manner deprive the trustees of the right to effect an insurance upon their own interest, and of contracting with the in- surer to subrogate the latter to their own rights under the deed of trust, * * * as a part of the consideration of the contract. They were entitled to insure for the benefit of the grantor, without a stipulation for subrogation. They were equally entitled to insure for the benefit of the cestui que trust, with such a stipulation. * * * The insurer may have known that the trustees had the right, under the deed of trust, to insure the granted premises for the joint benefit of the grantor in the deed and the beneficiary in the trust, and that any insurance money paid under such a contract of insurance would be applied in rebuilding. It may have known of thi^. The deed of trust may have been unfolded before the eyes of the agent when he (334) Ch. 6) SUBROGATION. § 113- countersigned and delivered the policy, but, nevertheless, the fact remains that, knowing that the trustees had also the right to effect a separate insurance upon their interests as trustees, it offered them,, for the stipulated premium, a policy insuring their interests, and not the interests of the grantor in the deed, nor any joint interest of themselves and the grantor, and it offered it to them upon the terms that, in case of loss, they (the trustees) should assign to it an inter- est in the deed of trust equal to the sum of loss paid under the policy,, providing that such assignment should not prejudice the claim of the- beneficiary in the trust to recover the full amount of his loss and proper charges. It offered, in terms, such an obligation upon such a condition, and in accepting the contract the parties accepted the- conditions, and now they cannot hold it to the performance of the obligation without themselves discharging the condition. It is a case of mutual covenants. They cannot enforce one without con- ceding the other. It is no answer for them to say that 'we cannot grant you such an assignment, because the mortgaged prem.i§es are not worth the amount of our debt, less the amount you are liable to pay as insurers.' They could not thus set up their own opinion in avoidance of their own contract. That was to be changed by an. event, and the insuring company had the right to participate in the shaping of the event. They had the right, not to an unqualified sub- rogation, but to subrogation with the qualification that it should not operate to the prejudice of the beneficiary in the deed of trust. An assignment of an interest in the deed of trust with such a proviso- would have entitled them to be present at the sale which took place under the deed of trust, and to bid for the protection of their own interests. Their presence might have produced such competitive bidding as would have caused the premises to sell for the amount of the mortgage debt, in which case they would have been entitled to re- ceive back from the parties what they had paid to them as insurance money. This right was denied them, and they had no actual notice of the sale and no opportunity to protect their interests. In view of these things, it cannot be said that the subrogation clause in the policy was immaterial, and no part of the consideration of the con- tract. This would not be said in any event, for by the terms of the contract the r)artier, have agreed that it is material and that it is a. part of the consideration." (335) § 114 LAW OF *'IRE INSURANCE. (Ch. 6 The court further held that it was the evident intention of the parties to assign the debt, as well as the security for the debt, and that this should have been done. The doctrine of this case, so far as the facts are analogous, is fully supported by the New York court of appeals in Foster v. Van Reed.* Justice Miller, who wrote the opinion of the court, said: "It is diffi- cult to see how the insurer can be deprived of the right to subroga- tion, when it is made a part of the contract that it shall enjoy such right." In the case of Norwich Fire Ins. Co. v. Boomer ° the court said, substantially, when the premium was paid by a mortgagee and insur- ance taken in his name, on payment of the loss by the insurer it would be subrogated to the right of the mortgagee against the debtor. The court declared the principle of law to be: "In such case the in- surance would be considered as a further security of the debt, and on the familiar principle that a surety who pays a debt may resort to the principal debtor for the payment in such a case, the insurer might no doubt resort to the mortgagor for payment." § 114. When Replacing the Property Destroyed does not Excuse Payment to the Mortgagee. (See sections 119, 120, and 124.) There is an old case (Foster v. Equitable Mut. Fire Ins. Co.)' where it was held by the Massachusetts court, under a policy made to pro- tect the interests of a mortgagee, that the restoration of the prop- erty destroyed did not relieve the insurer from the payment of the loss. The court said: "The fact that the injury caused by the Are to the property insured had been repaired by the owner of the right * 70 N. Y. 19, 25. 5 52 III. 442; Honore v. Insurance Co.. 51 111. 409; Carpenter v. Insurance Co., 16 Pet. .501 (a well-reasoned case); Sussex Co. Mut. Ins. Co. v. Woodruff, 26 N. J. Law, 555; Stoughton v. Gas Co., 165 Pa. St. 428, 30 Atl. 1001; Kip V. Receivers, 4 Edw. Ch. (N. Y.) 86; Anderson v. Insurance Co.. IS Ont. 355; Bull V. Insurance Co., 14 Ont. 322, affirmed 15 Ont. App. 421; Thomas v! Insurance Co.. 43 Hun (N. Y.) 218; Phenix Ins. Co. v. First Nat. Bank, 85 Va. 765, 8 S. E. 719. 6 2 Gray (Mass.) 216. (33«) ^"- ") SUBROGATION. § 115 .of redemption, before the commencement of the action, is wholly im- material. The plaintiff had an insurable interest in the property. The defendants agreed to insure it against a loss by fire and a loss has occurred. The contingeuov contemplated by the contract has therefore arisen, and the defendants are bound to pay the amount of the damage. It is wholly immaterial to them, and constitutes no valid defence to thi.s suit, that the property has been since repaired." No other court, so far as we have been able to find, has ever ac- cepted as satisfactory the logic of this decision. As before stated, the insurance was held only to protect the mortgagee. It was not in- tended to confer any benefit on the owner of the property. Its sole purpose was to indemnify the creditor, and to preserve unimpaired his security in the mortgaged property. When, therefore, the build- ing covered by the policy had been restored to the condition in which it existed before the fire, the mortgagee had sustained no loss, and ought not to have recovered, under his policy. In this instance, the insurance being held on the separate and independent interest of the mortgagee, the mortgagor and owner of the property could not demand that the money received from the insurer on the policy should be applied in payment of the mortgagee's ' debt. He was a stranger to the contract, and had no better right than any other stranger to receive the whole or any portion of such money. The mortgagee, therefore, would have two payments, one on the policy and another on the mortgage. This is bad law, and will be so re- garded by the courts. § 115. When the Property has been Restored, the Insurer is li^cused. (See sections 119, 120, and 123.) A wiser and safer rule of construction was given by Judge Blodg- ett, in the case of Friemansdorf v. Watertown Ins. Co.* The in- surance there was for the benefit of the mortgagee, and there had been a replacement of the property. The court said: "There being no rule in the federal courts upon this question, and there being a ' King V. Insurance Co.. 7 Gush. (Mass.) 1; Suffolk Fire Ins. Co. v. Boyilen, 9 Allen (Mass.) 123. 8 9 Biss. 167, 1 Fed. 68. (337) § 116 LAW OF FIRE INSUEANCE. (Ch. 6 conflict in the state courts, this court has the right to adopt such a rule as it considers most consonant with the principles of equity and practice; and 1 think the most satisfactory reasoning is that, as the only purpose of the policy is to prevent a diminution or impairment of the mortgagee's interest in the property, its capacity to pay the mortgagee's debt, if that remains unimpaired, and the property is as good or is made as good after the Are as it was before by reason of some other person's reparation, there is no right of action." § 116. When Contribution cannot be Claimed fronx Other Insurers on the Bisk. Where there are several policies on the same risk, all written in the name of the owner of the property, and one or more subsequently made payable to a mortgagee, with proper stipulation to fully pro- tect the mortgagee from forfeiture on account of ?ny act, neglect, or omission of the owner, and with the further covenant of subrogation to the insurer when it has paid a loss to the mortgagee (and there is no liability to the owner or mortgagor), the contract is independent, although the case was different at the time tht iusurance was writ- ten, and in payment of the loss neither class of companies can re- ceive the benefit of contribution from the other. ■ This question was considered by the court in the case of Hastings V. Westchester Fire Ins. Co.^ As that case is stated, a Mrs. Stout owned a building, on which she had procured insurance to the amount of .|4,000 in the Lycoming Company and $10,000 in the West- chester. One Hastings held a mortgage on the insured property for $14,000, and, with the consent of Mrs. Stout, the policy of the West- chester Company was indorsed, "Loss, if any, payable to Hastings, mortgagee," and besides this indorsement there was attached to the policy the usual mortgage clause, providing in suitable form of words that the interests of the mortgagee in the policy should not be in- validated by any act or neglect of the mortgagor, and that the insurer should be subrogated on payment of loss, when it was claimed that no liability existed as to the owner or mortgagor. This special mortgage clause did not provide for contribution, although there was 73 N. Y. 141, 7 Ins. Law J. 430. (338) Ch. 0) SUBKOGATION. § 118 a condition among the general provisions of the policy intended to secure that right, where there was other insurance concerned in the loss. The damage to the property was agreed to be |9,000. The Lycoming paid of this four-fourteenths, but the mortgagee, Hastings, refused to accept payment from the Westchester on the same basis. The court held that the mortgage clause created a new contract, to which Hastings was a party; that he had no interest in the Lycom- ing policy; that the insurance secured to him under the special and subsequent agreement with the Westchester Company was inde- pendent ; and that the mortgagee was entitled to receive payment of the loss in the same manner and on the same basis of computation as he would if there were no other insurance on the property. § 117. Unless Otherwise Stipulated, the Mortgagee and Payee ■will Have no Rights under the Policy Independent of the Mortgagor or O^Tier of the Property. When a mortgagor procures insurance in his own name, and a loss occurs, the mortgagee can claim no benefits.^" If, however, the policy is indorsed, "Loss payable to the mortgagee," he is then en- titled to receive any money which the insurer is liable to pay under the policy. But the making of the mortgagee the payee of the policy does not in any essential particular change the relations there- tofore existing between the insurer and the mortgagor. The latter is s till bound by the covenants of the contract, and any failure to per- form the conditions precedent wUl discharge the insurer. The mort- gagee can take no more than is due to the mortgagor, and if by rea- son of any act or neglect of the latter an avoidance has resulted, the former has no remedy.^^ § 118. Who may Make Proofs of Loss. It has, however, been held that when the mortgagor has failed or refused to make the stipulated "proofs of loss,"' tney may be furnished 10 Columbian Ins. Co. v. Lawrence, 10 Pet. 507; Vnndegiaaff v. MecUock, 3 Port. (Ala.) 389; White v. Brown, 2 Cush. (Mass.) 412. 11 Friemansdorf v. Insurance Co., 1 Fed. 68; Hoxsie v. Insurance Co., 6 R. I. 517; Cormier v. Insurance Co., 4 Pugsl. & B. (N. B.) 526; Baldwin v. Insurance Co.'. 00 X. H. 164. (339) I 118 LAW OF FIRE INSURANCE. (Ch. 6 by the mortgagee and a forfeiture prevented. When, howerer, the policy particularly designates that proofs must be made by the per- son originally insured, unless the property covered has been sold, and the policy assigned by the consent of the company, proofs cannot be made (in compliance with the terms of the policy) except by the per- son to whom the policy was issued. If it is important to the underwriter that it may know the person it insures, so it is important that it may have an option in selecting the person with whom it will adjust claims for loss. Moral and business character is a quality of the highest consideration in either relation. Many fires result from fraud, and there has been a large number from purely accidental causes, where the claimant for loss has resorted to schemes of deception and fraud in presenting his proofs, stimulated with the hope of securing an adjustment by the computation of quantities or values on a fictitious basis. The in- sured, the owner of the property damaged or destroyed, is the per- son with whom the insurer is dealing, and it has a right to receive his sworn declarations, to traverse his statements, and to challenge his good faith, when warranted in doing so. This has been clearly provided for in the policy, and to substitute as suflQcient the esti- mates and declarations of another contemplates changes so radical and important in the performance of contract obligations, as to im- ply an abandonment of the original intention of the parties. A contract of insurance is nowhere more personal than in respect to its provisions concerning the adjustment of claims. The insured must present his claim under oath. He must produce a magistrate's certificate as to his good faith, and, if required, must submit to a sworn examination. Each of these matters relates to the person of the insured, and the importance of this requirement is too obvious to need argument. The person insured may be fairly presumed to be in possession of the largest number of facts and the most reliable information in regard to the circumstances of the fire and the ex- tent of the loss, and if there be a fraud suspected, the insurer cannot be denied the right which he has stipulated for, to meet face to face the one who alone would have a motive for the perpetration of a crime. To excuse, therefore, the insured, who may have secreted himself to avoid arrest, and compel the insurer to accept proofs and adjust the loss with one who may know nothing of the cause of the (340) C'h. 6) SUBKOGATIO.V. § 118 fire, and who, in the preparation of the proofs, is acting under but little of the responsibility which would rest upon the insured in per- forming the same duty, would be a gross perversion of justice, and the setting aside of plain contract obligations. Where, however, the policy is issued to the owner of the property, with direction that the loss be paid to a mortgagee, an action to re- cover on the policy will not be sustained, when brought in the name of the person owning the property, unless it is shown that he has permission of the mortgagee, or that the debt secured has been paid. An action, however, cannot be defeated through the arbitrary or con- tumacious refusal of the mortgagee to give his consent. The mort- gagor has an interest in securing payment of the loss, as the money collected will apply in reducing the debt secured by the mortgage. On refusal or neglect, therefore, of the mortgagee to bring suit, either in his own name or that of the mortgagor, the latter may do so, making the mortgagee party defendant. In the case of Graves v. American Live-Stock Ins. Co.^- the right of a mortgagor to bring suit on a policy without the consent of the mortgagee, to whom the loss was made payable, was carefully con- sidered, and decided adversely to the contention of plaintiff. On the trial of the case it was not shown that the mortgage indebt- edness was wholly paid. The suit was brought by the insured and mortgagor, without the consent of the mortgagee, to whom loss, if any, was made payable by express stipulation on the face of the policy. The mortgagee was made party defendant, but it was not shown by the return to the court that he had ever been served with summons or had appeared in the case. The court said : "There is absolutely nothing in the record from which it can be gathered that either Huntington or Boss (mortgagees) had been advised of the pendency of an action on the policy, of which they were named as defendants. It cannot be presumed. * * * The plaintiff's right to recover in an action against the insurance company must be made to depend upon his right to the money as against the mortgagee. It depended upon his having paid the debt, or in having in some other proper manner satisfied and discharged the incumbrance, or, possi- bly, he could have recovered had he alleged in his complaint and la 46 Minn. 130, 48 N. TV. 684. (341) § 119 LAW OF FIRE INSURANCE. (Ch. 6 8hown upon the trial that the mortgagee had consented and author- ized a recovery by the plaintiff (mortgagor), but the right of the latter could not be made to depend solely upon the fact that no claim had been made or action instituted by the mortgagee within the period of time prescribed by the terms of the policy for the presenta- tion of a claim for loss or the bringing of an action." § 119. When Insurer will not be Liable under Mort- gage Clause. A policy of insurance that has become void for any reason wUl not gain new life by having attached the special agreement known as the "mortgage clause." This agreement admits to the contract a third party, who has an insurable interest by reason of his relations to the property insured growing cut of the mortgage indebtedness. It is generally stipulated that "the policy shall not be invalidated as to the interest of the mortgagee by any act or neglect of the mortgagor or owner of the property." The consideration for this special prom- ise, made by the insurer to the mortgagee, is the premium paid for the policy, either by the mortgagee or mortgagor, and without such consideration this promise could not be enforced. When, because of a breach of the policy conditions, the contract is at an end and null, the premium paid is forfeited, and there is no right of rescission left; aU obligations on the part of the insurer having been termi- nated and canceled by the act of the insured. When this occurs, the policy cannot be revived without a new agreement of the parties, supported by a new consideration.^' If, then, after forfeiture has come to exist, a clause is attached to the policy, as before stated, for the benefit of a mortgagee, it wUl not ha^e the effect to create any rights in his behalf that can be en- forced, as the promises expressed in the supplemental contract do not rest on any consideration. 13 Carey v. Insurance Co., 84 Wis. 80, 54 N. W. 18; Boyd v. Insurance Co., 90 Tenn. 212, 16 S. W. 470; Brink v. Insurance Co., 70 N. Y. 593; New v. Insurance Co., 5 Ind. App. 82, 31 N. E. 475; Imperial Fire Ins. Co. v. Coos Co., 151 U. S. 452, 14 Sup. Ct. 379; Moore v. Insurance Co., 62 N. H. 240; I May. Ins. (3d Ed.) § 700; New York Cent. Ins. Co. v. Watson, 23 Mich., at page 488. (342) d- 6) SUBROGATION. § 119 In Davis v. Grerman American Ins. Co.^* the policy was written in the name of one Putney, who owned the property. Putney after- wards sold to Henry Pearsons. Of this sale the plaintiff had knowl- edge, but the defendant was not informed. By reason of the sale defendant was, of course, relieved from any liability under the policy. The insured, having parted with his interest in the property, had sustained no loss on account of the fire, and, the purchaser having acquired no right to the policy by assignment or otherwise, and, be- sides, the policy distinctly providing for forfeiture in case of sale without notice and consent, the defendant was clearly let out, unless held to the mortgagee by virtue of an indorsement on the policy made by the defendant's agent at the mortgagee's request. There had been a foreclosure of the mortgage, and with the distinct purpose of protecting the purchaser at the foreclosure sale, the policy was in- dorsed as follows: "It is understood and agreed that this policy shall attach and cover their interests as such." Then follows a mort- gage waiver clause in the usual form. The court held that this promise on the part of the defendant to insure failed to give any right to plaintiff because it was without consideration. The theory upon which this decision rests is that, the policy being void by reason of the sale of Putney to Pearsons, there was no right remaining to be appropriated by the mortgagee ; that, the forfeiture being absolute, relations could be established between the insurance company and the mortgagee only by the terms of a new contract, supported by a new consideration. In Graham v. Firemen's Ins. Co.^' the court found that there had been such misrepresentation in the application as to avoid policy, but there was attached a mortgage clause which stipulated that the insurance as to the interests of the mortgagee should not be invali- dated on account of any act or neglect of the mortgagor or owner of the property. The court said : "A policy obtained through misrepre- sentation as to the owner cannot fairly be considered as embraced within the meaning of the clause referred to, nor caa such misrepre- sentation be regarded of itself as an act or neglect, within the terms of the policy." This question is discussed by the United States circuit court of 14 135 Mass. 251. ib 87 N. Y. 69, 11 Ins. Law J. 64. (343) § 119 LAW OF FIRE INSURANCE. (Ch. 6 appeals, in the case of Syndicate Ins. Co. v. Bohn," and a conclu- sion reached directly opposed to that of the New York and Massa- chusetts courts here referred to. In this case the facts show that, at the inception of the insurance and the attaching of the mortgage clause, the policy was valid. Some months afterwards the property was sold without knowledge of either the insurer or mortgagee. This sale created a forfeiture as to Bohn, the mortgagor. The policy in suit was subsequently twice renewed without any disclosure as to the change of title. There was, it appears, a continuous insur- ance with the plaintiff company from the issuance of the first policy mentioned until the time of the fire. The court held that the insur- ance as to defendant, Bohn, was invalidated, but good as to the mortgagee. The policy being valid when the mortgage clause was attached, there was a good consideration to support the separate agreement between the insurer and mortgagee, and, if the insur- ance is treated as continuous on account of the several renewals, the conclusion of the court would be logical so far as it refers to the ques- tions involved in that case, but it should be carefully observed that each renewal of the policy signifies a new contract. It may be that it will continue in the same terms, but there will always be a new con- sideration. The better doctrine is that the old agreement is contempo- raneous and co-existent with the consideration which supports it; that both terminate at the same moment; that the renewal means a new and distinct contract, whether another policy is issued or not." le 12 0. C. A. 531, 65 Fed. 165. 1' Brady v. Insurance Co., 11 Mich. 425; Aurora Fire & Marine Ins. Co. v. Kranich, 36 Micli. 289; King v. Insurance Co., 58 Wis. 508, 17 N. W. 297. "The renewal of the policy is in effect a new contract, on the same terms and conditions as in the original policy." Hartford Fire Ins. Co. v. Walsh, 54 111. 164; Orn-sby v. Insurance Co., 5 S. D. 72, 58 N. W. 301. In American Building & Loan Ass'n v. Farmers' Ins. Co., 11 Wash. 619, 4^ Pac. 125, the court declared that, while the mortgage clause was a part of the contract, it was not a complete contract of itself, that the immunities stipulated for referred only to particular clauses of the policy, and that all other stipula- tions and conditions bound both the owner and mortgagee alike. As to the time within which suit can be brought, the court said it was i condition of the policy, from which the mortgagee was not exempt by the special clause, relieving him from the "acts and omissions" of the mortgagor. See Syndicate Ins. Co. v. Bohn, where the mortgage clause Is held to be an independent and complete con- tract. 12 C. C. A., at page 531, and 65 Fed., at page 177. (344) d- 6 SUBROGATION. g 120 The mortgage clause is a part of the policy to which it is attached. Both terminate at the same moment; that is, when the policy expires bv its own terms. The separate agreement with the mortgagee also expires. It is folly to regard the mortgage clause as an independent contract. It is independent in nothing except in regard to the condi- tions to be performed, under penalty of forfeiture, by the owner or mortgagor. There are no promises made by the insurer to pay a loss that will be found expressed in the mortgage clause. As a distinct and in- dependent contract it will impose no burdens upon the insurer, nor will it be of any value to the mortgagee. It is only as a part of the poUcy that the mortgage clause has any validity. The property in- sured, the amount covered, and the time when the policy begins and ends are nowhere referred to in the special agreement between the insurance company and the mortgagee. A contract of insurance which omits any mention of these very essential particulars cannot be enforced. The independent character of the mortgage clause con- tract consists in nothing important outside of the promises that the policy, so far as the interest of the mortgagee is concerned, shall not be invalidated by any act or neglect of the mortgagor or owner of the property. It seems, therefore, that the United States circuit court of appeals in this case has been somewhat too broad in its applica- tion of legal principles in the construction of this tripartite agree- ment between the insurance company, the owner of the property, and the mortgagee. The court said: "The inference is irresistible that they intended to, and that they did, thereby agree that no act or neglect of the mortgagors, unknown to the mortgagees, whether prior or subsequent to the date of this contract, should avoid it. Moreover, these insurance companies cannot now be compelled to say that these contracts were void in their inception as to the interests of the mortgagee." § 120. When Policy is Void as to Mortgagor and Valid as to Mortgagee. The case of Springfield Fire & Marine Ins. Co. v. Brown ^^ pre- sents another point of interest in the general discussion of this sub- is i Ins. Law J. 57. (345) § 121 LAW OF FIRE INSURANCE. (Ch. 6 ject. The poricy there was issued to the owner of the property, with the stipulation that loss should be paid to mortgagee, and, as to the latter, the policy contained a provision that it 'should not be in- validated by any act or neglect of the mortgagor or owner of the property." Subsequently, and during the term of the insurance, the insured property was sold without the consent of the insurer, and in contravention of the terms of the policy, on account of which the company was discharged from any liability as to the owner. The mortgagee, having been paid the loss, assigned the mortgage to the insurer, and in a suit to foreclose it was held that the mortgagor could not require that the money paid to the mortgagee in settlement of the loss should be applied in payment of his debt. There was, in this case, an agreement, expressed in the policy, that when any loss should be paid to the mortgagee, and there was no liability as to the mortgagor, the mortgage should be assigned to the insurer. The •court held that it was competent for the parties to so agree, notwith- standing the mortgage authorized the mortgagee to insure at the expense of the mortgagor; that the mortgagee was at liberty to insure for his own benefit, and to make it a part of the consideration that, in case of the payment of a loss, he would assign the mortgage and the notes which it was made to secure, to the company, on pay- ing the loss. § 121. "When Mortgagor may Recover. When the policy is issued in name of the mortgagee, but at the charge of mortgagor, the latter may recover a loss in his own name, if the mortgage debt is paid before a right of action arises on the policy. It is immaterial whether the mortgage is satisfied before or after the occurrence of loss. In a case of this kind, the mortgagor, on payment of the debt, is held to be subrogated to the right of mort- gagee, under the terms of the policy. In Phoenix Assur. Co. v. Allison ^^ the policy was issued to mortgagee, but the owner of the property had paid the premium, and after the loss he also paid the mortgage debt. Suit was brought to recover by the mortgagee, who had ceased to have any interest in the matter, and it was held by the i» (Tex. Civ. App.) 27 S. W. 894. (346) ■Ch. 6) SUBROGATION. § 122 Texas court of civil appeals that no right of action vested in plain- tiffs. The court said: "Whether the mortgagee procures the policy, paying the premium without authority of the mortgagor, or whether it is procured by the mortgagor in the name of the mortgagee, and the debt is paid, the insurers are not liable to the mortgagee, because in the one case payment of the debt and extinguishment of the mort- gage determine all efficacy of the policy, and in the other the mort- gagor paying the debt is subrogated, and he alone should sue, or, in other words, the underwriters would be responsible to him and not to the mortgagee." § 122. Contribution, under Mortgage Clause. In Eddy t. London Assur. Corp.^" the plaintiff had procured insur- ance to protect mortgagee. To these policies was attached the New York standard waiver clause, in some instances providing for full contribution. Subsequently other insurance was obtained by plain- tiff, which was not made payable to mortgagee. On the occurrence of a loss, companies issuing policies of the first class demanded that the loss be apportioned pro rata among all the policies insuring the property, whether payable to the mortgagee or not. The last insur- ance mentioned was for the sole benefit of plaintiff, and without the consent or even the knowledge of the mortgagee. It was a part of the mortgage clause referred to that "this insurance, as to the inter- est of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described prop- erty. * * * In case of any other insurance upon the within- described property, this company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property issued to or held by any party or parties having an insurable interest therein, whether as owner, mortgagee, or otherwise." It was under the terms of this special stipulation that the insurers of the mortgagee claimed contribution from all the policies on the risk, but the court held that this very distinct provision concerning what policies should be contributory must be considered as subordi- 2 143 N. y. 311. 38 N. E. 307. (347) § 122 LAW OF FIRE INSURANCE. (Ch. 6 nate to the antecedent provision, intended to protect the mortgagee from "any act or neglect of the mortgagor or owner of the property." It reasoned, with force, that, as the last policies were procured by the mortgagor for his own benefit, the interest of the mortgagee could not by such act be dissipated through the process of the pro- posed contribution. The court said: "The act of obtaining this additional insurance was the act of the owner, and it was unknown to the mortgagee, and, of course, not consented to by him. The additional insurance could by no possibility benefit him, as it was not upon any interest of his in the property. He could not, therefore, resort to any of these additional policies for his indemnity. It is- not a case of contribution in any sense, but simply one on the insur- er's theory of diminution of their liability, caused by the act of the owner, and unknown, and with no possible corresponding benefit, to the mortgagee." The court found that the stipulations in this inde- pendent and separate clause were repugnant to one another, and to meet the diflflculties applied the common rule of construction that repugnancies of language must be reconciled, consistent with the general purpose of the contract. In this case the obvious intention was to indemnify the mortgagee, and this intention would be defeated in part by adopting the principle of apportionment insisted upon by the defendants. While there can be no doubt that Lord Bacon was correct when saying that "judges should beware of hard con- structions and strained inferences, for there is no worse torture than the torture of the law," it is equally certain that persons charged, with the important duty of formulating insurance contracts should be required to perform their work with such measure of intelligence as to relieve the courts from the difficult and unpleasant duty of reconciling repugnancies and qualifying vital interests by construc- tion. A different rule of construction, and one giving better effect to im- portant stipulations of the policy, was laid down by the United States circuit court of appeals in the case of Hartford Fire Ins. Co. V. Williams." There was attached to the policy a mortgage clause providing for full contribution. After the policy in suit was issued, the mortgagor procured other insurance without the knowledge of 21 11 C. C. A. 503, 63 Fed. 925. (348) t!h. 6) SUBROGATION. § 123 the mortgagee. The court held that the mortgagee could not re fuse contribution on account of the subsequent insurance, and that the provision of the mortgage clause, that the policy should not be invalidated by any act of the mortgagor, was qualified by the stipula- tion in regard to contribution. § 123. Application of the Mortgage Clause. The interest of the mortgagee is so far recognized in particular cases that, besides being named as the payee, there is attached to the policy a special stipulation for his better protection. This stipu- lation is to the effect that the policy shall not be invalidated as to the mortgagee's interest because of any act or neglect of the mort- gagor. For this surrender by the insurer of important contract rights expressed in the policy, which are either annulled or quali- fied by the stipulation, the mortgagee promises to give notice of any change in the ownership of the property or increase of hazard which shall come to his laiowledge, etc. This clause, when attached by the consent of the original parties, introduces new elements, and, in a qualified sense, other and independent interests, into the con- tract. It is, by a new agreement, enlarged, so as to include the mortgagee, who, by the special terms of bis incorporation, is con- ditionally relieved from forfeitures which may result from any act or neglect of the mortgagor. In no other respect, however, are the terms of the policy to be construed difi'erently in regard to the mort- gagee than in regard to the mortgagor, and, should a forfeiture oc- cur as to the mortgagor, by sale or otherwise, the mortgagee will continue the only person insui'ed, and, a fire subsequently happen- ing, it will become his duty to perform all things under the terms of the. policy subsequent to loss. The mortgagee must then claim, if claim is made by anyone. He is the "assured," and the only person under the terms of the policy who sustains towards the insurance company any beneficial relations, and on him by mutual agreement falls the duty of performance. The insurer assumes no duty to pay him anything except what may be due under the policy, from the con- ditions of which he is specifically relieved from certain things, to wit, forfeitures because of "the occupation of the premises for pur- poses more hazardous than are permitted by the policy," and from (349) § 123 LAW OF FIRE INSURANCE. (Ch. (>■ such forfeitures as, by the policy conditions, may result from the act or neglect of the owner of the property and mortgagor. But it will be observed that this grace is contingent, and in respect to all' other conditions and stipulations the mortgagee is as firmly bound as the mortgagor. The mortgage clause has no effect whatever, except as it is a part of the policy, and the agreement it contains, to give the insurer no- tice of any change of title or ownership which shall come to his knowledge, is a condition and promissory warranty. Under the forms of policy now in general use, "the stipulations, conditions,, limitations, and requirements of the policy are expressly made a part of the consideration," on which rests the promise to pay in case of loss. This construction of the contract was distinctly denied by the supreme court of Nebraska, in the case of Phenix Ins. Co. of Brooklyn v. Omaha Loan & Trust Co.^^ In that case the person first insured sold to another, without knowledge of the Phenix Company, but with knowledge to the defendant in error. The loss, if any,, was payable to the latter, under the terms of a mortgage clause,, in form substantially like the one considered. The opinion was writ- ten by Commissioner Ragan, and commits the court of that state to the illogical doctrine that the special provisions attached to the policy, for the benefit of the mortgagee, constitute a contract which may be enforced for the collection of a loss claim, independent of the promises and conditions of the policy, of which it has elsewhere- been uniformly held a part. The Nebraska court further declared that the stipulation, to give the insurer notice of any change of own- ership that should come to the knowledge of the mortgagee, was not a condition, that it was immaterial, and a default in performance would not prevent recovery. The special promise made to the mortgagee, as expressed in the clause referred to, if contemporaneous with the writing of the policy, is- obviously as much a part as any other promise or stipulation con- tained in the contract, and the agreements to perform will all rest upon the consideration originally paid and stipulated for. If the agreement for the benefit of the mortgagee is a subsequent arrange- ment, the special clause being attached to the policy after its de- 22 41 Neb. 834, 60 N. W. 133. (350) Cll. 6) SUBROGATION. § 12S livery, while it must still be considered as a stipulation collateral to the principal contract, it is not clear that the separate and distinct interests can be so identified that the promise to the mortgaj;ee will find support in the consideration originally moving from the mort- gagor and owner of the property insured. The rule of law is that a promise will not rest on a past consideration, the presumption be- ing that as to what has been done, in consideration and performance, there has been a balancing of agreements, and that there remains no unsatisfied equities to form the basis of new obligations.^" Of course, the mortgage clause recognizes in the mortgagee one having independent rights, and, when he is admitted to participate in the protection of the policy, he is also bound by all its conditions, except those from which he is especially relieved by the agreements which made him a party to the tripartite contract. Certainly the one here holding the "third estate"' cannot be prejudiced by "any act or neg- lect" of the mortgagor. In Hastings v. Westchester Fire Ins. Co.^* the facts, briefly restated, are that there were two policies insuring the property, one for $4,000 in the Lycoming and the other for |10,000 in the Westchester. To the last-named policy was attached the usual form of mortgage clause, making loss payable to plaintiff, Hastings. On adjusl- ment it was found that the property was damaged to the amount of 19,832.52, and in settlement the defendant company claimed pro rata contribution from the Lycoming. This the mortgagee, Hastings, would not permit, as he had no interest in the Lycoming policy. The New York court sustained the plaintiff's contention by a bare majority. Justices Allen, Tolger, and Andrews dissenting. From the separate opinion of Eapallo, J., I quote as follows: "I think that the intent of this clause was that in case, by reason of any act of the mortgagor or owner, the company should have a defense against any claim on their part for a loss, the policy should, neveiiJieless, protect the interest of the mortgagees, and operate as an independent insurance of that interest, and indemnify them against loss resulting from fire, without regard to the rights of the mortgagor under the policy, and that, to effectuate that intention, we should hold that, 2s Johnston v. Johnston's Adm'r, 31 Pa. St. 450; Chamberlin v. WWtford, 102 Mass. 448; Summers v. Vaughan, 35 Ind. 323; 3 Am. & Eug. Enc. Law, 838. 2 4 73 X. y. 141. (351) § 123 LAW OF FIRE INSUKANCE. (Ch. 6 as against the mortgagees, the defendant cannot set up any defense based upon any act or neglect of the mortgagors, whether committed before or after the issuing of the policy, or the making of the agree- ment between the company and the mortgagee." This is a plain statement of the respective rights of all the par- ties to the contract, and, as the procuring of the additional insurance in the Lycoming company was the act of the mortgagor, such act must be treated as subject to the terms of the protecting clause, if in- juriously affecting the interests of the mortgagee, as it clearly would in the event that the two insuring companies were allowed to pay the loss on the basis of pro rata contribution, the mortgagee receiv- ing only ten-fourteenths of the amount which he was entitled to have, " under the terms of the agreement. The prejudicial act was that of a mortgagor, and comes directly within the terms of the stipulation. If the promises of the mortgagee contained in the special clause are treated as conditions or warranties, they must be enforced, and any inquiry on the part of the court concerning their materiality will be an impertinence, as that important question has been finally de- termined by agreement of the parties interested. It was held, in Byers v. Farmers' Ins. Co.,^° that "warranties are conditions precedent to a valid policy, whether such conditions are material or not, if the parties have regarded them as material, and clearly intended them to be so treated. In such cases, when the parties have stipulated that certain things should constitute condi- tions, courts, as a general rule, will not inquire whether they are material to the risk or not. It is enough to know that they influ- ence the risk, and that the parties have fairly made them the basis of the contract." In Blumer v. Phoenix Ins. Co.^' the supreme court of Wisconsin defines in very clear and forcible language the legal effect of this class of stipulations. It says : "Stipulations in the policy, or, what is the same thing, stipulations in some other writing, which the par- ties expressly agreed shall be a part of the policy, although not in- serted in it, whether the same are statements of existing facts, or that certain acts shall thereafter be done, or a certain condition of things continued, are, in general, part of the contract, and express 2"! 35 Ohio St. 606. ae 45 wis. 622. (352) t'l- "i) SDBROGATION. § 123 warranties, unless it can fairly be gathered from the whole con- tract that the parties did not so intend. A breach of any such war- ranty, — at least any substantial breach of it, — whether material to the risk or not, will defeat a rScovery on the policy." ^' In Ormsby r. Phenix Ins. Co.=^ the policy was issued to one Simons, and to secure a loan to the American Investment Company the prop- erty was mortgaged, and a mortgage clause in usual form attached to the policy. Besides this incumbrance, there was a second mort- gage to secure the payment of certain commissions or fees. Simons subsequently conveyed the property to one Fowler, without notice to the insurer, causing a forfeiture of all rights under the policy as to the owner and mortgagor. Afterwards, without knowledge of the defendant company, but with knowledge of plaintiff, the sec- ond mortgage was foreclosed, and the property sold to satisfy the judgment. The defendant company set out, as a defense to the ac- tion, the stipulations in mortgage clause concerning notice of sale or transfer. The court held, in a very cai'efully considered opinion, that the stipulations in the mortgage clause, in regard to notice of sale and increase of hazard, were conditions, and not covenants. It is stated in the syllabus "that a failure on the part of the mort- gagees to comply with the conditions of the mortgage-clause agree- ments suspends the operation of the same, and leaves in force and effect the stipulations in the policy as to the acts on the part of the owner or mortgagor that will operate to forfeit the policy."' "The e'^ident design and the legal effect of such conditions is to re- quire the mortgagee to notify the insurer of any change of ownership or increase of hazard which shall come to his knowledge, as a condition of continuing such stipulations in force." I quote from the opinion as follows: "Therefore the clause in the 27 Jeffries V. Instirance Co.. 22 "Wall. 47; Stensgaard v. Insurance Co., 5C Minn. 429, 52 N. VS'. 910: Fidelity ilut. I^ife Ass'n of Philadelphia v. Ficklin. 74 Md. 172, 21 Atl. 6S0, and -d Atl. 197; Clemans v. Society, 131 N. Y. 4Sri, :J0 N. E. 496; Brooks v. Insurance Co., 11 >Io. App. 349; Mers v. Insurance Co., GS Mo. 131; Glendale Woolen Co. v. Protection Ins. Co., 21 Conn. 19; .Johnson V. Insurance Co., 1 N. D. 107, 4.j N. W. 799; First Nat. Bank of Ballston Spa V. President, etc., of Ins. Co. of North America, 50 N. Y. 45. 28 5 S. D. 72, 58 N. W. 301. OSTR. FIBE INS. — 23 (353) § 123 LAW OF FIRE INSURANCE. (Ch. & mortgage contract, that the insurance as to the interest of the mortgagee should not he invaUdated as to any act or neglect of the mortgagor or owner of the property insured, ceases to be operative whenever there is a change of ownersliip or increase of hazard that comes to the knowledge of such mortgagee, and he fails or neglects to give notice of the same to the insurer, and have permission for such change of ownership or increase of hazard indorsed on the pol- icy. It is only upon compliance with these conditions that the in- surer has agreed to so suspend the original stipulations in the policy. Therefore, if, in the case at bar, there was a change in ownership of the property insured, of which the plaintiff, Mary F. Crosby, through her agent or agents (Ormsby), had knowledge, but of which she failed or neglected to give notice to the defendant, and have permission for such change of ownership indorsed upon the policy, the first clause in the mortgage agreement ceased to be operative as to her, and she therefore held her insurance subject to the original terms of the policy. The stipulations in the original policy were only sus- pended, as to her, upon the express condition that she should comply with the terms of the original mortg?se-clause agreemfent ; and when she failed to comply with the terms of that agreement the stipu- lations in the original policy came into, force, and remained in force until the stipulations in such agreement were complied with." The Dakota court has, as I think, with excellent reason, construed the promise of the insurer, in the first part of the mortgage clause, to relieve the mortgagee from such forfeitures as might result under the terms of the policy by reason of any act or neglect of the mort- gagor, to be conditioned on the mortgagee giving notice of any changes of ownership that should come to his knowledge, and that he should, on demand, pay for any increase of hazard, etc., and that failure to perform on the part of the mortgagee excused the insurer from its special engagements in his behalf, and left him with no oth- er or greater right under the policy than to receive any money in settlement of loss that might be due to the mortgagor. A mortgagee has no interest in a policy of insurance, procured by the mortgagor, by reason of his relations to the property. While he has an insurable interest, he can claim no benefits from the policy which the mortgagor has obtained for his own use. When he is (354) Ch. 6) SUBROGATION. § 123 made the payee of such policy, it is by the agreement of parties.^' ^Vhen the policy is written that the loss, if any, must he paid to a mortgagee, as his interest may appear, and after the fire it is shown that such interest exceeds the amount which the insurer is liable to pay, the mortgagee may bring suit in his own name to re- coTer.^" But if the whole sum of the mortgage indebtedness is less than the loss for which the insurer is liable, then suit to recover must be brought in the names of both the owner of the property and the mortgagee.'* When the policy is written or indorsed so as to authorize the in- surer to pay the loss to the moi'tgagee without reserve or qualiflcii- tion, the mortgagee may bring suit without joining^the mortgagor.^^ So, too, if the mortgagee procures an insurance to protect his own interest only, and the mortgagor is subjected to no charge on account of the premium, any money received in payment of loss will not be applied for the benefit of the mortgagor, and the insurer will be en- titled to subrogation.'* 2 Mortgagee has no rights to a policy, unless he acquires them bj- the stipiilii- tion of the parties. Schwab Bros, owned the property and procured the policy, which was made payable In event of loss to one Kase. There was attached a waiver clause. Kase sold mortgage to Headly, but his interest as payee of policy was not assigned until after the fire. Held that, as Kase had suffered no loss, he could talje nothing; that Headly had acquired no rights in the policy; that, the contract being personal, there could be no recovery. Kase v. Insurance Co. (X. J. Sup.) 32 Atl. 1057; Carter v. Rockett, 8 Paige (N. Y.) -437; Columbia Ins. Co. of Alexandria v. Lawrence, 10 Pet. 507; Vandegi-aaff v. Medlock, 3 Port. (Ala.) 3S0: White v. Brown, 2 Cush. (Mass.) 412. 30 Slaxcy V. Insurance Co., 54 Minn. 272, 55 N. W. 1130; Donaldson v. In- surance Co., 0."> Tenn. 280, 32 S. W. 2."il; Ermentrout v. Insurance Co., (iO Minn. 41S, C2 N. W. 543; Hammel v. Insurance Co., 50 Wis. 240. 6 N. W. SO.j; Meriden Sav. Banl< v. Home Mut. Fire Ins. Co., 50 Conn. 39(!. 12 Ins. Law J. 1120. See Williamson v. Insurance Co., 86 Wis. :vxi. 57 N. W. 4(!, where a different ruling was had. 31 Fire Ins. Cos. v. Felrath, 77 Ala. 104; Donaldson v. Insurance Co., supra; Carberry v. Insurance Co., 86 Wis. 323, 56 N. W. 920. 32 Donaldson v. Insurance Co.. supra. 33 Mclntire v. Plaisted, 68 Me. 363, at page 365; Burton v. Insurance Co., 12 Grant (U. C.) 156. (355) § 124 ■ LAW OF FIRE INSURANCE. {fih. 6 § 134. Mortgage Clause will not Protect Mortgagee While Acting in Bad J'aith.. A loss was payable to a mortgagee, under a waiver clause contain- ing the usual provisions relieving the trustee or mortgagee from forfeitures arising from any omission or neglect on the part of the owner or mortgagor. It was in evidence at the trial that the in- surance was procured by the mortgagor for the mortgagee, and that, in the performance of this service, the former had acted as agent of the latter. It was also shown at the trial that the amount of in- cumbrances on the property had been misrepresented.^* The court siAmerican Cent. Ins. Co. v. Cowan (Tex. Civ. App.) 34 S. W. 460; Hanover Fire Ins. Co. v. National Exeh. Bank (Tex. Civ. App.) 34 S. W. 333. In this case to the policy was attached a waiver or mortgage clause in the usual form. The premium was paid by the mortgagor. In addition to the mortgage for the benefit of which this insurance was procured, there was another incumbrance in the sum of $16,500. This was in existence at the time the insurance was effected, but the fact was not disclosed. It was held that the concealment of this incumbrance was a fraud on the insurer; that the policy, by reason of such fraud, was never a valid and subsisting contract; that the only right or benefit enforceable by the mortgagee came to exist through the mortgagor, and, that act being fraudulent, the mortgagee could take nothing. The importance of the discussion justifies the presentation, as a part of this note, of a full statement of the reasons on which the court based its opinion. Lightfoot, C. .1. said: "The first assignment of error presented by appellants is as follows: 'The court erred in its second conclusion of law, which reads as follows: "The action of Cowan in concealing the incumbrance did not and could not affect the rights of the defendant Security .Mortgage & Trust Company to recover the proceeds of the policy, because the mortgage clause attached to the policy provided, in express terms, that no act or neglect on the part of Cowan, the assured, should invalidate the mortgage as to the interest of the mort- gagee, the Security Mortgage & Trust Company." First. Because said mort- gage clause applies only to acts and neglect subsequent to the execution of the policy with the mortgage clause attached, and the fraud of .1. B. Cowan in the procurement of the policy was prior, and not subsequent, to its exe- cution, and prevented said policy from ever becoming a valid policy. Second Because said mortgage company could not avail itself of the benefit of Cow- an's acts in its behalf, in procuring said policy to be issued with said mort- gage clause attached, and at the same time avoid responsibility of the fraud by which said policy was procured.' This assignment is well taken. It Is (356) ^^h. 6) SUBROGATION. § 124 said: "The mortgage clause protects the mortgagee against the acts or neglect of the owner or mortgagor, and not against its own neglect or M-rong-doing. The policy was void on account of the mis- representation of Cowan [mortgagor] as to the incumbrances on the property." manifest from the terms of the contract that the exiiression in the mortgage clause, that the insurance 'shall not be invalidated by any act or neglect of the mortgagor or owner of the within-described property,' etc., was not intended to annul the other express provisions under which the contract should become valid in the first instance. The fraudulent concealment of a fact so material to the rislj itself, which fact was expressly provided against on the face of the policy, and a knowledge of which would liave stopped the issuance of the policy, prevented it from becoming a valid contract in favor of the assured, or the party for whose security it provided. The doctrine is well established in this state that A., for a consideration paid by him, may make a contract with B.. for the benefit of C, and the latter will have a right of action to enforce it. Spaun v. Cochran, 6.S Tex. 242; ilcCown v. Schrimpf, 21 Tex. 27; Story, Cont. § -ijlb. But, if the contract was obtained by a fraud- ulent device of A., the person for whose benefit he fraudulently obtained it can gain no higher right than A. held, and, if the contract is void as to him, it is void as to his beneficiary. Heath v. Coreth (Tex. Civ. App.) 32 S. W. 50. We are referred by the learned counsel for appellee to the case of Hastings v. Insurance Co., 73 X. Y. 141, to sustain the doctrine that the mortgage clause created a separate contract in favor of the mortgagee, which cannot be defeated by a fraud on the part of the insured in the creation of the contract. That case docs not sustain the position. It is true that the mortgage clause in that case was similar to, this one. The policy was taken out by Mrs. Stone, which provided on its face as fol- lows: 'Other insurance permitted.' After the loss it was shown that there was other insurance amounting to ^4,000, and it was contended by the de- fendant company, not that the policy sued on was void by reason of such additional insurance, or that such additional insurance was prohibited, but that it was entitled to share the loss pro rata with the other company. The court held that, as to the mortgagee, this could not be done. Here the policy, on its face, provides that, if the insured shall be guilty of any concealment of a material fact, the 'policy shall not become valid,' and, if the property be incumbered by a lien, the policy 'shall be void.' ,\r the time the policy was taken out, the property was incumbered with a lien for a large amount, which was material, and was concealed. The mortgage company, in ac- cepting the security attempted to be obtained for it by the insured, could not escape the express conditions upon which the contract should become valid. ■ In the more recent decision of Graham v. Insurance Co., 87 N. Y. 69, the supreme court of that state held that a similar mortgage clause attached (357) § 124 LAW OF FIRE INSURANCE. (Ch. 6 When the owner and mortgagor obtains insurance, and has the policy indorsed, "Loss, if a»y, payable to mortgagee," but requires no special stipulations for the benefit of mortgagee, the undertaking to pay loss to the holder of mortgage is "collateral, and dependent upon the principal undertaking, and if there has been a breach of the conditions of the policy by the mortgagor the mortgaigee cannot re- cover." ^'^ to a policy did not prevent an inquiry into a material misrepresentation made by the insured at the time the policy was obtained; and notwithstanding the o.nsc of Hastings v. Insurance Co., aboye referred to, was specially invoked, the court held that the policy was void. See, also, Cole v. Insurance Co., 99 N. Y. 37, 1 N. E. 38; 2 May, Ins. p. 1021, § 4.52d (which refers to Omnium Securities Co. v. Canada Fire & Mutual Ins. Co., 1 Ont. 494, not accessible to us); Smith v. Insurance Co., 17 Pa. St. 253; Indiana Ins. Co. v. Brehm, 88 Ind. 578; Ellis v. Insurance Co., 08 Iowa, 578, 27 N. W. 762; Hamblet v. Insurance Co., 36 Fed. 118; Davis v. Insurance Co., 135 Mass. 251; Friemans- dorf V. Insurance Co., 1 Fed. 68; Hoxsie v. Insurance Co., 6 R. I. 517. The negotiation in this case seems to have been wholly between Cowan and the insurance companies. He paid the premium, and had the mortgage clause attached to the policy. In doing this he acted for and on behalf of the mortgage company, and fo.' their benefit. How can that company accept the benefit of his acts as their agent, and escape the result of a fraud perpetrated in that act? The contract, as a whole, in such a case, must stand or fall. We can readily see that a difference might arise in a case where the mort- gage company, on its own behalf and for a separate Consideration, procures a policy of insurance for its own benefit, unaffected by any act or con- cealment on the part of the owner of the property. But where such owner, on his own behalf, and as agent for the mortgagee, obtains and pays for the insurance, and in the very act malies a fraudulent concealment of a material fact, which the policy on its face provides shall prevent the policy from ever becoming valid, the mortgagee, however innocent, cannot, by ac- cepting the policy, evade the efllect of the fraudulent act. East Texas Fire Ins. Co. V. Brown, 82 Tex. 631, 18 S. W. 713; Centennial Mut. Life Ass'n v. Parham, 80 Tex. 518, 16 S. W. 316; Fire Ass'n of Philadelphia v. Flournoy, 84 Tex. 632, 19 S. W. 793. See, also, Swenson v. Sun Fire Office, 68 Tex. 461, 5 S. W. GO; Henderson v. Railway Co., 17 Tex. 572." •See, also, Graham v. Insurance Co., 87 N. Y. 69, 11 Ins. Law J. 69; Davis V. Insurance Co., 135 Mass. 251. s5 Moore v. Insurance Co., 141 N. Y. 219, 36 N. B. 191, (358) <^^ll- 6) SUBROGATION. § 125 § 125. When the Insurer will be Entitled to Collect from the Carrier. Wlion a lairier is liable to a consignee or owner for goods lost while in transit or in its custody, on payment of a loss by the in- surer the latter will be subrogated to tlie rights of the owner to re- cover from the carrier."" This proposition is based upon the principle that the liability of the carrier is primary, and that of the insurer secondary; not in the order of time, but in respect to ultimate lia- bility. The owner of the property lost may look to either party to be reimbursed for the damage he has sustained. If he elects to hold the carrier, the insurer will be excused, as the owner will not be entitled to two satisfactions for one claim. Wlien the carrier has pro\ided in its bill of lading that it shall not be liable on account of loss by fire, it will be relieyed, unless it appears that the fire was the result of the carrier's own negligence."'' When there is a considera- tion for the exemption, as the offer of a reduced rate or the promise of a superior ser\ice, the courts will allow carrier's to contract in such a manner as to limit their liability in respect to certain of the ordinary or eren extraordinary accidents incident to their business, but, on grounds of public policy, carriers will not be permitted to in- terpose contract stipulations to protect themselves from the conse- quences of their own wrongdoing. It is competent for carriers to stipulate in their contracts with shippers for the benefit of any insur- ance which shippers may obtain on property consigned. When this is done, the insuver will not be entitled to subrogation on payment of a loss."* 30 Marine Ins. Co. v. St. Louis, I. M. & S. Ry. Co.. 41 Fed. 0-13, 19 Ins. Law "■^fLoe V. Ad..ms, 100 Mass. r.O.-,; Minneapolis. St. T. & S. S. M. R. Co. v. Homo Ins Co., r.r. Minn. 230. 50 N. W. Sir,: Id.. GO N. W. 132. L MelntiieMut. Ins. Co. v. Caiol.s, 20 N. V. 173; Rintonl - Kaii.oad Co oo Fed 313; British & F. Ins. Co. v. Gulf. C. & S. F. K. Co.. 03 lex. 4,o U in. Law J 770: Providence Washington Ins. Co. v. The Sidney. 23 Fed. vs rriix ins CO. v. Erie .<. W. Transp. Co., 117 U. S. 312, G Snp. Ct. ToO. '^no and iV. ins. Law J. :>74: Minneapolis. St. P. & S. S. M. R. Co. v. Home lus. Co. Olinn.) GO N. W. 132. § 126 LAW OF FIRE INSURANCE. (Ch. 6 § 126. When by Subrogation the Insurer will Have a Right of Action against Those through Whose Negligence the Loss has been Occasioned. When insured property has been destroyed by the wrongful act of another, and the loss is paid by the underwriter, the right of subro- gation is now so well settled and so generally understood that it will need -hardly to be stated. The use of steam power as a motor has largely increased the perils of fire. The transportation of passen- gers and freight by rail has multiplied the dangers of conflagrations. The train must run on its appointed time, irrespective of conditions that may increase or diminish the security of exposed property. Un- usual dryness or exceptionally strong winds will not excuse the rail- road company from carrying the mails, or from delivering passen- gers and freight at their proper destination, on scheduled time. The. convenience of the public and the exigencies of business require prompt and faithful performance on the part of the carrier. But, while this is true, the railroad company, as well as all others, must so use its own as to do no harm to the rights and property of oth- ers. This is based on the principle expressed in the maxim, "Sic utere tuo, ut alienum non laedas." Cooley in his work on Torts,^" in discussing the liability arising from negligence, says: "Fire being a dangerous element, a degree of care is required in making use of it corresponding to the danger. It may be employed lawfully for all the purposes of life, for what is useful, and also for amusement upon one's own premises, sub- ject, only, to the conditions of due care; but due care, is a degree of care corresponding to the danger, and requires circumspection not only as to the time and place of starting, but in protecting against its spread afterwards." In Hewey v. Nourse," the court said of one who builds a fire: "He must use reasonable care and prudence to prevent its spreading and doing injury to the property of others. The time of building may be suitable, and the manner prudent, and yet, if he be guilty of negligence in taking care of it, and it spreads, and does injury to so Page 589. -lo 54 jie. 250. (360) f^h. 6) SUBROGATION. § 126 the property of others in consequence, he is liable for any damage for the injury done." These declarations correctly express the common-law liability of the wrongdoer. The liability of railroad companies and others in some of the states is regulated by statute; elsewhere, reliance is had on the common law. We find some Tery old English authorities defining the law on this subject as early as the fifteenth century. Rolle, in his Abridgment of Action on the Case, says: ''If any fire burns the goods of another man, he shall have his action on the case against him. If a fire breaks out accidentally in mv house, I not knowing it, and it burns my goods, and also my neighbor's house, he shall have his action on the case against me. So, if the fire is caused by a servant or a guest, or by any person who enters the house with my consent; but otherwise if it is caused by a stranger who enters the house against my will." So, also, ilk Beaulieu v. Finglam,''^ where it is declared: "A man is held to answer for the deed of his servant, or of one of his house- hold in such case; for if my servant or one of my family puts a can- dle on a bracket, and the candle falls in straw, and burns up my house and the house of my neighbor, also in such case I shall answer to my neighbor for the damage he has received." Before the American Eevolution, we find that the English par- liament had undertaken to change by statute the liability of per- sons through whose negligence fires were caused. The first legisla- tion we find on this subject is 6 Anne.*= This was enacted in 1707, and provided that "no action shall be maintained against any person in whose house or chamber any fire shall accidentally begin." The supreme court of Wisconsin, in Spaulding v. Chicago & N. W. Ry. Co.,'" expresses a doubt whether these statutes were a part of the common law of this country, and intimates that, while it will govern in a large majority of cases, it should not be regarded as having the force of law, and that, in its application, there will be found a large number of exceptions; that the statute was enacted just prior to the Revolution, when the sentiment of respect for English laws and Eng- lish institutions throughout the colonies, for obvious reasons, was. 41 2 Hen. IV. Y. B. fol. IS, pi. G; Althorf v. Wolfe, 22 N. Y. 366. 4 2 Cbapter 3, § 6. "30 Wis. 116. (361) § 127 LAW OP FIRE INSURANCE. (Ch. 6 weak. It is suggested, too, that the circumstances in this country ■were so different from those in England as to render a law of this character unsuitable to the wants and interests of the people. But, irrespective of the question of how much force this statute was en- titled to be given as the law of the land, the court said : "It would need no argument to show that railroad companies' engines, moving at the greatest velocity, and conveying their fire through the length and breadth of the land, and which, with the utmost precautions for the safety and protection of property, and with the application of great care imposed upon their managers, are still very dangerous, were not within the contemplation of the framers of the statute. No such machinery was then known, nor was it invented or thus put to use for more than half a century after the act was passed. It would seem, therefore, a great stretch of construction to apply the statute to such a case." In 1774, parliament again enacted a law relating to fires.** It reads : "No action, suit or process whatever shall be had, maintained or prosecuted against any person in whose house, chamber, stable, barn or other buildings, or on whose estate any fire shall, after the 24:th of June, accidentally begin, nor shall any recompense be made by such person for any damage suffered thereby." § 127. Negligence the Basis of Liability. It will be observed that both of these statutes relate wholly to buildings; that persons are exempt from liability on account of the "burning of other and contiguous property only when the fire is ac- cidentally kindled in his house, chamber, stable, barn, or other build- ing. Blackstone says that the word "accidental" in the first of ihese statutes was construed to mean "negligent"; that is, not will- ful or criminal. Thus modified, we find the principle of these stat- utes applied substantially in all of the United States where the com- mon law prevails. No person can be held for damages on account of a fire which may have originated in his house, barn, or other build- ings, such fire being accidentally or even negligently caused, unless such negligence is so gross as to raise a presumption of fraud and ** 14 Geo. III. c. 78, § 86. (362) Ch. 6) SUBROGATION. § 127 criminal intent. These statutes, it will be seen, mark the limit be- yond which a person will be liable for his negligent act. When one kindles a fire in a public street, or in his field, he must exercise care to keep it within control, or, failing to do so, must make good the damage which results. Negligence will in all cases be the test of liability.*'' The farmer burning his brush and stumps and the rail- road company operating its trains are subject to the same rule of law. Both must act with prudence and due regard to the rights and se- curity of others. In the case of Fahn v. Eeichart *"= the defendant had set fire to logs and brush on his own land, and sparks were carried by the wind to the farm of the plaintiff, burning his barn. The court held: "If the defendant was not guilty of negligence in the care and man- agement of the fire set by him, he would not be liable." Negligence is the gist of the action. The authorities in support of this propo- sition are uniform and numerous. A careful examination of the authorities discloses the fact that in a large proportion of the cases which the courts have been called upon to consider, where recovery Mas claimed on account of the burning of property by the wrong-doing of another, the use of steam power has been the active cause, and a railroad company the party complained of. This arises, obviously, from the circumstances and magnitude of the business in which this class of carriers is engaged. In some of the states legislation has been had that relieves the person seek- ing to recover from a railroad company from the burden of prov- ing neghgence.*^ It is only necessary to show that the defendant railway company caused the burning of the property, and negligence will be presumed. The burden is thrown upon the accused party of showing that its engine was properly equipped, and that it was operated with prudence and skill, and otherwise was not in fault. Elsewhere, negligence must be pleaded and proven by the party seek- ing to recover. ^Miat constitutes negligence is a question for ,the *5 Missouri Pac. R. Co. v. Cullers, 17 S. W. 19, SI Tex. 3S2. 46 8 Wis. 255. 4T In Missouri and Iowa, and perhaps other states, it is not required to show negligence, In order to charge railroad companies with loss which has been caused by their agents and servants. Mathews v. Railroad Co., 121 Mo. 298, 24 S. W. 591. (303) § 129 LAW OF FIRE INSURANCE. (Ch. 6 jury under instructions, and is often a matter of much difficulty. While extraordinary care will not be required on the part of the railroad company, it must neglect no reasonable precaution to pre- vent the setting of fires. Its engines must have the best well-known modern appliances for arresting sparks,. and these must be kept in good repair. Its engines, too, must be managed with prudence and skill. Beyond this nothing can be required. Judge Dillon, in deciding the case of Kellogg v. Milwaukee & St. P. R. Co.,*^ said: "The best test you can bring to bear is, what would an ordinarily prudent and careful man have done under the precise circumstances here presented to you ?" The supreme court of Wisconsin, in Bead v. Morse,*' said: "The utmost care which the law can impose upon the defendant relates only to the use of all reasonable and proper means to avoid damage, and does not extend to all possible precautions against injury." § 128. Burden of Showing Negligence will Generally Rest on the PlaintiflF. On this question of negligence, Cooley states his understanding of the law as follows: "There must be some evidence which will war- rant imputing the injury to the negligence or misconduct of the de- fendant, or his servants, and the burden is upon the plaintiff to make this showing. The plaintiff makes out this part of his case by show- ing that the fire was kindled when and where it would be likely to spread as it did, or pass beyond control, or that it was left without proper care afterwards. * * * It is immaterial whether the fire spreads by running along the ground or by sparks or brands being- carried through the air by the wind." * § 129. "What is the Proximate Cause. It will often occur that the property burned, for which damage is^ claimed, is remote from the place where the fire was first kindled. The conflagration, once started, may advance from building to build- ing, or sparks may be carried by the wind until the property which *8 5 Dill. 542, Fed. Cas. No. 7,664. o 34 Wis. 318. • Page 701. (364) Cll. 6) SUBROGATION. § 129 is the subject of contention is reached, at a long distance from the place where the flre ^Yas tortiously set. In a case of this kind, the question to be considered is, has there been an independent and in- tervening cause? If not, the primary fire will be regarded as the proximate cause of the burning of the property in dispute. Atkinson v. Goodrich Transp. Co.^" is a leading authoi'ity on this point. The defendant in that case, it was alleged, negligently set fire to a planing mill situated on the banks of the Fox river, at Oreen Bay, Wis. The flre spread to other buildings across the street, and thence to others more remote, and from the latter was carried by the wind for more than a quarter of a mile to the house of tlie plaintiff, which was destroyed. The Wisconsin court, in its opinion, reasserted the rule for distinguishing between the proximate and re- mote cause, applied by the supreme court of the United States in the ease of Milwaukee & St. P. Ry. Co. v. Kellogg," and quoted from the opinion in that case as follows: "The true rule is that what is the proximate cause of the injury is ordinarily a question for the jury. It is not a question of science or legal knowledge. It is to be determined as a fact, in view of all the circumstances of fact at- tending it. The primary cause may be the proximate cause of the •disaster, though it may operate through successive instruments, as an article at the end of a chain may be moved by the force applied at the other end, that force being the proximate cause of the move- ment, or as in the oft-cited case of a squib thrown in the market place.^^ The question always is, was there an unbroken connec- tion between the wrongful act and tlie injury, a continuous opera- tion? Did the facts constitute a continuous succession of events, so linked together as to make a natural whole, or was there some other and independent cause intervening between the wrong and the injury? * * * it must appear that the injury was the natural and probable consequence of the negligence of the wrongful act, and that it ought to have been foreseen in the light of attending cir- <;umstances." The proximate cause is not- the one which is nearest in time to the result, unless such cause be independent. That must be regarded 50 60 Wis. 141, 18 N. W. 704. " 94 TJ. S. 4G9. =2 Scott V. Shepherd, 2 W. Bl. 892. (305) § 129 LAW OF FIRE INSURANCE. (Ch. S as proximate which is primary, efficient, — the one which is the cause of causes. That which is only incidental and contributing is in no sense responsible for the disaster, and it is with this understanding that we must apply the maxim, "Causa proxima non remota specta- tur." In considering the question of negligence, on which liability will generally depend, a careful regard must be had to attending cir- cumstances. To make plain this proposition, let us suppose that a railroad engine sets Are to the prairie grass. A mile distant, and across a plowed field, are farm buildings and stacks of grain. At the time the grass is kindled, the wind is light, and blowing from the direction of the buildings mentioned. Subsequently its course is changed, and the velocity increased to a gale. The fire is car- ried across the plowed field, and the property burned. Under the circumstances here supposed, was it negligent for the servant of the- railroad company to so operate its engine as to permit fire to escape and kindle the dry grass? Could he, as a prudent and intelligent person, in view of the facts mentioned, have reasonably anticipated and foreseen that the fire thus set would have caused the injury?" We think such a conclusion would be unwarranted, and that the- case is wanting in the element of negligence which makes the rail- road company a tort-feasor, and liable for the damage sustained. There is another important question involved in this hypothetical case. When the fire was first started, the wind, it will be remem- bered, was light, and blowing from the buildings towards the rail- road track. Afterwards its direction was changed, and velocity greatly increased. Was this an independent cause? We think it was. It may be suggested that the change in the course and velocity of the wind was only contributing and auxiliary to the disaster. While it is true that the wind, of itself, would not have caused the loss, neither would the fire, without the agency of the wind. Aftor- the grass had first been ignited, the conditions had been changed in such important respects as to create another independent and, in a qualified sense, intervening cause. At the inception of the fire- the eflflcient force was absent. It came later with the wind. The primary cause was an innocent one. There was no continuous chain connecting it with the stacks of grain and farm buildings. There was, it is true, the materials from which a chain could be constructed, but these existed in fragmentary form. There may even have been. (366) ^ll- 6) SUBROGATION. § 130 dissevered parts, but additional links were required to unite these parts into one continuous whole. § 130. Contributory Ifegligence. Where the plaintiff has contributed to the loss by his own negli- gence, he cannot recover. This question will sometimes arise under circumstances so complicated as to occasion courts great difficulty in determining the rights of litigants. The interests of manufacturing and commerce are those of the general public, and in promoting these interests the manufacturer and the carrier will be protected within reasonable limitations. In the prosecution of their business, the extensive use of fire is indispensable, and, while recognized as useful, it is also understood to be a dangerous agent, and its use must be attended with reasonable care. Still, to impose such strin- gent restrictions upon its employment as to materially impair its usefulness and embarrass business, would be unwise, and opposed to a sound public policy. In the fostering of these enterprises, in which the well-being of society is so directly concerned, the courts properly show a protective interest, and when loss results, where the suffer- ing party has been guilty of contributory negligence, no damage will be adjudged. Persons owning property situated contiguous to rail- ways and manufacturing establishments must exercise a due degree of care in its protection, and, failing to do so, they will be without a remedy, should they sustain loss. The fact, however, that a per- son builds his house or shop near the railroad track will not excuse negligence on the part of the railroad company. The exposed po- sition may even call for increased care by both parties; but, should the owner of the property thus situated invite disaster by his own imprudence, he will do so at his peril. Should a building so located be filled with inflammable material, and the windows allowed to re- main open on the exposed side, or if shavings, litter, or other highly combustible matter be allowed to accumulate about the premises dur- ing periods of unusual dryness, and a loss occur under such circum- stances, it will be the duty of the court to refuse damages, on the ground of contributory negligence. In the case of Cook v. Champlain Transp. Co." the court said: 3 1 Denio (N. Y.) 91. (367) § 131 LAW OF FIRE INSURANCE. (Ch. 6 ^'The landowner builds immediately on the line of the railroad, as he has the unquestioned right to do. It may be an act of great im- prudence, but in no sense is it illegal. Is he remediless, if his house is set on fire by the sheer negligence of an engineer in conduct- ing his engine over the railroad? There must be some wrongful act or culpable negligence on the part of the plaintiff to bar him on this principle, and neither can be affirmed of any one for simply occupy- ing a position of more or less danger on his own premises. * * • We must, I think, come to the conclusion that, while the person con- fines himself to a lawful employment on his own premises, his po- sition, however dangerous or imprudent it may be, is not, therefore, wrongful, and his undue care or judgment in its selection can never amount to negligence, so as to deprive him of redress for wrongs done him by others." § 131. As to Who is Primarily Liable. The supreme court of the United States, in the case of Chicago, St. L. & N. O. E. Co. V. Pullman South Car Co.^* discusses the ques- tion presented, when two or more parties are liable for a loss, with which of the parties the liability primarily rests. The Pullman Car Company had agreed to furnish parlor and sleeping cars for the plaintiff's road during a term of years, the latter assuming by con- tract stipulations to make good any loss or damage by accident or casualty which might result to the cars, except such as might be caused by any defect in the lighting or heating apparatus. One of the cars thus engaged, from unknown cause, and without fault of the railroad company, was destroyed by fire. The Pullman Car Com- pany held policies of insurance on the property, and under these poli cies a loss had been recognized by the insurers, adjusted, and paid. Subsequently, by arrangements between the insurers and the Pull- man Company, suit was brought by the latter against the railway company to recover the whole loss sustained. No wrong was im- puted to the railway company in connection with the cause of the fire. Its liability, if any, was created entirely by the terms of the contract into which it had entered with the Pullman Company, and 54 139 U. S. 79. 11 Sup. Ct. 490. (368) Cll. 6) SUBKOGATION. § 132 the court held that the insurers were entitled to the benefits of the contract between the railroad and the Pullman Company. We quote from the opinion by Harlan, J.: "The plaintiff could recover only one satisfaction for the loss, and if the amount recovered from the railroad company, increased by the sum collected from the insurance companies, was more than sufficient for its indemnity, the excess would be held in trust for the insurance companies. The inquiry in this action is as to the amount for which the railroad company is bound, on its contract v,ith the plaintiff, and the recovery is not affected or limited by the amount collected from the insurance companies. As said in Mobile & M. R. Co. v. Jurey," which was a suit against a carrier, 'although the suit is brought for the use of the insurer and it is the sole party beneficially interested; yet its rights are to be worked out through the cause of action which the insured has against the common carrier. The legal title is in the in- sured, and the carrier is bound to respond to all the damages sus- tained by the breach of his contract. If one part of the loss has been paid by the insurer, the insured is entitled to the residue.' This is because, as said by Chief Justice Shaw, in Hart v. Western R. Corp.,^'' 'the liability of the railroad is, in legal effect, first and prin- cipal, and that of the insurer secondary, — not in the order of time, but in order of ultimate liability.' So, in Weber v. Morris & E. R. Co.:" 'Xotwithstanding such payment, an action will lie by the insured against the railroad company. The insurance is to be treated as a mere indemnity, and the insured and the insurer regarded as one person.' So, also, as to when the right of subrogation exists and the manner of its enforcement, in the opinion of Justice Gray, in St. Louis, I. M. & S. R. Co. v. Commercial Union Ins. Co." " § 132. Conclusions. ■^Mien the mortgagee procures the insurance at his own charge, the mortgagor may claim nothing in the settlement of a loss. He is not a party to the contract, and in no way beneficially affected. 65 111 TT. S. 5S4, 4 Sup. Ct. 566; Phoenix Ins. Co. v. Erie & W. Transp. Co., 117 V. S. 312. 320, 321, 6 Sup. Ct. 750, 1176. '■« 13 Mete. (Mass.) 99. 6 7 3.J N. J. Law, 409. 6 8 lyo u. S. 223, 11 Sup. Ct. 554. OSTR. FIRE INS. — 24 (369) § 132 LAW OF FIKE INSURANCE. (Ch. 6 When, in such case, the insurer pays the mortgagee the full sum due him under the terms of the mortgage, then he will be entitled to an assignment of the securities, for the protection of which the policy was issued. As the mortgagee has no insurable interest in the property covered by the policy, except in the preservation of his security, the extent of the insurer's obligation will be the restoration of the property, or the payment of the sum due on the mortgage. It is contrary to public policy and destructive of public virtue to permit the insurance of property for the benefit of persons who have no insurable interest. It is equally opposed to public policy and public virtue for a person to be twice satisfied for one debt, to have two payments of one loss, or otherwise to be benefited by the wrongs and misfortunes of others. As, therefore, the mortgagor is not privy to the contract between the insurer and mortgagee, he has no rights to be enforced, and his obligations as debtor will continue unim- paired; and, as the law will not permit two payments to' the mort- gagee, when he is made whole the duty of the insurer has been per- formed, and he may go hence, tailing with him whatever may remain of the mortgage debt. It is competent for carriers to relieve themselves, by contract, from loss to property for which they become liable in the course of business, except such loss as shall result through their own negli- gence and wrong-doing, or the negligence and wrong-doing of their servants. Carriers may agree with shippers for the benefit of insurance they may have, or thereafter obtain, on merchandise received from sucli shippers for transportation. When this is done, the right of subro- gation will not exist to the insurer, who pays loss on affreightment. Every person must use his own in such manner as not to deprive others of the natural and lawful enjoyment of their own. This rule expresses the compromise between the spirit of order and jus- tice on one side and aggression and robbery on the other. To its recognition and enforcement we shall owe the permanence of human society. "Sic utere tuo, ut alienum non Isedas." When the insured property is destroyed by the wrongful act of another, on payment of the loss, the insurer will be subrogated of the insured's right to re- cover from the wrong-doer. (370) Ch. 6) SUBRO .ATION. § 132 Negligence or a wanton destruction of property is, in most cases, the basis of subrogation, except in states where the rule of the com- mon law is changed by statute. When separate insurance is procured by both the owner of the property and the mortgagee, independent and distinct interests are covered, and there will be no forfeitures on account of other insur- ance "without notice," nor will one policy be entitled to contribution from the other in payment of a loss. The respective rights of the insurer, mortgagor, and mortgagee must be determined by the terms of the contract which brings them into relationship. Each will owe to the other the performance of such duty only as the conl^-act expresses. When the mortgagor ob- tains the insurance, the loss will be payable to him, unless it be oth- erwise designated in the policy. When the mortgagor obtains insurance at the request and charge, and for the benefit, of the mortgagee, the former becomes the agent of the latter in respect to this particular act, and any concealment, misrepresentation, or other fraud practiced by the mortgagor in pro- curing such insurance is chargeable to his principal, the mortgagee. "Qui facit per alium, facit per se." In such case the stipulation in the mortgage clause, relieving the mortgagee from forfeitures under the terms of the policy, caused by "the acts and omissions" of the owner, of the property, does not apply. The acts and omissions are those of the mortgagee, from the consequences of which he is not relieved by the stipulation. (371) § 133 LAW OF FIRE INSURANCE. (Ch. 7 CHAPTER VII. WARRANTIES AND REPRESENTATIONS. § 133. Warranties must be Performed unless Performance is Waived. 134. Distinction between Warranties and Representations. 135. Wliat is Performance, and What is Not. 136. May tbe Written Evidence of Warranty be Set Aside by the Parol Testimony of an Interested Witness? 137. Is it within the Province of the Court to Annul a Promissory Wai'ranty because such Warranty Contemplates Changes in the Circumstances of the Risk? , 138. The Right of Persons to Make Contracts Concerning All Subjects Affecting the Ordinary Affairs of Life is a Constitutional One, and Cannot be Taken Away, by Construction or Otherwise. 139. Warranties and Conditions Precedent Essenlially Alike. 140. Warranty Concerning the Quantity of Land Comprising the Premises Insured. 141. When Warranties are in Praeseriti. and When Continuing. 142. Conclusions. § 133. Warranties must be Performed unless Performance is Waived. The warranty expressed in an insurance contract must be sub- stantially true, whether the fact warranted is material or not. The courts have held without exception that the question of materiality has been settled by the agreement of parties, and cannot be inquired into after a loss. The rule is different in respect to representations. It is on the materiality of these, and not their literal truth, that an obligation rests.^ ■> Virginia Fire & Marine Ins. Co. v. Morgan, 90 Va. 290, 18 S. E. 191 (see authorities there cited); Home Ins. Co. of New York v. Delta Bank, 71 Miss. 008, 15 South. 932; Mechanics' Ins. Co. v. Thompson, 57 Ark. 270, 21 S. W. 468; Hanover Fire Ins. Co. v. Gustin, 40 Neb. 828, 59 N. W. 375. In the last case cited, it was held that there must be substantial, if not literal, compliance, when the terms of the warranty are definite, and that when ambiguity exists the construction must be reasonable, and consistent with common usage. (372) ^h- 7) WARRANTIES AND REPRESENTATIONS. § 134 § 134. Distinction between Warranties and Representa- tions. To distinguish between a warranty and a representation often calls into exercise our best faculties of discrimination, and it not unfrequently occurs that the courts ai-e baffled in their most patient efforts to ascertain the real intention of the parties. The facts in- volved sometimes present this question clouded with so much ob- scurity that no clear line of distinction can be found, e\en by minds accustomed to dealing with abstruse and perplexing problems. When the circumstances are of this character, it will be the duty of the court to resolve its doubt most favorably to the insured, who, it may fairly be presumed, is the least responsible for the confusing entanglement of words which has caused to be doubtful that which could so easily have been made plain. Generally the line separating a warranty from a representation is broad, and plainly discernible to the average intelligence. The preliminary survey and the later negotiations which lead to the ultimate agreement and completed contract are usually the work of persons who are unlearned in the dialectics of the law, — persons who are without such special knowl- edge and technical skill concerning these important matters as to enable them to intelligently distinguish the precise legal import of particular words and phrases. These facts are recognized by the courts, and their judgments frequently indicate the desire, and some- times the purpose, to "temper the winds to the shorn lambs." When the application signed by the assured is referred to in thp policy, and declared to be a warranty, it will be so held;= but even then distinctions have been made between such parts of the appli- cation as are merely descriptive, which are necessary only to locate ' When application is referred to in ttie policy, signed by tl:e insured, and its statements warranted to be true, tlie parties will be bound. Sun Fire Office V. Wich (Colo. App.) 39 Pac. .587; Plioenix Assur. Co. v. Coffnian (Tex. Civ. App.) 32 S. W. 810; Denny v. Insurance Co., 13 Gray (ilass.) 497; South- ern Ins. Co. V. White, 58 Ark. 277. 24 S. W. 42.-.. Held, that statement contained in the application, designated a "warranty," being inconsistent with other statements in application, could have no greater legal effect than representations. Indiana Farmers' Live-Stock Ins. Co. v. Byrkett (Ind. App.) 30 N. E. 779. (373) § 134 LAW OF FIKE INSURANCE. (Ch. 7 and define the risk, but have no importance as to an understanding of its character, and cannot be presumed to have influenced the in- surer in fixing the rate, or its acceptance of the hazard, and other parts where the statements made are clearly material, relating to matters affecting either the physical or moral features of the risk proposed. The former are usually called "representations," and the latter "warranties." A warranty cannot be created by construction. It has such rigor in its character, and such dominating influence in the construction and enforcement of a contract, that it can never be called into existence except by the agreement of parties, either expressed or clearly implied. In Daniels v. Hudson River Fire Ins. Co.,' the question of what con- stituted a warranty was a subject of contention. Shaw, C. J., said, "There is undoubtedly some difficulty in determining by any simple and certain test what proposition in a contract of insurance consti- tutes a warranty, and what a representation." It appears that the intention of the parties must be the ultimate test. This can frequently be ascertained from the circumstances pre- sented. If the statement or proposition made has no important re- lation to the undertaking, it ought not to be presumed that the in- sured intended, or that the insurer understood, that it was to have the dignity and importance of a warranty. Chief Justice Shaw gives a very satisfactory illustration of this principle of interpretation. Referring to the application, he says, "Tl^e declaration was 'ashes are taken up in iron hods.' " It was admitted that the hods were made of copper, and not of iron. He adds:. "If this was a warranty, the policy is gone. If a representation, it would not, we presume, affect the policy, because it would be utterly immaterial, and would not have influenced the minds of either party in making the contract or fixing its terms. Hence it is that the leaning of all courts is to hold such a stipulation to be a representation, rather than a warranty, in all cases where there is any room for construction, because such con- struction will in general but carry into effect the real intent and pur- pose which the parties had in view in making the contract." The learned and eminent judge reasoned with much plausibility that it was the intention of the insurer to warrant a "metal hod," and s 12 Gush. (Mass.) 416. (374) Ch. 7) M'ARRANTIES AKD REPRESENTATIONS. § 134 that the kind of metal was not material, and presumably not in the minds of the parties to the contract. This conclusion, it appears to us, involves a fallacy, which on being poiated out indicates the danger that will always exist when the court stops to consider the question of materiality in connection with a warranty. The application, which was made a part of the policy and a warranty, said that "the ashes were taken up in an iron hod." Now, suppose, for purpose of illustra- tion, that the hod actually in use was made of lead, — a metal that will fuse at a comparatively low temperature. Would the learned judge have been justified in holding, as a matter of law, that it was immaterial, and that the fact had not influenced the minds of the par- ties when entering into the undertaking? But if the use of a lead hod would have been a breach of warranty, because it is a metal that liquefies at a lower temperature than iron, then for the same reason would the use of a copper hod, for a greater heat is required to melt iron than copper. The difiiculty and confusion result from the abandonment of the distinctive and elemental character of a warranty, and degrading it to the level of a representation, by per- mitting an inquiry to be made into the materiality of the thing or fact warranted. The Pennsylvania court, in deciding the case of State Mut. Fire Ins. Co. v. Arthur,* presents the following brief yet lucid ex- planation of the nature and object of a warranty. It said: ''The purpose in requiring a warranty is to dispense with inquiry, and cast entirely upon the assured the obligation that the facts shall be as represented. Compliance with his warranty is a condition pre- cedent to any recovery upon the contract. It is therefore that the materiality of the thing warranted to the risk is of no consequence." " In the case of Chrisman v. State Ins. Co.^ an application was taken on a printed form. Certain questions were asked and answered, and *30 Pa. St. 315. » Newcastle Fire Ins. Co. v. Macmorran, 3 Dow. 205; Burrltt v. Insurance Co.. 5 Hill (X. Y.) 188; Wilson v. Insurance Co., 6 N. Y. TjS; BowUitib Mut. Fire Ins. Co. v. Winslow, 3 Gray (Mass.) 415. Materiality of waiTanty a matter of law. Patten v. Insurance Co., 3S N. H. 338; Hutchins r. Insurance Co., 11 Ohio St. 477; Shoemaker v. Insurance Co., CO Barb. (N. Y.) 84; O'Neill v. Insurance Co.. 30 U. C. C. P. 151. 6 10 Or. 283, IS Pac. 460. (375) § 134 LAW OF FIEE INSURANCE. CCh. 7 there were other questions to which no answers were given. The policy referred to this application, and made it a warranty, in the following terms: "The basis of the contract is said application, which shall be taken and deemed as a part of this policy and a warranty on the part of assured, and any fact or untrue answer and statements material to the hazard of the risk shall render this policy null and void." The trial court instructed the jury that the statements con- tained in the application must be true "so far as they were material to the hazard, and that the matei'iality of such statements must be shown by evidence." The supreme court, to which the case went on appeal, held to a different opinion. It said: "This contract must be so construed as that every word and part thereof shall have effect if possible. This is an elementary rule, to be applied to all writings whenever any right is claimed under them in a court of justice. But, in giving and refusing the charges excepted to, the court below over- looked one essential part of the contract. It is contained in the ap- plication and is quoted above. The effect of the material part of it is that if the applicant does not truly answer the following inter- rogatories, and correctly describe, state, and make known the prop- erty, the value, the title, the location, the exposures, the occupancy, the liens and incumbrances thereon, or if any misrepresentations or omissions to make known any and all facts material to the risk herein, then the said policy shall in either event be null and void. Here the assured was required to make known certain enumerated facts, concerning which he was particularly questioned, and then he was required to make known all facts material to the risk therein, and a failure in either event rendered the policy void. The instruc- tion given by the court was not in accordance with this construction of the policy, and was therefore erroneous; and so, too, as to the in- struction refused by the court. The effect of that refusal, and the giv- ing of the instruction complained of, was to declare that said policy contained no warranty; that all the statements of the assured in his application were representations merely, and not warranties, and their falsity was of no effect unless material to the hazard of the risk. In this view, the distinction between a warranty and a representation was entirely overlooked. The difference between a warranty and a representation is that a warranty must be true, while a representation must be true only so far as the representation is (376) Ch. 7) WARRANTIES AiND REPRESENTATIONS. § 134 material to the risk; and it is material when a knowledge of the truth would have induced the insurer to have refused the risk, or to have charged a higher rate of premium." It will be observed that the court here takes the position that, an application having been made a part of the policy, not only the facts stated therein became warranties, but, under the terms of that part of the application quoted, the insured warranted to disclose all facts in regard to the situation, character, and occupancy of the property, — in fact, the disclosures promised and warranted related to all mat- ters inquired about, and besides to all other matters material to the risk; that the printing in the application of a question signified the asking of such a question, which must be answered; and that if no answer was given the omission constituted a breach of the warranty. We think this is carrying the doctrine further than will be justified, in view of the general trend of authorities. The courts have often held — and, we think, generally — that when a printed question is pre- sented in an application, and the blank in which answer is to be made is left unfilled, such question will be deemed not to have been asked, or that the answer has been waived.'' The covenant, how- ever, in this application, differs in important particulars from those usually found in applications for insurance. The court, too, it will be observed, says that the application and the policy become an en- tirety; that, by force of the agreement expressed on the face of the policy, the two writings are merged into one contract; and that they must be construed together, as far as possible, and in such a manner as to give effect to each word and provision. But the courts have been in the habit of construing the insurance contract, when it is am- biguous, or when difficulty is experienced in reconciling apparently contradictory provisions, so as to give to the assured the benefit of any doubt which may be found to exist, on the ground that it is the language of the company, and not of the insured, and that it was the 7 Wyman v. Insurance Co., 1 Allen (Mass.) 301; Campbell v. Insurance Co., 73 Wis. 100, 40 N. W. 661; Butler v. Insurance Co.. 4 Tupper (Ciin.) 301; Gill V. Insurance Co., 1 Ont. 341; Dolan v. Insurance Co., 5 Lans. (N. Y.) 275; Uuell V. Insurance Co., 2 Flip. 9, Fed. Cas. No. 2,104, and 5 Ins. Law J. 274; Pavey v. Insurance Co., 56 Wis. 221, 13 N. W. 925; Dodge Co. Mut. Ins. Co. V. Rogers, 12 Wis. 337; Geib v. Insurance Co., 1 Dill. 443, Fed. Cas. No. 5,208; Kansas Protective Union v. Gardner, 41 Kan. 307, 21 Pac. 233. (377) § 134 LAW OF FIRE INSURANCE. (Uh. 7 insurer's duty to make the contract plain and free from ambiguities or contradictions. The rule appears to be invariable that when con- struction becomes necessary it will be more strictly against the in- surer than the insured. Now, the provision of the policy by which it is claimed that this application was incorporated provided, among •other things, as the lower court interpreted it, and as we think it should be interpreted, that the answers should be warranted so far as they were material to the hazard. Adopting, therefore, the usual rules of construction, it is not clear, we think, that the trial court ■committed any error in holding that the matter of materiality must be shown by evidence. But, as we have seen, the supreme court disputed this view of the matter, and notwithstanding the clause re- ferred to, in regard to materiality, it was held that the application, with each statement it contained, under the agreement expressed on the face of the policy, became a warranty, and, if not literally true in each and every particular, there would be no liability on the part of the insurance company to pay the loss. But the court does not stop here. The warranty is extended to embrace printed questions, and the omission to answer these, it is held, would be such a breach as to cause a forfeiture. Where an application is made the basis of the insurance, and re- ferred to in the policy as containing statements and representations that are to explain and constitute a part of the agreement, the con- tract will be understood as existing in two parts, which must be con- strued together. The application will generally set out with partic- ularity, and in definite form, such facts and circumstances as the insurer deems important and material for an understanding of the hazard; and it is uniformly stipulated in such cases that its obligation to pay a loss is made to depend upon the truthfulness and good faith of the statements contained in the application. The signing of an application by the insured, or the manner of its identification, is not essential. Proof in both these respects can be supplied by parol. In Rankin v. Amazon Ins. Co.* the policy expressed the following stipulation : "Reference is hereby made to a survey and diagram on file in the oflflce of J. C. Mitchell & Son, which is made part of this pol- icy, and a warranty on the part of the assured." In fact, there was 8 (Cal.) 25 Pac. 260. (378) ^h. 7) WARRANTIES AND REPRESENTATIONS. § 134 no iipplication on file in the office of J. C. Mitchell & Son at the time the policy was issued, nor for a period of two weeks afterwards. Mitchell & Son were the brokers who negotiated the insurance, and Mr. Mitchell's undisputed testimony was to the eifect that when he procured the insurance he promised to obtain survey and application, and retain the same on file in his oflBce, for the benefit of the parties interested. The application thus procured does not appear to have been regularly signed by the insured, and, besides, it was written on a blank prepared for the use of another company; and we are left to infer from the statement of facts contained in the report of the case that there was nothing in the survey and application itself to show •conclusively that it was the one referred to in the policy, and nothing to indicate that such was the fact, except that it described the par- ticular property insured. The court held that this was not important, and permitted the defendant, by parol evidence, to identify the sur- vey and application. The court said: "Mitchell testifies that when he procured the policy he promised to procure and furnish such an application and survey, and that he did procure and furnish this one in compliance with that promise; and it is uncontradicted that he did so, and that this was the only one furnished. The contract was to be in two parts, as all these contracts are, — each dependent upon the other. One of the parts was finished at one time, and in this instance either the other was finished at another time, or has never been finished. If finished, they constitute one contract. If never finished, there was never any contract. This paper, which was furnished by the agent of the insurer in pursuance of his promise, an- swers the calls of the other part of the contract, is in the form of an application and survey, accompanied by a diagram illustrating the survey, and furnishes the ordinary information upon the insurer's part on which such a contract is based." The rule of law as to whether a court may inquire into the materi- ality of a warranty was clearly and forcibly stated by the supreme court of Maine in the case of Johnson v. Maine & N. B. Ins. Co.» The insurance there was on the life of one Smith, and was based on cer- tain statements contained in the application, which were agreed to be material and warranties. To one of the questions asked in the » (Me.) 22 Atl. 107. (379) § 134 LAW OF FIRE INSURANCE. (Ch. 7 application it had been answered that neither of the insured's parents or brothers and sisters had been affected with insanity. This, on the trial of the case, was found to be untrue, and the plaintiff sought to relieve a forfeiture by showing that it was not material. The court said : "This contract was evidenced by two written instruments,— one called the 'application,' signed by Smith ; the other called the 'policy,' signed by the proper oflScers of the company. All the terms and con- ditions of the contract were embraced in these two writings." To save an avoidance, while plaintiff admitted that the applicant for insurance did know that he had a half-brother of an unsound mind, afflicted with a mild form of what is designated in medical science as "dementia," he had given the answer contained in the application in good faith, not understanding that his brother's mental disease was of a character known either to the" law or to science as insanity. To this plea the court answered: "If the applicant was sincere in such a belief, it would acquit him of fraud in so answering, but his sincerity is not enough to uphold a contract stipulated to be based upon the actual correctness of his answers. He stipulated absolutely in his application that his answer was 'full, complete, and true.' Such a stipulation calls for truth in fact, not merely for the applicant's knowl- edge and belief. His answer was unqualified. It purported to state an absolute fact. He did not qualify it by any reference to belief or understanding. The other party was to rely upon the language used, — the outward expression, — without inquiring into the inward belief. Had he stated his answer to be merely according to his belief, and such answer had been accepted, his belief might be material and suf- ficient, as in Insurance Co. v. Gridley," cited by plaintiff's counsel;, but, as the answer stands in this case, the applicant's belief and sin- cerity are clearly immaterial and insufficient." In respect to the question of whether the fact warranted was ma- terial or not, the court further says : "We do not think, however, the question of materiality of the answer is now open for consideration. That question was closed by the parties themselves. They stipulated that this answer, with all other answers, was material. The com- pany was under no obligation to insure the life of the applicant. It was a private corporation, doing a private business. It could admit 10 100 U. S. 614. (380) Ch. 7) WARRANTIES AND REPRESENTATIONS. § 134 or reject applicants at will. It could impose such terms and condi- tions (not illegaf) as it pleased, however immaterial or trivial they might appear to the court. It had a right to stipulate that it would not insure the life of any person whose brother had ever had any kind or degree of insanity. It had a right to stipulate that any insanity in any relative should be regarded as material to the risk. The ap- plicant could decline to enter into a contract for insuraijce on those terms and conditions, or he could accept them and close the contract." Representations will become warranties, whether designated as such or not, when, from their character, or the circumstances under which they are made, it clearly appears that it was the intention of the parties that the facts represented should be the basis of the con- tract ; and it may often be of no consequence whether the application is referred to in the policy as a warranty, and a part thereof. If it otherwise appears that the application is the basis of the contract, all material statements which it contains will have the character and the importance of warranties. The fact that title, incumbrance, occupation of the premises, watchman, etc., are inquired about, creates a presumption that each of these matters is by the parties themselves deemed material. The applicant for insurance, and the company ap- plied to, have a right to decide these matters in the first instance; and, as a distinguished law writer has said, "it is not competent for the courts to say they have misjudged as to the materiality of the facts." While it is the duty of courts to construe and to enforce con- tracts, they have no power either to create them, or to give by con- struction any different meaning to their terms than the parties them- selves have intended. When the insured warrants to do a particular thing, it will not be performance if something else is done, which he may believe, or even know, to be as good or better. To illustrate, we will suppose that he warrants to procure and place on the prem- ises a particular appliance for arresting fires, but, instead, another kind, of equal or even superior efficiency, is obtained. The warranty is broken, and the insurer discharged. The justice of this rule is apparent. The parties have agreed and specified what appliance will be useful and satisfactory, and it is not competent or just for either of the parties, acting independently, to substitute something different, on the plea that it is equally effective. Neither party is authorized to estimate for the other the relative value and efficiency (381) § 134 lAw OF FIRE INSURANCE. (Ch. 7 of the particular thing warranted and the substitute procured, nor may the courts undo what the insured and the insurer hare them- selves done. The question of materiality cannot be a matter of judi- cial inquiry. The case of Murdock v. Chenango Co. Mut. Ins. Co.^^ is quite analogous, and aptly illustrates the importance of absolute verity in stating a fact which is made a warranty. It there appeared that a stovepipe passed through a window, but it was warranted that a stone chimney would be built, and the pipe caused to enter it at the side. Afterwards the stove was removed to another part of the building, and the pipe passed through a stone placed in the roof, but no chimney was built. The company assented to the change in the location of the stove, and, through its proper oflQcer, indorsed the pol- icy as follows : "Consent is given that the within policy remain good, notwithstanding the stove has been removed." The court held that the warranty had not been performed, and that the policy was voided. It may often happen that the matters warranted can serve no useful purpose, but, when this occurs, performance will not be excused. An instance of this kind is found in the case of Johnson v. Dakota Fire & Marine Ins. Co.^^ The application which the plaintiff signed contained certain misrepresentations in regard to title or incum- brance. The insurance was against loss from hail storms, and, as risks of that class are beyond the control of human agency, the lia- bility of the insurer could not be increased or diminished on account of the negligence or care of the insured. There would be, from the circumstances of the case, no way in which the destructive forces of nature could be turned from their course by the will of an embar- rassed and dishonest policy holder. As no bad moral hazard could by any possibility come to exist, it was, so far as the insurer was con- cerned, a matter of no consequence whether the property was incum- bered or not, but the court said: "It certainlyis not apparent to us that representations as to incumbrances, which in lire risks are conceded to be important and material, are equally so when the insurance is a hail risk. Nevertheless we must hold that the parties have a right to make a stipulation to the effect that any given representation as to a matter of fact, made as the basis for the contract, shall be deemed a warranty, and a material part of the contract. * * • It does 11 2 N. Y. 210. 12 1 N. D. 167, 45 X. W. 799. (382) Cll. 7) WARRANTIES AND REPRESENTATIONS. § 135- not, in our opinion, matter whetlier the representations in the appli- cation as to the incumbrance on the property are or are not material in fact. If not intrinsically material, they have been made so by agreement of parties." While the arbitrary insistence upon a technical right may occasion- ally result in hardship to one or the other of the parties to a con- tract, the courts have no remedial power. It is their duty to enforce the contract as made. It would, no doubt, be a greater evil to re- strict the liberty of a person to agree with another in terms that he may judge best intended to promote his interests, than to give legal, effect to unwise and oppressive contracts.^^ § 135. What is Performance, and What is Not. Nothing less than a substantial performance of a warranty will be- sufBcient. It refers to the spirit as well as the letter of the contract. Even a literal observance, if it fails to accomplish the evident intent of the parties, will not satisfy. It is not form, but substance, that is warranted. This was aptly illustrated in the case of Mechanics' Ins. Co. V. Thompson.^* In the application, which was made a part of the policy and a warranty, it was promised that the insured would "keep within ten feet of a gin stand one barrel full of water, and two buckets." At the trial, while it was not disputed but that the barrel of water and buckets were at the place designated, it was shown that they were inaccessible, on account of cotton bales being piled in such manner as to prevent water and pails being reached without so much delay as to defeat the purpose for which they were provided. The court held — and very properly, I think — that the warranty had not been performed. It said: "The object of the second agreement or warranty is apparent. The barrel of water and two buckets were evidently required to be kept within ten feet of the gin stand for the purpose of being promptly used in extinguishing any fire that might originate in or at the gin stand. The terms of the agreement neces- sarily imply that the water and buckets should have been at all times 13 Stensgaard v. Insurance Co., 50 Minn. 429, 52 N. W. 910; Micbigau Shin- gle Co. V. London & Lancashire Fire Ins. Co., 91 Midi. 441, 51 N. W. 1111. 1* 57 Ark. 279, 21 S. W. 468; Southern Ins. Co. v. White, 58 AHj. 277, 24 S. W. 425. (383) § 135 LAW OF FIRE INSURANCE. (Ch. 7 readily accessible. Their purpose could not have been subserved in any other manner." In Virginia Fire & Marine Ins. Co. v. Morgan " there was an appli- catibn, which, by incorporation into the policy, was made a warranty. The thing warranted was the keeping of certain account books in an iron safe, or other secure place. This was not done, and the court held that there could be no recovery. To prevent the forfeiture, parol contemporaneous testimony was offered to show that the insured was asked no questions in regard to books of account, that he could not read English, and that the application was not read to him before sign- ing. The testimony so offered was refused, as it proposed an in- fringement of the rule that, "in the absence of fraud, parol testimony is incompetent to vary the terms of a written contract." The court referred to Southern Mut. Ins. Co. v. Yates, ^° and, in discussing the opinion in that case, remarked : "The plaintiff, it was said, was bound, not only to answer the questions put to him correctly, but to use due diligence to see that the answers were correctly written, and that if he signed the application without reading it, or having it read to him, that of itself was inexcusable negligence. It was also said that if the evidence was admissible it would be difficult to imagine a case in which the legal import of a deed might not be varied by parol tes- timony. The only difference between that case and this is that here the plaintiff offered to prove his inability to read the language in which the application was filled up, but that is immaterial, as he could have easily ascertained the contents of the paper; and the law presumes, under the circumstances of the present case, that when he signed the paper he understood and assented to all it contained. If the rale were otherwise, there would be no certainty or safety in written contracts." The correct rule is no doubt here stated by the Virginia court, but the facts to which it is applied should be carefully distinguished from those of another and a numerous class of cases, where the agent of the company, in filling up the application, fraudulently writes in dif- ferent answers from those given by the insured, or where no inquiry is made concerning facts which are known to the agent, through whose fault they are incorrectly stated in the application signed by 15 90 Va. 290, 18 S. E. 191. lo 28 Grat. (Va.) 585. (384) ^1'- "i) WAHEANTIES AND REPRESENTATIONS. § 135 the insured.^^ When fraud is perpetrated by the company's agent, the warranty in either the application or policy will fail; and, when the company has knowledge at the inception of the risk that the facts warranted are not true, it will be estopped from pleading a breach of warranty as a defense, unless it appears that the agent and the applicant are colluding to defraud the company.^* In that case the person who fills up the application will be regarded as the agent of the one whom he collusively serves, and the insured will be bound by his warranty. The line between representations and warranties is often vague and uncertain. When this occurs the courts will resolve the doubt in favor of the insured. The righteousness of this partial- ity cannot be challenged, as it recognizes the fact that, in all mat- ters preliminary and otherwise to the writing and delivery of the pol- icy, the insurer has in most instances assumed to direct at each stage of the proceedings which lead up to the completed contract. The application and policy are both prepared in reference to forms sub- mitted by the insurer, and these are in most instances filled up by its expert agents or employes. When, therefore, the language used is of doubtful meaning, and may be fairly understood in different ways, it will be given such construction as will be most favorable to the in- sured. Lord Eldon, in discussing this question, said: "It is a first principle in the law of insurance that, if there is a warranty, it is a part of the contract; that the matter is such as it is represented to be. The materiality or immateriality signifies nothing. The only question is as to the mere facts." The distinction between a warranty and a representation con- sists in the fact that in one case the question of materiality is closed. and in the other it is still open. Representations often form the basis of a contract, and it is important that they be true in respect to every material fact. If untrue, and in consequence rights are injuriously affected, the contract stands on a fraudulent basis, and is without legal effect. In a warranty the materiality and value of the fact warranted are agreed upon by the parties, while the materiality and value of a representation must be determined by a court or jury. It 17 Mayor, etc., of New York v. Brooklyn Fire Ins. Co., *43 N. Y. 405, ;i Abb. Dec. (N. Y.) 251; Durand v. Thouron, 1 Port. (Ala.) 238. 18 Liverpool & London & Globe Ins. Co. v. Farnsworth Lumber Co., 72 Miss. 555, 17 South. 445. OSTR.FIRE INS. — '25 (385) § 135 LAW OF FIRE INSURANCE. (Ch. T will not often occur that anythiuig in the nature of the fact itself will determine its character as a warranty or representation. Irrespec- tive of their importance per se, facts may be given an artificial value and dignity by the agreement of the parties. This is frequently true in regard to warranties. It will often depend wholly upon the- language of the contracting parties what position and value any par- ticular fact has in reference to the enlargement or limitation of their obligations. If they choose to make it a warranty, it is easy to say so, and to employ such form of words as will leave no doubt as tc their intention. When a fact is designated as a warranty, that will usually be the end of controversy; but, when the interbtion of the par- ties is involved in ambiguous phrase, courts must resolve the doubt, and this will be done consistently with the rule before stated, — to- prevent forfeitures when it is possible to do so without unnatural in- terpretation or strained construction. Eeferring to particular facts in the policy or application, and des- ignating them as "warranties," is not conclusive as to their character. This was held in the case of Indiana Farmers' Live-Stock Ins. Co. v. Rundell.^" The insurance there was on a stallion, and the applica- tion, in answer to a pertinent question, stated that during the season- before the horse had served seven mai-es, obtained five colts, and that the fee had been |20. The court found that instead of five colts there was but one, and that the service fee was only flO to |15; that it was never $20. The facts stated were relevant to the question of values, and incidentally referred to the moral hazard of the risk. The policy was issued on the "warranties contained in the applica- tion." Above the signature in the application of the defendant in error were the following words: "I warrant the above answers to each of the foregoing questions to be true." Tne court then calls^ attention to the fact that in both the policy and application the state- ments referred to were, in various forms, designated as "representa- tions." It quotes from the application the following stipulation,— that "The insured has in no wise misrepresented or concealed any fact concerning said stock"; and from the policy, "This policy shall be void if any material fact or circumstance stated in writing has not been fairly represented." 10 7 Ind: App. 42G, 34 N. E. 588. (386) Ch. 7) WARRANTIES AND REPRESENTATIONS. § 135 From this and other similar qualifying stipulations found in the printed terms of the policy, the court reached the somewhat singular conclusion that the statements made in regard to the service and value of the horse insured \\ere not warranties, notwithstanding the direct and positive aflQrmance of that fact in both the policy and ap- plication, and in the latter over the signature of applicant. This decision is perhaps chiefly valuable in showing how far a court will sometimes go, in the matter of construction, to save for- feitures. TMiile the facts here involved do not appear to support the conclusion, the principle of construction recognized must be ac- cei>ted as correct. In National Banli v. Insurance Co.^" it was said: "When a policy of insurance contains contradictory provisions, or has been so framed as to leave room for construction, rendering it doubtful whether the parties intended the exact truth of the applicant's statement to be a condition precedent to any binding contract, the court should lean against that construction w^hich imposes upon the insured the obliga- tion of a warranty." When one warrants the truth of a particular statement, it is the fact, and not the belief or good faith of the warrantor, that is in- volved. The insurer may suffer none the less because the applicant has intended no deception, but was himself honestly mistaken con- cerning the facts warranted. The insurer estimates the desirability of the risk, and its value, on the basis of circumstances affecting its character, which are warranted, and definitely made conditions upon which his obligation shall rest. If the facts are substantially dif- ferent from those warranted, the insurer will not be held, not because he has been fraudulently dealt with, but for the equally valid reason that the agreement to pay a loss refers to different considerations. If a person, in discharging a debt of $100, pays the creditor by mis- take what both believe to be that sum, but what subsequently is ascertained not to be more than one-half that amount, the creditor is wronged, and there will be no complete acquittance, notwithstanding the good faith may not be questioned in which payment was made.^^ 2 95 U. S. 678; Moulor v. Insurance Co., Ill TI. S. 335, 4 Sup. Ot. 466; Grace v. Insurance Co., 109 U. S. 282, 3 Sup. Ct. 207. 21 Elliot V. Life Ass'n, 76 Hun, 378, 27 N. Y. Supp. 698; Bernard v. Insur- ance Ass'n, 8 Misc. Rep. 499, 28 N. Y. Supp. 756. (387) § 135 LAW OF riRrc insurance. (Ch. 7 When a wari'anty is plain in respect to the duty of performance, but is indefinite as to tlie time or manner of its being done, the court must give it such reasonable construction as they would to any other contract. In Crocker v. People's Mut. Fire Ins. Co.''^ Judge Shaw said: "The stipulation, 'A watchman kept on the premises,' as this in the body of the policy, immediately after the description of the property insured, is in the nature of a warranty, and must be substan- tially complied with by the assured. But the terms are not explicit as to the time and manner of keeping a watch. It does not stipulate for a constant watch. It therefore requires construction, as a mat- ter of law, to determine what is meant in this policy by 'keeping a watch.' It relates to the factory, — to its safety against fire,— and this depends upon the habit or practice in this respect, and upon the fact whether that usage has been followed. When there is an ex- press stipulation that a thing shall be done, but the contract is silent as to the time and manner, the law holds that it must be reasonable in this respect, having regard to the object and the purpose of the stipulation, — in this case, to the safety of the building. If it is done in the manner in which men of ordinary care and skill in similar de- partments manage their own affairs of like kind, this is only strong ground to hold it reasonable, and to warrant the admission of evi- dence of usage." ^^ 22 8 Cusla. (Mass.) 79. 23 Sheldon v. Insurance Co., 22 Conn. 235; Frisbie v. Insurance Co., 27 Pa. St. 325; Houghton v. Insurance Co., 8 Mete. (Mass.) 114; Percival v. Insurance Co., 33 Me. 242; Stout v. Insurance Co., 12 Iowa, 371. In Phcenix Assur. Co. of London v. Coffman (Tex. Civ. App.) 32 S. W. 810, the policy warranted on the part of the insured that a watchman should be kept on duty at night. Special reference was made to the application, by the terms of which it was made a warranty that a watchman should be con- stantly kept on the premises on Sundays and during the nighttime, and at all times when work was suspended. A watchman was employed, and he was oh the premises when the fire began, but the evidence showed that he was asleep. The court held that it was not warranted that the watchman should keep awake, and that the insurers were charged with the loss. It is a safe rule, and one which the courts will inflexibly follow, that a war- ranty will not be presumed, nor its scope extended by implication. But is it using our plain English in its ordinary and reasonable sense when the word "watchman" is made to signify one who does not watch? In this case the warranty was to keep a watchman. Does not a person who goes to (388) *^h. 7) WARKANTIES AND RKPRESENTATIOKS. § 135 In Hanover Fire Ins. Co. v. Gustin " the warranty was that "a watchman should be kept on the premises during the night, and at all times when the works were not in operation, or when the work- men were not present." The evidence was that the watchman had left the premises at 6:15 in the evening, and had not returned at 7:30, when the fire occurred. It does not api)ear that the watchman's ab- sence from his place of duty was caused by sudden sickness, or from any unexpected or extraordinary exigency that could not have been provided for or put aside. He went to the central part of the town to make a purchase, thence to the railroad station to procure a ticket for a lady friend, and later to his dinner. The Nebraska court was of the opinion that the temporary absence of the watchman was not a breach of the wari-anty, and in support of this opinion refers to the language of Judge Shaw, above quoted. It should be observed that the terms of warranty in the case which Judge Shaw was considering differed materially from those which the Nebraska court was called to construe in Hanover Ins. Co. v. Gustin; and it may be possible that the great Massachusetts jurist would have hesitated, and perhaps been more guarded in his declara- tion of the law, had he contemplated that he would be made respon- sible for legal doctrines of so questionable orthodoxy as those offered by the Nebraska court. We find in Thomas v. Commercial Union Assur. Co.^° an interest- ing discussion concerning a misdescription of the property insured. In the written portion of the policy the house was referred to and designated as a dwelling. On trial it was shown that the only occu- pancy of the building had been that of an hotel ; that at the time of the insurance, and when the fire occurred, it was practically unoc- cupied, — inhabited by no one except a "care taker" or watchman. sleep on duty lose bis character as a watchmanV The designation clearly refers to the duty to be performed, as well as to flie person, and he who ceases to watch will also cease to be a watchman. If the agreement to keep a watchman does not carry with it, by fair implication, a promise that the person employed will perforin the duties of ^yatchman. then warranties are futile, and words have no distinct significance, when used to exi)ress a con- tract obligation. To say that one is a watchman who does not watch is no less absurd than to call that which is white, black, or that which is hot,, cold. 24 40 Neb. 828, 59 N. W. 375. 2= 162 Alass. 29, 37 N. B. 672. (389) § 135 LAW OF FIBE INSURANCE. C^-h- 7 The court treated the description incorporated into the policy as a warranty, and, being false, the insurer was held to be discharged from any payment of loss. Testimony was offered by the plaintiff to show that the agent of the insurer, at the time of issuing the policy, understood the situation of the property and the character of its occupancy. This the court refused to admit, on the ground that its tendency would be to vary the terms of a writtten contract.^" While the courts will guard with jealous care any infraction of the rule that a contract cannot exist partly in writing and partly in parol, there are many respectable authorities sustaining equitable estoppel under circumstances where this "hoary and venerable" rule is practically subverted. When, for illustration, it is warranted that the property insured is not incumbered, and investigation after a loss discloses the existence of mortgages, the claimant is permitted to show by parol testimony that he signed the application without read- ing it, and that the agent who filled it up had not stated the facts correctly as they were given to him; and thus the principle of equi- table estoppel is often successfully invoked. However, there appears to be a concurrence of authority in support of the rule that a written contract cannot be varied by parol testimony in respect to any matter relating to subsequent performance.^^ 28 Barrett v. Insurance Co., 7 Gush. (Mass.) 175; Jenkins v. Insurance Co., 7 Gray (Mass.) 370; McCluskey v. Insurance Co., 126 Mass. 306; Batchelder V. Insurance Co., 135 Mass. 449. 2 7 It -was in evidence at the trial that it had been explained to the agent who filled up the application that no regular watchman was employed, but that, as the mill was operated most of the time night and day, there was generally some one about to care for the property. The court held that the insurer was estopped. German-American Ins. Co. of New York v. Hart, 43 Neb. 441, 61 N. W. 582. Statements made warranties must be true, irrespective of the fact that the .statements may have been made with no intention to deceive. Standard Life & Accident Ins. Co. v. Lauderdale, 94 Tenn. 635, 30 S. W. 732. An insurance company has the right to determine the conditions upon which it will issue a policy. When these conditions are expressed, and made part of contract, their materiality is settled. Fidelity & Casualty Co. v. Alpert, 14 C. C. A. 474, G7 Fed. 460; Mechanics' Ins. Co. v. Thompson, 57 Ark. 279, 21 S. W. 468; Virginia Fire & Marine Ins. Co. v. Morgan, 90 Va. 290, 18 S. E. 191; Southern Ins. Co. v. White, 58 Ark. 277, 24 S. W. 425; (390) ■Ch. 7) WARRANTIES AND REPRESENTATIONS. § l35 In Garretson v. Merchants' & Bankers' Ins. Co.^' the policy pro- hibited the use of gasoline in the building insured. It was admitted that there was a gasoline stove, and the plaintiff sought to excuse its use, and save a forfeiture on account of the alleged violation of the condition referred to, by pleading and offering to show that the privilege written in application, "to use building for any mercantile purpose," carried with it permission to occupy for restaurant, and the use of gasoline stove as one of the incidents of such occupation. The Iowa supreme court, in construing the language of the application, «aid: "The business of keeping a restaurant is in no sense commerce. If a restaurant be a mercantile establishment, the term is equally applicable to taverns, boarding houses, and the like, which cannot be admitted. The point demands no further attention. Permission to use buildings 'for any mercantile purpose' does not authorize their use as a restaurant." There was evidence at the trial which tended to show that the so- liciting agent of the defendant had knowledge that the building insured was occupied as a restaurant; but as such agent had no au- thority to issue policy, or to bind defendant company by a completed ■contract, he had no power to waive a forfeiture resulting from the Ijreach of warranty in regard to occupancy, and the use of gasoline on the premises. The language of the court was : "If it be assumed that defendant's agent had knowledge of the use of the building as a restaurant, and assented thereto, and even knew of and assented to the use of the gasoline stove, defendant is not bound thereby, for the reason that the agent did not act within the scope of his au- thority." There is a class of cases where certain facts have been warranted, and the insurer estopped, after a loss, from settmg up their untruth- Providence Life Assur. Soc. v. Reutlinger, 58 Ark:. 52S, 25 S. W. 835; Alston V. Insurance Co., 4 Hill (N. Y.) 329; Aurora Fire Ins. Co. v. Eddy, 49 111. 106 (see Id., 55 111. 213); Blumer v. Insurance Co., 45 Wis. 622; Id., 48 Wis. 535, 4 N. W. 674; Glendale Woolen Co. v. Protection Ins. Co., 21 Conn. 19; Walroth v. Insurance Co., 10 U. C. Q. B. 525; Battles v. Insurance Co., 41 Me. 208; Smith v. Insurance Co., 25 Barb. (N. Y.) 497; Baker v. Insurance Co., 04 N. Y. 648; Merwin v. Insurance Co., 7 Hun (N. Y.) 659; Parker v. In- surance Co., 10 Gray (Mass.) 302; Boggs v. Insurance Co., 3p Mo. 63. 2 8 81 Iowa, 727, 45 N. W. 1047. (391) § 136 LAW OF FIRE INSUBANCE. (Ch. 7 fulness to defeat the insurance, on the ground that the agent -who took the application or wrote the policy had full knowledge, and that the company had not acted under a misapprehension of the facts when completing the contract and receiving the premium. The appli- cation of the doctrine of equitable estoppel in this class of cases is based on the idea that the law, in its administration, should not be made the agency of iujustice and wrong; that the insurer, having been informed of the character and circumstance of the risk before the payment of the premium, will not afterwards be permitted to escape liability for the technical reason that the facts fully disclosed were not set out in the application, which was incorporated into the policy, and made a warranty.^' § 136. May the Written. Evidence of "Warranty be Set Aside by tbe Parol Testimony of an Interested "Witness? This would, of course, be a simple and righteous solution of a not infrequent problem presented to the courts, were it not for the fact that it creates another problem, of equal difficulty, concerning the choice of evidence for establishing the verity of contracts. The old rule that "parol testimony cannot be received to vary the terms of a written instrument" recognizes the writing as the best evidence of what it was that the parties at the time understood and agreed to. "Equitable estoppel," in cases of this kind, must mean that this long- established and conservative rule shall be put aside, and that the oral testimony of an interested party may take its place. The policy contained a warranty that there was "one chimney; 2!> Stone V. Insurance Co., 68 Iowa, 737, 28 N. W. 47; MuUin v. Insurance Co., 2 New Eng. Rep. 483, 54 Vt. 223; Dwelling-House Ins. Co. v. Brodie, 52 Ark. 11, 11 S. W. 1016; Dunbar v. Insurance Co., 72 Wis. 492, 40 N. W. 386r Menk v. Insurance Co., 76 Cal. 50, 14 Pac. 837, and 18 Pac. 117; Continental! Ins. Co. V. Pearce, 39 Kan. 396, 18 Pae. 291; Pickel v. Insurance Co., 119- Ind. 201, 21 N. E. 898; Phoenix Ins. Co. v. Copeland, 86 Ala. 551, 6 South. 143; Western Assur. Co. v. Rector, 85 Ky. 294, 3 S. W. 415; Planters' Ins. Co. y. Sorrels, 1 Baxt. (Tenn.) 352; McBride v. Insurance Co., 30 Wis. 562; Cheek v. Insurance Co., 4 Ins. Law J. 99; Parker v. Insurance Co., 34 Wis. 363; Chatillon v. Insurance Co., 27 U. C. C. P. 450; Home Ins. & Banking: Co. V. Lewis, 48 Tex. 622; Texas Banking & Ins. Co. v. Stone, 49 Tex. 4. (392) Ch. 7) WARRANTIES AND REPRESENTATIONS. § 137 one stove well secured; pipe passes through crock well secured." The policy provided, in suitable language, that it should become void if there were any false descriptions by assured concerning either build- ing or contents, or if he omitted to make known any fact which in- creased the hazai-d. There was a further provision that the com- pany should not be liable for any loss occasioned by the use of fires in buildings unprovided with stone or brick chimneys. The evidence at the trial disclosed that there was no chimney or crock, and that when the first fire was built in the stove the whole property was consumed. The court held that the plaintiff, knowing that his representations concerning the character and circumstances of the hazard were false, could recover nothing, and that the situation was in no sense relieved by the fact that the agent who took the risk was on the ground, made the survey, and knew all the facts ; that the misrepresentations were for the benefit of the insured, and, being- made with the knowledge and concurrence of the agent, were in fraud of the company.*" § 137. Is it -within the Province of the Court to Annul a Promissory Warranty Because Such Warranty Contemplates Changes in the Circumstances of the Risk? It was held by the Mississippi court, in the case of Liverpool & London & Globe Ins. Co. v. Farnsworth Lumber Co.,'^ that an ex- press warranty could not be enforced, which required that thereafter a clear space of a specified number of feet should be maintained, be- cause no such clear space existed at the time the insurance was effected, which fact was known to the agent who solicited the risk. We are of the opinion that this decision has the double infirmity of being repugnant to the "customs of business," and the "reason of the law." The warranty, in its form as well as its purpose, was clearly in futuro, and not in prsesenti. From the nature of the en- gagement, and the uses contemplated, it might be a matter of no importance to the underwriter what the situation of the property was at the time the insurance was negotiated; and it might, too, be a 30 Smith V. Insurance Co., 24 Pa. St. 320. si 72 Miss. 553, 17 South. 445. (393) § 138 LAW OF FIRE INSURANCE. (Ch. 7 matter of so much importance as to what the conditions should there- after be, that the changes required would be made the subject of a promissory warranty. Cannot a mill owner or manufacturer, seet- ing insurance, stipulate to make beneficial changes in the condition of his risk, in order to obtain policies on more favorable terms, or for any other reason of sufficient importance to influence his will in the matter? If he may promise to improve the hazard, what valid objec- tion, in law or in reason, can be urged against making the perform- ance of that promise a condition precedent? Shall A. be prohibited from selling wheat to D. for future delivery, and shall such contract, when made, be declared a nullity, if it is known to the vendee at the time of the sale that the vendor owns no wheat? What interest of public policy or public morality is imperiled by a millowner, in the exercise of his natural and constitutional right, obtaining insurance at a lower rate of premium by warranting that certain piles of lum- ber shall be removed to a greater distance from his mill, and that thereafter, and during the term of the insurance, a designated space shall be maintained? If this is not a matter in which the public is concerned, what is there to justify this restriction of the liberty of the citizen in making contracts relating to matters that are purely personal? What rights secured to us by the constitution are more important than those of "liberty and the pursuit of happiness"; and is liberty anything more than a name, if we are not permitted to man- age our own affairs, — ^to make contracts concerning all legitimate sub- jects which it will be the duty of the courts to enforce, and never their right to annul? § 138. The Riglit of Persons to Make Contracts Concern- ing All Subjects That Refer to the Ordinary- Affairs of Life is a Constitutional One, and Cannot be Taken Away, by Construction or Otherwise. It was said in Leep v. Railway Co.:'^ "When the subject of con- tract is purely and exclusively private, unaffected by any public inter- est or duty to person, to society, or government, and the parties are capable of contracting, there is no condition existing upon which the 82 58 Ark. 407, 25 S. W. 75. (394) "Ch. 7) WARRANTIES AND REPRESENTATIONS. § 138 legislature can interfere for the purpose of prohibiting the contract, or controlling the terms thereof." In Ritchie v. People ^^ Justice Magruder said: "Section 2 of article 2 of the constitution of Illinois provides that 'no person shall be de- prived of life, liberty or property without due process of law.' • * * The privilege of contracting is both a liberty and a property right. Liberty includes the right to acquire property, and that means and includes the right to make and enforce contracts. The right to use, buy, and sell property, and contract in respect thereto, is protected by the constitution. Labor is property, and the laborer has the same right to sell his labor, and to contract with reference thereto, as has any other property owner. In this country the legislature has no power to prevent persons who are sui juris from making their own contracts, nor can it interfere with the freedom of contract between the workman and the employer. The right to labor, or employ labor, and make contracts in respect thereto upon such terms as may be agreed upon between the parties, is included in the constitutional guaranty above quoted. * * * xhe protection of property is one of the objects for which free governments are instituted among men. The right to acquire, possess, and protect property includes the right to make reasonable contracts ; and when an owner is deprived of one of the attributes of property, like the right to make contracts, he is deprived of his property, within the meaning of the constitution. The fundamental rights of Englishmen, brought to this country by its original settlers, and wrested from time to time, in the progress of history, from the sovereigns of the English nation, have been reduced by Blackstone to three principal or primary articles: 'The right of personal security, the right of personal liberty, and the right of pri- vate property.' The right of contract is the only way by which a person can rightfully acquire property by his own labor. Of all the rights of persons, it is the most essential to human happiness." This statement of the law by Justice Magruder recalls for the thoughtful attention of patriotic and intelligent citizens the essential principles of liberty and justice upon which the foundations of free and protective governments rest. If we would preserve for future generations our civil institutions, we must resist every distinct depar- 3 3 155 111. 98, 40 N. E. 454. (395) § 139 LAW OF FIBE INSURANCE. (Cll. 7 ture from the principles of the constitution. In these days there is a marked tendency to crowd aside conservative rules, that there may be opportunity to experiment with new theories of social and political reform. With these departures and with these experiments come new dangers to the state. The constitution may be subverted by the very agencies created to preserve it, and in the name of law and huinan rights a despotism may grow up that will defy the constitution, and leave our personal liberty only a name, and that to be pronounced by those who come after us with derision. The best hope of the future lies in our re- stricting legislation to its constitutional limitations, and it is to the courts chiefly that we must look for the repression of these en- croachments upon the inalienable rights of the citizen that now threaten our peace and stability. § 139. Warranties and Conditions Precedent Essentially Alike. Warranties and the conditions precedent of the insurance policy, while different frequently in form, are in their elements and legal effect essentially the same. Both must be literally kept or per- formed. In this affirmation all authorities agree. Whenever doubt has arisen, it has proceeded from the obscurity of the language em- ployed to express the intention of the parties. When the conditions of the policy call for a disclosure of certain facts, such as title, in- cumbrance, occupation, or other insurance, under penalty of forfei- ture, concealment or failure to comply will be fatal to recovery in ease of loss. These provisions incorporated into the contract to se- cure a better understanding of the hazard, and to protect the insurer against fraud, are sometimes designated as "warranties," and some- times as "conditions precedent." ^* In the case of Baker v. German Fire Ins. Co.'*^ the supreme court of Indiana uses the terms synonymously. The court said: "The statement that the building insured was 'occupied as an hotel, with s* Smith v. Insurance Co., 118 N. Y. App. 518, 23 N. E. 883, and 19 Ins. Law J. 374. 3 5 124 Ind. 490, 24 N. E. 1041. (396) Ch. 7) WARRANTIES AND REPRESENTATIONS. § 139 bar and billiard room attached,' inserted in the face of the policy, constitutes an express warranty that the building was so occupied at the time the policy was issued, and the validity of the contract depends upon the truth of the stipulation. * » « The phrase 'oc- cupied,' etc., relates to the character of the risk at the same time the contract was made, and was in the nature of a condition precedent to the taking effect of the policy." In Allen v. German- American Ins. Co.^'^ the New York court of appeals said: "Parties may insert any provision they choose in con- tracts, provided they violate none of the rules of law, and they should all be given their appropriate and intended effect. The warranty inserted here was that the policy should be void if the insurer should thereafter obtain other insurance on the property in excess of a certain stated sum. The assent of the plaintiff to this provision is conclusively presumed from his acceptance of the policy. In that respect he voluntarily fettered himself, and submitted to the defend- ant's conditional acceptance of the risk proposed." It will be observed that the court treats the provision of the policy in reference to other insurance as a prohibitory warranty. This, it appears to us, is the true character to be given to policy conditions, whether they are so framed as to promise absolutely the performance of any particular thing, or to prohibit anything which the parties may have agreed should be interdicted. See, also, Jefferson Ins. Co. v. Cotheal,^' where the court declared that "a warranty is considered as a condition precedent, and, wheth- er material or immaterial as regards the risk, must be complied with before the assured can sustain an action against the under- writer." In Boyd v. Vanderbilt Ins. Co.^^ the policy described the property insured as a "one-story frame dwelling house, occupied by good ten- ants as such." On the trial it was shown by competent evidence that the house was unoccupied at the time the policy was issued, and so continued for several months subsequently. Some time after the property was insured, and before the fire, plaintiff, Boyd, notified the insurer that the house was vacant; and its agent, the secretary, re- 30 123 N. Y. 6, 25 N. E. 309. s^ 7 Wend. (N. Y.) 73. »8 90 Tenn. 212, 16 S. W. 470. (397) § 130 LAW OF FIEE INSURANCE. (Ch. T plied that it was "all right." This was claimed by the plaintiff as- a waiver on the part of the defendant of its right to declare a for- feiture on account of the breach of warranty, if such right had ever- existed. To this proposition the court declared its dissent. Lurton, J., said: "The facts show that this house had not been occupied for nearly a month before issuance of the policy, and that it continued vacant until burned, nearly a year afterwards. During this time the unoccupied premises were used by wagoners and tramps as a camp- ing place. The notice given the secretary was not earlier than No- vember [the policy was issued in March]. * * » a consent to a vacancy occurring during the life of the policy would not be a waiver of the warranty that the premises were occupied at the inception of the contract. * * » Notice of such a vacancy, and consent there- to, would only operate to waive the clause of the policy forfeiting it for the vacancy without consent during life of the policy. This * * * contract had never had any validity, and life could not be given to it unless the company, with full notice, consented to its continuance. Faith and fair dealing required that all the facts should have been stated. * * * The evidence of plaintiff as to what he said to the secretary does not show that he informed him of the nonoccupancy at issuance of the contract." This ruling is based on a well-settled principle of law, — ^that knowledge must pre- cede waiver. There can, of course, be no intention to relinquish a right without first knowing that the right exists; and in recogni- tion of this rule the Tennessee court has held that the insurer only- waived its right to insist on a forfeiture because of the vacancy that existed at the time the notification was given, and as to the other- fact which had been withheld — that the house was vacant at the in- ception of the contract — the case was otherwise. The stipulation expressed upon the face of the policy in regard to occupancy the court construed to be a warranty, and as the house was then vacant the undertaking to insure had failed. The policy was of no effect from the beginning, and the waiver of a subsequent fact would not be sufficient to vitalize and re-establish the original promise to insure on the part of the company, for the reason that that promise rested upon another and wholly independent consideration, — a warranty that the house was then occupied by good tenants. The trial judge instructed the jury that: "The statement in the- (398) ^h- 7) WARRANTIES AND KEPRESENTATIONS. § 140 policy in this case, on the 'one-story frame dwelling house, occupied by good tenants as such,' is a representation by the plaintiff to the defendant that at the time the policy was issued the building wap really occupied, and the condition upon which the contract of insur- ance was based; and, to entitle the plaintiff to recover, it must have been true. Therefore, if you find the building was vacant, and that the defendant was ignorant of the fact, this avoids the policy, and your verdict should be for defendant. This is the law, even though the statement be made in ignorance, and without any desire to mis- represent any of the facts." Justice Lurton, of the supreme court, said that this charge "was a succinct statement of the law," and then quotes approvingly Arnold's definition of "warranty," found in sec- tion 577 of his work on Insurance: "Warranty is a stipulation in- serted in writing on the face of the policy, on the literal truth or ful- fillment of which the validity of the contract depends." Judge May expresses his satisfaction with this definition of Mr. Arnold's, and, as if for the purpose of giving a greater amplitude of expression, adds, "By a warranty the insured stipulates for the ab- solute truth of the statement made, and the strict compliance with some promised line of conduct, upon penalty or forfeiture of his right to recover in case of loss, should the statement prove untrue, or the course of conduct be unfulfilled." § 140. Warranty Concerning the Quantity of Land Com- prising the Premises Insured. When insurance is taken on farm property, the applicant is fre- quently required to state the number of acres owned by him, compris- ing the premises on which the property insured is situated. Such statements are not merely descriptive, and should be made with due consideration to their importance, when, with proper form of words, they are incorporated into the policy, and made warranties. While such literal exactness as would include the fractional part of an acre, perhaps, might not be necessary to save the warranty, it is re- quired that the statements should be substantially true. This ques- tion was considered by the court in the case of Bennett v. Agricul- tural Ins. Co.°° The plaintiff stated in his application that the so 50 Conn. 420, 13 Ins. Law J. 817. (399) § 140 LAW OF FIRE INSURANCE. (Cfa. 7 premises consisted of 60 acres of land. Tlie testimony on the trial sliowed that the quantity of land was less; in fact, that there were but 46| acres. The trial court held that the statement was only a representation, that the number of acres was immaterial, and that the policy was not voided. On appeal the case was reversed, and the appellate court said: "In the first place, the parties having ex- pressly stipulated and intended to make the statements in the ap- plication technical warranties, rather than representations, it might be presumed that the assured weighed his words more carefully, and made statements of fact, rather than of mere opinion." The court here intimates, by the use of the term "technical war- ranties," that this decision rests upon a naked legal right. To this conclusion we are compelled to dissent. When insuring farm prop- erty, time is generally given for the payment of the premium. As a basis of credit, it is therefore important that the insurer should have accurate information in regard to the character and amount of prop- erty which the applicant owns, whether it is incumbered or other- wise. Again, too, as affecting the moral aspects of the hazard it is asked to assume, it will often be important for the insurer to know whether the buildings or other property specified in the pro- posal for insurance are adapted for the convenient and profitable use of such a farm as the applicant owns. If the dwelling or bam were small and cheaply constructed, and the farm large and valuable, there would perhaps be less capacity than was required for indis- pensable uses. Then appearance and want of style might be re- pugnant to the taste and pride of the owner. On the other hand, if the farm is small, and the buildings large and expensive, this fact would sometimes imply that the expenditure for improvements had not been judiciously made, and that more capital had been invested than could, in the ordinary uses, be made profitable. In either of these cases the owner would have no motive to exercise a watchful care to protect the property insured against accident from fire. His interests, in fact, would be promoted by the destruction of the build- ings he could not use to advantage, and which he could not other- wise dispose of without financial loss. It is this perilous condition of things which the prudent underwriter has sought to avoid by in- quiries so careful and full, in regard to all facts afEecting both the moral and physical hazard, that his questions will sometimes appear (400) ^^- 7) WARRANTIES AND REPRESENTATIONS. § 140 to the inexperienced as irrelevant, and intended to create a technical advantage. There is a very clear distinction to be observed between the- equitable basis of the warranty in the case here considered, and one that is purely technical; and we may refer, for the purpose of better illustrating the point by comparison, to the warranty in re- gard to the incumbrance in the hail-storm policy. Johnson v. Dakota Ins. Co., supra. In Kussell v. Cedar Rapids Ins. Co.*" the policy was issued on an application, which was made a part, and which described the prem- ises as a tract of land consisting of 280 acres. There was a mort- gage of $1,600, of which notice was duly given. Subsequently 200 acres of the land were sold, and another lot, consisting of 40 acres, was purchased. At that time the mortgage indebtedness was reduced to |1,000. It was provided that the policy would become void if the risk were increased in any manner, except the erection of nec- essary buildings, or if the property was sold, or any change should talce place in the title. Given, C. J., in delivering the opinion of the court, said: "If the incumbrance remaining upon the land un- sold should be less in proportion to the quantity than was upon the land when the policy was issued, there was surely no breach of the condition against incumbrances. Or if, for any reason, the hazard should not be increased by the change, so that no higher rate of pre- mium would be demanded, there would arise no violation of the con- dition. The question, then, in order to determine whether there has been a breach of the condition, is this: Was the risk increased, or was defendant's security decreased, by the change of the incum- brance? This is a question of fact, and should have been left to the juiy. We think the same rule applies to the sale of parts of the land, and the purchase of other lands, and to any change in the use made of the insured premises. It was proper for the jury to determine what changes, if any, had been made in the incumbrances, title, or use of the premises, and whether by such changes the risk was increased, or the defendant's security decreased. Though there were changes in the respect alleged, if they did not increase the risk, or decrease the security, then there was no breach of the condition as to title, incumbrance, or use; but, if there was such a change in 40 78 Iowa, 216, 42 N. W. 6-54. OSTR.FIREINS. 26 (401) § 141 LAW OF FIRE INSURANCE. (Ch. 7 either respect as did increase the risk or decrease the security, then thei'e was a breach of the condition. The testimony set forth in the record shows beyond controversy that, notwithstanding the pay- ment of |600 of the incumbrance, yet the sale of the part of the lands upon which the |1,600 rested, and the renewal of the incum- brance on the remaining lands, was in fact an increase of the in- cumbrance upon the lands unsold. It also appears that the plain- tiff's interest in the lands purchased was not equivalent to her in- terest in the lands sold, and hence there was a decrease of the se- curity to the defendant. Under the state of the evidence, we think the court should have sustained the defendant's motion for verdict on the ground that the un controverted evidence shows an increase of the incumbrance, and a decrease of the security." *^ § 141. When Warranties are in Praesenti, and When Con- tinuing. A careful examination of the authorities shows that the courts do not always distinguish between warranties in prtesenti and those that are continuing. Where it is written on the face of the policy that the building is occupied for a particular purpose, it is a war- ranty that it is so occupied at the time; but s.iould it subsequently be occupied differently, unless in violation of some other condition of the policy, there will be no avoidance. This construction, it ap- pears to us, is illogical, and without equitable support. A "war- ranty" is frequently defined as a representation of a state of facts that has induced either one party or the other to assent to the con- tract. It involves a grossly absurd proposition to say that a party may be led into a contract that will continue for a term of months, or perhaps years, on the basis that certain material facts are war- ranted, which may be changed immediately after the obligation has been assumed. Of what importance is it to the insurer to know that the building insured is, at the inception of the insurance, oc- cupied as a dwelling, and has the care and protection of a family living in it, if, as soon as the policy is written and delivered, the *i Pangborn v. Insurance Co., 67 Mich. 683, 35 N. W. 814, and 17 Ins. Law J. 224; Id., 6.2 Mich. 638, 29 N. W. 475, and 16 Ins. Law J. 62. (402) Ch. 7) WARRANTIES AND REPRESENTATIONS. § 141 premises may be transformed into a planing mill or powder house without the insurer's consent? The justness of this criticism is rec- ognized by the leading authorities, and warranties in regard to water supply, appliances for suppressing fires, watchman, etc., have gen- erally been held to be continuing. In Glendale Woolen Co. v. Protective Ins. Co.*^ it was answered by the assured, in response to a question contained in the applica- tion, that "there was a watchman in the mill during the night," and it was held that the question and answer constituted a continuing warranty that a watchman should be kept in the mill every night during the term of the insurance. There are many other reported cases where this doctrine of con- tinuing warranty has been fully sustained.*' Warranties in regard to occupancy are generally continuing, as from the nature of the case they should be. In Sun Mut. Ins. Co. V. Texarkana Foundry & Machine Co.** this question was fairly dis- cussed by the court. The policy there provided that the building insured was to be occupied as a foundry and machine shop. The court said it was a warranty that it should be thus occupied.*'' "In some cases, statements as to the use and occupation of prop- erty have been held warranties. Thus, the description must be true where the property is insured as a stock in a brick building occu- pied as a storehouse; *° a paper mill;*' a dwelling house; *^ a ma- chine shop.*" " 42 21 Conn. 10. *3 Sheldon v. Insurance Co., 22 Conn. 235; Houghton v. Insurance Co., 8 Mete. (Mass.) 114; Blumer v. Insurance Co., 45 Wis. 622. a (Tex. App.) 15 S. W. 34. <5 Snn Ins. Co. v. Texarkana Foundry & Machine Works Co., 3 Willson, Civ. Cas. Ct. App. § 320; 4 Wait, Act. & Def. p. 38. 4 Wall V. Insurance Co., 7 N. Y. 370. *7 Wood V. Insurance Co., 13 Conn. 533. 48 Sarsfield v. Insurance Co., 61 Barb. (N. Y.) 479; Alexander v. Insur- ance Co., m N. Y. 464. *" Goddanl v. Insurance Co., 108 Mass. 56. (403) § 142 LAW OF FIRE INSURANCE. CCh. 7 § 142. Conclusions. A warranty must be substantially, if not literally, true, whether the fact warranted is material or not. It will not be the duty of the court to inquire into the materiality of a warranty, and any evidence offered for that purpose will be i;i- competent. What the parties have agreed to, unless repugnant to law, will be conclusive. When, by reason of obscure or ambiguous language, a doubt ex- ists whether it was the intention of the parties that a fact should be regarded as a warranty or a representation, the courts will give such construction as will be most favorable to the insured. A warranty will never be presumed, nor will its scope be enlarged by implication. It has such rigor in its character, and such domi- nating influence in the construction and performance of a contract, that it can exist only by the express agreement of parties. When the truth of a particular statement is warranted, it is the fact, and not the belief or good faith of the warrantor, that is in- volved. It will not excuse the breach of a warranty to show that the warrantor honestly supposed the facts to be as warranted.. The principle of equitable estoppel will not apply to relieve a forfeiture, because the facts, either represented or warranted, were known to the agent of the insurer to be untrue. The insured, col- luding with the agent to defraud the company, can take nothing by his wrong. While warranties differ from conditions precedent in form, in the rigor of their character and ultimate purpose they are essentially the same. (404) ^h. 8) VACANT OR UNOCCUPIED. § 143 CHAPTER Vni. VACANT OR UNOCCUPIED. § 143. Importance of the Condition Concerning Vacancy. 144. What is Occupancy? 145. When Occupied at the Time of the Loss. 14G. Occupancy will be Determined in Reference to Character of the Risk. 147. Policy Conditions will be Construed Strictly in Respect to Occupancy. 148. If the Property is Vacant at the Time the Insurance is Effected, with Knowledge of the Insurer, will Estoppel Apply? 140. What Constitutes Occupancy is a Question of Law— Construction of Contract. 150. That the Risk Is Increased When the Property is Vacant, the Courts will Take .ludicial Notice. 151. Animus Revertendi. 152. When a Condition has been Broken, and the Forfeiture Waived, the Waiver will not Continue to Relieve Later Forfeitures, Arising from New Breaches of the Same Condition, 153. Application of the Rule that Contract is Entire. 154. What Constitutes Vacancy. 155. When Insured Knows that Agent is Disobeying the Instructions of His Principal, in Granting Privileges or Waiving Conditions, Such Acts will be without Legal Effect. 156. Conclusions. § 143. Importance of the Condition Concerning Vacancy. Among the most important of the prohibitory conditions of the fire insurance policy is that in regard to the insured property becom- ing "vacant or unoccupied." There are but few lessons that the careful and intelligent underwriter has better learned and better re- membered than the one that vacant buildings burn more frequently than those that are either inhabited or occupied for storage, business, or other useful purposes. The reason of this is easy of explanation. There is not "a weak or cracked link in the chain" connecting useless and abandoned buildings and the lurid conflagration. When motive and opportunity join, action results. When one is supplied and the other wanting, there is always statu quo. When property of this class is left unwatched, there is presented an opportunity for the (405) § 143 LAW OF FIRE INSURANCE. (Gh. 8 perpetration of a crime; and a motive may be frequently found in the fact that tlie property abandoned or left without an occupant is unproductive, and hence unprofitable. It may be safely stated as a general proposition that buildings not in use constitute undesirable investments. Fortunately, the advanced moral and social condi- tions, the improved average business integrity, and the restraints of conscience do not permit of the conversion of all unproductive proper- ty in the manner here suggested. But it is incumbent on the insurer to be watching for exceptional cases. For strictly legitimate haz- ards, a rate can be computed that will not be burdensome and un- just to the insured, and one that will afford the underwriter a reasonable profit for his venture. The fire insurance office collects premiums from the many to pay losses to the few. When loss claims become more numerous on account of frauds or imprudent under- writing, larger sums must be gathered from the householder, the merchant, and the manufacturer to pay the increased demands. There is, perhaps, no business undertaking in which the general pub- lic is more directly concerned than that of insurance. Every person, in fact, who holds a policy or has property to insure, is in an im- portant sense a partner in the business. He is interested in the same manner that the taxpayer is concerned in the prudent and economical management of the public funds. If there is waste, pec- ulation, or robbery, the loss in either case must be made good by in- creased levies. It is important to every honest property owner that the insurance company shall pursue its business in a careful, guard- ed manner, in such a way as to put no temptation before the evil doer, or those who would become such, under a promise of gain that would silence conscience, and put aside the ordinary considerations of honor and duty. Independent of the bad moral hazard which at- taches in a large number of cases to unoccupied and unproductive property, the withdrawal of constant and watchful care of the owner or his tenant affords exceptional opportunities for tramps and prowl- ing vagabonds to make the unoccupied building a convenient resort and temporary place of abode. Their reckless and often criminal habits will create additional elements of danger, and the character of the hazard become sO changed that every consideration of pru- dent and legitimate underwriting will require that the risk be re- fused. It is not the duty of the insurance company to watch unoc- (406) Cll. S) VACANT OR UNOCCUPIED. § 144 cupied property. From the nature of the case, it is impossible for them to do so. This duty must be performed by the owners, and it is not more a right than an obligation on the part of the insurer to place this burden where it properly belongs. The courts have very generally accepted this view of the matter, and, on equitable grounds, have excused the insurer when the buildings protected by its policies are vacant or unoccupied, contrary to the conditions agreed to. This provision of the insurance contract has been the cause, perhaps, of more litigated cases than any other. The contention has seldom been as to the validity of the prohibition. While that has been conceded, it has been urged in each particular case either that the condition had been wai\ ed by the company insuring, or that the facts presented did not show that the property was without an occupant, within the meaning of the policy, when the fire occurred. § 144. What is Occupancy P A very proper distinction has generally been made between the word "vacant" and the word "unoccupied." A mill or any manufactur- ing establishment ^\ill not be "vacant," in the literal or even popular meaning of the word, while the machinery, tools, or any implements for carrying on the business are remaining in the building; but it is held that a factory, mill, or shop is "unoccupied," within the mean- ing of the policy, when it is abandoned for its ordinary uses. When it ceases to be operated, and the workmen have departed, not intend- ing to again return, then occupation has terminated; and, should a fire occur, the insurer would not be charged with the loss.^ This distinction is perhaps more clearly marked in the case of a dwelling house from which the family has removed, leaving a por- tion of their household goods in the building. It will not be vacant, but occupation is at an end when it is no longer the place of abode ^ Wustum V. Insurance Co., 15 Wis. 138; Keith v. Insurance Co., 10 Allen (Mass.) 228; Ashworth v. Insurance Co., 112 Mass. 422; American Ins. Co. v. Padfield, 78 111. 167; Paine v. Insurance Co., 5 Tbomp. & C. (N. Y.) 611); Abra- hams v. Association, 40 U. C. Q. B. 175; Corrigan v. Insurance Co., 122 Mass. 208; Sleeper v. Insurance Co., 56 N. H. 401, overruling Chamberlain v. In- surance Co., 55 N. H. 249; Hill v. Insurance Co., 58 N. H. 82, 6 Ins. Law J. 314; Cook v. Insurance Co., 70 Mo. 610; American Ins. Co. v. Foster. !)2 111. (407) § 144 LAW OF FIEE INSURANCE. (Ch. 8 of any living person. A temporary absence of the family will not avoid the policy. They may absent themselves for purposes of health, pleasure, business, or convenience for any reasonable period, if they go with the intention of returning again, and the building insured continues to be their home.^ This general proposition, however, must be understood with certain special qualifications. The absence must be only temporary, and, if extended beyond a reasonable time, the insurer will be relieved. The case of Traders' Ins. Co. v. Race ^ affords an excellent illus- tration of the principle here stated. In the dwelling insured and subsequently burned, no one had lived continuously for several 335; Herrman v. Insurance Co., 85 N. Y. 162, reversing 45 N. Y. Super. Ct 3iM; Barry v. Insurance Co., 35 Hun (N. Y.) 601. A dwelling house is unoccupied wlien no one lives in it. Sonnebom v. In- surance Co., 44 N. J. Law, 220. Leaving a pail, scrub brusb, and mop is not occupancy. Litcli v. Insurance Co., 136 Mass. 491, 13 Ins. Law J. 381. Farm building used occasionally by farm hands not occupancy. Fitzgerald V. Insurance Co., 64 Wis. 463, 25 N. W. 785, and 15 Ins. Law J. 277. Using dwelling house as saloon Increases the risk. Western Assur. Co. v. McPike, 62 Miss. 740. Leaving in house a few articles of furniture is not occupancy. Moore v. In- surance Co., 64 N. H. 140, 6 Atl. 27; Sexton v. Insurance Co., 69 Iowa, 99, 28 N. W. 462; Hartshorne v. Insurance Co., 14 Atl. 615, 50 N. J. Law, 427. Dwelling house, to be occupied within the meaning of policy, must be in- habited. Weidert v. Insurance Co., 24 Pac. 242, 19 Or. 261, and 19 Ins. Law J. 740; Craig v. Insurance Co., 34 Mo. App. 481. Manufacturing plant closed, and left in charge of one living on the premises, is not occupancy. Halpiil v. Insurance Co., 118 N. Y. 165, 23 N. E. 482; Id., 120 N. Y. 70, 23 N. E. 988, 19 Ins. Law J. 459, and 43 Bait. Underwriter, 257. Leaving some one to look after a vacant dwelling does not constitute occu- pancy. Bonefant v. Insurance Co., 76 Mich. 653, 43 N. W. 682; Agricultural Ins. Co. V. Frith, 21 111. App. 593; Richards v. Insurance Co., 83 Mich. 508, 47 N. W. 350, and 20 Ins. Law J. 366; England v. Insurance Co., 81 Wis. 583, 51 N. W. 954. 2 HiU V. Insurance Co., 99 Mich. 466, 58 N. W. 359; East Texas Fire Ins. Co. V. Kempner (Tex. Civ. App.) 25 S. W. 999; Home Ins. Co. v. Scales, 71 Miss. 975, 15 South. 134; Springfield Fire & Marine Ins. Co. v. McLimans, 28 Neb. 846, 45 N. W. 171; Dohlantry v. Insurance Co., 83 Wis. 181, 53 N. W. 448. Vacancy presumed an increase of risk. White v. Insurance Co., 85 Me. 97, 26 AU. 1049. 8 15 Ins. Law J. 633. (408) Ch. 8) VACANT OR UNOCCUPIED. § 145 months. It was frequently visited and aired, and the furniture in use when the house was inhabited by the family remained in its ac- customed place, a Mr. Race, brother of the owner, occasionally sleep- ing on the premises; but the court held that "the occupancy was not such as the law required in order to save the condition of the policy. The visitation of the various members of the Race family upon the premises, and the sleeping therein by the hired man or Richard Race, may have served a useful purpose, as a protection against marauders or burglars, and even as a prevention of fire; but neither one nor both was sufficient. In the case at bar, both a living in the house and the animo manendi as to the customary place of abode were wholly lacking. The house in question was visited, and at night stayed in for a special purpose, that of watching it, and not for the general and useful purpose of abode or dwelling." In Herrman v. Adriatic Fire Ins. Co.,* the dwelling insured was the usual abiding place for the plaintiff and his family during the warm weather; was what is known as a summer residence; and, while the family was elsewhere during the cold season, all furnishings were left in the house, which was always ready for occupancy. Mr. Herrman and his wife visited the place fortnightly. The house was aired once a week, and, besides, received other unimportant attention and su- pervision from servants. The court held that this was not sufficient to constitute occupancy. It said: "For the dwelling house to be in a state of occupation, there must be in it the presence of human be- ings as at their customary place of abode, not absolute and uninter- ruptedly continuous, but that must be the place of usual return and habitual stoppage." § 145. When Occupied at the Time of the Loss. Insurance policies uniformly provide, in suitable but different words, that, if the insured property "becomes vacant or unoccupied 4 85 N. y. 162. In case of Western Assur. Co. v. Mason, a different ruling was had. 5 111. App. 141. So, also, Stupetski v. Insurance Co., 43 Mich. 373, 5 N. W. 401, and 9 Ins. Iiaw J. 521; Herrman v. Insurance Co., 81 N. Y. 184. The provision of the policy was that it should be void if the property became vacant and unoccupied. Court held that it must be both. (409) § 145 LAW OF FIRE INSUKA.NCK. (Ch. 8 without consent of the company, the policy shall be void." Some- times the avoidance, it is stipulated, shall not occur until the ex- piration of some fixed period of indulgence or grace, as 10 or 20 days. Regarding the purpose of this provision to be the protection of the insurer from such changes in the circumstances of the risli as would increase the hazard of fire, the courts have sometimes held that al- though the building becomes vacant and unoccupied during the term of the policy, if it was actually occupied when the fire oc- curred, the insurer would be held.^ These decisions appear to be based on the principle, which is not exactly cardinal in the law, that "substantial justice" must be secured at all hazards. It must be admitted that if no harm comes to the risk during the period of its abandonment, and if it is in the care of an occupant at the time of the loss, no important interest of the insurer is prejudiced on ac- count of the temporary vacancy; and in such case there is an ap- parent hardship to the honest claimant if the insurer is excused from paying the loss. But may the courts properly interfere to prevent the execution of a contract which the parties were competent to make, and did make in the exercise of their natural and constitu- In case of Imperial Fire Ins. Co. v. Coos Co., 151 U. S. 452, 14 Sup. Ct. 379, it was provided that the policy should be void if, without the consent of the company, meclianics should be employed on the premises to make other than ordinary repairs, without notice to and permission of the company. Con- siderable changes and improvements were made, by which mechanics of dif- ferent liinds were employed, for several weeks; but the work was all com- pleted, and the workmen dismissed, before the fire occurred. It was held by the supreme court of the United States that the forfeiture took place and the policy became void at the time the condition in regard to the employment of mechanics was violated, and that the contract could not again be restored without the concurrent action of the parties. This principle of construction has been distinctly recognized in the following •cases: Moore v. Insurance Co., 62 N. H. 240; Fabyan v. Insurance Co., 33 N. H. 203; Mead v. Insurance Co., 7 N. Y. 530; Kyte v. Assurance Co., 149 Mass. 116, 21 N. E. 361; Wilcox v. Insurance Co., 85 Wis. 193, 197, 55 N. W. 188; England v. Insurance Co., 81 Wis. 583, 588, 51 N. W. 954; Carey v. Insurance Co., 84 Wis. 80, 87, 54 N. W. 18. In the foUowing cases the rule is recognized that, If the nonoccupancy has terminated before the loss, the insurer will be held: Aetna Ins. Co. v. Meyers, 63 Ind. 238; Alston v. Insurance Co., 80 N. C. 326; Laselle v. Insur- ance Co., 43 N. J. Law, 468; Bennett v. Insurance Co., 51 Conn. 504, 13 Ins. Law J. 817; Ring v. Assurance Co., 145 Mass. 426, 14 N. E. 525. (410) ^h. S) VACANT OR UNOCCUPIED. § 146 tional rights? The policy plainly enough provides that, on the hap- pening of a certain event, it shall be void. The event occurred, and the obligation of the insurance company then terminated. Unless the court has the power to create for the parties a different contract than the one they created for themselves, it can do nothing to relieve the situation; and, when the courts undertake to correct mistakes of persons by taking away their right to make contracts, the well- meant effort is likely, in the long run, to produce more evil than good. When a contract has become void for any reason, that is an end of it; and it cannot again have vitality without such affirmative action by both of the parties interested as will have the legal effect to create a new contract; and such further and supplemental action should rest on a valid consideration. ^ 146. Occupancy •will be Determined in Reference to the Character of the Risk. To determine whether a building is occupied within the meaning of the policy, reference is always necessary to the uses for which it was intended, such uses as were in the contemplation of both par- ties at the time the insurance was entered into. Churches and school- houses are usually closed a part of the year, during the "vacation season." This fact will be presumed to have been understood by the insurer, and that the agreement to indemnify was made in reference lo circumstances which are common to property of this class. The same rule of construction will apply to farm barns, which are usually vacant during two or three months of each year." In Herrman v. Adriatic Fire Ins. Co.,^ this principle of construc- tion was discussed in reference to its application to a summer resi- dence. The insurance was there entered into during the season of occupation, — ^that is, while the plaintiff's family was living in the house; and it was urged in the argument of the case that the fact was well known to the fire insurance oflSce that the dwelling was not to be inhabited continuously during the entire term of the policy, .and that the insurance must be presumed to have been made in ref- .erence to the uses for which the property was intended. The argu- « Caraher v. Insurance Co., 63 Hun, 82, 17 N. Y. Supp. 858, 7 81 N. Y. 184. (411) § 146 LAW OF FIRE INSURANCE. (t^h. 8 ment, it must be admitted, is not without considei'abie plausibility and force; but Chief Justice Folger, who wrote the opinion of the court, stated with great perspicuity the distinction between this and the class of cases before mentioned. He said:- "It may be that the defendant knew that it was but the summer abode of the plaintiff. Their contract was issued in the summer, when the property was in strict occupancy; and it provided for the coming fall, when that occupancy would be abandoned or modified, for the policy was not void at once or on a cessation of occupancy. That cessation must last for thirty days, and be notified to the defendant, and continue thereafter without their consent. There was opportunity for the plaintiff to keep up that indemnity, or to get other, and to the de- fendant to retain the risk, or to be freed from it when that occu- pancy was about to cease, and notice was given." Country elevators, ice manufactories, and sawmills are distinct types of particular classes of risks, where active business operations are usual to only a part of each year. The elevator will generally be closed at midsummer, and the ice factory and sawmill in winter. But it will not be supposed that, during these dormant intervals of business, the elevator, the factory, or the mill is to be understood as vacant or unoccupied, within the meaning of an insurance policy. If the office is deserted, and the mill doors locked, it signifies no more than that the business for which these buildings were provided is experiencing its customary season of rest. If the property be aban- doned, the case will, of course, be otherwise; but, if the animus re- vertendi is shown from the nature and circumstances of the business carried on, then it will be presumed that the risk was accepted by the insurance company, with the understanding that there would be tem- porary periods of idleness, and that whatever was incident and nec- essary to the usual management of that particular line of business would be permitted.' « WiUiams v. Insurance Co., 24 Fed. 025, 14 Ins. Law J. 708; Brighton Manuf g Co. v. Reading Fire Ins. Co., 33 Fed. 232; German Ins. Co. v. Davis, 40 Neb. 700, 59 N. W. 698; Hill v. Insurance Co., 99 Micli. 466, 58 N. W. 359; Morotocli Ins. Co. v. Pankey, 91 Va. 259, 21 S. E. 487: East Texas Five Ins. Co. V. Kemper (Tex. Civ. App.) 34 S. W. 393; Keith v. Insurance Co., 10 Allen (Mass.) 228; Albion Lead Works v. Williamsburg City Fire Ins. Co., 2 Fed. 479, 9 Ins. Law J. 435; Carr v. Insurance Co., 60 N. H. 513, 13 Ins. Law J. 443. (412) ^h. S) VACANT OR UNOCCUPIED. § 148 § 147. The Policy Conditions will be Construed Strictly in Respect to Occupancy. When the policy specifies any particular term, as "ten days" or "thirty days,'" that the building may remain unoccupied without no- tice and consent, the indulgence is for a definite period; and, should the vacancy continue beyond the time mentioned, the insurer will not be liable for any loss occurring. If the privilege of nonoccu- pancy suspends the operation of the condition for 10 days, it can- not be extended by either grace or construction for 11 days. In Bennett v. Agricultural Ins. Oo." the condition of the policy read: "If the dwelling hereby insured shall cease to be occupied as such, the policy shall be void." The occupant moved out in the afternoon, and at 2 o'clock the next morning the house took fire, and was consumed. It was held that there could be no recovery. The facts in this case are almost identical with those in the case of Farmers' Ins. Co. v. Wells,^** where the tenant removed from the house at 6 o'clock in the evening, leaving a few articles therein of no particular value. The court said: "The leaving of a barrel of bran and coal-oil can did not prevent an avoidance of the policy. The length of time elapsing after the vacation and before the fire is wholly immaterial." ^^ § 148. If the Property is Vacant at the Time the Insur- ance is Effected, with Knowledge of the In- surer, will Estoppel Apply ? It has been frequently held that when a company insures a build- ing, knowing it to be vacant and unoccupied, it will be estopped from defending under the condition of the policy making it void on ac- count of vacancy. While the weight of authority appears to be the 50 Conn. 420. " 42 Ohio St. 519. 11 Cook V. Insurance Co., 70 Mo. 610, 9 Ins. Law J. 887; Paine v. Insurance Co., 5 Thomp. & C. 619; Keith v. Insurance Co., 10 Allen (Mass.) 228; Ash- worth V. Insurance Co., 112 Mass. 422; Aetna Ins. Co. v. Meyer, 63 Ind. 238; Dennison v. Insurance Co., 52 Iowa, 457, 3 N. W. 500; American Ins. Co. v. Padfield, 78 111. 109; Insurance Co. of North America v. Garland, 108 111. 220. (413) § 149 LAW OD' FIRE INSURANCE. (Ch. 8 other way, we think this the better rule of law, as its application tends to secure results that are less repugnant to justice. When an insurance company receives a premium with knowledge of facts that will make the policy invalid from its inception, by its own terms, it is fair to assume that something else was intended. There can be no legal presumption to support the theory that the insured had parted with the premium, except for a valuable consideration, or that the company, in receiving the premium, had contemplated a fraud on the one who had paid it. Estoppel in a case of this kind violates no principle of law, and secures substantial justice.^^ The policy in the case of North American Fire Ins. Co. v. Zaenger ^* contained a provision that it should be void if the property, by any means within the control of the insured, should become unoccupied. The declaration contained an averment that the premises had not become vacant or unoccupied by any means within the plaintiff's; control, but no evidence was introduced in support of this averment. Defendant pleaded general denial, and plaintiff having read on the trial his "proofs of loss," which set forth that "there was no person living in the house at the time of the fire, the tenant having left some three weeks before," the court held that, to recover, it was necessary that the condition in regard to vacancy should be performed, or that it should be shown that the vacancy was beyond the plaintiff's con- trol. "The condition," it said, "was in the nature of a warranty; and, having proved the house was vacant by his own aflQdavit, he should then have proved that such vacancy was beyond his control." § 149. What Constitutes Occupancy is a Question of Law — Construction of Contract. What is meant by the word "occupation" is a question of law, but whether occupied or not, within the meaning of the law, is a ques- 12 Whitney v. Insurance Co., 9 Hun (N. Y.) 39; Commercial Union Assur. Co. V. Dunbar, 7 Tex. Civ. App. 418, 26 S. W. 628; England v. Insurance Co., 81 Wis. 583, 51 N. W. 954; Devine v. Insurance Co., 32 Wis. 471; Aetna Ins. Co. V. Burns, 5 Ins. Law J. 69; Cone v. Insurance Co., 60 N. Y. 619; Hartford Fire Ins. Co. v. Davenport, 37 Mich. 609; St. Paul Fire & Marine Ins. Co. v. Wells, 89 111. 82; Agricultural Ins. Co. v. Ansley, 15 Quebec Law Kep. 256; Short V. Insurance Co., 00 N. Y. 16, 12 Ins. Law J. 138. 13 63 111. 464. (414) Ch- 8) VACANT OR UNOCCUPIED. § 150 tion of fact. In cases of temporary vacancy, the courts, in applying the law, hare usually had reference to the animus revertendi. This was not done, however, by the supreme court of Illinois in deciding the case of Phoenix Ins. Co. v. Tucker.^* The plaintiff there had rented his house for a term of years. Tenant was to take possession on Saturday, but a rainfall prevented his doing so. Plaintiff's fam- ily moved out on Friday, and found temporary shelter at the village- a mile distant, intending to remove to Nevada in a few days. Plain- tiff was at the house for a short time on both Saturday and Sunday evenings. During the night of Sunday the property burned, the flre having an incendiary origin. The court, we think, mistakenly held that the question whether the premises were occupied, within the meaning of the policy, was one for the jury. Justice Mulkey, in de- livering the opinion of the court, clearly shows his doubt in regard to the correctness of the position taken. The discussion in which he engages to distinguish legal principles indicates conclusively that the problem presented was one for a learned judge, and not for an unlearned jury. We are led to infer that the case was decided more- on the ground of sympathy than of law. To quote George Eliot: "Our impressions are not formed from what the judge distinctly said,, but from what he has unconsciouslv enabled us to discern." § 150. That the Bisk is Increased When the Property is Vacant, the Courts -wrill Take Judicial Notice. When property is vacant or unoccupied, the risk is increased. Of this fact the court will take judicial notice. The presumption, how- ever, that a greater hazard has come to exist is not conclusive, and may be rebutted by ccnpetent testimony. This was distinctly held in White v. Phoenix Ins. Co.^° The policy there provided for an 1* 92 111. fi4; Western Assur. Co. v. Mason, 5 111. Apij. 141; Cummins v. In- surance Co., G7 X. Y. 2G0, reversing 5 Hun (N. Y.) 554; Cliandler v. Insurance- Co., 88 Pa. St. 223; Wait v. Insurance Co., 13 Hun (N. Y.) 371; AVoodruff v. Insurance Co., 83 N. Y. 133; Poor v. Insurance Co., 2 Fed. 432, 9 Ins. Law J. 428; Carr v. Insurance Co., 60 N. H. 513, 13 Ins. Law J. 443; Dwelling- House Ins. Co. v. Osborn, 1 Kan. App. 197, 40 Pac. 1099. IS 83 Me. 279, 22 Atl. 107. See, also, 85 Me. 97, 20 Atl. 1049; Mulry v. In- surance Co., 5 Gray (Mass.) 541; Lyman v. Insurance Co., 14 Allen (Mass.). (415) § 151 LAW OF FIKE INSURANCE. (Ch. 8 avoidance if the premises insured should become vacant without no- tice to the company, and its consent indorsed on the policy. This condition of the contract was so qualified by the Kevised Statutes of Maine ^° that no avoidance could result on account of vacancy, un- less the risk had thereby been increased. We quote from the opinion of Haskell, J.: "That vacant buildings are more exposed to danger from fire than they would be if occupied is a fact of common knowl- edge, to prove which, therefore, the opinion of witnesses is incom- petent and unnecessary. * * * The evidence offered and ex- cluded tended simply to prove that vacant buildings, as a rule, are more exposed to loss by fire than if occupied, inasmuch as the cost of their insurance is universally fixed at higher rates of premium. If the court failed to take judicial notice of the fact that the evi- dence tended to prove, its existence might have been error, for the reason stated in Luce v. Dorchester Mut. Fire Ins. Co.;^' but when the fact is known, and recognized as within common knowledge of all well-informed persons, it is useless to waste the time of a trial in proving it." § 151. Animus Revertendi. The outgoing tenant still retained the key to the dwelling from which he had removed, leaving a few articles of little value, such as old papers, empty barrels, boxes, etc., and it was in evidence that the tenant had not actually inhabited the house for a period of 10 days before the fire. The agent of the company knew of the situation, and testified that he did not consider the house unoccupied. The court said that this was only the agent's opinion, and that he was clearly wrong. The tenant, while still retaining the key, was no longer living in the house. There was no animus revertendi, to save a forfeiture.^* In Iowa, the departing tenant had left a counter in the abandoned 329; Luce v. Insurance Co., 110 Mass. 301; Joyce v. Insurance Co., 45 Me. 168; Thayer v. Insurance Co., 70 Me. 531; Gamwell v. Insurance Co., 12 Cush. (Mass.) 167; Residence Fire Ins. Co. v. Hannawold, 37 Micli. 103; Lancy v. Insurance Co., 82 Me. 492, 20 Atl. 79, and 19 Ins. Law J. 878. i« Chapter 49, § 20. 1' 110 Mass. 361. 18 Home Ins. Co. v. beales, 71 Miss. 975, 15 South. 134 (416) *""• 8) VACANT OR UNOCCUPIED. § 153 building, and the owner of the premises had permitted a saloon keep- er doing business near by to store a small quantity of surplus stock. This the court thought did not prevent the building being unoccu- pied, within the meaning of the policy ; that the storage of property of so little value as not to require the care and watchfulness which the policy holder owes to the insurer did not constitute occupancy.^* A. dwelling house and barn were specifically insured in separate sums. The policy provided that there should be a forfeiture "if any change takes place in occupancy of the premises insured, or if they become vacant." This language, it was held, contemplated an avoid- ance only in the event that both house and barn became vacant.^" § 152. "When a Condition has been Broken, and the For- feiture "Waived, the "Waiver -will not Continue to Relieve Later Forfeitures Arising from Ne-wr Breaches of the Same Condition. A policy, containing thfe usual provision that it "shall be void if the building insured be or become vacant, without consent indorsed," etc., was written to cover property that was actually vacant at the time, and known to be so by the insurer's agent. Afterwards, and during the term of the insurance, the building was occupied, and then again vacated. It was held that the vacancy at the inception of the insurance, being known to the company, would not cause an avoidance; but, when the occupation of the building took place, the condition in regard to vacancy applied, and that the later nonoc- cupancy relieved the insurer from payment of loss.^^ § 153. Application of Rule that the Contract is Entire. Four dwellings were insured, a specific sum of $250 being written on each. At the occurrence of a fire, two of the dwellings were in- habited, and two were not. The policy was held to be separable, 10 Llmburg v. Insurance Co., 90 Iowa, 709, 57 N. W. 626. 20 Worley v. Insurance Co., 91 Iowa, 150, 59 N. W. 16. 21 Commercial Union Assur. Co. v. Dunbar, 7 Tex. Civ. App. 418, 20 S. W. 628. OSTR.FIREINS. 27 (417) § 155 LAW OF FIRE INSURANCE. (Ch. 8 and that the condition in regard to forfeiture, on itccount of vacancy, applied only to the dwellings that were unoccupied. ^^ If the contract was entire, the facts above mentioned would sug- gest the application of a different rule. In McQueeny v. Phoenix Ins. Co.,^' the policy covered two separate dwellings, located about 30 feet apart. Each was insured for a specific sum, and one was occu- pied, while the other was vacant. The insurer paid the loss on, the building inhabited, and denied liability as to the other. The con- tract was held entire, and, as the company had admitted its liability under the policy by paying for one of the dwellings, it was charged also with the payment of the other. The logic of this decision is obvious. By paying for a part of the insured property, there was a waiver of the forfeiture on account of the vacancy of one of the dwell- ings. Had the insurer denied liability as to both dwellings, the same reasoning would have excused payment altogether. § 154. What Constitutes Vacancy. It was a condition of the policy that it would become void if the insured property, without the consent of company, should remain vacant for a period of more than 10 days. The owner of the house was absent for a longer term. The evidence showed that he was engaged in hunting, but each day returned for a short time to Jook after the property. A servant living 200 feet away was charged with its care, and had slept there every night during the absence of the owner, until the night of the fire. Held, that the house was vacant, within the terms of the policy.^* § 155. When Insured Knows that Agent is Disobej^lng the Instructions of His Principal in Granting Privileges or Waiving Conditions, Such Acts will be without Legal Effect. The insurance was to terminate if the house continued unoccupied for more than ten days at one time. At the issuing of the policy, 2 2 Speagle v. Insurance Co. (Ky.) 31 S. W. 282; Connecticut Fire Ins. Co. V. TiUey, 14 S. E. 851, 88 Va. 1024, and 21 Ins. Law J. 558. 23 52 Ark. 257, 12 S. W. 498, and 19 Ins. Law J. 305. 24 Lester v. Insurance Co. (Miss.) 19 South. 99. (418) Ch. 8) VACANT OR UNOCCUPIED. § 156 a permit was given for thirty days' vacancy. Eleven days after the expiration of this permit, the property burned. The fact that the house was not occupied was known to the local agent, but not other- wise to the company. During the thirty days of permitted vacancy, the local agent had received a letter from the general agent, instruct- ing him to cancel the policy if the property was not occupied at the expiration of the thirty days. This letter the local agent had shown to the insured. Held, that the owner of the house had knowledge of agent's instructions, and that he had no right to rely on any promise of the agent for further indulgence.^' If we sometimes fail to find harmony and concurrence of opinion expressed in the decisions concerning these difficult questions, the fact, we may suppose, refers less to the judgment of the law than to the conscience of the court. It is a hopeful sign, and one full of significance in respect to the future administration of the law, that the love of justice has grown to be a more active force in the human heart than original sin. Each case considered by the courts will have its own colorings of right and wrong. The contrariety and dif- ferentiations so often observed are affected unconsciously by these colorings. Thus, it often happens that the sympathetic heart speaks the judgment, while the legal mind ponders in silence. § 156. Conclusions. A dwelling house will be unoccupied, within the meaning of the insurance policy, when no one is living in it; not, however, the tem- porary departure of its tenants will constitute nonoccupancy. Aban- donment is necessary,*— a going away without the intention to return. A mill or manufactory will be construed to be unoccupied, al- though there remain on the premises the ordinary tools and machin- ery incident to the business, if the mill or factory has ceased to oper- ate, and the workmen have departed, \A'ithout a request to return. When the policy, by its terms, becomes void, on account of non- occupancy of the premises insured, it will not again be revived un- less by the agreement of parties. A subsequent reoccupation will not have the effect to reinstate the original promise of indemnity. 2 McLeary v. Insurance Co. (Tex. Civ. App.) 32 S. W. 583. (419) § 156 LAW OF FIRE INSURANCE. (Ch. 8 The policy being void, all duty of performance under its terms has ended. A new obligation cannot be imposed without the affirmative action of the persons upon whom its burdens may rest. Occupancy will always be determined by the character of the risk and the particular uses for which it is intended. What constitutes occupancy is a question of law, but whether or not the building is occupied, within the meaning of the law, is a question of fact. Withdrawing from many kinds of property the care and protection which are the ordinary incidents of actual occupation is an increase of the hazard. Of this fact it is the duty of the court to take ju- dicial notice. (420) ^^- 9) FIXTURES. § 157 CHAPTER IX. FIXTURES. § 157. General Definitions. 158. Fixtures and Macliinery in Mills Distinguislied. 159. Fixtures Distinguished from Buildings. 160. When Duplicates and Extra Parts of Mill Appliances are and are not Fixtures. 161. Are the Engines and Cars of a Railroad Fixtures? 162. Particular Things that in Their Ordinary Uses are Regarded as Fix- tures. 163. Statues and Other Ornaments for Lavvn and House. 164. Partitions and Other Improvements Owned by Tenants, with and without Privilege to Remove. 165. What are Fixtures in Manufacturing Establishments — A General Discussion. 166. Fixtures, as the Subject of Contract, may be Treated by the Agree- ment of Parties either as Fixtures, Chattels, or Real Estate. 167. To Determine whether the Subject of Insurance is or is not a Fix- ture, Reference must be had to the Circumstances of Each Particu- lar Case. 168. Conclusions. § 157. General Definitions. As employed to define the particular subject insured, the word "fixture" is frequently too general in its legal signification to ex- press the precise intention of the parties. There are but few words common to the insurance contract that in their ordinary meaning are more comprehensive or possess larger possibilities of involved obligation than the word "fixture." Mr. Ferard, in his work on Fixtures, defines the term as "denoting those personal chattels which have been annexed to land, and which may afterwards be severed and removed by the party who has annexed them, or his personal representatives, against the will of the owner of the freehold." The word is modern, and, when used in the policy of insurance, does not always and necessarily import that the subject to which it refers is a part of the freehold. It may mean, and often does, any article which tile tenant has the power of removing. In its larger (421) § 157 LAW OF FIRE INSURANCE. (Ch. 9 sense, it signifies something which is aifixed to something else.^ A very full and careful examination of the authorities reveals a good deal of confusion, and frequently a contrariety of opinion, in regard to what constitutes a fixture in particular cases. Many of the deci- sions where the question of fixtures has been considered refer to con- t( sts between landlord and tenant, where a somewhat less liberal rule of construction is followed than that usually applied in adjudica- tions under the insurance contract, where, if doubt or ambiguity ex- ists, the courts generally presume that it was the intendment of the parties that the largest measure of indemnity should be afforded. The definition given by Ferard is accepted by Ewell in his work on Fixtures, and, besides, has the support of a long line of decisions.^ Within the limits of my inquiry, I do not find that any of these writers refer to the custom among insurers of designating many ar- ticles as "fixtures" that belong to the owners of the freehold; and it appears that the definition given is too narrow to compel perform- ance on the part of the insurer, as they should do to be consistent with a faithful observance of well-known usage. In recognition of the customs of this particular business, the word "fixture" must be understood to denote something which has been a personal chattel, now annexed to the realty, and of such a character that it may be severed again without material detriment either to the chattel or to the freehold. So far as its character as a fixture is concerned, it is quite immaterial, as a subject of insurance, whether it is the prop- erty of the tenant or of the owner of the freehold. The technical and restricted meaning may be properly applied in matters affect- ing the relation of landlord and tenant, and in determining the rights of the reversioner or remainder-man; but the word must be under- stood as having a larger and different meaning in its application to the insurance policy. Fixtures are insured indifferently to both the landlord and the tenant, and in either case the same things are intended, and to this intention it is the duty of the courts to give proper legal effect. It will be conceded that Mr. Ferard, in the rule he formulates, expresses correctly the general principle of the law. The fixture 1 Sheen v. Rickle, 5 Hees. & W. 175. 2 Gib. Mxt 5; Grady, Fixt. 1; 2 Bouv. Inst. 102; 2 Kent, Comm. 344. (422) ^'h- y) FIXTURES. § 157 was once a chattel, and still retains, as an incident to the realty, something of its original character. When that is wholly lost, the object or thing considered has become so far identified with and merged into the realty as to be no longer a fixture. Stone piled in the field in an orderly manner or otherwise would be a chattel; but if laid in a wall, forming an inclosure or separating one field from another, the same stone becomes a fixture. It is not necessary that the wall should be laid with mortar or cement, or that the earth should be removed or disturbed to receive it. The uses for which it is intended establish its relations to the realty, and change the chat- tel into a fixture. And what is true of a stone wall would be equally true of a rail fence. Compost or other forms of fertilizers piled in the field are chattels, but, when scattered over the surface of the land, are converted into a fixture. Should, however, this process of dis- tribution result in the dissipation of the fertilizer as an integral property, by becoming inseparably mixed with the soil, it will there- after be realty only, and its character as a fixture lost. An elevator car in the hands of the manufacturer or as an article of commerce is a chattel, but when attached to a building, and adapted to use, it changed to a fixture; and, if afterwards it is separated from the building, it will again become a chattel. These illustrations will be sufQcient to indicate the nature of a fixture and the principle of law that controls in giving it a dis- tinctive character. A fixture may be designated as a chattel that for the time being is immovable, on account of its temporary attach- ment to the realts', and which may not be separated without the con- sent of either the tenant or the owner of the freehold. In Teaff v. Hewitt,^ Bartley, C. J., said: "The term 'fixture,' in its ordinary signification, is expressive of the act of annexation, and denotes the change which has occurred in the nature and the legal incidents of the property; and it appears to be not only appropriate, but necessary, to distinguish this class of property from movable property, possessing the nature and incidents of chattels. It is in this sense that the term is used in the greater part of the adjudicated cases." * 3 1 Ohio St. 511, 524. 4 2 Smith, Lead. Cas. 114; 2 Kent, Comm. 345, note A; Elwes v. Maw, 3 East, 57. (423) , § 158 LAW OF FIRE INSURANCE. (Ch. 9 Mr. Ewell, in his work on Fixtures,' says: "It may be observed that the word 'fixture' necessarily means only something fixed or at- tached to another, as distinguished from a movable, — a status of fixation or annexation, — and does not imply that such annexation is not severable." The supreme court of Iowa was called upon to distinguish what were fixtures and what appurtenances in a photographer's business. It held that appurtenances embraced all such property as pertained to the business or room or remained there permanently, such as maps and pictures hanging on the wall, stove and carpet, furniture, ma- chines, and stock; and that the word "fixture" referred only to the skylight, balcony, and partitions.® § 158. Fixtures and Machinery in Mills Distinguished. The leading American case where the discussion refers to the dis- tinction between personal property and fixtures is Walker v. Sher- man.' The subject in controversy there was the machinery in a woolen mill, which was referred to as consisting of carding, pick- ing, shearing, and spinning machines, looms, etc., located in the factory building, but in no permanent manner attached. Cowen, J., who delivered the opinion of the court, said that a chattel, to become a fixture, "need not be constantly fastened. It need not be so fixed that detaching will disturb the earth or rend any part of the build- ing. I am not prepared to deny that a machine movable in itself would become a fixture from being connected in its operation by bauds, or in any other way with the permanent machinery, though it might be detached and restored to its ordinary place as easily as the chain in Farrar v. Stackpole.^ I think it would be a fixture notwith- standing." Applying the rule which governs this decision, an insurance "on fixtures" would attach to all the machinery contained in a manu- facturing establishment, whether fastened to the building or not, if connected with belts to other machines or to the line shaft, and thus embraced as a part of the operating system. In effecting an in- 6 Page 5. 7 20 Wend. (N. X.) 636. « Pickerell v. Carson, 8 Iowa, 544. s 6 Me. 154. (424) Cll- 9) FIXTURES. § IS!) siirance on this class of property, the term "fixtures" would generally be found more comprehensive than the term "machinery," as it would include such subjects of insurance as foundations, steam boilers, etc.,^ that could not with proprietj- be designated as machinery. § 159. Fixtures Distinguished from Buildings. Such articles as mantels, chandeliers, ranges, furnaces, etc., are properly described as fixtures, for the reason that they are incidents to the realty, and cannot be removed except with the consent of the owner of the freehold. Each may be detached without serious in- jury to the building; and each of the articles named has a distinctly specific character, and, before its annexation to the realty, was a chattel, bought and sold in the market as such. Weston, J., in Farrar v. Stackpole," said: "It is an ancient prin- ciple of law that certain things which in their nature are personal propertj', \\ hen attached to the realty, become a part of it as a fix- ture." Gas, steam, and water pipes, and sometimes their appurtenances, while perhaps not wholly losing their character as chattels, from the manner in which they are generally placed within the walls of the building, are irremovable, and can with no better propriety be des- ignated as fixtures than the brick and plaster which conceal them from view, and hold them permanently in the places they occupy. In Farrar v. Stackpole, above referred to, the contention arose in regard to whether a. certain mill chain contained in the building at the time of the sale became the property of the person who purchased the mill. The evidence on the trial of the case disclosed that the chain in dispute was attached only by a hook to another chain, which was spiked to the permanent timbers of the mill. In the opinion handed down by the court it was said: "Is it too much to say that a mill is incomplete without a chain, cable, or other substitute? * * * We are of the opinion that it ought to be regarded as ap- pertaining to and constituting a part of the realty. * * * Win- dows, doors, and window shutters are often hung, but not fastened, to a building; yet they are properly part of the real estate, and pass. 6 Me. 154. (425) § KiO LAW OF FIEE INSURANCE. (Ch. 9 with it, because it is not the mere fixing or fastening which is re- garded, but the use, nature, and intention." The reasoning of this case will hardly convince the legal mind. While "use" and "intention" should always be properly regarded, they are not of sufficient consideration to change a subject distinctly personal into real estate. The operation of a sawmill without a chain, it is conceded, would be attended with inconvenience; and so, too, would the occupation of a dwelling without table or beds; and yet for this reason it will not be claimed that such common and in- dispensable articles of household furniture become fixtures and inci- dents of the realty, § 160, When Duplicates and Extra Parts of Mill Ap- pliances are and are not Fixtures, It was held in Voorhis r. Freeman^" that duplicates and other parts of rolling-mill machinery not in actual use were to be consid- ered as fixtures, and passed to the purchaser as a part of the free- hold. But it should be observed in this case that all of the articles which were the subject of contention had at one time and another "been in use. In changing the style and character of the mill prod- ucts, a temporary substitution of rolls having different form and size was required. It does not appear, therefore, that this decision proposes any enlargement of the doctrine in regard to the law of fix- tures, except perhaps in the declaration that actual physical annex- ation is unnecessary. Had the rolls referred to been new, — that is, never in use, but kept on hand as extras to take the place of other rolls that might become unfitted for use on account of wear or ac- cident, — a very different question would have been presented. There are many kinds of machines that are so constructed that, with the adjustment of parts as contemplated, work in different style and form will be produced. A different roll or a different knife, to secure the desired results in size or shape, is only bringing into active use a dormant member of the machine. Without these necessary ad- juncts, the machine would not be complete, and would be unfitted to perform the multifarious uses for which it is designed. In respect to 10 2 Watts & S. (Pa.) H6. (426) €h. 9) FIXTURES. § 160 a machine of this kind, it is manifest that actual physical attachment of all its parts at one time is impossible. There is, however, a con- structive annexation; and, whether the machine be a chattel or a fixture, all these separate parts temporarily out of use will be subject to the same rules of law.^^ Ewell says: ^^ "Mill saws and leather belting, purchased by the owner of a sawmill for use therein, and which have been attached and used as a part of the mill, without any intention at the time of removing them, and which are essential parts of the mill, become parts of the realty, though temporarily severed and stored in the file room adjoining the mill." ^^ This proposition is in support of the rule before explained, but does not essentially extend its scope. Placing the saws on an arbor and the belts on pulleys constitutes them an integral part of the operat- ing machinery of the mill and gives them a character as fixtures; and the subsequent removal, with the intention of being again restored to active use, when convenience or necessity requires, does not im- port a severance from the realty. An important distinction should be observed between saws, belts, and other similar articles apper- taining to mills and factories, that on account of their previous use have an established relationship to the machinery, and thereby have become an incident of the realty, and the same class of articles that have never been in actual use, although bought for that purpose, and kept conveniently on the premises to replace broken or worn-out saws, belts, and other parts of the machinery, without unnecessary interruption of business. The bringing of these things onto the premises, where they may be at hand in case of urgent need, does not change their character as chattels, which will be retained un- til actual physical annexation has occurred." 11 Bwell, Flxt. 19; Christian v. Dripps, 28 Pa. St. 271, 278; Hill v. Sewald, 53 Pa. St. 271; Patterson v. Delaware Co., 70 Pa. St. 381, 385; Palmer v. Forbes, 23 111. 301, 313; Minnesota Co. v. St. Paul Co., 2 Wall. 609. 12 Page 33. 18 Burnside v. Twitchell, 43 N. H. 390. 14 Johnson v. Mehaffey, 43 Pa. St. 308; Burnside v. Twitchell, supra. (427) § 162 LAW OF FIRE INSURAKCE. (Ch. 9 § 161. Are the Engines and Cars of a Railroad Fixtures? In several important cases it has been held, and I think illogically, ' that the engines and cars of a railroad were fixtures. In Farmers' Loan & Trust Co. v. Hendrickson/'^ Strong, P. J., said: "That rail- way cars are a necessary part of the entire establishment, without which it would be inoperatiye and valueless, there can be, of course, no doubt. Their wheels are fitted to the rails. They are constant- ly upon the rails, and, except in cases of accident or when taken off for repairs, nowhere else." Chiefly for the reasons here stated, the court reached the conclusion that the rolling stock of a rail- road company was a part of the realty, in the nature of fixtures. Judge Denio, in Bishop v. Bishop,^* very ably refuted the rea- soning of this case. He pointed to the well-understood fact that the rolling stock of a railroad was a subject of barter in the same sense and quite to the same extent as agricultural implements ; that cars of a standard gauge were seldom localized. As the means of transportation and agents of commerce, it was a common thing for cars to be taken long distances away on other roads, earning freight or mileage for their owners, and to return, perhaps, only after an absence of weeks or months. It is certainly difficult to discover any of the important distinguishing elements of a fixture in a railroad car. § 162. Particular Things that in Their Ordinary Uses are Regarded as Fixtures. Mr. Ewell, in his work on Fixtures,^' has collected from adju- dicated cases a large number of articles variously classified, which have been held to be fixtures, among which may be mentioned en- gines, boilers, furnaces, vats, partitions, soap boilers, distillery pipes, coolers, worms, stills, boilers in brickwork, retorts, cisterns, etc., shafting, belting, platform scales, shelving, millstones, ma- chinery for running a chair factory, bowling alley, coal bins, railing^ and balusters for stairs, wood awning, etc. 15 25 Barb. 484. le n N. Y. 126. n Pages 91-93. (428) Cb. 9) FIXTURES. § 163 In a recent decision from the supreme court of Alabama (Capital City Ins. Co. v. Caldwell)/ ^ Stone, C. J., said: "The primary mean- ing of the word 'fixture' is 'that which is fixed or attached to some- thing as a permanent appendage.' In law it takes a wider range, — anything fixed or attached to a building and used in connection with it is a fixture, whether it be a permanent appendage or not." § 163. Statues and Other Ornaments for Lawn or House. In Snedeker v. Warring,^" the court was required to consider whether a certain statue passed with the realty as a fixture. The statue and pedestal, weighing between three and four tons, were sculptured from stone, and placed upon a stone foundation, located conveniently on the lawn between the house and street. It was in no manner fastened except by its own weight to the founda- tion upon which it rested. The court held it to be a fixture. Parker, J., who wrote the opinion of the court, in a somewhat ex- tended discussion of the question presented, referred to Pothier, and approvingly quoted from that author the following proposi- tion: "TVTien, in the construction of a large vestibule or hall, niches are made, the statues attached to those niches make part of the house, for they are placed there ad integrandam domum. They serve to complete that part of the house. Indeed, the niches be- ing made only to receive the statues, there will fail to be anything in the vestibule without the statues." Judge Parker declared that this application of the law appeared to him to be "in accordance with reason and justice.'' liut it is stated elsewhere in the opinion handed down in that case that no English or American decisions had been found where the exact point of law had been settled as to whether statuary placed in a house or in grounds shall be deemed personal property or fixtures. The reasoning of the New York court in reference to the state- ment of the law given by Pothier appears to the writer to be not only fallacious, but extremely unfortunate. Niches, alcoves, and recesses are common to most dwellings intended for the use of per- sons who have the means of gratifying a cultivated taste in respect 18 95 Ala. 77, 10 South. S.j.-J, aud 21 Ins. Law J. 776. lo 12 N. Y. 170. (429) § 163 LAW OF FIRE INSUEANCE. (Ch. 9* to art, in both the utilities and decorations. A niche carefully de- signed in vestibule or hallway signifies no -more than the artistic preparation for placing ornamental furniture. This may consist of statues, vases, or such other rare or curious articles as the pride- or fancy of the owner may wish to display. The writer recalls having seen, in an old American home, placed in such a niche as that described by Pothier, a statue of a remote ancestor of the owner of the property. On its head was a helmet,, and it was dressed in iron mail, being the same cap and coat the grim warrior had worn while fighting for his country's liberties, 300 years before. This statue and these relics had a sentimental value to the owner, greater than that of the house in which they were- placed; and would they have passed to a purchaser of the freehold without special reservations in the deed? Clearly not. A statue occupying a niche arranged as a part of the interior walls of a dwell- ing, and not fastened in any way to the building, is as much an article of furniture as a painting or anything else that is intended for either use or ornament. Let us suppose a person furnishing a new house finds a place- between two pilasters, forming a recess or niche of suitable dimen- sions for a bookcase, and, acting with regard to his convenience, procures a bookcase to be made exactly fitting the niche. Would this piece of furniture be any less a chattel than if placed against any other part of the wall? No one, I presume, will contend that such would be the case, and yet to do so would be consistent with the rule declared by Pothier. To transform furniture into fixtures, there must be annexation of an essentially permanent nature, some- thing more than the mere form or circumstance of location. It cannot be important whether the niche containing a statue or other article was created with special reference to that particular use, or whether it was the result of the accidental and fortuitous adjustment of structural parts, in respect to either use or orna- mentation. What may have been the intention of the aixhitect who planned, or the owner who built, the vestibule and hallway with recess or niche, is too uncertain a matter to change the legal status of this class of property in the manner indicated by the New York court in the case of Snedecker v. Warring. (430) Cll. 9) FIXTURES. § 164 § 164. Partitions and Other Improvements Owned by Ten- ants -with and "wltliout Privilege to Remove. Among cases of the most common occurrence are those of per- sons who rent stores or manufacturing property for the purpose of carrying on a business that requires special appliances in the nature of fixtures. By arrangement with the owner of the buildings, these fixtures are to be attached by the tenant; and it may be stipu- lated in the lease that they are to remain his property, with per- mission to remove Avhen his holding terminates. When this is the situation, the ownership of the fixtures will continue that of the tenant, and he may insure them as his own. But it frequently nappens that, in the fitting up of a store or factory for special lines of trade or manufacturing, the fixtures are of so permanent a char- acter, or so illy suited to other localities or for other usee, as to be of little value if removed; and, to meet this ditficulty, an agree- ment is reached between the owner of the building and the lessee that the fixtures shall not be removed at the expiration of the lease. If it is thus arranged, the fixtures are a part of the freehold, and the tenant cannot insure them as "his own." He may have an insurable interest on account of "uses";'"' but the fixtures are, in legal effect, as much a part of the real estate when first attached as at any subsequent time, and are properly insured by the owner of the building. Furniture and other things not fastened to the building, or, if not entirely free, easily loosened, and without de- facement of wall or floor, are not fixtures.''^ And this rule applies as well to the implements and machinery in factories and mills. 20 Mitchell v. Insurance Co., 32 Iowa, 421; Allen v. Insurance Co., 36 La. Ann. 767; Fletcher v. Insurance Co., 18 Pick. (Mass.) 419; Niblo v. Insur- ance Co., 1 Sandf. (N. Y.) 5ol; Lawrence v. Insurance Co., 43 Barb. (N. Y.) 479; Tongue v. Nutwell, 31 Md. 302. A partition in an hotel building held a trade fixture. Podlech v. Phelan (Utah) 44 Pac. 838. A tenant held entitled to ren^ove trade fixtures after expiration of the lease. Id. 21 Holmes v. Insurance Co., 10 Mete. (Mass.) 211. (431) § 165 LAW OF FIRE INSURANCE. (Ch- 9 § 165. What are Fixtures in Manufacturing Establish- ments — A General Discussion. In Teaflf t. Hewitt," we find a very carefully considered case, in which nearly all of the authorities available to the court were crit- ically examined and analyzed. In the syllabus is given this defl- uition of "fixture": "(1) Actual annexation to the realty, or some- thing appurtenant thereto; (2) application to the use or purpose to which that part of the realty with which it is connected is appro- priated; (3) the intention of the party making the annexation to make a permanent accession to the freehold." "The machinery of a woolen factory, consisting of carding ma- chines, spinning machines, power looms, etc., connected with the motive power of the steam engine by bands and straps, but in no wise attached to the building in which used, except by cleats or other means to confine them to their proper places for use, and subject to removal whenever convenience of business may require, without injury, are not fixtures, but chattel property." The opinion in this case Was by Bartley, C. J., and contains an exhaustive review and discussion of the whole subject of "fixtures," as the word is applied to the accessory machinery and appurte- nances of factories and workshops. "Fixtures in a manufactur- ing establishment must be governed by the same criterion which applies to fixtures in other situations. The machinery and imple- ments in such establishments, although useful and even essential for the business carried on, which are not permanently affixed to the ground or the structure of the building, and which can be easily removed without material injury to the building or the articles themselves, and their place supplied by other articles of a similar kind, are not fixtures, but personal property." "^ 2 2 1 Ohio St. 511. 28 1 Ohio St. 542. See, also, Lawton v. Lawton, 3 Atk. 14; Dudley v. Warde, Amb. 113; Case Manuf'g Co. v. Garven, 45 Ohio St. 289, 13 N. E. 493. The court here said: "It Is a distinction generally recognized by those who run and operate mills, as well as by the courts, being founded on the general character of the niachiuery of each class, and the mode In which it is usually placed upon the premises for use. The machinery furnishing the (432) Ch. y) FIXTURES. § 166 § 166. Fixtures, as the Subject of Contract, may be Treat- ed by the Agreement of Parties either as Fixtures, Chattels, or Real Estate. It will sometimes occur that, on the narrow border ground which separates the known from the unknown, it will be very difficult to determine, from the character and circumstances of the subject motive power is generally more closely annexed to the freehold, and of a more permanent nature, as the power furnished by it may be adapted to the propulsion of the machinery of a variety of mills without any substantial change in the motive power itself, or in the building, other than by sub- stituting one kind of machinery for another; while the machinery that is propelled has more of the general character of personalty, is not as a rule so closely annexed to the freehold, and may be removed, and frequently is, from one mill to another, as any other article of personalty. Hence it has generally been held in this country that articles of machinery used in a factorj- for manufacturing purposes only attached to the building to keep them steady in their places, so that they may be more serviceable when in use, and that may be removed without any essential injury to the freehold or the articles themselves, are personal property, and do not pass bj' a con- veyance or mortgage of the freehold." Wolford V. Baxter, 33 Minn. 12, 21 N. W. 744. The dispute in this case re- ferred to the question of whether certain valuable property contained in a brewery was personal or real. "On applying these rules and tests to the case In hand, we are of opinion that the coops or casks and tubs in controversy have none of the characteristics of fixtures. They were not actually annexed to the freehold, nor were they of a naturf to be deemed constructively affixed to the realty. It is true that they were well adapted to and necessary for carrying on the brewing business, to which the premises were appropriated; but this of itself is quite an immaterial element In determining the nature of an article. Many articles of a purely per- sonal nature are useful and necessary in carrying on a particular business which can In no just sense be termed 'fixtures.' These articles were no more essential to the brewing business than were the ice tools, pitching machine, or ordinary beer kegs, or are farm machinery for the business of husbandry. It is also true that it is stipulated that these casks and tubs were constructed for the purpose of being put into and used In this brewery, and were placed there with intent that they should remain there for permanent use, and that the vaults were excavated for the special purpose of storing therein such hogsheads, and that the ice house was constructed for the special purpose of placing therein fermenting tubs In the first story, and casks in the second; but it does not appear that the vaults were excavated or the ice house built in any special OSTB. FIRE INS. — 28 (433) § 166 LAW OF FIRE INSURANCE. (Ch. 9 of insurance, whether it be chattel property or real estate. When these cases arise, the doubt may frequently be resolved by an in- quiry as to the intention of the parties. It seems altogether a reasonable proposition that if the parties, for the purpose of in- surance, treat a particular subject as personalty, it will have that character, even though it is permanently attached to the real es- tate. It is customary in writing on manufacturing risks to make the policy specific on machinery. In nearly all cases, in both the application and policy, the machinery is separated from the build- ing, and treated as chattel property. The competency of the par- ties to do this cannot be disputed. °* shape to suit these particular casks or tubs, or that the casks or tubs were con- structed to fit into any particular place in the vaults or Ice house. They were adapted to receive any other casks or tubs as well as these, and any other such casks or tubs would have been just as well adapted to be stored there as these. It is expressly stipulated that these tubs and hogsheads were of the same description as those in general use in breweries, and that they might be sold to other brewers for the purposes for which they were constructed. They were readily removed from the vaults and ice houses, and in fact were removed once a year or oftener outside, tor the purpose of being pitched or repaired. We can see no particular difference between them and ordinary beer kegs, except that they were used exclusively inside of the vaults or Ice houses, and, being larger, were somewhat more difficult to move. The intent that they should remain in this brewery for permanent use there is unimportant. Intent alone will not convert a chattel into a fixture. A farmer may take a plow or any other farm implement upon his farm, with intent to keep and use it there until it wears out, but this will not make it real estate. Moreover, It will be noted that it is not stipulated that these articles were placed in the brewery with the intent to make them a permanent accession to the freehold, but merely that they should remain there for permanent use. What has been said as to the hogsheads and tubs will, in the main, apply to the copper cooler. It was a loose, movable utensil, the same as in common use in breweries. The only ground for a distinction between this and the other articles is that, when in use, it was connected by a hose to a stationary water tank, in order to permit water to pass through it. When not in use, the hose was disconnected, and the cooler was laid away. The object and purpose of this temporary annexa- tion was not to make the cooler a permanent accessory to the building, but for the purpose of using the article as a chattel." Wolford v. Baxter, supra. See, also, Maguire v. Park, 140 Mass. 21, 1 N. E. 750. 24 Ford V. Cobb, 20 N. Y. 344; Eaves v. Estes, 10 Kan. 314; Coleman v. Lewis, 27 Pa. St. 291; Sword v. Low, 122 111. 487, 13 N. E. 826; Hunt v. Iron Co., 97 Mass. 279; Richardson v. Copeland, 6 Gray (Mass.) 53(5; Haven v (434) Ch. 9) FIXTURES. § 167 In Clark v. Svea Fire Ins. Co.,'"' the fixtures were placed in the building by the tenant, and were so permanently attached that re- moval was impossible without serious injury to the realty. The insurance was for the tenant, and the court held that he could recover. Doubtless it was as the court said, — that the right of the tenant to these fixtures was good against all the world except the landlord. That the tenant had an insurable interest is not fairly disputable, but it is also indisputable that he was not the "sole and unconditional owner"; in fact, that he was not the owner at all. Without the right of removal, his interest in the fixtures was limited to their use during the term of Jiis lease. § 167. To Determine whether the Subject of Insurance is or is not a Fixture, Beference must be had to the Circumstances of Each Particular Case. As to what are to be understood as "fixtures," within the mean- ing of an insurance policy, must usually be determined by the cir- cumstances of each particular case. Among the more important subjects of insurance, we find many things that have the character of fixtures so distinct as to afford no ground for controversy. Of such is the motive power in mills and factories, which includes en- gines and boilers, and all attachments immediately appertaining to the generating and application of force. In most instances this would embrace line shafting and pulleys attached, elevators in stores, factories, and apartment houses, heating apparatus (em- bracing the furnace or boiler, radiators, and piping), gas and water fixtures, except pipes laid in the walls or between floors (when, of course, they are part of the building). Bath-room equipments audi the more permanent appliances of the kitchen and laundry, coun- ters, shelving, and movable partitions in store and oflBce, may be either furniture or fixtures; and whether they are one or the other Emery, 33 N. H. 66; Honeyman v. Thomas, 25 Or. 539, 36 Pa(?. 636; Kendall V. Hathaway, 67 Vt. 122, 30 Atl. 859; Winslow v. Bromich, 54 ICan. 300, 3& p'ae. 275; Chase v. Box Co., 11 Wash. 377, 39 Pac. 639; Manwarlng v. Jenison, 61 Mich. 117, 27 N. W. 899: Myrick v. Bill, 3 Dak. 284, 17 N. W. 268; Corcoraa V. Webster, 50 Wis. 125, 6 N. W.*513. 2 102 Cal. 252, 36 Pac. 587. (435) § 168 LAW OF FIRE INSURANCE. (Ch. 9 will generally depend upon the nature and permanency of their relations to the building. If designed and constructed for a particular building, reference being had to the style and form of the room to which they have been specially adapted, it would show intention to affix, but would not be conclusive that they had lost their character as chattels. If they are only fastened in such a manner as to steady them on the floor or against the wall, and easily be removed and used in another store or building, they are still furniture, and should be insured as such.^" § 168. Conclusions. "Fixture" signifies a chattel attached to the freehold in such manner and under such circumstances that it may afterwards Le detached by the person to whom it rightfully belongs, without the consent of the owner of the freehold. A fixture will be irrecoverably merged in the freeliold when its character as a chattel is wholly gone. Unless, as a part of the freehold, its chattel identity is preserved, to the extent of making it possible by separation to resume its original character, it is no longer a fixture, but a permanent accession to the realty. When the tenant affixes to the freehold his own chattels, under the terms of a lease which provides that he may remove them at the expiration of his holding, the ownership of the fixtures con- tinues that of the tenant, and he may insure them as his own. When the tenant annexes to the freehold his own personal chat- tels in such a manner that they take the character of fixtures, they become eo instante the property of the owner of the freehold, and should be insured in his name. The tenant will have an insurable interest in the nature of uses, which may be protected under a suitable form of policy. 2« Thurston v. Insurance Co. 17 Fed. 127, 12 Ins. Law J. G99; Ck)mmerciai Fire Ins. Co. v. Allen, 80 Ala. 571, 1 South. 202, and 16 Ins. Law .1. 641; Holmes v. Insurance Co., 10 Mete. (Mass.) 211; Wolford v. Baxter, 33 Minn. 12, 21 N. W. 744; Teaff v. Hewitt, 1 Ohio St. 511-529. (436) ^^- iO) ADJUSTMENT. § 169 CHAPTER X. ADJUSTMENT. 169. When a Fire Occurs, the Insured must Use His Best Endeavors to Protect the Property. 170. "Notice" and "Proofs of Loss," and "Books of Account." 171. Must Produce Original or Duplicate Invoices When Required. 172. Examination under Oath. 173. The Insured must Answer Truthfully All Relevant Questions, and. Failing to Do So, will Forfeit All Right to Recover. 174. When False Swearing will Avoid the Policy, although No Fraud in Re- gard to the Insurer is Intended. 175. Statements Involving Matters of Judgment and Opinion. 176. When False Statements, under Oath, Concerning the Amount of Loss, will Defeat Recovery, whether Such Statements are Material or not. 177. When Insured Absents Himself, so that He cannot be Subjected to a Sworn Examination, the Insurer will be Excused from Payment of Loss. 178. Fraudulent Overvaluations in I'roofs of Loss Forfeit All Claim under the Policy. 179. The Contract will Generally be Construed so as to Afford the Indem- nity Contemplated. 180. Indemnity does not Include Unrealized Profits. 181. When Indemnity is the Market Value. 182. When the Cost of Production is the Measure of Damages. 183. Parties may Contract as to the I^imit of Liability. 184. Adjustment of Building Claims. 185. Adjustments on Personal Property. 186. Unnecessary Expense need not be Considered In Computing the Cost of Production. 187. When the Insurer is not Liable for Loss Caused by Fire. 188. Will There be no Liability unless There is Actual Ignition Outside of the Agencies Employed? 189. Insurance against Loss by Fire does not Indemnify against Loss by- Lightning. 190. When a Manufacturing Establishment Ceases to Operate, the Insurer- will not be Liable. 191. What is a Manufacturing Establishment? 192. Gross Negligence. 193. Gross Carelessness will Excuse the Insurer When so Stipulated. 194. Consequential Damages. 195. Damages by Removal. (437) § 169 LAW OF FIRE INSURANCE. (Ch. 10 I 196. Measure of Damages. 197. When Both the Insurer and Insured will Contribute in Payment of Loss by Removal. 198. Replacement of Property Damaged or Destroyed. 199. When Repairs are not Properly Made, the Insured's Remedy is by an Action at Law on the Contract to Repair. 200. The Insurer may Restore the Property, although Loss is Payable to a Mortgagee. 201. When the Cost of Rebuilding or Repairing is Less than the Insurance, the Insurer will not be Excused from the Payment of Future Losses on the Balance of the t'olicy. 202. An Election to Rebuild is Irrevocable. 203. The Insurer will Have his Election to Rebuild or Replace, although the Policy is Made Payable to a Third Person. 204. When the Insurer is Entitled to Contribution from Co-Insurer. 205. Apportionment of Nonconcurrent Policies. 206. Contribution when Policies are General and Specific. 207. Contribution when Any of the Co-Insuring Policies are Invalid, or where Any of the Companies Insuring on the Risk have Become In- solvent. 208. Co-Insurance Clause. 209. Assignment of Policy. 210. The Relations Created, between Insurer and the Assignee of Policy are Wholly Independent of the Original Insured. 211. Assignment for the Benefit of Creditors is Alienation, within Meaning of Policy. 212. Assignment of Policy for Collateral Security does not Invalidate the Insurance, unless It is so Stipulated in the Policy. 213. When Settlement is Conclusive. 214. The Adjustment is the Making of a New Contract. 215. When There is No Implied Promise to Pay an Award. 216. Fraud Vitiates the Award. 217. Settlement Rests on Mutual E'aith and Understanding. 218. The Party Asking to have Settlement Set Aside must Offer to Return Any Consideration He has Received on Account of Such Settlement. 219. Personal Opinions Generally without Legal Effect. 220. Conclusions. § 169. When a Fire Occurs, the Insured must TJse His Best Endeavors to Protect the Property. When a fire occurs, it is the duty of the insured to engage his best efforts to protect the property. The utmost good faith is re- quired, both at and after the Are, in this respect. The insured can- (438) Ch. 10) ADJUSTMENT. § 170 not be an indifferent spectator, when any act on Ms part can be performed to arrest tlie conflagration, or remove the insured prop- erty to a place of safety/ When goods are saved in a damaged condition, it is the insured's duty to care for them in such manner as to prevent further loss, when possible. If the damaged prop- erty be household goods, or a stock of merchandise, carried from a burning building into the street, the owner must act with dili gence in providing a suitable shelter, and in doing everything rea- sonable for their preservation. The circumstances under which the fire occurred, and the character of the property exposed, will, of course, need to be considered, in determining the question of M'hether the insured has proceeded with good faith and proper celerity in the matter. It wUl be his duty to act always with zeal and prudence to guard the salvage against thieves, and from dete- rioration on account of frosts or storms, or from any other cause whatever. The insurance policy generally provides what steps it will be necessary for a claimant to pursue after a loss. When this is the case, there should be a substantial compliance. § 170. "Notice" and "Proofs of Loss," and "Books of Account." If it is required that notice be given the insurer, this must be done in the manner and within the time mentioned, and proofs of loss must be prepared and furnished the company in conformity with the terms of the policy, or the company will be relieved from payment.^ The insured must present his books of account for in- spection of the company's adjuster, and submit to an examination under oath, when required.^ If the insured has original invoices, - Hoffman v. Insurance Co., 1 Rob. (N. Y.) 501, 19 Abb. Prac. (N. Y.) 325, affirming 32 N. Y. 40o; Lycoming Ins. Co. v. Barringer, 73 III. 230; Willis v. Insurance Co., 79 X. C. 285; Devlin v. Insurance Co., 4() U. C. Q. B. Gil; Ells- worth V. Insurance Co., 89 N. Y. 18(i, 11 Ins. Law J. 514; Pheui.x; Ins. Co. v. Sullivan, 39 Kan. 449, 18 Pac. 528; Dear v. Assurance Co., 41 U. C. Q. B. 5.5:5; Phonix Ins. Co. v. La Pointe, 118 111. 384, 8 X. R. 3.53, and 10 Ins. Law .T. -"iS, affirming 17 111. App. 248. 2 For discussion and citation of authorities, see chapter on "Proofs of Loss." s Books of account must be furnished when required. Insurance Cos. v. (439) § 171 LAW OF FIRE INSURANCE. (Ch. 10 verifying Ms account of stock purchased, they must be furnished, when requested; and, if the originals are destroyed or lost, a rea- sonable effort must be made to obtain duplicates. When the pro- duction of the books and the invoices is, by the terms of the policy, made a condition precedent, as is frequently the case, any failure on the part of the insured to perform will be at his peril. The company has stipulated for the fullest information in regard to the insured's interest in the property, the circumstances of the fire, and the extent of the loss ; and, when this is withheld or refused, there can be no recovery. § 171. Must Produce Original or Duplicate Invoices when Required. In Farmers' Fire Ins. Co. of York, Pa., v. Mispelhorn * the policy provided that the insured should exhibit, at the request of- the com- pany, his books, bills of purchase, or duplicates, etc. The original invoices having been burned, the company demanded that dupli- cates be furnished. This the insured neglected to do. It was held that there could be no recovery. The court said: "The insured was not only bound to produce and exhibit to the company, or its agent, upon being required to do so, the bills of purchase, if with- in his power or control, but if they were destroyed, as he must prove, he was bound to produce duplicates thereof, if it were pos- sible for him to do so ; and it was no excuse for his failure to pro- duce such duplicates that they were not in his possession, or at Lis command, at the time of the demand made. If they could have been had by application to those who could have furnished them, he was bound to procure and exhibit them as required. Compliance with this condition, if required by the company, was indispensable to the assured's right of action; and there is no answer to the ob- Weides, 14 Wall. 375; Langan v. Insursince Co., 162 Pa. St. 357, 29 Atl. 710; Ward V. Insurance Co., 10 Wash. 361, 38 Pac. 1127; Liverpool & L. & G. Ins. Co. v. Ellington, 94 Ga. 785, 21 S. E. 1006; Allen v. Insiu-ance Co. (Mich.) 64 N. W. 13; Jube v. Insurance Co., 28 Barb. (N. Y.) 412; Bonner v. Insurance- Co., 13 Wis. 677. See authorities under section in regard to sworn examina- tion, post, § 172. 4 50 Md. ISO. (440) ^h- ^^) ADJUSTMKNT. § 172 jection that he had failed to comply, unless he could show either that compliance had been waived, or that performance of the con- dition had become impossible, without fault of his own." The Marj-land court cites in support of its decision the case of O'Brien v. Commercial Fire Ins. 00.,=" where the court, in constru- ing a similar provision, said: "The intent and meaning of the clause is neither ambiguous nor obscure, and, upon the most favor- able interpretation for the insured, exacts from him, upon the requi- sition of the insurer, duplicates of his invoices of purchase, certi- fied by the merchants from whom the purchases were made. The condition is reasonable, and not difficult of perfoi-mance, and the defendant has a right to insist upon a compliance." ° § 173. Examination under Oath. The right to require the insured to submit to an examination under oath concerning all proper subjects of inquiry is clearly stipu- lated for in the form of policies now in general use. The intent of this provision is to prevent fraudulent concealment, and to en- able the insurer to obtain material information in regard to the origin and circumstances of the fire, the value of the property, and the claimant's interest therein. The requirement is a reasonable one, and will often, no doubt, be useful in securing important and s 63 N. Y. 108. " Worslpy V. Wood, 6 Term R. 710; Columbian Ins. Co. v. Lawrence, 2 Pet. 52. "i.S; .Tube v. Insurance Co., 28 Barb. (X. Y.) 412; .Jennings v. Insur- ance Co., 2 Denio (N. Y.) 75; Gross v. Iu.surance Co., 22 Fed. 74, 14 Ins. Law .1. 159, ICO; Bumstead v. Insurance Co., 12 N. Y. 93; Pliillips v. Insurance Co., 14 5Io. 2.35; Cameron v. Insurance Co., 7 U. C. C. P. 234; Cinqu Mars v. Insurance Co., l."i TJ. C. Q. B. 143; Osbl?osh M.atch Works v. .Manchester Fire Assur. Co. OVis.) 66 N. W. 525 (see authorities cited at notes 3, 4 and 5); O'Brien v. Insurance Co., 03 N. Y. 108; Eggleston v. Insurance Co., f loss exceed the whole amount of the insurance, will a knowingly and purposely false statement, on oath, in a proof of loss, or other pretended losses, destroy the plaintiff's claim for his actual losses, under such a pol- icy as this? We cannot doubt that it wUl. The party stipiilatetl that it should, it is so provided in the contract, and it is a lawful proTision. The conti-act of insurance is one of indemnity only. The sole and lawful object of obtaining a policy of insurance is to secure simply reimbursement for actual loss. Any purpose of making a profit on the part of the assured is unlawful, and will vitiate the contract. Such being the nature of the contract, it requires good faitb on the part of the assured towards the insur- ers. Especially is this so in the adjustment of a loss after a fire. It is impracticable for the insurers to ascertain for themselves the extent of the losses, particularly where the contents of a dwelling house and barn are insured, as in this case. The assured and his family or servants are usually the only persons who can give a true account of the losses. The insurers, therefore, usually, as in this policy, require from the assured a detailed statement, on oath, of such losses, as a necessary preliminaiy to the payment of the indemnity. The statute also requires this. Rev. St. c. 49, § 21. The statute and the policy both make this statement a nee essary preliminary to a right of action on the policy, and they both contemplate, of course, a true statem^t. The demand of the stat- ute and of the policy for such a statement is addressed to his con- science, like a bill for discovery. When, therefore, he meets this demand with knowingly false statements of losses he did not sus- tain, in addition to those he did sustain, he ought to lose all stand- ing in a court of justice as to any claim under that policy. The court will not undertake for him the offensive task of separating his true from his false assertions. Fraud in any part of his formal OSTR. FIRE I-NS. 29 (.-1^9) § 177 LAW OF FIRE INSUEANCE. (Ch. 10 statement of loss taints the whole. Thus corrupted, it should be wholly rejected, and the suitor left to repent that he destroyed his actual claim by the poison of his false claim." We have not overlooked the case of Shaw v. Scottish Commercial Ins. Co.,=* where Judge Lowell makes the distinction contended for by the plaintiff here. There the stipulation in the policy was, 'All fraud, or attempt at fraud, by false swearing,' etc. Here the words are, 'Any fraud, or attempt at fraud, or false swearing,' etc. It might be that there harmful fraud should appear, while here false rswear- ing by itself is made a cause for forfeiture. But it will be seen that the United States supreme court, in Claflin v. Insurance Co., supra, three years after Judge Lowell's opinion, considered the same ques- tion, and decided the other way; holding that false swearing .alone, without its operating as a fraud upon the company, forfeited the policy. * * * It is further suggested by the plaintiff that, the buildings having been separately valued in the policy, the in- surance on them is not affected by any false swearing as to the personal property. The policy of insurance, however, is an entire, single contract, to stand or fall as a whole, so far as fraud or false swearing is concerned." § 177. When the Insured Absents Himself so that He cannot be. Subjected to a Svrorn Examination, the Insurer -will be Excused from Payment of Loss. In Harris v. Phoenix Ins. Co.^^ the policy contained a clause which provided, in substance, that the assured, if required, should sub- mit to an examination under oath, and that until such examina- tion was had or permitted the loss should not be due and payable. It appears that the defendant company did desire to make a per- sonal examination of the assured under oath, but, notwithstand- ing it had put forth all reasonable efforts to find him and serve notice of its election, it had been unable to do so, for the reason 10 Claflin v. Insurance Co., 110 U. S. 81, 3 Sup. Ct. 507; Sleeper v. In- sui-ance Co., 56 N. H. 401; Wall v. Insurance Co., 51 Me. 32. 20 1 Fed. 761. =1 35 Conn. 310, 4 Benn. Fire Ins. Cas. 186. (450) Ch. 10) ADJUSTMENT. § 178 that he had purposely absented himself to avoid being thus notified by the defendant of its purpose. It was the opinion of the court that the insured having intentionally kept away to avoid jierform- ance, and thereby defeat the right of the insurer to the examina- tion, such action was equivalent to a refusal, and that, under the terms of the policy, such examination was made a "condition prece- dent," and, having been defeated or obstructed by the bad faith of the assured, there could be no recovery.' Hinman, C. J., said: "It becomes important to determine whether the stipulation for his personal examination is a condition precedent to his right [of recovery] under the policy. The plaintiff insists that it is not such a condition in this case, because it does not appear that notice that a personal examination was required has ever been brought home to the assured. If this was so in consequence of the de- fault of the defendant, there would doubtless be force in the sug- gestion, but the defendants have not been in fault. Having used due diligence to notify the assured that they required the perform ance of this stipulation, tliey clearly ought not to be held to luive waived its performance. If the assured has intentionally absent- ed himself so that he cannot be notified that performance of the stipulation is required, he should be held to have had notice; and if, for any cause, whether by his fault or otherwise, he cannot be notified, that may be his misfortune, or the misfortune of those claiming under or through him, but is no reason for treating as in- operative an important stipulation, which the defendant saw fit to require, and the assured to give, as a condition which was to be complied with before there could be any obligation to pay the loss. " § 178. Fraudulent Overvaluations in Proofs of Loss For- feit All Claim under the Policy. In Huchberger v. Merchants' Fire Ins. Co. of Hartford,-" it was claimed by the defendant that plaintiff had forfeited his right to recover under the policy, on account of having stated his loss, in the formal and preliminary proofs, to be largely in excess of the actual amount shown on the trial. Judge David Davis, who heard 22 4 Biss. 2Uo, 2(B, Fed. Cas. No. (i.SL'J. (451) § 178 LAW OF FIEE INSURANCE. (Ch. 10 tlie case, declared the rule of law, in his instructions to the jury, as follows: "If, after carefully viewing all the evidence on this subject, you are satisfied that the plaintiif intended to commit a fraud on the insurance company, you will find for the defendant. If, on the contrary, the evidence satisfies you the account was true, you will find for the plaintiff; or if the evidence satisfies you that the account of loss was not true, but mistakenly rendered, with- out fraud, or intent to defraud, you will find for the loss actually sustained. If you come to the latter conclusion, — that there was no intentional wrong, but that the loss was actually less than the plaintiff says,— you will find accordingly." " The case of Huchberger v. Home Fire Ins. Co. was tried before Judge Blodgett, of the United States circuit court." The defense made was the same as that in Huchberger v. Merchants' Fire Ins. Co., supra. We quote from the instructions of Judge Blodgett to the jury: "The chief defense set up to avoid the liability arising upon the admitted facts to which I have referred is that plaintiffs fraudu- lently presented and insisted upon a claim against the defendant for a much greater loss than they had actually sustained; and the real question in this case is whether the claim of loss made out by the plaintiffs, and demanded from the defendant, was for an amount which plaintiffs knew was greater than the loss actually sustained. If the plaintiffs knowingly, and with intent to defraud the defendant and other insurance companies who had insured their stock of goods, made up a false and exaggerated statement of the amount and value of their stock of goods in the store at the time of the fire, and destroyed or damaged, they thereby forfeit all claim against the insurers. In cases of this kind the plaintiff must come into court with clean hands. The insured is presumed to know better than any one else the value of his property and the amount of his loss, and is bound to make his statement of loss hon- estly, without any attempt to obtain more than his actual dam- age; and this rule of law, that thus defeats all claims unless hon- estly made, is intended to protect insurance companies from fraud which might otherwise be perpetrated on them. It is a rule which 2 3 Dimhani v. Insurance Co., 1 Lowell, 233, Fed. Gas. No. 4,152; Beck v. Insurance Co., 2::'> La. Ann. 510. 24 5 Biss. IOC, Fed. Cas. No. C,821. (452) ^^- 10) ADJUSTMENT. § 178 can do an honest man no harm. I do not mean by this that a per- son who has sustained a loss for which an insurance company is liable is pledged to state the exact amount of his loss in dollars and cents, with arithmetical accuracy, for that, from a variety of circumstances, is frequently impi-acticable ; but he must disclose the whole truth, and nothing but the truth, as nearly as he can get at it at the time by reasonable effort on his part. If the evi- dence in this case, taken altogether, satisfies your mind that the plaintiffs did knowingly and fraudulently present a claim for a loss greater than they had sustained by the fire in question, then they cannot recover in this action." In the case of Weide v. Germania Ins. Co.^" the policy provided, among other things, that "all fraud, or attempted fraud, or false swearing, on the part of the assured, shall cause a forfeiture of all claims under the policy." There was a further provision in the policy that the insured should submit to a sworn examination, and produce, if required, his books of account, invoices, etc., with the stipulation that until such proofs were produced, and exam- inations permitted, the loss should not be payable. The court held that there would be no right of action, after a demand on the part of the insurer for a sworn examination, until it was permitted. The case was tried before both Judges Miller and Dillon, who con- curred in the opinion given. We quote as follows: "It is held by the court that false swearing by the assured, either in the pre- liminary proofs of loss, or in the examination on oath as required by the policy, in a matter material to the rights of the company, with the intent to mislead the company, would work a forfeiture of the policy, and false statements by the assured on such examina- tion, with intent to deceive and mislead the company relative to the terms of settlement by the assured with other companies which had insured the same property, are material, and will defeat any right to recover under the policy; that if the assured, after the fire, with intent to deceive the company, exhibited to it books of account, in which there were false entries as to the value and amount of the goods insured and claimed to have been burned, this. 2 5 1 Dill. 4-11, Fed. Cas. No. 1T,3DS. (453) § 178 LAW OF FIRE INSURANCE. (Ch. 10 -would be a fraud, or an attempt at fraud, within the meaning of the policy, and would forfeit all right thereunder." ^^ In Terriss v. North American Fire Ins. Co.,^^ Cowan, J., said, "A policy is always void, by the common law, for the least want of good faith in the assured." In Britton v. Royal Ins. Co.,^* Willes, J., said: "Suppose the insured made a claim for twice the amount insured, as lost, thus seeking to put the office off its guard, and, in the result, to recover more than he is entitled to; that would be a willful fraud, and the consequence is that he could not recover anything. This is a defense quite different from that of willful arson. It gives the go-by to the origin of the fire, and it amounts to this: that the assured took advantage of the fire to make a fraudulent claim. The law upon such a case is in accordance with justice, and also with sound policy. The law is that a person who has made such a fraudulent claim could not be permitted to recover at all. The contract of insurance is one of perfect good faith on both sides, and it is most important that such good faith shall be maintained." See, also, Lion Fire Ins. Go. v. Starr.^" The defense pleaded was an excessive valuation of tlie property destroyed. It was held that "the fraud, or attempted fraud, or false swearing, to cause a for- feiture of all claim under the policy, must have been willful, and not the result of inadvertence or mistake. » » » jf ^jjg as- sured has been guilty of willful fraud, attempted fraud, or false swearing, the warranty is broken, and all benefits under the policy forfeited." =» -" Geih V. Insurance Co., 1 Dill. 443, Fed. Oas. No. 5,298. 2T 1 Hill (N. Y.) 71; Moore v. Insurance Co., 28 Grat. (Va.) 508, 6 Ins. Law J. 441; Carter v. Boebm, 3 Burrows, 19&5; Britton v. Insurance Co., 4 Fost. & F. 905. 28 4 Fost. & F.